As filed with the Securities and Exchange Commission on April 1, 2002.
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, 2001
or
| [ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ______________
NARA BANCORP, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
95-4849715
(I.R.S. Employer
Identification Number)
3701 Wilshire Boulevard
Suite 220
Los Angeles, California 90010
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (213) 639-1700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
(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. [ ]
The aggregate market value of the Common Stock held by non-affiliates of the Registrant based upon the closing sale price of the Common Stock on March 22, 2002, as reported on the Nasdaq National Market, was approximately $35,596,668. Shares of Common Stock held by each executive officer and director and each person owning more than 5% of the outstanding Common Stock of the Registrant have been excluded in that such persons may be deemed to be affiliates of the Registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
Number of shares outstanding of the Registrant’s Common Stock, as of March 22, 2002: 5,575,087
Portions of the Definitive Proxy Statement that will be filed in connection with the registrants Annual Meeting of Shareholders to be held on May 29, 2002 are incorporated by reference into Part III of this Form 10-K.
Table of Contents
2
PART I
Forward-Looking Information
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 we operate, projections of future performance, perceived opportunities in the market and statements regarding our mission and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the word “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. Our actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in such forward-looking statements. For a detailed discussion of the factors that might cause such a difference, see Item 1. “ Factors That May Impact Our Business or the Value of Our Stock.”
Factors that might affect forward-looking statements include, among other things:
| • | our ability to remain in compliance with our written consent agreement with the OCC; | ||
| • | the demand for our products; | ||
| • | actions taken by ours competitors; | ||
| • | changes in the FDIC insurance premium; | ||
| • | tax rate changes, new tax laws and revised tax law interpretations; | ||
| • | adverse changes occurring in the securities markets; | ||
| • | inflation and changes in prevailing interest rates that reduce our margins or the fair market value of the financial instruments that we hold; | ||
| • | economic or business conditions, either nationally or in our market areas, that are worse than we anticipated; | ||
| • | legislative or regulatory changes that adversely affect our business; | ||
| • | the timing, impact and other uncertainties of our asset sales or securitizations; | ||
| • | technology changes that are more difficult or expensive than we expect; | ||
| • | increases in delinquencies and defaults by our borrowers and other loan delinquencies; | ||
| • | increases to our provision for losses on loans and leases due to loan quality/performance deterioration; | ||
| • | our inability to sustain or improve the performance of our subsidiaries; | ||
| • | our inability to achieve our financial goals and strategic plans, including any financial goals related both to contemplated and consummated assets sales or acquisitions; | ||
| • | the outcome of lawsuits or regulatory disputes; and | ||
| • | credit and other risks of lending, leasing and investment activities. |
As a result of the above, we cannot assure you that our future results of operations or financial conditions or any other matters will be consistent with those presented in any forward-looking statements. Accordingly, we caution you not to rely on these forward-looking statements. We do not undertake, and specifically disclaim any obligation, to update these forward-looking statements, which speak only as of the date made.
3
Item 1. BUSINESS
General
Nara Bancorp, Inc. (“Nara Bancorp,” on a parent-only basis, and “we” or “our” on a consolidated basis), incorporated under the laws of the State of Delaware in 2000, is a bank holding company, headquartered in Los Angeles, California, offering a full range of commercial banking and consumer financial services through its wholly owned subsidiary, Nara Bank, N.A., a national bank (“Nara Bank”). During the first quarter of 2001, Nara Bancorp became a bank holding company regulated by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) as part of the reorganization of Nara Bank into a holding company formation.
Recent Developments
On March 8, 2002, we announced that our Board of Directors authorized the repurchase of up to 10% of the 5.57 million shares of our common stock outstanding on that date. The repurchases may be made at any time and from time to time over the next 12 months. We intend to repurchase the shares in open market transactions, including block purchases. The timing and amount of shares, if any, actually repurchased during the authorized period will be determined based on management’s discretion and will depend on market conditions. As of March 29, 2002, we had not yet repurchased any shares under the program.
On March 12, 2002, we announced that our Board of Directors declared a dividend of $0.10 per common share for the first quarter of 2002, which is payable on April 11, 2002 to stockholders of record on March 31, 2002.
On March 26, 2002, we completed a private offering of $8 million of trust preferred securities, issued as part of a pooled offering with several other financial institutions through a newly formed wholly-owned subsidiary, Nara Statutory Trust II (“Nara Trust II”), a Connecticut statutory business trust.
For the period beginning on March 26, 2002 to June 25, 2002, the trust preferred securities bear the interest rate of 5.59% per annum. For each successive period beginning on (and including) June 26, 2002, and each succeeding Interest Payment Date (March 26, June 26, September 26, and December 26 during the 30-year term), and ending on (but excluding) the next succeeding Interest Payment Date, interest rate will adjust to 3-Month LIBOR plus 3.60%. However, prior to March 26, 2007, the interest rate can not exceed 11.00%.
Nara Trust II used the proceeds from the sale of the trust preferred securities to purchase junior subordinated deferrable interest debentures of Nara Bancorp. Bancorp intends to use the proceeds for general corporate purposes. Under applicable regulatory guidelines, we expect that the trust preferred securities will qualify as Tier I Capital.
Business Overview
Nara Bancorp succeeded to the business and operations of Nara Bank upon consummation of reorganization of Nara Bank into a holding company structure, effective as of February 2, 2001. Upon consummation of the reorganization, Nara Bancorp had 5,467,942 shares of common stock outstanding, all of which were authorized for quotation on the Nasdaq National Market. Prior to the completion of the reorganization, Nara Bancorp had no material operations or assets. Nara Bancorp’s principal business is to serve as a holding company for Nara Bank and other bank or bank-related subsidiaries, which Nara Bancorp may establish or acquire. As of December 31, 2001, Nara Bancorp had 5,572,837 shares of common stock outstanding.
On March 28, 2001, Nara Bancorp, through a newly formed and wholly-owned subsidiary, Nara Bancorp Capital Trust I (“Nara Capital”), a Delaware statutory business trust, completed a private placement of $10 million of trust preferred securities, issued as part of a pooled offering with several other financial institutions.
4
Our principal business activities are conducted through Nara Bank by earning interest on loans, leases and investment securities that are funded by customer deposits and other borrowings. The difference between interest received and interest paid comprises the majority of our operating earnings.
We conduct our operations through 14 branch offices and 4 loan production offices. Our headquarters is located at 3701 Wilshire Boulevard, Suite 220, Los Angeles, California 90010. Our telephone number is (213) 639-1700. In September of 2001, we opened our fourteenth office in Cerritos, California and we established our fourth loan production office in Atlanta, Georgia. The FDIC insures our deposits up to the maximum legal limits, and we are a member of the Federal Reserve System.
We offer a full range of commercial banking and consumer financial services for our customers, who typically are individuals and small- to medium-sized businesses in our market areas. We accept deposits and originate a variety of loans including commercial loans, trade finance, Small Business Administration (SBA) loans, automobile and various consumer loans. To better meet our customers’ needs, our mini-market branches generally offer extended hours from 9 a.m. to 6 p.m. Each of our branches, except for the Wilshire and Downtown Offices, operates 24-hour automated teller machines. We provide courier services to qualifying clients and have personal banking officers for our key customers to better support their banking needs. We honor merchant drafts for both VISA and MasterCard and provide debit cards services to our customers. In addition, most of our branches offer travelers’ checks, safe deposit boxes, notary public and other customary bank services. We also offer 24-hour banking by telephone. Our website at www.narabank.com features both English and Korean applications and internet banking services.
A significant amount of our operating income and net income depends on the difference between interest revenue received from interest-earning assets and interest expense paid on interest-bearing liabilities. However, interest rates are highly sensitive to many factors that are beyond our control, such as general economic conditions and the policies of various governmental and regulatory authorities, in particular those of the Federal Reserve Board. Although our business may vary with local and national economic conditions, such variations do not appear to be seasonal in nature.
Lending Activities
Our lending activity is conducted exclusively through Nara Bank. Our net loans, including loans held for sale, totaled approximately $502.1 million as of December 31, 2001, accounting for 81.6% of our total interest-earning assets of $615.5 million. At December 31, 2001, total loans consisted of: commercial loans, including lease and trade financing, of approximately $211.2 million; real estate and construction loans of approximately $251.7 million; consumer loans of approximately $46.6 million; less deferred loan fees of $650,000 and allowance for loan losses of $6.7 million. Loans are carried at face amount, less payments collected, net of deferred loan origination fees, and the allowance for loan losses. Interest on all loans is accrued daily on a simple interest basis. Loans are placed on a non-accrual basis when principal and interest on a loan is past due 90 days or more, unless a loan is both well secured and in process of collection. Once a loan is placed on non-accrual status, accrual of interest is discontinued and previously accrued interest is reversed.
The rates of interest charged on variable rate loans are set at specified increments in relation to our prime lending rate and, accordingly, vary as our prime lending rate varies. A majority of our loans (approximately 81.0% at December 31, 2001) are variable- rate loans. Although most of our variable-rate loans are secured loans, we are permitted with certain exceptions, under applicable law, to make unsecured loans to individual borrowers in aggregate amounts of up to 15% of the sum of our total capital and the allowance for loan losses, as defined for regulatory purposes. As of December 31, 2001, our lending limits were approximately $9.5 million for unsecured loans. For the purpose of lending limits, a secured loan is defined as a loan secured by readily marketable collateral having a current market value of at least 100% of the amount of the loan or extension of credit at all times. In addition to unsecured loans, we are permitted to make collateral-secured loans secured by collaterals in an additional amount up to 10% of our total capital and the allowance for loan losses.
The following table shows the composition of our loan portfolio by type of loan on the dates indicated:
5
December 31,
(dollars in thousands)
2001*
2000
1999*
1998*
1997
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
$
211,214
41.5
%
$
139,544
38.5
%
$
100,411
42.0
%
$
84,166
50.2
%
$
68,199
62.0
%
251,691
49.4
%
177,849
49.0
%
103,311
43.2
%
52,823
31.5
%
21,136
19.2
%
46,596
9.1
%
45,488
12.5
%
35,295
14.8
%
30,651
18.3
%
20,635
18.8
%
509,501
100.0
%
362,881
100.0
%
239,017
100.0
%
167,640
100.0
%
109,970
100.0
%
(650
)
(177
)
(86
)
32
45
(6,710
)
(6,980
)
(3,452
)
(2,834
)
(2,033
)
$
502,141
$
355,724
$
235,479
$
164,838
$
107,982
| * | Includes commercial loans held for sale; $3,657,842 in 2001, $168,250 in 1999 and $415,138 in 1998. |
Commercial Loans
Commercial loans are made primarily for the purposes of providing working capital or financing the purchase of inventory and equipment and for other business purposes. Short term business loans (due within one year), generally are used to finance current transactions and typically provide for periodic interest payments, with principal being payable at maturity. Term loans (5 to 7 years) normally provide for monthly payments of both principal and interest. We review the credit-worthiness of our commercial borrowers on a periodic basis, and most commercial loans are collateralized by inventory, equipment and/or real estate.
We include trade financings within our commercial loan portfolio. We have established a trade finance department to serve international trade customers. This department issues and advises letters of credit for export and import businesses. It also purchases bills from export businesses at discounts and makes loans to international traders. These loans usually are collateralized with inventories and accounts receivables. As of December 31, 2001, outstanding letters of credit, including domestic letters of credit totaled $26 million.
Real Estate Loans
Our real estate loans consist primarily of loans secured by deeds of trust on commercial properties and are normally extended for short durations. It is our policy to restrict real estate loans to 70% of Nara Bank’s appraised value of the property. We offer both fixed and floating rate loans. The maturities on such loans generally are restricted to seven years (on amortizations of up to 25 years with balloon payments due at maturity).
Small Business Administration Loans
Our Small Business Administration (SBA) loans typically are made for the purpose of providing working capital, financing the purchase of equipment or inventory, financing the purchase of a business, debt refinancing, or financing the purchase or construction of owner occupied commercial property. SBA loans typically are term loans with maturities ranging from 7 to 10 years. SBA real estate loans generally are 25 years term loans with full amortization. SBA loans normally provide for floating interest rates, with monthly payments of both principal and interest.
Our SBA lending represents an important segment of our loan portfolio because of our ability to sell the guaranteed portion in the secondary market at a premium, while earning servicing fees on the sold portion over the remaining life of the loan. Thus, in addition to the yield earned on the portion of the SBA loans that we retained, we recognize income from the gains on the sales and from loan servicing on the SBA loans sold into the secondary market.
We established a separate SBA loan department to expedite our services related to SBA loans. The SBA loan department is staffed by loan officers who provide assistance to qualified individuals and existing businesses. We attained SBA Preferred Lenders status in the Los Angeles and Santa Ana districts on January 16, 1997. SBA Preferred Lender status is the highest designation awarded by the SBA and generally facilitates the marketing and approval process for new SBA loans. On February 24, 1999, we attained Preferred Lender status in the New York,
6
Chicago, San Francisco, Seattle, and Spokane districts. On April 20, 2001, we also received Preferred Lender status in New Jersey, Baltimore, Washington D.C., and Atlanta.
Consumer Loans
Most of our consumer loan portfolio consists of automobile loans. Nara
Bank began originating automobile loans in early 1995. Referrals from
automobile dealers comprise the majority of originations of such loans. We
also offer fixed-rate loans to buyers of new and previously owned automobiles
who are not qualified for automobile dealers’ most preferential loan rates.
During 2001, these loans increased to $35.3 million from $33.9 million at
December 31, 2000 and $25.9 million at December 31, 1999.
Lines of Credit
We extend lines of credit to business customers usually on an annual
review basis. Our undisbursed commercial loan commitments at December 31,
2001, 2000 and 1999 were $146.2 million, $87.9 million and $56.3 million,
respectively. The following table shows our loan commitments and letters of
credit outstanding at the dates indicated:
Concentrations
Loan concentrations are considered to exist when there are significant
amounts of loans to a multiple number of borrowers engaged in similar
activities, which would cause them to be similarly impacted by economic or
other conditions. The following table describes the industry concentrations in
Nara Bank’s loan portfolio, which exceeded 10% of Nara Bank’s total gross
loans, including loans held for sale, as of the dates indicated:
December 31,
(dollars in thousands)
2001
2000
1999
1998
1997
$
146,201
$
87,895
$
56,278
$
47,707
$
31,152
4,785
4,574
2,851
2,948
2,787
21,634
21,427
17,554
10,689
8,921
At December 31,
(dollars in thousands)
2001
2000
1999
1998
1997
% of
% of
% of
% of
% of
Amount
Portfolio
Amount
Portfolio
Amount
Portfolio
Amount
Portfolio
Amount
Portfolio
$
38,665
7.6
%
$
36,142
10.0
%
$
30,072
12.6
%
$
31,383
18.7
%
$
25,608
23.3
%
109,112
21.4
%
89,609
24.7
%
71,283
29.8
%
46,517
27.7
%
34,648
31.5
%
85,515
16.8
%
61,282
16.9
%
35,878
15.0
%
30,345
18.1
%
19,276
17.5
%
104,669
20.6
%
63,792
17.6
%
25,702
10.8
%
23,745
14.2
%
13,208
12.0
%
129,495
25.4
%
75,567
20.8
%
48,453
20.3
%
—
—
—
—
$
467,456
$
326,392
$
211,388
$
131,990
$
92,740
7
Other Real Estate Owned
Assets classified as other real estate owned (“OREO”) include foreclosed
real estate owned by us . We had no OREO as of December 31, 2001. We owned
other real estate, taken through foreclosure, in the aggregate amount of
approximately $300,000 and $57,000 at December 31, 2000, and 1999,
respectively. We reserved $37,000 and $13,000 at December 31, 2000 and 1999,
respectively, as a valuation allowance. We incurred no OREO expense through
OREO transaction in 2001. We incurred expenses of $90,748 and $16,628 and
earned income of $2,893 and $906 from these properties in 2001 and 1999,
respectively. The following table summarizes our OREO at the dates indicated:
December 31,
(dollars in thousands)
2001
2000
1999
1998
1997
$
0
$
300
$
57
$
10
$
10
(0
)
(37
)
(13
)
0
(10
)
$
0
$
263
$
44
$
10
0
Investing Activities
The main objectives of our investment strategy are to support a sufficient level of liquidity while providing a means to manage our interest rate risk, and to generate an adequate level of interest income without taking undue risks. Our investment policy permits investment in various types of securities, certificates of deposits and federal funds sold in compliance with various restrictions in the policy. Securities are classified as held-to-maturity or available-for-sale. The securities that we have the ability and intent to hold to maturity are classified as held-to-maturity securities. All other securities are classified as available-for-sale. There were no trading securities at December 31, 2001 or 2000. As of December 31, 2001, held-to-maturity securities totaled $4.3 million, compared to $15.7 million at December 31, 2000, and available-for-sale securities totaled $65.1 million at December 31, 2001, compared to $54.9 million at December 31, 2000. The decrease in held-to-maturity securities is primarily due to called agency bonds during 2001 as a result of decreases in interest rates. During 2001, a total of $36.7 million in agency securities were called and a total of $51.8 million in securities available-for-sale were purchased. From the investment portfolio, securities with amortized cost of approximately $2.5 million and $4.2 million were pledged to Federal Reserve Board as required or permitted by law at December 31, 2001 and 2000, respectively. The investment portfolio consists of government sponsored agency bonds, mortgage backed securities, bank-qualified California municipals, and corporate bonds. This investment portfolio composition reflects our investment strategy.
8
The following table summarizes the maturity of securities and their
pertinent weighted average yield ratios at the dates and for the periods
indicated:
At or For the Year Ended December 31,
(dollars in thousands)
2001
2000
1999
Weighted
Weighted
Weighted
Amortized
Market
Average
Amortized
Market
Average
Amortized
Market
Average
Cost
Value
Yield
Cost
Value
Yield
Cost
Value
Yield
$
1,598
$
1,520
7.00
%
$
13,068
$
12,587
6.78
%
$
14,658
$
13,820
6.76
%
—
—
—
7,492
7,466
6.13
%
8,000
7,804
6.14
%
—
—
—
—
—
—
1,000
977
6.75
%
1,598
1,520
7.00
%
5,576
5,121
7.72
%
5,658
5,039
7.71
%
2,725
2,754
7.20
%
2,676
2,409
7.16
%
2,627
2,321
7.16
%
2,002
2,111
7.13
%
2,003
1,968
7.09
%
2,003
1,893
7.09
%
723
643
7.41
%
673
441
7.48
%
624
428
7.45
%
16,154
16,521
5.59
%
18,552
18,591
6.99
%
11,051
10,902
6.88
%
—
—
—
7,000
7,009
6.66
%
—
—
—
12,154
12,385
5.12
%
7,052
7,070
7.12
%
5,555
5,531
6.55
%
2,000
2,091
7.03
%
4,000
4,011
7.14
%
4,996
4,888
7.14
%
2,000
2,045
7.00
%
500
501
8.72
%
500
483
8.00
%
8,756
8,977
5.52
%
9,720
9,645
6.96
%
950
978
6.86
%
1,184
1,196
6.70
%
—
—
—
7,806
7,999
5.36
%
8,536
8,449
7.00
%
—
—
—
1,102
1,104
7.00
%
56
56
7.00
%
—
—
—
1,102
1,104
7.00
%
56
56
7.00
%
—
—
—
383
384
2.48
%
—
—
—
—
—
—
383
384
2.48
%
—
—
—
—
—
—
4,369
4,304
5.09
%
—
—
—
—
—
—
4,369
4,304
5.09
%
—
—
—
—
—
—
32,359
32,287
7.46
%
24,296
24,866
7.26
%
3,486
3,416
7.14
%
2,484
2,511
4.92
%
—
—
—
—
—
—
10,965
11,072
6.36
%
10,622
10,893
6.88
%
1,514
1,501
7.25
%
9,341
9,486
7.58
%
10,216
10,458
7.18
%
1,972
1,915
7.05
%
9,569
9,218
9.36
%
3,458
3,515
8.70
%
—
—
—
1,451
1,555
8.35
%
1,726
1,757
7.18
%
1,701
1,729
8.68
%
1,451
1,555
8.35
%
1,726
1,757
7.18
%
1,701
1,729
8.68
%
$
68,897
$
69,406
6.58
%
$
70,094
$
69,911
7.06
%
$
33,523
$
32,188
6.97
%
Deposit Activities
We attract both short-term and long-term deposits from the general public by offering a wide range of deposit products and services. Through our branch network, we provide our banking customers with money market accounts, savings and checking accounts, certificate of deposit, individual retirement accounts, business checking accounts, 24-hour automated teller machines, and internet banking and bill-pay services.
Our primary source of funds is FDIC-insured deposits. We try to match our interest-bearing liabilities with our interest-earning assets. We cover all volatile funds with liquid assets as a method to ensure adequate liquidity. Thus, we analyze our deposits’ maturities and interest rates to monitor and control the cost of funds and review the stability of the supply of funds. We believe our deposits are a stable and reliable funding source.
9
When we have more funds than required for our reserve requirements or short-term liquidity needs, we sell federal funds to other financial institutions. Conversely, when we have less funds than required, we may borrow funds from both our corresponding banks and the Federal Reserve Bank, also known as the FRB. The maximum amount that we currently are authorized to borrow from our correspondent banks is $13 million on an overnight basis. The maximum amount that we may borrow from the FRB discount window is 97% of the market value of the pledged security with the FRB, which amount was $1.0 million at December 31, 2001.
The following table sets forth information for the periods indicated
regarding the balances of our deposits by category.
December 31,
2001
2000
1999
(dollars in thousands)
Amount
Percent
Amount
Percent
Amount
Percent
(Dollars in thousands)
$
199,083
33.7
%
$
192,837
36.6
%
$
115,623
36.1
%
84,103
14.3
%
82,043
15.5
%
37,288
11.7
%
78,933
13.4
%
49,831
9.4
%
38,529
12.0
%
227,725
38.6
%
202,998
38.5
%
128,429
40.2
%
$
589,844
100.0
%
$
527,709
100.0
%
$
319,869
100.0
%
Borrowing Activities
On September 31, 1999, we issued five-year subordinated capital notes in the aggregate amount of $4.3 million with a stated interest rate of 9 percent, maturing on September 30, 2004. Interest on the notes is payable quarterly and no scheduled payments of principal are due prior to maturity. We may redeem the notes prior to their maturity as of, or after, September 30, 2002. The notes qualify as Tier 2 risk-based capital under the Office of the Comptroller of the Currency guidelines for assessing regulatory capital. For the total risk-based capital ratio, the amount of notes that qualify as capital is reduced as those notes approach maturity. At December 31, 2001, $1.7 million, which represents 40% of the total outstanding amount of the notes, qualified as risk-based capital.
During 2000, we established a lending line with the FHLB of San Francisco. Advances may be obtained from the FHLB of San Francisco to supplement our supply of lendable funds. Advances from the FHLB of San Francisco typically are secured by a pledge of mortgage loans and/or qualified securities, with a market value at least equal to outstanding advances. At December 31, 2001, we had a $5.0 million advance outstanding, collateralized with securities pledged by Nara Bank. The borrowing has a seven-year, fixed-rate term.
On March 28, 2001, through our subsidiary, Nara Capital Trust I, we completed a private placement of $10 million of trust preferred securities, issued as part of a pooled offering with several other financial institutions.
The trust preferred securities bear a 10.18% fixed rate of interest payable semi-annually and maturing June 8, 2031. Nara Capital used the proceeds from the sale of the trust preferred securities to purchase junior subordinated deferrable interest debentures issued by Nara Bancorp. The net proceeds from the trust preferred securities will be used to accommodate stock repurchase program that was approved by the Board of Directors as described in “Recent Developments” section of this report. Pending deployment of the funds for the repurchase program, we have invested the proceeds in federal fund overnight accounts. Under applicable regulatory guidelines, the trust preferred securities qualify as Tier I Capital.
Competition
The banking and financial services industry generally, and in our market areas specifically, including California and New York City, is highly competitive. The increasingly competitive environment is a result primarily of changes in regulation, changes in technology and product delivery systems, and the accelerating pace of consolidation among financial services providers. We compete for loans, deposits, and customers with other commercial banks, savings and loan associations, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market funds, credit unions, and other non-bank financial service providers. Many of these competitors are much larger in total assets and capitalization, have greater access to
10
capital markets and offer a broader range of financial services than we do. In addition, recent federal legislation may have the effect of further increasing the pace of consolidation within the financial services industry. See “Item 1. Business — Supervision and Regulation — Financial Services Modernization Legislation.”
Economic Conditions, Government Policies and Legislation
Our profitability, like most financial institutions, primarily depends on interest rate differentials. In general, the difference between the interest rates paid on interest-bearing liabilities, such as deposits and other borrowings, and the interest rates received on our interest-earning assets, such as loans extended to our clients and securities held in our investment portfolio, comprise the major portion of our earnings. These rates are highly sensitive to many factors that are beyond our control, such as inflation, recession and unemployment. The impact that future changes in domestic and foreign economic conditions might have on our performance cannot be predicted.
Our business also is influenced by the monetary and fiscal policies of the federal government and the policies of regulatory agencies, particularly the Board of Governors of the Federal Reserve System (the “FRB”). 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 Nara Bancorp and Nara Bank any of our future changes in monetary and fiscal policies cannot be predicted.
From time to time, legislation, as well as regulations, is enacted which has the effect of increasing the cost of doing business, limiting or expanding permissible activities, or affecting the competitive balance between banks and other financial services providers. Proposals to change the laws and regulations governing the operations and taxation of banks, bank holding companies, and other financial institutions and financial services providers are frequently made in the U.S. Congress, in the state legislatures, and before various regulatory agencies. This legislation may change banking statutes and the operating environment of Nara Bancorp and its subsidiaries in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. We cannot predict whether any of this potential legislation will be enacted, and if enacted, the effect that it, or any implementing regulations, would have on our financial condition or results of operations of us or any of our subsidiaries. See “Item 1. Business - Supervision and Regulation.”
Supervision and Regulation
General
Bank holding companies and banks are extensively regulated under both federal and state law. This regulation is intended primarily for the protection of depositors and the deposit insurance fund and not for the benefit of our stockholders. Set forth below is a summary description of the material laws and regulations, which relate to our operations. The description is qualified in its entirety by reference to the applicable laws and regulations.
Nara Bancorp
As a registered bank holding company, we are subject to regulation under the Bank Holding Company Act of 1956, as amended (the “BHCA”). We are required to file with the FRB periodic reports and such additional information as the FRB may require pursuant to the BHCA. The FRB may conduct examinations of our subsidiaries and us.
The FRB may require that we terminate an activity or terminate control of or liquidate or divest ourselves of certain subsidiaries or affiliates when the FRB believes the activity or the control of the subsidiary or affiliate
11
constitutes a significant risk to the financial safety, soundness or stability of any of our banking subsidiaries. The FRB also has the authority to regulate provisions of certain bank holding company debt, including the authority to impose interest ceilings and reserve requirements on such debt. Under certain circumstances, we must file written notice and obtain approval from the FRB prior to purchasing or redeeming our equity securities.
Further, we are required by the FRB to maintain certain levels of capital. See “Capital Standards.”
We are required to obtain the prior approval of the FRB for the acquisition of more than 5% of the outstanding shares of any class of voting securities or substantially all of the assets of any bank or bank holding company. Prior approval of the FRB is also required if we merge or consolidate with another bank holding company. We are prohibited by the BHCA, except in certain statutorily prescribed instances, from acquiring direct or indirect ownership or control of more than 5% of the outstanding voting shares of any company that is not a bank or bank holding company and from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or furnishing services to our subsidiaries. However, subject to the prior approval of the FRB, we may engage in any, or acquire shares of companies engaged in, activities that are deemed by the FRB to be so closely related to banking or managing or controlling banks as to be a proper incident there to.
Under FRB regulations, a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, it is the FRB’s policy that a bank holding company should stand ready to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. A bank holding company’s failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the FRB to be an unsafe and unsound banking practice or a violation of the FRB’s regulations or both.
We are also a bank holding company within the meaning of Section 3700 of the California Financial Code. As such, we and our subsidiaries are subject to examination by, and may be required to file reports with, the California Department of Financial Institutions.
Our securities are registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, we are subject to the information, proxy solicitation, insider trading, and other requirements and restrictions of the Exchange Act.
Nara Bank, N.A.
Nara Bank, as a national banking association, is subject to primary supervision, examination, and regulation by the Office of the Comptroller of the Currency. To a lesser extent, Nara Bank is also subject to regulations of the Federal Deposit Insurance Corporation as administrator of the Bank Insurance Fund and the FRB. If, as a result of an examination of Nara Bank, the Office of the Comptroller of the Currency should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of Nara Bank’s operations are unsatisfactory or that Nara Bank or its management is violating or has violated any law or regulation, various remedies are available to the Office of the Comptroller of the Currency. 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 Nara Bank, to assess civil monetary penalties, and to remove officers and directors. The Federal Deposit Insurance Corporation has similar enforcement authority, in addition to its authority to terminate Nara Bank’s deposit insurance in the absence of action by the Office of the Comptroller of the Currency and upon a finding that Nara Bank is in an unsafe or unsound condition, is engaging in unsafe or unsound activities, or that its conduct poses a risk to the deposit insurance fund or may prejudice the interest of its depositors.
Various requirements and restrictions under the laws of the United States and the State of California affect the operations of Nara Bank. Federal and California statutes and regulations relate to many aspects of Nara Bank’s operations, including reserves against deposits, ownership of deposit accounts, interest rates payable on deposits, loans, investments, mergers and acquisitions, borrowings, dividends, locations of branch offices and new products
12
and services. Further, Nara Bank is also required to maintain certain minimum levels of capital. See “Capital Standards.”
During 2001, Nara Bank and its board of directors negotiated and on, February 20, 2002,they signed a Stipulation and Consent to the Issuance of a Consent Order (the “Consent Order”) with the Office of the Comptroller of the Currency (the “OCC”) pursuant to 12 U.S.C. 1818. Nara Bank, without admitting to any allegations, entered into the Consent Order in connection with alleged deficiencies relating to the lack of sufficient internal controls, procedures and inadequate compliance with the Bank Secrecy Act. Management is taking all necessary steps to comply with the Consent Order and the Bank Secrecy Act, including, but not limited to, the implementation of new IT systems and the expansion of the employee training program.
The Consent Order requires, among other matters, that Nara Bank:
| • | implement specified internal procedures, including the implementation of a new IT system, to ensure compliance with the Bank Secrecy Act; | ||
| • | develop, implement and ensure adherence to a written program of policies and internal procedures to ensure compliance with the Bank Secrecy Act and the rules and regulations of the OFAC; | ||
| • | appoint a Board Compliance Committee; | ||
| • | develop and implement an audit program to test the adequacy of internal controls to comply with the provisions of the Bank Secrecy Act; and | ||
| • | develop, implement and ensure adherence to a comprehensive training program for personnel to ensure their awareness of, and compliance with the requirements of the Bank Secrecy Act and the OFAC. |
If we fail to comply with the terms of the Consent Order, the OCC could:
| • | assess civil money penalties upon us; | ||
| • | place restrictions on the source of our deposits or, | ||
| • | in certain circumstances, appoint a conservator or receiver to oversee our operations. |
In addition, if we violate the Consent Order, the FDIC may initiate a termination of insurance proceeding against us. If any of these penalties or actions were to occur, they would materially and adversely affect our business and operations.
USA Patriot Act of 2001
On October 26, 2001, President Bush signed the USA Patriot Act of 2001 (the “Patriot Act”). Enacted in response to the terrorist attacks in New York, Pennsylvania and Washington, D.C. on September 11, 2001, the Patriot Act is intended to strengthen U.S law enforcement’s and the intelligence communities’ abilities to work cohesively to combat terrorism on a variety of fronts. The potential impact of the Patriot Act on financial institutions of all kinds is significant and wide ranging. The Patriot Act contains sweeping anti-money laundering and financial transparency laws and requires various regulations, including:
| • | due diligence requirements for financial institutions that administer, maintain, or manage private banks accounts or correspondent accounts for non-U.S. persons; | ||
| • | standards for verifying customer identification at account opening; |
13
| • | rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; | ||
| • | reports by nonfinancial trades and businesses filed with the Treasury Department’s Financial Crimes Enforcement Network for transactions exceeding $10,000; and | ||
| • | filing of suspicious activities reports securities by brokers and dealers if they believe a customer may be violating U.S. laws and regulations. |
We are not able to predict the impact such law will have on our financial condition or results of operations at this time.
Financial Services Modernization Legislation
General . On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley Act of 1999 also referred to as the FSMA. The FSMA repeals the two affiliation provisions of the Glass-Steagall Act: Section 20, which restricted the affiliation of Federal Reserve Member Banks with firms “engaged principally” in specified securities activities; and Section 32, which restricts officer, director, or employee interlocks between a member bank and any company or person “primarily engaged” in specified securities activities. In addition, the FSMA also contains provisions that expressly preempt any state law restricting the establishment of financial affiliations, primarily related to insurance. The general effect of the law is to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers by revising and expanding the BHCA framework to permit a holding company system to engage in a full range of financial activities through a new entity known as a financial holding company.
The law also:
| • | broadens the activities that may be conducted by national banks, banking subsidiaries of bank holding companies, and their financial subsidiaries; | ||
| • | provides an enhanced framework for protecting the privacy of consumer information; | ||
| • | adopts a number of provisions related to the capitalization, membership, corporate governance, and other measures designed to modernize the Federal Home Loan Bank system; | ||
| • | modifies the laws governing the implementation of the Community Reinvestment Act; and | ||
| • | addresses a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions. |
We do not believe that the FSMA will have a material adverse effect on operations in the near-term. However, to the extent that it permits banks, securities firms, and insurance companies to affiliate, the financial services industry may experience further consolidation. The FSMA is intended to grant to community banks certain powers as a matter of right that larger institutions have accumulated on an ad hoc basis. Nevertheless, this act may have the result of increasing the amount of competition that we face from larger institutions and other types of companies offering financial products, many of which may have substantially more financial resources than we do.
Financial Holding Companies . Bank holding companies that elect to become a financial holding company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or are incidental or complementary to activities that are financial in nature. “Financial in nature” activities include:
| • | securities underwriting, | ||
| • | dealing and market making, |
14
| • | sponsoring mutual funds and investment companies, | ||
| • | insurance underwriting and agency, | ||
| • | merchant banking, and | ||
| • | activities that the FRB, in consultation with the Secretary of the Treasury, determines from time to time to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. |
Prior to filing a declaration of its election to become a financial holding company, all of the bank holding company’s depository institution subsidiaries must be well capitalized, well managed, and, except in limited circumstances, in compliance with the Community Reinvestment Act.
Failure to comply with the financial holding company requirements could lead to divestiture of subsidiary banks or require all activities of such company to conform to those permissible for a bank holding company. No FRB approval is required for a financial holding company to acquire a company (other than a bank holding company, bank or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the FRB:
| • | lending, exchanging, transferring, investing for others, or safeguarding financial assets other than money or securities; | ||
| • | providing any devise or other instrumentality for transferring money or other financial assets; or | ||
| • | arranging, effecting or facilitating financial transactions for the account of third parties. |
A bank holding company that is not also a financial holding company can only engage in banking and such other activities determined by the FRB to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.
We are not currently a Financial Holding Company. Management has not determined at this time whether it will seek an election to become a Financial Holding Company.
Merchant Banking Restrictions. While the BHCA generally prohibits bank holding companies from owning more than 5 percent of the voting stock of non-financial companies, with limited exceptions, the FSMA authorizes merchant banking activities. Permissible merchant banking investments are defined as investments that meet two important requirements:
| • | the investment may only be held for a period of time to enable the resale of the investment (generally current regulations allow for a 10-year holding period for direct investments and a 15-year holding period for investments in private equity funds), and | ||
| • | while the investment is held by the financial holding company, the investing financial holding company may not routinely manage or operate the commercial firm except as necessary or required to obtain a reasonable return on the investment on resale (regulation presumes that officer or director interlocks involve routine management). |
In addition, there are limits on bank funding of portfolio companies owned by the bank’s parent holding company, transactions between the bank and portfolio companies and on cross-marketing activities between banks and portfolio companies owned by the same financial holding company. However, current rules do not prevent a depository institution from marketing the shares of private equity funds controlled by an affiliated financial holding company, and does not apply to situations in which the financial holding company owns less than 5 percent of the voting shares of the portfolio company.
15
Furthermore, in December 2001, federal regulators adopted new capital requirements for merchant banking activities. The rule employs a sliding scale based on each banking organization’s aggregate equity investments in non-financial entities and Tier 1 capital, requiring banks or holding companies to hold regulatory capital equal to:
| • | 8 cents for every $1 of equity investments up to 15% of Tier 1 capital; | ||
| • | 12 cents for every $1 of investments for the next 10% of Tier 1 capital; and | ||
| • | 25 cents for every $1 exceeding 25% of Tier 1 capital. |
The first 15% of investments that banking companies make through small-business investment companies, also known as SBICs, is exempt, however, the sliding scale applies for any such investments over 15%.
Expanded Bank Activities. The FSMA also permits national banks to engage in expanded activities through the formation of financial subsidiaries. A national bank may have a subsidiary engaged in any activity authorized for national banks directly or any financial activity, except for insurance underwriting, insurance investments, real estate investment or development, or merchant banking, which may only be conducted through a subsidiary of a financial holding company. Financial activities include all activities permitted under new sections of the BHCA or permitted by regulation.
A national bank seeking to have a financial subsidiary, and each of its depository institution affiliates, must be “well-capitalized,” “well-managed” and in compliance with the Community Reinvestment Act. The total assets of all financial subsidiaries may not exceed the lesser of 45% of a bank’s total assets, or $50 billion. A national bank must exclude from its assets and equity all equity investments, including retained earnings, in a financial subsidiary. The assets of the subsidiary may not be consolidated with the bank’s assets. The bank must also have policies and procedures to assess financial subsidiary risk and protect the bank from such risks and potential liabilities.
Privacy. Under the FSMA, federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. Pursuant to these rules, effective July 1, 2001, financial institutions must provide:
| • | initial notices to customers about their privacy policies, describing the conditions under which they may disclose nonpublic personal information to nonaffiliated third parties and affiliates; | ||
| • | annual notices of their privacy policies to current customers; and | ||
| • | a reasonable method for customers to “opt out” of disclosures to nonaffiliated third parties. |
These privacy provisions affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. It is not possible at this time to assess the impact of the privacy provisions on our financial condition or results of operations.
Dividends and Other Transfers of Funds
Dividends from Nara Bank constitute the principal source of income to Nara Bancorp. Nara Bancorp is a legal entity separate and distinct from Nara Bank. Nara Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends to Nara Bancorp. Under such restrictions, the amount available for payment of dividends to Nara Bancorp by Nara Bank totaled $12 million at December 31, 2001. In addition, the California Department of Financial Institutions and the FRB have the authority to prohibit Nara Bank from paying dividends, depending upon Nara Bank’s financial condition, if such payment is deemed to constitute an unsafe or unsound practice.
16
Transactions with Affiliates
Nara 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, Nara Bancorp 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 Nara Bancorp or other affiliates. Such restrictions prevent Nara Bancorp and such other affiliates from borrowing from Nara Bank unless the loans are secured by marketable obligations of designated amounts. Further, such secured loans and investments by Nara Bank to or in Nara Bancorp or to or in any other affiliate are limited, individually, to 10.0% of Nara 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 Nara Bank’s capital and surplus (as defined by federal regulations). California law also imposes certain restrictions with respect to transactions involving Nara Bancorp and other controlling persons of Nara Bank. Additional restrictions on transactions with affiliates may be imposed on Nara Bank under the prompt corrective action provisions of federal law. See “Item 1. Business — Supervision and Regulation — Prompt Corrective Action and Other Enforcement Mechanisms.”
Capital Standards
The federal banking agencies have 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 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 federal banking agencies, to 100% for assets with relatively high credit risk.
The guidelines require a minimum ratio of qualifying total capital to
risk-adjusted assets of 8% and a minimum ratio of Tier 1 capital to
risk-adjusted assets of 4%. In addition to the risk-based guidelines, federal
banking regulators require 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 4%. In addition to these uniform risk-based
capital guidelines and leverage ratios that apply across the industry, the
regulators have the discretion to set individual minimum capital requirements
for specific institutions at rates significantly above the minimum guidelines
and ratios.
As of December 31, 2001 (Dollars in thousands)
Nara Bancorp
Actual
Required
Excess
Amount
Ratio
Amount
Ratio
Amount
Ratio
$
63,389
9.7
%
$
26,298
4.0
%
$
37,091
5.7
%
$
63,389
11.0
%
$
23,231
4.0
%
$
40,158
7.0
%
$
71,818
12.4
%
$
46,462
8.0
%
$
25,356
4.4
%
The following table presents the amounts of regulatory capital and the capital ratios for Nara Bank, compared to its minimum regulatory capital requirements as of December 31, 2001.
17
As of December 31, 2001 (Dollars in thousands)
Nara Bank
Actual
Required
Excess
Amount
Ratio
Amount
Ratio
Amount
Ratio
$
54,815
8.8
%
$
24,973
4.0
%
$
29,842
4.8
%
$
54,815
9.5
%
$
23,162
4.0
%
$
31,653
5.5
%
$
63,244
10.9
%
$
46,325
8.0
%
$
16,919
2.9
%
In addition, federal banking regulators may set capital requirements higher than the minimums described above for financial institutions whose circumstances warrant it. For example, a financial institution experiencing or anticipating significant growth may be expected to maintain capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets.
Predatory Lending
The term “predatory lending,” much like the terms “safety and soundness” and “unfair and deceptive practices,” is far-reaching and covers a potentially broad range of behavior. As such, it does not lend itself to a concise or a comprehensive definition. But typically predatory lending involves at least one, and perhaps all three, of the following elements:
| • | making unaffordable loans based on the assets of the borrower rather than on the borrower’s ability to repay an obligation (“asset-based lending”) | ||
| • | inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced (“loan flipping”) | ||
| • | engaging in fraud or deception to conceal the true nature of the loan obligation from an unsuspecting or unsophisticated borrower. |
On December 14, 2001, FRB amended its regulations aimed at curbing such lending. Compliance is not mandatory until October 1, 2002. The rule significantly widens the pool of high-cost home-secured loans covered by the Home Ownership and Equity Protection Act of 1994, a federal law that requires extra disclosures and consumer protections to borrowers. The following triggers coverage under the act:
| • | interest rates for first lien mortgage loans in excess of 8 percentage points above comparable Treasury securities, | ||
| • | subordinate-lien loans of 10 percentage points above Treasury securities, and | ||
| • | fees such as optional insurance and similar debt protection costs paid in connection with the credit transaction, when combined with points and fees if deemed excessive. |
In addition, the regulation bars loan flipping by the same lender or loan servicer within a year. Lenders also will be presumed to have violated the law — which says loans shouldn’t be made to people unable to repay them — unless they document that the borrower has the ability to repay. Lenders that violate the rules face cancellation of loans and penalties equal to the finance charges paid.
We are unable at this time to determine the impact of these rule changes and potential state action in this area on our financial condition or results of operation.
18
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: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. At December 31, 2001, Nara Bank and Nara Bancorp 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.
In addition to measures taken under the prompt corrective action provisions, commercial banking organizations may be subject to potential enforcement actions by the federal regulators for unsafe or unsound practices in conducting their businesses or for violations of any law, rule, regulation, or any condition imposed in writing by the agency or any written agreement with the agency. Finally, pursuant to an interagency agreement, the FDIC can examine any institution that has a substandard regulatory examination score or is considered undercapitalized — without the express permission of the institution’s primary regulator.
Safety and Soundness Standards
The federal banking agencies have adopted guidelines designed to assist the federal banking agencies 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
Through the Bank Insurance Fund (BIF), the FDIC insures the deposits of Nara Bank up to prescribed limits for each depositor. The amount of FDIC assessments paid by each BIF member institution is based on its relative risk of default as measured by regulatory capital ratios and other factors. Specifically, the assessment rate is based on the institution’s capitalization risk category and supervisory subgroup category. An institution’s capitalization risk category is based on the FDIC’s determination of whether the institution is well capitalized, adequately capitalized or less than adequately capitalized. An institution’s supervisory subgroup category is based on the FDIC’s assessment of the financial condition of the institution and the probability that FDIC intervention or other corrective action will be required.
FDIC-insured depository institutions pay an assessment rate equal to the rate assessed on deposits insured by the Savings Association Insurance Fund (“SAIF”).
The assessment rate currently ranges from zero to 27 cents per $100 of domestic deposits. The FDIC may increase or decrease the assessment rate schedule on a semi-annual basis. An increase in the assessment rate could
19
have a material adverse effect on our earnings, depending on the amount of the increase. The FDIC is authorized to terminate a depository institution’s deposit insurance upon a finding by the FDIC that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the institution’s regulatory agency. The termination of deposit insurance for Nara Bank could have a material adverse effect on our earnings, depending on the collective size of the particular institutions involved.
All FDIC-insured depository institutions must pay an annual assessment to provide funds for the payment of interest on bonds issued by the Financing Corporation, a federal corporation chartered under the authority of the Federal Housing Finance Board. The bonds, commonly referred to as FICO bonds, were issued to capitalize the Federal Savings and Loan Insurance Corporation. The FDIC established the FICO assessment rates effective for the fourth quarter of 2001 at approximately $0.0184 per $100 of assessable deposits. The FICO assessments are adjusted quarterly to reflect changes in the assessment bases of the FDIC’s insurance funds and do not vary depending on a depository institution’s capitalization or supervisory evaluations.
Interstate Banking and Branching
The BHCA 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. 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
We are subject to certain fair lending requirements and reporting obligations involving home mortgage lending operations and Community Reinvestment Act 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. Furthermore, financial institutions are subject to annual reporting and public disclosure requirements for certain written agreements that are entered into between insured depository institutions or their affiliates and nongovernmental entities or persons that are made pursuant to, or in connection with, the fulfillment of the CRA.
A bank’s compliance with its CRA obligations is based 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 FRB 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.
Federal Reserve System
The Federal Reserve Board requires all depository institutions to maintain non-interest bearing reserves at specified levels against their transaction accounts (primarily checking, NOW, and Super NOW checking accounts) and non-personal time deposits. At December 31, 2001, Nara Bank was in compliance with these requirements.
Employees
As of December 31, 2001, we had 264 full-time equivalent employees. Our employees are not represented by a union or covered by a collective bargaining agreement. We have entered into a written employment agreement with Benjamin B. Hong, President and Chief Executive Officer. Management believes that its relations with its employees are good. See Item 4(a) below for a list of executive officers.
20
Factors That May Impact Our Business or the Value of Our Stock
Set forth below are certain factors that may affect our financial results and operations, which you should consider when evaluating our business and prospects.
Failure to comply with our Consent Order with the Office of the Comptroller of the Currency written agreement could adversely affect our business .
If we fail to comply with the terms of the Consent Order, OCC could:
| • | assess civil money penalties upon us, | ||
| • | place restrictions on the source of our deposits, or | ||
| • | in certain circumstances, appoint a conservator or receiver to oversee our operations. |
In addition, if we violate the Consent Order, the FDIC may initiate a termination of insurance proceeding against us. If any of these penalties or actions were to occur, they would materially and adversely affect our business and operations.
Deterioration of economic conditions in Southern California, New York or Korea could adversely affect our loan portfolio and reduce the demand for our services. We focus our business primarily in Korean communities in Southern California and in the greater New York City metropolitan area. A deterioration in economic conditions in our market areas could have a material adverse impact on the quality of our business. An economic slowdown in California or New York could have the following consequences, any of which could reduce our net income:
| • | Loan delinquencies may increase; | ||
| • | Problem assets and foreclosures may increase; | ||
| • | Claims and lawsuits may increase; | ||
| • | Demand for our products and services may decline; and | ||
| • | Collateral for loans may decline in value below the principal amount owed by the borrower. |
Loan loss reserves may not cover actual loan losses . If our actual loan losses exceed the amount we have reserved for probable losses, it will hurt our business. We try to limit the risk that borrowers will fail to repay loans by carefully underwriting the loans. Losses nevertheless occur. We create reserves for estimated loan losses in our accounting records. We base these allowances on estimates of the following:
| • | industry standards; | ||
| • | historical experience with our loans; | ||
| • | evaluation of current economic conditions; | ||
| • | regular reviews of the quality, mix and size of the overall loan portfolio; | ||
| • | regular reviews of delinquencies; and | ||
| • | the quality of the collateral underlying our loans. |
A downturn in the real estate market could seriously impair our loan portfolio . As of December 31, 2001, approximately 48% of the value of our loan portfolio consisted of loans secured by various types of real estate. If
21
real estate values decline significantly, especially in California or New York, higher vacancies and other factors could harm the financial condition of our borrowers, the collateral for our loans will provide less security, and we would be more likely to suffer losses on defaulted loans.
Changes in interest rates affect our profitability . Changes in prevailing interest rates may hurt our business. We derive our income mainly from the difference or “spread” between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. In general, the wider the spread, the more we earn. When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities will fluctuate. This can cause decreases on our spread and can greatly affect our income. In addition, interest rate fluctuation can affect how much money we may be able to lend. For example, when interest rates rise, loan originations tend to decrease.
If we lose key employees, our business may suffer . If we lost key employees temporarily or permanently, it could hurt our business. We could be particularly hurt if our key employees went to work for competitors. Our future success depends on the continued contributions of existing senior management personnel.
Environmental laws could force us to pay for environmental problems . The cost of cleaning up or paying damages and penalties associated with environmental problems could increase our operating expenses. When a borrower defaults on a loan secured by real property, we often purchase the property in foreclosure or accept a deed to the property surrendered by the borrower. We may also take over the management of commercial properties whose owners have defaulted on loans. We also lease premises where our branches and other facilities are located and where environmental problems may exist. Although we have lending, foreclosure and facilities guidelines intended to exclude properties with an unreasonable risk of contamination, hazardous substances may exist on some of the properties that we own, lease, manage or occupy. We may face the risk that environmental laws could force us to clean up the properties at our expense. It may cost much more to clean a property than the property is worth. We also could be liable for pollution generated by a borrower’s operations if we take a role in managing those operations after a default. We may find it difficult or impossible to sell contaminated properties.
We are exposed to the risks of natural disasters . A significant portion of our operations is concentrated in Southern California. California is in an earthquake-prone region. A major earthquake could result in material loss to us. A significant percentage of our loans are and will be secured by real estate. Many of our borrowers could suffer uninsured property damage, experience interruption of their businesses or lose their jobs after an earthquake. Those borrowers might not be able to repay their loans, and the collateral for such loans could decline significantly in value. Unlike a bank with operations that are more geographically diversified, we are vulnerable to greater losses if an earthquake, fire, flood or other natural catastrophe occurs in Southern California.
An increase in non-performing assets would reduce our income and increase our expenses . If the level of non-performing assets rises in the future, it could adversely affect our operating results. Non-performing assets are mainly loans on which the borrowers are not making their required payments. Non-performing assets also include loans that have been restructured to permit the borrower to have smaller payments and real estate that has been acquired through foreclosure of unpaid loans. To the extent that assets are non-performing, we have less cash available for lending and other activities.
Governmental regulation may impair our operations or restrict our growth . We are subject to significant governmental supervision and regulation. These regulations are intended primarily for the protection of depositors. Statutes and regulations affecting our business may be changed at any time, and the interpretation of these statutes and regulations by examining authorities may also change. Within the last several years Congress and the President have passed and enacted significant changes to these statutes and regulations. There can be no assurance that such changes to the statutes and regulations or in their interpretation will not adversely affect our business. Nara Bank is subject to regulation and examination by the Comptroller of the Currency. In addition to governmental supervision and regulation, Nara Bank is subject to changes in other federal and state laws, including changes in tax laws, which could materially affect the banking industry. Nara Bancorp is subject to the rules and regulations of the Federal Reserve Board. If we fail to comply with federal and state bank regulations, the regulators may limit our activities or growth, fine us or ultimately put us out of business. Banking laws and regulations change from time to time. Bank regulations can hinder our ability to compete with financial services companies that are not regulated or are less regulated.
22
Federal and state bank regulatory agencies regulate many aspects of our operations. These areas include:
| • | the capital that must be maintained; | ||
| • | the kinds of activities that can be engaged in; | ||
| • | the kinds and amounts of investments that can be made; | ||
| • | the locations of offices; | ||
| • | how much interest can be paid on demand deposits; | ||
| • | insurance of deposits and the premiums that must be paid for this insurance; and | ||
| • | how much cash must set aside as reserves for deposits. |
Our stock price may be volatile, which could result in substantial losses for our stockholders. The market price of our common stock could be subject to wide fluctuations in response to a number of factors, including:
| • | issuing new equity securities pursuant to this offering or otherwise; | ||
| • | the amount of our common stock outstanding and the trading volume of our stock; | ||
| • | actual or anticipated changes in our future financial performance; | ||
| • | changes in financial estimates of us by securities analysts; | ||
| • | competitive developments, including announcements by us or our competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; | ||
| • | the operating and stock performance of our competitors; | ||
| • | changes in interest rates; and | ||
| • | additions or departures of key personnel at the management company. |
Future offerings of debt securities, which would be senior to our common stock upon liquidation, or equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of dividend distributions, may adversely affect the market price of our common stock. In the future, we may attempt to increase our capital resources by making additional offerings of debt or equity securities, including commercial paper, medium-term notes, senior or subordinated notes and classes of preferred stock or common stock. Upon liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings by us may dilute the holdings of our existing stockholders or reduce the market price of our common stock, or both. Our preferred stock, if issued, would have a preference on dividend payments that could limit our ability to make a dividend distribution to the holders of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock or diluting their stock holdings in us.
Accounting Matters
Statement of Financial Accounting Standards (“SFAS”) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement No. 125 , was issued in September 2000 and revises the standards for accounting for securitizations and other transfers of financial assets
23
and collateral and requires certain disclosures, but it carries over most of the provisions of SFAS No. 125 without reconsideration. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The statement is effective for recognition and reclassification of collateral and for disclosures related to securitization transactions and collateral for fiscal years ending after December 15, 2000. The adoption of SFAS No. 140 did not have a material impact on our results of operations, financial position or cash flows.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, Business Combinations , and SFAS No. 142, Goodwill and Other Intangible Assets . SFAS No. 141 requires that the purchase method of accounting be used for all business combinations completed after June 30, 2001 and also specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill and those acquired intangible assets that are required to be included in goodwill. SFAS No. 142 will require that goodwill no longer be amortized, but instead tested for impairment at least annually. Additionally, SFAS No. 142 will require recognized intangible assets be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of , as replaced by SFAS No. 144. Any recognized intangible asset determined to have an indefinite useful life will not be amortized, but instead tested for impairment until its life is determined to no longer be indefinite. We adopted the provisions of SFAS No. 141 and SFAS No. 142 on January 1, 2002. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized until December 31, 2001.
During the first quarter of fiscal year 2002, we will evaluate our existing intangible assets and goodwill and make any necessary reclassifications in order to conform with the new requirements in accordance with SFAS No. 141. Upon the adoption of SFAS No. 142, we will be required to reassess the useful lives and residual values of all intangible assets and make any necessary amortization period adjustments by March 31, 2002. Although we have commenced our evaluation, no final conclusion has been reached.
Furthermore, in connection with the transitional impairment evaluation, SFAS No. 142 will require us to perform an assessment of whether there is an indication that goodwill is impaired as of January 1, 2002. The transitional assessment, which is required to be completed by June 30, 2002, will consist of (1) identify our reporting units, (2) determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets to those reporting units, and (3) determine the fair value of each reporting unit. If the carrying value of any reporting unit exceeds its fair value, then detailed fair values for each of the assigned assets (excluding goodwill) and liabilities will be determined to calculate the amount of goodwill impairment, if any. Such impairment evaluation is to be completed as soon as possible, but no later than December 31, 2002. Any transitional impairment loss resulting from the adoption will be recognized as the effect of a change in accounting principle in our consolidated statement of income. We are evaluating the impact of the adoption of these standards and have not yet fully determined the effect of adoption on our financial position, results of operations and cash flows.
We also carry negative goodwill, the amount of the fair values of assets acquired and liabilities assumed exceeds the cost of an acquired company, of $4,192,334 at December 31, 2001. In accordance with SFAS No. 142, such amount will be recognized in our consolidated statement of income as the cumulative effect of a change in accounting principle on January 1, 2002.
SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets , replaces SFAS No. 121. SFAS No. 144 requires that long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. It also expands the reporting of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and that will be eliminated from the ongoing operations of the entity in a disposal transaction. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001. The adoption of this statement is not expected to have a material impact on our financial position, results of operations or cash flows.
24
Item 2. PROPERTIES
Our principal executive offices are located at 3701 Wilshire Blvd., Los Angeles, California 90010. We conduct our operations through fourteen branch offices and four loan production offices located throughout California, in the greater New York City metropolitan area and in Chicago, Seattle, New Jersey, and Atlanta. We lease all of our offices. The leases expire under various dates, including options to renew, through January 31, 2041. We believe our present facilities are adequate for our present needs, We also believe that, if necessary, we could secure suitable alternative facilities or similar terms, without adversely impacting operations.
Item 3. LEGAL PROCEEDINGS
We are a party to routine litigation incidental to our business, none of which is considered likely to have a material adverse effect on us.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of our security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year ended December 31, 2001.
Item 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT
The following individuals are executive officers of Nara Bancorp. Pertinent information relating to these individuals is set forth below. There are no family relationships between any of the officers.
Benjamin B. Hong- Chief Executive Officer and President — Age 69
Mr. Hong has served as President and Chief Executive Officer of Nara Bank since 1994 and as President and Chief Executive Officer of Nara Bancorp since February 2001. Mr. Hong previously served as President and Chief Executive Officer of Hanmi Bank from 1988 to 1994.
Bon T. Goo- Executive Vice President and Chief Financial Officer — Age 52
Mr. Goo has served as Executive Vice President and Chief Financial Officer of Nara Bank since 1990 and as Executive Vice President and Chief Financial Officer of Nara Bancorp since February 2001. Mr. Goo previously served as Vice President and Manager of the Accounting, Investment and Control Division of Hanmi Bank from 1988 to 1990.
Min Jung Kim- Executive Vice President and Chief Credit Officer — Age 42
Ms. Kim has served as Executive Vice President and Chief Credit Officer of Nara Bank since 1995 and as Executive Vice President and Chief Credit Officer of Nara Bancorp since February 2001. Ms. Kim served as Vice President and Manager of the Western Branch of Hanmi Bank from 1992 to 1995.
25
Part II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock, par value $0.001 per share, began trading on the Nasdaq National Market on February 5, 2001 under the symbol “NARA.” The common stock of Nara Bank, par value $3.00 per share, also was traded on the Nasdaq National Market under the symbol “NARA” through February 2, 2001, which was Nara Bank’s last trading day.
There were 3,145,484
shares of common stock held by approximately 1,126
beneficial owners as of March 22, 2002. The following table sets forth, for
the calendar quarters indicated, the range of high and low sales prices for the
common stock of Nara Bancorp and Nara Bank, as applicable, for each quarter
within the last two fiscal years. Sales prices represent actual sales of which
our management has knowledge.
High Sales Price
Low Sales Price
$
9.50
$
7.00
$
9.38
$
8.00
$
13.50
$
8.13
$
20.81
$
12.75
$
20.81
$
16.00
$
19.00
$
14.25
$
20.45
$
15.87
$
20.40
$
14.85
On March 21, 2001, we declared a $0.15 per share cash dividend payable on May 1, 2001 to shareholders of record at the close of business on April 24, 2001. Future dividends are subject to the discretion of our Board of Directors and will depend upon a number of factors, including future earnings, financial condition, cash needs and general business conditions. Any dividend must comply with applicable bank regulations.
Our 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. Under California law, a corporation is prohibited from paying dividends unless (i) the retained earnings of the corporation immediately prior to the distribution exceed 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 its current liabilities.
Our ability to pay cash dividends in the future will depend in large part on the ability of Nara Bank to pay dividends on its capital stock to us. The ability of Nara Bank to pay dividends to us is subject to restrictions set
26
forth in the National Bank Act and the rules of the Office of Comptroller of the Currency. Pursuant to such regulations, among other restrictions, Nara Bank cannot pay dividends out of its capital; all dividends must be paid out of net profits then on hand, after deducting for expenses such as losses and bad debts. In addition, the payment of dividends out of net profits of a national bank is further limited by a statute which prohibits a bank from declaring a dividend on its shares of common stock until the surplus fund equals the amount of capital stock, or if the surplus fund does not equal the amount of capital stock, until not less than one-tenth of its net profits for the preceding half-year (in the case of quarterly dividends) or at least one-tenth of its net profits for the preceding year (in case of annual dividends) are transferred to the surplus fund.
On March 28, 2001, we completed a private placement offering of $10 million trust preferred securities, issued as part of a pooled offering with several other financial institutions. Sandler O’Neill & Partners, L.P. and Barclay’s Capital acted as underwriters for the offering and the trust preferred securities were sold by the underwriters to MMCapS Funding I, Ltd., a Cayman Islands limited liability company established to acquire the trust preferred securities issued by us and by 25 other trust subsidiaries of bank holding companies.
Our trust preferred securities bear a 10.18% fixed rate of interest, payable semi-annually. The trust preferred securities were issued by our subsidiary, Nara Bancorp Capital Trust I, a Delaware statutory business trust. Nara Bancorp Capital Trust I used the proceeds from the sale of the trust preferred securities to purchase junior subordinated deferrable interest debentures issued by us.
The sale of the trust preferred securities was considered to be exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4(2) of such Act. The sale was made to one institutional, accredited investor and therefor would not be a transaction involving a public offering of our securities.
Holders of the Capital Securities are entitled to receive cumulative cash distributions, accumulating from March 28, 2001, the date of original issuance, and payable semi-annually in arrears on June 8 and December 8 of each year, commencing June 8, 2001, at an annual rate of 10.18% of the liquidation amount of $1,000 per Trust Security. We have the right under certain circumstances to defer payments of interest on the Junior Subordinated Debentures at any time and from time to time for a period not exceeding 10 consecutive semi-annual periods with respect to each deferral period, provided that no deferral period may end on a day other than an interest payment date or extend beyond the stated maturity date of the Junior Subordinated Debentures. If and for so long as interest payments on the Junior Subordinated Debentures are so deferred, cash distributions on the Trust Securities will also be deferred and we will not be permitted, subject to certain exceptions, to declare or pay any cash distributions with respect to our capital stock (which includes common and preferred stock) or to make any payment with respect to our debt securities that rank equal with or junior to the Junior Subordinated Debentures.
Upon the repayment on June 8, 2031, the stated maturity date, or prepayment prior to this date of the Junior Subordinated Debentures, the proceeds from such repayment or prepayment shall be applied to redeem the Trust Securities upon not less than 30 nor more than 60 days notice of a date of redemption at the applicable redemption price. At maturity, the redemption price shall equal the principal of and accrued and unpaid interest on the Junior Subordinated Debentures. The Junior Subordinated Debentures will be prepayable prior to the maturity date either through special event or at the option. Special event, as defined in the indenture, redemption price is 106.09% of the principal payable in whole. Optional prepayment on or after June 8, 2011, in whole or in part, price is equal to 105.09% of the principal amount thereof on the prepayment date, declining ratably on each June 8 thereafter to 100% on or after June 8, 2021, plus accrued and unpaid interest thereon to the date of prepayment.
27
Item 6. SELECTED FINANCIAL DATA
The following table presents selected financial and other data of Nara Bancorp and prior to the February 2001 reorganization, financial and other data of Nara Bank, for each of the years in the five-year period ended December 31, 2001. The information below should be read in conjunction with, and is qualified in its entirety by, the more detailed information included elsewhere herein including our Audited Consolidated Financial Statements and Notes thereto.
| For The Year Ended December 31, | ||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||
| 2001 | 2000 | 1999 | 1998 | 1997 | ||||||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||||||||||||
|
Statement of Income Data
|
||||||||||||||||||||||||||||||
|
Total interest income
|
$ | 47,860 | $ | 41,602 | $ | 25,256 | $ | 18,657 | $ | 13,279 | ||||||||||||||||||||
|
Total interest expense
|
16,970 | 14,149 | 7,919 | 6,107 | 4,204 | |||||||||||||||||||||||||
|
Net interest income
|
30,890 | 27,453 | 17,337 | 12,550 | 9,075 | |||||||||||||||||||||||||
|
Provision for (recapture of) loan losses
|
750 | (1,100 | ) | 3,395 | 1,430 | 1,130 | ||||||||||||||||||||||||
|
Other operating income
|
15,324 | 13,518 | 8,024 | 6,269 | 4,802 | |||||||||||||||||||||||||
|
Other operating expense
|
28,364 | 24,830 | 16,337 | 12,463 | 8,939 | |||||||||||||||||||||||||
|
Income before income tax
|
17,100 | 17,241 | 5,629 | 4,926 | 3,808 | |||||||||||||||||||||||||
|
Income tax (benefit)
|
6,316 | 6,784 | 1,657 | 1,730 | 1,111 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
Net income
|
$ | 10,784 | $ | 10,457 | $ | 3,972 | $ | 3,196 | $ | 2,697 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
Per Share Data:
|
||||||||||||||||||||||||||||||
|
Net income — basic
|
$ | 1.96 | $ | 2.09 | $ | 0.84 | $ | 0.68 | $ | 0.79 | ||||||||||||||||||||
|
Net income — diluted
|
1.85 | 1.98 | 0.80 | 0.64 | 0.77 | |||||||||||||||||||||||||
|
Book value (period end)
|
9.95 | 8.15 | 6.07 | 5.22 | 5.73 | |||||||||||||||||||||||||
|
Number of common shares outstanding (period end)
|
5,573 | 5,462 | 4,404 | 4,045 | 3,424 | |||||||||||||||||||||||||
|
Statement of Financial Condition Data — At Period End:
|
||||||||||||||||||||||||||||||
|
Assets
|
$ | 679,438 | $ | 602,563 | $ | 359,090 | $ | 276,253 | $ | 181,238 | ||||||||||||||||||||
|
Securities
|
69,455 | 70,659 | 33,331 | 16,980 | 18,549 | |||||||||||||||||||||||||
|
Loans, net
|
502,141 | 355,724 | 235,479 | 164,838 | 107,981 | |||||||||||||||||||||||||
|
Deposits
|
589,844 | 527,709 | 319,869 | 249,309 | 158,638 | |||||||||||||||||||||||||
|
Shareholders’ equity
|
55,427 | 44,512 | 26,726 | 22,805 | 19,628 | |||||||||||||||||||||||||
|
Average Balance Sheet Data:
|
||||||||||||||||||||||||||||||
|
Assets
|
$ | 635,337 | $ | 479,898 | $ | 312,757 | $ | 213,527 | $ | 147,228 | ||||||||||||||||||||
|
Securities
|
70,615 | 50,244 | 22,622 | 16,621 | 13,523 | |||||||||||||||||||||||||
|
Loans, net
|
447,225 | 307,382 | 205,991 | 136,424 | 92,880 | |||||||||||||||||||||||||
|
Deposits
|
550,257 | 428,872 | 280,283 | 188,368 | 132,663 | |||||||||||||||||||||||||
|
Shareholders’ equity
|
50,449 | 34,496 | 24,944 | 21,199 | 11,628 | |||||||||||||||||||||||||
|
Selected Performance Ratios:
|
||||||||||||||||||||||||||||||
|
Return on average assets
|
1.70 | % | 2.18 | % | 1.27 | % | 1.50 | % | 1.83 | % | ||||||||||||||||||||
|
Return on average shareholders’ equity
|
21.38 | % | 30.31 | % | 15.92 | % | 15.08 | % | 23.19 | % | ||||||||||||||||||||
|
Net interest spread(1)
|
4.04 | % | 4.90 | % | 4.90 | % | 5.10 | % | 5.50 | % | ||||||||||||||||||||
|
Net yield on interest-earning assets(2)
|
5.40 | % | 6.60 | % | 6.40 | % | 6.52 | % | 7.10 | % | ||||||||||||||||||||
|
Average shareholders’ equity to average assets
|
7.94 | % | 7.19 | % | 7.98 | % | 9.93 | % | 7.90 | % | ||||||||||||||||||||
|
Regulatory Capital Ratio:
|
||||||||||||||||||||||||||||||
|
Leverage
|
Bank | 8.37 | % | 7.66 | % | 7.23 | % | 8.37 | % | 11.50 | % | |||||||||||||||||||
|
|
Bancorp | 9.64 | % | N/A | N/A | N/A | N/A | % | ||||||||||||||||||||||
|
Tier 1 risk-based
|
Bank | 9.47 | % | 10.03 | % | 9.01 | % | 10.18 | % | 14.63 | % | |||||||||||||||||||
|
|
Bancorp | 10.91 | % | N/A | N/A | N/A | N/A | |||||||||||||||||||||||
|
Total risk-based
|
Bank | 10.92 | % | 11.90 | % | 11.49 | % | 11.44 | % | 15.88 | % | |||||||||||||||||||
|
|
Bancorp | 12.37 | % | N/A | N/A | N/A | N/A | |||||||||||||||||||||||
|
Asset Quality:
|
||||||||||||||||||||||||||||||
|
Nonaccrual loans
|
$ | 1,720 | $ | 2,038 | $ | 1,523 | $ | 2,310 | $ | 442 | ||||||||||||||||||||
|
Loans 90 days or more past due
|
36 | — | — | — | 103 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
Total nonperforming loans
|
1,756 | 2,038 | 1,523 | 2,310 | 545 | |||||||||||||||||||||||||
|
Other real estate owned
|
— | 263 | 44 | 4 | 52 | |||||||||||||||||||||||||
|
Total nonperforming assets
|
$ | 1,756 | $ | 2,301 | $ | 1,567 | $ | 2,314 | $ | 597 | ||||||||||||||||||||
|
Asset Quality Ratios:
|
||||||||||||||||||||||||||||||
|
Nonaccrual loans to net loans
|
0.34 | % | 0.57 | % | 0.65 | % | 1.40 | % | 0.41 | % | ||||||||||||||||||||
|
Nonaccrual assets to total assets
|
0.25 | % | 0.34 | % | 0.42 | % | 0.84 | % | 0.24 | % | ||||||||||||||||||||
|
Allowance for loan losses to net loans
|
1.34 | % | 1.96 | % | 1.47 | % | 1.72 | % | 1.88 | % | ||||||||||||||||||||
|
Allowance for loan losses to nonaccrual loans
|
390.12 | % | 342.49 | % | 226.66 | % | 122.68 | % | 459.95 | % | ||||||||||||||||||||
|
Net charge-offs to average net loans
|
0.33 | % | 0.83 | % | 1.32 | % | 0.65 | % | 0.85 | % | ||||||||||||||||||||
| (1) | Difference between the interest yield on interest-earning assets and interest paid on interest-bearing liabilities | |
| (2) | Net interest income expressed as a percentage of average total interest-earning assets. |
28
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.
Accounting for the allowance for loan losses involves significant judgments and assumptions by management which have a material impact on the carrying value of net loans. Management considers this accounting policy to be a critical accounting policy. The judgments and assumptions used by management are based on historical data and management’s view of the current economic environment as described in “Allowance for Loan and Lease Losses and Methodology”.
We generally cease to accrue interest on any loan with respect to which the loan’s contractual payments are more than 90 days delinquent, as well as loans classified substandard for which interest payment reserves were established from loan funds rather than borrower funds. In addition, interest is not recognized on any loan for which management has determined that collection of our investment in the loan is not reasonably assured. A nonaccrual loan may be restored to accrual status when delinquent principal and interest payments are brought current, the loan is paying in accordance with its payment terms for a period, minimum six month, and future monthly principal and interest payments are expected to be allocated.
Properties acquired through foreclosure, or deed in lieu of foreclosure, are transferred to the other real estate owned portfolio and carried at the lower of cost or estimated fair value less the estimated costs to sell the property. The fair value of the property is based upon a current appraisal. The difference between the fair value of the real estate collateral and the loan balance at the time of transfer is recorded as a loan charge-off if fair value is lower. Subsequent to foreclosure, management periodically performs valuations and the property is carried at the lower of carrying value or fair value, less costs to sell. The determination of a property’s estimated fair value includes revenues projected to be realized from disposal of the property, construction and renovation costs.
Certain Small Business Administration (“SBA”) loans that we have the intent to sell prior to maturity are designated as held for sale at origination and are recorded at the lower of cost or market value, on an aggregate basis. A valuation allowance is established if the market value of such loans is lower than their cost, and operations are charged or credited for valuation adjustments. A portion of the gains on sale of SBA loans is recognized as other operating income at the time of the sale. The remaining portion of the gain is deferred and amortized over the remaining life of the loan as an adjustment to yield. Upon sales of such loans, a fee is received for servicing the loans. The servicing asset is recorded based on the present value of the contractually specified servicing fee, net of servicing costs over the estimated life of the loan, currently discounted at the rate of the related note plus 1 percent. The servicing asset is amortized in proportion to and over the period of estimated servicing income. Management periodically evaluates the servicing asset for impairment, which is the carrying amount of the servicing asset in excess of the related fair value. Impairment, if it occurs, is recognized in a valuation allowance in the period of impairment.
29
Results of Operations
General
Our most significant source of income is net interest income, which is the
difference between our interest income and our interest expense. Generally,
interest income is generated from our loans and investments and interest
expense is generated from interest-bearing deposits and other borrowings that
we may have, such as Federal Home Loan Bank borrowings, our debt securities,
and trust preferred securities. Our ability to generate profitable levels of
net interest income is largely dependent on our ability to maintain sound asset
quality and appropriate levels of capital and liquidity. Interest income and
interest expense can fluctuate widely based on changes in the level of interest
rates in the economy.
We attempt to minimize the effect of interest rate fluctuations on net
interest margin by matching a portion of our interest-sensitive assets against
our interest-sensitive liabilities. Net interest income also can be affected by
a change in the composition of assets and liabilities, for example, if higher
yielding loans were to replace a like amount of lower yielding investment
securities. Changes in volume and changes in rates also affect net interest
income. Volume changes are caused by differences in the level of
interest-earning assets and interest-bearing liabilities. Rate changes result
from differences in yields earned on assets and rates paid on liabilities.
We also have other operating income from sources other than interest
income. Those sources include service charges and fees on deposit accounts,
fees from trade finance activities and the issuance of letters of credit, and
net gains on sale of loans and investment securities available for sale. In
addition to interest expense, our income is impacted by other operating
expenses, such as salaries and benefits, occupancy, furniture and equipment
expenses, and provision for loan losses.
Net Income
We reported net income of $10.8 million in 2001, or $1.85 per diluted
share, compared with $10.5 million, or $1.98 per diluted share, in 2000, and
$4.0 million, or $0.80 per diluted share, in 1999. The annualized return on
average assets was 1.70% for 2001 as compared to 2.18% for 2000, and 1.27% for
1999. The annualized return on average equity was 21.38% for 2001 as compared
to 30.31% for 2000 and 15.92% for 1999.
During 2001, the increase in net income is largely attributable to
continued growth in the loan portfolio despite a decline in net interest margin
from series of rate cuts by the Federal Reserve, and an increase in other
operating income offset by higher other operating expenses. The increase in
net income in 2000 as compared to 1999 was mainly the result of an increase in
net interest income from $17.3 million to $27.5 million as discussed below in
net interest income section.
The following table summarizes increases and decreases, as applicable, in
income and expense for the years indicated.
30
Table of Contents
Operations Summary
Increase
Increase
Year
(Decrease)
Year
(Decrease)
Year
Ended
Ended
Ended
(dollars in thousands)
2001
Amount
%
2000
Amount
%
1999
$
47,860
$
6,258
15.0
%
$
41,602
$
16,346
64.7
%
$
25,256
16,970
2,821
19.9
%
14,149
6,230
78.7
%
7,919
30,890
3,437
12.5
%
27,453
10,116
58.3
%
17,337
750
1,850
168.2
%
(1,100
)
(4,495
)
-132.4
%
3,395
15,324
1,806
13.4
%
13,518
5,494
68.5
%
8,024
28,364
3,534
14.2
%
24,830
8,493
52.0
%
16,337
17,100
(141
)
-0.8
%
17,241
11,612
206.3
%
5,629
6,316
(468
)
-6.9
%
6,784
5,127
309.4
%
1,657
$
10,784
$
327
3.1
%
$
10,457
$
6,485
163.3
%
$
3,972
Net Interest Income
We reported net interest income of $30.9 million in 2001, which was an increase of $3.4 million, or 12.4% compared to net interest income of $27.5 million in 2000. Although the average interest-earning assets increased $155.4 million or 37.3% to $572.2 million for 2001 from $416.8 million for 2000, the net interest income only increased 12.5% due to a decrease in interest margin. Net interest margin decreased 120-basis points or 18.2% to 5.4% for 2001 from 6.6% for 2000. This was due to a 475 basis point drop market interest rates during the year 2001.
Interest and fees on loans increased $6.3 million or 18.4% to $40.5 million for 2001, from $34.2 million for 2000. This increase is derived primarily from 45.5% growth in average net loan portfolio. Approximately $10.6 million is attributable to growth in loan volume, and negative $4.4 million is attributable to rate decrease. The average yield earned on net loans decreased to 9.0% in 2001, from 11.1% in 2000. The decrease is primarily due to series of rate cuts made by the Federal Reserve during the year. Interest income on securities and other investments increased $1.3 million or 36.1% to $4.9 million in 2001 from $3.6 million in 2000, mainly due to increase in investment portfolio. Nara Bank’s average yield earned on investment securities slightly decreased to 6.9% in 2001 from 7.0% in 2000. Overall, our yield on average interest-earning assets decreased to 8.4% in 2001 from 10.0% in 2000 primarily due to decrease in interest rates.
Interest paid on deposits increased $1.8 million or 13.1% to $15.5 million in 2001 from $13.7 million in 2000. Of this increase, approximately $3.2 million is attributed to the increase in average interest-bearing deposits of $98.1 million or 36.1% and a negative $1.4 million is attributed to the decrease in interest rates. Our overall cost on average interest-bearing liabilities decreased to 4.4% in 2001 from 5.1% in 2000. This decrease was primarily due to the decrease in rates paid on all interest-bearing deposits, predominantly on time deposits.
We reported net interest income of $27.5 million in 2000 which was an increase of $10.2 million, or 59.0% compared to net interest income of $17.3 million in 1999 Our volume growth in interest-earning assets, especially with the acquisition of KFBNY, was the cause of a 64.4% increase in total interest income to $41.6 million for 2000 from $25.3 million for 1999. Net interest margin improved to 6.6% for 2000 from 6.4% for 1999.
Interest and fees on loans increased $12.9 million or 60.6 % to $34.2 million for 2000, from $21.3 million for 1999. Of this increase, approximately $11.2 million was attributable to volume growth, and $1.7 million was attributable to rate increase. Our average yield earned on net loans slightly increased to 11.1% in 2000, from 10.4% in 1999, due to increases in prime rates that are tied directly to our loan interest rates. Interest income on securities and other investments increased $2.0 million or 125.0% to $3.6 million in 2000, from $1.6 million in 1999, due to an increase in our investment portfolio. Our average yield earned on investment securities remained almost the same
31
at 7.0% in 2000, from 7.1% in 1999. Overall, our yield on average interest-earning assets has increased to 10.0% in 2000, from 9.3% in 1999.
Interest paid on deposits increased $5.9 million or 75.6% to $13.7 million in 2000, from $7.8 million in 1999. Of this increase, approximately $4.7 million is attributable to 244.7% average volume increase in interest-bearing deposits and an approximately $1.2 million is attributable to increase in interest rates. Our overall cost on average interest-bearing liabilities increased to 5.1% in 2000, compared to 4.4% in 1999.
Net Yield and Interest Rate Spread
We analyze our earnings performance using, among other measures, the interest rate spread and net yield on interest-earning assets. The interest rate spread represents the difference between the interest yield received on interest-earning assets and the interest rate paid on interest-bearing liabilities. Net interest income, when expressed as a percentage of average total interest-earning assets, is referred to as the net yield on interest-earning assets or net interest margin. Our net yield on interest-earning assets is affected by changes in the yields earned on assets and rates paid on liabilities, referred to as rate changes.
Interest rates charged on the loans are affected principally by the demand
for such loans, the supply of money available for lending purposes, and other
competitive factors. These factors are in turn affected by general economic
conditions and other factors beyond our control, such as federal economic
policies, the general supply of money in the economy, legislative tax policies,
governmental budgetary matters, and the action of the Federal Reserve Board.
The table below presents the average yield on each category of interest-earning
asset, average rate paid on each category of interest-bearing liability, and
the resulting interest rate spread and net yield on interest-earning assets for
each year in the three-year period ended December 31, 2001.
Average Balance Sheet and Analysis of Net Interest Income
December 31, 2001
December 31, 2000
December 31, 1999
Interest
Average
Interest
Average
Interest
Average
Average
Income/
Yield/
Average
Income/
Yield/
Average
Income/
Yield/
Balance
Expense
Rate
Balance
Expense
Rate
Balance
Expense
Rate
(Dollars in thousands)
$
447,222
$
40,450
9.0
%
$
307,382
$
34,214
11.1
%
$
205,991
$
21,344
10.4
%
2,951
201
6.8
%
4,940
322
6.5
%
2,323
139
6.0
%
71,792
4,932
6.9
%
51,051
3,567
7.0
%
23,212
1,649
7.1
%
50,232
2,277
4.5
%
53,432
3,499
6.5
%
39,948
2,124
5.3
%
$
572,197
$
48,860
8.4
%
$
416,805
$
41,602
10.0
%
$
271,474
$
25,256
9.3
%
85,815
2,653
3.1
%
58,352
2,220
3.8
%
37,907
1,355
3.6
%
67,154
2,039
3.0
%
43,875
1,472
3.4
%
32,648
1,092
3.3
%
217,255
10,778
5.0
%
169,898
9,997
5.9
%
107,229
5,362
5.0
%
16,700
1,500
9.0
%
5,375
460
8.6
%
1,287
110
8.5
%
$
386,924
$
16,970
4.4
%
$
277,500
$
14,149
5.1
%
$
179,071
$
7,919
4.4
%
$
30,890
$
27,453
$
17,337
5.4
%
6.6
%
6.4
%
4.0
%
4.9
%
4.9
%
32
| (1) | Loan fees are included in interest income and deferred fees and ALLL are included in net loans as follows (in thousands): |
| Deferred | |||||||||||||
| Year ended December 31, | Loan Fees | (Fees) cost | ALLL | ||||||||||
|
|
|
|
|
||||||||||
|
1999
|
$ | 800 | $ | (86 | ) | $ | 3,452 | ||||||
|
2000
|
$ | 968 | $ | (177 | ) | $ | 6,980 | ||||||
|
2001
|
$ | 1,150 | $ | (650 | ) | $ | 6,710 | ||||||
| (2) | Average loans outstanding including non-accrual loans. |
The following table shows changes in interest income (including loan fees)
and interest expense and the amount attributable to variations in interest
rates and volumes for the period indicated. The variances attributable to
simultaneous volume and rate changes have been allocated to the change due to
volume and the change due to rate categories in proportion to the relationship
of the absolute dollars amounts attributable solely to the change in volume and
to the change in rate.
December 31, 2001 compared to 2000
December 31, 2000 compared to 1999
Net
Change due to
Net
Change due to
Increase
Increase
(Decrease)
Rate
Volume
(Decrease)
Rate
Volume
(Dollars in thousands)
$
6,236
$
(4,369
)
$
10,605
$
12,870
$
1,687
$
11,183
(121
)
15
(136
)
183
13
170
1,364
(60
)
1,424
1,918
(26
)
1,944
(1,221
)
(1,022
)
(199
)
1,375
560
815
$
6,258
$
(5,436
)
$
11,694
$
16,346
$
2,234
$
14,112
$
433
$
(286
)
$
719
$
865
$
92
$
773
567
(124
)
691
380
3
377
781
(1,006
)
1,787
4,636
1,076
3,560
1,040
24
1,016
349
(1
)
350
$
2,821
$
(1,392
)
$
4,213
$
6,230
$
1,170
$
5,060
$
3,437
$
(4,044
)
$
7,481
$
10,116
$
1,064
$
9,052
Provision for loan losses
The provision for loan losses represents the current period credit cost associated with maintaining an appropriate allowance for loan losses. The loan loss provision for each period is dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of the quality for the loan portfolio, the value of the underlying collateral on problem loans and the general economic conditions in our market area. Periodic fluctuations in the provision for loan losses result from management’s assessment of the adequacy of the allowance for loan losses; however, actual loan losses may vary from current estimates.
Refer to the section “Financial Condition-Allowance for Loan Losses” for a description of our systematic methodology employed in determining an adequate allowance for loan losses.
For the year ended December 31, 2001, the provision for loan losses was $750,000, an increase of $1.85 million or 168.2%, from the net recapture of loan losses of $1.1 million in 2000. The increase in provision for loan
33
losses for 2001 is primarily due to the significant growth experienced in the loan portfolio of $146.6 million or 40.4%. The provision for loan losses decreased $4.5 million or 132.4% to negative $1.1 million in 2000 from $3.4 million in 1999. Provision for (recapture of) loan losses is charged (added back) to income to bring the allowance for loan losses to a level deemed appropriate by management based on the factors discussed under the “Allowance for Loan Losses” section of this report.
In 2000, there was a total recapture of loan loss provision of $1.5 million. As the result of our acquisition of KFBNY in February 2000, we had evaluated and brought forward an additional loan loss reserve of $7.9 million relating to the KFBNY loan portfolio, which was determined to be at higher risk of default based on weak underwriting standards and lower loan quality in comparison to our own loan portfolio. Additionally, we recorded a provision for loan losses of $400,000 during the third quarter of 2000, because of an identified loan with high-risk exposure, which was deteriorating rapidly. During the year 2000, we charged off approximately $6.6 million of loans and had recoveries of $4.0 million. Approximately $3.5 million or 53.0% of total charged off loans were those from KFBNY, which were charged off after the closing of the acquisition. However, approximately $3.6 million in KFBNY loans were eventually recovered during the year 2000, some of which were not anticipated. The high level of recoveries during the latter half of year 2000 led to the recapture of $1.5 million of loan loss provisions.
We use systematic methodology to calculate the allowance for loan losses. Through applying this methodology, which takes into account our loan portfolio mix, credit quality, loan growth, the amount and trends relating to our delinquent and non-performing loans, regulatory policies, general economic conditions and other factors relating to the collectibility of loans in our portfolio, we determine the appropriateness of our allowance for loan losses, which is further adjusted by quarterly provisions charged against earnings.
Other Operating Income
Our other operating income increased $1.8 million or 13.3% to $15.3 million in 2001, compared to $13.5 million in 2000. The increase was primarily due to increased SBA loans sales and also due to sale of securities. The gain on sale of SBA loans increased approximately $900,000 or 131.8% to $1.6 million in 2001, compared to $683,000 in 2000. We sold a total of $30.8 million in SBA loans in 2001, which was an increase of $16.6 million or 116.9% from $14.9 million in 2000. The earnings on cash surrender value increased $197,000 or 73.8% to $464,000 in 2001, compared to $267,000 in 2000. This increase was due to additional purchase of Bank- Owned Life Insurance of $1.8 million for Benjamin Hong and $3.2 million for the group of key employees during 2001. During 2001, we also recognized $917,000 of gains from the sale of investment securities, which totaled $16.5 million in book value.
Our other operating income increased $5.5 million or 68.8%, to $13.5 million in 2000, compared to $8.0 million in 1999. Service charges on deposit accounts, particularly non-sufficient fund fees and account analysis fees, increased $2.3 million or 70.0% to $5.6 million in 2000, from $3.3 million in 1999. These increases were mainly due to increases in deposit accounts, especially the three New York branches acquired from KFBNY in February of 2000.
The fee income generated from our international letter of credit transactions increased $827,000 or 45.9% to $2.7 million in 2000 from $1.8 million in 1999. Increase in trade finance activities from three locations (Los Angeles, Silicon Valley, and New York) contributed to this increase. Other operating income increased due to transaction increases in operating activities from newly acquired branches as well as the existing branches.
34
The breakdown of other operating income by category is reflected below:
Increase
Increase
Year
(Decrease)
Year
(Decrease)
Year
Ended
Ended
Ended
(Dollars in thousands)
2001
Amount
%
2000
Amount
%
1999
$
5,903
$
323
5.8
%
$
5,580
$
2,271
68.6
%
$
3,309
1,550
867
126.9
%
683
(226
)
-24.9
%
909
2,439
(218
)
-8.2
%
2,657
827
45.2
%
1,830
960
122
14.6
%
838
394
88.7
%
444
431
(19
)
-4.2
%
450
(146
)
-24.5
%
596
464
197
73.8
%
267
9
3.5
%
258
1,324
221
20.0
%
1,103
1,103
100
%
—
36
(382
)
-91.4
%
418
419
41,900
%
(1
)
917
917
100
%
—
(119
)
100.0
%
(119
)
1,300
(222
)
-14.6
%
1,522
843
124.2
%
679
$
15,324
$
1,806
13.4
%
$
13,518
$
5,494
68.5
%
$
8,024
Other Operating Expenses
Our other operating expenses increased $3.6 million or 14.5% to $28.4 million in 2001, compared to $24.8 million in 2000. Salaries and benefits increased $2.4 million or 17.6% to $16.0 million in 2001, compared to $13.6 million in 2000. This increase was primarily due increased bonus reserves to compensate employees and the additional staffing for the newly opened branches during 2001. Occupancy expenses increased approximately $471,000 or 14.3% to $3.8 million in 2001, compared to $3.3 million in 2000. Furniture and equipment expenses also increased $237,000 or 21.5% to $1.3 million in 2001, compared to $1.1 million in 2000. These increases also were primarily due to the additional branches opened during 2001 and partly due to leasehold improvements made in our New York branches.
Our regulatory fees increased $87,000 or 21.5% to $491,000 in 2001, compared to $404,000 in 2000. The increase primarily came as the result of an increase in the OCC’s assessment fees, which are calculated based on our asset size. Communication expenses also increased $154,000 or 32.2% to $632,000 in 2001, compared to $478,000 in 2000. This increase was mainly due to upgrading and installing data lines to accommodate faster network services. Directors’ fees increased $73,000 or 24.2% to $375,000 in 2001, compared to $302,000 in 2000, as of result of the hiring of new Directors for Nara Bancorp, commencing in early 2001. Other income decreased by 48.0%, mainly due to a discontinuation of lease income received from the Manhattan building, which was sold at the end of year 2000. The lease income totaled approximately $439,000 in year 2000.
During 2000, other operating expenses increased $8.5 million or 52.1% to $24.8 million from $16.3 million in 1999. Salaries and benefits, which accounted for over 50% of other operating expenses, increased $5.4 million or 65.9% to $13.6 million in 2000, compared to $8.2 million in 1999, mainly because of an increased number of employees resulting from the KFBNY acquisition and the opening of new branches. Occupancy expenses increased $1.4 million or 73.7% to $3.3 million in 2000, compared to $1.9 million in 1999. This was primarily due to an increase in the depreciation of buildings acquired in the KFBNY transaction. All other operating expenses increased as well, largely due to the acquisition of KFBNY although some portion of the increase was related to other expansions and projects that we accomplished.
Other operating expenses generally reflect the direct expenses and related administrative expenses associated with staffing, maintaining, promoting and operating branch facilities. Consequently, other operating expenses have increased as our asset size increased and the number of branch offices and other offices increased.
A breakdown of other operating expenses by category is reflected below:
Increase
Increase
Year
(Decrease)
Year
(Decrease)
Year
Ended
Ended
Ended
(dollars in thousands)
2001
Amount
%
2000
Amount
%
1999
$
16,044
$
2,410
17.7
%
$
13,634
$
5,463
66.9
%
$
8,171
3,811
471
14.1
%
3,340
1,459
77.6
%
1,881
1,290
237
22.5
%
1,053
291
38.2
%
762
858
30
3.6
%
828
181
28.0
%
647
491
87
21.5
%
404
132
48.5
%
272
35
Increase
Increase
Year
(Decrease)
Year
(Decrease)
Year
Ended
Ended
Ended
(dollars in thousands)
2001
Amount
%
2000
Amount
%
1999
632
154
32.2
%
478
133
38.6
%
345
1,515
136
9.9
%
1,379
(130
)
-8.6
%
1,509
1,202
12
1.0
%
1,190
410
52.6
%
780
404
7
1.8
%
397
77
24.1
%
320
375
73
24.2
%
302
—
0.0
%
302
601
38
6.7
%
563
(24
)
-4.1
%
587
200
—
0.0
%
200
—
0.0
%
200
941
(121
)
-11.4
%
1,062
501
89.3
%
561
$
28,364
$
3,534
14.2
%
$
24,830
$
8,493
52.0
%
$
16,337
Provision for Income Taxes
During 2001, we recorded a $6.3 million provision for income taxes, which resulted in an effective tax rate of 37%, compared with $6.8 million or effective tax rate of 39%, and $1.7 million, or effective tax rate of 29%, for the years ended December 31, 2000 and 1999, respectively. This decrease in 2001 compared to 2000 was primarily due to the state income tax benefits related to the acquisition of KFBNY. At December 31, 2001, we had federal and California net operating loss carryforwards relating to Nara Bank’s ownership change that occurred on July 15, 1994 of approximately $664,000 and $622,000, respectively, which will expire through 2009. Also at December 31, 2001, we had federal and New York net operating loss carryforwards relating to the purchase of KFBNY that occurred on February 25, 2000, both approximating $7,185,000, which will expire through 2019. Due to the ownership change in 1994 and restructuring in 2000, the annual limitation that can be utilized to offset future taxable income approximates $83,000 and $497,000, respectively.
Financial Condition
Our total assets increased $76.8 million or 12.7% to $679.4 million at December 31, 2001, compared to $602.6 million at December 31, 2000. This increase was primarily due to growth in our loan portfolio. Net loans, including loans held for sale, increased $146.4 million or 41.2% to $502.1 million at December 31, 2001, compared to $355.7 million at December 31, 2000. The increase in loans was primarily funded by deposits. Total deposits increased $62.1 million or 11.8% to $589.8 million at December 31, 2001, compared to $527.7 million at December 31, 2000. The details are discussed below.
At December 31, 2000, our total assets increased $243.5 million or $67.8% to $602.6 million from $359.1 million at December 31, 1999. Net loans increased $120.2 million or 51.0% to $355.7 million at 2000 year-end from $235.5 million at the previous year-end. This accounted for 49.4% of the total increase in assets. Total deposits at December 31, 2000 also increased $207.8 million or 65.0% to $527.7 million from $319.9 million at December 31, 1999. This resulted from the acquisition of KFBNY and the growth of existing branches during the year.
Investment Security Portfolio
The main objectives of our investment strategy are to support a sufficient level of liquidity while providing a means to manage our interest rate risk, and to generate an adequate level of interest income without taking undue risks. Our investment policy permits investment in various types of securities, certificates of deposits and federal funds sold in compliance with various restrictions in the policy. Securities are classified as held-to-maturity or available-for-sale. The securities that we have the ability and intent to hold to maturity are classified as held-to-maturity securities. All other securities are classified as available-for-sale. There were no trading securities at December 31, 2001 or 2000. As of December 31, 2001, held-to-maturity securities totaled $4.3 million, compared to $15.7 million at December 31, 2000, and available-for-sale securities totaled $65.1 million at December 31, 2001, compared to $54.9 million at December 31, 2000. The decrease in held-to-maturity securities is primarily due to called agency bonds during 2001 as a result of decreases in interest rates. During 2001, a total of $36.7 million in agency securities were called and a total of $51.8 million in securities available for sale were purchased. From the investment portfolio, securities with amortized cost of approximately $2.5 million and $4.2 million were pledged to Federal Reserve Board as required or permitted by law at December 31, 2001 and 2000, respectively. The investment portfolio consists of government sponsored agency bonds, mortgage backed securities, bank qualified California municipals, and corporate bonds. This investment portfolio composition reflects our investment strategy.
36
The following table summarizes the maturity of securities and their
pertinent weighted average yield ratios at the dates and for the periods
indicated:
At or For the Year Ended December 31,
(dollars in thousands)
2001
2000
1999
Weighted
Weighted
Weighted
Amortized
Market
Average
Amortized
Market
Average
Amortized
Market
Average
Cost
Value
Yield
Cost
Value
Yield
Cost
Value
Yield
$
1,598
$
1,520
7.00
%
$
13,068
$
12,587
6.78
%
$
14,658
$
13,820
6.76
%
—
—
—
7,492
7,466
6.13
%
8,000
7,804
6.14
%
—
—
—
—
—
—
1,000
977
6.75
%
1,598
1,520
7.00
%
5,576
5,121
7.72
%
5,658
5,039
7.71
%
2,725
2,754
7.20
%
2,676
2,409
7.16
%
2,627
2,321
7.16
%
2,002
2,111
7.13
%
2,003
1,968
7.09
%
2,003
1,893
7.09
%
723
643
7.41
%
673
441
7.48
%
624
428
7.45
%
16,154
16,521
5.59
%
18,552
18,591
6.99
%
11,051
10,902
6.88
%
—
—
—
7,000
7,009
6.66
%
—
—
—
12,154
12,385
5.12
%
7,052
7,070
7.12
%
5,555
5,531
6.55
%
2,000
2,091
7.03
%
4,000
4,011
7.14
%
4,996
4,888
7.14
%
2,000
2,045
7.00
%
500
501
8.72
%
500
483
8.00
%
8,756
8,977
5.52
%
9,720
9,645
6.96
%
950
978
6.86
%
1,184
1,196
6.70
%
—
—
—
7,806
7,999
5.36
%
8,536
8,449
7.00
%
—
—
—
1,102
1,104
7.00
%
56
56
7.00
%
—
—
—
1,102
1,104
7.00
%
56
56
7.00
%
—
—
—
383
384
2.48
%
—
—
—
—
—
—
383
384
2.48
%
—
—
—
—
—
—
4,369
4,304
5.09
%
—
—
—
—
—
—
4,369
4,304
5.09
%
—
—
—
—
—
—
32,359
32,287
7.46
%
24,296
24,866
7.26
%
3,486
3,416
7.14
%
2,484
2,511
4.92
%
—
—
—
—
—
—
10,965
11,072
6.36
%
10,622
10,893
6.88
%
1,514
1,501
7.25
%
9,341
9,486
7.58
%
10,216
10,458
7.18
%
1,972
1,915
7.05
%
9,569
9,218
9.36
%
3,458
3,515
8.70
%
—
—
—
1,451
1,555
8.35
%
1,726
1,757
7.18
%
1,701
1,729
8.68
%
1,451
1,555
8.35
%
1,726
1,757
7.18
%
1,701
1,729
8.68
%
$
68,897
$
69,406
6.58
%
$
70,094
$
69,911
7.06
%
$
33,523
$
32,188
6.97
%
Loan Portfolio
Our net loans increased $146.4 million or 41.2% to $502.1 million at December 31, 2001, compared to $355.7 million at December 31, 2000. Net loans accounted for 81.6% of our total interest-earning assets at year-end 2001, compared to 66.7% at year-end 2000. The average net loans for 2001 increased $139.8 million or 45.5% from the previous year. From the total increase of $146.4 million in net loans, approximately 42.8% was contributed by the branches in the New York regions. The net loans in the New York region increased $62.7 or 80.1% to $141.0 million at December 31, 2001, compared to $78.3 million at December 31, 2000.
37
As a result of continued focus on commercial lending activities, loan growth remained concentrated in the commercial loans. Our commercial loans increased $71.7 million or 51.4% to $211.2 million at December 31, 2001, compared to $139.5 million at December 31, 2000. Real estate loans, mostly consisting of commercial real estate loans, also increased $73.9 million or 41.6% to $251.7 million at December 31, 2001, compared to $177.8 million at December 31, 2000.
Our net loans increased by $120.2 million or 51.0% to $355.7 million at December 31, 2000, compared to $235.5 million at December 31, 1999. Net loans accounted for 66.7% of our total interest-earning assets at year-end 2000, compared to 74.7% at year-end 1999. While total net loans outstanding increased 51.0% as of December 31, 2000, average net loans for the year increased 49.2% from the previous year. The increase was due to the acquisition of KFBNY and growth in our existing branches, including the newly acquired New York branches. Approximately $30.8 million or 25.6% of the total increase in net loans was attributable to the acquisition of KFBNY. Net loans from the three branches in New York, including the $30.8 million acquired in the KFBNY transaction, increased $23.1 million or 41.4% to $78.9 million at year-end 2000, from $55.8 million at year-end 1999.
We carry all loans at face amount, less payments collected, net of deferred loan origination fees and the allowance for loan losses. Interest on all loans is accrued daily on a simple interest basis. Once a loan is placed on non-accrual status, accrual of interest is discontinued and previously accrued interest is reversed. Loans are placed on a non-accrual basis when principal and interest on a loan is past due 90 days or more, unless a loan is both well-secured and in process of collection.
The rates of interest charged on variable rate loans are set at specified increments in relation to our prime lending rate and accordingly vary as our prime lending rate varies. Approximately 81.0% of our net loans were variable-rate loans at December 31, 2001.
With certain exceptions, we are permitted, under applicable law, to make unsecured loans to individual borrowers in aggregate amounts of up to 15% of the sum of our total capital and the allowance for loan losses (as defined for regulatory purposes). As of December 31, 2001, our lending limit was approximately $9.6 million for unsecured loans. For the purpose of lending limits, a secured loan is defined as a loan secured by readily marketable collateral having a current market value of at least 100% of the amount of the loan or extension of credit at all times. In addition to unsecured loans, we are permitted to make collateral-secured loans in an additional amount up to 10% of our total capital and the allowance for loan losses.
The following table shows the composition of our loan portfolio by type of loan on the dates indicated:
December 31,
(dollars in thousands)
2001*
2000
1999*
1998*
1997
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
$
211,214
41.5
%
$
139,544
38.5
%
$
100,411
42.0
%
$
84,166
50.2
%
$
68,199
62.0
%
251,691
49.4
%
177,849
49.0
%
103,311
43.2
%
52,823
31.5
%
21,136
19.2
%
46,596
9.1
%
45,488
12.5
%
35,295
14.8
%
30,651
18.3
%
20,635
18.8
%
509,501
100.0
%
362,881
100.0
%
239,017
100.0
%
167,640
100.0
%
109,970
100.0
%
(650
)
(177
)
(86
)
32
45
(6,710
)
(6,980
)
(3,452
)
(2,834
)
(2,033
)
$
502,141
$
355,724
$
235,479
$
164,838
$
107,982
| * | Includes commercial loans held for sale; $3,657,842 in 2001, $168,250 in 1999 and $415,138 in 1998. |
38
Commercial Loans and Real Estate Loans
Commercial loans are made for the purposes of providing working capital, financing the purchase of inventory, especially for importers and exporters, or equipment and for other business purposes. Short term business loans (within one year) are generally used to finance current transactions and typically provide for periodic interest payments, with principal being payable at maturity. Term loans (5 to 7 years) normally provide for monthly payments of both principal and interest. The credit-worthiness of the borrower is reviewed on a periodic basis, and most loans are collateralized by inventory, equipment and/or real estate. Our real estate loans consist primarily of loans secured by deeds of trust on commercial property and are normally written for a short duration. It is our policy to restrict real estate loans to 70% of the appraised value of the property. We offer both fixed and floating rate loans. The maturities on such loans are generally restricted to seven years (on an amortization up to 25 years with a balloon payment due at maturity).
SBA Loans
Our SBA loans typically are made for the purpose of providing working capital, financing the purchase of equipment or inventory, financing the purchase of a business, debt refinancing, or financing the purchase or construction of owner occupied commercial property. SBA Commercial loans typically are term loans with maturities ranging from 7 to 25 years. These loans normally provide for floating interest rates, with monthly payments of both principal and interest. At December 31, 2001, total SBA commercial loans were $10.5 million. SBA real estate loans generally are 25 year term loans with full amortization. At December 31, 2001, total SBA real estate loans were $63.6 million. Our SBA lending represents an important portion of its loan portfolio because of our ability to sell the guaranteed portion in the secondary market at a premium, while earning servicing fees on the sold portion over the remaining life of the loan. Thus, in addition to the yield earned on the portion of the SBA loans retained by us, we recognize income from the gains on the sales from the loan servicing on the loans sold into the secondary market.
Consumer Loans
Most of our consumer loan portfolio consists of automobile loans and savings-secured loans. Nara Bank began originating automobile loans in early 1995. Referrals from automobile dealers comprise the majority of originations of such loans. We also offer fixed-rate loans to buyers of new and previously owned automobiles who are not qualified for automobile dealers’ most preferential loan rates. These loans are reviewed on an annual basis.
We extend lines of credit to business customers usually on an annual review basis. We do not normally make loan commitments in material amounts for periods in excess of one year. Our undisbursed commercial loan commitments at December 31, 2001, 2000 and 1999 were $146.2 million, $87.9 million, and $56.3 million, respectively.
The following table shows our loan commitments and letters of credit
outstanding at the dates indicated:
December 31,
(dollars in thousands)
2001
2000
1999
$
146,201
$
87,895
$
56,278
4,785
4,574
2,851
21,634
21,427
17,554
Interest income on all loans is recognized under the accrual method of accounting. Accrual accounting takes the daily interest earned on the daily outstanding loan balance and records it as interest revenue regardless of the individual loan payment dates. The calculation is based on the simple interest method where the unpaid loan
39
balance is multiplied by the number of outstanding days and then multiplied by the applicable interest rate per day. We generally do not record as revenue the potential interest on loans that are classified as probable losses.
Non-performing Loans and Other Real Estate Owned(“OREO”)
Loans are placed on nonaccrual status when they become 90 days past due, unless the loan is both well- secured and in the process of collection. Loans may be placed on nonaccrual status earlier if, in management’s opinion, the full and timely collection of principal or interest becomes uncertain. When a loan is placed on nonaccrual status, unpaid accrued interest is charged against interest income. Loans are charged off when our management determines that collection has become unlikely. OREO consists of real estate acquired by us through foreclosure.
Non-performing loans decreased $282,000 or 13.8% to $1.8 million at
December 31, 2001, compared to $2.0 million at December 31, 2000.
Non-performing loans increased $515,000 or 33.8% to $2.0 million at December
31, 2000, compared to $1.5 million at December 31, 1999. The primary reason
for this increase was because of a $1.2 million loan that was subsequently
charged off in February of 2001.
December 31,
(dollars in thousands)
2001
2000
1999
$
1,720
$
2,038
$
1,523
36
0
0
0
0
0
$
1,756
$
2,038
$
1,523
We did not own any other real estate at December 31, 2001. There was no
expense incurred through OREO transactions in 2001. We owned other real
estate, taken through foreclosure, in aggregate amounts of approximately
$263,000 and $44,000 at December 31, 2000 and 1999, respectively. We reserved
$37,000 and $13,000 at December 31, 2000 and 1999, respectively, as a valuation
allowance. We incurred expenses of $90,748 and $16,629 in 2000 and 1999,
respectively. We earned income of $2,893 and $906 from the properties in 2001
and 1999, respectively. The following table summarizes our OREO at the dates
indicated:
December 31,
(dollars in thousands)
2001
2000
1999
$
—
$
300
$
57
—
(37
)
(13
)
$
—
$
263
$
44
Maturity of Loans and Sensitivity of Loans to Changes in Interest Rates
The following table sets forth by category of loan (including fixed and variable rate loans) the amounts of loans outstanding as of December 31, 2001, which are based on remaining scheduled repayment of principal, due in less than one year, due in one to five years, or due in more than five years. Loan maturities are based on contractual maturities.
40
Concentrations
Loan concentrations are considered to exist when there are significant
amounts of loans to a multiple number of borrowers engaged in similar
activities, which would cause them to be similarly impacted by economic or
other conditions. The following table describes the industry concentrations in
our loan portfolio, which exceeded 10% of our total loans as of the dates
indicated:
December 31, 2001
(dollars in thousands)
Loans maturing in
After one
Within
But within
After
One Year
Five years
Five years
Total
$
97,495
$
64,243
$
49,476
$
211,214
28,011
73,163
150,517
251,691
4,637
35,260
6,699
46,596
130,143
172,666
206,692
509,501
18,981
54,211
23,721
96,913
111,162
118,455
182,971
412,588
$
130,143
$
172,666
$
206,692
$
509,501
At December 31,
(dollars in thousands)
2001
2000
1999
1998
1997
% of
% of
% of
% of
% of
Amount
Portfolio
Amount
Portfolio
Amount
Portfolio
Amount
Portfolio
Amount
Portfolio
$
38,665
7.6
%
$
36,142
10.0
%
$
30,072
12.6
%
$
31,383
18.7
%
$
25,608
23.3
%
109,112
21.4
%
89,609
24.7
%
71,283
29.8
%
46,517
27.7
%
34,648
31.5
%
85,515
16.8
%
61,282
16.9
%
35,878
15.0
%
30,345
18.1
%
19,276
17.5
%
104,669
20.6
%
63,792
17.6
%
25,702
10.8
%
23,745
14.2
%
13,208
12.0
%
129,495
25.4
%
75,567
20.8
%
48,453
20.3
%
—
—
—
—
$
467,456
$
326,392
$
211,388
$
131,990
$
92,740
Summary of Loan Loss Experience
The risk of nonpayment on loans is inherent in all commercial banking operations. We employ a concept of total quality loan management in order to minimize our credit risk. For new loans, we thoroughly analyze each loan application and a majority of those loans is approved by the Management Loan Committee, which is comprised of six officers including the Chief Executive Officer, Chief Credit Officer and Chief Financial Officer. For existing loans, we maintain a systematic loan review program, which includes a quarterly loan review by the internal loan review officer and a semi-annual loan review by external loan consultants. Based on the reviews, loans are graded for their overall quality, which is measured based on the type of the loan being made, the credit-worthiness or history of the borrower over the term of the loan, security for the loan and cash flow of the borrower. We closely monitor loans that management has determined require further supervision because of the loan size, loan structure, and/or complexity of the borrower. These loans are periodically reviewed by the Management Loan Committee.
When principal or interest on a loan is past due 90 days or more, a loan is normally placed on non-accrual status unless it is considered to be both well-secured and in the process of collection. Further, a loan is considered to be a loss in whole or in part when (1) its loss exposure beyond any collateral value is apparent, (2) servicing of the unsecured portion has been discontinued or (3) collection is not anticipated due to the borrower’s financial condition and general economic conditions in the borrower’s industry. Any loan, or portion of a loan, judged by management to be uncollectible is charged against the allowance for loan losses, while any recoveries are credited to such allowance.
Our allowance for loan losses is established to provide for loan losses, which can be reasonably anticipated. The allowance for loan losses is established through charges to operating expenses in the form of provisions for loan
41
losses. Actual loan losses or recoveries are charged or credited, respectively, directly to the allowance for loan losses. The amount of the allowance is determined by management and reported to the Board quarterly. The results of both internal and external loan reviews are used to determine the loan loss reserve. Our current loan review system takes into consideration such factors as the current financial condition of the borrower, the value of security, future economic conditions and their impacts on various industries. Our own historical loan loss experience is factored into a detailed loss migration analysis method, which determines loss factors to be used in calculating the allowance for loan losses.
At December 31, 2001, the allowance for loans losses was $6.7 million, which was an decrease of $300,000 or 4.3% from $7.0 million at December 31, 2000. During the year 2001, we charged off approximately $3.8 million and recovered $2.3 million of which $2.0 million was the recoveries from KFBNY loans either before or after the acquisition. The allowance for loan losses increased $3.5 million or 100.0% to $7.0 million at year ended 2000, from $3.5 million at year ended 1999. Approximately $7.9 million of loan loss reserve in 2000 were transferred from the KFBNY acquisition. During the year 2000, we charged off approximately $6.6 million and recovered $4.0 million in loans.
Specific reserves for impaired loans in accordance with SFAS No. 114, were $1.4 million at year-end 2001, compared to $1.9 million at year-end 2000 and $1.0 million at year-end 1999. Our management and Board of Directors review the adequacy of the allowance for loan losses at least quarterly. Based upon these evaluations and internal and external reviews of the overall quality of our loan portfolio, management and the Board of Directors believe that the allowance for loan losses was adequate as of December 31, 2001, to absorb estimated losses associated with the loan portfolio. However, no assurances can be given as to whether we will experience further losses in excess of the allowance, which may require additional provisions for loan loss reserves. If there are further losses, they may have a negative impact on our earnings.
The allowances as a percentage of loans outstanding at December 31, 2001, 2000 and 1999 were 1.48%, 2.21%, and 1.65%, respectively. Management believes that the allowance for loan losses is adequate to cover all reasonably anticipated losses in the loan portfolio. However, no assurance can be given that future economic conditions will not adversely affect our service areas or that other circumstances, including circumstances beyond our control, will not result in increased losses in our loan portfolio, which could possibly exceed the total allowance for loan losses.
The following table shows the provision made for loan losses, the amount
of loans charged off, the recoveries on loans previously charged off together with the balance in the allowance for possible loan losses at the beginning and end of each period, the amount of average and total loans outstanding, and other pertinent ratios as of the dates and for the periods indicated:
December 31,
(dollars in thousands)
2001
2000
1999
1998
1997
$
454,591
$
315,735
$
208,895
$
138,914
$
94,841
508,850
362,704
238,931
167,672
110,015
$
6,980
$
3,452
$
2,834
$
2,033
$
1,727
3,463
6,300
2,785
754
576
233
225
154
260
327
83
52
0
0
85
3,779
6,577
2,939
1,014
988
1,737
2,292
151
54
111
182
173
76
69
83
376
1,571
—
—
—
2,295
4,036
227
123
194
1,484
2,541
2,712
891
794
750
(1,100
)
3,395
1,430
1,130
—
7,878
—
285
—
464
(709
)
(65
)
(22
)
(30
)
$
6,710
$
6,980
$
3,452
$
2,834
$
2,033
0.33
%
0.80
%
1.30
%
0.64
%
0.84
%
0.29
%
0.70
%
1.14
%
0.53
%
0.72
%
42
December 31,
(dollars in thousands)
2001
2000
1999
1998
1997
1.48
%
2.21
%
1.65
%
2.04
%
2.14
%
1.32
%
1.92
%
1.44
%
1.69
%
1.85
%
21.26
%
73.61
%
95.70
%
43.83
%
45.98
%
197.87
%
-231.00
%
79.88
%
62.31
%
70.27
%
The reserve for losses on commitments to extend credit and letters of credit is primarily related to undisbursed funds on lines of credit. We evaluate credit risk associated with the loan portfolio at the same time we evaluate credit risk associated with the commitments to extend credit and letters of credits. However, the allowances necessary for the commitments is reported separately in other liabilities in the accompanying consolidated statements of financial conditions, and not as part of the allowance for loan losses, as presented above. The reserve for losses on commitments to extend credit and letters of credit was $437,000 and $901,000 at December 31, 2001 and 2000, respectively.
Allowance For Loan and Lease Losses and Methodology
We maintain an allowance for loan and lease losses (“Allowance”) in an amount believed to be adequate to absorb the estimated known and inherent losses identified in the loan portfolio for the next twelve months. Our methodology for determining the adequacy of the Allowance is based on a consistent and comprehensive analysis that is performed quarterly by management. By assessing the probable estimated losses inherent in the loan portfolio on a quarterly basis, we are able to adjust specific and inherent loss estimates based upon the most recent information that has become available.
We use three different methodologies to determine the adequacy of the Allowance: (1) the Migration Analysis; (2) the Reasonableness Test; and (3) the Specific Allocation method.
The Migration Analysis is a formula method based on our actual historical net charge-off experience for each loan type pools and undisbursed commitments graded Pass (less cash secured loans), Special Mention, Substandard, and Doubtful.
We use an eight-quarter rolling average of historical losses detailing charge-offs, recoveries, and loan type pool balances to determine the estimated credit losses for non-classified and classified loans. Also, in order to reflect the impact of recent events, the eight-quarter rolling average has been weighted. The most recent four quarters have been assigned a 60% weighted average and the older four quarters have been assigned a 40% weighted average.
The resultant migration risk factors, or our established minimum risk factor for loan type pools that have no historical loss, whichever is greater, for each loan type pool is used to calculate our General Reserve. For loan type pools that have no historical loss, we have established a minimum risk factor for each loan grade Pass (0.40% — 1.0%), Special Mention (3.0% — 5.0%), Substandard (7.0% — 15.0%), Doubtful (50.0%), and Loss (100.0%).
For unfunded/undisbursed commitments and contingent liabilities, we use 50.0% of the migration/minimum risk factor for loans graded Pass, due to the fact that in many cases the Bank has the option of freezing or withholding unfunded loan proceeds if the Bank becomes aware of a problem or potential problem with the borrower. For graded loans (Special Mention, Substandard, Doubtful, and Loss), 100% of the migration/minimum risk factor is assigned to the unfunded/undisbursed commitments and contingent liabilities.
For identified impaired loans, if the calculated impairment is less than the migration risk factor, the migration risk factor is used. If the calculated impairment is greater than the migration risk factor, the General Reserve is increased by the amount of the difference.
Additionally, in order to systematically quantify the credit risk impact of trends and changes within the loan portfolio, we subjectively, within established parameters, make adjustments to the Migration Analysis for:
| • | Changes in lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices. |
43
| • | Changes in national and local economic and business conditions and developments, including the condition of various market segments. | ||
| • | Changes in the nature and volume of the loan portfolio. | ||
| • | Changes in the experience, ability, and depth of lending management and staff. | ||
| • | Changes in the trend of the volume and severity of past due and classified loans; and trends in the volume of nonaccrual loans and troubled debt restructurings, and other loan modifications. | ||
| • | Changes in the quality of our loan review system and the degree of oversight by the Directors. | ||
| • | The existence and effect of any concentrations of credit, and changes in the level of such concentrations. | ||
| • | Transfer risk on cross-border lending activities. | ||
| • | The effect of external factors such as competition and legal and regulatory requirements on the level of estimated losses in our loan portfolio. |
Our parameters for making adjustments are established under a Credit Risk Matrix that provides seven possible scenarios for each of the above factors. The matrix allows for three positive/decrease (Major, Moderate, and Minor), three negative/increase (Major, Moderate, and Minor), and one neutral credit risk scenarios within each factor for each loan type pool. Generally, the factors are considered to have no impact (neutral) to our migration ratios. However, if information exits to warrant adjustment to the Migration Analysis, we make the changes in accordance with the established parameters supported by narrative and/or statistical analysis. Our Credit Risk Matrix and the seven possible scenarios enable us to adjust the Migration Analysis as much as 50 basis points in either direction (positive or negative) for each loan type pool.
The Reasonableness Test is based on a national historical loss experience for each loan graded Special Mention, Substandard, Doubtful, and Loss; and an established minimum for loans graded Pass. The reserve factors applied under this method are: 1.0% for loans graded Pass; 5.0% for loans graded Special Mention; 15.0% for loans graded Substandard; 50.0% for loans graded Doubtful; and 100.0% for loans graded Loss. This method in not intended to substitute or override the Bank’s other methodologies, but rather is used for comparative purposes.
Under the Specific Allocation method, management establishes specific allowances for loans where management has identified significant conditions or circumstances related to a credit that are believed to indicate the probability that a loss may be incurred. The specific allowance amount is determined by a method prescribed by the Statement of Financial Accounting Standards (SFAS) No. 114, “Accounting by Creditors for Impairment of a Loan.” Our actual historical repayment experience and the borrower’s cash flow, together with an individual analysis of the collateral held on a loan, is taken into account in determining the allocated portion of the required Allowance under this method. As estimations and assumptions change, based on the most recent information available for a credit, the amount of the required specific allowance for a credit will increase or decrease. The Migration Analysis risk factor is used to determine the unallocated portion of the required Allowance under this method. By analyzing the identified credits on a quarterly basis, we are able to adjust a specific allowance based upon the most recent information that has become available.
Deposits
Deposits are our primary source of funds to use in lending and investment activities. Our deposits consist of demand deposits, savings deposits, money market, super-NOW, and time deposits with various maturities. At December 31, 2001, we had $199.1 million in non-interest bearing demand deposits; $84.1 million in interest-bearing demand deposits; $78.9 million in savings; and $227.7 million in time deposits.
Total deposits increased $62.1 million or 11.8% to $589.8 million at December 31, 2001, compared to $527.7 million at December 31, 2000. Average deposits increased $121.4 million or 28.3% to $550.3 million at
44
December 31, 2001, compared to $428.9 million at December 31, 2000. From the total increase of $62.1 million, approximately $21.2 million or 34.1% was attributable to the branches in the New York region Total deposits in the New York region increased $21.2 million or 14.7% to $165.6 million at December 31, 2001, compared to $144.4 million at December 31, 2000. Total deposits in Northern California increased $9.3 million or 16.6% to $65.4 million at December 31, 2001, compared to $56.1 million at December 31, 2000. This increase was attributable to the Oakland branch, which opened during 2000. During the year 2001, our total non-interest bearing deposit increased $6.2 million or 3.2%, time deposits increased $24.7 million or 12.2%, savings increased $29.1 million or 58.4%, and money market and other accounts increased $2.1 million or 2.5%. All of these increases were primarily due to new deposits accounts and changes in balances of existing accounts.
Included in the time deposits are $5.0 million brokered deposits; $2.0 million with five year maturity at 5.65%; $2.0 million with two year maturity at 5.30% and $0.9 million with one year maturity at 5.15%. Included also are $10.0 million of time deposit from the State; two $5.0 million with one and a half year maturity at 1.83% and 2.19%, respectively.
At December 31, 2000, we had $192.8 million in non-interest bearing demand deposits; $82.0 million in interest bearing demand deposits; $49.8 million in savings; and $203.0 million in time deposits. A total of $125.7 million of the deposits in 2000 was in the form of certificates of deposit in denominations of $100,000 or more as of December 31, 2000. Of our total deposits in 2000, 61.9% were time and savings deposits (including money market deposit accounts) and 38.1% were demand deposits and other transaction accounts (including NOW accounts).
Total deposits increased $207.8 million, or 65.0% to $527.7 million at December 31, 2000, from $319.9 million at December 31, 1999. The average deposits increased $148.6 million or 53.0% to $428.9 million at December 31, 2000 from $280.3 million at December 31, 1999. Non-interest bearing deposits increased $77.2 million or 66.8% to $192.8 million at December 31, 2000 from $115.6 million at December 31, 1999. Approximately $30.7 million or 39.8% of the total increase in non-interest bearing deposits was attributable to the three branches acquired in the KFBNY transaction. Interest-bearing deposits increased $130.7 million or 64.0% to $334.9 million at December 31, 2000, from $204.2 million at December 31, 1999. The increase in deposits partly resulted from the acquisition of the three branches of KFBNY, and partly from growth in those branches as well as in our other existing branches. Approximately $67.2 million or 32.3% of total increase was contributed by three newly acquired branches. Deposits in the New York region increased over 37.7% in 2000, and accounted for 27.4% of our total deposits. Noninterest-bearing deposits accounted for 36.5% of total deposits at 2000 year-end, which was slightly higher than in 1999. Time deposits accounted for 38.5% of total deposits. Time deposits of $100,000 or more increased 64.1% and other time deposits increased 49.2% in 2000. Savings deposits and other interest-bearing demand deposits increased 29.3% and 120.0% in 2000, respectively
Although our deposits vary with local and national economic conditions,
management does not believe that our deposits are seasonal in nature. The
following table sets forth information for the periods indicated regarding the
balances of our deposits by category.
December 31,
2001
2000
1999
Amount
Percent
Amount
Percent
Amount
Percent
(Dollars in thousands)
$
199,083
33.8
%
$
192,837
36.5
%
$
115,624
36.1
%
84,103
14.3
%
82,043
15.5
%
37,288
11.7
%
78,933
13.3
%
49,831
9.5
%
38,529
12.0
%
227,725
38.6
%
202,998
38.5
%
128,428
40.2
%
$
589,844
100.0
%
$
527,709
100.0
%
$
319,869
100.0
%
45
The following table shows the maturity schedules of our certificates of
deposit for $100,000 or more, for the years indicated (dollars in thousands).
December 31,
2001
2000
1999
Amount
Percentage
Amount
Percentage
Amount
Percentage
(Dollars in thousands)
$
120,543
52.9
%
$
93,549
46.1
%
$
63,452
49.4
%
61,747
27.1
%
47,956
23.6
%
25,322
19.7
%
38,966
17.1
%
58,721
28.9
%
36,598
28.5
%
6,469
2.9
%
2,772
1.4
%
3,056
2.4
%
$
227,725
100.0
%
$
202,998
100.0
%
$
128,428
100.0
%
Other Borrowings
On September 31, 1999, we issued five-year subordinated capital notes in the aggregate amount of $4.3 million with a stated interest rate of 9.0%, maturing on September 30, 2004. Interest on the notes is payable quarterly and no scheduled payments of principal are due prior to maturity. We may redeem the notes prior to their maturity as of or after September 30, 2002. The notes qualify as Tier 2 risk-based capital under Comptroller of the Currency guidelines for assessing regulatory capital. For the total risk-based capital ratio, the amount of notes that qualify as capital is reduced as those notes approach maturity. At December 31, 2001, $1.7 million, which represented 40% of the total outstanding amount of the notes, qualified as risk-based capital.
During 2000, we established a borrowing line with the FHLB of San Francisco. Advances may be obtained from the FHLB of San Francisco to supplement our supply of lendable funds, Advances from the FHLB of San Francisco typically are secured by a pledge of mortgage loans and/or securities, with a market value at least equal to outstanding advances. At December 31, 2001, we had $5.0 million of advance outstanding, all collaterized with securities pledged by Nara Bank, with an amortized cost of $6.1 million. The borrowing has a seven-year, fixed rate term.
On March 28, 2001, our subsidiary, Nara Capital Trust I, completed a private placement of $10 million of trust preferred securities, as part of a pooled offering with several other financial institutions. The trust preferred securities bear a 10.18% fixed rate of interest payable semi-annually. Nara Capital used the proceeds from the sale of the trust preferred securities to purchase junior subordinated deferrable interest debentures of Nara Bancorp. The net proceeds from the trust preferred securities will be used to accommodate stock repurchase program. Pending deployment of the funds for the repurchase program, we have invested the proceeds in federal fund overnight accounts. Under applicable regulatory guidelines, the trust preferred securities qualify as Tier I Capital.
Capital Resources
Historically, our primary source of capital has been the retention of operating earnings. In order to ensure adequate levels of capital, we conduct ongoing assessments of projected sources and uses of capital in conjunction with projected increases in assets and level of risk. We have considered, and we will consider, additional sources of capital as the need may arise, whether through the issuance of additional securities, debt or otherwise.
As mentioned above, On March 28, 2001, our subsidiary, Nara Capital, completed an offering of $10 million in trust preferred securities through its wholly owned subsidiary, Nara Capital. At December 31, 2001, total shareholders’ equity was $55.4 million, which represents $10.9 million or 24.5% increase from $44.5 million at December 31, 2000. For 2000, total shareholders’ equity also increased $17.8 million or 66.7% to $44.5 million from $26.7 million at December 31, 1999.
During August of 2000, we raised additional capital of $6.9 million through the issuance of 175,000 units, with each unit consisting of four shares of common stock plus a fully vested, immediately exercisable warrant to purchase an additional share of common stock. The warrant is a three year warrant to purchase a share of common stock at a price of $11, if exercised within one year, $12 if exercised after one and within two years, and $13 if exercised after two and within three years, from the date of grant.
At December 31, 2001, Tier 1 Capital, shareholders’ equity less intangible assets, plus proceeds from the trust preferred securities, was $63.4 million. This represents an increase of $20.7 million or 48.5% over Tier 1 Capital of $42.7 million at December 31, 2000. At December 31, 2001, Nara Bancorp had a ratio of total capital to total risk-weighted assets of 12.4% and a ratio of Tier 1 Capital to total risk weighted assets of 11.0%. The Tier 1 leverage ratio was 9.7% at December 31, 2001. Nara Bank had a ratio of total risk-weighted assets of 10.9%, a ratio of Tier 1 Capital to total risk-weighted assets at 9.5%, and Tier 1 leverage ratio was 8.8% at December 31, 2001.
46
At December 31, 2000, Tier 1 Capital, shareholders’ equity less intangible assets, plus proceeds from the trust preferred securities, was $42.7 million . This represents an increase of $17.6 million or 70.1% over Tier 1 Capital of $25.1 million at December 31, 1999. At December 31, 2000, we had a ratio of total capital to total risk-weighted assets of 11.9% and a ratio of Tier 1 Capital to total risk weighted assets of 10.0%. The Tier 1 leverage ratio was 7.7% at December 31, 2000
The following table presents the amounts of regulatory capital and the
capital ratios for Nara Bancorp and Nara Bank , compared to their minimum
regulatory capital requirements as of December 31, 2001.
As of December 31, 2001
Nara Bancorp
Actual
Required
Excess
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
$
63,389
9.7
%
$
26,298
4.0
%
$
37,091
5.7
%
$
63,389
11.0
%
$
23,231
4.0
%
$
40,158
7.0
%
$
71,818
12.4
%
$
46,462
8.0
%
$
25,356
4.4
%
As of December 31, 2001
Nara Bank
Actual
Required
Excess
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
$
54,815
8.8
%
$
24,973
4.0
%
$
30,142
4.8
%
$
54,815
9.5
%
$
23,162
4.0
%
$
31,953
5.5
%
$
63,244
10.9
%
$
46,325
8.0
%
$
16,919
2.9
%
Liquidity Management
Liquidity risk is the risk to earnings or capital resulting from our inability to meet our obligations when they come due without incurring unacceptable losses. Liquidity risk includes the ability to manage unplanned decreases or changes in funding sources and to recognize or address changes in market conditions that affect our ability to liquidate assets quickly and with minimum loss of value. Factors considered in liquidity risk management are stability of the deposit base; marketability, maturity, and pledging of investments; and the demand for credit.
The objective of our liquidity management is to have funds available to pay anticipated deposit withdrawals and any other maturing financial obligations promptly and fully in accordance with their terms. Liquidity management involves our ability to convert assets into cash or cash equivalents without incurring significant loss, and to raise cash or maintain funds without incurring excessive additional cost.
In general, liquidity risk is managed daily by controlling the level of federal funds and the use of funds provided by the cash flow from the investment portfolio. To meet unexpected demands, lines of credit are maintained with correspondent banks, the Federal Home Loan Bank and the Federal Reserve Bank. The sale of bonds maturing in the near future can also serve as a contingent source of funds. Increases in deposit rates are considered a last resort as a means of raising funds to increase liquidity.
For deposits, our primary source of funds, we maintain a deposit policy under which we endeavor to match our interest-bearing liabilities to fund interest-earning assets as closely as possible. We also endeavor to cover all volatile funds with liquid assets, as a method to ensure adequate liquidity. Thus, we analyzes our deposits’ maturity and interest rates in order to monitor and control the cost of funds and review the stability of our supply of funds.
At times when we have more funds than the amount we need for our reserve requirements or short-term liquidity needs, we sell federal funds to other financial institutions. We derived $3.3 million in income from sales of
47
Federal Funds during the year ended December 31, 2001, and $3.5 million and $2.1 million in income from such sales during the year ended December 31, 2000 and 1999, respectively.
On the other hand, when we have less funds than we need, we are allowed to borrow funds from both its correspondent banks and from the Federal Reserve Bank (FRB). The maximum borrowing amount from our correspondent banks is $13 million on an overnight basis. The maximum borrowing amount from the FRB discount window is 97% of the market value of the pledged security with the FRB, which was $1.0 million at December 31, 2001. We also have an available borrowing line with Federal Home Loan Bank of San Francisco of up to 25% of our total assets. At December 31, 2001 and 2000, we had $5.0 million of advances outstanding from Federal Home Loan Bank.
We maintain a portion of our funds in interest-bearing cash deposits in other banks, funds loaned to other banks overnight (federal funds sold), and investment securities available-for-sale. At December 31, 2001, our liquidity level was 18.3% totaling $124.1 million, reflecting a $63.3 million decrease compared to a liquidity level of $187.4 million at 2000 year-end. The decrease was mainly due to $57.5 million decrease in federal funds sold from $99.7 million at 2000 year-end to $42.2 million at 2001 year-end. At December 31, 2001, our liquid assets included cash and cash equivalents, federal funds sold, interest-bearing deposits in other banks with maturities of one year or less, and available-for-sale investment securities not pledged. At December 31, 2001, cash and cash equivalents totaled $72.6 million. This represented a decrease of $60.1 million or 45.3%, from a total of $132.7 million at December 31, 2000.
Because our primary sources and uses of funds are loans and deposits, the relationship between gross loans and total deposits provides a useful measure of our liquidity. Typically, the closer the ratio of loans to deposits is to 100%, the more we rely on its loan portfolio to provide for short-term liquidity needs. Because repayment of loans tends to be less predictable than the maturity of investments and other liquid resources, the higher the loan to deposit ratio, the less liquid are our assets. For 2001, our loan to deposit ratio averaged 82.6%, compared to an average ratio of 73.6% for 2000, and a ratio of 74.5% for 1999.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISKS
Market risk is the risk of loss to future earnings, to fair values, or to future cash flow that may result from changes in the price of a financial instrument. Our primary market risk is interest rate risk. Our success is largely dependent upon our ability to manage interest rate risk, which is the impact of adverse fluctuations in interest rates on our net interest income and net portfolio value. The objective is to measure the effect on net interest income and to manage the assets and liabilities to minimize the interest rate risk while at the same time maximizing income. The management of interest risk is governed by policies reviewed and approved annually by the Board of Directors (“Board”). Our Board of Directors delegates responsibility for interest risk management to the Asset and Liability Management Committee (“ALCO”), which is composed of Nara Bank’s senior executives and other designated officers.
The fundamental objective of the ALCO is to manage our exposure to interest rate fluctuations while maintaining adequate levels of liquidity and capital. The ALCO meets regularly to monitor the interest rate risk, the sensitivity of our assets and liabilities to interest rate changes, the book and market values of assets and liabilities, investment activities and directs changes in the composition of the balance sheet. Our balance sheet is assets sensitive, which means that assets generally reprice more often than liabilities. Because an asset-sensitive balance sheet tends to reduce net interest income when interest rates decline and to increase net interest income when interest rate rise, careful forecasts of interest rates and changes to the security portfolio are used to manage the interest rate risk.
We monitor the interest rate “sensitivity” risk to earnings from potential changes in interest rates using various methods, including a maturity/repricing gap analysis. This analysis measures, at specific time intervals, the
48
differences between interest-earning assets and interest-bearing liabilities for which repricing opportunities will occur. A positive difference, or gap, indicates that earning assets will reprice faster than interest-bearing liabilities. This will generally produce a greater net interest margin during periods of rising interest rates, and a lower net interest margin during periods of declining interest rates. Conversely, a negative gap will generally produce a lower net interest margin during periods of rising interest rates and a greater net interest margin during periods of decreasing interest rates.
Table below provides our maturity/repricing gap analysis at December 31,
2001. We had a positive cumulative 180 day gap of $118,436 million at December
31, 2001. In theory, this would indicate that at December 31, 2001, $118,4336
million more in assets than liabilities would re-price if there were to be a
change in interest rates over the next 180 days. If interest rates increase,
the positive gap would tend to result in a higher net interest margin. If
interest rates decrease, the positive gap would tend to result in a decrease in
net interest margin.
Asset and Liability Maturity/Repricing Gap
(dollars in thousands)
Over 90
Over 180
90 days
Days to
Days to
Over
December 31, 2001
Or less
180 days
365 days
365 days
$
43,811
$
99
$
1,197
$
68,250
408,578
7,318
4,533
89,072
452,389
7,417
5,730
157,322
99,756
90,065
19,289
18,561
84,103
—
—
—
56,320
11,126
8,812
2,675
—
—
—
4,300
—
—
—
5,000
—
—
—
9,665
240,179
101,191
28,101
40,201
212,210
(93,774
)
(22,371
)
117,121
$
212,210
$
118,436
$
96,065
$
213,186
The interest rates paid on deposit accounts do not always move in unison with the rates charged on loans. In addition, the magnitude of changes in the rates charged on loans is not always proportionate to the magnitude of changes in the rate paid for deposits. Consequently, changes in interest rates do not necessarily result in an increase or decrease in the net interest margin solely as a result of the differences between repricing opportunities of earning assets or interest-bearing liabilities. The fact that we reported a positive gap at December 31, 2001 does not necessarily indicate that, if interest rates increase, net interest income would increase, or if interest rates decrease, net interest income would decrease.
We also utilize the results of a dynamic simulation model to quantify the estimated exposure of net interest income to sustained interest rate changes. The sensitivity of our net interest income is measured over a one year period. The simulation model estimates the impact of changing interest rates on the interest income from all interest earning assets and the interest expense paid on all interest bearing liabilities reflected on our balance sheet. The following reflects our net interest income sensitivity analysis as of December 31, 2001:
49
Estimated Net
Simulated
Interest Income
Market Value
Rate Changes
Sensitivity
Volatility
13.26
%
(14.82
)%
6.61
%
(7.02
)%
(6.89
)%
6.25
%
(13.73
)%
4.78
%
The estimated sensitivity does not necessarily represent our forecast and the results may not be indicative of actual changes to Nara Bank’s net interest income. These estimates are based upon a number of assumptions including; the nature and timing of interest rate levels including yield curve shape, prepayment on loans and securities, pricing strategies on loans and deposits, and replacement of asset and liability cashflow. While the assumptions used are based on current economic and local market conditions, there is no assurance as to the predictive nature of these conditions including how customer preferences or competitor influences might change.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, together with the report thereon of Deloitte & Touche LLP dated March 26, 2002, begin at page F-1 of this Report and contain the following:
See “Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K” below for financial statements filed as a part of this Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
50
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 Nara Bancorp’s definitive Proxy Statement, to be filed with the SEC within 120 days after December 31, 2001. Reference is also made in connection with the list of Executive Officers, which is provided under Item 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 Nara Bancorp’s definitive Proxy Statement, to be filed with the SEC within 120 days after December 31, 2001.
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 Nara Bancorp’s definitive Proxy Statement, to be filed with the SEC within 120 days after December 31, 2001.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference is the information from the section entitled “Certain Transactions” from Nara Bancorp’s definitive Proxy Statement, to be filed with the SEC within 120 days after December 31, 2001.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT 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 Financial Statements and related notes. |
(b) Reports on Form 8-K
| On February 26, 2002, we filed a report on Form 8-K, reporting that on February 20, 2002, Nara Bank and its board of directors negotiated and signed a Stipulation and Consent to the Issuance of a Consent Order with the OCC. |
51
| (c) | List of Exhibits The following exhibits constitute compensation plans or arrangements: 10.1, 10.2, and 10.3. |
| Number | Description | |
|
|
|
|
| 2.1 | Plan of Reorganization and Merger Agreement among Nara Bancorp, Inc., Nara Bank, N.A. and Nara Interim Bank, N.A. (incorporated herein by reference to Exhibit 2.1 filed with the Registration Statement on Form S-4 filed with the Securities and Exchange Commission on November 16, 2000) | |
| 2.2 | Agreement and Plan of Reorganization between Nara Bank, N.A., Korea First Bank of New York and Korea First Ltd., dated November 9, 1999 (incorporated herein by reference to Exhibit 2.2 filed with the Registration Statement on Form S-4 filed with the Securities and Exchange Commission on March 31, 2000) | |
| 3.1 | Certificate of Incorporation of Nara Bancorp, Inc. (incorporated herein by reference to Appendix III included with the Registration Statement on Form S-4 filed with the Securities and Exchange Commission on November 16, 2000) | |
| 3.2 | Bylaws of Nara Bancorp, Inc. (incorporated herein by reference to Appendix IV included with the Registration Statement on Form S-4 filed with the Securities and Exchange Commission on November 16, 2000) | |
| 4.1 | Form of Stock Certificate of Nara Bancorp, Inc. (incorporated herein by reference to Exhibit 4.1 filed with Pre-Effective Amendment No. 1 to the Registration Statement on Form S-4 filed with the Securities and Exchange Commission on December 5, 2000) | |
| 4.2 | Subordinated Note Purchase Agreement (incorporated herein by reference to Exhibit 4.2 filed with Registrant’s Form 10-Q for the quarter ended March 31, 2001 filed with the Securities and Exchange Commission on May 15, 2001) | |
| 4.3 | Warrant Agreement (incorporated herein by reference to Exhibit 4.1 filed with the Registration Statement on Form S-8 filed with the Securities and Exchange Commission on April 9, 2001) | |
| 4.4 | Warrant Certificate (incorporated herein by reference to Exhibit 4.2 filed with the Registration Statement on Form S-8 filed with the Securities and Exchange Commission on April 19, 2001) | |
| 4.5 | Amended and Restated Trust Agreement of Trust dated March 28, 2001, by and among Delaware Trustee, Wilmington Trust Company as Property Trustee, the Nara Bancorp and the Administrative Trustees named therein* | |
| 4.6 | Indenture dated March 28, 2001 between the Nara Bancorp and Wilmington Trust Company as Debenture Trustee* | |
| 4.7 | Common Securities Guarantee Agreement dated March 28, 2001 of the Nara Bancorp* | |
| 4.8 | Capital Securities Guarantee Agreement dated March 28, 2001 between Nara Bancorp and Wilmington Trust Company as Guarantee Trustee* |
52
Number
Description
4.9
Amended and Restated Declaration of Trust dated March 26,
2002, by and among State Street Bank and Trust Company of
Connecticut, National Association, as Institutional Trustee, Nara
Bancorp, Inc., as sponsor.*
4.10
Indenture dated March 26, 2002 between the Nara Bancorp and
State Street Bank and Trust Company of Connecticut, National
Association as Trustee*
4.11
Guarantee Agreement dated March 26, 2002 be and between Nara
Bancorp and State Street Bank and Trust Company of Connecticut,
National Association*
10.1
Nara Bancorp, Inc. 2001 Nara Bank 2000 Continuation Long Term Incentive
Plan (incorporated herein by reference to Exhibit 99.1 filed with
the Registration Statement on Form
S-8 filed with the Securities and Exchange Commission on April 9,
2001)
10.2
Nara Bancorp, Inc. 2001 Nara Bank 1989 Continuation Stock Option Plan
(incorporated herein by reference to Exhibit 99.1 filed with
the Registration Statement on Form
S-8 filed with the Securities and Exchange Commission on April 9,
2001)
10.3
Nara Bank, N.A. Deferred Compensation Plan*
10.4
Lease for premises located at 118 Broad Avenue, Palisades
Park, New Jersey (incorporated herein by reference to Exhibit 10.4
filed with the Registrant’s Form 10-K filed with the Securities
and Exchange Commission on April 2, 2001)
10.5
Lease for premises located at 29 West 30th Street, New York,
New York (incorporated herein by reference to Exhibit 10.5 filed with the Registrant’s Form 10-K
filed with the Securities and Exchange Commission on April 2, 2001)
10.6
Lease for premises located at 138-02 Northern Blvd.,
Flushing, New York. (incorporated herein by reference to Exhibit
10.6 filed with the Registrant’s Form 10-K filed with the Securities and Exchange Commission on
April 2, 2001)
10.7
Lease for premises located at 2250 Broadway, Oakland,
California. (incorporated herein by reference to Exhibit 10.7 filed with the Registrant’s Form 10-K
filed with the Securities and Exchange Commission on April 2, 2001)
10.8
Lease for premises located at 3701 Wilshire Blvd. Los
Angeles, California. (incorporated herein by reference to Exhibit
10.8 filed with the Registrant’s Form 10-K filed with the Securities and Exchange Commission on
April 2, 2001)
10.9
Employment Agreement between Benjamin B. Hong and Nara Bank,
N.A. (incorporated herein by reference to Exhibit 10.9 filed with Registrant’s Form 10-Q for
the quarter ended March 31, 2001, filed with the Securities Exchange
Commission on May 15, 2001)
10.10
Consent Order issued by the OCC (incorporated herein by
reference to Exhibit 99.2 filed with the Registrant’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on February 26, 2002)
10.11
Tax Sharing Agreement*
10.12
Affiliate Agreement*
53
Number
Description
10.13
Form of Nara Bancorp, Inc. Option Agreement (entered into by
directors Ki Suh Park,
Jesun Paik, and Steve Kim)
21.1
List of Subsidiaries*
23.1
Consent of Deloitte & Touche LLP*
| * | Filed herewith |
54
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 29, 2002.
| Nara Bancorp, Inc | ||||||
| By: |
/s/ Benjamin B. Hong
|
Benjamin B. Hong
President & Chief Executive Officer |
||||
| By |
/s/ Bon T. Goo
|
Bon T. Goo
Executive Vice President and Chief Financial Officer |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated.
| By: |
/s/ Thomas Chung
|
March 29, 2002 |
Thomas Chung
Director and Chairman of the Board |
|||
| By: |
/s/ Benjamin B. Hong
|
March 29, 2002 |
Benjamin B. Hong
Director |
|||
| By: |
/s/ Ki Suh Park
|
March 29, 2002 |
Ki Suh Park
Director |
|||
| By: |
/s/ Jesun Paik
|
March 29, 2002 |
Je Sun Paik
Director |
|||
| By: |
/s/ Steve Kim
|
March 29, 2002 |
Steve Kim
Director |
55
Nara Bancorp, Inc.
and Subsidiaries
Consolidated Financial Statements as of
December 31, 2001 and 2000 and for
Each of the Three Years in the Period
Ended December 31, 2001 and
Independent Auditors’ Report
F-1
INDEPENDENT AUDITORS’ REPORT
To the Board of Directors and Stockholders
We have audited the accompanying consolidated statements of financial condition
of Nara Bancorp, Inc. and subsidiaries (the “Company”) as of December 31, 2001
and 2000 and the related consolidated statements of income, changes in
stockholders’ equity, and cash flows for each of the three years in the period
ended December 31, 2001. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Nara Bancorp, Inc. and
subsidiaries as of December 31, 2001 and 2000 and the results of their
operations and their cash flows for the each of the three years in the period
ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America.
March 26, 2002
F-2
Nara Bancorp, Inc.
Los Angeles, California:
Table of Contents
NARA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2001 AND 2000
2001
2000
$
30,364,996
$
32,980,310
42,230,000
99,700,000
72,594,996
132,680,310
487,000
6,035,294
65,131,608
54,914,606
4,323,569
15,744,083
224,322
410,337
3,657,842
498,482,682
355,723,848
5,301,080
5,816,759
266,700
251,600
918,300
918,300
262,949
3,242,772
3,437,114
1,182,414
1,061,139
5,994,002
7,250,639
2,609,753
5,394,334
10,429,962
4,992,628
1,347,030
1,547,378
3,244,143
6,121,574
$
679,438,175
$
602,562,892
(Continued)
F-3
NARA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
See accompanying notes to consolidated financial statements.
(Concluded)
F-4
NARA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
See accompanying notes to consolidated financial statements.
F-5
NARA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Continued)
F-6
NARA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
See accompanying notes to consolidated financial statements.
(Concluded)
F-7
NARA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Concluded)
F-8
NARA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
See accompanying notes to consolidated financial statements.
F-9
NARA BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-10
F-11
F-12
F-13
F-14
F-15
F-16
F-17
F-18
F-19
F-20
F-21
F-22
F-23
F-24
F-25
F-26
F-27
F-28
F-29
F-30
F-31
F-32
F-33
F-34
******
F-35
DECEMBER 31, 2001 AND 2000
Table of Contents
THREE-YEAR PERIOD ENDED DECEMBER 31, 2001
2001
2000
1999
$
40,450,319
$
34,213,755
$
21,344,104
4,931,536
3,567,397
1,649,054
2,477,663
3,820,965
2,263,180
47,859,518
41,602,117
25,256,338
15,469,382
13,689,099
7,808,879
1,500,493
459,860
110,591
16,969,875
14,148,959
7,919,470
30,889,643
27,453,158
17,336,868
750,000
(1,100,000
)
3,395,000
30,139,643
28,553,158
13,941,868
5,902,862
5,579,998
3,308,936
5,558,487
5,714,743
3,687,817
1,550,124
683,156
909,202
916,947
118,823
36,070
418,371
(819
)
35,555
18,658
1,323,895
1,103,246
15,323,940
13,518,172
8,023,959
16,043,528
13,634,045
8,170,937
3,811,119
3,340,480
1,880,845
1,289,841
1,053,267
761,907
857,772
828,448
647,079
631,742
477,748
344,947
1,514,733
1,378,987
1,508,844
1,201,979
1,189,592
780,438
404,415
397,052
320,380
2,608,481
2,530,374
1,921,450
28,363,610
24,829,993
16,336,827
17,099,973
17,241,337
5,629,000
6,316,444
6,784,274
1,657,199
$
10,783,529
$
10,457,063
$
3,971,801
$
1.96
$
2.09
$
0.84
$
1.85
$
1.98
$
0.80
Table of Contents
THREE-YEAR PERIOD ENDED DECEMBER 31, 2001
Accumulated
Number of
Other
Shares
Common
Capital
Retained
Comprehensive
Comprehensive
Outstanding
Stock
Surplus
Earnings
Income (Loss)
Income
4,045,332
$
4,045
$
19,016,476
$
3,783,875
$
939
34,000
34
107,389
324,421
325
3,102,696
(3,103,021
)
3,971,801
$
3,971,801
(158,301
)
(158,301
)
$
3,813,500
4,403,753
4,404
22,226,561
4,652,655
(157,362
)
700,000
700
6,867,410
5,837
6
14,994
352,339
352
2,994,530
(2,994,882
)
10,457,063
$
10,457,063
445,740
445,740
$
10,902,803
5,461,929
5,462
32,103,495
12,114,836
288,378
Table of Contents
THREE-YEAR PERIOD ENDED DECEMBER 31, 2001
Accumulated
Number of
Other
Shares
Common
Capital
Retained
Comprehensive
Comprehensive
Outstanding
Stock
Surplus
Earnings
Income (Loss)
Income
5,461,929
$
5,462
$
32,103,495
$
12,114,836
$
288,378
57,925
58
637,367
52,317
52
237,033
666
1
11,654
(822,753
)
10,783,529
$
10,783,529
68,296
68,296
$
10,851,825
5,572,837
$
5,573
$
32,989,549
$
22,075,612
$
356,674
2001
2000
1999
$
618,464
$
445,740
$
(87,007
)
(550,168
)
(71,294
)
$
68,296
$
445,740
$
(158,301
)
Table of Contents
THREE-YEAR PERIOD ENDED DECEMBER 31, 2001
2001
2000
1999
$
10,783,529
$
10,457,063
$
3,971,801
(425,881
)
(183,865
)
162,416
138,083
750,000
(1,100,000
)
3,395,000
75,233
13,000
30,764,933
14,902,798
18,185,262
(1,550,124
)
(683,156
)
(909,202
)
(35,555
)
(18,658
)
(36,070
)
(418,371
)
819
(25,691,759
)
(14,126,452
)
(14,379,951
)
1,211,105
(1,178,107
)
282,768
(916,947
)
(118,823
)
194,342
(1,227,714
)
(708,717
)
5,540,737
(2,994,322
)
(1,971,322
)
(549,090
)
1,672,048
275,942
(3,924,577
)
2,936,496
697,778
16,252,726
8,112,993
8,896,771
(150,689,726
)
(88,366,358
)
(76,894,301
)
(5,437,334
)
(142,099
)
(132,788
)
(2,254,989
)
(1,173,076
)
(583,022
)
1,757,812
13,725,264
25,232,515
1,711,229
1,502,342
17,431,065
4,763,950
11,420,514
2,000,000
500,000
(51,792,219
)
(29,774,204
)
(15,037,751
)
(7,486,797
)
306,524
79,433
(4,655
)
5,549,000
(2,761,260
)
(2,748,444
)
298,505
223,670
13,529
(251,350
)
(96,300
)
(15,100
)
(251,600
)
(8,699,445
)
23,634,963
(148,193,433
)
(90,044,833
)
(96,204,237
)
Table of Contents
THREE-YEAR PERIOD ENDED DECEMBER 31, 2001
2001
2000
1999
$
62,135,481
$
140,039,712
$
70,559,798
6,868,110
4,300,000
237,085
15,000
107,423
5,000,000
11,655
637,425
(822,753
)
9,656,500
71,855,393
151,922,822
74,967,221
(60,085,314
)
69,990,982
(12,340,245
)
132,680,310
62,689,328
75,029,573
$
72,594,996
$
132,680,310
$
62,689,328
$
17,518,965
$
16,312,285
$
7,643,528
$
7,960,752
$
6,649,512
$
1,580,000
$
8,731,016
$
447,944
$
57,310
$
4,645,127
$
2,994,882
$
3,103,021
certain liabilities of
Korea First Bank of New York (“KFB”)
In conjunction of the
acquisition, net assets were
purchased as follows:
$
84,253,449
$
68,934,527
$
8,699,445
$
6,619,477
Table of Contents
THREE-YEAR PERIOD ENDED DECEMBER 31, 2001
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
- The accounting and reporting policies of Nara
Bancorp, Inc. and subsidiaries (the “Company”) are prepared in conformity
with accounting principles generally accepted in the United States of
America and conform to practices within the banking industry. The
consolidated financial statements include the accounts of Nara Bancorp, Inc.
(the “Bancorp”) and its wholly owned subsidiaries, Nara Bank, N.A. (“Bank”)
and Nara Bancorp Capital Trust I (“Capital Trust”). All significant
intercompany transactions and balances have been eliminated in
consolidation.
The Bancorp was formed as a holding company of the Bank and registered with
the Securities and Exchange Commission under the Securities Act of 1933 on
December 5, 2000. Effective February 2, 2001, upon consummation of the
reorganization of the Bank into a holding company structure, each of the
Bank’s common shares at par value of $3 was exchanged for one share of the
Bancorp’s common stock at par value of $0.001. The reorganization was
accounted for in a manner similar to a pooling of interests.
The Bank, a national association organized under the laws of the United
States, maintains fourteen branch operations and four loan production
offices serving individuals and small to medium-sized businesses in the Los
Angeles, San Jose, New York City, Seattle, Chicago, Atlanta, and surrounding
areas. The Bank’s primary source of revenue is from providing financing for
business working capital, commercial real estate and trade activities, and
its investment portfolio.
On March 28, 2001, the Bancorp, through the newly formed Capital Trust, a
Delaware statutory business trust, completed a private placement of $10
million of trust preferred securities, issued as part of a pooled offering
with several other financial institutions.
Cash and Cash Equivalents
- Cash and cash equivalents include cash and due
from banks and federal funds sold, all of which have maturities less than 90
days. The Company may be required to maintain reserve balances with the
Federal Reserve Bank under the Federal Reserve Act. Such reserve was
approximately $14,467,000 at December 31, 2000. There was no such reserve
at December 31, 2001.
Interest-Bearing Deposits in Other Financial Institutions
- Interest-bearing
deposits in other financial institutions mature within one year and are
carried at cost.
Investment Securities
- Investment securities are classified into one of
three categories and accounted for as follows:
(i)
Securities that the Company has the positive intent and ability to
hold to maturity are classified as “held to maturity” and reported at
amortized cost;
(ii)
Securities that are bought and held principally for the purpose of
selling them in the near future are classified as “trading securities”
and reported at fair value. Unrealized gains and losses are recognized
in earnings; and
Table of Contents
(iii)
Securities not classified as held-to-maturity or trading
securities are classified as “available for sale” and reported at fair
value. Unrealized gains and losses are reported as a separate
component of stockholders’ equity as accumulated other comprehensive
income (loss), net of taxes.
Accreted discounts and amortized premiums on investment securities are
included in interest income using the interest method, and unrealized and
realized gains or losses related to the holding or selling of securities are
calculated using the specific identification method. Declines in the fair
value of held to maturity and available for sale securities below their cost
that are deemed to be other than temporary are reflected in earnings as
realized losses. During 2001, the Company recorded a write-down of $138,083
on a security from the available for sale portfolio due to such
other-than-temporary decline.
Loans
- Interest on loans is credited to income as earned and is accrued
only if deemed collectible. Accrual of interest is discontinued when a loan
is over 90 days delinquent or if management believes that collection is
highly uncertain. Generally, payments received on nonaccrual loans are
recorded as principal reductions. Interest income is recognized after all
principal has been repaid or an improvement in the condition of the loan has
occurred that would warrant resumption of interest accruals.
Nonrefundable fees, net of incremental costs, associated with the
origination or acquisition of loans are deferred and recognized as an
adjustment of the loan yield over the life of the loan in a manner that
approximates the interest method. Other loan fees and charges, representing
service costs for the prepayment of loans, for delinquent payments, or for
miscellaneous loan services, are recorded as income when collected.
Certain Small Business Administration (“SBA”) loans that the Company has the
intent to sell prior to maturity have been designated as held for sale at
origination and are recorded at the lower of cost or market value, on an
aggregate basis. A valuation allowance is established if the market value
of such loans is lower than their cost, and operations are charged or
credited for valuation adjustments. A portion of the gains on sale of SBA
loans is recognized as other operating income at the time of the sale. The
remaining portion of the gain is deferred and amortized over the remaining
life of the loan as an adjustment to yield. Upon sales of such loans, the
Company receives a fee for servicing the loans. The servicing asset is
recorded based on the present value of the contractually specified servicing
fee, net of servicing costs over the estimated life of the loan, discounted
at the rate of the related note plus 1 percent. The servicing asset is
amortized in proportion to and over the period of estimated servicing
income. The Company has capitalized $356,942, $327,459 and $459,209 of
servicing assets during 2001, 2000 and 1999, respectively, and amortized
$235,667, $159,197 and $35,438 during the years ended December 31, 2001,
2000 and 1999, respectively. Management periodically evaluates the
servicing asset for impairment, which is the carrying amount of the
servicing asset in excess of the related fair value. At December 31, 2001,
the fair value of servicing asset was determined using a discount rate of
the related note rate plus 1.5 percent (a weighted-average rate of 10.9
percent) and a prepayment speed of 16 percent. At December 31, 2000, the
fair value of servicing asset was determined using a discount rate of the
related note rate plus 1 percent (a weighted-average rate of 11.1 percent)
and a range of prepayment speeds of 10 to 16 percent. Impairment, if it
occurs, is recognized in a valuation allowance in the period of impairment.
An interest-only strip is recorded based on the present value of the excess
of the total servicing fee over the contractually specified servicing fee
for the estimated life of the loan, calculated using the same assumptions as
noted above. Such interest-only strip is accounted for at the estimated
fair value, with unrealized gain or loss, net of tax, recorded as an
adjustment in accumulated other comprehensive income (loss) in stockholders’
equity.
Table of Contents
The Company offers direct financing leases to customers whereby the assets
leased are acquired without additional financing from other sources. Direct
financing leases are carried net of unearned income, unamortized
nonrefundable fees, and related direct costs associated with the origination
or purchase of leases.
Allowance for Loan Losses
- Loan losses are charged and recoveries are
credited to the allowance account. Additions to the allowance account are
charged to provision for loan losses. The allowance for loan losses is
maintained at a level considered adequate by management to absorb potential
losses in the loan portfolio. The adequacy of the allowance is determined
by management based upon an evaluation and review of the loan portfolio,
consideration of historical loan loss experience, current economic
conditions, changes in the composition of the loan portfolio, analysis of
collateral values, and other pertinent factors.
The Company considers a loan as impaired when it is probable that it will be
unable to collect all amounts due (principal and interest) according to the
contractual terms of the loan agreement. Factors considered by management
in determining impairment include payment status, collateral value, and the
probability of collecting scheduled principal and interest payments when
due. Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as impaired. Management determines
the significance of payment delays and payment shortfalls on a case-by-case
basis, taking into consideration all of the circumstances surrounding the
loan and the borrower, including the length of the delay, the reasons for
the delay, the borrower’s prior payment record, and the amount of the
shortfall in relation to the principal and interest owed.
For commercial, real estate, and certain consumer loans, the Company bases
the measurement of loan impairment on the present value of the expected
future cash flows, discounted at the loan’s effective interest rate or on
the fair value of the loan’s collateral if the loan is collateral dependent.
The Company evaluates installment loans for impairment on a pooled basis.
These loans are considered to be smaller balance, homogeneous loans and are
evaluated on a portfolio basis. Impairment losses are included in the
allowance for loan losses through a charge to provision for loan losses.
Upon disposition of an impaired loan, any related allowance is charged off
to the allowance for loan losses.
Premises and Equipment
- Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation on buildings,
furniture, fixtures, and equipment is computed on the straight-line method
over the estimated useful lives of the related assets, which is 40 years for
buildings and range from 3 to 5 years for furniture, fixtures, and
equipment.
Leasehold improvements are capitalized and amortized on the straight-line
method over the term of the lease or the estimated useful lives of the
improvements, whichever is shorter. An accelerated method of depreciation
is followed, as appropriate, for federal income tax purposes.
Trust Preferred
Securities
- During 2001, the Company established Nara
Bancorp Capital Trust I as a wholly owned subsidiary. In a private
placement transaction, the Capital Trust issued $10 million of 10.18 percent
capital securities representing undivided preferred beneficial interests in
the assets of Capital Trust. The Company is the owner of all the beneficial
interests represented by the common securities of Capital Trust. The
purpose of issuing the capital securities was to provide the Company with
means of obtaining additional Tier 1 capital for regulatory purposes.
Table of Contents
Other Real Estate Owned
- Other real estate owned, which represents real
estate acquired through foreclosure in satisfaction of commercial and real
estate loans, is stated at fair value less estimated selling costs of the
real estate. Loan balances in excess of the fair value of the real estate
acquired at the date of acquisition are charged to the allowance for loan
losses. Any subsequent operating expenses or income, reduction in estimated
fair values, and gains or losses on disposition of such properties are
charged or credited to current operations.
Goodwill and Intangible Assets
- Goodwill represents the excess of cost over
the fair value of net assets acquired. Goodwill is currently being
amortized on a straight-line basis over a period of up to 15 years. Core
deposit premiums arise from the acquisition of deposits and are amortized on
a straight-line basis over the estimated life of the deposit base acquired,
currently seven years.
Income Taxes
- Deferred income tax assets and liabilities represent the tax
effects, based on current tax law, of future deductible or taxable amounts
attributable to events that have been recognized in the financial
statements. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal
of deferred tax liabilities, the projected future taxable income, and tax
planning strategies in making this assessment.
Earnings per Share (“EPS”)
- Basic EPS excludes dilution and is computed by
dividing earnings available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution of securities that could share in the earnings. EPS
data for 1999 was retroactively restated, reflecting the 2000 stock
dividend.
Stock-Based Compensation
- Compensation cost for stock options is measured
as the excess, if any, of the quoted market price of the Company’s stock at
the date of the grant over the amount an employee must pay to acquire the
stock. Pro forma disclosure of net income and earnings per share is
provided as if the fair value-based method had been applied (see Note 10).
Impairment of Long-Lived Assets
- The Company evaluates long-lived assets
for impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. If the estimated future
cash flows (undiscounted and without interest charges) from the use of an
asset are less than the carrying value, a write-down would be recorded to
reduce the related asset to its estimated sales value.
Use of Estimates in the Preparation of Consolidated Financial Statements
-
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant balance sheet
items that could be materially affected by such estimates include loans that
are presented net of the allowance for loan losses and the valuation for
other real estate owned.
Recent Accounting Pronouncements
- Statement of Financial Accounting
Standards (“SFAS”) No. 140,
Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, a replacement of FASB
Statement No. 125,
was issued in September 2000 and revises the standards
for accounting for securitizations and other transfers of financial assets
and collateral and requires certain
Table of Contents
disclosures, but it carries over most of the provisions of SFAS No. 125
without reconsideration. SFAS No. 140 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring
after March 31, 2001. The statement is effective for recognition and
reclassification of collateral and for disclosures related to securitization
transactions and collateral for fiscal years ending after December 15, 2000.
The adoption of SFAS No. 140 did not have a material impact on its
financial position, results of operations, or cash flows of the Company.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
Business Combinations
, and SFAS No. 142,
Goodwill and Other Intangible
Assets
. SFAS No. 141 requires that the purchase method of accounting be
used for all business combinations completed after June 30, 2001 and also
specifies the types of acquired intangible assets that are required to be
recognized and reported separately from goodwill and those acquired
intangible assets that are required to be included in goodwill. SFAS No.
142 will require that goodwill no longer be amortized, but instead tested
for impairment at least annually. Additionally, SFAS No. 142 will require
recognized intangible assets be amortized over their respective estimated
useful lives and reviewed for impairment in accordance with SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of
, as replaced by SFAS No. 144. Any recognized intangible
asset determined to have an indefinite useful life will not be amortized,
but instead tested for impairment until its life is determined to no longer
be indefinite. The Company will adopt the provisions of SFAS No. 141 and
SFAS No. 142 on January 1, 2002. Goodwill and intangible assets acquired in
business combinations completed before July 1, 2001 will continue to be
amortized until December 31, 2001.
During the first quarter of fiscal year 2002, the Company will evaluate its
existing intangible assets and goodwill and make any necessary
reclassifications in order to conform to the new requirements in accordance
with SFAS No. 141. Upon the adoption of SFAS No. 142, the Company will be
required to reassess the useful lives and residual values of all intangible
assets and make any necessary amortization period adjustments by March 31,
2002. Although the Company has commenced its evaluation, no final
conclusion has been reached.
Furthermore, in connection with the transitional impairment evaluation, SFAS
No. 142 will require the Company to perform an assessment of whether there
is an indication that goodwill is impaired as of January 1, 2002. The
transitional assessment, which is required to be completed by June 30, 2002,
will consist of (1) identifying its reporting units, (2) determining the
carrying value of each reporting unit by assigning the assets and
liabilities, including the existing goodwill and intangible assets to those
reporting units, and (3) determining the fair value of each reporting unit.
If the carrying value of any reporting unit exceeds its fair value, then
detailed fair values for each of the assigned assets (excluding goodwill)
and liabilities will be determined to calculate the amount of goodwill
impairment, if any. Such impairment evaluation is to be completed as soon
as possible, but no later than December 31, 2002. Any transitional
impairment loss resulting from the adoption will be recognized as the effect
of a change in accounting principle in the Company’s consolidated statement
of income. The Company is evaluating the impact of the adoption of these
standards and has not yet fully determined the effect of adoption on its
financial position, results of operations, or cash flows.
The Company also carries negative goodwill, the amount that the fair values
of assets acquired and liabilities assumed exceeds the cost of an acquired
company, of $4,192,334 at December 31, 2001. In accordance with SFAS No.
142, such amount will be recognized to the Company’s consolidated statement
of income as the cumulative effect of a change in accounting principle on
January 1, 2002.
Table of Contents
2001
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair
Cost
Gain
Loss
Value
$
17,639,484
$
369,827
$
18,009,311
8,755,951
220,564
8,976,515
4,368,861
$
64,428
4,304,433
32,358,679
490,540
562,320
32,286,899
1,450,938
103,512
1,554,450
$
64,573,913
$
1,184,443
$
626,748
$
65,131,608
$
1,598,094
$
77,594
$
1,520,500
2,725,475
$
108,624
80,589
2,753,510
$
4,323,569
$
108,624
$
158,183
$
4,274,010
2000
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair
Cost
Gain
Loss
Value
$
28,328,202
$
63,751
$
100,444
$
28,291,509
24,296,510
569,898
24,866,408
1,725,519
31,170
1,756,689
$
54,350,231
$
664,819
$
100,444
$
54,914,606
$
13,068,177
$
5,965
$
487,317
$
12,586,825
2,675,906
266,276
2,409,630
$
15,744,083
$
5,965
$
753,593
$
14,996,455
Table of Contents
For the year ended December 31, 2001, proceeds from sales of securities
available for sale amounted to $17,431,065. Gross realized gains from the
sales of securities available for sale amounted to $916,947. There was no
gross realized loss from sales during 2001. There were no sales of
securities available for sale during 2000.
The Company adopted SFAS No. 133,
Accounting for Derivative Instruments and
Hedging Activities
, as amended and interpreted, in 1999. As permitted with
the initial adoption of SFAS No. 133, the Bank reclassified Korean corporate
bonds with a book value of $6,331,594 and an estimated fair value of
$6,523,207 from the held to maturity to the available for sale portfolio.
During 1999, the Bank sold four of these securities with a book value of
$4,645,127 for $4,763,950. At the time of sale, unrealized gains of
$118,823 in accumulated other comprehensive income were reclassified into
earnings.
The amortized cost and estimated fair value of investment securities at
December 31, 2001, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
Estimated
Amortized
Fair
Cost
Value
$
2,002,336
$
2,110,960
2,321,233
2,163,050
$
4,323,569
$
4,274,010
$
2,483,913
$
2,511,252
24,570,049
25,011,001
12,673,767
12,939,064
24,846,184
24,670,291
$
64,573,913
$
65,131,608
Securities with amortized cost of approximately $2,500,000 and $4,222,000 at
December 31, 2001 and 2000, respectively, were pledged to secure public
deposits and for other purposes as required or permitted by law.
At December 31, 2001 and 2000, securities with amortized cost of
approximately $6,092,000 and $5,854,000, respectively, were pledged as
collateral for borrowing from Federal Home Loan Bank of $5,000,000. This
borrowing accrues interest at 6.7 percent and has a term of seven years,
maturing in October 2007.
Table of Contents
3.
LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES
The following is a summary of loans by major category at December 31:
2001
2000
$
208,735,672
$
136,059,078
248,775,135
177,849,052
46,596,186
45,488,385
1,735,694
3,484,004
505,842,687
362,880,519
(650,430
)
(176,814
)
(6,709,575
)
(6,979,857
)
$
498,482,682
$
355,723,848
At December 31, 2001 and 2000, the Bank had $71,521,789 and $58,016,154,
respectively, of loans sold to unaffiliated parties for which it performs
servicing.
Management believes that the allowance for loan losses is adequate to provide
for losses inherent in the loan portfolio. However, the allowance is an estimate
that is inherently uncertain and depends on the outcome of future events.
Management’s estimates are based on previous loan loss experience; volume,
growth, and composition of the loan portfolio; the value of collateral; and
current economic conditions. The Bank’s lending is concentrated in consumer,
commercial, and real estate loans in Los Angeles, San Jose, New York City,
Seattle, and surrounding areas. Although management believes the level of the
allowance is adequate to absorb losses inherent in the loan portfolio, declines
in the local economy, as well as other unforeseen events, may result in
increasing losses that cannot reasonably be predicted at this date.
Activity in the allowance for loan losses is as follows:
2001
2000
1999
$
6,979,857
$
3,451,884
$
2,834,127
750,000
(1,100,000
)
3,395,000
7,877,565
(3,779,112
)
(6,576,691
)
(2,938,939
)
2,294,830
4,036,099
226,696
464,000
(709,000
)
(65,000
)
$
6,709,575
$
6,979,857
$
3,451,884
The reserve for losses on commitments to extend credit and letters of credit is
primarily related to undisbursed funds on lines of credit. The Company evaluates
credit risk associated with the loan portfolio at the same time it evaluates
credit risk associated with the commitments to extend credit and letters of
credits. However, the allowances necessary for the commitments is reported
separately in other liabilities in the accompanying consolidated statements of
financial conditions and not as part of the allowance for loan losses, as
presented above. The reserve for losses on commitments to extend credit and
letters of credit was $437,000 and $901,000 at December 31, 2001 and 2000,
respectively.
Table of Contents
At December 31, 2001 and 2000, the Bank had classified $2,682,698 and
$2,197,903, respectively, of its commercial and real estate loans as impaired,
with specific reserves of $1,410,791 and $1,916,609, respectively. The average
recorded investment in impaired loans during the years ended December 31, 2001,
2000 and 1999 was $1,712,722, $3,026,063 and $3,109,366, respectively. It is
generally the Bank’s policy to place loans on nonaccrual status when they are 90
days past due. At December 31, 2001, loans on nonaccrual status totaled
$1,720,432, compared to $2,038,345 at December 31, 2000. Interest income of
$78,577, $143,993 and $170,260 was recognized on impaired loans during the years
ended December 31, 2001, 2000 and 1999, respectively.
The following is an analysis of loans to directors of the Bank and their
affiliates for 2001 and 2000. All such loans were made under terms that are
consistent with the Bank’s normal lending policies:
2001
2000
$
894,000
$
1,906,000
1,643,000
75,000
(939,000
)
(1,087,000
)
$
1,598,000
$
894,000
2001
2000
$
538,983
1,217,256
$
5,204,221
4,305,915
4,311,788
3,270,912
9,516,009
9,333,066
(4,214,929
)
(3,516,307
)
$
5,301,080
$
5,816,759
Table of Contents
5.
OTHER REAL ESTATE OWNED
The following is a summary of the changes in the allowance for losses on
other real estate owned at December 31:
2001
2000
1999
$
37,293
$
13,000
$
9,778
75,233
13,000
(37,293
)
(50,940
)
(9,778
)
$
—
$
37,293
$
13,000
(Income) expense activities related to other real estate owned include the
following at December 31:
2001
2000
1999
$
(35,555
)
$
(18,658
)
75,233
$
13,000
(2,893
)
15,515
12,501
$
(38,448
)
$
72,090
$
25,501
6.
DEPOSITS
The scheduled maturities of time deposits at December 31 are as follows:
2001
2000
$
221,255,163
$
200,375,672
3,345,087
2,054,701
235,197
459,922
108,000
2,090,000
800,000
$
227,725,447
$
202,998,295
Interest expense for certificates of deposit of $100,000 or more amounted to
$7,051,608, $6,398,715 and $3,081,634 in 2001, 2000 and 1999, respectively.
7.
SUBORDINATED NOTES
At December 31, 2001 and 2000, the Company had subordinated capital notes
outstanding of $4,300,000 with a stated interest rate of nine percent,
maturing on September 30, 2004. Interest on the notes is payable quarterly,
and no scheduled payments of principal are due prior to maturity. The
Company may redeem the notes prior to their maturity on or after September
30, 2002.
The notes qualify as Tier 2 risk-based capital under the Office of the
Comptroller of the Currency guidelines for assessing regulatory capital.
For the total risk-based capital ratio, the amount of notes that qualify as
capital is reduced as those notes approach maturity. At December 31, 2001,
$1,720,000 of the notes qualified as risk-based capital.
Table of Contents
Current
Deferred
Total
$
5,130,152
$
(766,908
)
$
4,363,244
(24,813
)
1,978,013
1,953,200
$
5,105,339
$
1,211,105
$
6,316,444
$
6,224,067
$
(1,024,972
)
$
5,199,095
1,738,314
(153,135
)
1,585,179
$
7,962,381
$
(1,178,107
)
$
6,784,274
$
1,352,562
$
267,151
$
1,619,713
21,869
15,617
37,486
$
1,374,431
$
282,768
$
1,657,199
Table of Contents
As of December 31, the federal and state deferred tax assets (liabilities)
are as follows:
Federal
State
Total
$
1,507,607
$
80,689
$
1,588,296
2,746,961
67,371
2,814,332
806,290
246,640
1,052,930
(6,256
)
(2,502
)
(8,758
)
195,542
78,202
273,744
(9,484
)
(3,797
)
(13,281
)
106,292
42,509
148,801
151,821
60,717
212,538
79,605
31,836
111,441
(196,448
)
(41,337
)
(237,785
)
51,744
51,744
$
5,433,674
$
560,328
$
5,994,002
Federal
State
Total
$
(1,155,149
)
$
(3,029
)
$
(1,158,178
)
2,949,855
1,493,638
4,443,493
(59,686
)
(19,794
)
(79,480
)
2,757,147
893,133
3,650,280
31,500
10,204
41,704
60,211
19,504
79,715
140,652
45,562
186,214
151,821
49,180
201,001
145
145
(168,221
)
(24,031
)
(192,252
)
(13,138
)
91,135
77,997
$
4,694,992
$
2,555,647
$
7,250,639
A reconciliation of the difference between the federal statutory income tax
rate and the effective tax rate as of December 31 is shown in the following
table:
2001
2000
1999
35
%
35
%
35
%
7
6
1
(6
)
(3
)
(2
)
(2
)
(1
)
37
%
39
%
29
%
Table of Contents
At December 31, 2001, the Company had federal and California net operating
loss carryforwards relating to the Bank’s ownership change that occurred on
July 15, 1994 of approximately $664,000 and $622,000, respectively, which
will expire through 2009. Also, at December 31, 2001, the Company had
federal and New York net operating loss carryforwards relating to the
purchase of KFB that occurred on February 25, 2000, both approximating
$7,185,000, which will expire through 2019. Due to the ownership change in
1994 and 2000, the annual limitation that can be utilized to offset future
taxable income approximates $83,000 and $497,000, respectively.
10.
STOCKHOLDERS’ EQUITY
In August 2000, the Company raised additional capital of $6.9 million
through the issuance of 175,000 units, with each unit consisting of four
shares of common stock plus a fully vested, immediately exercisable warrant
to purchase an additional share of common stock. No value was allocated to
the warrants at issuance as the proceeds were allocated entirely to common
stocks based on the market price at date of issuance. The warrant is a
three-year warrant to purchase a share of common stock at a price of $11, if
exercised within one year, $12 if exercised after one and within two years,
and $13 if exercised after two and within three years, from the date of
grant. The exercise price was above the fair market value of the common
stock at the date of grant.
The Company adopted a stock option plan in 1989 that was replaced by the
Year 2000 Long Term Incentive Plan, under which options may be granted to
key employees and directors of the Company. Options are exercisable in
installments, which need not be equal, as shall be determined at the time of
grant. Option prices may not be less than the fair market value at the date
of grant. The Company authorized a total of 700,000 shares under the plan
as of December 31, 2001. After 10 years from grant, all unexercised options
will expire.
Activity in the stock option plans for the years ended December 31 is as
follows:
2001
2000
1999
Weighted
Weighted
Weighted
Average
Average
Average
Exercise
Exercise
Exercise
Number
Price
Number
Price
Number
Price
of Shares
per Share
of Shares
per Share
of Shares
per Share
423,139
$
4.67
397,200
$
5.02
370,000
$
4.87
31,776
4.64
31,200
4.91
110,000
18.49
30,000
9.26
(52,317
)
4.53
(5,837
)
2.57
(34,000
)
3.17
480,822
7.85
423,139
4.67
397,200
5.02
334,118
4.41
370,435
4.34
345,360
4.59
Table of Contents
Options Outstanding
Options Exercisable
Weighted
Average
Weighted
Weighted
Remaining
Average
Average
Range of
Number
Contractual
Exercise
Number
Exercise
Exercise Prices
Outstanding
Life
Price
Outstanding
Price
347,150
4.8 years
$
4.43
332,958
$
4.40
23,672
7.1 years
8.57
1,160
8.57
20,000
9.7 years
16.20
90,000
9.6 years
19.00
480,822
6.0 years
7.85
334,118
4.41
Had compensation cost for the Company’s stock option plans been determined
based on the fair value at the grant date, the Company’s net income and
earnings per share for the years ended December 31, 2001, 2000 and 1999
would have been reduced to the pro forma amounts indicated below:
2001
2000
1999
$
10,783,529
$
10,457,063
$
3,971,801
10,725,188
10,398,722
3,951,221
$
1.96
$
2.09
$
0.84
1.85
1.98
0.80
$
1.95
$
2.08
$
0.83
1.84
1.97
0.80
The weighted-average fair value of options granted during 2001 and 1999 was
$7.15 and $3.44, respectively. No options were granted in 2000. The fair
value of options granted under the Bank’s stock option plans during 2001 and
1999 were estimated on the date of grant using the Black-Scholes
option-pricing model, with the following weighted-average assumptions used:
0.5 percent dividends yield (2001) and no dividends yield (1999), expected
volatility of 35.5 percent (2001) and 28.0 percent (1999), risk-free
interest rate of 5.5 percent (2001) and 6.4 percent (1999), and expected
lives of five years.
11.
EMPLOYEE BENEFIT PLANS
Deferred Compensation Plan
- In 1996, the Company established a deferred
compensation plan that permits eligible officers and directors to defer a
portion of their compensation. In 2001, the Board of Directors approved and
the Company established a deferred compensation plan that allows a key
executive of the Company additional deferment of his compensation. The
deferred compensation, together with accrued accumulated interest, is
distributable in cash after retirement or termination of service. The
deferred compensation liabilities at December 31, 2001 and 2000 amounted to
$1,031,335 and $638,557, respectively, which are included in other
liabilities. The Company has insured the lives of certain officers and
directors who participate in the deferred compensation plan, to assist in
the funding of the deferred compensation liabilities. The Company is the
owner and beneficiary of the
Table of Contents
$
2,639,789
2,553,851
2,576,705
2,599,271
2,295,351
10,568,387
$
23,233,354
Rental expense recorded under such leases in 2001, 2000 and 1999 amounted to
approximately $2,399,000, $1,434,000 and $1,057,000, respectively.
In the normal course of business, the Company is involved in various legal
claims. Management has reviewed all legal claims against the Company with
counsel and has taken into consideration the views of such counsel as to the
outcome of the claims. In management’s opinion, the final disposition of
all such claims will not have a material adverse effect on the financial
position and results of operations of the Company.
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit, standby letters of credit, and commercial letters of credit. These
instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the consolidated statements
of financial condition. The Company’s exposure to credit loss in the event
of nonperformance by the other party to commitments to extend credit and
standby letters of credit is represented by the contractual notional amount
of those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for
Table of Contents
extending loan facilities to customers. The Company evaluates each
customer’s creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management’s credit evaluation of the counterparty.
Collateral held varies but may include accounts receivable; inventory;
property, plant, and equipment; and income-producing properties.
Commitments at December 31, 2001 are summarized as follows:
$
146,201,263
4,785,132
21,633,562
13.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies.
However, considerable judgment is required to interpret market data in order
to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
December 31, 2001
Carrying
Estimated
Amount
Fair Value
$
72,594,996
$
72,594,996
487,000
487,000
65,131,608
65,131,608
4,323,569
4,274,010
224,322
224,322
3,657,842
3,890,819
498,482,682
498,537,507
918,300
918,300
266,700
266,700
3,242,772
3,242,772
2,609,753
2,609,753
$
199,082,971
$
199,082,971
390,761,431
391,712,502
5,000,000
4,984,141
4,300,000
4,292,811
3,205,721
3,205,721
9,665,082
9,381,845
2,609,753
2,609,753
Table of Contents
December 31, 2000
Carrying
Estimated
Amount
Fair Value
$
132,680,310
$
132,680,310
6,035,294
6,035,294
54,914,606
54,914,606
15,744,083
14,996,455
410,337
410,337
355,723,848
353,731,520
918,300
918,300
251,600
251,600
3,437,114
3,437,114
5,394,334
5,394,334
$
192,836,727
$
192,836,727
334,872,194
335,512,279
5,000,000
5,000,000
4,300,000
4,423,140
3,754,811
3,754,811
5,394,334
5,394,334
The following methods and assumptions were used by the Company in estimating
the fair values of its financial instruments:
Cash and Cash Equivalents
- The carrying amounts approximate fair values
due to the short-term nature of these instruments.
Interest-Bearing Deposits in Other Financial Institutions
- The carrying
amounts approximate fair value due to the short-term nature of these
investments.
Investment Securities
- The fair values of investment securities are
generally obtained from market bids from similar or identical securities,
or are obtained from independent securities brokers or dealers.
Interest-Only Strips
- The fair value of interest-only strips is
calculated based on the present value of the excess of total servicing
fees over the contractually specified servicing fee for the estimated life
of loans that were sold, discounted at market rate.
Loans held for sale
- Fair values are based on quoted market prices or
dealer quotes.
Loans receivable
- To estimate the fair value of loans receivable, the
portfolio was divided between loans with fixed and variable interest
terms.
The fair value of loans was estimated by taking into account both credit
and interest risks. Credit risk was adjusted to the loans based on the
Company’s migration analysis. Interest risk was adjusted to only fixed
loans, while the loans with variable interest rates were assumed to have
no interest risk.
Table of Contents
The interest risk adjustment for fixed loans was estimated by discounting
the future cash flows using the current interest rates at which similar
loans would be made to borrowers with similar credit ratings and for the
same remaining maturities. The fair value of nonperforming loans was not
estimated because it is not practical to reasonably assess the credit
adjustment that would be applied in the marketplace for such loans. The
estimated fair value is net of allowance for loan losses. The carrying
amount of accrued interest receivable approximates its fair value.
Federal Reserve Bank Stock
- The carrying amount approximates fair value,
as the stocks may be sold back to the Federal Reserve Bank at carrying
value.
Federal Home Loan Bank Stock
- The carrying amount approximates fair
value, as the stocks may be sold back to the Federal Home Loan Bank at
carrying value.
Accrued Interest Receivable and Payable
- The carrying amounts approximate
fair value due to the short-term maturities of these instruments.
Customers’ Liabilities on Acceptances and Bank’s Liabilities on
Acceptances
- The carrying amount approximates fair value due to the
short-term maturities of these instruments.
Deposits
- The fair value of demand deposits, savings accounts, and
certain money market deposits is the amount payable on demand at the
reporting date. Thus, the carrying amount of such deposit liabilities is
a reasonable estimate of fair value. For fixed-maturity certificates of
deposit, the fair value is estimated using the rates currently offered for
deposits of similar remaining maturities. The carrying amount of accrued
interest payable approximates its fair value.
Borrowing from Federal Home
Loan Bank
- The fair values of Federal Home
Loan Bank borrowings are estimated based on the discounted value of
contractual cash flows, using rates currently offered by the Federal Home
Loan Bank of San Francisco for fixed-rate credit advances with similar
remaining maturities.
Subordinated Notes
- The fair values of subordinated notes are based on
rates currently available to the Company for debt with similar terms and
remaining maturities.
Trust Preferred Securities
- The fair values of trust preferred securities
are estimated by discounting the cash flows through maturity based on
prevailing rates offered on the 30-year Treasury bond plus the current
market spread at December 31, 2001.
Loan Commitments and Standby Letters of Credit
- The fair value of loan
commitments and standby letters of credit is based on fees currently
charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the counterparties’ credit standing.
At December 31, 2001 and 2000, the fair value for loan commitments and
standby letters of credit is immaterial.
The fair value estimates presented herein are based on pertinent information
available to management at December 31, 2001 and 2000. Although management
is not aware of any factors that would significantly affect the estimated
fair value amounts, such amounts have not been comprehensively revalued for
purposes of these financial statements since that date, and therefore,
current estimates of fair value may differ significantly from the amounts
presented herein.
Table of Contents
14.
REGULATORY MATTERS
The Company (on a consolidated basis) and the Bank are subject to various
regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that,
if undertaken, could have a direct material effect on the Company’s and the
Bank’s financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company and the Bank
must meet specific capital guidelines that involve quantitative measures of
their assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Company’s and the 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 the Company and the Bank to maintain minimum ratios (set forth in
the table below) of total and Tier I capital (as defined in the regulations)
to risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes that, as of December 31,
2001 and 2000, the Company and the Bank meet all capital adequacy
requirements to which it is subject.
As of December 31, 2001 and 2000, the most recent notification from the
Office of the Comptroller of the Currency (“OCC”) categorized the Bank as
“well capitalized” under the regulatory framework for prompt corrective
action. To be categorized as well capitalized the Bank must maintain
minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as
set forth in the table below. There are no conditions or events since the
notification that management believes have changed the Bank’s category.
Table of Contents
The Company’s and the Bank’s actual capital amounts and ratios are also
presented in the table. There are no prompt corrective action thresholds to
the bank holding company.
To Be Well
Capitalized under
For Capital
Prompt Corrective
Actual
Adequacy Purposes
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
$
71,818,361
12.4
%
$
46,462,088
8.0
%
N/A
N/A
$
63,244,482
10.9
%
$
46,324,984
8.0
%
$
57,906,230
10.0
%
$
63,388,786
11.0
%
$
23,231,044
4.0
%
N/A
N/A
$
54,814,907
9.5
%
$
23,162,492
4.0
%
$
34,743,738
6.0
%
$
63,388,786
9.7
%
$
26,297,804
4.0
%
N/A
N/A
$
54,814,907
8.8
%
$
24,973,066
4.0
%
$
31,216,332
5.0
%
$
50,605,875
11.9
%
$
34,034,034
8.0
%
$
42,542,543
10.0
%
$
42,676,414
10.0
%
$
17,017,017
4.0
%
$
25,525,526
6.0
%
$
42,676,414
7.7
%
$
22,280,968
4.0
%
$
27,851,209
5.0
%
The Company may not pay dividends or make any other capital distribution if,
after making the distribution, the Company would be undercapitalized. Based
on the current financial status of the Company, the Company believes that
such limitations and restrictions will not impair the Company’s ability to
continue to pay dividends.
Under federal banking law, dividends declared by the Company in any calendar
year may not, without the approval of the OCC, exceed its net income for
that year combined with its retained income from the preceding two years.
However, the OCC has previously issued a bulletin to all national banks
outlining guidelines limiting the circumstances under which national banks
may pay dividends even if the banks are otherwise statutorily authorized to
pay dividends. The limitations impose a requirement or in some cases
suggest that prior approval of the OCC should be obtained before a dividend
is paid if a national bank is the subject of administrative action or if the
payment could be viewed by the OCC as unsafe or unusual.
As a result of a recent regulatory examination by the OCC, the Bank has
stipulated and consented, without any admission of wrongdoing, to the
issuance of a Consent Order (the “Order”) by the OCC. The Order addresses
the OCC’s findings of weakness noted during its examination of the Bank as
they relate to compliance with the Bank Secrecy Act (“BSA”). Such Order is
effective on February 20, 2002. The violations of BSA rules and regulations
and other BSA weaknesses asserted by the OCC (including the failure to make
required reports) were determined by the OCC to be the result of
deficiencies in the Bank’s BSA program. The Order requires, among other
matters, the Bank to enhance its management information systems for
monitoring and making reports of suspicious activity
Table of Contents
Income
Shares
Per Share
(Numerator)
(Denominator)
Amount
$
10,783,529
5,513,913
$
1.96
266,964
(0.09
)
45,559
(0.02
)
$
10,783,529
5,826,436
$
1.85
$
10,457,063
5,007,470
$
2.09
258,919
(0.10
)
5,486
(0.01
)
$
10,457,063
5,271,875
$
1.98
$
3,971,801
4,743,224
$
0.84
207,969
(0.04
)
$
3,971,801
4,951,193
$
0.80
Table of Contents
Three Months Ended
March 31
June 30
September 30
December 31
(In thousands, except per share amounts)
$
7,971
$
7,555
$
7,687
$
7,677
300,000
450,000
2,775
3,328
2,546
2,135
0.51
0.61
0.46
0.38
0.48
0.57
0.43
0.37
$
5,487
$
6,586
$
7,369
$
8,011
2,339
2,999
2,793
2,326
0.47
0.60
0.59
0.43
0.44
0.57
0.56
0.41
18.
BUSINESS SEGMENT INFORMATION
The Company segregates its operations into three primary segments: Banking
Operations, Trade Finance Services (“TFS”), and Small Business
Administration Lending Services (“SBA”). The Company determines the
operating results of each segment based on an internal management system
that allocates certain expenses to each segment.
Banking Operations
- The Company provides lending products, including
commercial installment and real estate loans, to its customers.
Trade Finance Services
- The TFS department allows the Company’s
import/export customers to handle their international transactions. Trade
finance products include the issuance and collection of letters of credit,
international collection, and import/export financing.
Table of Contents
Small Business Administration Lending Services
- The SBA department provides
customers of the Company access to the U.S. SBA guaranteed lending program.
Business Segment
Banking
Operations
TFS
SBA
Company
(Dollars in Thousands)
$
24,337
$
2,120
$
4,433
$
30,890
565
115
70
750
11,595
1,637
2,092
15,324
35,367
3,642
6,455
45,464
25,077
1,568
1,719
28,364
$
10,290
$
2,074
$
4,736
$
17,100
$
551,051
$
39,822
$
88,565
$
679,438
Business Segment
Banking
Operations
TFS
SBA
Company
(Dollars in Thousands)
$
22,459
$
2,049
$
2,945
$
27,453
(1,400
)
300
(1,100
)
10,375
1,915
1,228
13,518
34,234
3,664
4,173
42,071
20,526
2,479
1,825
24,830
$
13,708
$
1,185
$
2,348
$
17,241
$
487,850
$
36,003
$
78,710
$
602,563
Business Segment
Banking
Operations
TFS
SBA
Company
(Dollars in Thousands)
$
13,408
$
2,110
$
1,819
$
17,337
1,975
1,040
380
3,395
5,135
1,401
1,488
8,024
16,568
2,471
2,927
21,966
13,344
1,524
1,469
16,337
$
3,224
$
947
$
1,458
$
5,629
$
280,464
$
33,723
$
44,903
$
359,090
Table of Contents
19.
CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY
The following presents the unconsolidated financial statements of only the
parent company, Nara Bancorp, Inc., as of December 31:
2001
2000
$
9,115,473
56,092,116
$
44,512,171
$
65,207,589
$
44,512,171
$
9,665,082
115,099
9,780,181
55,427,408
44,512,171
$
65,207,589
$
44,512,171
2001
2000
1999
$
(771,983
)
(771,983
)
(382,632
)
11,511,649
$
10,457,063
$
3,971,801
10,357,034
10,457,063
3,971,801
426,495
$
10,783,529
$
10,457,063
$
3,971,801
Table of Contents
2001
2000
1999
$
10,783,529
$
10,457,063
3,971,801
8,582
115,099
(11,511,649
)
(10,457,063
)
$
(3,971,801
)
(604,439
)
9,656,500
237,085
637,425
11,655
(822,753
)
9,719,912
9,115,473
$
9,115,473
$
—
$
—
20.
SUBSEQUENT EVENTS
On March 8, 2002, the Company’s Board of Directors authorized the repurchase
of up to 10 percent of the outstanding shares of the Company’s common stock
on that date over the next 12-month period. Repurchase transactions will be
done in the open market and will be determined based on management’s
discretion depending on market conditions.
On March 12, 2002, the Company’s Board of Directors declared a dividend of
$0.10 per common share for the first quarter of 2002, which is payable on
April 11, 2002, to stockholders of record on March 31, 2002.
On March 26, 2002, the Bancorp, through a newly formed wholly owned
subsidiary, Nara Statutory Trust II (“Nara Trust II”), a Connecticut
statutory business trust, completed a private offering of $8 million of
trust preferred securities, issued as part of a pooled offering with several
other financial institutions.
Table of Contents
For the period beginning on March 26, 2002 to June 25, 2002, the trust
preferred securities bear the interest rate of 5.59 percent per annum.
Beginning with June 26, 2002, the interest rate is adjusted quarterly
beginning March 26, June 26, September 26 and December 26 during the 30-year
term based on the 3-month LIBOR plus 3.60 percent. However, prior to March
26, 2007, the interest rate cannot exceed 11.00 percent.
Nara Trust II used the proceeds from the sale of the trust preferred
securities to purchase junior subordinated deferrable interest debentures of
the Bancorp. The Bancorp intends to use the proceeds for general corporate
purposes. Under applicable regulatory guidelines, the Bancorp expects that
the trust preferred securities will qualify as Tier I capital.
EXHIBIT 4.5
AMENDED AND RESTATED DECLARATION OF TRUST
OF
NARA BANCORP CAPITAL TRUST I
OF
NARA BANCORP, INC.
Dated as of March 28, 2001
TABLE OF CONTENTS
PAGE
ARTICLE I INTERPRETATION AND DEFINITIONS .................................................. 2
SECTION 1.1 Definitions .......................................................... 2
ARTICLE II TRUST INDENTURE ACT ............................................................ 8
SECTION 2.1 Trust Indenture Act; Application ..................................... 8
SECTION 2.2 Lists of Holders of Securities ....................................... 8
SECTION 2.3 Reports by the Property Trustee . .................................... 9
SECTION 2.4 Periodic Reports to Property Trustee ................................. 9
SECTION 2.5 Evidence of Compliance with Conditions Precedent ..................... 9
SECTION 2.6 Events of Default; Waiver . .......................................... 9
SECTION 2.7 Default; Notice ...................................................... 11
ARTICLE III ORGANIZATION .................................................................. 12
SECTION 3.1 Name ................................................................. 12
SECTION 3.2 Office................................................................ 12
SECTION 3.3 Purpose .............................................................. 12
SECTION 3.4 Authority............................................................. 12
SECTION 3.5 Title to Property of the Trust........................................ 12
SECTION 3.6 Powers and Duties of the Administrative Trustees ..................... 13
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees ................. 15
SECTION 3.8 Powers and Duties of the Property Trustee ............................ 16
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee .......... 18
SECTION 3.10 Certain Rights of Property Trustee . ................................ 20
SECTION 3.11 Delaware Trustee . .................................................. 22
SECTION 3.12 Execution of Documents .............................................. 22
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities .............. 23
SECTION 3.14 Duration of Trust ................................................... 23
SECTION 3.15 Mergers. ............................................................ 23
ARTICLE IV SPONSOR ........................................................................ 25
SECTION 4.1 Sponsor's Purchase of Common Securities ............................. 25
SECTION 4.2 Responsibilities of the Sponsor...................................... 25
SECTION 4.3 Right to Proceed .................................................... 25
SECTION 4.4 Right to Dissolve Trust . ........................................... 26
ARTICLE V TRUSTEES ........................................................................ 26
SECTION 5.1 Number of Trustees; Appointment of Co-Trustee ....................... 26
SECTION 5.2 Delaware Trustee .................................................... 26
|
SECTION 5.3 Property Trustee; Eligibility........................................ 27
SECTION 5.4 Certain Qualifications of Administrative Trustees and Delaware
Trustee Generally ................................................... 28
SECTION 5.5 Administrative Trustees ............................................. 28
SECTION 5.6 Appointment, Removal and Resignation of Trustees .................... 29
SECTION 5.7 Vacancies Among Trustees ............................................ 30
SECTION 5.8 Effect of Vacancies ................................................. 31
SECTION 5.9 Meetings............................................................. 31
SECTION 5.10 Delegation of Power ................................................ 31
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business: ....... 32
ARTICLE VI DISTRIBUTIONS .................................................................. 32
SECTION 6.1 Distributions ......................................................... 32
ARTICLE VII ISSUANCE OF SECURITIES ........................................................ 32
SECTION 7.1 General Provisions Regarding Securities ............................. 32
SECTION 7.2 Execution and Authentication ........................................ 33
SECTION 7.3 Form and Dating ..................................................... 33
SECTION 7.4 Registrar, Paying Agent and Exchange Agent .......................... 34
SECTION 7.5 Paying Agent to Hold Money in Trust.................................. 35
SECTION 7.6 Replacement Securities .............................................. 35
SECTION 7.7 Outstanding Capital Securities ...................................... 35
SECTION 7.8 Capital Securities in Treasury ...................................... 35
SECTION 7.9 Temporary Securities ................................................ 36
SECTION 7.10 Cancellation ....................................................... 36
SECTION 7.11 CUSIP Numbers....................................................... 36
ARTICLE VIII DISSOLUTION OF TRUST ......................................................... 36
SECTION 8.1 Dissolution of Trust ................................................ 36
ARTICLE IX TRANSFER OF INTERESTS ......................................................... 37
SECTION 9.1 Transfer of Securities .............................................. 37
SECTION 9.2 Transfer Procedures and Restrictions ................................ 38
SECTION 9.3 Deemed Security Holders ............................................. 44
ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR
OTHERS ........................................................................... 44
SECTION 10.1 Liability............................................................ 44
SECTION 10.2 Exculpation ......................................................... 44
SECTION 10.3 Fiduciary Duty ...................................................... 45
SECTION 10.4 Indemnification ..................................................... 46
SECTION 10.5 Outside Businesses .................................................. 48
|
ARTICLE XI ACCOUNTING ..................................................................... 49
SECTION 11.1 Fiscal Year. ......................................................... 49
SECTION 11.2 Certain Accounting Matters............................................ 49
SECTION 11.3 Banking............................................................... 49
SECTION 11.4 Withholding . ........................................................ 50
ARTICLE XII AMENDMENTS AND MEETINGS ....................................................... 50
SECTION 12.1 Amendments............................................................ 50
SECTION 12.2 Meetings of the Holders; Action by Written Consent ................... 52
ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE
TRUSTEE ........................................................................... 53
SECTION 13.1 Representations and Warranties of Property Trustee ................... 53
SECTION 13.2 Representations and Warranties of Delaware Trustee ................... 54
ARTICLE XIV MISCELLANEOUS ................................................................. 55
SECTION 14.1 Notices. ............................................................. 55
SECTION 14.2 Governing Law ........................................................ 56
SECTION 14.3 Intention of the Parties.............................................. 56
SECTION 14.4 Headings.............................................................. 56
SECTION 14.5 Successors and Assigns ............................................... 56
SECTION 14.6 Partial Enforceability................................................ 57
SECTION 14.7 Counterparts.......................................................... 57
ANNEX I
TERMS OF
10.18% MMCapS(SM)
10.18% COMMON SECURITIES ........................................................ A-1
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE .............................................Al-1
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE ..............................................A2-1
ANNEX II
TRANSFEREE LETTER ................................................................ B-1
|
CROSS-REFERENCE TABLE*
Section of
Trust Indenture
Act of 1939, as Section of
amended Declaration
--------------- ------------
310(a) .................................................................... 5.3
310(b) .................................................................... 5.3(c); 5.3(d)
311(a) .................................................................... 2.2(b)
311(b) .................................................................... 2.2(b)
312(a) .................................................................... 2.2(a)
312(b) .................................................................... 2.2(b)
313 .................................................................... 2.3
314(a) .................................................................... 2.4, 2.7(c);
3.6(j)
314(c) .................................................................... 2.5
315(a) .................................................................... 3.6(j); 3.9
315(b) .................................................................... 2.7(a)
315(c) .................................................................... 3.9(a)
315(d) .................................................................... 3.9(b)
316(a) .................................................................... 2.6
316(c) .................................................................... 3.6(e)
317(a) .................................................................... 3.8(e); 3.8(h)
317(b) .................................................................... 3.8(i); 7.5
318 .................................................................... 2.1
|
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
NARA BANCORP CAPITAL TRUST I
Dated as of March 28, 2001
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of March 28, 2001, by and among the Trustees (as defined herein), the Sponsor (as defined herein) and the Holders (as defined herein), from time to time, of undivided beneficial interests in the assets of the Trust to be issued pursuant to this Declaration;
WHEREAS, the Delaware Trustee (as defined herein) and the Sponsor established Nara Bancorp Capital Trust I (the "Trust"), a trust created under the Delaware Business Trust Act pursuant to a Declaration of Trust dated as of March 6, 2011 (the "Original Declaration"), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on March 15, 2001, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust, investing the proceeds thereof in certain Debentures of the Debenture Issuer (each as hereinafter defined), and engaging in only those activities necessary, advisable or incidental thereto; and
WHEREAS, all of the Trustees (as defined herein) and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration;
WHEREAS, all of the Trustees and the Sponsor, by this Declaration, ratify the actions of each Trustee taken prior to the date hereof;
NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration and, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties, intending to be legally bound hereby, amend and restate in its entirety the Original Declaration and agree as follows:
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) capitalized terms used in this Declaration but not defined in the preamble above or elsewhere herein have the respective meanings assigned to them in this Section 1.1;
(b) a term defined anywhere in this Declaration has the same meaning throughout;
(c) all references to "the Declaration" or "this Declaration" are to this Amended and Restated Declaration of Trust and each Annex and Exhibit hereto, as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires;
(f) a term defined in the Indenture (as defined herein) has the same meaning when used in this Declaration unless otherwise defined in this Declaration or the context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Administrative Trustee" has the meaning set forth in Section 5.1.
"Affiliate" has the same meaning as given to that term in Rule 405 under the Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent, Registrar or Exchange Agent.
"Authorized Officer" of a Person means any other Person that is authorized to legally bind such former Person.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which banking institutions in Wilmington, Delaware, Los Angeles, California or New York, New York are authorized or required by law or executive order to remain closed.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time, or any successor legislation.
"Capital Securities" has the meaning specified in Section 7.1(a).
"Capital Securities Guarantee" means the Capital Securities Guarantee Agreement, dated as of the Closing Time, entered into by Nara Bancorp, Inc. with respect to the Capital Securities.
"Capital Security Certificate" has the meaning set forth in
Section 7.3.
"Closing Time" means the "Closing Time" as defined in the Purchase Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation.
"Commission" means the United States Securities and Exchange Commission as from time to time constituted, or if at any time after the execution of this Declaration such Commission is not existing and performing the duties now assigned to it under applicable federal securities laws, then the body performing such duties at such time.
"Common Securities" has the meaning specified in Section 7.1(a).
"Common Security Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit A-2.
"Common Securities Guarantee" means the Common Securities Guarantee Agreement, dated as of the Closing Time, entered into by Nara Bancorp, Inc., with respect to the Common Securities.
"Common Securities Subscription Agreement" means the Common Securities Subscription Agreement, dated as of the Closing Time, between the Trust Nara Bancorp, Inc. relating to the Common Securities.
"Company Indemnified Person" means (a) any Administrative Trustee; (b) any Affiliate of any Administrative Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Administrative Trustee; or (d) any officer, employee or agent of the Trust or its Affiliates.
"Corporate Trust Office" means the office of the Property Trustee at which the corporate trust business of the Property Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Declaration is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration.
"Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means Nara Bancorp, Inc., a Delaware corporation, or any successor entity resulting from any consolidation, amalgamation, merger or other business combination, in its capacity as issuer of the Debentures under the Indenture.
"Debenture Subscription Agreement" means the Debenture Subscription Agreement, dated as of the Closing Time, between the Debenture Issuer and the Trust in respect of the Debentures.
"Debenture Trustee" means Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity but solely as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee.
"Debentures" means the 10.18% Junior Subordinated Deferrable Interest Debentures due June 8, 2031, of the Debenture Issuer issued pursuant to the Indenture.
"Default" means an event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.
"Definitive Capital Securities" has the meaning set forth in
Section 7.3.
"Delaware Trustee" has the meaning set forth in Section 5.1.
"Direct Action" has the meaning set forth in Section 3.8(e).
"Distribution" means a distribution payable to Holders in accordance with Section 6.1.
"Event of Default" with respect to the Securities means an Event of Default (as defined in the Indenture) that has occurred and is continuing with respect to the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation.
"Exchange Agent" has the meaning set forth in Section 7.4.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve System.
"Fiduciary Indemnified Person" has the meaning set forth in
Section 10.4(b).
"Fiscal Year" has the meaning set forth in Section 11.1.
"Holder" means a Person in whose name a Security or Successor Security is registered on the register maintained by or on behalf of the Registrar, such Person being a beneficial owner of the Trust within the meaning of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a Fiduciary Indemnified Person.
"Indenture" means the Indenture, dated as of the Closing Time, between the Debenture Issuer and the Debenture Trustee, as amended from time to time.
"Initial Optional Redemption Date" has the meaning set forth in
Section 4(b) of Annex I hereto.
"Investment Company" means an investment company as defined in the Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in Section 4(c) of Annex I hereto.
"Legal Action" has the meaning set forth in Section 3.6(g).
"Like Amount" has the meaning set forth in Section 3 of Annex I hereto.
"List of Holders" has the meaning set forth in Section 2.2(a).
"Majority in Liquidation Amount" means, with respect to the Trust Securities, except as otherwise provided in the terms of the Capital Securities or by the Trust Indenture Act, Holders of outstanding Trust Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, excluding the Trust and the Debenture Issuer and any Affiliate thereof, who are the record owners of more than 50% of the aggregate liquidation amount (including the amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to but excluding the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class.
"Officers' Certificate" means, with respect to any Person, a certificate signed by an Authorized Officer of such Person. Any Officers' Certificate delivered by the Trust shall be signed by at least one Administrative Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include:
(a) a statement that each officer signing the Certificate has read the covenants or conditions 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 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 or not, 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 an employee of the Sponsor, and who shall be acceptable to the Property Trustee.
"Paying Agent" has the meaning specified in Section 7.4.
"Payment Amount" has the meaning specified in Section 6.1.
"Placement Agency Agreement" means the Placement Agency Agreement, dated March 21, 2001, by and among the Sponsor, the Trust and the Placement Agent named therein.
"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.
"Property Trustee" has the meaning set forth in Section 5.3(a).
"Property Trustee Account" has the meaning set forth in Section 3.8(c)(i).
"Quorum" means a majority of the Administrative Trustees or, if there are only two Administrative Trustees, both of them.
"Redemption Price" has the meaning set forth in Section 4(a) of Annex I hereto.
"Registrar" has the meaning set forth in Section 7.4.
"Regulatory Capital Event" has the meaning set forth in Section 4(c) of Annex I hereto.
"Related Party" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor.
"Responsible Officer" means any officer within the Corporate Trust Office of the Property Trustee with direct responsibility for the administration of this Declaration and also means, with respect to a particular corporate trust matter, any other officer of the Property Trustee to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject.
"Restricted Capital Security" means a Capital Security required by Section 9.2 to contain a Restricted Securities Legend.
"Restricted Definitive Capital Securities" has the meaning set forth in Section 7.3.
"Restricted Securities Legend" has the meaning set forth in
Section 9.2(c).
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act, or any successor rule or regulation.
"Rule 144" means Rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.
"Rule 144A" means Rule 144A under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.
"Securities" or "Trust Securities" means the Common Securities and the Capital Securities.
"Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation.
"Securities Guarantees" means the Common Securities Guarantee and the Capital Securities Guarantee.
"Special Event" has the meaning set forth in Section 4(c) of Annex I hereto.
"Special Event Redemption Price" has the meaning set forth in
Section 4(c) of Annex I hereto.
"Sponsor" means Nara Bancorp, Inc., a Delaware corporation, or any successor entity resulting from any merger, consolidation, amalgamation or other business combination, in its capacity as sponsor of the Trust.
"Subscription Agreement" means the Capital Securities Subscription Agreement relating to the Capital Securities, dated March 21, 2001, by and among the Trust, the Debenture Issuer and MMCapS(SM) Funding 1, Ltd.
"Successor Delaware Trustee" has the meaning set forth in Section 5.6(b)(ii).
"Successor Entity" has the meaning set forth in Section 3.15(b)(i).
"Successor Property Trustee" has the meaning set forth in Section 3.8(f)(ii).
"Successor Securities" has the meaning set forth in Section 3.15(b)(i).
"Super Majority" has the meaning set forth in Section
2.6(a) (ii).
"Tax Event" has the meaning set forth in Section 4(c) of Annex I hereto.
"Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury Department, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation.
"Trust Property" means (a) the Debentures, (b) any cash on deposit in or owing to the Property Trustee Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Property Trustee pursuant to this Declaration.
"Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue as a trustee of the Trust in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder.
"20% in Liquidation Amount" means, with respect to the Trust Securities, except as otherwise provided in the terms of the Capital Securities or by the Trust Indenture Act, Holders of outstanding Trust Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, excluding the Trust and the Debenture Issuer and any Affiliate thereof, who are the record owners of 20% or more of the aggregate liquidation amount (including the amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to but excluding the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration in order for this Declaration to be qualified under the Trust Indenture Act 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 and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Administrative Trustees on behalf of the Trust shall provide the Property Trustee, unless the Property Trustee is Registrar for the Securities, (i)
within 14 days after each record date for payment of Distributions, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of such record date, provided, that neither the Sponsor nor the Administrative Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time that the List of Holders does not differ from the most recent List of Holders given to the Property Trustee by the Sponsor and the Administrative Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Property Trustee. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity), provided, that the Property Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
Within 60 days after the date hereof, and no later than the
anniversary date hereof in each succeeding year, the Property Trustee shall
provide to the Holders of the Capital Securities such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Property Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Property Trustee.
Each of the Sponsor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee and the Commission such documents, reports and information as are required by Section 314 (if any) of the Trust Indenture Act and shall provide to the Property Trustee 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.
Each of the Sponsor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent provided for in this Declaration 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 may be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in Liquidation Amount of Capital Securities may, by vote, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default in respect of the Capital Securities and its consequences, provided, that if the underlying Event of Default under the Indenture
(i) is not waivable under the Indenture, the Event of Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority in aggregate principal amount of the holders of the Debentures (a "Super Majority") to be waived under the Indenture, the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in aggregate liquidation amount of the Capital Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such Default shall cease to exist, and any Event of Default with respect to the Capital Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other Default or an Event of Default with respect to the Capital Securities or impair any right consequent thereon. Any waiver by the Holders of the Capital Securities of an Event of Default with respect to the Capital Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in Liquidation Amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided, that if the underlying Event of Default under the Indenture:
(i) is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of a Super Majority to be waived, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in aggregate liquidation amount of the Common Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding;
provided further, each Holder of Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Common Securities and their consequences if all Events of Default with respect to the Capital Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the
Holders of the Capital Securities and only the Holders of the Capital Securities will have the right to direct the Property Trustee in accordance with the terms of the Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Subject to the foregoing provisions of this Section 2.6(b), upon such waiver, any such Default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other Default or Event of Default with respect to the Common Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the Property Trustee, at the direction of the Holders of the Capital Securities, constitutes a waiver of the corresponding Event of Default under this Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Default; Notice.
(a) The Property Trustee shall, within 90 days after the Property Trustee has knowledge of the occurrence of a Default with respect to the Securities, transmit by mail, first class postage prepaid, to the Holders, notices of all such Defaults, unless such Defaults have been cured before the giving of such notice or previously waived; provided, however, that except in the case of a Default arising from the nonpayment of principal of (or premium, if any) or interest (including Compounded Interest and Additional Sums (as such terms are defined in the Indenture), if any) on any of the Debentures, the Property Trustee shall be protected in withholding such notice if and so long as a Responsible Officer in good faith determines that the withholding of such notice is in the interests of the Holders.
(b) The Property Trustee shall not be deemed to have knowledge of any Default or Event of Default except:
(i) a Default or Event of Default under Section 5.01(a) (other than the payment or nonpayment of Compounded Interest, Additional Sums and interest on any Other Debentures) or 5.01(b) (other than payment or nonpayment of principal of any Other Debentures) of the Indenture; or
(ii) any Default or Event of Default as to which the Property Trustee shall have received written notice or of which a Responsible Officer charged with the administration of the Declaration shall have actual knowledge.
(c) Within ten Business Days after the Property Trustee has knowledge of the occurrence of any Event of Default, the Property Trustee shall transmit notice of such Event of Default to the Holders of the Capital Securities, the Administrative Trustees and the Sponsor, unless such Event of Default shall have been cured or waived. The Sponsor and the Administrative Trustees shall file annually with the Property Trustee a certification as to whether
or not they are in compliance with all the conditions and covenants applicable to them under this Declaration.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named Nara Bancorp Capital Trust I as such name may be modified from time to time by the Administrative Trustees following written notice to the Delaware Trustee, the Property Trustee and the Holders. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Administrative Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust is c/o Nara Bancorp, Inc., 3701 Wilshire Boulevard, Suite 220, Los Angeles, California 90010. On ten Business Days' prior written notice to the Delaware Trustee, the Property Trustee and the Holders of Securities, the Administrative Trustees may designate another principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to issue and sell Securities, (b) use the proceeds from the sale of the Securities to acquire the Debentures, and (c) except as otherwise limited herein, to engage in only those other activities necessary, advisable or incidental thereto, including without limitation, those activities specified in Sections 3.6, 3.8, 3.9, 3.10, 3.11 and/or 3.12. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, mortgage or pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust.
SECTION 3.4 Authority.
Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Administrative Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by one or more of the Administrative Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee on behalf of the Trust in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration.
SECTION 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the Debentures and the Property Trustee Account or as otherwise provided in this Declaration, legal title to all assets of
the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust.
SECTION 3.6 Powers and Duties of the Administrative Trustees.
Subject to Section 5.5, the Administrative Trustees acting individually or together shall have the exclusive right, power, duty and authority, and are hereby authorized and directed, to cause the Trust to engage in the following activities:
(a) to execute, enter into and deliver the Common Securities Subscription Agreement and to execute, deliver, issue and sell the Securities in accordance with this Declaration; provided, however, that (i) the Trust may issue no more than one series of Capital Securities and no more than one series of Common Securities, (ii) there shall be no interests in the Trust other than the Securities, and (iii) the issuance of Securities shall be limited to a simultaneous issuance of both Capital Securities and Common Securities at the Closing Time;
(b) in connection with the issue and sale of the Capital Securities, at the direction of the Sponsor, to:
(i) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary in order to qualify or register all or part of the Capital Securities in any State in which the Sponsor has determined to qualify or register such Capital Securities for sale;
(ii) execute, enter into, deliver and perform the Subscription Agreement, the Placement Agent Agreement and letters, instruments, agreements or documents relating to the Capital Securities.
(c) to execute, enter into, deliver and perform the Debenture Subscription Agreement, to acquire the Debentures with the proceeds of the sale of the Capital Securities and the Common Securities; provided, however, that the Administrative Trustees shall cause legal title to the Debentures to be held of record in the name of the Property Trustee for the benefit of the Holders;
(d) to give the Sponsor and the Property Trustee prompt written notice of the occurrence of a Special Event;
(e) to establish a record date with respect to all actions to be taken hereunder that require a record date to be established, including and with respect to, for the purposes of Section 316(c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders with respect to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be required of the Administrative Trustees pursuant to the terms of the Securities;
(g) to the fullest extent permitted by law, to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against
the Trust ("Legal Actions"), unless pursuant to Section 3.8(e), the Property Trustee has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees, agents (who may be designated as officers with titles), managers, contractors, advisors, and consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act;
(j) to give the certificate required by Section 314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate may be executed by any Administrative Trustee;
(k) to incur expenses that are necessary or incidental to carry out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, Registrar and Exchange Agent for the Securities or to appoint a Paying Agent for the Securities as provided in Section 7.4 except for such time as such power to appoint a Paying Agent is vested in the Property Trustee;
(m) to give prompt written notice to the Property Trustee and to the Holders of any notice received from the Debenture Issuer of its election to defer payments of interest on the Debentures by extending the interest payment period under the Indenture;
(n) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders or to enable the Trust to effect the purposes for which the Trust was created;
(o) to take any action, not inconsistent with this Declaration or with applicable law, that the Administrative Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act;
(ii) causing the Trust to continue to be classified for United States federal income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure that the Debentures will be treated as indebtedness of the Debenture Issuer for United States federal income tax purposes;
(p) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Administrative Trustees, on behalf of the Trust; and
(q) to execute and deliver all documents, agreements, certificates and instruments, exercise all rights and powers, perform all duties and do all things for and on behalf of the Trust in all matters necessary, advisable or incidental to the foregoing or the transactions contemplated thereby.
The Administrative Trustees must exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Administrative Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3.
Subject to this Section 3.6, the Administrative Trustees shall
have none of the powers or the authority of the Property Trustee set forth in
Section 3.8.
Any expenses incurred by the Administrative Trustees pursuant to this Section 3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
The Trust shall not, and the Trustees (including the Property Trustee and the Delaware Trustee) shall not, and the Administrative Trustees shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. Notwithstanding any provision in this Declaration to the contrary, the Trust shall not:
(i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders pursuant to the terms of this Declaration and of the Securities;
(ii) acquire any assets other than as expressly provided herein;
(iii) possess Trust Property for other than a Trust purpose or execute any mortgage in respect of, or pledge, any Trust Property;
(iv) make any loans or incur any indebtedness other than loans represented by the Debentures;
(v) possess any power or otherwise act in such a way as to vary the Trust Property or the terms of the Securities in any way whatsoever;
(vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities;
(vii) other than as provided in this Declaration or Annex I hereto, (A) direct the time, method and place of conducting any proceeding with respect to any remedy available to the Debenture Trustee, or exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under the Indenture, or (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable; or
(viii) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received an opinion of independent tax counsel experienced in such matters to the effect that such amendment, modification or termination will not cause more than an insubstantial risk that the Trust will not be classified as a grantor trust for United States federal income tax purposes.
SECTION 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Trust and the Holders. The right, title and interest of the Property Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Section 5.6. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and interest in the Debentures to the Administrative Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest
bearing trust account (the "Property Trustee Account") in the
name of and under the exclusive control of the Property Trustee
on behalf of the Holders and, upon the receipt of payments of
funds made in respect of the Debentures held by the Property
Trustee, deposit such funds into the Property Trustee Account
and make payments or cause the Paying Agent to make payments to
the Holders from the Property Trustee Account in accordance with
Section 6.1; funds in the Property Trustee Account shall be held
uninvested until disbursed in accordance with this Declaration;
and the Property Trustee Account shall be an account that is
maintained with a banking institution the rating on whose
long-term unsecured indebtedness by a "nationally recognized
statistical rating organization," as that term is defined for
purposes of Rule 436(g)(2) under the Securities Act, is at least
equal to the rating assigned to the Capital Securities, unless
the Capital Securities are not rated, in which case the banking
institution's long term unsecured indebtedness shall be rated at
least investment grade by a "nationally recognized statistical
rating organization;
(ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Securities to the extent the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by the Administrative Trustees in accordance with the terms of the Securities, engage in such
ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures to Holders upon the occurrence of certain events.
(d) The Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of this Declaration and the Securities.
(e) Subject to Section 3.9(a), the Property Trustee shall take any Legal Action which arises out of or in connection with an Event of Default of which a Responsible Officer has actual knowledge or the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act; and if the Property Trustee shall have failed to take such Legal Action following a written request from the Holders, the Holders of the Capital Securities may, to the fullest extent permitted by law, take such Legal Action, to the same extent as if such Holders of Capital Securities held an aggregate principal amount of Debentures equal to the aggregate liquidation amount of such Capital Securities, without first proceeding against the Property Trustee or the Trust; provided, however, that if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay the principal of or premium, if any, or interest (including Compounded Interest and Additional Sums, if any) on the Debentures on the date such principal, premium, if any, or interest (including Compounded Interest and Additional Sums, if any) is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of Capital Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or premium, if any, or interest (including Compounded Interest and Additional Sums, if any) on the Debentures having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such Holder (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the Holders of the Common Securities will be subrogated to the rights of such Holder of Capital Securities to the extent of any payment made by the Debenture Issuer to such Holder of Capital Securities in such Direct Action. Except as provided in the preceding sentences, the Holders of Capital Securities will not be able to exercise directly any other remedy available to the holders of the Debentures.
(f) The Property Trustee shall continue to serve as a Trustee until either:
(i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders pursuant to the terms of the Securities and this Declaration; or
(ii) a successor Property Trustee has been appointed and has accepted that appointment in accordance with Section 5.6 (a "Successor Property Trustee").
(g) The Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures under the Indenture and, if an Event of Default actually known to a Responsible Officer occurs and is continuing, the Property Trustee shall, for the benefit of Holders, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to the terms of this Declaration and the Securities.
(h) The Property Trustee shall be authorized to undertake any actions set forth in Section 317(a) of the Trust Indenture Act.
(i) For such time as the Property Trustee is the Paying Agent, the Property Trustee may authorize one or more Persons to act as additional Paying Agents and to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to all Securities and any such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any such additional Paying Agent may be removed by the Property Trustee at any time the Property Trustee remains as Paying Agent and a successor Paying Agent or additional Paying Agents may be (but are not required to be) appointed at any time by the Property Trustee while the Property Trustee is acting as Paying Agent.
(j) Subject to this Section 3.8, the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Administrative Trustees set forth in Section 3.6.
Notwithstanding anything expressed or implied to the contrary in this Declaration or any Annex or Exhibit hereto, (i) the Property Trustee must exercise the powers set forth in this Section 3.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and (ii) the Property Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.3.
(k) If the Property Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Declaration and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Property Trustee or to such Holder, then and in every such case the Sponsor, the Property Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Property Trustee and the Holders shall continue as though no such proceeding had been instituted.
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.
(a) The Property Trustee, before the occurrence of any Event of Default
(of which, other than in the case of Events of Default under Sections 5.01(a)
and 5.01(b) of the Indenture, which the Property Trustee is deemed to have
knowledge of as provided in Section 2.7(b) hereof, a Responsible Officer of the
Property Trustee has actual knowledge) and after the curing or waiving of all
such Events of Default that may have occurred, shall undertake to perform only
such duties as are specifically set forth in this Declaration and in the
Securities and no implied covenants shall be read into this Declaration against
the Property Trustee. In case an Event of Default has occurred (that has not
been cured or waived pursuant to Section 2.6) of which a Responsible Officer has
actual knowledge, the Property Trustee shall exercise such of the rights and
powers vested in it by this Declaration, 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 or her own affairs.
(b) No provision of this Declaration 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) prior to the occurrence of an Event of Default (of
which, other than in the case of Events of Default under
Sections 5.01 (a) and 5.01(b) of the Indenture, which the
Property Trustee is deemed to have knowledge of as provided in
Section 2.7(b) hereof, a Responsible Officer of the Property
Trustee has actual knowledge) and after the curing or waiving of
all such Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration and in the Securities and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration and in the Securities, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and
(B) in the absence of bad faith on the part of the Property Trustee, the Property 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 Property Trustee and conforming to the requirements of this Declaration; provided, however, that in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not on their face they conform to the requirements of this Declaration;
(ii) the Property 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 Property Trustee was negligent in ascertaining the pertinent facts;
(iii) 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 a Majority in Liquidation Amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration;
(iv) no provision of this Declaration shall require the Property 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;
(v) the Property Trustee's sole duty with respect to the custody, safekeeping and physical preservation of the Debentures and the Property Trustee 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 Declaration and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Debentures or the payment of any taxes or assessments levied thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor. Money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Trustee Account maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; and
(viii) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Property Trustee be liable for any default or misconduct of the Administrative Trustees or the Sponsor.
SECTION 3.10 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Sponsor or the Administrative Trustees contemplated by this Declaration may be sufficiently evidenced by an Officers' Certificate;
(iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Administrative Trustees;
(iv) 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;
(v) the Property Trustee may consult with counsel or other experts of its selection, and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion; such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees; and the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction;
(vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Property Trustee security and indemnity, reasonably satisfactory to the Property Trustee, against the costs, expenses (including reasonable attorneys' fees and expenses and the expenses of the Property Trustee's agents, nominees or custodians) 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 Property Trustee; provided, however, that, nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the Property Trustee, upon the occurrence of an Event of Default (of which, other than in the case of Events of Default under Sections 5.01(a) and 5.01(b) of the Indenture, which the Property Trustee is deemed to have knowledge of as provided in Section 2.7(b) hereof, a Responsible Officer of the Property Trustee has actual knowledge), of its obligation to exercise the rights and powers vested in it by this Declaration;
(vii) 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, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys, and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any such agent, custodian, nominee or attorney appointed with due care by it hereunder;
(ix) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders, and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Property Trustee to so act or as to its compliance with any of the terms and
provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action;
(x) whenever in the administration of this Declaration 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 which instructions may only be given by the Holders of the same proportion in liquidation amount of the Securities as would be entitled to direct the Property Trustee under the terms of the 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 conclusively relying on or acting in accordance with such instructions;
(xi) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration; and
(xii) the Property Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence or willful misconduct, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration 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 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other than Section 5.2, 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 Trustees described in this Declaration (except as required under the Business Trust Act). Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. In the event the Delaware Trustee shall at any time be required to take any action or perform any duty hereunder, the Delaware Trustee shall be entitled to the benefits of Section 3.9(b)(ii) to (viii), inclusive, and Section 3.10. No implied covenants or obligations shall be read into this Declaration against the Delaware Trustee.
SECTION 3.12 Execution of Documents.
Unless otherwise required by applicable law, each Administrative Trustee, individually, is authorized to execute and deliver on behalf of the Trust any documents,
agreements, instruments or certificates that the Administrative Trustees have the power and authority to execute pursuant to Section 3.6.
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities
The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the Trust Property or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities.
SECTION 3.14 Duration of Trust.
The Trust, unless earlier dissolved pursuant to the provisions of Article VIII hereof, shall dissolve on June 8, 2036.
SECTION 3.15 Mergers.
(a) The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any Person, except as described in
Section 3.15(b) and (c) and except with respect to the distribution of
Debentures to Holders pursuant to Section 8.1(a)(iii) of this Declaration or
Section 3 of Annex 1.
(b) The Trust may, at the request of the Sponsor, with the consent of the Administrative Trustees or, if there are more than two, a majority of the Administrative Trustees and without the consent of the Holders, the Delaware Trustee or the Property Trustee, merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to, a trust organized as such under the laws of any State; provided, that:
(i) such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust under the Securities; or
(B) substitutes for the Securities other securities having substantially the same terms as the Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Securities rank in priority with respect to Distributions and payments upon liquidation, redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the Successor Entity that possesses the same powers and duties as the Property Trustee with respect to the Debentures;
(iii) the Successor Securities (excluding any securities substituted for the Common Securities) are listed, quoted or included for trading, or any
Successor Securities WILL be listed, quoted or included for trading upon notification of issuance, on any national securities exchange or with any other organization on which the Capital Securities are then listed, quoted or included;
(iv) if the Capital Securities or the Debentures are rated, such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Capital Securities (including any Successor Securities) or the Debentures to be downgraded by any nationally recognized statistical rating organization that publishes a rating on the Capital Securities or the Debentures;
(v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders (including the holders of any Successor Securities) in any material respect (other than with respect to any dilution of the interests of such Holders or holders, as the case may be, in the Successor Entity);
(vi) the 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 Sponsor has received an opinion of independent counsel to the Trust experienced in such matters to the effect that:
(A) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders (including the holders of any Successor Securities) in any material respect (other than with respect to any dilution of the interests of such Holders or holders, as the case may be, in the Successor Entity);
(B) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and
(C) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Trust (or the Successor Entity) will continue to be classified as a grantor trust for United States federal income tax purposes;
(viii) the Sponsor or any permitted successor or assignee of the Sponsor owns all of the common securities of the Successor Entity and guarantees the obligations of the Successor Entity under the Successor Securities at least to the extent provided by the Securities Guarantees; and
(ix) there shall have been furnished to the Property Trustee an Officers' Certificate and an Opinion of Counsel, each to the effect that all conditions precedent in this Declaration to such transaction have been satisfied.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with the consent of Holders of 100% in aggregate liquidation amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to, any other Person or permit any other Person to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the Successor Entity not to be classified as a grantor trust for United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
At the Closing Time, pursuant to the Common Securities Subscription Agreement, the Sponsor will purchase all of the Common Securities then issued by the Trust, in an amount equal to at least 3% of the total capital of the Trust, at the same time as the Capital Securities are issued and sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Capital Securities, the Sponsor shall have the exclusive right and responsibility to engage in, or direct the Administrative Trustees to engage in, the following activities:
(a) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Capital Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; and
(b) to negotiate the terms of, execute, enter into and deliver the Subscription Agreement and the Placement Agent Agreement.
SECTION 4.3 Right to Proceed.
The Sponsor acknowledges the rights of the Holders of Capital Securities, in the event that a failure of the Trust to make any payments in respect of the Capital Securities is attributable to the failure of the Debenture Issuer to pay the principal of or premium (if any) or interest on the Debentures, to institute a proceeding directly against the Debenture Issuer for enforcement of its payment obligations in respect of the Debentures.
SECTION 4.4 Right to Dissolve Trust.
The Sponsor will have the right at any time to dissolve the Trust and, after satisfaction of liabilities to creditors of the Trust as required by applicable law, to cause the Debentures to be distributed to the Holders in liquidation of the Trust. Such right is subject to the Sponsor's having received (i) an Opinion of Counsel to the effect that such distribution will not cause the Holders of Capital Securities to recognize gain or loss for United States federal income tax purposes and (ii) all required regulatory approvals.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees; Appointment of Co-Trustee.
The number of Trustees initially shall be five (5), and:
(a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the Holders of a Majority in Liquidation Amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities;
provided, however, that, the number of Trustees shall in no event be less than two (2); provided further, that (1) one Trustee, in the case of a natural person, shall be a person who is a resident of the State of Delaware or that, if not a natural person, is an entity which has its principal place of business in the State of Delaware (the "Delaware Trustee"); (2) there shall be at least one Trustee who is an employee or officer of, or is affiliated with, the Sponsor (an "Administrative Trustee"); and (3) one Trustee shall be the Property Trustee for so long as this Declaration is required to qualify as an indenture under the Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if it meets the applicable requirements. Notwithstanding the above, 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 Holders of a Majority in Liquidation Amount of the Common Securities acting as a class at a meeting of the Holders of the Common Securities, and the Administrative Trustees shall have power to appoint one or more Persons either to act as a co-trustee, jointly with the Property Trustee, of all or any part of the Trust Property, or to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in such capacity any property, title, right or power deemed necessary or desirable, subject to the provisions of this Declaration. In case an Event of Default has occurred and is continuing, the Property Trustee alone shall have power to make any such appointment of a co-trustee.
SECTION 5.2 Delaware Trustee.
For so long as required by the Business Trust Act, the Delaware Trustee shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) 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 law,
provided, however, that, if the Property Trustee has its principal place of
business in the State of Delaware and otherwise meets the requirements of
applicable law, then the Property Trustee shall also be the Delaware Trustee and
Section 3.11 shall have no application.
The initial Delaware Trustee shall be:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Telephone: (302) 651-1000
Telecopier: (302) 651-8882
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee (the "Property Trustee") which shall act as Property Trustee and which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an indenture trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least fifty million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.
(b) If at any time the Property Trustee shall cease to be eligible to so act under Section 5.3(a), the Property Trustee shall immediately resign in the manner and with the effect set forth in Section 5.6(c).
(c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of Section 330(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Common Securities (as if it were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act.
(d) The Capital Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first proviso contained in Section 310 (b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Telephone: (302) 651-1000
Telecopier: (302) 651-8882
SECTION 5.4 Certain Qualifications of Administrative Trustees and Delaware Trustee Generally.
Each Administrative Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware 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 Authorized Officers.
SECTION 5.5 Administrative Trustees.
The initial Administrative Trustees shall be:
Bon T. Goo
Timothy T. Chang
Christine Y. Oh
c/o Nara Bancorp, Inc.
3701 Wilshire Boulevard, Suite 220
Telephone: (213) 639-1700
Telecopier: (213) 225-3033
(a) Except as otherwise expressly set forth in this Declaration and except if a meeting of the Administrative Trustees is called with respect to any matter over which the Administrative Trustees have power to act, any power of the Administrative Trustees may be exercised by, or with the consent of, any one such Administrative Trustee.
(b) Unless otherwise required by the Business Trust Act or other applicable law, any Administrative Trustee acting alone is authorized to execute on behalf of the Trust any documents which the Administrative Trustees have the power and authority to cause the Trust to execute pursuant to Section 3.6.
(c) An 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 purposes of signing any documents which the Administrative
Trustees have power and authority to cause the Trust to execute pursuant to
Section 3.6.
SECTION 5.6 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.6(b) hereof and to Section 6(b) of Annex I hereto, Trustees may be appointed or removed without cause at any time:
(i) until the issuance of any Securities, by written instrument executed by the Sponsor;
(ii) unless an Event of Default shall have occurred and be continuing after the issuance of any Securities, by vote of the Holders of a Majority in Liquidation Amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; and
(iii) if an Event of Default shall have occurred and be
continuing after the issuance of the Securities, with respect to the
Property Trustee or the Delaware Trustee, by vote of Holders of a
Majority in Liquidation Amount of the Capital Securities voting as a
class at a meeting of Holders of the Capital Securities, and with
respect to the Administrative Trustees, in the manner set forth in
Section 5.6(a)(ii) hereof.
(b)(i) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.6(a) until a Successor Property Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Property Trustee and delivered to the removed Property Trustee, the Administrative Trustees and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with this Section 5.6(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the removed Delaware Trustee, the Property Trustee (if the removed Delaware Trustee is not also the Property Trustee), the Administrative Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, removal or resignation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the other Trustees, the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that:
(i) No such resignation of the Trustee that acts as the Property Trustee shall be effective:
(A) until a Successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Sponsor, the Delaware
Trustee (if the resigning Property Trustee is not also the Delaware Trustee) and the resigning Property Trustee; or
(B) until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders; and
(ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Property Trustee (if the resigning Delaware Trustee is not also the Property Trustee), the Sponsor and the resigning Delaware Trustee.
(d) The Holders of the Common Securities or, if an Event of Default shall have occurred and be continuing after the issuance of the Securities, the Holders of the Capital Securities shall use their best efforts to promptly appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be, if the Property Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with this Section 5.6.
(e) If no Successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.6 within 60 days after delivery of an instrument of resignation or removal, the Property Trustee or Delaware Trustee resigning or being removed, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be.
(f) No Property Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Property Trustee or Successor Delaware Trustee, as the case may be.
(g) At the time of resignation or removal of the Property Trustee or the Delaware Trustee, the Sponsor shall pay to such Trustee any amounts that may be owed to such Trustee pursuant to Section 10.4.
(h) Any successor Delaware Trustee shall file an amendment to the Certificate of Trust with the Secretary of State of the State of Delaware identifying the name and principal place of business of such Successor Delaware Trustee in the State of Delaware.
SECTION 5.7 Vacancies Among Trustees.
If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Administrative Trustees or, if there are more than two, a majority of the Administrative Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.6.
SECTION 5.8 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to dissolve, liquidate or annul the Trust or to terminate this Declaration. 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 5.6, the Administrative Trustees in office, regardless of their number, shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Declaration.
SECTION 5.9 Meetings.
If there is more than one Administrative Trustee, meetings of the Administrative Trustees shall be held from time to time upon the call of any Administrative Trustee. Regular meetings of the Administrative Trustees may be held at a time and place fixed by resolution of the Administrative Trustees. Notice of any in-person meetings of the Administrative Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before such meeting. Notice of any telephonic meetings of the Administrative Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of an Administrative Trustee at a meeting shall constitute a waiver of notice of such meeting except where an Administrative Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Administrative Trustees may be taken at a meeting by vote of a majority of the Administrative Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided, that a Quorum is present, or without a meeting by the unanimous written consent of the Administrative Trustees. In the event there is only one Administrative Trustee, any and all action of such Administrative Trustee shall be evidenced by a written consent of such Administrative Trustee.
SECTION 5.10 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 3.6 or making any other governmental filing.
(b) The Administrative Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of this Declaration.
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee or the Delaware Trustee or any Administrative Trustee that is not a natural person, as the case may be, may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Property Trustee or the Delaware Trustee, as the case may be, shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Property Trustee or the Delaware Trustee, as the case may be, shall be the successor of the Property Trustee or the Delaware Trustee, as the case may be, hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided such Person shall be otherwise qualified and eligible under this Article and provided further that such Person shall file an amendment to the Certificate of Trust with the Delaware Secretary of State as contemplated in Section 5.6(h).
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder's Securities. If and to the extent that the Debenture Issuer makes a payment of interest (including Compounded Interest and Additional Sums), premium and/or principal on the Debentures held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a "Distribution") of the Payment Amount to Holders in accordance with the terms of the Securities.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Administrative Trustees shall, on behalf of the Trust, issue one class of MMCapS(SM) representing undivided preferred beneficial interests in the assets of the Trust having such terms as are set forth in Annex I (the "Capital Securities") and one class of common securities representing undivided common beneficial interests in the assets of the Trust having such terms as are set forth in Annex I (the "Common Securities"). The Trust shall issue no securities or other interests in the assets of the Trust other than the Capital Securities and the Common Securities.
(b) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued and, subject to the terms of this Declaration, fully paid and nonassessable undivided beneficial interests in the assets of the Trust and entitled to the
benefits of this Declaration, and the Holders thereof shall be entitled to the benefits of this Declaration.
(d) Every Person, by virtue of having become a Holder in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration.
SECTION 7.2 Execution and Authentication.
(a) The Securities shall be signed on behalf of the Trust by an Administrative Trustee. In case any Administrative Trustee of the Trust who shall have signed any of the Securities shall cease to be such Administrative Trustee before the Securities so signed shall be delivered by the Trust, such Securities nevertheless may be delivered as though the Person who signed such Securities had not ceased to be such Administrative Trustee; and any Securities may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Security, shall be the Administrative Trustees of the Trust, although at the date of the execution and delivery of this Declaration any such person was not an Administrative Trustee.
(b) One Administrative Trustee shall sign the Capital Securities for the Trust by manual or facsimile signature. Unless otherwise determined by an Administrative Trustee on behalf of the Trust, an Administrative Trustee shall sign the Common Securities for the Trust by manual signature.
A Capital Security shall not be valid until authenticated by the manual signature of an authorized signatory of the Property Trustee. The signature shall be conclusive evidence that the Capital Security has been authenticated under this Declaration. A Common Security shall be valid upon execution by an Administrative Trustee without any act of the Property Trustee.
Upon a written order of the Trust signed by one Administrative Trustee, the Property Trustee shall authenticate the Capital Securities for original issue. The aggregate number of Capital Securities outstanding at any time shall not exceed the number set forth in Annex I hereto except as provided in Section 7.6.
The Property Trustee may appoint an authenticating agent acceptable to the Trust to authenticate Capital Securities. An authenticating agent may authenticate Capital Securities whenever the Property Trustee may do so. Each reference in this Declaration to authentication by the Property Trustee includes authentication by such agent. An authenticating agent has the same rights as the Property Trustee hereunder with respect to the Sponsor or an Affiliate.
SECTION 7.3 Form and Dating.
The Capital Securities shall be evidenced by one or more certificates substantially in the form of Exhibit A-1, and the Common Securities shall be evidenced by one or more certificates substantially in the form of Exhibit A-2. The Property Trustee's certificate of authentication shall be substantially in the form set forth in Exhibit A-1. Certificates representing the Securities may be printed, lithographed or engraved or may be produced in any
other manner as is reasonably acceptable to an Administrative Trustee, as evidenced by the execution thereof. The Securities may have letters, "CUSIP" or other numbers, notations or other marks of identification or designation and such legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject, if any, or usage, provided, that any such notation, legend or endorsement is in a form acceptable to the Administrative Trustees, as evidenced by their execution thereof. The Trust at the direction of the Sponsor, shall furnish any such legend not contained in Exhibit A-1 to the Property Trustee in writing. Each Capital Security shall be dated the date of its authentication. The terms and provisions of the Securities set forth in Annex I and the forms of Securities set forth in Exhibits A-l and A-2 are part of the terms of this Declaration and, to the extent applicable, the Property Trustee and the Sponsor, by their execution and delivery of this Declaration, expressly agree to such terms and provisions and to be bound thereby.
Purchasers of Capital Securities will be entitled to receive physical delivery of certificated Capital Securities in the form of individual certificates ("Capital Security Certificate") in definitive, fully registered form ("Definitive Capital Securities") without distribution coupons and with the Restricted Securities Legend set forth in Exhibit A-1 hereto ("Restricted Definitive Capital Securities"). Restricted Definitive Capital Securities will bear the Restricted Securities Legend set forth on Exhibit A-1 unless removed in accordance with Section 9.2.
SECTION 7.4 Registrar, Paying Agent and Exchange Agent.
The Trust shall maintain in Wilmington, Delaware (i) an office or agency where Capital Securities may be presented for registration of transfer ("Registrar"), (ii) an office or agency where Capital Securities may be presented for payment ("Paying Agent") and (iii) an office or agency where Securities may be presented for exchange ("Exchange Agent"). The Registrar shall keep a register of the Capital Securities and of their transfer. The Trust may appoint the Registrar, the Paying Agent and the Exchange Agent and may appoint one or more co-registrars, one or more additional paying agents and one or more additional Exchange Agents in such other locations as it shall determine. The term "Registrar" includes any additional registrar, the term "Paying Agent" includes any additional paying agent and the term "Exchange Agent" includes any additional Exchange Agent. The Trust may change any Paying Agent, Registrar, co-registrar or Exchange Agent without prior notice to any Holder. The Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Property Trustee, the Administrative Trustees and the Sponsor. The Trust shall notify the Property Trustee of the name and address of any Agent not a party to this Declaration. If the Trust fails to appoint or maintain another entity as Registrar, Paying Agent or Exchange Agent, the Property Trustee shall act as such. The Trust or any of its Affiliates may act as Paying Agent, Registrar, or Exchange Agent. The Trust shall act as Paying Agent, Registrar and Exchange Agent for the Common Securities.
The Trust initially appoints the Property Trustee as Registrar, Paying Agent and Exchange Agent for the Capital Securities.
SECTION 7.5 Paying Agent to Hold Money in Trust.
The Trust shall require each Paying Agent other than the Property Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Property Trustee all money held by the Paying Agent for the payment of liquidation amounts or Distributions, and will notify the Property Trustee if there are insufficient funds for such purpose. While any such insufficiency continues, the Property Trustee may require a Paying Agent to pay all money held by it to the Property Trustee. The Trust at any time may require a Paying Agent to pay all money held by it to the Property Trustee and to account for any money disbursed by it. Upon payment over to the Property Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust) shall have no further liability for the money. If the Trust or the Sponsor or an Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent.
SECTION 7.6 Replacement Securities.
If a Holder claims that a Security owned by it has been lost, destroyed or wrongfully taken or if such Security is mutilated and is surrendered to the Trust or in the case of the Capital Securities to the Property Trustee, an Administrative Trustee shall execute and the Property Trustee shall, upon receipt of written direction from an Administrative Trustee, authenticate and make available for delivery a replacement Security if the Property Trustee's requirements are met. An indemnity bond must be provided by the Holder which, in the judgment of the Property Trustee, is sufficient to protect the Trustees, the Sponsor, the Trust or any authenticating agent from any loss which any of them may suffer if a Security is replaced. The Trust may charge such Holder for its expenses in replacing a Security.
SECTION 7.7 Outstanding Capital Securities.
The Capital Securities outstanding at any time are all the Capital Securities authenticated by the Property Trustee except for those canceled by it, those delivered to it for cancellation, and those described in this Section as not outstanding.
If a Capital Security is replaced, paid or purchased pursuant to
Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Capital
Security is held by a bona fide purchaser.
If Capital Securities are considered paid in accordance with the terms of this Declaration, they cease to be outstanding and Distributions on them shall cease to accumulate.
A Capital Security does not cease to be outstanding because one of the Trust, the Sponsor or an Affiliate of the Sponsor holds the Security.
SECTION 7.8 Capital Securities in Treasury.
In determining whether the Holders of the required amount of Securities have concurred in any direction, waiver or consent, Capital Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as the case may be, shall be disregarded and deemed not to be outstanding, except that for the purposes of determining whether the Property Trustee shall be
fully protected in relying on any such direction, waiver or consent, only Securities which the Property Trustee actually knows are so owned shall be so disregarded.
SECTION 709 Temporary Securities.
Until Definitive Capital Securities are ready for delivery, the Trust may prepare and, in the case of the Capital Securities, the Property Trustee shall, upon receipt of written direction from an Administrative Trustee, authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Capital Securities but may have variations that the Trust considers appropriate for temporary Securities. Without unreasonable delay, the Trust shall prepare and, in the case of the Capital Securities, the Property Trustee shall, upon receipt of a Corporation Order, authenticate Definitive Capital Securities in exchange for temporary Securities.
SECTION 7.10 Cancellation.
The Trust at any time may deliver Capital Securities to the Property Trustee for cancellation. The Registrar, Paying Agent and Exchange Agent shall forward to the Property Trustee any Capital Securities surrendered to them for registration of transfer, redemption, exchange or payment. The Property Trustee shall promptly cancel all Capital Securities surrendered for registration of transfer, redemption, exchange, payment, replacement or cancellation and shall dispose of canceled Capital Securities in accordance with its customary procedures unless the Trust otherwise directs. The Trust may not issue new Capital Securities to replace Capital Securities that it has paid or that have been delivered to the Property Trustee for cancellation or that any Holder has exchanged.
SECTION 7.11 CUSIP Numbers.
The Trust in issuing the Capital Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Property Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders of Capital Securities; provided, that, any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Capital 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 Capital Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Sponsor will promptly notify the Property Trustee of any change in the CUSIP numbers.
ARTICLE VIII
DISSOLUTION OF TRUST
SECTION 8.1 Dissolution of Trust.
(a) The Trust shall automatically dissolve
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or liquidation or its equivalent with respect to the Sponsor; or the revocation of the Sponsor's
charter and the expiration of 90 days after the date of revocation without a reinstatement thereof;
(iii) following the distribution of a Like Amount of the Debentures to the Holders, provided, that the Property Trustee has received written notice from the Sponsor directing the Property Trustee to dissolve the Trust (which direction is optional, and except as otherwise expressly provided below, within the discretion of the Sponsor), and provided further, that such direction and such distribution is conditioned on (a) the receipt by the Sponsor of any and all required regulatory approvals, and (b) the Sponsor's receipt and delivery to the Administrative Trustees of an opinion of independent tax counsel experienced in such matters, which opinion may rely on public or private rulings of the Internal Revenue Service, to the effect that the Holders of the Capital Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the dissolution of the Trust and the distribution of Debentures;
(iv) upon the entry of a decree of judicial dissolution of the Trust by a court of competent jurisdiction;
(v) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities;
(vi) upon the redemption or repayment of the Debentures or at such time as no Debentures are outstanding; or
(vii) the expiration of the term of the Trust provided in
Section 3.14.
(b) As soon as is practicable upon completion of winding up of the Trust following the occurrence of an event referred to in Section 8.1 (a) and the satisfaction of creditors of the Trust in accordance with applicable law, the Administrative Trustees shall terminate the Trust by filing a certificate of cancellation with the Secretary of State of the State of Delaware in accordance with the Business Trust Act.
(c) The provisions of Section 3.9 and Article X shall survive the dissolution and termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
(a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in accordance with the terms of the Securities. To the fullest extent permitted by law, any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void.
(b) Subject to this Article IX, Capital Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration. To the fullest extent permitted by law, any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void.
(c) For so long as the Securities remain outstanding, the Sponsor agrees (i) not to transfer ownership of the Common Securities of the Trust, provided that any permitted successor of the Sponsor under the Indenture may succeed to the Sponsor's ownership of the Common Securities, (ii) not to cause, as Sponsor of the Trust, or to permit, as Holder of the Common Securities, the dissolution, winding-up or liquidation of the Trust, except as provided in this Declaration and (iii) to use its best efforts to cause the Trust (a) to remain a business trust, except in connection with the distribution of Debentures to the Holders in liquidation of the Trust, the redemption of all of the Securities, or certain mergers, consolidations or amalgamations, each as permitted by this Declaration, and (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes.
(d) The Registrar shall provide for the registration of Capital Securities and of the transfer of Capital Securities, which will be effected without charge but only upon payment (with such indemnity as the Registrar may require) in respect of any tax or other governmental charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Capital Securities, an Administrative Trustee shall cause one or more new Capital Securities to be issued in the name of the designated transferee or transferees. Every Capital Security surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Capital Security surrendered for registration of transfer shall be delivered to the Registrar and canceled in accordance with Section 7.10. A transferee of a Capital Security shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Capital Security. By acceptance of a Capital Security or any interest therein, each transferee shall be deemed to have agreed to be bound by this Declaration.
SECTION 9.2 Transfer Procedures and Restrictions.
(a) General. If Capital Securities are issued upon the transfer, exchange or replacement of Capital Securities bearing the Restricted Securities Legend set forth in Exhibit A-1 hereto, or if a request is made to remove such Restricted Securities Legend on Capital Securities, the Capital Securities so issued shall bear the Restricted Securities Legend, or the Restricted Securities Legend shall not be removed, as the case may be, unless there is delivered to the Trust and the Property Trustee such satisfactory evidence, which shall include an Opinion of Counsel, as may be reasonably required by the Trust and the Property Trustee, that neither the Restricted Securities Legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof are made pursuant to an exception from the registration requirements of the Securities Act or, with respect to Restricted Capital Securities, that such Securities are not "restricted" within the meaning of Rule 144. Upon provision of such satisfactory evidence, the Property Trustee, at the written direction of an Administrative Trustee on behalf of the Trust, shall authenticate and deliver Capital Securities that do not bear the legend.
(b) Transfer and Exchange of Definitive Capital Securities. When Definitive Capital Securities are presented to the Registrar or co-registrar:
(x) to register the transfer of such Definitive Capital Securities; or
(y) to exchange such Definitive Capital Securities which became mutilated, destroyed, defaced, stolen or lost, for an equal number of Definitive Capital Securities, the Registrar or co-registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Capital Securities surrendered for registration of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Trust and the Registrar or co-registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and
(ii) in the case of Definitive Capital Securities that are Restricted Definitive Capital Securities:
(A) if such Restricted Capital Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, certification(s) from such Holder to that effect; or
(B) if such Restricted Capital Securities are being transferred: (i) certification(s) in a form substantially similar to that attached hereto as the form of "Assignment" in Exhibit A-1, and (ii) if the Trust or Registrar so requests, evidence reasonably satisfactory to them as to the compliance with the restrictions set forth in the Restricted Securities Legend.
(c) Legend.
(i) Except as permitted by the following paragraph (ii), each Capital Security Certificate evidencing each Definitive Capital Security and all Capital Securities issued in exchange thereof or substitution thereof shall bear a legend (the "Restricted Securities Legend") in substantially the following form:
THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS CAPITAL SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH NARA BANCORP, INC. (THE "CORPORATION") OR ANY "AFFILIATE" OF THE CORPORATION WAS THE OWNER OF THIS CAPITAL SECURITY (OR ANY PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A) TO THE CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS CAPITAL SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3), (7) OR (8) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF NARA BANCORP CAPITAL TRUST I (THE "TRUST") AND THE CORPORATION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO CLAUSE (D) TO REQUIRE THAT THE TRANSFEROR DELIVER TO THE TRUST A LETTER FROM THE TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX II TO THE DECLARATION. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CAPITAL SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE CAPITAL SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF CAPITAL SECURITIES IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE CAPITAL SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE
WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
In all circumstances, each Capital Security Certificate shall bear the following legend:
THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100 CAPITAL SECURITIES) AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF CAPITAL SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 (100 CAPITAL SECURITIES) SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH CAPITAL SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON SUCH CAPITAL SECURITIES, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH CAPITAL SECURITIES.
(ii) Upon any sale or transfer of a Restricted Capital Security pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144 the Registrar shall permit the Holder thereof to exchange such Restricted Capital Security for a Definitive Capital Security that does not bear the Restricted Securities Legend and rescind any restriction on the transfer of such Restricted Capital Security.
(d) Obligations with Respect to Transfers and Exchanges of Capital Securities.
(i) To permit registrations of transfers and exchanges, the Trust shall execute and the Property Trustee shall authenticate Definitive Capital Securities at the Registrar's or co-registrar's request in accordance with the terms of this Declaration.
(ii) Registrations of transfers or exchanges will be effected without charge, but only upon payment (with such indemnity as the Trust or the Sponsor may require) in respect of any tax or other governmental charge that may be imposed in relation to it.
(iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of (a) Capital Securities during a period beginning at the opening of business 15 days before the day of mailing of a notice of
redemption or any notice of selection of Capital Securities for redemption and ending at the close of business on the day of such mailing or (b) any Capital Security so selected for redemption in whole or in part, except the unredeemed portion of any Capital Security being redeemed in part.
(iv) Prior to the due presentation for registration of transfer of any Capital Security, the Trust, the Property Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a capital security is registered as the absolute owner of such Capital Security for the purpose of receiving Distributions on such Capital Security and for all other purposes whatsoever, and none of the Trust, the Property Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary.
(v) All Capital Securities issued upon any registration of transfer or exchange pursuant to the terms of this Declaration shall evidence the same security and shall be entitled to the same benefits under this Declaration as the Capital Securities surrendered upon such registration of transfer or exchange.
(e) No Obligation of the Property Trustee.
(i) The Property Trustee shall have no responsibility or obligation to any Person with respect to any ownership interest in the Capital Securities or with respect to the delivery to any beneficial owner or other Person of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Capital Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Capital Securities shall be given or made only to or upon the order of the registered Holders.
(ii) The Property Trustee and the Registrar shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Declaration or under applicable law with respect to any transfer of any interest in any Capital Security other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Declaration, and to examine the same to determine whether or not on their face they substantially comply with the express requirements hereof.
(f) Minimum Transfers. Capital Securities may only be transferred in minimum blocks of $100,000 aggregate liquidation amount (100 capital securities) and multiples of $1,000 in excess thereof. any attempted transfer of Capital Securities in a block having an aggregate liquidation amount of less than $100,000 shall be deemed to be voided and of no legal effect whatsoever. Any such purported transferee shall be deemed not to be a Holder of such Capital Securities for any purpose, including, but not limited to, the receipt of Distributions on
such Capital Securities, and such purported transferee shall be deemed to have no interest whatsoever in such Capital Securities.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any Security shall be registered on the books and records of the Trust as the sole owner and Holder of such Security for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Security on the part of any Person, whether or not the Trust shall have actual or other notice thereof.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration, the Securities Guarantees and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders which shall be made solely from assets of the Trust; and
(ii) required to pay to the Trust or to any Holder any deficit upon dissolution of the Trust or otherwise.
(b) The Sponsor shall be liable for all of the debts and obligations of the Trust (other than in respect of the Securities).
(c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders 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.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or in the case of the Property Trustee or the Delaware Trustee, negligence) or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such
other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders might properly be paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this declaration shall not be liable to the trust or to any other covered person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between any Covered Person and any Indemnified Person, or
(ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law.
SECTION 10.4 Indemnification.
(a) (i) The Sponsor shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) by reason of the fact that he is or was a Company Indemnified Person, against expenses (including attorneys' fees and expenses), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Company Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
(ii) The Sponsor shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees and expenses) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such Company Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such Person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 10.4(a), or in defense of any claim, issue or matter therein, he or she shall be indemnified, to the full extent permitted by law, against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(a) (unless ordered by a court) shall be made by the Sponsor only as
authorized in the specific case upon a determination that indemnification of the
Company Indemnified Person is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in paragraphs (i) and (ii).
Such determination shall be made (1) by the Administrative Trustees by a
majority vote of a Quorum consisting of such Administrative Trustees who were
not parties to such action, suit or proceeding, (2) if such a Quorum is not obtainable, or, even if obtainable, if a Quorum of disinterested Administrative Trustees so directs, by independent legal counsel in a written opinion, or (3) by the Common Security Holder of the Trust.
(v) Expenses (including attorneys' fees and expenses) incurred
by a Company Indemnified Person in defending a civil, criminal, administrative
or investigative action, suit or proceeding referred to in paragraphs (i) and
(ii) of this Section 10.4(a) shall be paid by the Sponsor in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Company Indemnified Person to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified by the Sponsor as authorized in this Section 10.4(a).
Notwithstanding the foregoing, no advance shall be made by the Sponsor if a
determination is reasonably and promptly made (i) by the Administrative Trustees
by a majority vote of a Quorum of disinterested Administrative Trustees, (ii) if
such a Quorum is not obtainable, or, even if obtainable, if a Quorum of
disinterested Administrative Trustees so directs, by independent legal counsel
in a written opinion or (iii) by the Common Security Holder of the Trust, that,
based upon the facts known to the Administrative Trustees, counsel or the Common
Security Holder at the time such determination is made, such Company Indemnified
Person acted in bad faith or in a manner that the Common Security Holder did not
believe to be in, or believed was opposed to, the best interests of the Trust,
or, with respect to any criminal proceeding, that such Company Indemnified
Person believed or had reasonable cause to believe his or her conduct was
unlawful. In no event shall any advance be made in instances where the
Administrative Trustees, independent legal counsel or Common Security Holder
reasonably determine that a Company Indemnified Person deliberately breached his
or her duty to the Trust or its Common or Capital Security Holders.
(vi) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 10.4(a) shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Sponsor or Capital Security Holders of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 10.4(a) shall be deemed to be provided by a contract between the Sponsor and each Company Indemnified Person who serves in such capacity at any time while this Section 10.4(a) is in effect. Any repeal or modification of this Section 10.4(a) shall not affect any rights or obligations then existing.
(vii) The Sponsor or the Trust may purchase and maintain insurance on behalf of any person who is or was a Company Indemnified Person against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Debenture Issuer would have the power to indemnify him or her against such liability under the provisions of this Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the
request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 10.4(a) with respect to the resulting or surviving entity as he or she would have with respect to such constituent entity if its separate existence had continued.
(ix) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 10.4(a) shall, unless otherwise provided when authorized or ratified, continue as to a Person who has ceased to be a Company Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a Person.
(b) The Sponsor agrees to indemnify the (i) Property Trustee, (ii)
the Delaware Trustee, (iii) any Affiliate of the Property Trustee or the
Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee or the Delaware Trustee (each of the Persons in (i) through
(iv), including the Property Trustee and the Delaware Trustee in their
respective individual capacities, being referred to as a "Fiduciary Indemnified
Person") for, and to hold each Fiduciary Indemnified Person harmless against,
any and all loss, liability, damage, action, suit, claim or expense including
taxes (other than taxes based on the income of such Fiduciary Indemnified
Person) of any kind and nature whatsoever incurred without negligence or bad
faith on the part of such Fiduciary Indemnified Person, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending against or investigating any claim or liability in
connection with the exercise or performance of any of the powers or duties of
such Fiduciary Indemnified Person hereunder. The obligation to indemnify as set
forth in this Section 10.4(b) shall survive the resignation or removal of the
Property Trustee or the Delaware Trustee and the satisfaction and discharge of
this Declaration.
(c) The Sponsor agrees to pay the Property Trustee and the Delaware Trustee, from time to time, such compensation for all services rendered by the Property Trustee and the Delaware Trustee hereunder as may be mutually agreed upon in writing by the Sponsor and the Property Trustee or the Delaware Trustee, as the case may be, and, except as otherwise expressly provided herein, to reimburse the Property Trustee and the Delaware Trustee upon its or their request for all reasonable expenses (including legal fees and expenses), disbursements and advances incurred or made by the Property Trustee or the Delaware Trustee, as the case may be, in accordance with the provisions of this Declaration, except any such expense, disbursement or advance as may be attributable to its or their negligence or bad faith.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee (subject to Section 5.3(c)) may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders shall have no rights by virtue of this Declaration 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. No Covered Person, the Sponsor, the Delaware Trustee, or the Property 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 any Covered Person, the Sponsor, the Delaware Trustee and the Property 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 Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the Administrative Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Administrative Trustees.
(b) The Administrative Trustees shall cause to be duly prepared and delivered to each of the Holders any annual United States federal income tax information statement required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Administrative Trustees shall endeavor to deliver all such information statements within 30 days after the end of each Fiscal Year of the Trust.
(c) The Administrative Trustees shall cause to be duly prepared and filed with the appropriate taxing authority, an annual United States federal income tax return, on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Administrative Trustees on behalf of the Trust with any state or local taxing authority.
SECTION 11.3 Banking.
The Trust may maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Property Trustee shall be made directly to the Property Trustee Account and no other funds of the Trust shall be deposited in the Property Trustee Account. The sole
signatories for such accounts shall be designated by the Administrative Trustees; provided, however, that the Property Trustee shall designate the signatories for the Property Trustee Account.
SECTION 11.4 Withholding.
The Trust and the Administrative Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Administrative Trustees shall cause to be filed required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to Distributions or allocations to any Holder, the amount withheld shall be deemed to be a Distribution in the amount of the withholding to the Holder. In the event of any claim of excess withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration (including Section 7 of Annex I hereto) or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed by:
(i) the Sponsor and the Administrative Trustees (or, if there are more than two Administrative Trustees, a majority of the Administrative Trustees);
(ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee; and
(iii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, the Delaware Trustee.
(b) No amendment shall be made, and any such purported amendment shall be void and ineffective:
(i) unless, in the case of any proposed amendment, the Property Trustee shall have first received an Officers` Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terns of the Securities);
(ii) unless, in the case of any proposed amendment which affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee shall have first received:
(A) an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and
(B) an Opinion of Counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities) and that all conditions precedent to the execution and delivery of such amendment have been satisfied;
provided, however, that the Property Trustee shall not be required to sign any such amendment; and
(iii) to the extent the result of such amendment would be to:
(A) cause the Trust to fail to continue to be classified for purposes of United States federal income taxation as a grantor trust;
(B) reduce or otherwise adversely affect the powers of the Property Trustee in contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act.
(c) At such time after the Trust has issued any Securities that remain outstanding, any amendment that would adversely affect the rights, privileges or preferences of any Holder (other than an amendment pursuant to (g) below) may be effected only with such additional requirements as may be set forth in the terms of such Securities;
(d) Section 10.1(c) and this Section 12.1 shall not be amended without the consent of all of the Holders;
(e) Article Four shall not be amended without the consent of the Holders of a Majority in Liquidation Amount of the Common Securities;
(f) The rights of the Holders of the Common Securities under Article V to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in Liquidation Amount of the Common Securities; and
(g) Notwithstanding Section 12.1(c), this Declaration may be amended without the consent of the Holders to:
(i) cure any ambiguity, correct or supplement any provision in this Declaration that may be inconsistent with any other provision of this Declaration or to make any other provisions with respect to matters or questions arising under this Declaration which shall not be inconsistent with the other provisions of the Declaration; and
(ii) to modify, eliminate or add to any provisions of the Declaration 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 Securities are outstanding or to ensure that the Trust will not be required to register as an Investment Company under the Investment Company Act;
provided, however, that in each clause above, such action shall not adversely affect in any material respect the interests of the Holders, and any such amendments of this Declaration shall become effective when notice thereof is given to the Holders.
SECTION 12.2 Meetings of the Holders; Action by Written Consent.
(a) Meetings of the Holders of any class of Securities may be called at any time by the Administrative Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Capital Securities are listed or admitted for trading. The Administrative Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 20% in Liquidation Amount of such class of Securities. Such direction shall be given by delivering to the Administrative Trustees one or more notices in writing stating that the signing Holders wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders calling a meeting shall specify in writing the Capital Security Certificates held by the Holders exercising the right to call a meeting and only those Securities specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders:
(i) notice of any such meeting shall be given to all the Holders having a right to vote thereat at least seven days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders is permitted or required under this Declaration or the rules of any stock exchange on which the Capital Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders; any action that may be taken at a meeting of the Holders may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders having a right to vote thereon were present and voting; prompt notice of the taking of action without a
meeting shall be given to the Holders entitled to vote who have not consented in writing; and the Administrative Trustees may specify that any written ballot submitted to the Security Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Administrative Trustees;
(ii) each Holder may authorize any Person to act for it by proxy on all matters in which a Holder is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting; no proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy; every proxy shall be revocable at the pleasure of the Holder executing it; and, except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders were stockholders of a Delaware corporation;
(iii) each meeting of the Holders shall be conducted by the Administrative Trustees or by such other Person that the Administrative Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration, the terms of the Securities, the Trust Indenture Act or the listing rules of any stock exchange on which the Capital Securities are then listed or trading, otherwise provides, the Administrative Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
The Trustee that acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that:
(a) the Property Trustee is a Delaware banking corporation, a national banking association or a bank or trust company, duly organized, validly existing and in good standing under the laws of the United States or the State of Delaware as the case may be, with corporate
power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration;
(b) the execution, delivery and performance by the Property Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee; and this Declaration has been duly executed and delivered by the Property Trustee and under Delaware law (excluding any securities laws) constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Declaration by the Property Trustee does not conflict with or constitute a breach of the charter or by-laws of the Property Trustee; and
(d) no consent, approval or authorization of, or registration with or notice to, any federal or state banking authority governing the trust powers of the Property Trustee is required for the execution, delivery or performance by the Property Trustee of this Declaration.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee that:
(a) the Delaware Trustee is a Delaware banking corporation, a national banking association or a bank or trust company, duly organized, validly existing and in good standing under the laws of the United States or the State of Delaware, as the case may be, with corporate power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration;
(b) the execution, delivery and performance by the Delaware Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Delaware Trustee; and this Declaration has been duly executed and delivered by the Delaware Trustee and under Delaware law (excluding any securities laws) constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Declaration by the Delaware Trustee does not conflict with or constitute a breach of the charter or by-laws of the Delaware Trustee; and
(d) no consent, approval or authorization of, or registration with or notice to, any federal or Delaware banking authority governing the trust powers of the Delaware Trustee is required for the execution, delivery or performance by the Delaware Trustee of this Declaration; and
(e) the Delaware Trustee is 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 is a Person that satisfies for the Trust Section 3807(a) of the Business Trust Act.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, overnight courier service or confirmed telecopy, as follows:
(a) if given to the Trust, in care of the Administrative Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Property Trustee, the Delaware Trustee and the Holders):
Nara Bancorp Capital Trust I c/o Nara Bancorp, Inc. 3701 Wilshire Boulevard, Suite 220 Los Angeles, California 90010 Telephone: (213) 639-1700 Telecopier: (213) 225-3033
(b) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as Delaware Trustee may give notice of to the Holders):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telecopier: (302) 651-8882
Telephone: (302) 651-1000
(c) if given to the Property Trustee, at the Property Trustee's mailing address set forth below (of such other address as the Property Trustee may give notice of to the Holders):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Telephone: (302) 651-1000
Telecopier: (302) 651-8882
(d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust):
Nara Bancorp, Inc.
3701 Wilshire Boulevard, Suite 220
Los Angeles, California 90010
Telephone: (213) 639-1700
Telecopier: (213) 225-3033
(e) if given to any other Holder, at the address set forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.
SECTION 14.2 Governing Law.
This Declaration and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflict of laws principles thereof.
SECTION 14.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties.
SECTION 14.4 Headings.
Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof.
SECTION 14.5 Successors and Assigns.
Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants
and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether or not so expressed.
SECTION 14.6 Partial Enforceability.
If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby.
SECTION 14.7 Counterparts.
This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one or more of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page.
IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written.
/S/ BON T. GOO -------------------------------------- Bon T. Goo Administrative Trustee /S/ TIMOTHY T. CHANG -------------------------------------- Timothy T. Chang Administrative Trustee /S/ CHRISTINE Y. OH -------------------------------------- Christine Y. Oh Administrative Trustee |
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By: /S/ DONALD G. MACKELCAN
----------------------------------
Name: DONALD G. MACKELCAN
Title: VICE PRESIDENT
|
WILMINGTON TRUST COMPANY,
as Property Trustee
By: /S/ DONALD G. MACKELCAN
----------------------------------
Name: DONALD G. MACKELCAN
Title: VICE PRESIDENT
|
NARA BANCORP, INC.,
as Sponsor and Debenture Issuer
By: /S/ BENJAMIN B. HONG
----------------------------------
Benjamin B. Hong
President and Chief Executive Officer
|
ANNEX I
TERMS OF
10.18% MMCAPS(SM)
10.18% COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust of Nara Bancorp Capital Trust I dated as of March 28, 2001 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration or, if not defined in such Declaration, as defined in the Indenture (as defined in the Declaration):
1. Designation and Number.
(a) Capital Securities. 10,000 MMCapS(SM) of the Trust (the "Capital Securities") with an aggregate liquidation amount with respect to the assets of the Trust of Ten Million Dollars ($10,000,000) and with a liquidation amount with respect to the assets of the Trust of One Thousand Dollars ($1,000) (the "Liquidation Amount") per security, are hereby designated for the purposes of identification only as "10.18% Capital Securities." The certificates evidencing the Capital Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any exchange or quotation system on or in which the Capital Securities are listed, traded or quoted.
(b) Common Securities. 400 Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of Four Hundred Thousand Dollars ($400,000) and a liquidation amount with respect to the assets of the Trust of $1,000 per security, are hereby designated for the purposes of identification only as "10.18% Common Securities" (the "Common Securities"). The certificates evidencing the Common Securities shall be substantially in the form of Exhibit A-2 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice.
2. Distributions.
(a) Distributions on each Security will be payable at a fixed rate per annum of 10.18% (the "Coupon Rate") of the Liquidation Amount of $1,000 per Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one semi-annual period will bear additional Distributions thereon compounded semi-annually at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein, includes distributions of any and all such interest, if any, payable unless otherwise stated. A Distribution is payable only to the extent that payments are made with respect to the Debentures held by the Property Trustee and to the extent the Property Trustee has funds legally available therefor.
(b) Distributions on the Securities will be cumulative, will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from
ANNEX I-1
March 28, 2001 and will be payable semi-annually in arrears on June 8th and December 8th of each year, commencing June 8, 2001 (each, a "Distribution Date"), except as otherwise described below. Distributions will be computed on the basis a 360-day year of twelve 30-day months. As long as no Event of Default has occurred and is continuing under the Indenture, the Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period at any time and from time to time on the Debentures for a period not exceeding 10 consecutive semi-annual periods, including the first such semi-annual period during such period (each an "Extension Period"), during which Extension Period no interest shall be due and payable on the Debentures, provided, that no Extension Period shall end on a date other than an Interest Payment Date for the Debentures or extend beyond the Maturity Date of the Debentures. As a consequence of such deferral, Distributions will also be deferred. Notwithstanding such deferral, Distributions will continue to accumulate with additional Distributions thereon (to the extent permitted by applicable law but not at a rate greater than the rate at which interest is then accruing on the Debentures) at the Coupon Rate compounded semi-annually during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further defer payments of interest by further extending such Extension Period, provided, that such extension does not cause such Extension Period, together with all such previous and further extensions within such Extension Period, to exceed 10 consecutive semi-annual periods, including the first semi-annual period during such Extension Period, end on a date other than an Interest Payment Date for the Debentures or extend beyond the Maturity Date of the Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements.
(c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the close of business on the 15th day of the month immediately preceding the month in which the relevant Distribution Date occurs, which Distribution Dates correspond to the Interest Payment Dates for the Debentures. The relevant record dates for the Common Securities shall be the same as the record dates for the Capital Securities. Distributions payable on any Securities that are not punctually paid on any Distribution Date, as a result of the Debenture Issuer having failed to make a payment under the Debentures, will cease to be payable to the Holder on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distributions payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that if such next succeeding Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day with the same force and effect as if made on such date.
(d) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders.
3. Liquidation Distribution Upon Dissolution.
ANNEX I-2
In the event of any dissolution of the Trust, the Trust shall be liquidated by the Administrative Trustees as expeditiously as the Administrative Trustees determine to be possible by distributing to the Holders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, a Like Amount (as defined below) of the Debentures, unless such distribution is determined by the Property Trustee not to be practicable, in which event such Holders will be entitled to receive out of the assets of the Trust legally available for distribution to Holders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the aggregate of the Liquidation Amount of $1,000 per Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution").
"Like Amount" means (i) with respect to a redemption of the Securities, Securities having a Liquidation Amount equal to the principal amount of Debentures to be paid in accordance with their terms and (ii) with respect to a distribution of Debentures upon the liquidation of the Trust, Debentures having a principal amount equal to the Liquidation Amount of the Securities of the Holder to whom such Debentures are distributed.
If, upon any such liquidation, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets legally available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust with respect to the Securities shall be paid on a Pro Rata basis.
4. Redemption and Distribution.
(a) Upon the repayment of the Debentures in whole or in part, at maturity or otherwise (either at the option of the Debenture Issuer or pursuant to a Special Event, as described below), the proceeds from such repayment shall be simultaneously applied by the Property Trustee (subject to the Property Trustee having received written notice no later than 45 days prior to such repayment) to redeem a Like Amount of the Securities at a redemption price equal to (i) in the case of the repayment of the Debentures on the Maturity Date, the Maturity Redemption Price (as defined below), (ii) in the case of the optional prepayment of the Debentures prior to the Initial Optional Redemption Date and upon the occurrence and continuation of a Special Event, the Special Event Redemption Price (as defined below) and (iii) in the case of the optional prepayment of the Debentures on or after the Initial Optional Redemption Date, the Optional Redemption Price (as defined below). The Maturity Redemption Price, the Special Event Redemption Price and the Optional Redemption Price are referred to collectively as the "Redemption Price." Holders will be given not less than 30 nor more than 60 days prior written notice of such redemption.
(b) (i) The "Maturity Redemption Price" shall mean an amount equal to 100% of the principal amount of the Debentures, plus any accrued and unpaid interest thereon (including Compounded Interest and Additional Sums, if any) to the Maturity Date thereof.
(ii) The Debenture Issuer shall have the right (subject to the conditions in the Indenture) to elect to prepay the Debentures, in whole or in part, at any time on or after June 8, 2011 (the "Initial Optional Redemption Date"), and, simultaneous with such prepayment, to cause a Like Amount of the Securities to be redeemed by the Trust at the Optional Redemption Price on a Pro Rata basis. "Optional Redemption Price" shall mean an amount equal to the
ANNEX I-3
applicable redemption price set forth below plus, accumulated and unpaid Distributions thereon, if any, to the date of such redemption if redeemed during the 12-month period beginning June 8, of the years indicated below:
Percentage of
Liquidation
Year Amount
---- -------------
2011 105.090%
2012 104.581%
2013 104.072%
2014 103.563%
2015 103.054%
2016 102.545%
2017 102.036%
2018 101.527%
2019 101.018%
2020 100.509%
2021 and thereafter 100.000%
|
(c) If at any time an Investment Company Event, a Regulatory Capital Event or a Tax Event (each as defined below, and each a "Special Event") occurs, the Debenture Issuer shall have the right (subject to the conditions set forth in the Indenture) at any time prior to the Initial Optional Redemption Date, to prepay the Debentures in whole, but not in part, within the 90 days following the occurrence of such Special Event (the "90 Day Period"), and, simultaneous with such prepayment, to cause a Like Amount of the Securities to be redeemed by the Trust at the Special Event Redemption Price on a Pro Rata basis.
"Investment Company Event" shall mean the receipt by the Debenture Issuer and the Trust of a written opinion of independent securities counsel experienced in such matters to the effect that as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any rules, guidelines or policies of any applicable regulatory authority for the Debenture Issuer or (b) 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 original issuance of the Securities, the Trust is, or within 90 days of the date of such opinion will be, considered an Investment Company that is required to be registered under the Investment Company Act.
ANNEX I-4
"Regulatory Capital Event" shall mean the receipt by the Debenture Issuer and the Trust of a written opinion of independent bank regulatory counsel experienced in such matters to the effect that as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any rules, guidelines or policies of an applicable regulatory authority for the Debenture Issuer or (b) 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 original issuance of the Securities, the Capital Securities do not constitute, or within 90 days of the date of such opinion will not constitute, Tier 1 Capital (or its then equivalent) if the Debenture Issuer is a bank holding company or if the Debenture Issuer is a savings and loan holding company and is then subject to similar capital adequacy requirements; provided, however, that the distribution of the Debentures in connection with the liquidation of the Trust by the Debenture Issuer shall not in and of itself constitute a Regulatory Capital Event.
"Special Event Redemption Price" shall mean, with respect to any
redemption of the Securities following a Special Event, an amount in cash equal
to (i) 106.09% of the principal amount of the Debentures, if the Special Event
occurs prior to June 8, 2011 and (ii) if the Special Event occurs on or after
June 8, 2011, the amount of the Optional Redemption Price (calculated as if the
Debenture Issuer had prepaid such Debentures on such date), plus, in the case of
(i) and (ii), any accrued and unpaid interest thereon (including Compounded
Interest and Additional Sums, if any) to the date of such redemption.
A "Tax Event" shall occur upon receipt by the Debenture Issuer and the Trust of a written opinion of independent tax counsel experienced in such matters to the effect that, as a result of (a) 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 (b) 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 original issuance of the Securities, 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 Debentures, (ii) the interest payable by the Debenture Issuer on the Debentures is not, or within 90 days of the date of such opinion will not be, deductible by the Debenture Issuer, 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.
(d) In the case of an optional redemption, if fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Capital Securities shall be redeemed Pro Rata and the Capital Securities to be redeemed will be determined as described in Section 4(g)(ii) below. Upon the entry of an order for the dissolution of the Trust by a court of competent jurisdiction, the Debentures thereafter will be subject to optional redemption, in whole, but not in part, on or after the Initial Optional Redemption Date.
(e) On and from the date fixed by the Administrative Trustees for any distribution of Debentures and liquidation of the Trust: (i) the Securities will no longer be deemed to be
ANNEX I-5
outstanding and (ii) any certificates representing Securities will be deemed to represent beneficial interests in a Like Amount of Debentures until such certificates are presented to the Debenture Issuer or its agent for transfer or reissue.
(f) The Trust may not redeem fewer than all the outstanding Securities unless all accumulated and unpaid Distributions have been paid on all Securities for all semi-annual Distribution periods terminating on or before the date of redemption.
(g) The procedure with respect to redemptions or distributions of Securities shall be as follows:
(i) Notice of any redemption of, or notice of distribution of
Debentures in exchange for, the Securities (a "Redemption/Distribution
Notice") will be given by the Trust by mail to each Holder of Securities
to be redeemed or exchanged not fewer than 30 nor more than 60 days
before the date fixed for redemption or exchange thereof which, in the
case of a redemption, will be the date fixed for redemption of the
Debentures. For purposes of the calculation of the date of redemption or
exchange and the dates on which notices are given pursuant to this
Section 4(g)(i), a Redemption/Distribution Notice shall be deemed to be
given on the day such notice is first mailed by first-class mail,
postage prepaid, to Holders. Each Redemption/Distribution Notice shall
be addressed to the Holders at the address of each such Holder appearing
in the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing of either thereof with
respect to any Holder shall affect the validity of the redemption or
exchange proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Securities are to be redeemed, the particular Securities to be redeemed shall be selected on a Pro Rata basis (based upon Liquidation Amounts) not more than 60 nor less than 30 days prior to the date fixed for redemption from the outstanding Securities not previously called for redemption; provided, however, that with respect to Holders that would be required to hold less than 100 but more than zero Securities as a result of such redemption, the Trust shall redeem Securities of each such Holder so that after such redemption such Holder shall hold either 100 Securities or such Holder no longer holds any Securities, and shall use such method (including, without limitation, by lot) as the Trust shall deem fair and appropriate; provided further, that any such redemption may be made on the basis of the aggregate Liquidation Amount of Securities held by each Holder thereof and may be made by making such adjustments as the Trust deems fair and appropriate in order that fractional Securities shall not thereafter remain outstanding.
(iii) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice (which notice will be irrevocable), then, with respect to Definitive Capital Securities and Common Securities, provided that the Debenture Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will irrevocably deposit with the paying agent for the Capital Securities (if other than the Property Trustee) funds sufficient to pay the applicable Redemption Price to the Holders by check mailed to the
ANNEX I-6
address of the relevant Holder appearing on the books and records of the Trust on the redemption date, and provided further, that any such payment shall become due only upon surrender by the Holder of the related certificated Capital Securities. If a Redemption/Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the date of such deposit, or on the redemption date, as applicable, Distributions will cease to accumulate on the Securities so called for redemption and all rights of Holders so called for redemption will cease, except the right of the Holders of such Securities to receive the Redemption Price, but without interest on such Redemption Price, and such Securities shall cease to be outstanding.
(iv) Payment of accumulated and unpaid Distributions on the Redemption Date of the Securities will be subject to the rights of Holders at the close of business on a regular record date in respect of a Distribution Date occurring on or prior to such Redemption Date.
Neither the Administrative Trustees nor the Trust shall be required
to register or cause to be registered the transfer of (i) any Securities
beginning at the opening of business 15 days before the day of mailing of a
notice of redemption or any notice of selection of Securities for redemption or
(ii) any Securities selected for redemption, except the unredeemed portion of
any Security being redeemed. If any date fixed for redemption of Securities 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). If payment of the
Redemption Price with respect to any Securities is improperly withheld or
refused and not paid either by the Property Trustee or by the Sponsor as
guarantor pursuant to the relevant Securities Guarantee, Distributions on such
Securities will continue to accumulate from the original redemption date to the
actual date of payment, in which case the actual payment date will be considered
the date fixed for redemption for purposes of calculating the Redemption Price.
(v) Redemption/Distribution Notices shall be sent by the Property Trustee on behalf of the Trust to the Holders of the Securities.
(vi) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws and banking laws), the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Capital Securities by tender, in the open market or by private agreement.
5. Voting Rights - Capital Securities.
(a) Except as provided under Sections 5(b), 6(b) and 7 and as otherwise required by law and the Declaration, the Holders of the Capital Securities will have no voting rights.
(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 such Debenture Trustee with respect to the Debentures, (ii) waive any past default that is waivable under Section 5.07 of the
ANNEX I-7
Indenture, (iii) exercise any right to rescind or annul a declaration of acceleration of the maturity of the principal of the Debentures 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 a Majority in Liquidation Amount of all outstanding capital 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 approval of each Holder of the Capital Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of the Capital Securities except by subsequent vote of such Holders. The Property Trustee shall notify each Holder of Capital Securities of any notice of default with respect to the Debentures. In addition to obtaining the foregoing approvals of such Holders of the Capital Securities, prior to taking any of the foregoing actions, the Trustees shall obtain an opinion of counsel experienced in such matters to the effect that the Trust will continue to be classified as a grantor trust for United States federal income tax purposes after taking any such action into account.
If an Event of Default under the Declaration has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay principal of or premium, if any, or interest on the Debentures on the due date (or, in the case of redemption, on the redemption date), then a Holder of Capital Securities may institute a proceeding directly against the Debenture Issuer for enforcement of payment to such Holder of the principal of or premium, if any, or interest on a Like Amount of Debentures (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the Common Securities Holder will be subrogated to the rights of such Holder of Capital Securities to the extent of any payment made by the Debenture Issuer to such Holder of Capital Securities in such Direct Action. Except as provided in the second preceding sentence, or except as set forth in the first sentence of Section 3.8(e) of the Declaration, the Holders of Capital Securities will not be able to exercise directly any other remedy available to the holders of the Debentures.
Any approval or direction of Holders of Capital Securities may be given at a separate meeting of Holders of Capital Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Property Trustee will cause a notice of any meeting at which Holders of Capital Securities are entitled to vote to be mailed to each Holder of record of Capital Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consent
No vote or consent of the Holders of the Capital Securities will be required for the Trust to redeem and cancel Capital Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities.
Notwithstanding that Holders of Capital Securities are entitled to vote or consent under any of the circumstances described above, any of the Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding.
ANNEX I-8
6. Voting Rights - Common Securities.
(a) Except as provided under Sections 6(b), 6(c), and 7 or as otherwise required by law and the Declaration, the Holders of the Common Securities will have no voting rights.
(b) Unless a Debenture Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by the Holder of the Common Securities. If a Debenture Event of Default has occurred and is continuing, the Property Trustee and the Delaware Trustee may be removed at such time by the Holders of a Majority in Liquidation Amount of the outstanding Capital Securities. In no event will the Holders of the Capital Securities have the right to vote to appoint, remove or replace the Administrative Trustees, which voting rights are vested exclusively in the Sponsor as the Holder of the Common Securities. No resignation or removal of a Trustee and no appointment of a successor trustee shall be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the Declaration.
(c) 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 such Debenture Trustee with respect to the Debentures, (ii) waive any past default that is waivable under Section 5.07 of the Indenture, (iii) exercise any right to rescind or annul a declaration of acceleration of the maturity of the principal of the Debentures 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 a Majority in Liquidation Amount of all outstanding Common 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 approval of each Holder of the Common Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of the Common Securities except by subsequent vote of such Holders. The Property Trustee shall notify each Holder of Common Securities of any notice of default with respect to the Debentures. In addition to obtaining the foregoing approvals of such Holders of the Common Securities, prior to taking any of the foregoing actions, the Trustees shall obtain an opinion of counsel experienced in such matters to the effect that the Trust will continue to be classified as a grantor trust for United States federal income tax purposes after taking any such action into account.
If an Event of Default under the Declaration has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay principal of or premium, if any, or interest on the Debentures on the due date (or in the case of redemption, on the redemption date), then a Holder of Common Securities may institute a Direct Action directly against the Debenture Issuer for enforcement of payment to such Holder of the principal of or premium, if any, or interest on a Like Amount of Debentures on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the Common Securities Holder will be subordinated to the rights of Holders of Capital Securities in respect of any payment from the Debenture Issuer in such Direct Action. Except as provided in the second preceding sentence, the Holders of Common Securities will not be able to exercise directly any other remedy available to the holders of the Debentures.
ANNEX I-9
Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Administrative Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, TO be mailed to each Holder of record of Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought, and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities.
7. Amendments to Declaration.
In addition to the requirements set out in Section 12.1 of the Declaration, the Declaration may be amended from time to time by the Sponsor, the Property Trustee and the Administrative Trustees without the consent of the Holders to (i) cure any ambiguity, correct or supplement any provisions in the Declaration that may be inconsistent with any other provisions, or make any other provisions with respect to matters or questions arising under the Declaration which shall not be inconsistent with the other provisions of the Declaration or (ii) modify, eliminate or add to any provisions of the Declaration 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 Securities are outstanding or to ensure that the Trust will not be required to register as an Investment Company under the Investment Company Act; provided, however, that in each case, such action shall not adversely affect in any material respect the interests of any Holder, and any such amendments of the Declaration shall become effective when notice thereof is given to the Holders. The Declaration may also be amended by the Trustees and the Sponsor with (i) the consent of Holders representing a Majority in Liquidation Amount of all outstanding Securities, 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 as an Investment Company under the Investment Company Act; provided, however, that, without the consent of each Holder of Securities, the Declaration may not be amended to (i) change the amount or timing of any Distribution on, or the payment required to be made in respect of, the Securities as of a specified date, increase the number or aggregate Liquidation Amount of the Securities or change of any of the redemption provisions or (ii) restrict the right of a Holder of Securities to institute suit for the enforcement of any such payment on or after such date.
ANNEX I-10
8. Pro Rata
A reference in these terms of the Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder according to the aggregate Liquidation Amount of the Securities held by such Holder in relation to the aggregate Liquidation Amount of all Securities outstanding unless, in relation to a payment, an Event of Default under the Declaration has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Capital Securities pro rata according to the aggregate Liquidation Amount of Capital Securities held by such Holder relative to the aggregate Liquidation Amount of all Capital Securities outstanding and then, only after satisfaction of all amounts owed to the Holders of the Capital Securities, to each Holder of Common Securities pro rata according to the aggregate Liquidation Amount of Common Securities held by such Holder relative to the aggregate Liquidation Amount of all Common Securities outstanding.
9. Ranking.
The Capital Securities rank pari passu with the Common Securities and payment thereon shall be made Pro Rata with the Common Securities, except that, if an Event of Default under the Declaration occurs and is continuing, no payments in respect of Distributions on, or payments upon liquidation, redemption or otherwise with respect to, the Common Securities shall be made until the Holders of the Capital Securities shall be paid in full the Distributions, Redemption Price, Liquidation Distribution and any other payments to which they are entitled at such time.
10. Acceptance of Capital Securities Guarantee,. Common Securities Guarantee Indenture and Debentures.
Each Holder of Capital Securities and Common Securities, by the acceptance thereof, agrees to the provisions of the Capital Securities Guarantee, the Common Securities Guarantee, the Indenture and the Debentures, as applicable, including the subordination provisions therein.
11. No Preemptive Rights.
Neither the issuance of Capital Securities, nor the issuance of Common Securities is subject to preemptive or other similar rights. The Holders shall have no preemptive or similar rights to subscribe for any additional securities.
12. Miscellaneous.
These terms constitute a part of the Declaration
The Sponsor will provide a copy of the Declaration, the Capital Securities Guarantee or the Common Securities Guarantee, as applicable, and the Indenture (including any supplemental indenture) to a Holder without charge upon written request to the Trust at its principal place of business.
ANNEX I-11
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY
THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS CAPITAL SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH NARA BANCORP, INC. (THE
"CORPORATION") OR ANY "AFFILIATE" OF THE CORPORATION WAS THE OWNER OF THIS
CAPITAL SECURITY (OR ANY PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A) TO THE
CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS CAPITAL SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3), (7) OR (8) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, FOR INVESTMENT PURPOSES PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF NARA BANCORP CAPITAL TRUST I
(THE "TRUST") AND THE CORPORATION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii)
PURSUANT TO CLAUSE (D) TO REQUIRE THAT THE TRANSFEROR DELIVER TO THE TRUST A
LETTER FROM THE TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX II TO THE
DECLARATION. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO
Exhibit A-1-1
WHOM THIS CAPITAL SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF ALSO
AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE CAPITAL SECURITIES OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,
95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND
HOLDING OF CAPITAL SECURITIES IS NOT PROHIBITED BY SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER
OR HOLDER OF THE CAPITAL SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO
HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT
AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN
TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON
ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR
ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH
PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION
UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO
APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
In all circumstances, each Capital Security Certificate shall bear the following legend:
THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100 CAPITAL SECURITIES) AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF CAPITAL SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 (100 CAPITAL SECURITIES) SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH CAPITAL SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON SUCH CAPITAL SECURITIES, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH CAPITAL SECURITIES.
Exhibit A-1-2
Certificate Number: Aggregate Liquidation Amount:
----------------- $
-------------------------
|
Certificate Evidencing Capital Securities
of
Nara Bancorp Capital Trust I
10.18% MMCapS(SM)
(liquidation amount $1,000 per Capital Security)
Nara Bancorp Capital Trust I a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that _____________________________________________ (the "Holder") is the registered owner of $ __________________ in aggregate liquidation amount of the Capital Securities of the Trust representing undivided preferred beneficial interests in the assets of the Trust designated the 10.18% MMCapS(SM) (liquidation amount $1,000 per Capital Security) (the "Capital Securities"). The Capital 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. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust, dated as of March 28, 2001, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Capital Securities as set forth in Annex I to the Declaration. Capitalized terms used but not defined herein shall have the meaning given them in the Declaration. The Sponsor will provide a copy of the Declaration, the Capital Securities Guarantee and the Indenture (including any supplemental indenture) to a Holder without charge upon written request to the Trust at its principal place of business.
Upon receipt of this Certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder and to the benefits of the Capital Securities Guarantee to the extent provided therein.
By acceptance hereof, the Holder agrees, for United States federal income tax purposes, to treat the Debentures as indebtedness and the Capital Securities as evidence of indirect beneficial ownership in the Debentures.
Exhibit A-1-3
IN WITNESS WHEREOF, the Trust has executed this certificate this ______th day of March 28, 2001.
NARA BANCORP CAPITAL TRUST I
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 10.18% MMCapS(SM) of Nara Bancorp Capital Trust I referred to in the within-mentioned Declaration.
Dated: _______________ , ______
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Property Trustee
Exhibit A-1-4
[FORM OF REVERSE OF SECURITY
Distributions on each Capital Security will be payable at a fixed rate per annum of 10.18% (the "Coupon Rate") of the liquidation amount of $1,000 per Capital Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one semi-annual period will bear interest thereon compounded semi-annually at the Coupon Rate (to the extent permitted by applicable law). The term "Distribution," as used herein, includes such cash distributions and any and all such interest, if any, payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds legally available therefor.
Distributions on the Capital Securities will be cumulative, will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from March 28, 2001 and will be payable semi-annually in arrears on June 8th and December 8th of each year, commencing June 8, 2001 (each, a "Distribution Date"), except as otherwise described below. Distributions will be computed on the basis of a 360-day year of twelve 30-day months. As long as no Event of Default has occurred and is continuing under the Indenture, the Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period at any time and from time to time on the Debentures for a period not exceeding 10 consecutive semi-annual calendar periods, including the first such semi-annual period during such extension period (each an "Extension Period"), provided, that no Extension Period shall end on a date other than an Interest Payment Date for the Debentures or extend beyond the Maturity Date of the Debentures. As a consequence of such deferral, Distributions will also be deferred. Notwithstanding such deferral, semi-annual Distributions will continue to accumulate with interest thereon (to the extent permitted by applicable law, but not at a rate exceeding the rate of interest then accruing on the Debentures) at the Coupon Rate compounded semi-annually during any such Extension Period. Prior to the termination of any Extension Period, the Debenture Issuer may further defer payments of interest by further extending such Extension Period; provided, that such Extension Period, together with all such previous and further extensions within such Extension Period, may not (i) exceed 10 consecutive semi-annual periods, including the first semi-annual period during such Extension Period, (ii) end on a date other than an Interest Payment Date for the Debentures or (iii) extend beyond the Maturity Date of the Debentures. Payments of accumulated Distributions will be payable to Holders as they appear on the books and records of the Trust on the record date immediately preceding the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements.
Exhibit A-1-5
Subject to receipt by the Sponsor of any and all required regulatory approvals and to certain other conditions set forth in the Declaration and the Indenture, the Property Trustee may, at the direction of the Sponsor, at any time dissolve the Trust and after satisfaction of liabilities to creditors of the Trust as provided by applicable law, cause the Debentures to be distributed to the Holders of the Securities in liquidation of the Trust or, simultaneously with any redemption of the Debentures, cause a Like Amount of the Securities to be redeemed by the Trust.
The Capital Securities shall be redeemable as provided in the Declaration.
Exhibit A-1-6
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN CON - as tenants in common
TEN ENT - as tenants in the entireties
JT TEN - as joint tenants with right of survival
UNIF GIFT MIN ACT - under Uniform Gift to Minors Act and not as tenants
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby assigns and transfers this Capital Security Certificate to:
and irrevocably appoints
-------------------------------------------------------------------------- agent to transfer this Capital Security Certificate on the books of the Trust. The agent may substitute another to act for him or her.
Exhibit A-l-7
(Sign exactly as your name appears on the other side of this Capital Security Certificate)
Signature Guarantee:_________________________________________________________
Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
Exhibit A-1-8
[INCLUDE THE FOLLOWING IF THE CAPITAL SECURITY BEARS A
RESTRICTED SECURITIES LEGEND]
In connection with any transfer of any of the Capital Securities evidenced by this Certificate, the undersigned confirms that such Capital Securities are being:
CHECK ONE BOX BELOW
(1) exchanged for the undersigned's own account without transfer; or
(2) transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or
(3) transferred to an institutional "accredited investor" within the meaning of subparagraph (a)(1), (2), (3), (7) or (8) of Rule 501 under the Securities Act of 1933 that is acquiring the Capital Securities for its own account, or for the account of such an institutional "accredited investor," for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act of 1933, as amended; or
(4) transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended; or
(5) transferred pursuant to an effective registration statement.
Unless one of the boxes is checked, the Registrar will refuse to register any of the Capital Securities evidenced by this Certificate in the name of any Person other than the Holder hereof; provided, however, that if box (3) or (4) is checked, the Registrar may require, prior to registering any such transfer of the Capital Securities, such legal opinions, certifications and other information as the Trust has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended, such as the exemption provided by Rule 144 under such Act; provided further, that (i) if box (2) is checked, by acceptance of this Certificate, the transferee shall be deemed to have certified that it is a "qualified institutional buyer" (as defined in Rule 144A) ("QIB") acquiring the Capital Securities for its own account or for the account of another QIB over which it exercises sole investment discretion and that it is aware that the Holder is relying upon the exemption from registration afforded by Rule 144A in respect of the Holder's transfer of Capital Securities to it or (ii) if box (3) is checked, the transferee must also provide to the Registrar a Transferee Letter of Representation in the form attached to the Declaration, provided further, that after the date that a registration statement has been filed and so long as such registration statement continues to be effective, only then may the Registrar permit transfers for which box (5) has been checked.
Exhibit A-1-9
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS COMMON SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
Exhibit A-2-1
This Certificate is not transferable except in compliance with Section 9.1(c) of the Declaration.
Certificate Evidencing Common Securities
of
Nara Bancorp Capital Trust I
10.18% Common Securities
(liquidation amount $1,000 per Common Security)
Nara Bancorp Capital Trust I a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Nara Bancorp, Inc. (the "Holder") is the registered owner of __________ common securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the 10.18% Common Securities (liquidation amount $1,000 per Common Security) (the "Common Securities"). Subject to the terms of Section 9.1(c) of the Declaration (as defined below), the Common Securities are not transferable. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of the Trust dated as of March 28, 2001 as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Common Securities as set forth in Annex I to the Declaration. Capitalized terms used but not defined herein shall have the meaning given them in the Declaration. The Sponsor will provide a copy of the Declaration, the Common Securities Guarantee and the Indenture (including any supplemental indenture) to a Holder without charge upon written request to the Trust at its principal place of business.
Upon receipt of this Certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder and to the benefits of the Common Securities Guarantee to the extent provided therein.
By acceptance hereof, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this __th day of March, 2001.
NARA BANCORP CAPITAL TRUST I
Exhibit A-2-2
[FORM OF REVERSE OF SECURITY]
Distributions on each Common Security will be payable at a rate of 10.18% per annum (the "Coupon Rate") of the liquidation amount of $1000 per Common Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one semi-annual period will bear interest thereon compounded semi-annually at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions," as used herein, includes such cash distributions and any and all such interest, if any, payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds legally available therefor.
Distributions on the Common Securities will be cumulative, will accrue from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from March 28, 2001 and will be payable semi-annually in arrears on June 8th and December 8th of each year, commencing June 8, 2001 (each, a "Distribution Date"), except as otherwise described below. Distributions will be computed on the basis of a 360-day year of twelve 30-day months. As long as no Event of Default has occurred and is continuing under the Indenture, the Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period at any time and from time to time on the Debentures for a period not exceeding 10 consecutive calendar semi-annual periods, including the first such semi-annual period during such extension period (each an "Extension Period"), provided, that no Extension Period shall end on a date other than an Interest Payment Date for the Debentures or extend beyond the Maturity Date of the Debentures. As a consequence of such deferral, Distributions will also be deferred. Notwithstanding such deferral, semi-annual Distributions will continue to accumulate with interest thereon (to the extent permitted by applicable law, but not at a rate exceeding the rate of interest then accruing on the Debentures) at the Coupon Rate compounded semi-annually during any such Extension Period. Prior to the termination of any Extension Period, the Debenture Issuer may further defer payments of interest by further extending such Extension Period; provided, that such Extension Period, together with all such previous and further extensions within such Extension Period, may not (i) exceed 10 consecutive semi-annual periods, including the first semi-annual period during such Extension Period, (ii) end on a date other than an Interest Payment Date for the Debentures or (iii) extend beyond the Maturity Date of the Debentures. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the record date immediately preceding the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements.
Subject to the receipt by the Sponsor of any and all required regulatory approvals and to certain other conditions set forth in the Declaration and the Indenture, the Property Trustee may, at the direction of the Sponsor, at any time dissolve the Trust and cause the Debentures to be distributed to the Holders of the Securities in liquidation of the Trust or, simultaneously with any redemption of the Debentures, cause a Like Amount of the Securities to be redeemed by the Trust.
The Common Securities shall be redeemable as provided in the Declaration.
Exhibit A-2-3
Under certain circumstances, the rights of the holders of the Common Securities shall be subordinate to the rights of the holders of the Capital Securities, as provided in the Declaration.
Exhibit A-2-4
ANNEX 11
TRANSFEREE LETTER OF REPRESENTATION
Nara Bancorp Capital Trust I
c/o Nara Bancorp, Inc.
3701 Wilshire Boulevard, Suite 220
Los Angeles, California 90010
Ladies and Gentlemen:
In connection with the proposed transfer to us of 10.18% MMCapS(SM) (the "capital securities") of Nara Bancorp Capital Trust I (the "Trust"), we confirm that:
1. We understand that the capital securities have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or other applicable securities laws, and may not be offered, sold or otherwise
transferred except as permitted in the following sentence. We agree on our
behalf and on behalf of any investor account for which we are purchasing capital
securities to offer, sell or otherwise transfer such capital securities prior to
the date which is two years after the later of the date of original issue
thereof and the last date on which Nara Bancorp, Inc. (the "Corporation") or any
"affiliate" of the Corporation was the owner of such capital securities (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the
Corporation, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) so long as the capital securities are
eligible for resale pursuant to Rule 144A under the Securities Act, to a person
we reasonably believe is a "qualified institutional buyer" (a "QIB") as defined
in Rule 144A under the Securities Act that purchases for its own account or for
the account of a QIB to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) to an institutional "accredited investor" (an
"Institutional Accredited Investor") within the meaning of subparagraph (a)(1),
(2), (7) or (8) of Rule 501 under the Securities Act that is acquiring the
capital securities for its own account or for the account of such an
Institutional Accredited Investor for investment purposes and not with a view
to, or for offer and sale in connection with, any distribution in violation of
the Securities Act or (e) pursuant to any other available exemption from the
registration requirements under the Securities Act, subject to the right of the
Trust and the Corporation prior to any such offer, sale or transfer (i) pursuant
to clause (d) or (e) above to require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to each of them and (ii)
pursuant to clause (d) above to require that the transferor deliver to the Trust
a letter from the transferee substantially similar to this letter.
2. We are an Institutional Accredited Investor purchasing for our own account or for the account of such an Institutional Accredited Investor for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act or any other applicable securities laws and we have such knowledge and experience in financial
Annex II-1
and business matters as to be capable of evaluating the merits and risks of our investment in the capital securities, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment for an indefinite period.
3. We are acquiring the capital securities purchased by us for our own account or for one or more accounts as to each of which we exercise sole investment discretion.
4. You and the Corporation are entitled to rely upon this letter and you are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
5. We are (1) not an employee benefit plan within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or a plan to which Section 4975 of the Internal Revenue Code of 1986
("Code") is applicable, a trustee or other person acting on behalf of such
employee benefit plan or plan, or any other person or entity using the assets of
any employee benefit plan or plan to finance such purchase, or (2) such purchase
will not result in a prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code for which there is no applicable statutory or
administrative exemption. We make this representation to the trustees of the
Trust, Nara Bancorp, Inc. and MMCapS(SM) Funding I, Ltd.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
Very truly yours,
The capital securities will be registered in the name of the beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
Annex II-2
EXHIBIT 4.6
NARA BANCORP, INC.
INDENTURE
Dated as of March 28, 2001
WILMINGTON TRUST COMPANY,
as Debenture Trustee
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS ...................................................................... 1
SECTION 1.01 Definitions ......................................................... 1
SECTION 1.02 Business Day Certificate ............................................ 9
ARTICLE II SECURITIES ...................................................................... 9
SECTION 2.01 Forms Generally ..................................................... 9
SECTION 2.02 Execution and Authentication......................................... 9
SECTION 2.03 Form and Payment .................................................... 10
SECTION 2.04 Legends ............................................................. 10
SECTION 2.05 Interest............................................................. 10
SECTION 2.06 Transfer and Exchange................................................ 11
SECTION 2.07 Replacement Securities .............................................. 12
SECTION 2.08 Temporary Securities ................................................ 12
SECTION 2.09 Cancellation ........................................................ 13
SECTION 2.10 Defaulted Interest .................................................. 13
SECTION 2.11 CUSIP Numbers ....................................................... 14
ARTICLE III PARTICULAR COVENANTS OF THE CORPORATION ........................................ 14
SECTION 3.01 Payment of Principal and Interest ................................... 14
SECTION 3.02 Offices for Notices and Payments, etc. .............................. 14
SECTION 3.03 Appointments to Fill Vacancies in Debenture Trustee's Office ........ 15
SECTION 3.04 Provision as to Paying Agent ........................................ 15
SECTION 3.05 Certificate to Debenture Trustee .................................... 16
SECTION 3.06 Compliance with Consolidation Provisions ............................ 16
SECTION 3.07 Limitation on Dividends ............................................. 16
SECTION 3.08 Covenants as to the Trust ........................................... 17
SECTION 3.09 Payment of Expenses ................................................. 17
SECTION 3.10 Payment Upon Resignation or Removal ................................. 18
ARTICLE IV LIST OF SECURITYHOLDERS AND REPORTS BY THE CORPORATION
AND THE DEBENTURE TRUSTEE .......................................................... 18
SECTION 4.01 List of Securityholders ............................................... 18
SECTION 4.02 Preservation and Disclosure of Lists .................................. 18
SECTION 4.03 Reports by the Corporation ............................................ 20
SECTION 4.04 Reports by the Debenture Trustee ...................................... 21
ARTICLE V REMEDIES OF THE DEBENTURE TRUSTEE AND SECURITYHOLDERS UPON EVENT OF DEFAULT....... 21
|
SECTION 5.01 Events of Default ................................................... 21
SECTION 5.02 Payment of Securities on Default; Suit Therefor ..................... 23
SECTION 5.03 Application of Moneys Collected by Debenture Trustee ................ 24
SECTION 5.04 Proceedings by Securityholders ...................................... 25
SECTION 5.05 Proceedings by Debenture Trustee .................................... 26
SECTION 5.06 Remedies Cumulative and Continuing .................................. 26
SECTION 5.07 Direction of Proceedings and Waiver of Defaults by Majority
of Securityholders .................................................. 26
SECTION 5.08 Notice of Defaults .................................................. 27
SECTION 5.09 Undertaking to Pay Costs ............................................ 28
ARTICLE VI CONCERNING THE DEBENTURE TRUSTEE................................................. 28
SECTION 6.01 Duties and Responsibilities of Debenture Trustee .................... 28
SECTION 6.02 Reliance on Documents, Opinions, etc. ............................... 29
SECTION 6.03 No Responsibility for Recitals, etc. ................................ 31
SECTION 6.04 Debenture Trustee, Authenticating Agent, Paying Agents,
Transfer Agents and Registrar May Own Securities .................... 31
SECTION 6.05 Moneys to be Held in Trust........................................... 31
SECTION 6.06 Compensation and Expenses of Debenture Trustee ...................... 31
SECTION 6.07 Officers' Certificate as Evidence ................................... 32
SECTION 6.08 Conflicting Interest of Debenture Trustee ........................... 32
SECTION 6.09 Eligibility of Debenture Trustee..................................... 33
SECTION 6.10 Resignation or Removal of Debenture Trustee ......................... 33
SECTION 6.11 Acceptance by Successor Debenture Trustee ........................... 34
SECTION 6.12 Succession by Merger, etc. .......................................... 35
SECTION 6.13 Limitation on Rights of Debenture Trustee as a Creditor ............. 35
SECTION 6.14 Authenticating Agents................................................ 35
ARTICLE VII CONCERNING THE SECURITYHOLDERS.................................................. 37
SECTION 7.01 Action by Securityholders ........................................... 37
SECTION 7.02 Proof of Execution by Securityholders ............................... 37
SECTION 7.03 Who Are Deemed Absolute Owners ...................................... 38
SECTION 7.04 Securities Owned by Corporation Deemed Not Outstanding .............. 38
SECTION 7.05 Revocation of Consents; Future Holders Bound ........................ 38
ARTICLE VIII MEETINGS OF SECURITYHOLDERS.................................................... 39
SECTION 8.01 Purposes of Meetings ................................................ 39
SECTION 8.02 Call of Meetings by Debenture Trustee ............................... 39
SECTION 8.03 Call of Meetings by Corporation or Securityholders .................. 39
SECTION 8.04 Qualifications for Voting ........................................... 40
SECTION 8.05 Regulations.......................................................... 40
SECTION 8.06 Voting............................................................... 40
ARTICLE IX AMENDMENTS....................................................................... 41
|
SECTION 9.01 Without Consent of Securityholders .................................. 41
SECTION 9.02 With Consent of Securityholders ..................................... 42
SECTION 9.03 Compliance with Trust Indenture Act; Effect of Supplemental
Indentures .......................................................... 43
SECTION 9.04 Notation on Securities .............................................. 43
SECTION 9.05 Evidence of Compliance of Supplemental Indenture to be
Furnished to Debenture Trustee ...................................... 44
ARTICLE X CONSOLIDATION, MERGER, SALE, CONVEYANCE, TRANSFER AND LEASE....................... 44
SECTION 10.01 Corporation May Consolidate, etc., on Certain Terms . ............... 44
SECTION 10.02 Successor Person to be Substituted for Corporation .................. 44
SECTION 10.03 Opinion of Counsel to be Given Debenture Trustee .................... 45
ARTICLE XI SATISFACTION AND DISCHARGE OF INDENTURE ......................................... 45
SECTION 11.01 Discharge of Indenture .............................................. 45
SECTION 11.02 Deposited Moneys and U.S. Government Obligations to be
Held in Trust by Debenture Trustee .................................. 46
SECTION 11.03 Paying Agent to Repay Moneys Held ................................... 46
SECTION 11.04 Return of Unclaimed Moneys .......................................... 46
SECTION 11.05 Defeasance Upon Deposit of Moneys or U.S. Government
Obligations ......................................................... 47
ARTICLE XII IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS................. 48
SECTION 12.01 Indenture and Securities Solely Corporate Obligations ................ 48
ARTICLE XIII MISCELLANEOUS PROVISIONS....................................................... 48
SECTION 13.01 Successors ........................................................... 48
SECTION 13.02 Official Acts by Successor Corporation ............................... 48
SECTION 13.03 Surrender of Corporation Powers ...................................... 49
SECTION 13.04 Addresses for Notices, etc ........................................... 49
SECTION 13.05 Governing Law ........................................................ 49
SECTION 13.06 Evidence of Compliance with Conditions Precedent ..................... 49
SECTION 13.07 Business Days ........................................................ 50
SECTION 13.08 Trust Indenture Act to Control ....................................... 50
SECTION 13.09 Table of Contents, Headings, etc. .................................... 50
SECTION 13.10 Execution in Counterparts ............................................ 50
SECTION 13.11 Separability ......................................................... 50
SECTION 13.13 Acknowledgment of Rights ............................................. 51
ARTICLE XIV PREPAYMENT OF SECURITIES ....................................................... 51
|
SECTION 14.01 Special Event Prepayment ............................................. 51
SECTION 14.02 Optional Prepayment by Corporation ................................... 51
SECTION 14.03 No Sinking Fund ...................................................... 52
SECTION 14.04 Notice of Prepayment; Selection of Securities ........................ 53
SECTION 14.05 Payment of Securities Called for Prepayment .......................... 53
ARTICLE XV SUBORDINATION OF SECURITIES ................................................... 54
SECTION 15.01 Agreement to Subordinate ............................................. 54
SECTION 15.02 Default on Senior Indebtedness ....................................... 54
SECTION 15.03 Liquidation; Dissolution; Bankruptcy ................................. 55
SECTION 15.04 Subrogation .......................................................... 56
SECTION 15.05 Debenture Trustee to Effectuate Subordination ........................ 57
SECTION 15.06 Notice by the Corporation ............................................ 57
SECTION 15.07 Rights of the Debenture Trustee; Holders of Senior Indebtedness ...... 58
SECTION 15.08 Subordination May Not Be Impaired .................................... 58
ARTICLE XVI EXTENSION OF INTEREST PAYMENT PERIOD ......................................... 59
SECTION 16.01 Extension of Interest Payment Period ................................. 59
SECTION 16.02 Notice of Extension .................................................. 60
|
TESTIMONIUM
SIGNATURES
EXHIBIT A
Tie Sheet of provisions of Trust Indenture Act of 1939 with Indenture dated as of March 285 2001 between Nara Bancorp, Inc. and Wilmington Trust Company, as Debenture Trustee
ACT SECTION INDENTURE SECTION
310(a)(1) .............................................................. 6.09
(a)(2) .............................................................. 6.09, 6.10, 6.11
310(a)(3) .............................................................. N/A
(a)(4) .............................................................. N/A
310(a)(5) .............................................................. 6.09, 6.10, 6.11
310(b) .............................................................. 6.08
310(c) .............................................................. N/A
311(a) .............................................................. 6.13
311(b) .............................................................. 6.13
311(c) .............................................................. N/A
312(a) .............................................................. 4.01(a) and 4.02(a)
312(b) .............................................................. 4.02(b)
312(c) .............................................................. 4.02(c)
313(a) .............................................................. 4.04(a)
313(b)(1) .............................................................. 4.04(a)
313(b)(2) .............................................................. 4.04(a)
313(c) .............................................................. 4.04(a)
313(d) .............................................................. 4.04(b)
314(a) .............................................................. 3.05, 4.03
314(b) .............................................................. N/A
314(c)(1) .............................................................. 6.07 and 13.06
314(c)(2) .............................................................. 6.07 and 13.06
314(c)(3) .............................................................. N/A
314(d) .............................................................. N/A
314(e) .............................................................. 6.07, 13.06
314(f) .............................................................. N/A
315(a)(c) and (d) .............................................................. 6.01
315(b) .............................................................. 5.08
315(e) .............................................................. 5.09
316(a)(1) .............................................................. 5.07
316(a)(2) .............................................................. N/A
316(a) last sentence .............................................................. 9.02
316(b) .............................................................. 5.07 and 9.02
316(c) .............................................................. 7.01 and 9.02
317(a) .............................................................. 5.05
317(b) .............................................................. 6.05
318 .............................................................. 13.08
|
THIS INDENTURE, dated as of March 28, 2001, between Nara Bancorp, Inc., a Delaware corporation (hereinafter called the "Corporation"), and Wilmington Trust Company, a Delaware banking corporation, as debenture trustee (hereinafter sometimes called the "Debenture Trustee").
WITNESSETH:
In consideration of the premises, and the purchase of the Securities (as defined below) by the holders thereof, the Corporation covenants and agrees with the Debenture Trustee for the equal and proportionate benefit of the respective holders from time to time of the Securities, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions.
The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture shall have the respective meanings specified in this Section
1.01. All other terms used in this Indenture which are defined in the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), or which are by
reference therein defined in the Securities Act of 1933, as amended (the
"Securities Act"), shall (except as herein otherwise expressly provided or
unless the context otherwise requires) have the meanings assigned to such terms
in said Trust Indenture Act and in said Securities Act as in force at the date
of this Indenture as originally executed. The following terms have the meanings
given to them in the Declaration (as defined below): (i) Delaware Trustee; (ii)
Property Trustee; (iii) Administrative Trustees; (iv) Capital Securities; (v)
Direct Action; (vi) Capital Securities Guarantee; (vii) Distributions; (viii)
Common Securities; and (ix) Common Securities Guarantee. All accounting terms
used herein and not expressly defined shall have the meanings assigned to such
terms in accordance with generally accepted accounting principles, and the term
"generally accepted accounting principles" means such accounting principles as
are generally accepted at the time of any computation. 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. Headings are used for convenience of reference only and do not
affect interpretation. The singular includes the plural and vice versa.
"Additional Sums" shall have the meaning set forth in Section 2.05(c).
"Affiliate" shall have the meaning given to that term in Rule 405 under the Securities Act or any successor rule thereunder.
"Allocable Amounts," when used with respect to any Senior Indebtedness, means all amounts due or to become due on such Senior Indebtedness less, if applicable, any amount which would have been paid to, and retained by, the holders of such Senior Indebtedness (whether as a result of the receipt of payments by the holders of such Senior Indebtedness from the Corporation 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 Indebtedness
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 Indebtedness or otherwise) but for the fact that such Senior Indebtedness is subordinate or junior in right of payment to (or subject to a requirement that amounts received on such Senior Indebtedness be paid over to obligees on) trade accounts payable or accrued liabilities arising in the ordinary course of business.
"Authenticating Agent" shall mean any agent or agents of the Debenture Trustee which at the time shall be appointed and acting pursuant to Section 6.14.
"Bankruptcy Law" shall mean Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.
"Board of Directors" shall mean either the Board of Directors of the Corporation or any duly authorized committee of that board.
"Board Resolution" shall mean a copy of a resolution certified by the Secretary or an Assistant Secretary of the Corporation to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Debenture Trustee.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in Wilmington, Delaware, Los Angeles, California or New York, New York are authorized or required by law or executive order to remain closed.
"Capital Securities" shall mean undivided beneficial interests in the assets of the Trust which are designated as "MMCapS(SM)" and rank pari passu with the Common Securities issued by the Trust; provided, however, that if an Event of Default has occurred and is continuing, no payments in respect of Distributions on, or payments upon liquidation, redemption or otherwise with respect to, the Common Securities shall be made until the holders of the Capital Securities shall be paid in full the Distributions and the liquidation, redemption and other payments to which they are entitled.
"Capital Securities Guarantee" shall mean any guarantee agreement that the Corporation may enter into with Wilmington Trust Company or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities.
"Commission" shall mean 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 Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.
"Common Securities" shall mean undivided beneficial interests in the assets of the Trust which are designated as "Common Securities" and rank pari passu with Capital Securities issued by the Trust; provided, however, that if an Event of Default has occurred and is continuing, no payments in respect of Distributions on, or payments upon liquidation, redemption or otherwise with respect to, the Common Securities shall be made until the holders of the Capital Securities shall be paid in full the Distributions and the liquidation, redemption and other payments to which they are then entitled.
"Common Securities Guarantee" shall mean any guarantee that the Corporation may enter into that operates directly or indirectly for the benefit of holders of Common Securities.
"Common Stock" shall mean the Common Stock, $0.001 par value per share, of the Corporation or any other class of stock resulting from changes or reclassifications of such Common Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value.
"Compounded Interest" shall have the meaning set forth in Section 16.01.
"Corporation" shall mean the person identified as "corporation" in the preamble to this Indenture and, subject to the provisions of Article X, shall also include its successors and assigns.
"Corporation Request" or "Corporation Order" shall mean a written request or order signed in the name of the Corporation by an Officer and delivered to the Debenture Trustee.
"Coupon Rate" shall have the meaning set forth in Section 2.05(a).
"Custodian" shall mean any receiver, trustee, assignee, liquidator, or similar official under any Bankruptcy Law.
"Debenture Trustee" shall mean the Person identified as "Debenture Trustee" in the preamble to this Indenture and, subject to the provisions of Article VI hereof, shall also include its successors and assigns.
"Declaration" shall mean the Amended and Restated Declaration of Trust of the Trust, dated as of March 28, 2001, by and among the Trustees (as defined therein), the Corporation, as sponsor, and the holders from time to time of undivided beneficial interest in the assets of the Trust, as amended from time to time.
"Default" shall mean any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.
"Defaulted Interest" shall have the meaning set forth in Section 2.10.
"Deferred Interest" shall have the meaning set forth in Section 16.01.
"Dissolution Event" shall mean any event resulting in the dissolution of the Trust pursuant to the Declaration, and the distribution of the Securities held by the Property Trustee to the holders of the Trust Securities issued by the Trust pro rata in accordance with the Declaration.
"Event of Default" shall mean any event specified in Section 5.01, continued for the period of time, if any, and after the giving of the notice, if any, therein designated.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 16.01.
"Federal Reserve" shall mean the Board of Governors of the Federal Reserve System.
"Indebtedness" shall mean, whether recourse as to all or a portion of the assets of the Corporation and whether or not contingent, (i) every obligation of the Corporation for money borrowed; (ii) every obligation of the Corporation 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 the Corporation with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of the Corporation; (iv) every obligation of the Corporation 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 the Corporation; (vi) all indebtedness of the Corporation, whether incurred on or prior to the date of this Indenture or hereafter 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, the Corporation has guaranteed or is responsible or liable for directly or indirectly, as obligor or otherwise.
"Indebtedness Ranking on a Parity with the Securities" shall mean (i) Indebtedness, whether outstanding on the date of execution of this Indenture or hereafter created, assumed or incurred, to the extent such Indebtedness by its terms ranks pari passu with and not junior to or prior or senior to the Securities in the right of payment upon the happening of the dissolution, winding-up, liquidation or reorganization of the Corporation, and (ii) all other debt securities, and guarantees in respect of those debt securities, issued to any trust other than the Trust, or a trustee of such trust, partnership or other entity affiliated with the Corporation, that is a financing vehicle of the Corporation (a "financing entity") in connection with the issuance by such financing entity of equity securities or other securities guaranteed by the Corporation pursuant to an instrument that ranks pari passu with or junior in right of payment to the Capital Securities Guarantee. The securing of any Indebtedness otherwise constituting Indebtedness Ranking on a Parity with the Securities shall not be deemed to prevent such Indebtedness from constituting Indebtedness Ranking on a Parity with the Securities with respect to any assets of the Corporation not securing such Indebtedness.
"Indebtedness Ranking Junior to the Securities" shall mean any Indebtedness, whether outstanding on the date of execution of this Indenture or hereafter created, assumed or incurred, to the extent such Indebtedness by its terms ranks junior to and not pari passu with or prior or senior to the Securities in right of payment upon the happening of the dissolution or winding-up or liquidation or reorganization of the Corporation. The securing of any Indebtedness otherwise constituting Indebtedness Ranking Junior to the Securities shall not be deemed to prevent such Indebtedness from constituting Indebtedness Ranking Junior to the Securities with respect to any assets of the Corporation not securing such Indebtedness.
"Indenture" shall mean this instrument as originally executed or, if amended as herein provided, as so amended.
"Initial Optional Prepayment Date" shall mean June 8, 2011.
"Interest Payment Date" shall have the meaning set forth in Section 2.05(a).
"Investment Company" shall mean an investment company as defined in the Investment Company Act.
"Investment Company Act" shall mean the Investment Company Act of 1940, as amended from time to time, or any successor legislation.
"Investment Company Event" shall mean the receipt by the Corporation and the Trust of a written opinion of independent securities counsel experienced in such matters to the effect that as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any rules, guidelines or policies of any applicable regulatory authority for the Corporation or (b) 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 original issuance of the Securities, the Trust is, or within 90 days of the date of such opinion will be, considered an investment company that is required to be registered under the Investment Company Act.
"Like Amount" shall mean (i) with respect to a redemption of the Trust Securities, Trust Securities having a liquidation amount equal to the principal amount of Securities to be paid with their terms and (ii) with respect to a distribution of Securities upon the liquidation of the Trust, Securities having a principal amount equal to the liquidation amount of the Trust Securities of the holder to whom Securities are distributed, pursuant to Section 2.06(c).
"Maturity Date" shall mean June 8, 2031.
"Officers" shall mean any of the Chairman, the Chief Executive Officer, the President, an Executive or Senior Vice President, a Vice President, the Chief Financial Officer, the Secretary or an Assistant Secretary of the Corporation.
"Officers' Certificate" shall mean a certificate signed by two Officers and delivered to the Debenture Trustee.
"Opinion of Counsel" shall mean a written opinion of counsel, who may be an employee of the Corporation, and who shall be reasonably acceptable to the Debenture Trustee.
"Optional Prepayment Price" shall have the meaning set forth in Section 14.02(a).
"Other Debentures" shall mean all junior subordinated debentures other than the Securities issued by the Corporation from time to time and sold to trusts other than the Trust to be established by the Corporation (if any), in each case similar to the Trust.
"Other Guarantees" shall mean all guarantees other than the Capital Securities Guarantee and the Common Securities Guarantee issued by the Corporation with respect to preferred
beneficial interests (if any) issued to trusts other than the Trust to be established by the Corporation (if any), in each case similar to the Trust.
"Outstanding" when used with reference to the Securities, shall mean, subject to the provisions of Section 7.04, as of any particular time, all Securities authenticated and delivered by the Debenture Trustee or the Authenticating Agent under this Indenture, except
(a) Securities theretofore canceled by the Debenture Trustee or the Authenticating Agent or delivered to the Debenture Trustee for cancellation;
(b) Securities, or portions thereof, for the payment or prepayment of which moneys in the necessary amount shall have been deposited in trust with the Debenture Trustee or with any paying agent (other than the Corporation) or shall have been set aside and segregated in trust by the Corporation (if the Corporation shall act as its own paying agent); provided that, if such Securities, or portions thereof, are to be prepaid prior to maturity thereof, notice of such prepayment shall have been given as set forth in Article XIV or provision satisfactory to the Debenture Trustee shall have been made for giving such notice;
(c) Securities in lieu of or in substitution for which other Securities
shall have been authenticated and delivered pursuant to the terms of
Section 2.07 unless proof satisfactory to the Corporation and the
Debenture Trustee is presented that any such Securities are held by
bona fide holders in due course and;
(d) Securities held by the Corporation, the Trust or any Affiliate thereof.
"Person" shall mean any individual, corporation, estate, partnership, joint venture, national banking association, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof.
"Placement Agent Agreement" shall mean the Placement Agent Agreement, dated March 219 2001 by and among the Corporation, the Trust and the Placement Agent.
"Placement Agent" shall mean Sandler O'Neill & Partners, L.P.
"Predecessor Security" of any particular Security shall mean 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 2.07 in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Security.
"Prepayment Price" shall mean the Special Event Prepayment Price or Optional Prepayment Price, as the context requires.
"Principal Office of the Debenture Trustee," or other similar term, shall mean the office of the Debenture Trustee, at which at any particular time its corporate trust business shall be administered.
"Regulatory Capital Event" shall mean the receipt by the Corporation and the Trust of a written opinion of independent bank regulatory counsel experienced in such matters to the effect that as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any rules, guidelines or policies of an applicable regulatory authority for the Corporation or (b) 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 original issuance of the Securities, the Capital Securities do not constitute, or within 90 days of the date of such opinion will not constitute, Tier 1 Capital (or its then equivalent) if the Corporation is a bank holding company or if the Corporation is a savings and loan holding company and is then subject to similar capital adequacy requirements; provided, however, that the distribution of the Securities in connection with the liquidation of the Trust by the Corporation shall not in and of itself constitute a Regulatory Capital Event.
"Responsible Officer" shall mean any officer of the Debenture Trustee's Corporate Trust Administration department with direct responsibility for the administration of the Indenture and also means, with respect to a particular corporate trust matter, any other officer of the Debenture Trustee to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject.
"Restricted Security" shall mean Securities that bear or are required to bear the legends relating to transfer restrictions under the Securities Act set forth in Exhibit A hereto.
"Rule 144A" shall mean Rule 144A under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.
"Securities" shall mean the Corporation's 10.18% Junior Subordinated Deferrable Interest Debentures due June 8, 2031, as authenticated and issued under this Indenture.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securityholder," "holder of Securities," or other similar terms, shall mean any Person in whose name at the time a particular Security is registered in the Security Register kept by the Corporation or the Debenture Trustee for that purpose in accordance with the terms of this Indenture.
"Security Register" shall mean (i) prior to a Dissolution Event, the list of holders provided to the Debenture Trustee pursuant to Section 4.01, and (ii) following a Dissolution Event, any security register maintained by a security registrar for the Securities appointed by the Corporation following the execution of a supplemental indenture providing for transfer procedures as provided for in Section 2.06(a).
"Senior Indebtedness" shall mean 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 Corporation whether or not such claim for post petition interest is allowed in such proceedings), on all Indebtedness, whether outstanding on the date of execution of this Indenture, or hereafter created, assumed or incurred, except Indebtedness Ranking on a
Parity with the Securities or Indebtedness Ranking Junior to the Securities, and any deferrals, renewals or extensions of such Senior Indebtedness.
"Special Event" shall mean an Investment Company Event, a Regulatory Capital Event or a Tax Event, as the context requires.
"Special Event Prepayment Price" shall mean, with respect to any prepayment of the Securities following a Special Event, an amount in cash equal to (i) 106.09% of the principal amount of the Securities to be prepaid if the Special Event occurs prior to June 8, 2011 and (ii) if the Special Event occurs on or after June 8, 2011, the amount of the Optional Prepayment Price (calculated as if the Corporation had prepaid such Securities on such date), plus, in the case of (i) and (ii), any accrued and unpaid interest thereon (including Compounded Interest and Additional Sums, if any) to the date of such prepayment.
"Subscription Agreement" shall mean the Capital Securities Subscription Agreement, dated March 21, 2001, by and among the Corporation, the Trust and the Purchaser named therein.
"Subsidiary" shall mean with respect to any Person, (i) any corporation at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture, limited liability company or similar entity, at least a majority of whose outstanding partnership, membership or similar interests shall at the time be owned by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, "voting stock" means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.
"Tax Event" shall mean the receipt by the Trust and the Corporation of a written opinion of independent tax 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 original issuance of the Securities, 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) the interest payable by the Corporation on the Securities is not, or within 90 days of the date of such opinion will not be, deductible by the Corporation, 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.
"Trust" shall mean Nara Bancorp Capital Trust I, a Delaware business trust created for the purpose of issuing its undivided beneficial interests in connection with the issuance of Securities under this Indenture.
"Trust Securities" shall mean, collectively, the Capital Securities and the Common Securities.
"U.S. Government Obligations" shall mean securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case under clauses (i) or (ii), are not callable or prepayable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction with respect to the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt.
SECTION 1.02 Business Day Certificate.
On the date of execution and delivery of this Indenture (with respect to the remainder of calendar year 2001) and within 15 days prior to the end of each calendar year while this Indenture remains in effect (with respect to succeeding calendar years), the Corporation shall deliver to the Debenture Trustee an Officers' Certificate specifying the days on which banking institutions or trust companies in Wilmington, Delaware, Los Angeles, California and New York, New York are then authorized or obligated by law or executive order to remain closed.
ARTICLE II
SECURITIES
SECTION 2.01 Forms Generally.
The Securities and the Debenture Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, the terms of which are incorporated in and made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Corporation is subject or usage. Each Security shall be dated the date of its authentication.
SECTION 2.02 Execution and Authentication.
An Officer shall sign the Securities for the Corporation by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Security is authenticated, the Security shall nevertheless be valid.
A Security shall not be valid until authenticated by the manual signature of the Debenture Trustee. The signature of the Debenture Trustee shall be conclusive evidence that the Security has been authenticated under this Indenture.
The Debenture Trustee shall, upon a Corporation Order, authenticate for original issue up to, and the aggregate principal amount of Securities outstanding at any time may not exceed, $10,400,000 aggregate principal amount of the Securities, except as provided in Sections 2.06, 2.07, 2.08 and 14.05.
SECTION 2.03 Form and Payment.
The Securities shall be issued in fully registered certificated form without interest coupons. Principal of and premium, if any, and interest on the Securities will be payable in immediately available funds, the transfer of such Securities will be registerable and such Securities will be exchangeable for Securities bearing identical terms and provisions, at the office or agency of the Corporation maintained for such purpose under Section 3.02; provided, however, that payments of interest shall be made by transfer to an account maintained by the Person entitled thereto unless proper transfer instructions have not been received in writing by the relevant record date, in which case such payments shall be made by check mailed to the holder at such address as shall appear in the Security Register. Notwithstanding the foregoing, so long as the holder of any Securities is the Property Trustee, the payment of the principal of and premium, if any, and interest (including Compounded Interest if any) and Additional Sums, if any, on such Securities held by the Property Trustee will be made at such place and to such account as may be designated by the Property Trustee.
SECTION 2.04 Legends.
Except as otherwise determined by the Corporation in accordance with applicable law, each Security shall bear the applicable legends relating to restrictions on transfer pursuant to the Securities Act and any other applicable securities laws in substantially the form set forth on Exhibit A hereto.
SECTION 2.05 Interest.
(a) Each Security will bear interest, at the rate of 10.18% per annum (the "Coupon Rate"), from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from March 28, 2001, until the principal thereof becomes due and payable, and at the Coupon Rate on any overdue principal (and premium, if any) and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest, compounded semi-annually, payable (subject to the provisions of Article XVI) semi-annually in arrears on June 8th and December 8th of each year, commencing June 8, 2001 (each, an "Interest Payment Date"), to the Person in whose name such Security or any predecessor Security is registered at the close of business on the regular record date for such interest installment, which shall be the 15th day of the month immediately preceding the month in which the relevant Interest Payment Date falls.
(b) The amount of interest payable on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months.
(c) During such time as the Property Trustee is the holder of any Securities, the Corporation shall pay any additional amounts on the Securities as may be necessary in order that the amount of Distributions then due and payable by the Trust on the outstanding Trust Securities shall not be reduced as a result of any additional taxes, duties and other governmental charges to which the Trust has become subject as a result of a Tax Event ("Additional Sums").
SECTION 2.06 Transfer and Exchange.
(a) Transfer Restrictions.
(i) The Securities may not be transferred except in compliance with the legend contained in Exhibit A unless otherwise determined by the Corporation in accordance with applicable law. Upon any distribution of the Securities following a Dissolution Event, the Corporation and the Debenture Trustee shall enter into a supplemental indenture pursuant to Section 9.01 to provide for the transfer restrictions and procedures with respect to the Securities substantially similar to those contained in the Declaration to the extent applicable in the circumstances existing at such time.
(ii) The Securities will be issued and may be transferred only in blocks having an aggregate principal amount of not less than $100,000 and in multiples of $1,000 in excess thereof. Any attempted transfer of the Securities in a block having an aggregate principal amount of less than $100,000 shall be deemed to be voided and of no legal effect whatsoever. Any such purported transferee shall be deemed not to be a holder of such Securities for any purpose, including, but not limited to the receipt of payments on such Securities, and such purported transferee shall be deemed to have no interest whatsoever in such Securities.
(b) General Provisions Relating to Transfers and Exchanges. To permit registrations of transfers and exchanges, the Corporation shall execute and the Debenture Trustee shall authenticate Securities at the request of the security registrar. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Corporation, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.
No service charge shall be made to a holder for any registration of transfer or exchange, but the Corporation may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith.
The Corporation shall not be required to: (i) issue, register the transfer of or exchange Securities during a period beginning at the opening of business 15 days before the day of mailing of a notice of prepayment or any notice of selection of Securities for prepayment under Article XIV hereof and ending at the close of business on the day of such mailing; or (ii) register the transfer of or exchange any Security so selected for prepayment in whole or in part, except the nonprepaid portion of any Security being prepaid in part.
Prior to due presentment for the registration of a transfer of any Security, the Debenture Trustee, the Corporation and any agent of the Debenture Trustee or the Corporation may deem and treat the Person in whose name any Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and premium, if any, and interest
on such Securities, and none of the Debenture Trustee, the Corporation or any agents of the Debenture Trustee or the Corporation shall be affected by notice to the contrary.
(c) Exchanges in Connection With a Dissolution Event. In connection with a Dissolution Event, the Securities shall be presented to the Debenture Trustee by the Property Trustee and any Capital Security certificates which represent Capital Securities will be deemed to represent a beneficial interest in Securities having an aggregate principal amount equal to the aggregate liquidation amount of the Capital Securities until such Capital Security certificates are presented to the security registrar for the Securities for transfer or reissuance, at which time such Capital Security certificates will be canceled, and a Security in a Like Amount, registered in the name of the holder of the Capital Security certificate or the transferee of the holder of such Capital Security certificate, as the case may be, will be executed by the Corporation and delivered to the Debenture Trustee for authentication and delivery in accordance with this Indenture; and upon the issuance of such Securities to the holders, or transferee of the holder, of such Capital Security certificate, Securities with an equivalent aggregate principal amount that were presented by the Property Trustee to the Debenture Trustee will be canceled.
SECTION 2.02 Replacement Securities.
If any mutilated Security is surrendered to the Debenture Trustee, or the Corporation and the Debenture Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, the Corporation shall issue and the Debenture Trustee shall authenticate a replacement Security if the Debenture Trustee's requirements for replacements of Securities are met. An indemnity bond must be supplied by the holder that is sufficient in the judgment of the Debenture Trustee and the Corporation to protect the Corporation, the Debenture Trustee, any agent thereof or any Authenticating Agent from any loss that any of them may suffer if a Security is replaced. The Corporation or the Debenture Trustee may charge for its expenses in replacing a Security.
Every replacement Security is an obligation of the Corporation and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Securities duly issued hereunder.
SECTION 2.08 Temporary Securities.
Pending the preparation of definitive Securities, the Corporation may execute, and upon Corporation Order the Debenture Trustee shall authenticate and make available for delivery, temporary Securities that are printed, lithographed, typewritten, mimeographed or otherwise reproduced, in any authorized denomination, substantially of the tenor of the definitive Securities 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 conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Corporation shall cause definitive Securities to be prepared without unreasonable delay. The definitive Securities shall be printed, lithographed or engraved, or provided by any combination thereof, or in any other manner permitted by the rules and regulations of any applicable securities exchange, all as determined by the Officers
executing such definitive Securities. 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 maintained by the Corporation for such purpose pursuant to Section 3.02 hereof, without charge to the holder thereof. Upon surrender for cancellation of any one or more temporary Securities, the Corporation shall execute, and the Debenture Trustee shall authenticate and make available for delivery, in exchange therefor the same aggregate principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities.
SECTION 2.09 Cancellation.
The Corporation at any time may deliver Securities to the Debenture Trustee for cancellation. The Debenture Trustee and no one else shall cancel all Securities surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall return such canceled Securities to the Corporation. The Corporation may not issue new Securities to replace Securities that have been prepaid or paid or that have been delivered to the Debenture Trustee for cancellation.
SECTION 2.10 Defaulted Interest.
Any interest on any Security that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the holder on the relevant regular record date by virtue of having been such holder; and such Defaulted Interest shall be paid by the Corporation, at its election, as provided in clause (a) or clause (b) below:
(a) The Corporation may make payment of any Defaulted Interest on Securities to the Persons in whose names such Securities (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 Corporation shall notify the Debenture Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Security and the date of the proposed payment, and at the same time the Corporation shall deposit with the Debenture 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 Debenture 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 Debenture Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Debenture Trustee of the notice of the proposed payment. The Debenture Trustee shall promptly notify the Corporation of such special record date and, in the name and at the expense of the Corporation, 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 Securityholder at his or her address as it appears in the Security Register, not less than 10 days prior to 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 such Securities (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable pursuant to the following clause (b).
(b) The Corporation may make payment of any Defaulted Interest on any Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Corporation to the Debenture Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Debenture Trustee.
SECTION 2.11 CUSIP Numbers.
The Corporation in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Debenture Trustee shall use "CUSIP" numbers in notices of prepayment as a convenience to Securityholders; provided, however, 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 prepayment and that reliance may be placed only on the other identification numbers printed on the Securities, and any such prepayment shall not be affected by any defect in or omission of such numbers. The Corporation will promptly notify the Debenture Trustee of any change in the CUSIP numbers.
ARTICLE III
PARTICULAR COVENANTS OF THE CORPORATION
SECTION 3.01 Payment of Principal and Interest.
The Corporation covenants and agrees for the benefit of the holders of the
Securities that it will duly and punctually pay or cause to be paid the
principal of and premium, if any, and interest on the Securities at the place,
at the respective times and in the manner provided herein. The Corporation
further covenants to pay any and all amounts due in respect of the Securities,
including, without limitation, Additional Sums, as may be required pursuant to
Section 2.05(c) and Compounded Interest, as may be required pursuant to Section
16.01.
SECTION 3.02 Offices for Notices and Payments, etc.
So long as any of the Securities remain outstanding, the Corporation will maintain in Wilmington, Delaware an office or agency where the Securities may be presented for payment, an office or agency where the Securities may be presented for registration of transfer and for exchange as in this Indenture provided and an office or agency where notices and demands to or upon the Corporation in respect of the Securities or this Indenture may be served. The Corporation will give to the Debenture Trustee written notice of the location of any such office or agency and of any change of location thereof. Until otherwise designated from time to time by the Corporation in a notice to the Debenture Trustee, any such office or agency for all of the above purposes shall be the Principal Office of the Debenture Trustee. In case the Corporation shall fail to maintain any such office or agency or shall fail to give such notice of the location or
of any change in the location thereof, presentations and demands may be made and notices may be served at the Principal Office of the Debenture Trustee.
In addition to any such office or agency, the Corporation may from time to time designate one or more offices or agencies outside Wilmington, Delaware where the Securities may be presented for payment, for registration of transfer and for exchange and where notices and demands to or upon the Corporation in respect of the Securities or this Indenture may be served in the manner provided in this Indenture, and the Corporation may from time to time rescind such designation, as the Corporation may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Corporation of its obligation to maintain any such office or agency in Wilmington, Delaware for the purposes above mentioned. The Corporation will give to the Debenture Trustee prompt written notice of any such designation or rescission thereof.
SECTION 3.03 Appointments to Fill Vacancies in Debenture Trustee's Office.
The Corporation, whenever necessary to avoid or fill a vacancy in the office of Debenture Trustee, will appoint, in the manner provided in Section 6.10, a Debenture Trustee, so that there shall at all times be a Debenture Trustee hereunder.
SECTION 3.04 Provision as to Paying Agent.
(a) If the Corporation shall appoint a paying agent other than the Debenture Trustee with respect to the Securities, it will cause such paying agent to execute and deliver to the Debenture Trustee an instrument in which such agent shall agree with the Debenture Trustee, subject to the provisions of this Section 3.04,
(1) that it will hold all sums held by it as such agent for the payment of the principal of and premium, if any, or interest on the Securities (whether such sums have been paid to it by the Corporation or by any other obligor on the Securities) in trust for the benefit of the holders of the Securities; and
(2) that it will give the Debenture Trustee notice of any failure by the Corporation (or by any other obligor on the Securities) to make any payment of the principal of or premium, if any, or interest (including Additional Sums and Compounded Interest, if any) on the Securities when the same shall be due and payable.
(b) If the Corporation shall act as its own paying agent, it will, on or before each due date of the principal of and premium, if any, or interest on the Securities, set aside, segregate and hold in trust for the benefit of the holders of the Securities a sum sufficient to pay such principal, premium or interest so becoming due and will notify the Debenture Trustee of any failure to take such action and of any failure by the Corporation (or by any other obligor under the Securities) to make any payment of the principal of and premium, if any, or interest on the Securities when the same shall become due and payable.
(c) Anything in this Section 3.04 to the contrary notwithstanding, the Corporation may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Securities hereunder, or for any other reason, pay or cause to be paid to the Debenture Trustee all sums payable with respect to the Securities, such sums to be held by the Debenture Trustee upon the trusts herein contained.
(d) Anything in this Section 3.04 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.04 is subject to Sections 11.03 and 11.04.
SECTION 3.05 Certificate to Debenture Trustee.
The Corporation will deliver to the Debenture Trustee on or before 120 days after the end of each fiscal year of the Corporation, commencing with the first fiscal year ending after the date hereof, so long as Securities are outstanding hereunder, an Officers' Certificate, one of the signers of which shall be the principal executive, principal financial or principal accounting officer of the Corporation, stating that in the course of the performance by the signers of their duties as officers of the Corporation they would normally have knowledge of any Default by the Corporation in the performance of any covenants contained herein, stating whether or not they have knowledge of any such Default and, if so, specifying each such Default of which the signers have knowledge, the nature thereof and the action, if any, the Corporation intends to undertake as a result of such Default.
SECTION 3.06 Compliance with Consolidation Provisions.
The Corporation will not, while any of the Securities remain outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article X hereof are complied with.
SECTION 3.07 Limitation on Dividends.
The Corporation will not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Corporation's capital 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 Corporation (including Other Debentures) that rank pari passu with or junior in right of payment to the Securities or (iii) make any guarantee payments with respect to any guarantee by the Corporation of the debt securities of any Subsidiary of the Corporation (including Other Guarantees) if such guarantee ranks pari passu with or junior in right of payment to the Securities (other than (a) dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock, (b) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) payments under the Capital Securities Guarantee, (d) as a result of a reclassification of the Corporation's capital stock or the exchange or conversion of one class or series of the Corporation's capital stock for another class or series of the Corporation's capital stock, (e) the purchase of fractional interests in shares of the Corporation's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged and (f) purchases of Common Stock related to the issuance of Common
Stock or rights under any of the Corporation's benefit or compensation plans for its directors, officers or employees or any of the Corporation's dividend reinvestment plans), if at such time (1) there shall have occurred any event of which the Corporation has actual knowledge that (a) is a Default or an Event of Default and (b) in respect of which the Corporation shall not have taken reasonable steps to cure, (2) such Securities are held by the Property Trustee, and the Corporation shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee or (3) the Corporation shall have given notice of its election to exercise its right to commence an Extended Interest Payment Period and shall not have rescinded such notice, and such Extended Interest Payment Period or any extension thereof shall have commenced and be continuing.
SECTION 3.08 Covenants as to the Trust
In the event Securities are issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust, for so long as such Trust Securities remain outstanding, the Corporation (i) will maintain 100% direct or indirect ownership of the Common Securities of the Trust; provided, however, that any successor of the Corporation, permitted pursuant to Article X, may succeed to the Corporation's ownership of such Common Securities, (ii) will use commercially reasonable efforts to cause the Trust (a) to remain a business trust, except in connection with a distribution of Securities to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities of the Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, and (b) to otherwise continue to be classified as a grantor trust and not an association taxable as a corporation for United States federal income tax purposes, (iii) will use commercially reasonable efforts to cause each holder of the Trust Securities to be treated as owning an undivided beneficial interest in the Securities and (iv) will not cause, as sponsor of the Trust, or permit, as holder of the Common Securities, the dissolution, winding-up or liquidation of the Trust, except as provided in the Declaration.
SECTION 3.09 Payment of Expenses.
In connection with the offering, sale and issuance of the Securities to the Trust and in connection with the sale of the Trust Securities by the Trust, the Corporation, in its capacity as borrower with respect to the Securities, shall:
(a) pay all costs and expenses relating to the offering, sale and issuance of the Securities, including compensation of the Debenture Trustee in accordance with the provisions of Section 6.06;
(b) pay all costs and expenses of the Trust, including, but not limited to, costs and expenses relating to the organization of the Trust, the sale and issuance of the Trust Securities (including commissions payable to the Placement Agent pursuant to the Placement Agent Agreement in connection therewith), the fees and expenses of the Property Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment,
paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of assets of the Trust;
(c) be primarily and fully liable for any indemnification obligations arising with respect to the Declaration;
(d) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust; and
(e) pay all other fees, expenses, debts and obligations (other than in respect of the Trust Securities) related to the Trust.
SECTION 3.10 Payment Upon Resignation or Removal.
Upon termination of this Indenture or the removal or resignation of the Debenture Trustee, unless otherwise stated, the Corporation shall pay to the Debenture Trustee all amounts accrued and owing to the Debenture Trustee to the date of such termination, removal or resignation. Upon termination of the Declaration or the removal or resignation of the Delaware Trustee or the Property Trustee, as the case may be, pursuant to Section 5.7 of the Declaration, the Corporation shall pay to the Delaware Trustee or the Property Trustee, as the case may be, all amounts accrued and owing to such trustee(s) to the date of such termination, removal or resignation.
ARTICLE IV
LIST OF SECURITYHOLDERS AND REPORTS BY THE
CORPORATION AND THE DEBENTURE TRUSTEE
SECTION 4.01 List of Securityholders.
The Corporation covenants and agrees that it will furnish or cause to be furnished to the Debenture Trustee:
(a) on a semi-annual basis on each regular record date for the Securities, a list, in such form as the Debenture Trustee may reasonably require, of the names and addresses of the Securityholders as of such record date; and
(b) at such other times as the Debenture Trustee may request in writing, within 30 days after the receipt by the Corporation, 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,
except that, no such lists need be furnished so long as the Debenture Trustee is in possession thereof by reason of its acting as security registrar for the Securities.
SECTION 4.02 Preservation and Disclosure of Lists.
(a) The Debenture Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of the Securities (1) contained in the most recent list furnished to it as provided in Section 4.01 or (2) received by it in the capacity of security registrar (if so acting) hereunder. The Debenture Trustee may destroy any list furnished to it as provided in Section 4.01 upon receipt of a new list so furnished.
(b) In case three or more holders of Securities (hereinafter referred to as "applicants") apply in writing to the Debenture Trustee and furnish to the Debenture Trustee reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of Securities or with holders of all Securities with respect to their rights under this Indenture and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Debenture Trustee shall, within five Business Days after the receipt of such application, at its election, either:
(1) afford such applicants access to the information preserved at the time by the Debenture Trustee in accordance with the provisions of subsection (a) of this Section 4.02, or
(2) inform such applicants as to the approximate number of holders of all Securities whose names and addresses appear in the information preserved at the time by the Debenture Trustee in accordance with the provisions of subsection (a) of this Section 4.02, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application.
If the Debenture Trustee shall elect not to afford such applicants access to such information, the Debenture Trustee shall, upon the written request of such applicants, mail to each Securityholder whose name and address appear in the information preserved at the time by the Debenture Trustee in accordance with the provisions of subsection (a) of this Section 4.02 a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the Debenture Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five Business Days after such tender, the Debenture Trustee shall mail to such applicants and, if required by law, file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Debenture Trustee, such mailing would be contrary to the best interests of the holders of Securities or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Debenture Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Debenture Trustee shall be relieved of any obligation or duty to such applicants respecting their application.
(c) Each and every holder of Securities, by receiving and holding the same, agrees with the Corporation and the Debenture Trustee that neither the Corporation nor the Debenture Trustee nor any paying agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Securities in accordance with the provisions of subsection (b) of this Section 4.02, regardless of the source from which such information was derived, and that the Debenture Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b).
SECTION 4.03 Reports by the Corporation.
(a) The Corporation covenants and agrees to file with the Debenture Trustee, within 15 days after the date on which the Corporation is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as said Commission may from time to time by rules and regulations prescribe) which the Corporation may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Corporation is not required to file information, documents or reports pursuant to either of such sections, then to provide to the Debenture Trustee, such of the supplementary and periodic information, documents and reports which would have been required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange or copies of the call reports that the Corporation is required to file with its primary federal banking regulator. The Corporation also covenants and agrees to comply with the provisions of Section 314(a) of the Trust Indenture Act.
(b) The Corporation covenants and agrees to file with the Debenture Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by said Commission, such additional information, documents and reports with respect to compliance by the Corporation with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations.
(c) The Corporation covenants and agrees to transmit by mail to MMCapS(SM) Funding I, Ltd. and to all holders of Securities, as the names and addresses of such holders appear upon the Security Register, within 30 days after the filing thereof with the Debenture Trustee, such summaries of any information, documents and reports required to be filed by the Corporation pursuant to subsections (a) and (b) of this Section 4.03 as may be required by rules and regulations prescribed from time to time by the Commission.
(d) Delivery of such reports, information and documents to the Debenture Trustee is for informational purposes only and the Debenture Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Corporation's compliance with any of its covenants hereunder (as to which the Debenture Trustee is entitled to rely exclusively on Officers' Certificates).
(e) So long as is required for an offer or sale of the Securities to
qualify for an exemption under Rule 144A under the Securities Act, the
Corporation shall, upon request, provide the information required by clause
(d)(4) thereunder to each Securityholder and to each beneficial owner and
prospective purchaser of Securities identified by each Securityholder of
Restricted Securities, unless such information is furnished to the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
SECTION 4.04 Reports by the Debenture Trustee.
(a) The Debenture Trustee shall transmit to Securityholders such reports concerning the Debenture Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the Debenture Trustee shall, within 60 days after the date hereof, and no later than the anniversary date hereof in each succeeding year, deliver to Securityholders a brief report, dated as of each such date which complies with the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such transmission to Securityholders, be filed by the Debenture Trustee with each stock exchange, if any, upon which the Securities are listed, with the Commission and with the Corporation. The Corporation will promptly notify the Debenture Trustee when the Securities are listed on any stock exchange.
ARTICLE V
REMEDIES OF THE DEBENTURE TRUSTEE AND
SECURITYHOLDERS UPON EVENT OF DEFAULT
SECTION 5.01 Events of Default.
One or more of the following events of default shall constitute an Event of Default hereunder (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) default in the payment of any interest (including Compounded Interest and Additional Sums, if any) on the Securities or any Other Debentures (about which a Responsible Officer of the Debenture Trustee has actual knowledge) when due, and continuance of such default for a period of 30 days; provided, however, that a valid extension of an interest payment period by the Corporation in accordance with the terms hereof or thereof shall not constitute a default in the payment of interest for this purpose; or
(b) default in the payment of any principal of (or premium, if any, on) the Securities or any Other Debentures (about which a Responsible Officer of the Debenture Trustee has actual knowledge) when due, whether at maturity, upon prepayment, by declaration of acceleration of maturity or otherwise; or
(c) default in the performance, or breach, of any covenant or warranty of the Corporation in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section 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 Corporation by the
Debenture Trustee or to the Corporation and the Debenture Trustee by the holders of at least 25% in aggregate principal amount of the outstanding 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
(d) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Corporation in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Corporation or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or
(e) the Corporation shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due.
If an Event of Default with respect to Securities at the time outstanding occurs and is continuing, then in every such case the Debenture Trustee or the holders of not less than 25% in aggregate principal amount of the Securities then outstanding may declare the principal amount of all Securities to be due and payable immediately, by a notice in writing to the Corporation (and to the Debenture Trustee if given by the holders of the outstanding Securities), and upon any such declaration the same shall become immediately due and payable.
The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Securities shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, (i) the Corporation shall pay or shall deposit with the Debenture Trustee a sum sufficient to pay (A) all matured installments of interest (including Compounded Interest and Additional Sums, if any) on all the Securities and the principal of and premium, if any, on any and all Securities which shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest, at the same rate as the rate of interest specified in the Securities to the date of such payment or deposit) and (B) such amount as shall be sufficient to cover compensation due to the Debenture Trustee and each predecessor Debenture Trustee, their respective agents, attorneys and counsel, pursuant to Section 6.06, and (ii) any and all Events of Default under the Indenture, other than the nonpayment of the principal of the Securities which shall have become due solely by such declaration of acceleration, shall have been cured, waived or otherwise remedied as provided herein, then, in every such case, the holders of a majority in aggregate principal amount of the Securities then outstanding, by written notice to the Corporation and to the Debenture Trustee, may rescind and annul such declaration and its consequences, but no such waiver or rescission
and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon,
In case the Debenture Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Debenture Trustee, then and in every such case the Corporation, the Debenture Trustee and the holders of the Securities shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Corporation, the Debenture Trustee and the holders of the Securities shall continue as though no such proceeding had been taken.
SECTION 5.02 Payment of Securities on Default; Suit Therefor.
The Corporation covenants that (a) in case default shall be made in the payment of any installment of interest (including Compounded Interest and Additional Sums, if any) on any of the Securities as and when the same shall become due and payable, and such default shall have continued for a period of 30 days, or (b) in case default shall be made in the payment of the principal of or premium, if any, on any of the Securities as and when the same shall have become due and payable, whether at maturity of the Securities or upon prepayment or by declaration or otherwise, then, upon demand of the Debenture Trustee, the Corporation will pay to the Debenture Trustee, for the benefit of the holders of the Securities, the whole amount that then shall have become due and payable on all such Securities for principal and premium, if any, or interest (including Compounded Interest and Additional Sums, if any), with interest upon the overdue principal and premium, if any, and (to the extent that payment of such interest is enforceable under applicable law and, if the Securities are held by the Trust or a trustee of such Trust, without duplication of any other amounts paid by the Trust or a trustee in respect thereof) upon the overdue installments of interest (including Compounded Interest and Additional Sums, if any) at the rate borne by the Securities; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to the Debenture Trustee, its agents, attorneys and counsel, and any other amount due to the Debenture Trustee pursuant to Section 6.06.
In case the Corporation shall fail forthwith to pay such amounts upon such demand, the Debenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Corporation or any other obligor on the Securities and collect in the manner provided by law out of the property of the Corporation or any other obligor on the Securities, wherever situated, the moneys adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Corporation or any other obligor on the Securities under Title 11, United States Code, or any other applicable law, or in case a receiver or trustee shall have been appointed for the property of the Corporation or such other obligor, or in the case of any other similar judicial proceedings relative to the Corporation or other obligor upon the Securities, or to the creditors or property of the Corporation or such other obligor, the Debenture Trustee, irrespective of whether the
principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Debenture Trustee shall have made any demand pursuant to the provisions of this Section 5.02, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Securities and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Debenture Trustee (including any claim for amounts due to the Debenture Trustee pursuant to Section 6.06) and of the Securityholders allowed in such judicial proceedings relative to the Corporation or any other obligor on the Securities, or to the creditors or property of the Corporation or such other obligor, unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Securities in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute the same after the deduction of its charges and expenses; and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Debenture Trustee, and, in the event that the Debenture Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Debenture Trustee such amounts as shall be sufficient to cover reasonable compensation to, and expenses of, the Debenture Trustee, each predecessor Debenture Trustee and their respective agents, attorneys and counsel, and all other amounts due to the Debenture Trustee pursuant to Section 6.06.
Nothing herein contained shall be construed to authorize the Debenture Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any holder thereof or to authorize the Debenture Trustee to vote in respect of the claim of any Securityholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under any of the Securities, may be enforced by the Debenture Trustee without the possession of any of the Securities, or the production thereof on any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Debenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the holders of the Securities.
In any proceedings brought by the Debenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Debenture Trustee shall be a party), the Debenture Trustee shall be held to represent all the holders of the Securities, and it shall not be necessary to make any holders of the Securities parties to any such proceedings.
SECTION 5.03 Application of Moneys Collected by Debenture Trustee.
Any moneys collected by the Debenture Trustee shall be applied in the following order, at the date or dates fixed by the Debenture Trustee for the distribution of such moneys, upon
presentation of the Securities in respect of which moneys have been collected, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid:
First: To the payment of costs and expenses of collection applicable to the Securities and all other amounts due to the Debenture Trustee under Section 6.06;
Second: To the payment of all Senior Indebtedness of the Corporation if and to the extent required by Article XV;
Third: To the payment of the amounts then due and unpaid upon Securities for principal of (and premium, if any) and interest (including Compounded Interest and Additional Sums, if any) on the Securities, in respect of which or for the benefit of which money has been collected, ratably, without preference of priority of any kind, according to the amounts due on such Securities for principal (and premium, if any) and interest, respectively; and
Fourth: To the Corporation.
SECTION 5.04 Proceedings by Securityholders.
No holder of any Security shall have any right by virtue of or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless such holder previously shall have given to the Debenture Trustee written notice of an Event of Default and of the continuance thereof with respect to the Securities specifying such Event of Default, as hereinbefore provided, and unless also the holders of not less than 25% in aggregate principal amount of the Securities then outstanding shall have made written request upon the Debenture Trustee to institute such action, suit or proceeding in its own name as Debenture Trustee hereunder and shall have offered to the Debenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Debenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding, it being understood and intended, and being expressly covenanted by the taker and holder of every Security with every other taker and holder and the Debenture Trustee, that no one or more holders of Securities 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 holder of Securities, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Securities.
Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Security to receive payment of the principal of (and premium, if any) and interest on (including Compounded Interest and Additional Sums, if any) such Security, on or after the same shall have become due and payable, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder, and by accepting a Security hereunder it is expressly understood, intended and covenanted by the taker and holder of every Security with every other such taker and holder and the Debenture Trustee, that no one or more holders of Securities shall have any right in any manner whatsoever by virtue or by availing itself
of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other Securities, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Securities. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Debenture Trustee shall be entitled to such relief as can be given either at law or in equity.
The Corporation and the Debenture Trustee acknowledge that pursuant to
the Declaration, the holders of Capital Securities are entitled, in the
circumstances and subject to the limitations set forth therein, to commence a
Direct Action with respect to any Event of Default referred to in clause (a) or
(b) of Section 5.01.
SECTION 5.05 Proceedings by Debenture Trustee.
In case an Event of Default occurs with respect to Securities and is continuing, the Debenture Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Debenture Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Debenture Trustee by this Indenture or by law.
SECTION 5.06 Remedies Cumulative and Continuing.
All powers and remedies given by this Article V to the Debenture Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Debenture Trustee or the holders of the Securities, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to the Securities, and no delay or omission of the Debenture Trustee or of any holder of any of the Securities to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.04, every power and remedy given by this Article V or by law to the Debenture Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Debenture Trustee or by the Securityholders.
SECTION 5.07 Direction of Proceedings and Waiver of Defaults by Majority of Securityholders.
The holders of a majority in aggregate principal amount of the Securities at the time outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee; provided, however, that (subject to the provisions of Section 6.01) the Debenture Trustee shall have the right to decline to follow any such direction if the Debenture Trustee shall determine that the action so directed would be unjustly prejudicial to the
holders not taking part in such direction or if the Debenture Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if the Debenture Trustee in good faith by one of its Responsible Officers shall determine that the action or proceedings so directed would involve the Debenture Trustee in personal liability. Prior to any declaration accelerating the maturity of the Securities, the holders of a majority in aggregate principal amount of the Securities at the time outstanding may on behalf of the holders of all of the Securities waive any past Default or Event of Default and its consequences except a Default (a) in the payment of principal of (or premium, if any) or interest on (including Compounded Interest and Additional Sums, if any) any of the Securities (unless such default has been cured and a sum sufficient to pay all matured installments of interest (including Compounded Interest and Additional Sums, if any) and principal (and premium, if any), due otherwise than by acceleration has been deposited with the Debenture Trustee) or (b) in respect of covenants or provisions hereof which cannot be modified or amended without the consent of the holder of each Security affected; provided, however, that if the Securities are held by the Property Trustee, such waiver or modification to such waiver shall not be effective until the holders of a majority in aggregate liquidation amount of Trust Securities shall have consented to such waiver or modification to such waiver; provided, further, that if the consent of the holder of each outstanding Security is required, such waiver shall not be effective until each holder of the Trust Securities shall have consented to such waiver. Upon any such waiver, the Default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Corporation, the Debenture Trustee and the holders of the Securities shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Whenever any Default or Event of Default hereunder shall have been waived as permitted by this Section 5.07, said Default or Event of Default shall for all purposes of the Securities and this Indenture be deemed to have been cured and to be not continuing.
SECTION 5.08 Notice of Defaults
(a) The Debenture Trustee shall, within 90 days after the Debenture Trustee has knowledge of the occurrence of a Default with respect to the Securities, mail to all Securityholders, as the names and addresses of such holders appear upon the Security Register, notice of all such Defaults, unless such Default shall have been cured before the giving of such notice (the term "Default" for the purpose of this Section 5.08 being hereby defined to be any of the events specified in clauses (a), (b), (c), (d) and (e) of Section 5.01, not including periods of grace, if any, provided for therein, and irrespective of the giving of written notice specified in clause (c) of Section 5.01); provided, however, that, except in the case of Default in the payment of the principal of (or premium, if any) or interest (including Compounded Interest or Additional Sums, if any) on any of the Securities, the Debenture 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 Debenture Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders; provided, further, that in the case of any Default of the character specified in Section 5.01(c), no such notice to Securityholders shall be given until at least 60 days after the occurrence thereof, but shall be given within 90 days after such occurrence.
(b) Within ten Business Days after the Debenture Trustee has knowledge of the occurrence of any Event of Default, the Debenture Trustee shall transmit notice of such Event of Default to all Securityholders as their names and addresses appear on the Security Register, unless such Event of Default shall have been cured or waived.
SECTION 5.09 Undertaking to Pay Costs.
All parties to this Indenture agree, and each holder of any Security by its 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 Debenture Trustee for any action taken or omitted by it as Debenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.09 shall not apply to any suit instituted by the Debenture Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in aggregate principal amount of the Securities outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest (including Compounded Interest and Additional Sums, if any) on any Security against the Corporation on or after the same shall have become due and payable.
ARTICLE VI
CONCERNING THE DEBENTURE TRUSTEE
SECTION 6.01 Duties and Responsibilities of Debenture Trustee.
With respect to the holders of the Securities issued hereunder, the Debenture Trustee, prior to the occurrence of an Event of Default (which, other than in the case of Sections 5.01(a) and 5.01(b) hereof, is known to the Debenture Trustee) and after the curing or waiving of all such Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default (which, other than in the case of Sections 5.01(a) and 5.01(b) hereof, is known to the Debenture Trustee) has occurred (which has not been cured or waived), the Debenture 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 or her own affairs.
No provision of this Indenture shall be construed to relieve the Debenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default (which, other than in the case of Sections 5.01(a) and 5.01(b) hereof, is known to the Debenture Trustee) and after the curing or waiving of all such Events of Default which may have occurred,
(1) the duties and obligations of the Debenture Trustee shall be determined solely by the express provisions of this Indenture, and the Debenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Debenture Trustee; and
(2) in the absence of bad faith on the part of the Debenture Trustee, the Debenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificate or opinion furnished to the Debenture Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificate or opinion which by any provision hereof is specifically required to be furnished to the Debenture Trustee, the Debenture Trustee shall be under a duty to examine the same to determine whether or not it conforms on its face to the requirements of this Indenture;
(b) the Debenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers, unless it shall be proved that the Debenture Trustee was negligent in ascertaining the pertinent facts; and
(c) the Debenture 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 Securityholders pursuant to
Section 5.07, relating to the time, method and place of
conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred
upon the Debenture Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the Debenture 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 it reasonably believes that the repayment of such funds or liability is not reasonably assured to it under the terms of this Indenture or adequate indemnity against such risk is not reasonably assured to it.
SECTION 6.02 Reliance on Documents, Opinions, etc.
Except as otherwise provided in Section 6.01:
(a) the Debenture Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Corporation mentioned herein may be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may
be evidenced to the Debenture Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Corporation;
(c) the Debenture Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;
(d) the Debenture Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Debenture Trustee reasonable and sufficient security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;
(e) the Debenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; nothing contained herein shall, however, relieve the Debenture Trustee of the obligation, upon the occurrence of an Event of Default (which, other than in the case of Sections 5.01(a) and 5.01(b) hereof, is known to the Debenture Trustee) (that has not been cured or waived), to exercise such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs;
(f) the Debenture 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, coupon or other paper or document, unless requested in writing to do so by the holders of a majority in aggregate principal amount of the outstanding Securities; provided, however, that if the payment within a reasonable time to the Debenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Debenture Trustee, not reasonably assured to the Debenture Trustee by the security afforded to it by the terms of this Indenture, the Debenture Trustee may require reasonable indemnity against such expense or liability as a condition to so proceeding;
(g) the Debenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents (including any Authenticating Agent) or attorneys, and the Debenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care;
(h) notwithstanding any provision in this Indenture to the contrary, the Debenture Trustee shall not be charged with knowledge of any Default or Event of Default unless (1) such Default or Event of Default falls within Section 5.01(a) (other than a default with respect to the payment or nonpayment of Compounded Interest or
Additional Sums or, unless the Debenture Trustee is also trustee
with respect thereto, amounts on any Other Debentures) or
Section 5.01 (b) (other than a default with respect to the
payment or nonpayment of amounts on any Other Debentures unless
the Debenture Trustee is also trustee with respect thereto) of
this Indenture, (2) a Responsible Officer shall have actual
knowledge of such Default or Event of Default or (3) written
notice of such Default or Event of Default shall have been given
to the Debenture Trustee by the Corporation or any other obligor
on the Securities or by any holder of the Securities; and
(i) the Debenture Trustee shall not be liable for any action taken, suffered or omitted by it in good faith, without negligence or willful misconduct and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture.
SECTION 6.03 No Responsibility, for Recitals, etc.
The recitals contained herein and in the Securities (except in the certificate of authentication of the Debenture Trustee or the Authenticating Agent) shall be taken as the statements of the Corporation, and the Debenture Trustee and the Authenticating Agent assume responsibility for the correctness of the same. The Debenture Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of the securities. The Debenture Trustee and the Authenticating Agent shall not be accountable for the use or application by the Corporation of any Securities or the proceeds of any Securities authenticated and delivered by the Debenture Trustee or the Authenticating Agent in conformity with the provisions of this Indenture.
SECTION 6.04 Debenture Trustee, Authenticating Agent. Paying Agents, Transfer Agents and Registrar May Own Securities.
The Debenture Trustee or any Authenticating Agent or any paying agent or any transfer agent or any security registrar for the Securities, in its individual or any other capacity, may become the owner or pledgee of Securities with the same rights it would have if it were not Debenture Trustee, Authenticating Agent, paying agent, transfer agent or security registrar for the Securities.
SECTION 6.05 Moneys to be Held in Trust.
Subject to the provisions of Section 11.04, all moneys received by the Debenture Trustee or any paying agent shall, until used or applied as herein provided, be held in trust for the purpose for which they were received, but need not be segregated from other funds except to the extent required by law. The Debenture Trustee and any paying agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Corporation. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the written order of the Corporation, signed by an Officer thereof.
SECTION 6.06 Compensation and Expenses of Debenture Trustee.
The Corporation, as issuer of Securities under this Indenture, covenants and agrees to pay to the Debenture Trustee from time to time, and the Debenture Trustee shall be entitled to, such compensation as shall be agreed to in writing between the Corporation and the Debenture Trustee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), and the Corporation will pay or reimburse the Debenture Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Debenture Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ), except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Corporation also covenants to indemnify each of the Debenture Trustee (including in its individual capacity) and any predecessor Debenture Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any and all loss, damage, claim, action, suit, liability or expense including taxes (other than taxes based on the income of the Debenture Trustee) incurred without negligence or bad faith on the part of the Debenture Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability. The obligations of the Corporation under this Section 6.06 to compensate and indemnify the Debenture Trustee and to pay or reimburse the Debenture Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Securities upon all property and funds held or collected by the Debenture Trustee as such, except funds held in trust for the benefit of the holders of particular Securities.
When the Debenture Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.01(d) or Section 5.01(e), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for its services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the resignation or removal of the Debenture Trustee and the defeasance or other termination of this Indenture.
SECTION 6.07 Officers' Certificate as Evidence.
Except as otherwise provided in Sections 6.01 and 6.02, whenever in the administration of the provisions of this Indenture, the Debenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof is herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Debenture Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Debenture Trustee, and such Officers' Certificate, in the absence of negligence or bad faith on the part of the Debenture Trustee, shall be full warrant to the Debenture Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.
SECTION 6.08 Conflicting Interest of Debenture Trustee.
If the Debenture Trustee has or shall acquire any "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture Act, the Debenture
Trustee and the Corporation shall in all respects comply with the provisions of
Section 310(b) of the Trust Indenture Act.
SECTION 6.09 Eligibility of Debenture Trustee.
The Debenture Trustee hereunder shall at all times be a Person organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia, or a corporation or other Person permitted to act as trustee by the Commission authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least fifty million U.S. dollars ($50,000,000) and subject to supervision or examination by federal, state, territorial, or District of Columbia authority. If such Person 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 6.09 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.
The Corporation may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Corporation, serve as Debenture Trustee.
In case at any time the Debenture Trustee shall cease to be eligible in accordance with the provisions of this Section 6.09, the Debenture Trustee shall resign immediately in the manner and with the effect specified in Section 6.10.
SECTION 6.10 Resignation or Removal of Debenture Trustee.
(a) The Debenture Trustee, or any trustee or trustees hereafter
appointed, may at any time resign by giving written notice of such resignation
to the Corporation and by mailing notice thereof to the holders of the
Securities at their addresses as they shall appear on the Security Register.
Upon receiving such notice of resignation, the Corporation shall promptly
appoint a successor trustee or trustees, in accordance with the provisions of
Section 6.09, by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Debenture Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and have
accepted appointment within 60 days after the mailing of such notice of
resignation to the affected Securityholders, the resigning Debenture Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee, or any Securityholder may, subject to the provisions of Section 5.09,
on behalf of himself and all others similarly situated, petition any such court
for the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
(b) In case at any time any of the following shall occur:
(1) the Debenture Trustee shall fail to comply with the provisions of Section 6.08 after written request therefor by the Corporation, or by MMCapS(SM) Funding I, Ltd. or by any other Securityholder who has been a bona fide holder of a Security or Securities for at least six months, or
(2) the Debenture Trustee shall cease to be eligible in accordance with the provisions of Section 6.09 and shall fail to resign after written request therefor by the Corporation, by MMCapS(SM) Funding I, Ltd. or by any other Securityholder who has been a bona fide holder of a Security or Securities for at least six months, or
(3) the Debenture Trustee shall become incapable of acting, or shall be adjudged as bankrupt or insolvent, or a receiver of the Debenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Debenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, the Corporation may remove the Debenture Trustee and appoint a successor trustee, in accordance with the provisions of Section 6.09, by written instrument, in duplicate, one copy of which instrument shall be delivered to the Debenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 5.09, MMCapS(SM) Funding I, Ltd. or any other Securityholder 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 Debenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper prescribe, remove the Debenture Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the Securities at the time outstanding may at any time remove the Debenture Trustee and nominate a successor trustee, which shall be deemed appointed as successor trustee unless within 10 days after written notification of such nomination the Corporation objects thereto, or if no successor trustee shall have been so appointed and shall have accepted appointment within 30 days after such removal, in which case the Debenture Trustee so removed or any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this Section 6.10 provided, may petition any part of competent jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Debenture Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section 6.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 6.11.
SECTION 6.11 Acceptance by Successor Debenture Trustee.
Any successor trustee appointed as provided in Section 6.10 shall execute, acknowledge and deliver to the Corporation and to its predecessor trustee an instrument accepting such appointment hereunder, 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, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Corporation or of the successor trustee, the trustee ceasing to act shall, upon payment of all amounts then due it pursuant to the provisions of Section 6.06, execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act and shall duly assign, transfer and deliver to such successor trustee all property
and money held by such retiring trustee thereunder. Upon request of any such successor trustee, the Corporation shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Section 6.06.
No successor trustee shall accept appointment as provided in this
Section 6.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 6.08 and eligible under the
provisions of Section 6.09.
Upon acceptance of appointment by a successor trustee as provided in this Section 6.11, the Corporation shall mail notice of the succession of such trustee hereunder to the holders of Securities at their addresses as they shall appear on the Security Register. If the Corporation fails to mail such notice within 10 days after the acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Corporation.
SECTION 6.12 Succession by Merger, etc.
Any Person into which the Debenture Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Debenture Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Debenture Trustee, shall be the successor of the Debenture Trustee hereunder 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 at the time such successor to the Debenture Trustee shall succeed to the trusts created by this Indenture, any such successor to the Debenture Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Debenture Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor trustee; and in all such cases such certificates shall have the full force which the Securities or this Indenture elsewhere provides that the certificate of the Debenture Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Debenture Trustee or authenticate Securities in the name of any predecessor Debenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation.
SECTION 6.13 Limitation on Rights of Debenture Trustee as a Creditor.
The Debenture Trustee shall comply with Section 311 (a) of the Trust Indenture Act, excluding any creditor relationship described in Section 311 (b) of the Trust Indenture Act. A Debenture Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent included therein.
SECTION 6.14 Authenticating Agents.
There may be one or more Authenticating Agents appointed by the Debenture Trustee upon the request of the Corporation with power to act on the Debenture Trustee's behalf and subject to the Debenture Trustee's direction in the authentication and delivery of Securities issued upon exchange or transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver Securities; provided, however, that the Debenture Trustee shall have no liability to the Corporation for any acts or omissions of the Authenticating Agent with respect to the authentication and delivery of Securities. Any such Authenticating Agent shall at all times be a Person organized and doing business under the laws of the United States or of any state or territory thereof or of the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of at least $5,000,000 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such Person publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 6.14 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 an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect herein specified in this Section.
Any Person into which any Authenticating Agent may be merged, converted or with which it may be consolidated, or any Person resulting from any merger or consolidation to which any Authenticating Agent shall be a party, or any Person succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor Person is otherwise eligible under this Section 6.14 without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written notice of resignation to the Debenture Trustee and to the Corporation. The Debenture Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Corporation. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 6.14, the Debenture Trustee may, and upon the request of the Corporation shall, promptly appoint a successor Authenticating Agent eligible under this Section 6.14, shall give written notice of such appointment to the Corporation and shall mail notice of such appointment to all Securityholders as the names and addresses of such holders appear on the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein.
The Corporation, as issuer of the Securities, agrees to pay to any Authenticating Agent from time to time reasonable compensation for its services. Any Authenticating Agent shall have no responsibility or liability for any action taken by it as such in accordance with the directions of the Debenture Trustee.
ARTICLE VII
CONCERNING THE SECURITYHOLDERS
SECTION 7.01 Action by Securityholders.
Whenever in this Indenture it is provided that the holders of a
specified percentage in aggregate principal amount of the Securities may take
any action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action), the fact that at
the time of taking any such action the holders of such specified percentage have
joined therein may be evidenced (a) by any instrument (including by way of
electronic transmission) or any number of instruments of similar tenor executed
by such Securityholders in person or by agent or proxy appointed in writing, or
(b) by the record of such holders of Securities voting in favor thereof at any
meeting of such Securityholders duly called and held in accordance with the
provisions of Article VIII, or (c) by a combination of such instrument or
instruments and any such record of such a meeting of such Securityholders.
If the Corporation shall solicit from the Securityholders any request, demand, authorization, direction, notice, consent, waiver or other action, the Corporation may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action, but the Corporation shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action, and for that purpose the outstanding Securities shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date.
SECTION 7.02 Proof of Execution by Securityholders.
Subject to the provisions of Sections 6.01, 6.02 and 8.05, proof of the execution of any instrument by a Securityholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Debenture Trustee or in such manner as shall be satisfactory to the Debenture Trustee. The ownership of Securities shall be proved by the Security Register or by a certificate of the security registrar for the Securities. The Debenture Trustee may require such additional proof of any matter referred to in this Section 7.02 as it shall deem necessary.
The record of any Securityholders' meeting shall be proved in the manner provided in Section 8.06.
SECTION 7.03 Who Are Deemed Absolute Owners.
Prior to due presentment for registration of transfer of any Security, the Corporation, the Debenture Trustee, any Authenticating Agent, any paying agent, any transfer agent and any security registrar for the Securities may deem the person in whose name such Security shall be registered upon the Security Register to be, and may treat him or her as, the absolute owner of such Security (whether or not such Security shall be overdue) for the purpose of receiving payment of or on account of the principal of and premium, if any, and (subject to Section 2.05) interest on such Security and for all other purposes; and neither the Corporation nor the Debenture Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any security registrar for the Securities shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his or her order shall be valid and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Security.
SECTION 7.04 Securities Owned by Corporation Deemed Not Outstanding.
In determining whether the holders of the requisite aggregate principal amount of Securities have concurred in any direction, consent or waiver under this Indenture, Securities that are owned by the Corporation or any other obligor on the Securities or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Corporation or any other obligor on the Securities shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided, however, that for the purposes of determining whether the Debenture Trustee shall be protected in relying on any such direction, consent or waiver, only Securities which a Responsible Officer of the Debenture Trustee actually knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.04 if the pledgee shall establish to the satisfaction of the Debenture Trustee the pledgee's right to vote such Securities and that the pledgee is not the Corporation or any such other obligor or Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Corporation or any such other obligor. In the case of a dispute as to such right, any decision by the Debenture Trustee taken upon the advice of counsel shall be full protection to the Debenture Trustee.
SECTION 7.05 Revocation of Consents; Future Holders Bound.
At any time prior to (but not after) the evidencing to the Debenture Trustee, as provided in Section 7.01, of the taking of any action by the holders of the percentage in aggregate principal amount of the Securities specified in this Indenture in connection with such action, any holder of a Security (or any Security issued in whole or in part in exchange or substitution therefor), subject to Section 7.01, the serial number of which is shown by the evidence to be included in the group of Securities the holders of which have consented to such action, may, by filing written notice with the Debenture Trustee at its principal office and upon proof of holding as provided in Section 7.02, revoke such action so far as concerns such Security (or so far as
concerns the principal amount represented by any exchanged or substituted Security). Except as aforesaid, any such action taken by the holder of any Security shall be conclusive and binding upon such holder and upon all future holders and owners of such Security, and of any Security issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon such Security or any Security issued in exchange or substitution therefor.
ARTICLE VIII
MEETINGS OF SECURITYHOLDERS
SECTION 8.01 Purposes of Meetings.
A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes:
(a) to give any notice to the Corporation or to the Debenture Trustee, or to give any directions to the Debenture Trustee, or to consent to the waiving of any Default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article V;
(b) to remove the Debenture Trustee and nominate a successor trustee pursuant to the provisions of Article VI;
(c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.02; or
(d) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of such Securities under any other provision of this Indenture or under applicable law.
SECTION 8.02 Call of Meetings by Debenture Trustee.
The Debenture Trustee may at any time call a meeting of Securityholders to take any action specified in Section 8.01, to be held at such time and at such place in Wilmington, Delaware as the Debenture Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Securities at their addresses as they shall appear on the Security Register. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting.
SECTION 8.03 Call of Meetings by Corporation or Securityholders.
In case at any time the Corporation, pursuant to a resolution of the Board of Directors, or the holders of at least 20% in aggregate principal amount of the Securities then outstanding, shall have requested the Debenture Trustee to call a meeting of Securityholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Debenture Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Corporation or such Securityholders may determine the time and the
place in Los Angeles, California for such meeting and may call such meeting to take any action authorized in Section 8.01, by mailing notice thereof as provided in Section 8.02.
SECTION 8.04 Qualifications for Voting.
To be entitled to vote at any meeting of Securityholders, a Person shall be (a) a holder of one or more Securities or (b) a Person appointed by an instrument in writing as proxy by a holder of one or more Securities. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Debenture Trustee and its counsel and any representatives of the Corporation and its counsel.
SECTION 8.05 Regulations.
Notwithstanding any other provisions of this Indenture, the Debenture Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Securities and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit.
The Debenture Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Corporation or by Securityholders as provided in Section 8.03, in which case the Corporation or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 8.04, at any meeting each holder of Securities or proxy therefor shall be entitled to one vote for each $1,000 principal amount of Securities held or represented by him or her; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Securities held by him or instruments in writing as aforesaid duly designating him as the person to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 8.02 or 8.03 may be adjourned from time to time by a majority of those present, and the meeting may be held as so adjourned without further notice.
SECTION 8.06 Voting.
The vote upon any resolution submitted to any meeting of holders of Securities shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or numbers of the Securities held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be
prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.02. The record shall show the serial numbers of the Securities voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Corporation and the other to the Debenture Trustee to be preserved by the Debenture Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.
ARTICLE IX
AMENDMENTS
SECTION 9.01 Without Consent of Securityholders.
The Corporation and the Debenture Trustee may from time to time and at any time amend this Indenture, without the consent of the Securityholders, for one or more of the following purposes:
(a) to evidence the succession of another Person to the Corporation, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Corporation pursuant to Article X hereof;
(b) to add to the covenants of the Corporation such further covenants, restrictions or conditions for the protection of the Securityholders as the Board of Directors and the Debenture Trustee shall consider to be for the protection of the Securityholders, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a Default or an Event of Default permitting the enforcement of all or any of the remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant, restriction or condition such amendment may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Debenture Trustee upon such default;
(c) to provide for the issuance under this Indenture of Securities in coupon form (including Securities registrable as to principal only) and to provide for exchangeability of such Securities with the Securities issued hereunder in fully registered form and to make all appropriate changes for such purpose;
(d) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this
Indenture, provided that any such action shall not materially adversely affect the interests of the holders of the Securities;
(e) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to the Securities;
(f) to make provision for transfer procedures, certification, book entry provisions, the form of restricted securities legends, if any, to be placed on Securities, and all other matters required pursuant to Section 2.06 or otherwise necessary, desirable or appropriate in connection with the issuance of Securities to holders of Capital Securities in the event of a distribution of Securities by the Trust following a Dissolution Event, provided that any such action shall not materially adversely affect the interests of the holders of the Securities;
(g) to qualify or maintain qualification of this Indenture under the Trust Indenture Act; or
(h) to make any change that does not adversely affect the rights of any Securityholder in any material respect.
The Debenture Trustee is hereby authorized to join with the Corporation in the execution of any supplemental indenture to effect such amendment, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Debenture Trustee shall not be obligated to, but may in its discretion, enter into any such supplemental indenture which affects the Debenture Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any amendment to this Indenture authorized by the provisions of this
Section 9.01 may be executed by the Corporation and the Debenture Trustee
without the consent of the holders of any of the Securities at the time
outstanding, notwithstanding any of the provisions of Section 9.02.
SECTION 9.02 With Consent of Securityholders.
With the consent (evidenced as provided in Section 7.01) of the holders
of a majority in aggregate principal amount of the Securities at the time
outstanding, the Corporation, when authorized by a Board Resolution, and the
Debenture Trustee may from time to time and at any time amend this Indenture 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 the Securities; provided, however, that no such amendment
shall, without the consent of the holders of each Security then outstanding and
affected thereby (i) change the Maturity Date of any Security, or reduce the
rate or extend the time of payment of interest thereon (except as contemplated
by Article XVI), or reduce or increase the aggregate principal amount of the
series of which such Security is a part or issue other Securities, or change any
prepayment provisions, or make the principal thereof or any interest or premium
thereon payable in any coin or currency other than U.S. dollars, or impair or
affect the right of any Securityholder to institute suit for payment thereof, or
(ii) reduce the aforesaid percentage of Securities, the holders of which are
required to consent to any such amendment to the Indenture; provided,
however, that if the Securities are held by the Trust, such amendment shall not be effective until the holders of a majority in liquidation amount of Trust Securities shall have consented to such amendment; provided, further, that if the consent of the holder of each outstanding Security is required, such amendment shall not be effective until the holder of each outstanding Trust Security shall have consented to such amendment.
Upon the request of the Corporation accompanied by a copy of a resolution of the Board of Directors certified by its Secretary or Assistant Secretary authorizing the execution of any supplemental indenture effecting such amendment, and upon the filing with the Debenture Trustee of evidence of the consent of Securityholders as aforesaid, the Debenture Trustee shall join with the Corporation in the execution of such supplemental indenture unless such supplemental indenture affects the Debenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Debenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.
Promptly after the execution by the Corporation and the Debenture Trustee of any supplemental indenture pursuant to the provisions of this Section, the Debenture Trustee shall transmit by mail, first class postage prepaid, a notice, prepared by the Corporation, setting forth in general terms the substance of such supplemental indenture, to the Securityholders as their names and addresses appear upon the Security Register. Any failure of the Debenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under this Section 9.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.
SECTION 9.03 Compliance with Trust Indenture Act, Effect of Supplemental Indentures.
Any supplemental indenture executed pursuant to the provisions of this Article IX shall comply with the Trust Indenture Act. Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Debenture Trustee, the Corporation and the holders of Securities shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
SECTION 9.04 Notation on Securities.
Securities authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a notation in form approved by the Debenture Trustee as to any matter provided for in such supplemental indenture. If the Corporation or the Debenture Trustee shall so determine, new Securities so modified as to conform, in the opinion of the Debenture Trustee and the Board of Directors, to any modification
of this Indenture contained in any such supplemental indenture may be prepared and executed by the Corporation, authenticated by the Debenture Trustee or the Authenticating Agent and delivered in exchange for the Securities then outstanding.
SECTION 9.05 Evidence of Compliance of Supplemental Indenture to be Furnished to Debenture Trustee.
The Debenture Trustee, subject to the provisions of Sections 6.01 and 6.02, may receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article IX.
ARTICLE X
CONSOLIDATION, MERGER, SALE, CONVEYANCE, TRANSFER AND LEASE
SECTION 10.01 Corporation May Consolidate, etc., on Certain Terms.
Nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of the Corporation with or into any other Person (whether or not affiliated with the Corporation, as the case may be), or successive consolidations or mergers in which the Corporation or its successor or successors, as the case may be, shall be a party or parties, or shall prevent any sale, conveyance, transfer or lease of the property of the Corporation, or its successor or successors as the case may be, as an entirety, or substantially as an entirety, to any other Person (whether or not affiliated with the Corporation, or its successor or successors, as the case may be) authorized to acquire and operate the same; provided, that (a) the Corporation is the surviving Person, or the Person formed by or surviving any such consolidation or merger (if other than the Corporation) or to which such sale, conveyance, transfer or lease of property is made is a Person organized and existing under the laws of the United States or any State thereof or the District of Columbia, and (b) if the Corporation is not the surviving Person, upon any such consolidation, merger, sale, conveyance, transfer or lease, the due and punctual payment of the principal of (and premium, if any) and interest on the Securities according to their tenor and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Corporation shall be expressly assumed by the surviving Person, by supplemental indenture (which shall conform to the provisions of the Trust Indenture Act as then in effect) satisfactory in form to the Debenture Trustee, executed and delivered to the Debenture Trustee by the Person formed by such consolidation, or into which the Corporation shall have been merged, or by the Person which shall have acquired such property, as the case may be, and (c) after giving effect to such consolidation, merger, sale, conveyance, transfer or lease, no Default or Event of Default shall have occurred and be continuing.
SECTION 10.02 Successor Person to be Substituted for Corporation.
In case of any such consolidation, merger, sale, conveyance, transfer or lease, and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Debenture Trustee and satisfactory in form to the Debenture Trustee, of the obligation of due and punctual payment of the principal of (and premium, if any) and interest on all of the Securities and the due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed or observed by the Corporation, such successor Person shall succeed to and be substituted for the Corporation, with the same effect as if it had been named herein as a party hereto, and the Corporation thereupon shall be relieved of any further liability or obligation hereunder or upon the Securities. Such successor Person thereupon may cause to be signed, and may issue either in its own name or in the name of the Corporation, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Corporation and delivered to the Debenture Trustee or the Authenticating Agent; and, upon the order of such successor Person instead of the Corporation and subject to all the terms, conditions and limitations in this Indenture prescribed, the Debenture Trustee or the Authenticating Agent shall authenticate and deliver any Securities which previously shall have been signed and delivered by any Officer of the Corporation to the Debenture Trustee or the Authenticating Agent for authentication, and any Securities which such successor Person thereafter shall cause to be signed and delivered to the Debenture Trustee or the Authenticating Agent for that purpose. 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.
SECTION 10.03 Opinion of Counsel to be Given Debenture Trustee.
The Debenture Trustee, subject to the provisions of Sections 6.01 and 6.02, may receive an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale, conveyance, transfer or lease, and any assumption, permitted or required by the terms of this Article X complies with the provisions of this Article X.
ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 11.01 Discharge of Indenture.
When (a) the Corporation shall deliver to the Debenture Trustee for
cancellation all Securities theretofore authenticated (other than any Securities
which shall have been destroyed, lost or stolen and which shall have been
replaced as provided in Section 2.07) and not theretofore canceled, or (b) all
the Securities not theretofore canceled or delivered to the Debenture Trustee
for cancellation shall have become due and payable, or are by their terms to
become due and payable within one year or are to be called for prepayment within
one year under arrangements satisfactory to the Debenture Trustee for the giving
of notice of prepayment, and the Corporation shall deposit with the Debenture
Trustee, in trust, funds sufficient to pay on the Maturity Date or upon
prepayment all of the Securities (other than any Securities which shall have
been destroyed, lost or stolen and which shall have been replaced as provided in
Section 2.07) not theretofore canceled or delivered to the Debenture Trustee for
cancellation, including principal (and premium, if any) and interest (including
Compounded Interest and Additional Sums, if any) due or to become due to the
Maturity Date or prepayment date, as the case may be, but excluding, however,
the amount of any moneys for the payment of principal of (or premium, if any) or
interest (including Compounded Interest and Additional Sums, if any) on the
Securities (1) theretofore repaid to the Corporation in accordance with the
provisions of Section 11.04, or (2)
paid to any State or to the District of Columbia pursuant to its unclaimed property or similar laws, and if, in either case the Corporation shall also pay or cause to be paid all other sums payable hereunder by the Corporation, then this Indenture shall cease to be of further effect except for the provisions of Sections 2.02, 2.06, 2.07, 3.01, 3.02, 3.04, 6.06, 6.10 and 11.04 hereof, which shall survive until such Securities shall mature and be paid. Thereafter, Sections 6.06, 6.10 and 11.04 shall survive, and the Debenture Trustee, on demand of the Corporation accompanied by any Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Corporation, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture; the Corporation, however, hereby agrees to reimburse the Debenture Trustee for any costs or expenses thereafter reasonably and properly incurred by the Debenture Trustee in connection with this Indenture or the Securities.
SECTION 11.02 Deposited Moneys and U.S. Government Obligations to be Held in Trust by Debenture Trustee.
Subject to the provisions of Section 11.04, all moneys and U.S. Government Obligations deposited with the Debenture Trustee pursuant to Sections 11.01 or 11.05 shall be held in trust and applied by it to the payment, either directly or through any paying agent (including the Corporation if acting as its own paying agent), to the holders of the particular Securities for the payment of which such moneys or U.S. Government Obligations have been deposited with the Debenture Trustee, of all sums due and to become due thereon for principal, premium, if any, and interest.
The Corporation shall pay and indemnify the Debenture Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Governmental Obligations deposited pursuant to Section 11.05 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the holders of outstanding Securities.
SECTION 11.03 Paying Agent to Repay Moneys Held.
Upon the satisfaction and discharge of this Indenture all moneys then held by any paying agent of the Securities (other than the Debenture Trustee) shall, upon written demand of the Corporation, be repaid to it or paid to the Debenture Trustee, and thereupon such paying agent shall be released from all further liability with respect to such moneys.
SECTION 11.04 Return of Unclaimed Moneys.
Any moneys deposited with or paid to the Debenture Trustee or any paying agent for payment of the principal of (or premium, if any) or interest (including Compounded Interest and Additional Sums, if any) on Securities and not applied but remaining unclaimed by the holders of Securities for two years after the date upon which the principal of (or premium, if any) or interest (including Compounded Interest and Additional Sums, if any) on such Securities, as the case may be, shall have become due and payable, shall be repaid to the Corporation by the Debenture Trustee or such paying agent; and the holder of any of the Securities shall thereafter look only to the Corporation for any payment which such holder may be entitled to collect and all liability of the Debenture Trustee or such paying agent with respect to such moneys shall thereupon cease.
SECTION 11.05 Defeasance Upon Deposit of Moneys or U.S. Government Obligations.
The Corporation shall be deemed to have been Discharged (as defined below) from its obligations with respect to the Securities on the 91st day after the applicable conditions set forth below have been satisfied:
(a) the Corporation shall have deposited or caused to be deposited irrevocably with the Debenture Trustee or the Defeasance Agent (as defined below) as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the holders of the Securities (i) money in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (iii) a combination of (i) and (ii), sufficient, in the opinion (with respect to (ii) and (iii)) of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Debenture Trustee and the Defeasance Agent, if any, to pay and discharge each installment of principal of and interest on and premium, if any, on the outstanding Securities on the dates such installments of principal and interest (and premium, if any) are due;
(b) if the Securities are then listed on any national securities exchange, the Corporation shall have delivered to the Debenture Trustee and the Defeasance Agent, if any, an Opinion of Counsel to the effect that the exercise of the option under this Section 11.05 would not cause such Securities to be delisted from such exchange;
(c) no Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit; and
(d) the Corporation shall have delivered to the Debenture Trustee and the Defeasance Agent, if any, an Opinion of Counsel to the effect that holders of the Securities will not recognize income, gain or loss for United States federal income tax purposes as a result of the exercise of the option under this Section 11.05 and will be subject to United States federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised.
"Discharged" means that the Corporation shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Securities and to have satisfied all the obligations under this Indenture
relating to the Securities (and the Debenture Trustee, at the expense of the
Corporation, shall execute proper instruments acknowledging the same), except
(1) the rights of holders of Securities to receive, from the trust fund
described in clause (a) above, payment of the principal of and the interest and
premium, if any, on the Securities when such payments are due; (2) the
Corporation's obligations with respect to the Securities under Sections 2.06,
2.07, 5.02 and 11.04; and (3) the rights, powers, trusts, duties and immunities
of the Debenture Trustee hereunder.
"Defeasance Agent" means another financial institution which is eligible to act as Debenture Trustee hereunder and which assumes all of the obligations of the Debenture Trustee necessary to enable the Debenture Trustee to act hereunder. In the event such a Defeasance Agent is appointed pursuant to this Section, the following conditions shall apply:
(1) the Debenture Trustee shall have approval rights over the document appointing such Defeasance Agent and the document setting forth such Defeasance Agent's rights and responsibilities; and
(2) the Defeasance Agent shall provide verification to the Debenture Trustee acknowledging receipt of sufficient money and/or U.S. Government Obligations to meet the applicable conditions set forth in this Section 11.05.
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01 Indenture and Securities Solely Corporate Obligations.
No recourse for the payment of the principal of or premium, if any, or interest (including Compounded Interest and Additional Sums, if any) on any Security, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Corporation in this Indenture, or in any Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Corporation or of any successor Person to the Corporation, either directly or through the Corporation or any successor Person to the Corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of the Securities.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01 Successors.
All of the covenants, stipulations, promises and agreements of the Corporation contained in this Indenture shall also bind the Corporation's successors and assigns whether so expressed or not.
SECTION 13.02 Official Acts by Successor Corporation.
Any act or proceeding that, by any provision of this Indenture, is authorized or required to be done or performed by any board, committee or officer of the Corporation shall and may be
done and performed with like force and effect by the like board, committee or officer of any corporation that shall at the time be the lawful sole successor of the Corporation.
SECTION 13.03 Surrender of Corporation Powers.
The Corporation by instrument in writing executed by authority of 2/3 (two-thirds) of its Board of Directors and delivered to the Debenture Trustee may surrender any of the powers reserved to the Corporation hereunder, and thereupon such power so surrendered shall terminate both as TO the Corporation, as the case may be, and as to any successor Person.
SECTION 13.04 Addresses for Notices, etc.
Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Debenture Trustee or by the holders of Securities on the Corporation may be given or served by being deposited postage prepaid by first class mail, registered or certified mail, overnight courier service or conformed telecopy addressed (until another address is filed by the Corporation with the Debenture Trustee for the purpose) to Nara Bancorp, Inc. at 3701 Wilshire Boulevard, Suite 220, Los Angeles, California 90010, Attention: Timothy Chang. Any notice, direction, request or demand by any Securityholder to or upon the Debenture Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the office of Wilmington Trust Company at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration (unless another address is provided by the Debenture Trustee to the Corporation for such purpose). Any notice or communication to a Securityholder shall be mailed by first class mail to his or her address shown on the Security Register kept by the security registrar for the Securities. Notices required to be given to the Debenture Trustee or the Authenticating Agent shall be in writing, personally delivered or mailed first class postage prepaid to each of the foregoing, or at such other address as shall be designated by written notice to the other parties.
SECTION 13.05 Governing Law.
This Indenture and each Security shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be governed by and construed in accordance with the laws of said State without regard to conflict of law principles thereof.
SECTION 13.06 Evidence of Compliance with Conditions Precedent.
Upon any application or demand by the Corporation to the Debenture Trustee to take any action under any of the provisions of this Indenture, the Corporation shall furnish to the Debenture Trustee an Officers' Certificate stating that in the opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and delivered
to the Debenture Trustee with respect to compliance with a condition or covenant
provided for in this Indentuure (except certificates delivered pursuant to
Section 3.05) shall include (1) a statement that the Person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.
SECTION 13.07 Business Days.
In any case where the date of payment of principal of (or premium, if any) or interest on the Securities is not a Business Day, the payment of such principal of (or premium, if any) or interest on the Securities will not be made on such date but will be made on the next succeeding Business Day, except if such Business Day is in the next succeeding calendar year, such payment will be made on the immediately preceding Business Day, with the same force and effect as if made on the original date of payment, and no interest shall accrue for the period from and after such date.
SECTION 13.08 Trust Indenture Act to Control.
If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 318, inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 13.09 Table of Contents, Headings, etc.
The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.
SECTION 13.10 Execution in Counterparts.
This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.
SECTION 13.11 Separability.
In case any one or more of the provisions contained in this Indenture or in the Securities shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of the Securities, but this Indenture and the Securities shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.
SECTION 13.12 Assignment.
The Corporation will have the right at all times to assign any of its respective rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Corporation, provided that, in the event of any such assignment, the Corporation will remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures
to the benefit of the parties thereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties thereto.
SECTION 13.13 Acknowledgment of Rights.
The Corporation acknowledges that, with respect to any Securities held by the Trust or a trustee of such Trust, if the Property Trustee of such Trust fails to enforce its rights under this Indenture as the holder of the Securities held as the assets of the Trust, any holder of Capital Securities may institute legal proceedings, subject to Section 5.09, directly against the Corporation to enforce such Property Trustee's rights under this Indenture without first instituting any legal proceedings against such Property Trustee or any other person or entity. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Corporation to pay principal of (or premium, if any) or interest on the Securities when due, the Corporation acknowledges that a holder of Capital Securities may directly institute a proceeding for enforcement of payment to such holder of the principal of (or premium, if any) or interest on the Securities having an aggregate principal amount equal to the aggregate liquidation amount of the Capital Securities of such holder on or after the respective due date specified in the Securities.
ARTICLE XIV
PREPAYMENT OF SECURITIES
SECTION 14.01 Special Event Prepayment.
If, prior to the Initial Optional Prepayment Date, a Special Event has occurred and is continuing, then, notwithstanding Section 14.02(a) but subject to Section 14.02(c), the Corporation shall have the right, at any time within 90 days following the occurrence of such Special Event, upon (i) not less than 45 days' written notice to the Debenture Trustee and (ii) not less than 30 days nor more than 60 days' written notice to the Securityholders, to prepay the Securities, in whole (but not in part), at the Special Event Prepayment Price. The Special Event Prepayment Price shall be paid prior to 12:00 noon, New York City time, on the date of such prepayment or such earlier time as the Corporation determines, provided that the Corporation shall deposit with the Debenture Trustee an amount sufficient to pay the Special Event Prepayment Price by 10:00 a.m., New York City time, on the date such Special Event Prepayment Price is to be paid.
SECTION 14.02 Optional Prepayment by Corporation.
(a) Subject to Sections 14.02(b) and (c), the Corporation shall have the right to prepay the Securities, in whole or in part, at any time on or after the Initial Optional Prepayment Date, upon (i) not more than 45 days' written notice to the Debenture Trustee and (ii) not less than 30 days and not more than 60 days' written notice to the Securityholders, at the prepayment prices set forth below plus, in each case, accrued and unpaid interest thereon (including Compounded Interest and Additional Sums, if any) to the applicable date of prepayment (the "Optional Prepayment Price"), if prepaid during the 12-month period beginning June 8 of the years indicated below.
Year Percentage of Principal
---- -----------------------
2011 105.090%
2012 104.581%
2013 104.072%
2014 103.563%
2015 103.054%
2016 102.545%
2017 102.036%
2018 101.527%
2019 101.018%
2020 100.509%
2021 and thereafter 100.000%
|
If the Securities are only partially prepaid pursuant to this Section 14.02, the Securities to be prepaid shall be selected on a pro rata basis not more than 60 days prior to the date fixed for prepayment from the outstanding Securities not previously called for prepayment; provided, however, that with respect to Securityholders that would be required to hold Securities with an aggregate principal amount of less than $100,000 but more than an aggregate principal amount of zero as a result of such pro rata prepayment, the Corporation shall prepay Securities of each such Securityholder so that after such prepayment such Securityholder shall hold Securities either with an aggregate principal amount of at least $100,000 or such Securityholder no longer holds any Securities, and shall use such method (including, without limitation, by lot) as the Corporation shall deem fair and appropriate; provided, further, that any such proration may be made on the basis of the aggregate principal amount of Securities held by each Securityholder and may be made by making such adjustments as the Corporation deems fair and appropriate in order that only Securities in denominations of $1,000 or integral multiples thereof shall be prepaid. The Optional Prepayment Price shall be paid prior to 12:00 noon New York City time, on the date of such prepayment or at such earlier time as the Corporation determines, provided that the Corporation shall deposit with the Debenture Trustee an amount sufficient to pay the Optional Prepayment Price by 10:00 a.m., New York City time, on the date such Optional Prepayment Price is to be paid.
(b) Notwithstanding the first sentence of Section 14.02(a), upon the entry of an order for dissolution of the Trust by a court of competent jurisdiction, the Securities thereafter will be subject to optional prepayment, in whole only, but not in part, on or after the Initial Optional Prepayment Date, at the applicable Optional Prepayment Price and otherwise in accordance with this Article XIV.
(c) Any prepayment of Securities pursuant to Section 14.01 or Section 14.02 shall be subject to the Corporation obtaining any and all required regulatory approvals.
SECTION 14.03 No Sinking Fund.
The Securities are NOT entitled to the benefit of any sinking fund.
SECTION 14.04 Notice of Prepayment; Selection of Securities.
In case the Corporation shall desire to exercise the right to prepay all, or, as the case may be, any part of the Securities in accordance with their terms, it shall fix a date for prepayment and shall mail a notice of such prepayment at least 30 and not more than 60 days' prior to the date fixed for prepayment to the holders of Securities to be so prepaid as a whole or in part at their last addresses as the same appear on the Security Register. Such mailing shall be by first class mail. 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, failure to give such notice by mail or any defect in the notice to the holder of any Security designated for prepayment as a whole or in part shall not affect the validity of the proceedings for the prepayment of any other Security.
Each such notice of prepayment shall specify the CUSIP number of the Securities to be prepaid, the date fixed for prepayment, the Prepayment Price at which the Securities are to be prepaid (or the method by which such Prepayment Price is to be calculated), the place or places of payment where payment will be made upon presentation and surrender of the Securities, that interest accrued to the date fixed for prepayment will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be prepaid will cease to accrue. If less than all the Securities are to be prepaid, the notice of prepayment shall specify the numbers of the Securities to be prepaid. In case any Security is to be prepaid in part only, the notice of prepayment shall state the portion of the principal amount thereof to be prepaid and shall state that on and after the date fixed for prepayment, upon surrender of such Security, a new Security or Securities in principal amount equal to the portion thereof that has not been prepaid will be issued.
By 10:00 a.m., New York City time, on the prepayment date specified in the notice of prepayment given as provided in this Section, the Corporation will deposit with the Debenture Trustee or with one or more paying agents an amount of money sufficient to prepay on the prepayment date all the Securities so called for prepayment at the Prepayment Price.
SECTION 14.05 Payment of Securities Called for Prepayment.
If notice of prepayment has been given as provided in Section 14.04, the Securities or portions 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 Prepayment Price (subject to the rights of holders of Securities at the close of business on a regular record date in respect of an Interest Payment Date occurring on or prior to the prepayment date), and on and after said date (unless the Corporation shall default in the payment of such Securities at the Prepayment Price) interest (including Compounded Interest and Additional Sums, if any) on the Securities or portions of Securities so called for prepayment shall cease to accrue. On presentation and surrender of such Securities at a place of payment specified in said notice, the said Securities or the specified portions thereof shall be paid and prepaid by the Corporation at the applicable Prepayment Price (subject to the rights of holders of Securities on the close of business on a regular record date in respect of an Interest Payment Date occurring on or prior to the prepayment date).
Upon presentation of any Security prepaid in part only, the Corporation shall execute and the Debenture Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Corporation, a new Security or Securities of authorized denominations, in principal amount equal to the portion of the Security so presented that has not been prepaid.
ARTICLE XV
SUBORDINATION OF SECURITIES
SECTION 15.01 Agreement to Subordinate.
The Corporation covenants and agrees, and each holder of Securities issued hereunder likewise covenants and agrees, that the Securities shall be issued subject to the provisions of this Article XV; and each holder of a Security, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions.
The payment by the Corporation of the principal of, premium, if any, and interest (including Compounded Interest and Additional Sums, if any) on all Securities issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full of all Allocable Amounts then due and payable in respect of Senior Indebtedness, whether outstanding at the date of this Indenture or thereafter incurred.
No provision of this Article XV shall prevent the occurrence of any Default or Event of Default hereunder.
SECTION 15.02 Default on Senior Indebtedness.
In the event and during the continuation of any default by the Corporation in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness, or in the event that the maturity of any Senior Indebtedness has been accelerated because of a default and such acceleration has not been rescinded or canceled, then, in either case, no payment shall be made by the Corporation with respect to the principal (including prepayment payments) of (or premium, if any) or interest on the Securities (including Compounded Interest and Additional Sums, if any, or any other amounts which may be due on the Securities pursuant to the terms hereof or thereof).
In the event of the acceleration of the maturity of the Securities, then no payment shall be made by the Corporation with respect to the principal (including prepayment payments) of (or premiums if any) or interest on the Securities (including Compounded Interest and Additional Sums, if any, or any other amounts which may be due on the Securities pursuant to the terms hereof or thereof) until the holders of all Senior Indebtedness outstanding at the time of such acceleration shall receive payment, in full, of all Allocable Amounts due on or in respect of such Senior Indebtedness (including any amounts due upon acceleration).
In the event that, notwithstanding the foregoing, any payment is received by the Debenture Trustee, or any Securityholder, when such payment is prohibited by the preceding paragraphs of this Section 15.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered by the Debenture Trustee (if the notice required by Section 15.06 has
been received by the Debenture Trustee) or by any Securityholder, to the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent of the Allocable Amounts in respect of such Senior Indebtedness and to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Debenture Trustee in writing within 90 days of such payment of the Allocable Amounts then due and owing on such Senior Indebtedness, and only the Allocable Amounts specified in such notice to the Debenture Trustee shall be paid to the holders of such Senior Indebtedness.
SECTION 15.03 Liquidation: Dissolution; Bankruptcy.
Upon any payment by the Corporation or distribution of assets of the Corporation of any kind or character, whether in cash, property or securities, to creditors upon any dissolution, winding-up, liquidation or reorganization of the Corporation, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, the holders of all Senior Indebtedness of the Corporation will first be entitled to receive payment in full of Allocable Amounts due on or in respect of such Senior Indebtedness, before any payment is made by the Corporation on account of the principal of (or premium, if any) or interest on the Securities (including Compounded Interest and Additional Sums, if any, or any other amounts which may be due on the securities pursuant to the terms hereof or thereof); and upon any such dissolution, winding-up, liquidation or reorganization, any payment by the Corporation, or distribution of assets of the Corporation of any kind or character, whether in cash, property or securities, which the Securityholders or the Debenture Trustee would be entitled to receive from the Corporation, except for the provisions of this Article XV, shall be paid by the Corporation or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders or by the Debenture Trustee under the Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Corporation (pro rata to such holders on the basis of the respective Allocable Amounts of Senior Indebtedness held by such holders, as calculated by the Corporation) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all such Allocable Amounts of Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders or to the Debenture Trustee.
In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Corporation of any kind or character prohibited by the foregoing, whether in cash, property or securities, shall be received by the Debenture Trustee, or any Securityholder, before the Allocable Amounts of all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered by the Debenture Trustee (if the notice requested by section 15.06 has been received by the Debenture Trustee) or by any Securityholder, to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Corporation, for application to the payment of all Allocable Amounts of Senior Indebtedness remaining unpaid to the extent necessary to pay all Allocable Amounts due on or in respect of such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness.
For purposes of this Article XV, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Corporation as reorganized
or readjusted, or securities of the Corporation or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XV with respect
to the Securities to the payment of Senior Indebtedness that may at the time be
outstanding, provided that (i) such Senior Indebtedness is assumed by the new
corporation, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of such Senior Indebtedness are not, without the
consent of such holders, altered by such reorganization or readjustment. The
consolidation of the Corporation with, or the merger of the Corporation into,
another Person or the liquidation or dissolution of the Corporation following
the sale, conveyance, transfer or lease of its property as an entirety, or
substantially as an entirety, to another Person upon the terms and conditions
provided for in Article X of this Indenture shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 15.03
if such other Person shall, as a part of such consolidation, merger, sale,
conveyance, transfer or lease, comply with the conditions stated in Article X of
this Indenture. Nothing in Section 15.02 or in this Section 15.03 shall apply to
claims of, or payments to, the Debenture Trustee under or pursuant to Section
6.06 of this Indenture.
SECTION 15.04 Subrogation.
Subject to the payment in full of all Allocable Amounts of Senior Indebtedness, the rights of the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Corporation, as the case may be, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Securityholders or the Debenture Trustee would be entitled except for the provisions of this Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit of the holders of such Senior Indebtedness by Securityholders or the Debenture Trustee, shall, as between the Corporation, its creditors other than holders of Senior Indebtedness of the Corporation, and the holders of the Securities, be deemed to be a payment by the Corporation to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XV are and are intended solely for the purposes of defining the relative rights of the holders of the Securities, on the one hand, and the holders of such Senior Indebtedness on the other hand.
Nothing contained in this Article XV or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Corporation, its creditors other than the holders of Senior Indebtedness of the Corporation, and the holders of the Securities, the obligation of the Corporation, which is absolute and unconditional, to pay to the holders of the Securities the principal of (and premium, if any) and interest (including Compounded Interest and Additional
Sums, if any) on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Securities and creditors of the Corporation, as the case may be, other than the holders of Senior Indebtedness of the Corporation, as the case may be, nor shall anything herein or therein prevent the Debenture Trustee or the holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property or securities of the Corporation, as the case may be, received upon the exercise of any such remedy.
SECTION 15.05 Debenture Trustee to Effectuate Subordination.
Each Securityholder, by such Securityholder's acceptance thereof, authorizes and directs the Debenture Trustee on such Securityholder's behalf to take such action (as the Debenture Trustee, in its discretion, deems necessary or appropriate, upon instruction or otherwise) to effectuate the subordination provided in this Article XV and appoints the Debenture Trustee such Securityholder's attorney-in-fact for any and all such purposes.
SECTION 15.06 Notice by the Corporation.
The Corporation shall give prompt written notice to a Responsible Officer of the Debenture Trustee of any fact known to the Corporation that would prohibit the making of any payment of monies to or by the Debenture Trustee in respect of the Securities pursuant to the provisions of this Article XV. Notwithstanding the provisions of this Article XV or any other provision of this Indenture, the Debenture Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Debenture Trustee in respect of the Securities pursuant to the provisions of this Article XV, unless and until a Responsible Officer of the Debenture Trustee shall have received written notice thereof from the Corporation or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Debenture Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Debenture Trustee shall not have received the notice provided for in this Section 15.06 at least two Business Days prior to the date upon which, by the terms hereof, any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest (including Compounded Interest and Additional Sums, if any) on any Security), then, anything herein contained to the contrary notwithstanding, the Debenture Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date.
The Debenture Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled to conclusively rely on a written notice delivered to it by a Person representing himself to be a holder of Senior Indebtedness of the Corporation (or a trustee on behalf of such holder), as the case may be, to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee on behalf of any such holder or holders. In the event that the Debenture Trustee determines in good faith that further evidence is required with respect to the right of any
Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XV, the Debenture Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Debenture Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XV, and, if such evidence is not furnished, the Debenture Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.
Upon any payment or distribution of assets of the Corporation referred to in this Article XV, the Debenture Trustee, subject to the provisions of Article VI of this Indenture, and the Securityholders shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Debenture Trustee or to the Securityholders, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Corporation, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XV.
SECTION 15.07 Rights of the Debenture Trustee; Holders of Senior Indebtedness.
The Debenture Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Debenture Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness of the Corporation, the Debenture Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XV, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Debenture Trustee. The Debenture Trustee shall not be deemed to owe any fiduciary duty to the holders of` such Senior Indebtedness and, subject to the provisions of Article VI of this Indenture, the Debenture Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Securityholders, the Corporation or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise.
Nothing in this Article XV shall apply to claims of, or payments to, the Debenture Trustee under or pursuant to Section 6.06.
SECTION 15.08 Subordination May Not Be Impaired.
No right of any present or future holder of any Senior Indebtedness of the Corporation 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 Corporation, as the case may be, or by any act or
failure to act, in good faith, by any such holder, or by any noncompliance by the Corporation, as the case may be, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of the Corporation may, at any time and from time to time, without the consent of or notice to the Debenture Trustee or the Securityholders, without incurring responsibility to the Securityholders and without impairing or releasing the subordination provided in this Article XV or the obligations hereunder of the holders of the Securities to the holders of such Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Corporation, as the case may be, and any other Person.
ARTICLE XVI
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 16.01 Extension of Interest Payment Period.
So long as no Event of Default has occurred and is continuing, the Corporation shall have the right, at any time and from time to time during the term of the Securities, to defer payments of interest by extending the interest payment period of such Securities for a period not exceeding 10 consecutive semi-annual periods, including the first such semi-annual period during such extension period (the "Extended Interest Payment Period"), during which Extended Interest Payment Period no interest shall be due and payable, provided that no Extended Interest Payment Period shall end on a date other than an Interest Payment Date or extend beyond the Maturity Date. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 16.01, will bear interest thereon at the Coupon Rate compounded semi-annually for each semi-annual period during the Extended Interest Payment Period ("Compounded Interest"). At the end of the Extended Interest Payment Period, the Corporation shall pay all interest accrued and unpaid on the Securities, including any Additional Sums and Compounded Interest (together, "Deferred Interest"), that shall be payable to the holders of the Securities in whose names the Securities are registered in the Security Register on the record date immediately preceding the end of the Extended Interest Payment Period. Before the termination of any Extended Interest Payment Period, the Corporation may further defer payments of interest by further extending such Extended Interest Payment Period, provided that such Extended Interest Payment Period, together with all such previous and further extensions within such Extended Interest Payment Period, shall not (i) exceed 10 consecutive semi-annual periods, including the first such semiannual period during such Extended Interest Payment Period, (ii) end on a date other than an Interest Payment Date or (iii) extend beyond the Maturity Date of the Securities. Upon the termination of any Extended Interest Payment Period and the payment of all amounts then due,
the Corporation may commence a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof, but the Corporation may prepay at any time all or any portion of the interest accrued during an Extended Interest Payment Period.
SECTION 16.02 Notice of Extension.
(a) If the Property Trustee is the only holder of the Securities at the time the Corporation elects to commence an Extended Interest Payment Period, the Corporation shall give written notice to the Administrative Trustees, the Property Trustee and the Debenture Trustee of its election to commence such Extended Interest Payment Period at least five Business Days before the earlier of (i) the next succeeding date on which Distributions on the Trust Securities would have been payable, and (ii) the date the Property Trustee is required to give notice of the record date, or the date such Distributions are payable, to any national securities exchange or to holders of the Capital Securities, but in any event at least five Business Days before such record date.
(b) If the Property Trustee is not the only holder of the Securities at the time the Corporation elects to commence an Extended Interest Payment Period, the Corporation shall give the holders of the Securities and the Debenture Trustee written notice of its election of such Extended Interest Payment Period at least 10 Business Days before the earlier of (i) the next succeeding Interest Payment Date, and (ii) the date the Debenture Trustee is required to give notice of the record or payment date of such interest payment to any national securities exchange.
(c) The semiannual period in which any notice is given pursuant to paragraphs (a) or (b) of this Section 16.02 shall be counted as one of the 10 semi-annual periods permitted in the maximum Extended Interest Payment Period permitted under Section 16.01.
Wilmington Trust Company hereby accepts the trusts in this Indenture declared and provided, upon the terms and conditions hereinabove set forth.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written.
NARA BANCORP, INC.
By: /s/ BENJAMIN B. HONG -------------------------------------- Benjamin B. Hong President and Chief Executive Officer |
WILMINGTON TRUST COMPANY,
as Debenture Trustee
By: /s/ DONALD G. MACKELCAN -------------------------------------- Name: Donald G. MacKelcan Title: Vice President |
EXHIBIT A
(FORM OF FACE OF SECURITY)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH NARA BANCORP, INC. (THE
"CORPORATION") OR ANY "AFFILIATE" OF THE CORPORATION WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE CORPORATION, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE I44A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a)(1), (2), (3), (7) OR (8) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND NOT WITH
A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT
TO THE RIGHT OF THE CORPORATION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO THE CORPORATION, AND
(ii) PURSUANT TO CLAUSE (D) TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THE REVERSE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEREE TO THE CORPORATION. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND.
Exhibit A-1
THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
Exhibit A-2
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE CERTIFICATE
NARA BANCORP, INC.
$_______________________
10.18% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE JUNE 8, 2031
Nara Bancorp, Inc., a Delaware corporation (the "Corporation," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to _______________ or registered assigns, the principal sum of $ ________________ (___________________________ Dollars) on June 8, 2031 (the "Maturity Date"), unless previously prepaid, and to pay interest on the outstanding principal amount hereof from March 28, 2001, or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, semi-annually (subject to deferral as set forth herein) in arrears on June 8th and December 8th of each year, commencing June 8, 2001 at the rate of 10.18% per annum, until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, 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 same rate per annum compounded semi-annually ("Compounded Interest"). The amount of interest payable hereon shall be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which the principal of (or premium, if any) or interest on this Security is payable is not a Business Day (as defined in the Indenture), then the payment payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that if such next succeeding Business Day falls in the next succeeding calendar year such payment shall be made on the immediately preceding Business Day with the same force and effect as if made on such date. Pursuant to the Indenture, in certain circumstances the Corporation will be required to pay Additional Sums (as defined in the Indenture) with respect to this Security.
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, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment, which shall be at the close of business on the 15th day of the month immediately preceding the month in which the relevant Interest Payment Date falls. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the holders on such regular record date and may 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 to be fixed by the Debenture Trustee for the payment of such defaulted interest, notice whereof shall be given to the holders of Securities not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture.
Exhibit A-3
The principal of (and premium, if any) and interest (including Compounded Interest and Additional Sums, if any) on this Security shall be payable in immediately available funds at the office or agency of the Corporation maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest shall be made by transfer to an account maintained by the Person entitled thereto unless proper written transfer instructions have not been received by the relevant record date, in which case such payments shall be made by check mailed to the holder at such address as shall appear in the Security Register. Notwithstanding the foregoing, so long as the holder of this Security is the Property Trustee of Nara Bancorp Capital Trust 1 the payment of the principal of (and premium if any) and interest (including Compounded Interest and Additional Sums, if any) on this Security will be made at such place and to such account as may be designated by such Property Trustee.
The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Allocable Amounts then due and payable in respect of Senior Indebtedness, 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 Debenture Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Debenture Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.
This Security shall not be entitled to any benefit under the Indenture or be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Debenture Trustee.
The provisions of this Security are continued on the reverse side hereof and such provisions shall for all purposes have the same effect as though fully set forth at this place.
Exhibit A-4
IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly executed and sealed this __ day of ________________, _________________.
NARA BANCORP, INC.
Attest:
CERTIFICATE OF AUTHENTICATION
This is one of the 10.18% Junior Subordinated Deferrable Interest Debentures of Nara Bancorp, Inc. referred to in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Debenture Trustee
Exhibit A-5
(FORM OF REVERSE OF SECURITY)
This Security is one of the Securities of the Corporation (herein sometimes referred to as the "Securities"), specified in the Indenture, all issued or to be issued under and pursuant to an Indenture, dated as of march 28, 2001 (the "indenture"), duly executed and delivered between the corporation and Wilmington Trust Company, as Debenture Trustee (the "Debenture Trustee"), to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Debenture Trustee, the Corporation and the holders of the Securities. The Securities are limited in aggregate principal amount as specified in Section 2.02 of the Indenture.
Upon the occurrence and continuation of a Special Event (as defined in the Indenture) prior to June 8, 2011 (the "Initial Optional Prepayment Date"), the Corporation shall have the right, at any time within 90 days following the occurrence of such Special Event, to prepay this Security in whole (but not in part) at the Special Event Prepayment Price. "Special Event Prepayment Price" shall mean, with respect to any prepayment of the Securities following the occurrence and continuation of a Special Event prior to the Initial Optional Prepayment Date, an amount in cash equal to (i) 106.09% of the principal amount of the Securities to be prepaid, if the Special Event occurs prior to June 8, 2011 and (ii) if the Special Event occurs on or June 8, 2011, the amount of the Optional Prepayment Price (calculated as if the Corporation had prepaid such Securities on such date), plus, in the case of (i) and (ii), any accrued and unpaid interest (including Compounded Interest and Additional Sums, if any) thereon to the date of such prepayment.
In addition, the Corporation shall have the right to prepay this Security, in whole or in part, at any time on or after the Initial Optional Prepayment Date (an "Optional Prepayment"), at the prepayment prices set forth below plus, in each case, accrued and unpaid interest thereon (including Compounded Interest and Additional Sums, if any, thereon to the applicable date of prepayment (the "Optional Prepayment Price"), if prepaid during the 12-month period beginning June 8, of the years indicated below.
Year Percentage of Principal
---- -----------------------
2011 105.090%
2012 104.581%
2013 104.072%
2014 103.563%
2015 103.054%
2016 102.545%
2017 102.036%
2018 101.527%
2019 101.018%
2020 100.509%
2021 and thereafter 100.000%
|
The Prepayment Price shall be paid prior to 12:00 noon, New York City time, on the date of such prepayment or at such earlier time as the Corporation determines, provided that the Corporation shall deposit with the Debenture Trustee an amount sufficient to pay the Prepayment
Exhibit A-6
Price by 10:00 a.m., New York City time, on the date such Prepayment Price is to be paid. Any prepayment pursuant to this paragraph will be made upon not less than 30 days nor more than 60 days' prior written notice.
If the Securities are only partially prepaid by the Corporation pursuant to an Optional Prepayment, the particular Securities to be prepaid shall be selected on a pro rata basis from the outstanding Securities not previously called for prepayment; provided, however, that with respect to Securityholders that would be required to hold Securities with an aggregate principal amount of less than $100,000 but more than an aggregate principal amount of zero as a result of such pro rata prepayment, the Corporation shall prepay Securities of each such Securityholder so that after such prepayment such Securityholder shall hold Securities either with an aggregate principal amount of at least $100,000 or such Securityholder no longer holds any Securities and shall use such method (including, without limitation, by lot) as the Corporation shall deem fair and appropriate; provided, further, that any such proration may be made on the basis of the aggregate principal amount of Securities held by each Securityholder thereof and may be made by making such adjustments as the Corporation deems fair and appropriate in order that only Securities in denominations of $1,000 or integral multiples thereof shall be prepaid. In the event of prepayment of this Security in part only, a new Security or Securities for the portion hereof that has not been prepaid will be issued in the name of the holder hereof upon the cancellation hereof.
Notwithstanding the foregoing, any prepayment of Securities by the Corporation shall be subject to the receipt of any and all required regulatory approvals.
In case an Event of Default (as defined in the Indenture) shall have occurred and be continuing, the principal of all of the Securities may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Corporation and the Debenture Trustee, with the consent of the holders of a majority in aggregate principal amount of the Securities at the time outstanding (as defined in the Indenture), to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any manner the rights of the holders of the Securities; provided, however, that no such supplemental indenture shall, without the consent of each holder of Securities then outstanding and affected thereby, (i) change the Maturity Date of any Security, or reduce the rate or extend the time of payment of interest thereon (subject to Article XVI of the Indenture), or reduce or increase the aggregate principal amount of the series of which such Security is a part or issue other Securities, or change any of the prepayment provisions or make the principal thereof or any interest or premium thereon payable in any coin or currency other than U.S. dollars, or impair or affect the right of any holder of Securities to institute suit for payment thereof, or (ii) reduce the aforesaid percentage of Securities the holders of which are required to consent to any such supplemental indenture. The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Securities at the time outstanding affected thereby, on behalf of all of the holders of the Securities to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture, and its consequences, except a default in the
Exhibit A-7
payment of the principal of or premium, if any, or interest on any of the Securities or a default in respect of any covenant or provision under which the Indenture cannot be modified or amended without the consent of each holder of Securities then outstanding. Any such consent or waiver by the holder of this Security (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Security and of any Security issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest (including Compounded Interest Additional Sums, if any) on this Security at the time and place and at the rate and in the money herein prescribed.
So long as no Event of Default shall have occurred and be continuing,
the Corporation shall have the right, at any time and from time to time during
the term of the Securities, to defer payments of interest by extending the
interest payment period (an "Extended Interest Payment Period") of such
Securities for a period not (i) exceeding 10 consecutive semi-annual periods,
including the first such semi-annual period during such extension period, (ii)
ending on a date other than an Interest Payment Date or (iii) extending beyond
the Maturity Date of the Securities, at the end of which period the Corporation
shall pay all interest then accrued and unpaid (together with interest thereon
at the rate specified for the Securities to the extent that payment of such
interest is enforceable under applicable law). Before the termination of any
such Extended Interest Payment Period, the Corporation may further defer
payments of interest by further extending such Extended Interest Payment Period,
provided that such Extended Interest Payment Period, together with all such
previous and further extensions within such Extended Interest Payment Period,
(i) shall not exceed 10 consecutive semi-annual periods including the first
semi-annual period during such Extended Interest Payment Period, (ii) shall not
end on any date other than an Interest Payment Date, and (iii) shall not extend
beyond the Maturity Date of the Securities. Upon the termination of any such
Extended Interest Payment Period and the payment of all accrued and unpaid
interest and any additional amounts then due, the Corporation may commence a new
Extended Interest Payment Period, subject to the foregoing requirements. No
interest shall be due and payable during an Extended Interest Payment Period,
except at the end thereof, but the Corporation may prepay at any time all or any
portion of the interest accrued during an Extended Interest Payment Period.
The Corporation has agreed that it will not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock,
(ii) make any payment of principal of or premium, if any, or interest on or
repay, repurchase or redeem any debt securities of the Corporation (including
Other Debentures) that rank pari passu with or junior in right of payment to the
Securities or (iii) make any guarantee payments with respect to any guarantee by
the Corporation of the debt securities of any Subsidiary of the Corporation
(including Other Guarantees) if such guarantee ranks pari passu with or junior
in right of payment to the Securities (other than (a) dividends or distributions
in shares of, or options, warrants or rights to subscribe for or purchase shares
of, Common Stock), (b) any declaration of a dividend in connection with the
implementation of a
Exhibit A-8
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 Capital Securities Guarantee, as defined in the Indenture,
(d) as a result of a reclassification of the Corporation's capital stock or the
exchange or conversion of one class or series of the Corporation's capital stock
for another class or series of the Corporation's capital stock, (e) the purchase
of fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged and (f) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Corporation's benefit or
compensation plans for its directors, officers or employees or any of the
Corporation's dividend reinvestment plans), if at such time (1) there shall have
occurred any event of which the Corporation has actual knowledge that (a) is a
Default or an Event of Default and (b) in respect of which the Corporation shall
not have taken reasonable steps to cure, (2) such Securities are held by the
Property Trustee of Nara Bancorp Capital Trust I and the Corporation shall be in
default with respect to its payment of any obligations under the Capital
Securities Guarantee or (3) the Corporation shall have given notice of its
election to exercise its right to commence an Extended Interest Payment Period
and shall not have rescinded such notice, and such Extended Interest Payment
Period or any extension thereof shall have commenced and be continuing.
Subject to (i) the Corporation having received any required regulatory approvals and (ii) the Administrative Trustees of Nara Bancorp Capital Trust I having received an opinion of counsel to the effect that such distribution will not cause the holders of Capital Securities to recognize gain or loss for United States federal income tax purposes, the Corporation will have the right at any time to liquidate the Trust and, after satisfaction of liabilities of creditors of the Trust as required by applicable law, to cause the Securities to be distributed to the holders of the Trust Securities in liquidation of the Trust.
The Securities are issuable only in registered form without coupons in minimum denominations of $100,000 and multiples of $1,000 in excess thereof. As provided in the Indenture and subject to the transfer restrictions limitations as may be contained herein and therein from time to time, this Security is transferable by the holder hereof on the Security Register of the Corporation, upon surrender of this Security for registration of transfer at the office or agency of the Corporation in Wilmington, Delaware accompanied by a written instrument or instruments of transfer in form satisfactory to the Corporation or the Debenture Trustee duly executed by the holder hereof or his or her attorney duly authorized in writing, and thereupon one or more new Securities of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be made for any such registration of transfer, but the Corporation may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Security, the Corporation, the Debenture Trustee, any authenticating agent, any paying agent, any transfer agent and the security registrar may deem and treat the holder hereof as the absolute owner hereof (whether or not this Security shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the security registrar for the Securities) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and (subject to the Indenture) interest due hereon and for all other purposes, and neither the Corporation nor the
Exhibit A-9
Debenture Trustee nor any authenticating agent nor any paying agent nor any transfer agent nor any security registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or premium, if any, or interest (including Compounded Interest and Additional Sums, if any) on this Security, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, employee, officer or director, past, present or future, as such, of the Corporation or of any predecessor or successor Person, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released.
All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF.
Exhibit A-10
EXHIBIT 4.7
COMMON SECURITIES GUARANTEE AGREEMENT
NARA BANCORP, INC.
Dated as of March 28, 2001
COMMON SECURITIES GUARANTEE AGREEMENT
This COMMON SECURITIES GUARANTEE AGREEMENT (the "Common Securities Guarantee"), dated as of March 28, 2001, is executed and delivered by Nara Bancorp, Inc., a Delaware corporation (the "Guarantor"), for the benefit of the Holders (as defined herein) from time to time of the Common Securities (as defined herein) of Nara Bancorp Capital Trust I, a Delaware business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of March 28, 2001, by and among the Trustees of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof 400 common securities having an aggregate liquidation amount of Four Hundred Thousand Dollars ($400,000), to meet the capital requirements of the Trust; such common securities being designated the 10.18% Common Securities (the "Common Securities").
WHEREAS, as incentive for the Holders to purchase the Common Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Common Securities Guarantee, to pay the Guarantee Payments (as defined herein) to the Holders of the Common Securities and to make certain other payments on the terms and conditions set forth herein; and
WHEREAS, the Guarantor is also executing and delivering the Capital Securities Guarantee Agreement, dated as of March 28, 2001 (the "Capital Securities Guarantee"), for the benefit of the holders of the Capital Securities (as defined in the Declaration); it being understood that if an Event of Default (as defined in the Declaration) has occurred and is continuing, the rights of Holders of the Common Securities to receive Guarantee Payments under this Common Securities Guarantee are subordinated, to the extent and in the manner set forth herein, to the rights of holders of Capital Securities (as defined in the Declaration) to receive Guarantee Payments under the Capital Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of the Common Securities, which purchase the Guarantor hereby acknowledges shall benefit the Guarantor, the Guarantor executes and delivers this Common Securities Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation
In this Common Securities Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Common Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;
(b) terms defined in the Declaration as in effect at the date of execution of this Common Securities Guarantee have the same meaning when used in this Common Securities Guarantee unless otherwise defined in this Common Securities Guarantee;
(c) a term defined anywhere in this Common Securities Guarantee has the same meaning throughout;
(d) all references to "the Common Securities Guarantee" or "this Common Securities Guarantee" are references to this Common Securities Guarantee, as modified, supplemented or amended from time to time;
(e) all references in this Common Securities Guarantee to Articles and Sections are references to Articles and Sections of this Common Securities Guarantee unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning as in the Trust Indenture Act unless otherwise defined in this Common Securities Guarantee; and
(g) a reference to the singular includes the plural and vice versa.
"Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Common Securities, to the extent not paid or made by or on behalf of the Issuer: (i) any accumulated and unpaid Distributions (as defined in the Declaration) that are required to be paid on such Common Securities, to the extent the Issuer has funds legally available therefor at such time, (ii) the redemption price, including all accumulated and unpaid Distributions to the date of redemption (the "Redemption Price"), to the extent the Issuer has funds legally available therefor at such time, with respect to any Common Securities called for redemption, and (iii) upon a voluntary or involuntary dissolution, winding-up or liquidation of the Issuer (other than in connection with the distribution of Debentures (as defined in the Declaration) to the Holders in exchange for Common Securities or in connection with the redemption of the Common Securities, in each case as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accumulated and unpaid Distributions on the Common Securities to the date of payment, to the extent the Issuer has funds legally available therefor at such time, and (b) the amount of assets of the Issuer remaining available for distribution to the Holders after satisfaction of liabilities to creditors of the Issuer as required by applicable law (in either case, the "Liquidation Distribution"). If an Event of Default under the Declaration or the Capital Securities Guarantee has occurred and is continuing, no Guarantee Payments with respect to the Common Securities shall be made until holders of Capital Securities shall be paid in full the Guarantee Payments to which they are entitled under the Capital Securities Guarantee.
"Holder" means any holder, as registered on the books and records of the Issuer, of any Common Securities.
"Other Guarantees" means all guarantees, other than this Common Securities Guarantee, to be issued by the Guarantor with respect to common securities (if
any) similar to the Common Securities issued by trusts other than the Issuer to be established by the Guarantor (if any), in each case similar to the Issuer.
ARTICLE II
GUARANTEE
SECTION 2.1. Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim which the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders.
SECTION 2.2. Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this Common Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands.
SECTION 2.3. Obligations Not Affected
The obligations, covenants, agreements and duties of the Guarantor under this Common Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Common Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Common Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Common 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 Common Securities, or any action on the part of the Issuer 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 Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Common 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 2.3 that the obligations of the Guarantor with respect to the Guarantee Payments shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 2.4. Rights of Holders
The Guarantor expressly acknowledges that any Holder of the Common Securities may institute a legal proceeding directly against the Guarantor to enforce its rights under this Common Securities Guarantee, without first instituting a legal proceeding against the Issuer or any other Person.
SECTION 2.5. Guarantee of Payment
This Common Securities Guarantee creates a guarantee of payment and not of collection.
SECTION 2.6. Subrogation
The Guarantor shall be subrogated to all (if any) rights of the Holders of the Common Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Common Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any 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 Common Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Common Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders.
SECTION 2.7. Independent Obligations
The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Common Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Common Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 2.3 hereof.
ARTICLE III
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 3.1. Limitation of Transactions
So long as any Common Securities remain outstanding, the
Guarantor will not (i) declare or pay any dividends or distribution on, or
redeem, purchase, acquire or make a liquidation payment with respect to any of
the Guarantor's capital 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 Guarantor (including Other Debentures, as defined in the
Indenture) that rank pari passu with or junior in right of payment to the
Debentures or (iii) make any guarantee payments with respect to any guarantee by
the Guarantor of the debt securities of any subsidiary of the Guarantor
(including Other Guarantees, as defined in the Indenture) if such guarantee
ranks pari passu with or junior in right of payment to the Debentures (other
than (a) dividends or distributions in shares of, or options, warrants or rights
to subscribe for or purchase shares of, common stock of the Guarantor, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Capital Securities Guarantee, (d) as a result of a
reclassification of the Guarantor's capital stock or the exchange or the
conversion of one class or series of the Guarantor's capital stock for another
class or series of the Guarantor's capital stock, (e) the purchase of fractional
interests in shares of the Guarantor's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged, and (f) purchases of common stock related to the issuance of common
stock or rights under any of the Guarantor's benefit or compensation plans for
its directors, officers or employees or any of the Guarantor's dividend
reinvestment plans) if at such time (1) there shall have occurred any event of
which the Guarantor has actual knowledge that (A) is, or with the giving of
notice or the lapse of time, or both, would be, an Event of Default and (B) in
respect of which the Guarantor shall not have taken reasonable steps to cure,
(2) such Debentures are held by the Property Trustee, the Guarantor shall be in
default with respect to its payment of any obligations under the Capital
Securities Guarantee or (3) the Guarantor shall have given notice of its
election of the exercise of its right to commence an Extended Interest Payment
Period as provided in the Indenture and shall not have rescinded such notice,
and such Extended Interest Payment Period, or an extension thereof, shall have
commenced and be continuing.
SECTION 3.2. Ranking
This Common Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all Allocable Amounts (as defined in the Indenture) in respect of Senior Indebtedness (as defined in the Indenture), to the same extent and in the same manner that the Debentures are subordinated to the Senior Indebtedness pursuant to the Indenture, it being understood that the terns of Article XV of the Indenture shall apply to the obligations of the Guarantor under this Common Securities Guarantee as if such Article XV were set forth herein in full, (ii) pari passu with the most senior preferred or preference stock now or
hereafter issued by the Guarantor and with any Other Guarantee and, except as set forth herein or therein, the Capital Securities Guarantee and any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor and (iii) senior to the Guarantor's common stock.
ARTICLE IV
TERMINATION
SECTION 4.1. Termination
This Common Securities Guarantee shall terminate and be of no further force or effect upon (i) full payment of the Redemption Price of all Common Securities, (ii) the dissolution, winding-up or liquidation of the Issuer, immediately following the full payment of the amounts payable in accordance with the Declaration, or (iii) the distribution of all of the Debentures to the Holders of the Trust Securities (as defined in the Declaration). Notwithstanding the foregoing, this Common Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of the Common Securities must restore payment of any sums paid under the Common Securities or under this Common Securities Guarantee.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Successors and Assign
All guarantees and agreements contained in this Common Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Common Securities then outstanding.
SECTION 5.2. Amendments
Except with respect to any changes which do not adversely affect in any material respect the rights of the Holders (in which case no consent of the Holders will be required), this Common Securities Guarantee may only be amended with the prior approval of the Holders of a majority in liquidation amount of all the outstanding Common Securities. The provisions of Section 12.2 of the Declaration with respect to meetings of Holders of the Trust Securities apply to the giving of such approval.
SECTION 5.3. Notices
All notices provided for in this Common Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Issuer, in care of the Administrative Trustee at the Issuer's mailing address set forth below (or such other address as the Issuer may give notice of to the Holders of the Common Securities):
Nara Bancorp Capital Trust I
c/o Nara Bancorp, Inc.
3701 Wilshire Boulevard, Suite 220
Los Angeles, California 90010
Telephone: (213) 639-1700
Telecopier: (213) 235-3033
(b) if given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Common Securities):
Nara Bancorp, Inc.
3701 Wilshire Boulevard, Suite 220
Los Angeles, California 90010
Telephone: (213) 639-1700
Telecopier: (213) 235-3033
(c) if given to any Holder of the Common Securities, at the address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.
SECTION 5.4. Benefit
This Common Securities Guarantee is solely for the benefit of the Holders of the Common Securities and is not separately transferrable from the Common Securities.
SECTION 5.5. Governing Law
THIS COMMON SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF.
This Common Securities Guarantee is executed as of the day and year first above written.
NARA BANCORP, INC., as Guarantor
By: /s/ BENJAMIN B. HONG
---------------------------------------
Benjamin B. Hong
President and Chief Executive
Officer
|
EXHIBIT 4.8
CAPITAL SECURITIES GUARANTEE AGREEMENT
NARA BANCORP, INC.
Dated as of March 28, 2001
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND INTERPRETATION ..................................................... 1
SECTION 1.1. Definitions and Interpretation ........................................... 1
ARTICLE II TRUST INDENTURE ACT................................................................ 5
SECTION 2.1. Trust Indenture Act; Application ......................................... 5
SECTION 2.2. Lists of Holders of Securities ........................................... 5
SECTION 2.3. Reports by the Capital Securities Guarantee Trustee ...................... 5
SECTION 2.4. Periodic Reports ......................................................... 6
SECTION 2.5. Evidence of Compliance with Conditions Precedent ......................... 6
SECTION 2.6. Waiver of Events of Default .............................................. 6
SECTION 2.7. Notice of Events of Default .............................................. 6
SECTION 2.8. Conflicting Interests .................................................... 7
ARTICLE III POWERS, DUTIES AND RIGHTS OF CAPITAL SECURITIES GUARANTEE TRUSTEE................. 7
SECTION 3.1. Powers and Duties of the Capital Securities Guarantee Trustee ............ 7
SECTION 3.2. Certain Rights of Capital Securities Guarantee Trustee ................... 9
SECTION 3.3. Not Responsible for Recitals or Issuance of Capital Securities
Guarantee................................................................. 11
ARTICLE IV CAPITAL SECURITIES GUARANTEE TRUSTEE............................................... 11
SECTION 4.1. Capital Securities Guarantee Trustee; Eligibility ........................ 11
SECTION 4.2. Appointment, Removal and Resignation of Capital Securities Guarantee
Trustee................................................................... 11
ARTICLE V GUARANTEE........................................................................... 12
SECTION 5.1. Guarantee ................................................................ 12
SECTION 5.2. Waiver of Notice and Demand .............................................. 12
SECTION 5.3. Obligations Not Affected ................................................. 13
SECTION 5.4. Rights of Holders ........................................................ 13
SECTION 5.5. Guarantee of Payment ..................................................... 14
SECTION 5.6. Subrogation............................................................... 14
SECTION 5.7. Independent Obligations .................................................. 14
ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION.......................................... 14
SECTION 6.1. Limitation of Transactions ............................................... 14
SECTION 6.2. Ranking .................................................................. 15
|
ARTICLE VII TERMINATION....................................................................... 16
SECTION 7.1. Termination............................................................... 16
ARTICLE VIII INDEMNIFICATION.................................................................. 16
SECTION 8.1. Exculpation .............................................................. 16
SECTION 8.2. Compensation and Indemnification ......................................... 16
ARTICLE IX MISCELLANEOUS ..................................................................... 17
SECTION 9.1. Successors and Assigns ................................................... 17
SECTION 9.2. Amendments ............................................................... 17
SECTION 9.3. Notices .................................................................. 17
SECTION 9.4. Benefit................................................................... 18
SECTION 9.5. Governing Law............................................................. 18
|
CROSS REFERENCE TABLE
Section of Trust
Indenture Act of Section of Guarantee
1939, as amended Agreement
---------------- --------------------
310(a) ................................................ 4.1 (a)
310(b) ................................................ 2.8, 4.1 (c)
310(c) ................................................ N/A
311(a) ................................................ 2.2(b)
311(b) ................................................ 2.2(b)
311(c) ................................................ N/A
312(a) ................................................ 2.2(a)
312(b) ................................................ 2.2(b)
312(c) ................................................ N/A
313 ................................................ 2.3
314(a) ................................................ 2.4
314(b) ................................................ N/A
314(c) ................................................ 2.5
314(d) ................................................ N/A
314(e) ................................................ 1.1, 2.5, 3.2
314(f) ................................................ 2.1, 3.2
315(a) ................................................ 3.1(d), 3.2(a)
315(b) ................................................ 2.7
315(c) ................................................ 3.1 (c)
315(d) ................................................ 3.1(d), 3.2(a), 8.1
315(e) ................................................ N/A
316(a) ................................................ 1.1, 2.6, 5.4
316(b) ................................................ 5.3, 5.4
316(c) ................................................ 9.2
317(a) ................................................ N/A
317(b) ................................................ N/A
318(a) ................................................ 2.1 (a)
318(b) ................................................ 2.1 (b)
318(c) ................................................ 2.1 (b)
|
* This Cross-Reference Table does not constitute part of this Guarantee Agreement and shall not affect the interpretation of any of its terns or provisions.
CAPITAL SECURITIES GUARANTEE AGREEMENT
This CAPITAL SECURITIES GUARANTEE AGREEMENT (the "Capital Securities Guarantee"), dated as of March 28, 2001 is executed and delivered by Nara Bancorp, Inc., a Delaware corporation (the "Guarantor"), and Wilmington Trust Company, a Delaware banking corporation, as trustee (the "Capital Securities Guarantee Trustee" or "Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of Nara Bancorp Capital Trust I, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of March 28, 2001, by and among the trustees of the
Issuer named therein, the Guarantor, as sponsor, and the Holders from time to
time of undivided beneficial interests in the assets of the Issuer, the Issuer
(i) is issuing on the date hereof 10,000 capital securities, having an aggregate
liquidation amount of $10,000,000, such capital securities being designated the
10.18% MMCapS(SM) (collectively, the "Capital Securities").
WHEREAS, as incentive for the Holders to purchase the Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Capital Securities Guarantee, to pay the Guarantee Payments (as defined herein) to the Holders of the Capital Securities, and the Guarantor agrees to make certain other payments on the terms and conditions set forth herein.
WHEREAS, the Guarantor is also executing and delivering the Common Securities Guarantee Agreement, dated as of March 28, 2001 (the "Common Securities Guarantee"), for the benefit of the holders of the Common Securities (as defined herein), the terms of which provide that if an Event of Default (as defined in the Declaration) has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinated, to the extent and in the manner set forth in the Common Securities Guarantee, to the rights of Holders of the Capital Securities to receive Guarantee Payments under this Capital Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of Capital Securities, which purchase the Guarantor hereby acknowledges shall benefit the Guarantor, the Guarantor executes and delivers this Capital Securities Guarantee for the benefit of such Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation
In this Capital Securities Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Capital Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;
(b) terms defined in the Declaration as in effect at the date of execution of this Capital Securities Guarantee have the same meaning when used in this Capital Securities Guarantee unless otherwise defined in this Capital Securities Guarantee;
(c) a term defined anywhere in this Capital Securities Guarantee has the same meaning throughout;
(d) all references to "the Capital Securities Guarantee" or "this Capital Securities Guarantee" are to this Capital Securities Guarantee as modified, supplemented or amended from time to time;
(e) all references in this Capital Securities Guarantee to Articles and Sections are to Articles and Sections of this Capital Securities Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning when used in this Capital Securities Guarantee, unless otherwise defined in this Capital Securities Guarantee, or unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 under the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in Wilmington, Delaware, Los Angeles, California or New York, New York are authorized or required by law or executive order to remain closed.
"Capital Securities Guarantee Trustee" shall mean Wilmington Trust Company, as Trustee under the Capital Securities Guarantee, until a Successor Capital Securities Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Capital Securities Guarantee and thereafter means each such Successor Capital Securities Guarantee Trustee.
"Common Securities" shall mean the securities representing common undivided beneficial interests in the assets of the Issuer.
"Corporate Trust Office" shall mean the office of the Capital Securities Guarantee Trustee at which the corporate trust business of the Capital Securities Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration.
"Covered Person" shall mean any Holder or beneficial owner of Capital Securities.
"Debentures" shall mean the series of subordinated debt securities of the Guarantor designated the 10.18% Junior Subordinated Deferrable Interest Debentures due June 8, 2031, held by the Property Trustee (as defined in the Declaration) of the Issuer.
"Event of Default" shall mean a default by the Guarantor on any of its payment or other obligations under this Capital Securities Guarantee; provided, however, that, except with respect to default in respect of any Guarantee Payment, no default by the Guarantor hereunder shall constitute an Event of Default unless the Guarantor shall have received written notice of the default and shall not have cured such default within 60 days after receipt thereof.
"Guarantee Payments" shall mean the following payments or distributions,
without duplication, with respect to the Capital Securities, to the extent not
paid or made by or on behalf of the Issuer: (i) any accumulated and unpaid
Distributions (as defined in the Declaration) that are required to be paid on
such Capital Securities, to the extent the Issuer has funds legally available
therefor at such time, (ii) the redemption price, including ail accumulated and
unpaid Distributions to the date of redemption (the "Redemption Price"), to the
extent the Issuer has funds legally available therefor at such time, with
respect to any Capital Securities called for redemption, and (iii) upon a
voluntary or involuntary dissolution, winding up or liquidation of the Issuer
(other than in connection with the distribution of Debentures to the Holders in
exchange for Capital Securities or in connection with the redemption of the
Capital Securities, in each case as provided in the Declaration),the lesser of
(a) the aggregate of the liquidation amount and all accumulated and unpaid
Distributions on the Capital Securities to the date of payment, to the extent
the Issuer has funds legally available therefor at such time, and (b) the amount
of assets of the Issuer remaining available for distribution to the Holders
after satisfaction of liabilities to creditors of the Issuer as required by
applicable law (in either case, the "Liquidation Distribution"). If an Event of
Default has occurred and is continuing, no Guarantee Payments under the Common
Securities Guarantee with respect to the Common Securities or any guarantee
payment under the Common Securities Guarantee or any Other Common Securities
Guarantee shall be made until the Holders of the Capital Securities shall be
paid in full the Guarantee Payments to which they are entitled under this
Capital Securities Guarantee.
"Holder" shall mean any holder, as registered on the books and records of the Issuer, of any Capital Securities; provide, however, that, in determining whether the holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Person actually known to a Responsible Officer of the Capital Securities Guarantee Trustee to be an Affiliate of the Guarantor.
"Indemnified Person" shall mean the Capital Securities Guarantee Trustee (including in its individual capacity), any Affiliate of the Capital Securities Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Capital Securities Guarantee Trustee.
"Indenture" shall mean the Indenture, dated as of March 28, 2001, between Nara Bancorp, Inc., as issuer of Debentures (the "Debenture Issuer"), and Wilmington Trust Company, as trustee, pursuant to which the Debentures are to be issued to the Property Trustee of the Issuer.
"Majority in Liquidation Amount of the Capital Securities" shall mean, except as provided by the Trust Indenture Act, a vote by Holder(s) of the Capital Securities, voting
separately as a class, of more than 50% of the aggregate liquidation amount (including the amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to but excluding the date upon which the voting percentages are determined) of all outstanding Capital Securities, excluding Capital Securities held by the Guarantor, the Issuer or any Affiliate thereof.
"Officers' Certificate" shall mean, with respect to any Person, a certificate signed by the Chairman, the Chief Executive Officer, the President, an Executive or Senior Vice President, a Vice President, the Chief Financial Officer and the Secretary or an Assistant Secretary. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Capital Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate has read the covenants or conditions and the definitions relating thereto;
(b) 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
(c) a statement as to whether or not, in the opinion of each such officer, such condition or covenant has been complied with.
"Other Common Securities Guarantees" shall have the same meaning as "Other Guarantees" in the Common Securities Guarantee.
"Other Debentures" shall mean all junior subordinated debentures, other than the Debentures, issued by the Guarantor, from time to time, and sold to trusts other than the Issuer to be established by the Guarantor (if any), in each case similar to the Issuer.
"Other Guarantees" shall mean all guarantees, other than this Capital Securities Guarantee, to be issued by the Guarantor with respect to capital securities (if any) similar to the Capital Securities, issued by trusts other than the Issuer to be established by the Guarantor (if any), in each case similar to the Issuer.
"Person" shall mean 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" shall mean, with respect to a Person, any officer with direct responsibility for the administration of any matters relating to this Capital Securities Guarantee.
"Successor Capital Securities Guarantee Trustee" shall mean a successor Capital Securities Guarantee Trustee possessing the qualifications to act as Capital Securities Guarantee Trustee under Section 4.1.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as amended.
"Trust Securities" shall mean the Common Securities and the Capital Securities, collectively.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application
(a) This Capital Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Capital Securities Guarantee and shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Capital Securities Guarantee limits, qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. If any provision of this Capital Securities Guarantee modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the modified or excluded provision of the Trust Indenture Act shall be deemed to apply to this Capital Securities Guarantee as so modified or excluded, as the case may be.
SECTION 2.2. Lists of Holders of Securities
(a) The Guarantor shall provide the Capital Securities Guarantee Trustee (unless the Capital Securities Guarantee Trustee is otherwise the registrar of the Capital Securities) with a list, in such form as the Capital Securities Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Capital Securities ("List of Holders") (i) as of the record date, within fourteen (14) days after such record date for payment of Distributions (as defined in the Declaration), and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Capital Securities Guarantee Trustee; provided, however, that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Capital Securities Guarantee Trustee by the Guarantor. The Capital Securities Guarantee Trustee may destroy any List of Holders previously given to it upon receipt of a new List of Holders.
(b) The Capital Securities Guarantee Trustee shall comply with its obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3. Reports by the Capital Securities Guarantee Trustee
Within 60 days after the date hereof, and no later than the anniversary date hereof in each succeeding year, the Capital Securities Guarantee Trustee shall provide to the Holders of the Capital Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Capital Securities Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4. Periodic Reports
The Guarantor shall provide to the Capital Securities Guarantee Trustee such documents, reports and information as are required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Delivery of such reports, information and documents to the Capital Securities Guarantee Trustee is for informational purposes, only and the Capital Securities Guarantee Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Guarantor's compliance with any of its covenants hereunder (as to which the Capital Securities Guarantee Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 2.5. Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Capital Securities Guarantee Trustee such evidence of compliance with the conditions precedent, if any, provided for in this Capital Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.6. Waiver of Events of Default
The Holders of a Majority in Liquidation Amount of the Capital Securities may, by vote, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Capital Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.
SECTION 2.7. Notice of Events of Default
(a) The Capital Securities Guarantee Trustee shall, within 10 Business Days after the Capital Securities Guarantee Trustee has knowledge of the occurrence of an Event of Default with respect to this Capital Securities Guarantee, transmit by mail, first class postage prepaid, to all Holders of the Capital Securities, notices of all such Events of Default, unless such Events of Default have been cured before the giving of such notice; provided, however, that, except in the case of an Event of Default arising from the non-payment of any Guarantee Payment, the Capital Securities Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Capital Securities Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Capital Securities.
(b) The Capital Securities Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Capital Securities Guarantee Trustee shall have received written notice, or a Responsible Officer of the Capital Securities Guarantee Trustee charged with the administration of the Declaration shall have actual knowledge, of such Event of Default.
SECTION 2.8. Conflicting Interests
The Declaration shall be deemed to be specifically described in this Capital Securities Guarantee 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
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Capital Securities Guarantee Trustee
(a) This Capital Securities Guarantee shall be held by the Capital Securities Guarantee Trustee for the benefit of the Holders of the Capital Securities, and the Capital Securities Guarantee Trustee shall not transfer this Capital Securities Guarantee to any Person except a Holder of the Capital Securities exercising his or her rights pursuant to Section 5.4(b) or to a Successor Capital Securities Guarantee Trustee on acceptance by such Successor Capital Securities Guarantee Trustee of its appointment to act as Successor Capital Securities Guarantee Trustee. The right, title and interest of the Capital Securities Guarantee Trustee shall automatically vest in any Successor Capital Securities Guarantee Trustee, and such vesting and succession of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Capital Securities Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the Capital Securities Guarantee Trustee has occurred and is continuing, the Capital Securities Guarantee Trustee shall enforce this Capital Securities Guarantee for the benefit of the Holders of the Capital Securities.
(c) The Capital Securities Guarantee Trustee, before the occurrence of any Event of Default (of which, other than a default in respect of any Guarantee Payment, a Responsible Officer of the Property Trustee has actual knowledge) and after the curing of all such Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Capital Securities Guarantee, and no implied covenants or obligations shall be read into this Capital Securities Guarantee against the Capital Securities Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Capital Securities Guarantee Trustee, the Capital Securities Guarantee Trustee shall exercise such of the rights and powers vested in it by this Capital Securities Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Capital Securities Guarantee shall be construed to relieve the Capital Securities 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 (of which, other than a default in respect of any Guarantee Payment, a Responsible Officer of the Property Trustee has actual knowledge) and after the curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Capital Securities Guarantee Trustee shall be determined solely by the express provisions of this Capital Securities Guarantee, and the Capital Securities Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Capital Securities Guarantee, and no implied covenants or obligations shall be read into this Capital Securities Guarantee against the Capital Securities Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Capital Securities Guarantee Trustee, the Capital Securities 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 Capital Securities Guarantee Trustee and conforming to the requirements of this Capital Securities Guarantee; provided, however, that in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Capital Securities Guarantee Trustee, the Capital Securities Guarantee Trustee shall be under a duty to examine the same to determine whether or not on their face they conform to the requirements of this Capital Securities Guarantee;
(ii) the Capital Securities Guarantee Trustee shall not be liable for any errors of judgment made in good faith by a Responsible Officer of the Capital Securities Guarantee Trustee, unless it shall be proved that the Capital Securities Guarantee Trustee or such Responsible Officer was negligent in ascertaining the pertinent facts upon which such judgment was made;
(iii) the Capital Securities Guarantee Trustee shall not be liable with respect to any actions taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a Majority in Liquidation Amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Capital Securities Guarantee Trustee, or exercising any trust or power conferred upon the Capital Securities Guarantee Trustee under this Capital Securities Guarantee; and
(iv) no provision of this Capital Securities Guarantee shall require the Capital Securities 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 Capital Securities 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 Capital Securities Guarantee or indemnity, reasonably satisfactory to the Capital Securities Guarantee Trustee, against such risk or liability is not reasonably assured to it.
SECTION 3.2. Certain Rights of Capital Securities Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) the Capital Securities Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by this Capital Securities Guarantee may be sufficiently evidenced by an Officers' Certificate;
(iii) whenever, in the administration of this Capital Securities Guarantee, the Capital Securities Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Capital Securities Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate, which, upon receipt of such request, shall be promptly delivered by the Guarantor;
(iv) the Capital Securities Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument or other document (or any rerecording, refiling or registration thereof);
(v) the Capital Securities Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion; and such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees; and the Capital Securities Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Capital Securities Guarantee from any court of competent jurisdiction;
(vi) the Capital Securities Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Capital Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Capital Securities Guarantee Trustee such security and indemnity, reasonably satisfactory to the Capital Securities Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Capital Securities Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Capital Securities Guarantee Trustee, provided, however, that nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Capital Securities Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Capital Securities Guarantee;
(vii) the Capital Securities Guarantee Trustee shall have no obligation 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 Capital Securities Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit;
(viii) the Capital Securities Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Capital Securities Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such person appointed with due care by it hereunder;
(ix) any action taken by the Capital Securities Guarantee Trustee or its agents hereunder shall bind the Holders of the Capital Securities, and the signature of the Capital Securities Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Capital Securities Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Capital Securities Guarantee, both of which shall be conclusively evidenced by the Capital Securities Guarantee Trustee's or its agent's taking such action;
(x) whenever in the administration of this Capital Securities Guarantee the Capital Securities Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Capital Securities Guarantee Trustee (i) may request instructions from the Holders of a Majority in Liquidation Amount of the Capital Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions; and
(xi) the Capital Securities Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Capital Securities Guarantee.
(b) No provision of this Capital Securities Guarantee shall be deemed to impose any duty or obligation on the Capital Securities 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 Capital Securities 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 Capital Securities Guarantee Trustee shall be construed to be a duty.
SECTION 3.3. Not Responsible for Recitals or Issuance of Capital Securities Guarantee
The recitals contained in this Capital Securities Guarantee shall be taken as the statements of the Guarantor, and the Capital Securities Guarantee Trustee does not assume any responsibility for their correctness. The Capital Securities Guarantee Trustee makes no representation as to the validity or sufficiency of this Capital Securities Guarantee.
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4. I. Capital Securities Guarantee Trustee; Eligibility
(a) There shall at all times be a Capital Securities Guarantee Trustee that shall
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation or other Person organized and doing
business under the laws of the United States of America or any state or
territory thereof or of the District of Columbia, or a corporation or
other Person permitted by the Securities and Exchange Commission to act
as an indenture trustee under the Trust Indenture Act, authorized under
such laws to exercise corporate trust powers, having a combined capital
and surplus of at least fifty million U.S. dollars ($50,000,000), and
subject to supervision or examination by federal, state, territorial or
District of Columbia authority; it being understood that if such
corporation or other Person publishes reports of condition at least
annually, pursuant to law or to the requirements of the supervising or
examining authority referred to above, then, for the purposes of this
Section 4.1(a)(ii) 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 Capital Securities Guarantee Trustee shall cease
to be eligible to so act under Section 4.1(a), the Capital Securities Guarantee
Trustee shall immediately resign in the manner and with the effect set out in
Section 4.2(c).
(c) If the Capital Securities Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Capital Securities Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.2. Appointment, Removal and Resonation of Capital Securities Guarantee Trustee
(a) Subject to Section 4.2(b), the Capital Securities Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default.
(b) The Capital Securities Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Capital Securities Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Capital Securities Guarantee Trustee and delivered to the Guarantor.
(c) The Capital Securities Guarantee Trustee shall hold office until a Successor Capital Securities Guarantee Trustee shall have been appointed, subject to Section 4.1, or until its removal or resignation. The Capital Securities Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Capital Securities Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Capital Securities Guarantee Trustee has been appointed, subject to Section 4.1, and has accepted such appointment by instrument in writing executed by such Successor Capital Securities Guarantee Trustee and delivered to the Guarantor and the resigning Capital Securities Guarantee Trustee.
(d) If no Successor Capital Securities Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery of an instrument of removal or resignation, the Capital Securities Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Capital Securities Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Capital Securities Guarantee Trustee.
(e) No Capital Securities Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Capital Securities Guarantee Trustee.
(f) Upon termination of this Capital Securities Guarantee or removal or resignation of the Capital Securities Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Capital Securities Guarantee Trustee all amounts due to the Capital Securities Guarantee Trustee accrued to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1. Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders.
SECTION 5.2. Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this Capital Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands.
SECTION 5.3. Obligations Not Affected
The obligations, covenants, agreements and duties of the Guarantor under this Capital Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Capital 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 Capital Securities, or any action on the part of the Issuer 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 Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Capital 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 with respect to the Guarantee Payments shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.4. Rights of Holders
(a) The Holders of a Majority in Liquidation Amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Capital Securities Guarantee Trustee in respect of this Capital Securities
Guarantee or exercising any trust or power conferred upon the Capital Securities Guarantee Trustee under this Capital Securities Guarantee.
(b) If the Capital Securities Guarantee Trustee fails to enforce this Capital Securities Guarantee, any Holder of the Capital Securities may institute a legal proceeding directly against the Guarantor to enforce the Capital Securities Guarantee Trustee's rights under this Capital Securities Guarantee, without first instituting a legal proceeding against the Issuer, the Capital Securities Guarantee Trustee or any other person or entity. Notwithstanding the rights of the Capital Securities Guarantee Trustee to enforce this Guarantee Agreement, if the Guarantor has failed to make a Guarantee Payment, any Holder of the Capital Securities may directly institute a proceeding against the Guarantor for enforcement of this Capital Securities Guarantee for such payment, without first instituting a legal proceeding against the Issuer, the Capital Securities Guarantee Trustee or any other person or entity. The Guarantor waives any right or remedy to require that any action be brought first against the Issuer or any other person or entity before proceeding directly against the Guarantor.
SECTION 5.5. Guarantee of Payment
This Capital Securities Guarantee creates a guarantee of payment and not of collection.
SECTION 5.6. Subrogation
The Guarantor shall be subrogated to all (if any) rights of the Holders of Capital Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Capital Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Capital Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Capital Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.7. Independent Obligations
The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Capital Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Capital Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1. Limitation of Transactions
So long as any Capital Securities remain outstanding, the Guarantor shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of the Guarantor's capital 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 Guarantor (including Other Debentures) that
rank pari passu with or junior in right of payment to the Debentures or (iii)
make any guarantee payments with respect to any guarantee by the Guarantor of
the debt securities of any subsidiary of the Guarantor (including Other
Guarantees) if such guarantee ranks pari passu with or junior in right of
payment to the Debentures (other than (a) dividends or distributions in shares
of, or options, warrants, rights to subscribe for or purchase shares of, common
stock of the Guarantor, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under this Capital Securities Guarantee, (d) as a
result of a reclassification of the Guarantor's capital stock or the exchange or
the conversion of one class or series of the Guarantor's capital stock for
another class or series of the Guarantor's capital stock, (e) the purchase of
fractional interests in shares of the Guarantor's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, and (f) purchases of common stock related to the
issuance of common stock or rights under any of the Guarantor's benefit or
compensation plans for its directors, officers or employees or any of the
Guarantor's dividend reinvestment plans) if at such time (1) there shall have
occurred any event of which the Guarantor has actual knowledge that (A) is a
Default or Event of Default (each as defined in the Indenture) and (B) in
respect of which the Guarantor shall not have taken reasonable steps to cure,
(2) the Debentures are held by the Property Trustee, the Guarantor shall be in
default with respect to its payment of any obligations under this Capital
Securities Guarantee or (3) the Guarantor shall have given notice of its
election of the exercise of its right to commence an Extended Interest Payment
Period as provided in the Indenture and shall not have rescinded such notice,
and such Extended Interest Payment Period, or an extension thereof, shall have
commenced and be continuing.
SECTION 6.2. Ranking
This Capital Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all Allocable Amounts (as defined in the Indenture) in respect of Senior Indebtedness (as defined in the Indenture), to the same extent and in the same manner that the Debentures are subordinated to Senior Indebtedness pursuant to the Indenture, it being understood that the terms of Article XV of the Indenture shall apply to the obligations of the Guarantor under this Capital Securities Guarantee as if such Article XV were set forth herein in full, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Guarantor and with any Other Guarantee and, except to the extent set forth therein, the Common Securities Guarantee, any Other Common Securities Guarantee, and any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock.
ARTICLE VII
TERMINATION
SECTION 7.1. Termination
This Capital Securities Guarantee shall terminate and be of no further force and effect upon (i) full payment of the Redemption Price of all Capital Securities, (ii) dissolution, winding up or liquidation of the Issuer, immediately following the full payment of the amounts payable in accordance with the Declaration, or (iii) the distribution of all of the Debentures to the Holders of the Trust Securities. Notwithstanding the foregoing, this Capital Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Capital Securities must restore payment of any sums paid under the Capital Securities or under this Capital Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Exculpation
(a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Capital Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Capital Securities Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Capital Securities might properly be paid.
SECTION 8.2. Compensation and Indemnification
The Guarantor agrees to pay to the Capital Securities Guarantee Trustee such compensation for its services as shall be mutually agreed upon by the Guarantor and the Capital Securities Guarantee Trustee. The Guarantor shall reimburse the Capital Securities Guarantee Trustee upon request for all reasonable out-of-pocket expenses incurred by it, including the reasonable compensation and expenses of the Capital Securities Guarantee Trustee's agents and counsel, except any expense as may be attributable to the negligence or bad faith of the Capital Securities Guarantee Trustee.
The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, liability, damage, action, suit, claim or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The provisions of this Section 8.2 shall survive the termination of this Capital Securities Guarantee and shall survive the resignation or removal of the Capital Securities Guarantee Trustee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Successors and Assigns
All guarantees and agreements contained in this Capital Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding.
SECTION 9.2. Amendments
Except with respect to any changes that do not materially adversely affect the rights of Holders of the Capital Securities (in which case no consent of such Holders will be required), this Capital Securities Guarantee may only be amended with the prior approval of the Holders of a Majority in Liquidation Amount of the Capital Securities. The provisions of Section 12.2 of the Declaration with respect to meetings of Holders of the Trust Securities apply to the giving of such approval. This Capital Securities Guarantee may not be amended, and no amendment hereof that affects the Capital Securities Guarantee Trustee's rights, duties or immunities hereunder or otherwise, shall be effective, unless such amendment is executed by the Capital Securities Guarantee Trustee (which shall have no obligation to execute any such amendment, but may do so in its sole discretion).
SECTION 9.3. Notices
All notices provided for in this Capital Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows:
(a) If given to the Issuer, in care of the Administrative Trustee at the Issuer's mailing address set forth below (or such other address as the Issuer may give notice of to the Capital Securities Guarantee Trustee and the Holders of the Capital Securities):
Nara Bancorp Capital Trust I
c/o Nara Bancorp, Inc.
3701 Wilshire Boulevard, Suite 220
Los Angeles, California 90010
Telephone: (213) 639-1700
Telecopier: (213) 235-3033
If given to the Capital Securities Guarantee Trustee, at the Capital Securities Guarantee Trustee's mailing address set forth below (or such other address as the Capital Securities Guarantee Trustee may give notice of to the Holders of the Capital Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telephone: (302) 651-1000
Telecopier:(302) 651-8882
(b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Capital Securities Guarantee Trustee and the Holders of the Capital Securities):
Nara Bancorp, Inc.
3701 Wilshire Boulevard, Suite 220
Los Angeles, California 90010
Telephone: (213) 639-1700
Telecopier:(213) 235-3033
(c) If given to any Holder of the Capital Securities, at the address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.
SECTION 9.4. Benefit
This Capital Securities Guarantee is solely for the benefit of the Holders of the Capital Securities and, subject to Section 3.1(a), is not separately transferable from the Capital Securities.
SECTION 9.5. Governing Law
THIS CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF.
This Capital Securities Guarantee is executed as of the day and year first above written.
NARA BANCORP, INC.,
as Guarantor
By: /s/ BENJAMIN B. HONG --------------------------------------- Benjamin B. Hong President and Chief Executive Officer |
WILMINGTON TRUST COMPANY,
as Capital Securities Guarantee Trustee
By: /s/ W. CHRIS SPONENBERG --------------------------------------- Name: W. Chris Sponenberg Title: Assistant Vice President |
Exhibit 4.9
AMENDED AND RESTATED DECLARATION
OF TRUST
BY AND AMONG
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
AS INSTITUTIONAL TRUSTEE,
NARA BANCORP, INC.,
AS SPONSOR,
AND
BON T. GOO, TIMOTHY T. CHANG AND CHRISTINE Y. OH
AS ADMINISTRATORS,
DATED AS OF MARCH 26, 2002
TABLE OF CONTENTS
Page
ARTICLE I INTERPRETATION AND DEFINITIONS.....................................1
Section 1.1. Definitions.................................................1
ARTICLE II ORGANIZATION......................................................7
Section 2.1. Name........................................................7
Section 2.2. Office......................................................7
Section 2.3. Purpose.....................................................7
Section 2.4. Authority...................................................7
Section 2.5. Title to Property of the Trust..............................7
Section 2.6. Powers and Duties of the Institutional Trustee
and the Administrators......................................8
Section 2.7. Prohibition of Actions by the Trust and
the Institutional Trustee...................................11
Section 2.8. Powers and Duties of the Institutional Trustee..............12
Section 2.9. Certain Duties and Responsibilities of
the Institutional Trustee and Administrators................13
Section 2.10. Certain Rights of Institutional Trustee.....................14
Section 2.11. Execution of Documents......................................16
Section 2.12. Not Responsible for Recitals or Issuance of Securities......16
Section 2.13. Duration of Trust...........................................16
Section 2.14. Mergers.....................................................17
ARTICLE III SPONSOR..........................................................18
Section 3.1. Sponsor's Purchase of Common Securities.....................18
Section 3.2. Responsibilities of the Sponsor.............................18
Section 3.3. Expenses....................................................18
Section 3.4. Right to Proceed............................................19
ARTICLE IV INSTITUTIONAL TRUSTEE AND ADMINISTRATORS..........................19
Section 4.1. Institutional Trustee; Eligibility..........................19
Section 4.2. Administrators..............................................20
Section 4.3. Appointment, Removal and Resignation
of Institutional Trustee and Administrators.................20
Section 4.4. Institutional Trustee Vacancies.............................21
Section 4.5. Effect of Vacancies.........................................21
Section 4.6. Meetings of the Institutional Trustee and
the Administrators..........................................21
Section 4.7. Delegation of Power.........................................22
Section 4.8. Conversion, Consolidation or Succession to Business.........22
ARTICLE V DISTRIBUTIONS......................................................22
Section 5.1. Distributions...............................................22
ARTICLE VI ISSUANCE OF SECURITIES............................................22
Section 6.1. General Provisions Regarding Securities.....................22
Section 6.2. Paying Agent, Transfer Agent and Registrar..................23
Section 6.3. Form and Dating.............................................23
Section 6.4. Mutilated, Destroyed, Lost or Stolen Certificates...........24
Section 6.5. Temporary Securities........................................24
|
Page
Section 6.6. Cancellation................................................24
Section 6.7. Rights of Holders; Waivers of Past Defaults.................25
ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST.............................26
Section 7.1. Dissolution and Termination of Trust........................26
ARTICLE VIII TRANSFER OF INTERESTS...........................................27
Section 8.1. General.....................................................27
Section 8.2. Transfer Procedures and Restrictions........................28
Section 8.3. Deemed Security Holders.....................................30
ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES,
INSTITUTIONAL TRUSTEE OR OTHERS...................................30
Section 9.1. Liability...................................................30
Section 9.2. Exculpation.................................................30
Section 9.3. Fiduciary Duty..............................................31
Section 9.4. Indemnification.............................................31
Section 9.5. Outside Businesses..........................................33
Section 9.6. Compensation; Fee...........................................33
ARTICLE X ACCOUNTING.........................................................34
Section 10.1. Fiscal Year.................................................34
Section 10.2. Certain Accounting Matters..................................34
Section 10.3. Banking.....................................................34
Section 10.4. Withholding.................................................35
ARTICLE XI AMENDMENTS AND MEETINGS...........................................35
Section 11.1. Amendments..................................................35
Section 11.2. Meetings of the Holders of Securities;
Action by Written Consent...................................36
ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE.........................37
Section 12.1. Representations and Warranties of Institutional Trustee.....37
ARTICLE XIII MISCELLANEOUS...................................................38
Section 13.1. Notices.....................................................38
Section 13.2. Governing Law...............................................39
Section 13.3. Intention of the Parties....................................39
Section 13.4. Headings....................................................39
Section 13.5. Successors and Assigns......................................39
Section 13.6. Partial Enforceability......................................39
Section 13.7. Counterparts................................................40
Annex I....................................Terms of Securities
Exhibit A-1................................Form of Capital Security Certificate
Exhibit A-2................................Form of Common Security Certificate
Exhibit B..................................Specimen of Initial Debenture
Exhibit C..................................Placement Agreement
|
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
NARA STATUTORY TRUST II
MARCH 26, 2002
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of March 26, 2002, by the Institutional Trustee (as defined herein), the Administrators (as defined herein), the Sponsor (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the Trust (as defined herein) to be issued pursuant to this Declaration;
WHEREAS, the Institutional Trustee, the Administrators and the Sponsor established Nara Statutory Trust II (the "Trust"), a statutory trust under the Statutory Trust Act (as defined herein) pursuant to a Declaration of Trust dated as of March 13, 2002 (the "Original Declaration"), and a Certificate of Trust filed with the Secretary of State of the State of Connecticut on March 13, 2002, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain debentures of the Debenture Issuer (as defined herein);
WHEREAS, as of the date hereof, no interests in the Trust have been issued; and
WHEREAS, the Institutional Trustee, the Administrators and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration;
NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a statutory trust under the Statutory Trust Act and that this Declaration constitutes the governing instrument of such statutory trust, the Institutional Trustee declares that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. The parties hereto hereby agree as follows:
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1. DEFINITIONS. Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;
(b) a term defined anywhere in this Declaration has the same meaning throughout;
(c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Declaration unless otherwise specified; and
(e) a reference to the singular includes the plural and vice versa.
"Additional Interest" has the meaning set forth in the Indenture.
"Administrative Action" has the meaning set forth in paragraph 4(a) of Annex I.
"Administrators" means each of Bon T Goo, Timothy T. Chang and Christine Y. Oh, solely in such Person's capacity as Administrator of the Trust created and continued hereunder and not in such Person's individual capacity, or such Administrator's successor in interest in such capacity, or any successor appointed as herein provided.
"Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder.
"Authorized Officer" of a Person means any Person that is authorized to bind such Person.
"Bankruptcy Event" means, with respect to any Person:
(a) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or
(b) such Person shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of such Person of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due.
"Business Day" means any day other than Saturday, Sunday or any other day on which banking institutions in New York City or Hartford, Connecticut are permitted or required by any applicable law to close.
"Capital Securities" has the meaning set forth in paragraph 1(a) of Annex I.
"Capital Security Certificate" means a definitive Certificate in fully registered form representing a Capital Security substantially in the form of Exhibit A-1.
"Capital Treatment Event" has the meaning set forth in paragraph 4(a) of Annex I.
"Certificate" means any certificate evidencing Securities.
"Closing Date" has the meaning set forth in the Placement Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation.
"Common Securities" has the meaning set forth in paragraph 1(b) of Annex I.
"Common Security Certificate" means a definitive Certificate in fully registered form representing a Common Security substantially in the form of Exhibit A-2.
"Company Indemnified Person" means (a) any Administrator; (b) any
Affiliate of any Administrator; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Administrator; or
(d) any officer, employee or agent of the Trust or its Affiliates.
"Corporate Trust Office" means the office of the Institutional Trustee at which the corporate trust business of the Institutional Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Declaration is located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103.
"Coupon Rate" has the meaning set forth in paragraph 2(a) of Annex I.
"Covered Person" means: (a) any Administrator, officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) any of the Trust's Affiliates; and (b) any Holder of Securities.
"Creditor" has the meaning set forth in Section 3.3.
"Debenture Issuer" means Nara Bancorp, Inc., a Delaware corporation, in its capacity as issuer of the Debentures under the Indenture.
"Debenture Trustee" means State Street Bank and Trust Company of Connecticut, National Association, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee.
"Debentures" means the Floating Rate Junior Subordinated Deferrable Interest Debentures due 2032 to be issued by the Debenture Issuer under the Indenture.
"Defaulted Interest" has the meaning set forth in the Indenture.
"Determination Date" has the meaning set forth in paragraph 4(a) of Annex I.
"Direct Action" has the meaning set forth in Section 2.8(d).
"Distribution" means a distribution payable to Holders of Securities in accordance with Section 5.1.
"Distribution Payment Date" has the meaning set forth in paragraph 2(b) of Annex I.
"Distribution Period" has the meaning set forth in paragraph 2(a) of Annex I.
"Distribution Rate" means, for the period beginning on (and including) the date of original issuance and ending on (but excluding) June 26, 2002, 5.59%, and for the period beginning on (and including) June 26, 2002 and thereafter, the Coupon Rate.
"Event of Default" means any one of the following events (whatever the reason for such event 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 an Indenture Event of Default; or
(b) default by the Trust in the payment of any Redemption Price of any Security when it becomes due and payable; or
(c) default in the performance, or breach, in any material respect, of any covenant or warranty of the Institutional Trustee in this Declaration (other than those specified in clause (a) or (b) 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 Institutional Trustee and to the Sponsor by the Holders of at least 25% in aggregate liquidation amount of the outstanding Capital 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
(d) the occurrence of a Bankruptcy Event with respect to the Institutional Trustee if a successor Institutional Trustee has not been appointed within 90 days thereof.
"Extension Period" has the meaning set forth in paragraph 2(b) of Annex I.
"Federal Reserve" has the meaning set forth in paragraph 3 of Annex I.
"Fiduciary Indemnified Person" shall mean the Institutional Trustee, any Affiliate of the Institutional Trustee and any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Institutional Trustee.
"Fiscal Year" has the meaning set forth in Section 10.1.
"Guarantee" means the guarantee agreement to be dated as of the Closing Date, of the Sponsor in respect of the Capital Securities.
"Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Statutory Trust Act.
"Indemnified Person" means a Company Indemnified Person or a Fiduciary Indemnified Person.
"Indenture" means the Indenture dated as of the Closing Date, between the Debenture Issuer and the Debenture Trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued, as such Indenture and any supplemental indenture may be amended, supplemented or otherwise modified from time to time.
"Indenture Event of Default" means an "Event of Default" as defined in the Indenture.
"Institutional Trustee" means the Trustee meeting the eligibility requirements set forth in Section 4.1.
"Interest" means any interest due on the Debentures including any Additional Interest and Defaulted Interest.
"Investment Company" means an investment company as defined in the Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in paragraph 4(a) of Annex I.
"Liquidation" has the meaning set forth in paragraph 3 of Annex I.
"Liquidation Distribution" has the meaning set forth in paragraph 3 of Annex I.
"Majority in liquidation amount of the Securities" means Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class.
"Maturity Date" has the meaning set forth in paragraph 4(a) of Annex I.
"Officers' Certificates" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant providing for it in this Declaration shall include:
(a) a statement that each officer signing the 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 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.
"OTS" has the meaning set forth in paragraph 3 of Annex I.
"Paying Agent" has the meaning specified in Section 6.2.
"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.
"Placement Agreement" means the Placement Agreement relating to the offering and sale of Capital Securities in the form of Exhibit C.
"Property Account" has the meaning set forth in Section 2.8(c).
"Pro Rata" has the meaning set forth in paragraph 8 of Annex I.
"Quorum" means a majority of the Administrators or, if there are only two Administrators, both of them.
"Redemption Date" has the meaning set forth in paragraph 4(a) of Annex I.
"Redemption/Distribution Notice" has the meaning set forth in paragraph 4(e) of Annex I.
"Redemption Price" has the meaning set forth in paragraph 4(a) of Annex I.
"Registrar" has the meaning set forth in Section 6.2.
"Responsible Officer" means, with respect to the Institutional Trustee, any officer within the Corporate Trust Office of the Institutional Trustee, including any vice-president, any assistant vice-president, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Corporate Trust Office of the Institutional Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject.
"Restricted Securities Legend" has the meaning set forth in Section 8.2(b).
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
"Rule 3a-7" means Rule 3a-7 under the Investment Company Act.
"Securities" means the Common Securities and the Capital Securities.
"Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation.
"Special Event" has the meaning set forth in paragraph 4(a) of Annex I.
"Special Redemption Date" has the meaning set forth in paragraph 4(a) of Annex I.
"Special Redemption Price" has the meaning set forth in paragraph 4(a) of Annex I.
"Sponsor" means Nara Bancorp, Inc., a Delaware corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust.
"Statutory Trust Act" means Chapter 615 of Title 34 of the Connecticut General Statutes, Sections 500, et seq. as may be amended from time to time.
"Successor Entity" has the meaning set forth in Section 2.14(b).
"Successor Institutional Trustee" has the meaning set forth in Section 4.3(a).
"Successor Securities" has the meaning set forth in Section 2.14(b).
"Super Majority" has the meaning set forth in paragraph 5(b) of Annex I.
"Tax Event" has the meaning set forth in paragraph 4(a) of Annex I.
"10% in liquidation amount of the Securities" means Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class.
"3-Month LIBOR" has the meaning set forth in paragraph 4(a) of Annex I.
"Transfer Agent" has the meaning set forth in Section 6.2.
"Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
"Trust Property" means (a) the Debentures, (b) any cash on deposit in, or owing to, the Property Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Institutional Trustee pursuant to the trusts of this Declaration.
"U.S. Person" means a United States Person as defined in Section 7701(a)(30) of the Code.
ARTICLE II
ORGANIZATION
SECTION 2.1. NAME. The Trust is named "Nara Statutory Trust II," as such name may be modified from time to time by the Administrators following written notice to the Holders of the Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Administrators.
SECTION 2.2. OFFICE. The address of the principal office of the Trust is c/o State Street Bank and Trust Company of Connecticut, National Association, 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103. On at least 10 Business Days written notice to the Holders of the Securities, the Administrators may designate another principal office, which shall be in a state of the United States or in the District of Columbia.
SECTION 2.3. PURPOSE. The exclusive purposes and functions of the Trust are (a) to issue and sell the Securities representing undivided beneficial interests in the assets of the Trust, (b) to invest the gross proceeds from such sale to acquire the Debentures, (c) to facilitate direct investment in the assets of the Trust through issuance of the Common Securities and the Capital Securities and (d) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust.
SECTION 2.4. AUTHORITY. Except as specifically provided in this Declaration, the Institutional Trustee shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Institutional Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Institutional Trustee acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Institutional Trustee to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Institutional Trustee as set forth in this Declaration. The Administrators shall have only those ministerial duties set forth herein with respect to accomplishing the purposes of the Trust and are not intended to be trustees or fiduciaries with respect to the Trust or the Holders. The Institutional Trustee shall have the right, but shall not be obligated except as provided in Section 2.6, to perform those duties assigned to the Administrators.
SECTION 2.5. TITLE TO PROPERTY OF THE TRUST. Except as provided in
Section 2.8 with respect to the Debentures and the Property Account or as
otherwise provided in this Declaration, legal title to all assets of the Trust
shall be vested in the Trust. The Holders shall not have legal title to any part
of the assets of the Trust, but shall have an undivided beneficial interest in
the assets of the Trust.
SECTION 2.6. POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE AND THE ADMINISTRATORS.
(a) The Institutional Trustee and the Administrators shall conduct the affairs of the Trust in accordance with the terms of this Declaration. Subject to the limitations set forth in paragraph (b) of this Section, and in accordance with the following provisions (i) and (ii), the Institutional Trustee and the Administrators shall have the authority to enter into all transactions and agreements determined by the Institutional Trustee to be appropriate in exercising the authority, express or implied, otherwise granted to the Institutional Trustee or the Administrators, as the case may be, under this Declaration, and to perform all acts in furtherance thereof, including without limitation, the following:
(i) Each Administrator 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 Securities;
(B) to cause the Trust to enter into, and to execute and deliver on behalf of the Trust, such agreements as may be necessary or desirable in connection with the purposes and function of the Trust, including agreements with the Paying Agent;
(C) ensuring compliance with the Securities Act, applicable state securities or blue sky laws;
(D) the sending of notices (other than notices of default), and other information regarding the Securities and the Debentures to the Holders in accordance with this Declaration;
(E) the consent to the appointment of a Paying Agent, Transfer Agent and Registrar in accordance with this Declaration, which consent shall not be unreasonably withheld or delayed;
(F) execution and delivery of the Securities in accordance with this Declaration;
(G) execution and delivery of closing certificates pursuant to the Placement Agreement and the application for a taxpayer identification number;
(H) unless otherwise determined by the Holders of a Majority in liquidation amount of the Securities or as otherwise required by the Statutory Trust Act, to execute on behalf of the Trust (either acting alone or together with any or all of the Administrators) any documents that the Administrators have the power to execute pursuant to this Declaration;
(I) the taking of any action incidental to the foregoing as the Institutional Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Declaration for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder);
(J) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Capital Securities and Holders of Common Securities as to such actions and applicable record dates; and
(K) to duly prepare and file all applicable tax returns and tax information reports that are required to be filed with respect to the Trust on behalf of the Trust.
(ii) As among the Institutional Trustee and the Administrators, the Institutional 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 Property 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 Property Account;
(D) the distribution through the Paying Agent of amounts owed to the Holders in respect of the 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 Securities and the Debentures to the Holders in accordance with this Declaration;
(G) the distribution of the Trust Property in accordance with the terms of this Declaration;
(H) to the extent provided in this Declaration, 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 Connecticut;
(I) after any Event of Default (provided that such Event of Default is not by or with respect to the Institutional Trustee) the taking of any action incidental to the foregoing as the Institutional Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Declaration and protect and conserve the Trust Property for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder); and
(J) to take all action that may be necessary for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory trust under the laws of the State of Connecticut and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Capital Securities or to enable the Trust to effect the purposes for which the Trust was created.
(iii) The Institutional Trustee shall have the power and authority to act on behalf of the Trust with respect to any of the duties, liabilities, powers or the authority of the Administrators set forth in Section 2.6(a)(i)(D), (E) and (F) herein but shall not have a duty to do any such act unless specifically requested to do so in writing by the Sponsor, and shall then be fully protected in acting pursuant to such written request; and in the event of a conflict between the action of the Administrators and the action of the Institutional Trustee, the action of the Institutional Trustee shall prevail.
(b) So long as this Declaration remains in effect, the Trust (or the Institutional Trustee or Administrators acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, neither the Institutional Trustee nor the Administrators may cause the Trust to (i) acquire any investments or engage in any activities not authorized by this Declaration, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Holders, except as expressly provided herein, (iii) take any action that would reasonably be expected (x) to cause the Trust to fail or cease to qualify as a "grantor trust" for United States federal income tax purposes or (y) to require the trust to register as an Investment Company under the Investment Company Act, (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 Institutional Trustee shall, at the sole cost and expense of the Trust, 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 Holders in their capacity as Holders.
(c) In connection with the issuance and sale of the Capital Securities, the Sponsor 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 Sponsor in furtherance of the following prior to the date of this Declaration are hereby ratified and confirmed in all respects):
(i) the taking of any action necessary to obtain an exemption from the Securities Act;
(ii) the determination of the States in which to take appropriate action to qualify or register for sale all or part of the Capital 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 Administrators of actions they must take on behalf of the Trust, and the preparation for execution and filing of any documents to be executed and filed by the Trust or on behalf of the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States in connection with the sale of the Capital Securities;
(iii) the negotiation of the terms of, and the execution and delivery of, the Placement Agreement providing for the sale of the Capital Securities; and
(iv) 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 Administrators and the Holders of a Majority in liquidation amount of the Common Securities are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust will not (i) be deemed to be an Investment Company required to be registered under the Investment Company Act, and (ii) fail to be classified as a "grantor trust" for United States federal income tax purposes. The Administrators and the Holders of a Majority in liquidation amount of the Common Securities shall not take any action inconsistent with the treatment of the Debentures as indebtedness of the Debenture Issuer for United States federal income tax purposes. In this connection, the Administrators and the Holders of a Majority in liquidation amount of the Common Securities are authorized to take any action, not inconsistent with applicable laws, the Certificate of Trust or this Declaration, as amended from time to time, that each of the Administrators and the Holders of a Majority in liquidation amount of the Common Securities determines in their discretion to be necessary or desirable for such purposes.
(e) All expenses incurred by the Administrators or the Institutional Trustee pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the Institutional Trustee and the Administrators shall have no obligations with respect to such expenses.
(f) The assets of the Trust shall consist of the Trust Property.
(g) Legal title to all Trust Property shall be vested at all times in the Institutional Trustee (in its capacity as such) and shall be held and administered by the Institutional Trustee and the Administrators for the benefit of the Trust in accordance with this Declaration.
(h) If the Institutional Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Declaration and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Institutional Trustee or to such Holder, then and in every such case the Sponsor, the Institutional Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Institutional Trustee and the Holders shall continue as though no such proceeding had been instituted.
SECTION 2.7. PROHIBITION OF ACTIONS BY THE TRUST AND THE INSTITUTIONAL TRUSTEE.
(a) The Trust shall not, and the Institutional Trustee shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Institutional Trustee shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of the Securities pursuant to the terms of this Declaration and of the Securities;
(ii) acquire any assets other than as expressly provided herein;
(iii) possess Trust Property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness other than loans represented by the Debentures;
(v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever other than as expressly provided herein;
(vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities;
(vii) carry on any "trade or business" as that phrase is used in the Code; or
(viii) other than as provided in this Declaration (including Annex I), (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable, or (D) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received a written opinion of counsel to the effect that such modification will not cause the Trust to cease to be classified as a "grantor trust" for United States federal income tax purposes.
SECTION 2.8. POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE.
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Institutional Trustee in trust for the benefit of the
Trust and the Holders of the Securities. The right, title and interest of the
Institutional Trustee to the Debentures shall vest automatically in each Person
who may hereafter be appointed as Institutional Trustee in accordance with
Section 4.3. Such vesting and cessation of title shall be effective whether or
not conveyancing documents with regard to the Debentures have been executed and
delivered.
(b) The Institutional Trustee shall not transfer its right, title and interest in the Debentures to the Administrators.
(c) The Institutional Trustee shall:
(i) establish and maintain a segregated non-interest bearing trust account (the "Property Account") in the name of and under the exclusive control of the Institutional Trustee, and maintained in the Institutional Trustee's trust department, on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Institutional Trustee, deposit such funds into the Property Account and make payments, or cause the Paying Agent to make payments, to the Holders of the Capital Securities and Holders of the Common Securities from the Property Account in accordance with Section 5.1. Funds in the Property Account shall be held uninvested until disbursed in accordance with this Declaration;
(ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Capital Securities and the Common Securities to the extent the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by the Administrators in accordance with the terms of the Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures to Holders of Securities upon the occurrence of certain circumstances pursuant to the terms of the Securities.
(d) The Institutional Trustee may bring or defend, pay, collect, compromise, arbitrate, resort to legal action with respect to, or otherwise adjust claims or demands of or against, the Trust which arises out of or in connection with an Event of Default of which a Responsible Officer of the Institutional Trustee has actual knowledge or arises out of the Institutional Trustee's duties and obligations under this Declaration; provided, however, that if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of the Capital Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such Holder (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the Holders of the Common Securities will be subrogated to the rights of such Holder of the Capital Securities to the extent of any payment made by the Debenture Issuer to such Holder of the Capital Securities in such Direct Action; provided, however, that no Holder of the Common Securities may exercise such right of subrogation so long as an Event of Default with respect to the Capital Securities has occurred and is continuing.
(e) The Institutional Trustee shall continue to serve as a Trustee until either:
(i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of the Securities pursuant to the terms of the Securities and this Declaration; or
(ii) a Successor Institutional Trustee has been appointed and has accepted that appointment in accordance with Section 4.3.
(f) The Institutional Trustee shall have the legal power to exercise all of the rights, powers and privileges of a Holder of the Debentures under the Indenture and, if an Event of Default occurs and is continuing, the Institutional Trustee may, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to this Declaration (including Annex I) and the terms of the Securities.
The Institutional Trustee must exercise the powers set forth in this
Section 2.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 2.3, and the Institutional Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust set
out in Section 2.3.
SECTION 2.9. CERTAIN DUTIES AND RESPONSIBILITIES OF THE INSTITUTIONAL TRUSTEE AND ADMINISTRATORS.
(a) The Institutional Trustee, before the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Institutional Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 6.7), the Institutional Trustee shall exercise such of the rights and powers vested in it by this Declaration, 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 or her own affairs.
(b) The duties and responsibilities of the Institutional Trustee and the Administrators shall be as provided by this Declaration. Notwithstanding the foregoing, no provision of this Declaration shall require the Institutional Trustee or Administrators 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 it shall have reasonable grounds to believe that repayment of such funds or adequate protection against such risk of liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Declaration relating to the conduct or affecting the liability of or affording protection to the Institutional Trustee or Administrators shall be subject to the provisions of this Article. Nothing in this Declaration shall be construed to relieve an Administrator or the Institutional Trustee from liability for its own negligent act, its own negligent failure to act, or its own willful misconduct. To the extent that, at law or in equity, the Institutional Trustee or an Administrator has duties and liabilities relating to the Trust or to the Holders, the Institutional Trustee or such Administrator shall not be liable to the Trust or to any Holder for the Institutional Trustee's or such Administrator's good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of the Administrators or the Institutional Trustee otherwise existing at law or in equity, are agreed by the Sponsor and the Holders to replace such other duties and liabilities of the Administrators or the Institutional Trustee.
(c) All payments made by the Institutional Trustee or a Paying Agent in respect of the 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 Institutional Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Holder, by its
acceptance of a 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 Institutional Trustee and the Administrators are not personally liable to it for any amount distributable in respect of any Security or for any other liability in respect of any Security. This Section 2.9(c) does not limit the liability of the Institutional Trustee expressly set forth elsewhere in this Declaration.
(d) The Institutional Trustee shall not be liable for its own acts or omissions hereunder except as a result of its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(i) the Institutional Trustee shall not be liable for any error of judgment made in good faith by an Authorized Officer of the Institutional Trustee, unless it shall be proved that the Institutional Trustee was negligent in ascertaining the pertinent facts;
(ii) the Institutional 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 Capital Securities or the Common Securities, as applicable, relating to the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under this Declaration;
(iii) the Institutional Trustee's sole duty with respect to the custody, safekeeping and physical preservation of the Debentures and the Property Account shall be to deal with such property in a similar manner as the Institutional Trustee deals with similar property for its fiduciary accounts generally, subject to the protections and limitations on liability afforded to the Institutional Trustee under this Declaration;
(iv) the Institutional Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor; and money held by the Institutional Trustee need not be segregated from other funds held by it except in relation to the Property Account maintained by the Institutional Trustee pursuant to Section 2.8(c)(i) and except to the extent otherwise required by law; and
(v) the Institutional Trustee shall not be responsible for monitoring the compliance by the Administrators or the Sponsor with their respective duties under this Declaration, nor shall the Institutional Trustee be liable for any default or misconduct of the Administrators or the Sponsor.
SECTION 2.10. CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE. Subject to the provisions of Section 2.9:
(a) the Institutional Trustee may conclusively rely and shall fully 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, direction, 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, sent or presented by the proper party or parties;
(b) if (i) in performing its duties under this Declaration, the Institutional Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Declaration, the Institutional Trustee finds the same ambiguous or inconsistent with any other provisions contained herein, or (iii) the Institutional Trustee is unsure of the application of any provision of this Declaration,
then, except as to any matter as to which the Holders of Capital Securities are entitled to vote under the terms of this Declaration, the Institutional Trustee may deliver a notice to the Sponsor requesting the Sponsor's written instructions as to the course of action to be taken and the Institutional Trustee shall take such action, or refrain from taking such action, as the Institutional Trustee shall be instructed in writing, in which event the Institutional Trustee shall have no liability except for its own negligence or willful misconduct;
(c) any direction or act of the Sponsor or the Administrators contemplated by this Declaration shall be sufficiently evidenced by an Officers' Certificate;
(d) whenever in the administration of this Declaration, the Institutional Trustee shall deem it desirable that a matter be proved or established before undertaking, suffering or omitting any action hereunder, the Institutional Trustee (unless other evidence is herein specifically prescribed) may request and conclusively rely upon an Officers' Certificate as to factual matters which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Administrators;
(e) the Institutional 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 reregistration thereof;
(f) the Institutional Trustee may consult with counsel of its selection (which counsel may be counsel to the Sponsor or any of its Affiliates) and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice; the Institutional Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction;
(g) the Institutional Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any of the Holders pursuant to this Declaration, unless such Holders shall have offered to the Institutional Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; provided, that nothing contained in this Section 2.10(g) shall be taken to relieve the Institutional Trustee, subject to Section 2.9(b), upon the occurrence of an Event of Default, to exercise such of the rights and powers vested in it by this Declaration, 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 or her own affairs;
(h) the Institutional 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 Holders, but the Institutional Trustee may make such further inquiry or investigation into such facts or matters as it may see fit;
(i) the Institutional 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 Institutional Trustee shall not be responsible for any misconduct or negligence on the part of or for the supervision of, any such agent or attorney appointed with due care by it hereunder;
(j) whenever in the administration of this Declaration the Institutional Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Institutional Trustee (i) may request instructions from the Holders of the Capital Securities
which instructions may only be given by the Holders of the same proportion in
liquidation amount of the Capital Securities as would be entitled to direct the
Institutional Trustee under the terms of the Capital 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 fully protected in acting in accordance with such instructions;
(k) except as otherwise expressly provided in this Declaration, the Institutional Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration;
(l) when the Institutional Trustee incurs expenses or renders services in connection with a Bankruptcy Event, such expenses (including the fees and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy law or law relating to creditors rights generally;
(m) the Institutional Trustee shall not be charged with knowledge of an Event of Default unless a Responsible Officer of the Institutional Trustee obtains actual knowledge of such event or the Institutional Trustee receives written notice of such event from any Holder, the Sponsor or the Debenture Trustee;
(n) any action taken by the Institutional Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Institutional Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Institutional Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Institutional Trustee's or its agent's taking such action; and
(o) no provision of this Declaration shall be deemed to impose any duty or obligation on the Institutional 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 Institutional 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 Institutional Trustee shall be construed to be a duty.
SECTION 2.11. EXECUTION OF DOCUMENTS. Unless otherwise determined in writing by the Institutional Trustee, and except as otherwise required by the Statutory Trust Act, the Institutional Trustee, or any one or more of the Administrators, as the case may be, is authorized to execute on behalf of the Trust any documents that the Institutional Trustee or the Administrators, as the case may be, have the power and authority to execute pursuant to Section 2.6.
SECTION 2.12. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Institutional Trustee does not assume any responsibility for their correctness. The Institutional Trustee makes no representations as to the value or condition of the property of the Trust or any part thereof. The Institutional Trustee makes no representations as to the validity or sufficiency of this Declaration, the Debentures or the Securities.
SECTION 2.13. DURATION OF TRUST. The Trust, unless earlier dissolved pursuant to the provisions of Article VII hereof, shall be in existence for 35 years from the Closing Date.
SECTION 2.14. MERGERS.
(a) The Trust may not 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 corporation or other body, except as described in this Section 2.14(b) and (c) and except in connection with the liquidation of the Trust and the distribution of the Debentures to Holders of Securities pursuant to Section 7.1(a)(iv) of the Declaration or Section 4 of Annex I.
(b) The Trust may, with the consent of the Institutional Trustee and without the consent of the Holders of the Capital Securities, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any state; provided that:
(i) if the Trust is not the surviving entity, such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust under the Securities; or
(B) substitutes for the Securities other securities having substantially the same terms as the Securities (the "Successor Securities") so that the Successor Securities rank the same as the Securities rank with respect to Distributions and payments upon Liquidation, redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the Successor Entity that possesses substantially the same powers and duties as the Institutional Trustee as the Holder of the Debentures;
(iii) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect;
(iv) the Institutional Trustee receives written confirmation from Moody's Investor Services, Inc. or any other nationally recognized statistical rating organization that rates securities issued by the initial purchaser of the Capital Securities that it will not reduce or withdraw the rating of any such securities because of such merger, conversion, consolidation, amalgamation or replacement;
(v) such Successor Entity has a purpose substantially identical to that of the Trust;
(vi) prior to such merger, consolidation, amalgamation or replacement, the Trust has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that:
(A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect;
(B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and
(C) following such merger, consolidation, amalgamation or replacement, the Trust (or the Successor Entity) will continue to be classified as a "grantor trust" for United States federal income tax purposes;
(vii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Guarantee;
(viii) the Sponsor owns 100% of the common securities of any Successor Entity; and
(ix) prior to such merger, consolidation, amalgamation or replacement, the Institutional Trustee shall have received an Officers' Certificate of the Administrators and an opinion of counsel, each to the effect that all conditions precedent under this Section 2.14(b) to such transaction have been satisfied.
(c) Notwithstanding Section 2.14(b), the Trust shall not, except with the consent of Holders of 100% in aggregate liquidation amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes.
ARTICLE III
SPONSOR
SECTION 3.1. SPONSOR'S PURCHASE OF COMMON SECURITIES. On the Closing Date, the Sponsor will purchase all of the Common Securities issued by the Trust in an amount at least equal to 3% of the capital of the Trust, at the same time as the Capital Securities are sold.
SECTION 3.2. RESPONSIBILITIES OF THE SPONSOR. In connection with the issue and sale of the Capital Securities, the Sponsor shall have the exclusive right and responsibility to engage in, or direct the Administrators to engage in, the following activities:
(a) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Capital Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; and
(b) to negotiate the terms of and/or execute on behalf of the Trust, the Placement Agreement and other related agreements providing for the sale of the Capital Securities.
SECTION 3.3. EXPENSES. In connection with the offering, sale and issuance of the Debentures to the Trust and in connection with the sale of the Securities by the Trust, the Sponsor, in its capacity as Debenture Issuer, shall:
(a) pay all reasonable costs and expenses relating to the offering, sale and issuance of the Debentures, including compensation of the Debenture Trustee under the Indenture in accordance with the provisions of the Indenture;
(b) be responsible for and shall pay all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust (including, but not limited to, costs and expenses
relating to the organization, maintenance and dissolution of the Trust), the offering, sale and issuance of the Securities (including fees to the placement agents in connection therewith), the fees and expenses (including reasonable counsel fees and expenses) of the Institutional Trustee and the Administrators, the costs and expenses relating to the operation of the Trust, including, without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, Paying Agents, Registrars, Transfer Agents, duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets and the enforcement by the Institutional Trustee of the rights of the Holders; and
(c) to pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust.
The Sponsor's obligations under this Section 3.3 shall be for the benefit of, and shall be enforceable by, any Person to whom such debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor has received notice hereof. Any such Creditor may enforce the Sponsor's obligations under this Section 3.3 directly against the Sponsor and the Sponsor irrevocably waives any right or remedy to require that any such Creditor take any action against the Trust or any other Person before proceeding against the Sponsor. The Sponsor agrees to execute such additional agreements as may be necessary or desirable in order to give full effect to the provisions of this Section 3.3.
SECTION 3.4. RIGHT TO PROCEED. The Sponsor acknowledges the rights of Holders to institute a Direct Action as set forth in Section 2.8(d) hereto.
ARTICLE IV
INSTITUTIONAL TRUSTEE AND ADMINISTRATORS
SECTION 4.1. INSTITUTIONAL TRUSTEE; ELIGIBILITY.
(a) There shall at all times be one Institutional Trustee which shall:
(i) not be an Affiliate of the Sponsor;
(ii) not offer or provide credit or credit enhancement to the Trust; and
(iii) be a banking corporation or trust company organized and doing business under the laws of the United States of America or any state thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00), and subject to supervision or examination by Federal, state, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 4.1(a)(iii), 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 Institutional Trustee shall cease to be eligible to so act under Section 4.1(a), the Institutional Trustee shall immediately resign in the manner and with the effect set forth in Section 4.3(a).
(c) If the Institutional Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act of 1939, as amended, the Institutional Trustee shall
either eliminate such interest or resign, to the extent and in the manner provided by, and subject to this Declaration.
(d) The initial Institutional Trustee shall be State Street Bank and Trust Company of Connecticut, National Association.
SECTION 4.2. ADMINISTRATORS. Each Administrator shall be a U.S. Person, 21 years of age or older and authorized to bind the Sponsor. The initial Administrators shall be Bon T. Goo, Timothy T. Chang and Christine Y. Oh. There shall at all times be at least one Administrator. Except where a requirement for action by a specific number of Administrators is expressly set forth in this Declaration and except with respect to any action the taking of which is the subject of a meeting of the Administrators, any action required or permitted to be taken by the Administrators may be taken by, and any power of the Administrators may be exercised by, or with the consent of, any one such Administrator.
SECTION 4.3. APPOINTMENT, REMOVAL AND RESIGNATION OF INSTITUTIONAL TRUSTEE AND ADMINISTRATORS.
(a) Notwithstanding anything to the contrary in this Declaration, no resignation or removal of the Institutional Trustee and no appointment of a Successor Institutional Trustee pursuant to this Article shall become effective until the acceptance of appointment by the Successor Institutional Trustee in accordance with the applicable requirements of this Section 4.3.
Subject to the immediately preceding paragraph, the Institutional Trustee may resign at any time by giving written notice thereof to the Holders of the Securities and by appointing a Successor Institutional Trustee. Upon the resignation of the Institutional Trustee, the Institutional Trustee shall appoint a successor by requesting from at least three Persons meeting the eligibility requirements, its expenses and charges to serve as the successor Institutional Trustee on a form provided by the Administrators, and selecting the Person who agrees to the lowest expense and charges (the "Successor Institutional Trustee"). If the instrument of acceptance by the Successor Institutional Trustee required by this Section 4.3 shall not have been delivered to the Institutional Trustee within 60 days after the giving of such notice of resignation or delivery of the instrument of removal, the Institutional Trustee may petition, at the expense of the Trust, any Federal, state or District of Columbia court of competent jurisdiction for the appointment of a Successor Institutional Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Institutional Trustee. The Institutional Trustee shall have no liability for the selection of such successor pursuant to this Section 4.3.
The Institutional Trustee may be removed by the act of the Holders of a Majority in liquidation amount of the Capital Securities, delivered to the Institutional Trustee (in its individual capacity and on behalf of the Trust) if an Event of Default shall have occurred and be continuing. If the Institutional Trustee shall be so removed, the Holders of Capital Securities, by act of the Holders of a Majority in liquidation amount of the Capital Securities then outstanding delivered to the Institutional Trustee, shall promptly appoint a Successor Institutional Trustee, and such Successor Institutional Trustee shall comply with the applicable requirements of this Section 4.3. If no Successor Institutional Trustee shall have been so appointed by the Holders of a Majority in liquidation amount of the Capital Securities and accepted appointment in the manner required by this Section 4.3, within 30 days after delivery of an instrument of removal, any Holder who has been a Holder of the Securities for at least 6 months may, on behalf of himself and all others similarly situated, petition any Federal, state or District of Columbia court of competent jurisdiction for the appointment of the Successor Institutional Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Institutional Trustee.
The Institutional Trustee shall give notice of its resignation and removal and each appointment of a Successor Institutional Trustee to all Holders in the manner provided in Section 13.1(d) and shall give notice to the Sponsor. Each notice shall include the name of the Successor Institutional Trustee and the address of its Corporate Trust Office.
(b) In case of the appointment hereunder of a Successor Institutional Trustee, the retiring Institutional Trustee and the Successor Institutional Trustee shall execute and deliver an amendment hereto wherein the Successor Institutional Trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, the Successor Institutional Trustee all the rights, powers, trusts and duties of the retiring Institutional Trustee with respect to the Securities and the Trust and (ii) shall add to or change any of the provisions of this Declaration as shall be necessary to provide for or facilitate the administration of the Trust by more than one Institutional Trustee, it being understood that nothing herein or in such amendment shall constitute such Institutional Trustees co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Institutional Trustee shall become effective to the extent provided therein and each Successor Institutional Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Institutional Trustee; but, on request of the Trust or any Successor Institutional Trustee such retiring Institutional Trustee shall duly assign, transfer and deliver to such Successor Institutional Trustee all Trust Property, all proceeds thereof and money held by such retiring Institutional Trustee hereunder with respect to the Securities and the Trust.
(c) No Institutional Trustee shall be liable for the acts or omissions to act of any Successor Institutional Trustee.
(d) The Holders of the Capital Securities will have no right to vote to appoint, remove or replace the Administrators, which voting rights are vested exclusively in the Holder of the Common Securities.
SECTION 4.4. INSTITUTIONAL TRUSTEE VACANCIES. If the Institutional Trustee ceases to hold office for any reason a vacancy shall occur. A resolution certifying the existence of such vacancy by the Institutional Trustee shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a trustee appointed in accordance with Section 4.3.
SECTION 4.5. EFFECT OF VACANCIES. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of the Institutional Trustee shall not operate to dissolve, terminate or annul the Trust or terminate this Declaration.
SECTION 4.6. MEETINGS OF THE INSTITUTIONAL TRUSTEE AND THE ADMINISTRATORS. Meetings of the Administrators shall be held from time to time upon the call of an Administrator. Regular meetings of the Administrators may be held in person in the United States or by telephone, at a place (if applicable) and time fixed by resolution of the Administrators. Notice of any in-person meetings of the Institutional Trustee with the Administrators or meetings of the Administrators shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Institutional Trustee with the Administrators or meetings of the Administrators or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of the Institutional Trustee or an Administrator, as the case may be, at a meeting shall constitute a waiver of notice of such meeting except where the Institutional Trustee or an Administrator, as the case may be, attends a meeting for the
express purpose of objecting to the transaction of any activity on the grounds that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Institutional Trustee or the Administrators, as the case may be, may be taken at a meeting by vote of the Institutional Trustee or a majority vote of the Administrators present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Institutional Trustee or the Administrators. Meetings of the Institutional Trustee and the Administrators together shall be held from time to time upon the call of the Institutional Trustee or an Administrator.
SECTION 4.7. DELEGATION OF POWER.
(a) Any Administrator may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 that is a U.S. Person his or her power for the purpose of executing any documents contemplated in Section 2.6; and
(b) the Administrators shall have power to delegate from time to time to such of their number the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrators or otherwise as the Administrators may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein.
SECTION 4.8. CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any Person into which the Institutional Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Institutional Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Institutional Trustee shall be the successor of the Institutional Trustee hereunder, provided such Person 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.
ARTICLE V
DISTRIBUTIONS
SECTION 5.1. DISTRIBUTIONS. Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Capital Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Debenture Issuer makes a payment of Interest or any principal on the Debentures held by the Institutional Trustee, the Institutional Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a "Distribution") of such amounts to Holders.
ARTICLE VI
ISSUANCE OF SECURITIES
SECTION 6.1. GENERAL PROVISIONS REGARDING SECURITIES.
(a) The Administrators shall, on behalf of the Trust, issue one series of capital securities substantially in the form of Exhibit A-1 representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I and one series of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I. The Trust shall issue no securities or other interests in the assets of the Trust other than the Capital Securities and the Common Securities. The Capital Securities rank pari passu to, and payment thereon shall be
made Pro Rata with, the Common Securities except that, where an Event of Default has occurred and is continuing, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Capital Securities as set forth in Annex I.
(b) The Certificates shall be signed on behalf of the Trust by one or more Administrators. Such signature shall be the facsimile or manual signature of any Administrator. In case any Administrator of the Trust who shall have signed any of the Securities shall cease to be such Administrator before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Administrator, and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Security, shall be an Administrator of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such an Administrator. A Capital Security shall not be valid until authenticated by the facsimile or manual signature of an Authorized Officer of the Institutional Trustee. Such signature shall be conclusive evidence that the Capital Security has been authenticated under this Declaration. Upon written order of the Trust signed by one Administrator, the Institutional Trustee shall authenticate the Capital Securities for original issue. The Institutional Trustee may appoint an authenticating agent that is a U.S. Person acceptable to the Trust to authenticate the Capital Securities. A Common Security need not be so authenticated.
(c) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust.
(d) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and, except as provided in Section 9.1(b) with respect to the Common Securities, non-assessable.
(e) Every Person, by virtue of having become a Holder in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration and the Guarantee.
SECTION 6.2. PAYING AGENT, TRANSFER AGENT AND REGISTRAR. The Trust shall maintain in Hartford, Connecticut, an office or agency where the Capital Securities may be presented for payment ("Paying Agent"), and an office or agency where Securities may be presented for registration of transfer or exchange (the "Transfer Agent"). The Trust shall keep or cause to be kept at such office or agency a register for the purpose of registering Securities, transfers and exchanges of Securities, such register to be held by a registrar (the "Registrar"). The Administrators may appoint the Paying Agent, the Registrar and the Transfer Agent and may appoint one or more additional Paying Agents or one or more co-Registrars, or one or more co-Transfer Agents in such other locations as it shall determine. The term "Paying Agent" includes any additional paying agent, the term "Registrar" includes any additional registrar or co-Registrar and the term "Transfer Agent" includes any additional transfer agent. The Administrators may change any Paying Agent, Transfer Agent or Registrar at any time without prior notice to any Holder. The Administrators shall notify the Institutional Trustee of the name and address of any Paying Agent, Transfer Agent and Registrar not a party to this Declaration. The Administrators hereby initially appoint the Institutional Trustee to act as Paying Agent, Transfer Agent and Registrar for the Capital Securities and the Common Securities. The Institutional Trustee or any of its Affiliates in the United States may act as Paying Agent, Transfer Agent or Registrar.
SECTION 6.3. FORM AND DATING. The Capital Securities and the Institutional Trustee's certificate of authentication thereon shall be substantially in the form of Exhibit A-1, and the Common Securities shall be substantially in the form of Exhibit A-2, each of which is hereby incorporated in and
expressly made a part of this Declaration. Certificates may be typed, printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrators, as conclusively evidenced by their execution thereof. The Securities may have letters, numbers, notations or other marks of identification or designation and such legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Sponsor). The Trust at the direction of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the Institutional Trustee in writing. Each Capital Security shall be dated on or before the date of its authentication. The terms and provisions of the Securities set forth in Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent applicable, the Institutional Trustee, the Administrators and the Sponsor, by their execution and delivery of this Declaration, expressly agree to such terms and provisions and to be bound thereby. Capital Securities will be issued only in blocks having a stated liquidation amount of not less than $500,000.00 and any multiple of $1,000.00 in excess thereof.
The Capital Securities are being offered and sold by the Trust pursuant to the Placement Agreement in definitive, registered form without coupons and with the Restricted Securities Legend.
SECTION 6.4. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.
If:
(a) any mutilated Certificates should be surrendered to the Registrar, or if the Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Certificate; and
(b) there shall be delivered to the Registrar, the Administrators and the Institutional Trustee such security or indemnity as may be required by them to keep each of them harmless;
then, in the absence of notice that such Certificate shall have been acquired by
a protected purchaser, an Administrator on behalf of the Trust shall execute
(and in the case of a Capital Security Certificate, the Institutional Trustee
shall authenticate) and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under this
Section 6.4, the Registrar or the Administrators 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 Certificate issued pursuant to this
Section shall constitute conclusive evidence of an ownership interest in the
relevant Securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
SECTION 6.5. TEMPORARY SECURITIES. Until definitive Securities are ready for delivery, the Administrators may prepare and, in the case of the Capital Securities, the Institutional Trustee shall authenticate, temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Administrators consider appropriate for temporary Securities. Without unreasonable delay, the Administrators shall prepare and, in the case of the Capital Securities, the Institutional Trustee shall authenticate, definitive Securities in exchange for temporary Securities.
SECTION 6.6. CANCELLATION. The Administrators at any time may deliver Securities to the Institutional Trustee for cancellation. The Registrar shall forward to the Institutional Trustee any Securities surrendered to it for registration of transfer, redemption or payment. The Institutional Trustee shall promptly cancel all Securities surrendered for registration of transfer, payment, replacement or cancellation and shall dispose of such canceled Securities as the Administrators direct. The Administrators may not issue new Securities to replace Securities that have been paid or that have been delivered to the Institutional Trustee for cancellation.
SECTION 6.7. RIGHTS OF HOLDERS; WAIVERS OF PAST DEFAULTS.
(a) The legal title to the Trust Property is vested exclusively in the Institutional Trustee (in its capacity as such) in accordance with Section 2.5, and the Holders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their 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 Securities shall be personal property giving only the rights specifically set forth therein and in this Declaration. The Securities shall have no preemptive or similar rights.
(b) For so long as any Capital Securities remain outstanding, if upon an Indenture 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 a Majority in liquidation amount of the Capital Securities then outstanding shall have the right to make such declaration by a notice in writing to the Institutional Trustee, the Sponsor and the Debenture Trustee.
At any time after 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 provided in the Indenture, if the Institutional Trustee fails to annul any such declaration and waive such default, the Holders of a Majority in liquidation amount of the Capital Securities, by written notice to the Institutional Trustee, the Sponsor and the Debenture Trustee, may rescind and annul such declaration and its consequences if:
(i) the Debenture Issuer has paid or deposited with the Debenture Trustee a sum sufficient to pay
(A) all overdue installments of interest on all of the Debentures,
(B) any accrued Additional Interest on all of the Debentures,
(C) the principal of (and premium, if any, on) any Debentures that have become due otherwise than by such declaration of acceleration and interest and Additional Interest thereon at the rate borne by the Debentures, and
(D) all sums paid or advanced by the Debenture Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee and the Institutional 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 that has become due solely by such acceleration, have been cured or waived as provided in Section 5.7 of the Indenture.
The Holders of at least a Majority in liquidation amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default or Event of Default, except a default or Event of Default in the payment of principal or interest (unless such default or Event of 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 or Event of Default in respect of a covenant or provision that under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Debenture. No such rescission shall affect any subsequent default or impair any right consequent thereon.
Upon receipt by the Institutional Trustee of written notice declaring such an acceleration, or rescission and annulment thereof, by Holders of any part of the Capital Securities, a record date shall be established for determining Holders of outstanding Capital Securities entitled to join in such notice, which record date shall be at the close of business on the day the Institutional 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 that 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 that 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 6.7.
(c) Except as otherwise provided in paragraphs (a) and (b) of this
Section 6.7, the Holders of at least a Majority in liquidation amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default or Event of Default and its consequences. Upon such
waiver, any such default or Event of Default shall cease to exist, and any
default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Declaration, but no such waiver shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon.
ARTICLE VII
DISSOLUTION AND TERMINATION OF TRUST
SECTION 7.1. DISSOLUTION AND TERMINATION OF TRUST.
(a) The Trust shall dissolve on the first to occur of:
(i) unless earlier dissolved, on March 26, 2037, the expiration of the term of the Trust;
(ii) upon a Bankruptcy Event with respect to the Sponsor, the Trust or the Debenture Issuer;
(iii) (other than in connection with a merger, consolidation or similar transaction not prohibited by the Indenture, this Declaration or the Guarantee, as the case may be) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor, upon the consent of Holders of a Majority in liquidation amount of the Securities voting together as a single class to file a certificate of cancellation with respect to the Trust or upon the revocation of the charter of the Sponsor and the expiration of 90 days after the date of revocation without a reinstatement thereof;
(iv) upon the distribution of the Debentures to the Holders of the Securities in accordance with Section 3 of Annex I;
(v) upon exercise of the right of the Holder of all of the outstanding Common Securities to dissolve the Trust as provided in Annex I hereto;
(vi) upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor, the Trust or the Debenture Issuer;
(vii) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; or
(viii) before the issuance of any Securities, with the consent of the Institutional Trustee and the Sponsor.
(b) As soon as is practicable after the occurrence of an event referred to in Section 7.1(a), and after satisfaction of liabilities to creditors of the Trust as required by applicable law, including of the Statutory Trust Act, and subject to the terms set forth in Annex I, the Institutional Trustee shall terminate the Trust by filing a certificate of cancellation with the Secretary of State of the State of Connecticut.
(c) The provisions of Section 2.9 and Article IX shall survive the termination of the Trust.
ARTICLE VIII
TRANSFER OF INTERESTS
SECTION 8.1. GENERAL.
(a) Subject to Section 8.1(c), where Capital Securities are presented to the Registrar or a co-registrar with a request to register a transfer or to exchange them for an equal number of Capital Securities represented by different certificates, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met. To permit registrations of transfer and exchanges, the Trust shall issue and the Institutional Trustee shall authenticate Capital Securities at the Registrar's request.
(b) Upon issuance of the Common Securities, the Sponsor shall acquire and retain beneficial and record ownership of the Common Securities and for so long as the Securities remain outstanding, the Sponsor shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Sponsor, in its capacity as Debenture Issuer, under the Indenture that is a U.S. Person may succeed to the Sponsor's ownership of the Common Securities.
(c) Capital Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. To the fullest extent permitted by applicable law, any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void and will be deemed to be of no legal effect whatsoever and any such transferee shall be deemed not to be the holder of such Capital Securities for any purpose, including but not limited to the receipt of Distributions on such Capital Securities, and such transferee shall be deemed to have no interest whatsoever in such Capital Securities.
(d) The Registrar shall provide for the registration of Securities and of transfers of Securities, which will be effected without charge but only upon payment (with such indemnity as the Registrar may require) in respect of any tax or other governmental charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Securities, the Registrar shall cause one or more new Securities of the same tenor to be issued in the name of the designated transferee or transferees. Every Security surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Security surrendered for registration of transfer shall be canceled by the
Institutional Trustee pursuant to Section 6.6. A transferee of a Security shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Security. By acceptance of a Security, each transferee shall be deemed to have agreed to be bound by this Declaration.
(e) The Trust shall not be required (i) to issue, register the transfer of, or exchange any Securities during a period beginning at the opening of business 15 days before the day of any selection of Securities for redemption and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of the Securities to be redeemed, or (ii) to register the transfer or exchange of any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.
SECTION 8.2. TRANSFER PROCEDURES AND RESTRICTIONS.
(a) The Capital Securities shall bear the Restricted Securities Legend, which shall not be removed unless there is delivered to the Trust such satisfactory evidence, which may include an opinion of counsel satisfactory to the Trustee, as may be reasonably required by the Trust, that neither the legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of the Securities Act. Upon provision of such satisfactory evidence, the Institutional Trustee, at the written direction of the Trust, shall authenticate and deliver Capital Securities that do not bear the legend.
(b) Except as permitted by Section 8.2(a), each Capital Security shall bear a legend (the "Restricted Securities Legend") in substantially the following form and a Capital Security shall not be transferred except in compliance with such legend, unless otherwise determined by the Sponsor, upon the advice of counsel expert in securities law, in accordance with applicable law:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $500,000.00 (500 SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $500,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH
THE FOREGOING RESTRICTIONS.
(c) To permit registrations of transfers and exchanges, the Trust shall execute and the Institutional Trustee shall authenticate Capital Securities at the Registrar's request.
(d) Registrations of transfers or exchanges will be effected without charge, but only upon payment (with such indemnity as the Registrar or the Sponsor may require) in respect of any tax or other governmental charge that may be imposed in relation to it.
(e) All Capital Securities issued upon any registration of transfer or exchange pursuant to the terms of this Declaration shall evidence the same security and shall be entitled to the same benefits under this Declaration as the Capital Securities surrendered upon such registration of transfer or exchange.
SECTION 8.3. DEEMED SECURITY HOLDERS. The Trust, the Administrators, the Institutional Trustee, the Paying Agent, the Transfer Agent or the Registrar may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust, the Administrators, the Institutional Trustee, the Paying Agent, the Transfer Agent or the Registrar shall have actual or other notice thereof
ARTICLE IX
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS
SECTION 9.1. LIABILITY.
(a) Except as expressly set forth in this Declaration, the Guarantee and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; or
(ii) required to pay to the Trust or to any Holder of the Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to the Statutory Trust Act, the Holders of the Capital Securities 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 Connecticut.
SECTION 9.2. EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and, if selected by such Indemnified Person, has been selected by such Indemnified Person with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid.
SECTION 9.3. FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of the Indemnified Person.
(b) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law.
SECTION 9.4. INDEMNIFICATION.
(a) The Sponsor shall indemnify, to the full extent permitted by law, any Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) arising out of or in connection with the acceptance or administration of this Declaration by reason of the fact that he is or was an Indemnified Person against expenses (including reasonable attorneys' fees and expenses), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Sponsor shall indemnify, to the full extent permitted by law, any Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor arising out of or in
connection with the acceptance or administration of this Declaration by reason of the fact that he is or was an Indemnified Person against expenses (including reasonable attorneys' fees and expenses) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust; provided, however, that no such indemnification shall be made in respect of any claim, issue or matter as to which such Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.
(c) To the extent that an Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (a) and (b) of this Section 9.4, or in defense of any claim, issue or matter therein, he shall be indemnified, to the full extent permitted by law, against expenses (including attorneys' fees and expenses) actually and reasonably incurred by him in connection therewith.
(d) Any indemnification of an Administrator under paragraphs (a) and
(b) of this Section 9.4 (unless ordered by a court) shall be made by the Sponsor
only as authorized in the specific case upon a determination that
indemnification of the Indemnified Person is proper in the circumstances because
he has met the applicable standard of conduct set forth in paragraphs (a) and
(b). Such determination shall be made (i) by the Administrators by a majority
vote of a Quorum consisting of such Administrators who were not parties to such
action, suit or proceeding, (ii) if such a Quorum is not obtainable, or, even if
obtainable, if a Quorum of disinterested Administrators so directs, by
independent legal counsel in a written opinion, or (iii) by the Common Security
Holder of the Trust.
(e) To the fullest extent permitted by law, expenses (including
reasonable attorneys' fees and expenses) incurred by an Indemnified Person in
defending a civil, criminal, administrative or investigative action, suit or
proceeding referred to in paragraphs (a) and (b) of this Section 9.4 shall be
paid by the Sponsor in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Indemnified
Person to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Sponsor as authorized in this Section 9.4.
Notwithstanding the foregoing, no advance shall be made by the Sponsor if a
determination is reasonably and promptly made (i) by the Administrators by a
majority vote of a Quorum of disinterested Administrators, (ii) if such a Quorum
is not obtainable, or, even if obtainable, if a quorum of disinterested
Administrators so directs, by independent legal counsel in a written opinion or
(iii) by the Common Security Holder of the Trust, that, based upon the facts
known to the Administrators, counsel or the Common Security Holder at the time
such determination is made, such Indemnified Person acted in bad faith or in a
manner that such Indemnified Person did not believe to be in the best interests
of the Trust, or, with respect to any criminal proceeding, that such Indemnified
Person believed or had reasonable cause to believe his conduct was unlawful. In
no event shall any advance be made in instances where the Administrators,
independent legal counsel or the Common Security Holder reasonably determine
that such Indemnified Person deliberately breached his duty to the Trust or its
Common or Capital Security Holders.
(f) The Institutional Trustee, at the sole cost and expense of the Sponsor, retains the right to representation by counsel of its own choosing in any action, suit or any other proceeding for which it is indemnified under paragraphs (a) and (b) of this Section 9.4, without affecting its right to indemnification hereunder or waiving any rights afforded to it under this Declaration or applicable law.
(g) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 9.4 shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Sponsor or Capital Security Holders of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 9.4 shall be deemed to be provided by a contract between the Sponsor and each Indemnified Person who serves in such capacity at any time while this Section 9.4 is in effect. Any repeal or modification of this Section 9.4 shall not affect any rights or obligations then existing.
(h) The Sponsor or the Trust may purchase and maintain insurance on behalf of any Person who is or was an Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Sponsor would have the power to indemnify him against such liability under the provisions of this Section 9.4.
(i) For purposes of this Section 9.4, references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any Person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 9.4 with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued.
(j) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 9.4 shall, unless otherwise provided when authorized or ratified, (i) continue as to a Person who has ceased to be an Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a Person; and (ii) survive the termination or expiration of this Declaration or the earlier removal or resignation of an Indemnified Person.
SECTION 9.5. OUTSIDE BUSINESSES. Any Covered Person, the Sponsor and the Institutional Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration 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. None of any Covered Person, the Sponsor or the Institutional 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 any Covered Person, the Sponsor and the Institutional 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 Covered Person and the Institutional Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates.
SECTION 9.6. COMPENSATION; FEE. The Sponsor agrees:
(a) to pay to the Institutional Trustee from time to time such compensation for all services rendered by it hereunder as the parties 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); and
(b) except as otherwise expressly provided herein, to reimburse the Institutional Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by the Institutional Trustee in accordance with any provision of this Declaration (including the reasonable compensation and the expenses and disbursements of their respective agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, bad faith or willful misconduct.
The provisions of this Section 9.6 shall survive the dissolution of the Trust and the termination of this Declaration and the removal or resignation of the Institutional Trustee.
No Trustee may claim any lien or charge on any property of the Trust as a result of any amount due pursuant to this Section 9.6.
ARTICLE X
ACCOUNTING
SECTION 10.1. FISCAL YEAR. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code.
SECTION 10.2. CERTAIN ACCOUNTING MATTERS.
(a) At all times during the existence of the Trust, the Administrators shall keep, or cause to be kept at the principal office of the Trust in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, full books of account, records and supporting documents, which shall reflect in reasonable detail each transaction of the Trust. The books of account shall be maintained, at the Sponsor's expense, in accordance with generally accepted accounting principles, consistently applied. The books of account and the records of the Trust shall be examined by and reported upon (either separately or as part of the Sponsor's regularly prepared consolidated financial report) as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Administrators.
(b) The Administrators shall cause to be duly prepared and delivered to each of the Holders of Securities Form 1099 or such other annual United States federal income tax information statement required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Administrators shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust.
(c) The Administrators, at the Sponsor's expense, shall cause to be duly prepared at the principal office of the Trust in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, and filed an annual United States federal income tax return on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Administrators on behalf of the Trust with any state or local taxing authority.
SECTION 10.3. BANKING. The Trust shall maintain in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Institutional Trustee shall be made directly to the Property Account and no other funds of the Trust shall be deposited in the Property Account. The sole signatories for such accounts (including the Property Account) shall be designated by the Institutional Trustee.
SECTION 10.4. WITHHOLDING. The Institutional Trustee or any Paying Agent and the Administrators shall comply with all withholding requirements under United States federal, state and local law. The Institutional Trustee or any Paying Agent shall request, and each Holder shall provide to the Institutional Trustee or any Paying Agent, such forms or certificates as are necessary to establish an exemption from withholding with respect to the Holder, and any representations and forms as shall reasonably be requested by the Institutional Trustee or any Paying Agent to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Administrators shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Institutional Trustee or any Paying Agent is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a Distribution in the amount of the withholding to the Holder. In the event of any claimed overwithholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Institutional Trustee or any Paying Agent may reduce subsequent Distributions by the amount of such withholding.
ARTICLE XI
AMENDMENTS AND MEETINGS
SECTION 11.1. AMENDMENTS.
(a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed by the Institutional Trustee.
(b) Notwithstanding any other provision of this Article XI, an amendment may be made, and any such purported amendment shall be valid and effective only if:
(i) the Institutional Trustee shall have first received
(A) an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and
(B) an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and
(ii) the result of such amendment would not be to
(A) cause the Trust to cease to be classified for purposes of United States federal income taxation as a grantor trust; or
(B) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act.
(c) Except as provided in Section 11.1(d), (e) or (h), no amendment shall be made, and any such purported amendment shall be void and ineffective unless the Holders of a Majority in liquidation amount of the Capital Securities shall have consented to such amendment.
(d) In addition to and notwithstanding any other provision in this Declaration, without the consent of each affected Holder, this Declaration may not be amended to (i) change the amount or timing of any Distribution on the Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Securities as of a specified date or change any conversion or exchange provisions or (ii) restrict the right of a Holder to institute suit for the enforcement of any such payment on or after such date.
(e) Section 8.1 (b) and 8.1(c) and this Section 11.1 shall not be amended without the consent of all of the Holders of the Securities.
(f) Article III shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities.
(g) The rights of the Holders of the Capital Securities under Article IV to appoint and remove the Institutional Trustee shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Capital Securities.
(h) This Declaration may be amended by the Institutional Trustee and the Holders of a Majority in liquidation amount of the Common Securities without the consent of the Holders of the Capital Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration;
(iii) add to the covenants, restrictions or obligations of the Sponsor; or
(iv) modify, eliminate or add to any provision of this Declaration to such extent as may be necessary to ensure that the Trust will be classified for United States federal income tax purposes at all times as a grantor trust and will not be required to register as an "investment company" under the Investment Company Act (including without limitation to conform to any change in Rule 3a-5, Rule 3a-7 or any other applicable rule under the Investment Company Act or written change in interpretation or application thereof by any legislative body, court, government agency or regulatory authority) which amendment does not have a material adverse effect on the rights, preferences or privileges of the Holders of Securities;
provided, however, that no such modification, elimination or addition referred to in clauses (i), (ii) or (iii) shall adversely affect in any material respect the powers, preferences or special rights of Holders of Capital Securities.
SECTION 11.2. MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN CONSENT.
(a) Meetings of the Holders of any class of Securities may be called at any time by the Administrators (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration or the terms of the Securities. The Administrators shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Administrators one or more calls in a writing stating that the signing Holders of the Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of the Securities calling a meeting shall specify in writing the Certificates held by the Holders of the Securities exercising the right to call a meeting and only those Securities
represented by such Certificates shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of the Securities:
(i) notice of any such meeting shall be given to all the Holders of the Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of the Securities is permitted or required under this Declaration, such vote, consent or approval may be given at a meeting of the Holders of the Securities. Any action that may be taken at a meeting of the Holders of the Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of the Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of the Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of the Securities entitled to vote who have not consented in writing. The Administrators may specify that any written ballot submitted to the Holders of the Securities for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Administrators;
(ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of the Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Connecticut relating to proxies, and judicial interpretations thereunder, as if the Trust were a Connecticut corporation and the Holders of the Securities were stockholders of a Connecticut corporation; each meeting of the Holders of the Securities shall be conducted by the Administrators or by such other Person that the Administrators may designate; and
(iii) unless the Statutory Trust Act, this Declaration, or the terms of the Securities otherwise provides, the Administrators, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of the Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote; provided, however, that each meeting shall be conducted in the United States (as that term is defined in Treasury Regulations section 301.7701-7).
ARTICLE XII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
SECTION 12.1. REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL TRUSTEE. The initial Institutional Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Institutional Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Institutional Trustee's acceptance of its appointment as Institutional Trustee, that:
(a) the Institutional Trustee is a national banking association with trust powers, duly organized and validly existing under the laws of the United States of America with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration;
(b) the execution, delivery and performance by the Institutional Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Institutional Trustee. This Declaration has been duly executed and delivered by the Institutional Trustee, and it constitutes a legal, valid and binding obligation of the Institutional Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Declaration by the Institutional Trustee does not conflict with or constitute a breach of the charter or by-laws of the Institutional Trustee; and
(d) no consent, approval or authorization of, or registration with or notice to, any state or federal banking authority is required for the execution, delivery or performance by the Institutional Trustee of this Declaration.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. NOTICES. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied (which telecopy shall be followed by notice delivered or mailed by first class mail) or mailed by first class mail, as follows:
(a) if given to the Trust in care of the Administrators at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities):
Nara Statutory Trust II c/o Nara Bancorp, Inc. 3701 Wilshire Boulevard Los Angeles, California 90010 Attention: Timothy T. Chang Telecopy: 213-380-2240
(b) if given to the Institutional Trustee, at the Institutional Trustee's mailing address set forth below (or such other address as the Institutional Trustee may give notice of to the Holders of the Securities):
State Street Bank and Trust Company of Connecticut,
National Association
225 Asylum Street, Goodwin Square
Hartford, Connecticut 06103
Attention: Vice President, Corporate Trust Department
Telecopy: 860-244-1889
With a copy to:
State Street Bank and Trust Company P.O. Box 778
Boston, Massachusetts 02102-0778 Attention: Paul D. Allen, Corporate Trust Department Telecopy: 617-662-1462
(c) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice of to the Trust):
Nara Bancorp, Inc
3701 Wilshire Boulevard
Los Angeles, California 90010
Attention: Timothy T. Chang
Telecopy: 213-380-2240
(d) if given to any other Holder, at the address set forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.
SECTION 13.2. GOVERNING LAW. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the law of the State of Connecticut and all rights and remedies shall be governed by such laws without regard to the principles of conflict of laws of the State of Connecticut or any other jurisdiction that would call for the application of the law of any jurisdiction other than the State of Connecticut; provided, however, that there shall not be applicable to the Trust, the Institutional Trustee or this Declaration any provision of the laws (statutory or common) of the State of Connecticut pertaining to trusts that relate to or regulate, in a manner inconsistent with the terms hereof (a) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (b) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (c) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (d) fees or other sums payable to trustees, officers, agents or employees of a trust, (e) the allocation of receipts and expenditures to income or principal, or (f) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding or investing trust assets.
SECTION 13.3. INTENTION OF THE PARTIES. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties.
SECTION 13.4. HEADINGS. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof.
SECTION 13.5. SUCCESSORS AND ASSIGNS. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Institutional Trustee shall bind and inure to the benefit of their respective successors and assigns, whether or not so expressed.
SECTION 13.6. PARTIAL ENFORCEABILITY. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or
the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby.
SECTION 13.7. COUNTERPARTS. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Institutional Trustee and Administrators to any of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page.
Signatures appear on the following page
IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
as Institutional Trustee
By: /s/ Paul D. Allen ------------------------------------ Name: Paul D. Allen Title: Vice President |
NARA BANCORP, INC., as Sponsor
By: /s/ Bon T. Goo ------------------------------------ Name: Bon T. Goo Title: Executive Vice President and Chief Financial Officer |
NARA STATUTORY TRUST II
By: /s/ Bon T. Goo ------------------------------------ Administrator By: /s/ Timothy T. Chang ------------------------------------ Administrator By: /s/ Christine Y. Oh ------------------------------------ Administrator |
ANNEX I
TERMS OF SECURITIES
Pursuant to Section 6.1 of the Amended and Restated Declaration of Trust, dated as of March 26, 2002 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration):
1. Designation and Number.
(a) 8,000 Floating Rate Capital Securities of Nara Statutory Trust II (the "Trust"), with an aggregate stated liquidation amount with respect to the assets of the Trust of eight million and 00/100 dollars ($8,000,000.00) and a stated liquidation amount with respect to the assets of the Trust of $1,000.00 per Capital Security, are hereby designated for the purposes of identification only as the "Capital Securities". The Capital Security Certificates evidencing the Capital Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice.
(b) 248 Floating Rate Common Securities of the Trust (the "Common Securities") will be evidenced by Common Security Certificates substantially in the form of Exhibit A-2 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice.
2. Distributions.
(a) Distributions will be payable on each Security for the period beginning on (and including) the date of original issuance and ending on (but excluding) June 26, 2002 at a rate per annum of 5.59% and shall bear interest for each successive period beginning on (and including) June 26, 2002, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each, a "Distribution Period") at a rate per annum equal to the 3-Month LIBOR, determined as described below, plus 3.60% (the "Coupon Rate"); provided, however, that prior to March 26, 2007, the Coupon Rate shall not exceed 11.00%, applied to the stated liquidation amount thereof, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one quarterly period will bear interest thereon compounded quarterly at the applicable Distribution Rate (to the extent permitted by law). A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. In the event that any date on which a Distribution is payable on the Securities is not a Business Day, then payment of interest payable on such date shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable. The amount of interest payable for any Distribution Period will be calculated by applying the Coupon Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360. All percentages resulting from any calculations on the Capital Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar
amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).
(b) Distributions on the Securities will be cumulative, will accrue
from the date of original issuance, and will be payable, subject to extension of
distribution payment periods as described herein, quarterly in arrears on March
26, June 26, September 26 and December 26 of each year, commencing on June 26,
2002 (each a "Distribution Payment Date") when, as and if available for payment.
The Debenture Issuer has the right under the Indenture to defer payments of
interest on the Debentures, so long as no Indenture Event of Default has
occurred and is continuing, by deferring the payment of interest on the
Debentures for up to 20 consecutive quarterly periods (each an "Extension
Period") at any time and from time to time, subject to the conditions described
below, although such interest would continue to accrue on the Debentures at the
Distribution Rate compounded quarterly (to the extent permitted by law) during
any Extension Period. No Extension Period may end on a date other than a
Distribution Payment Date. At the end of any such Extension Period the Debenture
Issuer shall pay all interest then accrued and unpaid on the Debentures
(together with Additional Interest thereon); provided, however, that no
Extension Period may extend beyond the Maturity Date and provided further,
however, during any such Extension Period, the Debenture Issuer and its
Affiliates shall not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Debenture Issuer's or its Affiliates' capital stock (other than payments of
dividends or distributions to the Debenture Issuer) or make any guarantee
payments with respect to the foregoing, or (ii) make any payment of principal of
or interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Debenture Issuer or any Affiliate that rank pari passu in all
respects with or junior in interest to the Debentures (other than, with respect
to clauses (i) and (ii) above, (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Debenture Issuer in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or in
connection with the issuance of capital stock of the Debenture Issuer (or
securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the applicable
Extension Period, (b) as a result of any exchange or conversion of any class or
series of the Debenture Issuer's capital stock (or any capital stock of a
subsidiary of the Debenture Issuer) for any class or series of the Debenture
Issuer's capital stock or of any class or series of the Debenture Issuer's
indebtedness for any class or series of the Debenture Issuer's capital stock,
(c) the purchase of fractional interests in shares of the Debenture Issuer's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholders' rights plan, or the issuance of
rights, stock or other property under any stockholders' rights plan, or the
redemption or repurchase of rights pursuant thereto, (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock and any cash payments in lieu of fractional shares
issued in connection therewith, or (f) payments under the Capital Securities
Guarantee). Prior to the termination of any Extension Period, the Debenture
Issuer may further extend such period, provided that such period together with
all such previous and further consecutive extensions thereof shall not exceed 20
consecutive quarterly periods, or extend beyond the Maturity Date. Upon the
termination of any Extension Period and upon the payment of all accrued and
unpaid interest and Additional Interest, the Debenture Issuer may commence a new
Extension Period, subject to the foregoing requirements. No interest or
Additional Interest shall be due and payable during an Extension Period, except
at the end thereof, but each installment of interest that would otherwise have
been due and payable during such Extension Period shall bear Additional
Interest. If Distributions are deferred, the Distributions due shall be paid on
the date that the related Extension Period terminates, to Holders of the
Securities as they appear on the books and records of the Trust on the
record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trust's funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.
(c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates. The relevant record dates shall be 15 days before the relevant Distribution Payment Date. Distributions payable on any Securities that are not punctually paid on any Distribution Payment Date, as a result of the Debenture Issuer having failed to make a payment under the Debentures, as the case may be, when due (taking into account any Extension Period), will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such payment date.
(d) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities.
3. Liquidation Distribution Upon Dissolution. In the event of the voluntary or involuntary liquidation, dissolution, winding-up or termination of the Trust (each a "Liquidation") other than in connection with a redemption of the Debentures, the Holders of the Securities will be entitled to receive out of the assets of the Trust available for distribution to Holders of the Securities, after satisfaction of liabilities to creditors of the Trust (to the extent not satisfied by the Debenture Issuer), distributions equal to the lesser of (i) the aggregate of the stated liquidation amount of $1,000.00 per Security plus accrued and unpaid Distributions thereon to the date of payment, to the extent the Trust shall have funds available therefor, and (ii) the amount of assets of the Trust remaining available for distribution to Holders in liquidation of the Trust (such amount being, in either case, the "Liquidation Distribution"), unless in connection with such Liquidation, the Debentures in aggregate stated principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the Distribution Rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, and having the same record date as, such Securities, after paying or making reasonable provision to pay all claims and obligations of the Trust in accordance with the Statutory Trust Act, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities.
The Sponsor, as the Holder of all of the Common Securities, has the right at any time to dissolve the Trust (including, without limitation, upon the occurrence of a Special Event), subject to the receipt by the Debenture Issuer of prior approval from the Board of Governors of the Federal Reserve System and any successor federal agency that is primarily responsible for regulating the activities of the Sponsor (the "Federal Reserve"), if the Sponsor is a bank holding company, or from the Office of Thrift Supervision and any successor federal agency that is primarily responsible for regulating the activities of Sponsor, (the "OTS") if the Sponsor is a savings and loan holding company, in either case if then required under applicable capital guidelines or policies of the Federal Reserve or OTS, as applicable, and, after
satisfaction of liabilities to creditors of the Trust, cause the Debentures to be distributed to the Holders of the Securities on a Pro Rata basis in accordance with the aggregate stated liquidation amount thereof.
If a Liquidation of the Trust occurs as described in clause (i), (ii),
(iii) or (v) in Section 7.1(a) of the Declaration, the Trust shall be liquidated
by the Institutional Trustee as expeditiously as it determines to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust, to
the Holders of the Securities, the Debentures on a Pro Rata basis to the extent
not satisfied by the Debenture Issuer, unless such distribution is determined by
the Institutional Trustee not to be practical, in which event such Holders will
be entitled to receive out of the assets of the Trust available for distribution
to the Holders, after satisfaction of liabilities of creditors of the Trust to
the extent not satisfied by the Debenture Issuer, an amount equal to the
Liquidation Distribution. An early Liquidation of the Trust pursuant to clause
(iv) of Section 7.1(a) of the Declaration shall occur if the Institutional
Trustee determines that such Liquidation is possible by distributing, after
satisfaction of liabilities to creditors of Trust, to the Holders of the
Securities on a Pro Rata basis, the Debentures, and such distribution occurs.
If, upon any such Liquidation 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 the amounts payable directly by the Trust on such Capital Securities shall be paid to the Holders of the Trust Securities on a Pro Rata basis, except that if an Event of Default has occurred and is continuing, the Capital Securities shall have a preference over the Common Securities with regard to such distributions.
After the date for any distribution of the Debentures upon dissolution of the Trust (i) the Securities of the Trust will be deemed to be no longer outstanding, (ii) upon surrender of a Holder's Securities certificate, such Holder of the Securities will receive a certificate representing the Debentures to be delivered upon such distribution, and (iii) any certificates representing the Securities still outstanding will be deemed to represent undivided beneficial interests in such of the Debentures as have an aggregate principal amount equal to the aggregate stated liquidation amount with an interest rate identical to the Distribution Rate of, and bearing accrued and unpaid interest equal to accrued and unpaid distributions on, the Securities until such certificates are presented to the Debenture Issuer or its agent for transfer or reissuance (and until such certificates are so surrendered, no payments of interest or principal shall be made to Holders of Securities in respect of any payments due and payable under the Debentures; provided, however that such failure to pay shall not be deemed to be an Event of Default and shall not entitle the Holder to the benefits of the Guarantee), and (iv) all rights of Holders of Securities under the Declaration shall cease, except the right of such Holders to receive Debentures upon surrender of certificates representing such Securities.
4. Redemption and Distribution.
(a) The Debentures will mature on March 26, 2032. The Debentures may be redeemed by the Debenture Issuer, in whole or in part at any time and from time to time on or after March 26, 2007, at the Redemption Price. In addition, the Debentures may be redeemed by the Debenture Issuer at the Special Redemption Price, in whole but not in part, at any Distribution Payment Date, upon the occurrence and continuation of a Special Event within 120 days following the occurrence of such Special Event at the Special Redemption Price, upon not less than 30 nor more than 60 days' notice to holders of such Debentures so long as such Special Event is continuing. In each case, the right of the Debenture Issuer to redeem the Debentures is subject to the Debenture Issuer having received prior approval from the Federal Reserve (if the Debenture Issuer is a bank holding company) or prior approval from the OTS (if the Debenture Issuer is a savings and loan holding company), in each case if then required under applicable capital guidelines or policies of the applicable federal agency.
"3-Month LIBOR" means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Debenture Trustee in the following order of priority:
(1) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (as defined below). "Telerate Page 3750" means the display designated as "Page 3750" on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits;
(2) if such rate cannot be identified on the related Determination Date, the Debenture Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks' offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations;
(3) if fewer than two such quotations are provided as requested in clause (2) above, the Debenture Trustee will request four major New York City banks to provide such banks' offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and
(4) if fewer than two such quotations are provided as requested in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period.
If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.
The Coupon Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.
"Capital Treatment Event" means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of any amendment to, or change (including any announced prospective change) in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that the Sponsor will not, within 90 days of the date of such opinion, be entitled to treat an amount equal to the aggregate liquidation amount of the Debentures as "Tier 1 Capital" (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Sponsor (or if the Sponsor is not a bank holding company, such guidelines applied to the Sponsor as if the Sponsor were subject to such guidelines); provided, however, that the inability of the Sponsor to treat all or any portion of the liquidation amount of the Debentures as Tier l Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Sponsor having cumulative preferred
stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1 Capital treatment in excess of the amount which may now or hereafter qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines; provided further, however, that the distribution of Debentures in connection with the Liquidation of the Trust shall not in and of itself constitute a Capital Treatment Event unless such Liquidation shall have occurred in connection with a Tax Event or an Investment Company Event.
"Determination Date" means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the particular Distribution Period for which a Coupon Rate is being determined.
"Investment Company Event" means the receipt by the Debenture Issuer 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 written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion, will be considered an Investment Company that is required to be registered under the Investment Company Act which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures.
"Maturity Date" means March 26, 2032.
"Redemption Date" shall mean the date fixed for the redemption of Capital Securities, which shall be March 26, June 26, September 26 or December 26 commencing March 26, 2007.
"Redemption Price" means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest on such Debentures to the Redemption Date.
"Special Event" means a Tax Event, an Investment Company Event or a Capital Treatment Event.
"Special Redemption Date" means a Redemption Date on which a Special Event redemption occurs.
"Special Redemption Price" means (i) 107.5% of the principal amount of the Debentures being redeemed on a Redemption Date that occurs before March 26, 2007 and (ii) 100% of the principal amount of the Debentures being redeemed on a Redemption Date that occurs on March 26, 2007 or after, plus, in each case, accrued and unpaid interest on such Debentures to the Redemption Date.
"Tax Event" means the receipt by the Debenture Issuer and 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 (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action")) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Debenture Issuer or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, 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 Debentures; (ii) interest payable by the Debenture Issuer on the Debentures is not, or
within 90 days of the date of such opinion, will not be, deductible by the Debenture Issuer, 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.
(b) Upon the repayment in full at maturity or redemption in whole or in part of the Debentures (other than following the distribution of the Debentures to the Holders of the Securities), the proceeds from such repayment or payment shall concurrently be applied to redeem Pro Rata at the applicable Redemption Price or Special Redemption Price, as applicable, Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed; provided, however, that holders of such Securities shall be given not less than 30 nor more than 60 days' notice of such redemption (other than at the scheduled maturity of the Debentures).
(c) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Capital Securities will be redeemed Pro Rata and the Capital Securities to be redeemed will be redeemed Pro Rata from each Holder of Capital Securities.
(d) The Trust may not redeem fewer than all the outstanding Capital Securities unless all accrued and unpaid Distributions have been paid on all Capital Securities for all quarterly Distribution periods terminating on or before the date of redemption.
(e) Redemption or Distribution Procedures.
(i) Notice of any redemption of or notice of distribution of the Debentures in exchange for, the Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph 4(e)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of such Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of such Securities at the address of each such Holder appearing on the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder.
(ii) If the Securities are to be redeemed and the Trust gives a Redemption/ Distribution Notice, which notice may only be issued if the Debentures are redeemed as set out in this paragraph 4 (which notice will be irrevocable), then, provided that the Institutional Trustee has a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Institutional Trustee will pay the relevant Redemption Price or Special Redemption Price, as applicable, to the Holders of such Securities by check mailed to the address of each such Holder appearing on the books and records of the Trust on the Redemption Date. If a Redemption/Distribution Notice shall have been given and funds deposited as required then immediately prior to the close of business on the date of such deposit Distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the applicable Redemption Price or Special Redemption Price specified in paragraph 4(a), but without interest on such Redemption Price or Special Redemption Price. If any date fixed for redemption of Securities is not a Business Day, then payment of any such Redemption Price or
Special 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) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price or Special Redemption Price in respect of any Securities is improperly withheld or refused and not paid either by the Trust or by the Debenture Issuer as guarantor pursuant to the Guarantee, Distributions on such Securities will continue to accrue at the Distribution Rate from the original Redemption Date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price or Special Redemption Price. In the event of any redemption of the Capital Securities issued by the Trust in part, the Trust shall not be required to (i) issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before any selection for redemption of the Capital Securities and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of the Capital Securities to be so redeemed or (ii) register the transfer of or exchange any Capital Securities so selected for redemption, in whole or in part except for the unredeemed portion of any Capital Securities being redeemed in part.
(iii) Redemption/Distribution Notices shall be sent by the Administrators on behalf of the Trust to (A) in respect of the Capital Securities, the Holders thereof and (B) in respect of the Common Securities, the Holder thereof.
(iv) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), and provided that the acquiror is not the Holder of the Common Securities or the obligor under the Indenture, the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Capital Securities by tender, in the open market or by private agreement.
5. Voting Rights - Capital Securities.
(a) Except as provided under paragraphs 5(b) and 7 and as otherwise required by law and the Declaration, the Holders of the Capital Securities will have no voting rights. The Administrators are required to call a meeting of the Holders of the Capital Securities if directed to do so by Holders of at least 10% in liquidation amount of the Capital Securities.
(b) Subject to the requirements of obtaining a tax opinion by the Institutional Trustee in certain circumstances set forth in the last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Capital Securities, voting separately as a class, have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies available under the Indenture as the holder of the Debentures, (ii) waive any past default that is waivable under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable or (iv) consent on behalf of all the Holders of the Capital Securities to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required; provided, however, that, where a consent or action under the Indenture would require the consent or act of the holders of greater than a simple majority in aggregate principal amount of Debentures (a "Super Majority") affected thereby, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Capital Securities outstanding which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. If the Institutional Trustee fails to enforce its rights under the
Debentures after the Holders of a Majority in liquidation amount of such Capital
Securities have so directed the Institutional Trustee, to the fullest extent
permitted by law, a Holder of the Capital Securities may institute a legal
proceeding directly against the Debenture Issuer to enforce the Institutional
Trustee's rights under the Debentures without first instituting any legal
proceeding against the Institutional Trustee or any other person or entity.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay interest or principal on the Debentures on the date the interest or
principal is payable (or in the case of redemption, the Redemption Date), then a
Holder of record of the Capital Securities may directly institute a proceeding
for enforcement of payment on or after the respective due dates specified in the
Debentures, to such Holder directly of the principal of or interest on the
Debentures having an aggregate principal amount equal to the aggregate
liquidation amount of the Capital Securities of such Holder. The Institutional
Trustee shall notify all Holders of the Capital Securities of any default
actually known to the Institutional Trustee with respect to the Debentures
unless (x) such default has been cured prior to the giving of such notice or (y)
the Institutional Trustee determines in good faith that the withholding of such
notice is in the interest of the Holders of such Capital Securities, except
where the default relates to the payment of principal of or interest on any of
the Debentures. Such notice shall state that such Indenture Event of Default
also constitutes an Event of Default hereunder. Except with respect to directing
the time, method and place of conducting a proceeding for a remedy, the
Institutional Trustee shall not take any of the actions described in clauses
(i), (ii) or (iii) above unless the Institutional Trustee has obtained an
opinion of tax counsel to the effect that, as a result of such action, the Trust
will not be classified as other than a grantor trust for United States federal
income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the Debentures is required under the Indenture with respect to any amendment, modification or termination of the Indenture, the Institutional Trustee shall request the direction of the Holders of the Securities with respect to such amendment modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of a Super-Majority, the Institutional Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities outstanding which the relevant Super-Majority represents of the aggregate principal amount of the Debentures outstanding. The Institutional Trustee shall not take any such action in accordance with the directions of the Holders of the Securities unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of the corresponding Event of Default hereunder. Any required approval or direction of Holders of the Capital Securities may be given at a separate meeting of Holders of the Capital Securities convened for such purpose, at a meeting of all of the Holders of the Securities in the Trust or pursuant to written consent. The Institutional Trustee will cause a notice of any meeting at which Holders of the Capital Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of the Capital Securities. Each such notice will include a statement setting forth the following information (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Capital Securities will be required for the Trust to redeem and cancel Capital Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities.
Notwithstanding that Holders of the Capital Securities are entitled to vote or consent under any of the circumstances described above, any of the Capital Securities that are owned by the Sponsor or any
Affiliate of the Sponsor shall not entitle the Holder thereof to vote or consent and shall, for purposes of such vote or consent, be treated as if such Capital Securities were not outstanding.
In no event will Holders of the Capital Securities have the right to vote to appoint, remove or replace the Administrators, which voting rights are vested exclusively in the Sponsor as the Holder of all of the Common Securities of the Trust. Under certain circumstances as more fully described in the Declaration, Holders of Capital Securities have the right to vote to appoint, remove or replace the Institutional Trustee.
6. Voting Rights - Common Securities.
(a) Except as provided under paragraphs 6(b), 6(c) and 7 and as otherwise required by law and the Declaration, the Common Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in accordance with Article IV of the Declaration, to vote to appoint, remove or replace any Administrators.
(c) Subject to Section 6.7 of the Declaration and only after each
Event of Default (if any) with respect to the Capital Securities has been cured,
waived, or otherwise eliminated and subject to the requirements of the second to
last sentence of this paragraph, the Holders of a Majority in liquidation amount
of the Common Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waive any past default and its
consequences that is waivable under the Indenture, or (iii) exercise any right
to rescind or annul a declaration that the principal of all the Debentures shall
be due and payable; provided, however, that, where a consent or action under the
Indenture would require a Super Majority, the Institutional Trustee may only
give such consent or take such action at the written direction of the Holders of
at least the proportion in liquidation amount of the Common Securities which the
relevant Super Majority represents of the aggregate principal amount of the
Debentures outstanding. Notwithstanding this paragraph 6(c), the Institutional
Trustee shall not revoke any action previously authorized or approved by a vote
or consent of the Holders of the Capital Securities. Other than with respect to
directing the time, method and place of conducting any proceeding for any remedy
available to the Institutional Trustee or the Debenture Trustee as set forth
above, the Institutional Trustee shall not take any action described in (i),
(ii) or (iii) above, unless the Institutional Trustee has obtained an opinion of
tax counsel to the effect that for the purposes of United States federal income
tax the Trust will not be classified as other than a grantor trust on account of
such action. If the Institutional Trustee fails to enforce its rights under the
Declaration to the fullest extent permitted by law, any Holder of the Common
Securities may institute a legal proceeding directly against any Person to
enforce the Institutional Trustee's rights under the Declaration, without first
instituting a legal proceeding against the Institutional Trustee or any other
Person.
Any approval or direction of Holders of the Common Securities may be given at a separate meeting of Holders of the Common Securities convened for such purpose, at a meeting of all of the Holders of the Securities in the Trust or pursuant to written consent. The Administrators will cause a notice of any meeting at which Holders of the Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of the Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at
such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities.
7. Amendments to Declaration and Indenture.
(a) In addition to any requirements under Section 11.1 of the
Declaration, if any proposed amendment to the Declaration provides for, or the
Institutional Trustee, Sponsor or Administrators otherwise propose to effect,
(i) any action that would adversely affect the powers, preferences or special
rights of the Securities, whether by way of amendment to the Declaration or
otherwise, or (ii) the Liquidation of the Trust, other than as described in
Section 7.1 of the Declaration, then the Holders of outstanding Securities,
voting together as a single 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
Securities, affected thereby; provided, however, if any amendment or proposal
referred to in clause (i) above would adversely affect only the Capital
Securities or only the Common Securities, then only the affected 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 a Majority in liquidation
amount of such class of Securities.
(b) In the event the consent of the Institutional Trustee as the holder of the Debentures is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Debentures, the Institutional Trustee shall request the written direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification, or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require a Super Majority, the Institutional Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding.
(c) Notwithstanding the foregoing, no amendment or modification may be made to the Declaration if such amendment or modification would (i) cause the Trust to be classified for purposes of United States federal income taxation as other than a grantor trust, (ii) reduce or otherwise adversely affect the powers of the Institutional Trustee or (iii) cause the Trust to be deemed an Investment Company which is required to be registered under the Investment Company Act.
(d) Notwithstanding any provision of the Declaration, the right of any Holder of the Capital Securities to receive payment of distributions and other payments upon redemption or otherwise, on or after their respective due dates, or to institute a suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. For the protection and enforcement of the foregoing provision, each and every Holder of the Capital Securities shall be entitled to such relief as can be given either at law or equity.
8. Pro Rata. A reference in these terms of the Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of the Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities then outstanding unless, in relation to a payment, an Event of Default has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Capital Securities Pro Rata according to the aggregate liquidation amount of
the Capital Securities held by the relevant Holder relative to the aggregate liquidation amount of all Capital Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Capital Securities, to each Holder of the Common Securities Pro Rata according to the aggregate liquidation amount of the Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding.
9. Ranking. The Capital Securities rank pari passu with and payment thereon shall be made Pro Rata with the Common Securities except that, where an Event of Default has occurred and is continuing, the rights of Holders of the Common Securities to receive payment of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of the Holders of the Capital Securities with the result that no payment of any Distribution on, or Redemption Price of, any Common Security, and no other payment on account of redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all outstanding Capital 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 Capital Securities then called for redemption, shall have been made or provided for, and all funds immediately available to the Institutional Trustee shall first be applied to the payment in full in cash of all Distributions on, or the Redemption Price of, the Capital Securities then due and payable.
10. Acceptance of Guarantee and Indenture. Each Holder of the Capital Securities and the Common Securities, by the acceptance of such Securities, agrees to the provisions of the Guarantee, including the subordination provisions therein and to the provisions of the Indenture.
11. No Preemptive Rights. The Holders of the Securities shall have no preemptive or similar rights to subscribe for any additional securities.
12. Miscellaneous. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture to a Holder without charge on written request to the Sponsor at its principal place of business.
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND
A-1-1
HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $500,000.00 (500 SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $500,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
Certificate Number P-1 8,000 Capital Securities
March 26, 2002
Certificate Evidencing Floating Rate Capital Securities
of
Nara Statutory Trust II
(liquidation amount $1,000.00 per Capital Security)
Nara Statutory Trust II, a statutory trust created under the laws of the State of Connecticut (the "Trust"), hereby certifies that Hare & Co. (the "Holder"), as the nominee of The Bank of New York, indenture trustee under the Indenture dated as of March 26, 2002 among Preferred Term Securities V, Ltd., Preferred Term Securities V, Inc. and The Bank of New York, is the registered owner of securities of the Trust representing undivided beneficial interests in the assets of the Trust, (liquidation amount $1,000.00 per capital security) (the "Capital Securities"). Subject to the Declaration (as defined below), the Capital 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. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities represented hereby are issued pursuant to, and shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of March 26, 2002, among Bon T. Goo, Timothy T. Chang and Christine Y. Oh, as Administrators, State Street Bank and Trust Company of Connecticut, National Association, as Institutional Trustee, Nara Bancorp, Inc., as Sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Trust, including the designation of the terms of the Capital Securities as set forth in Annex I to such amended and restated declaration as the same may be amended from time to time (the "Declaration"). Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Guarantee to the extent provided therein. The Sponsor will provide a copy of the
A-1-2
Declaration, the Guarantee, and the Indenture to the Holder without charge upon written request to the Trust at its principal place of business.
Upon receipt of this Security, the Holder is bound by the Declaration and is entitled to the benefits thereunder.
By acceptance of this Security, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Capital Securities as evidence of beneficial ownership in the Debentures.
This Capital Security is governed by, and construed in accordance with, the laws of the State of Connecticut, without regard to principles of conflict of laws.
Signatures appear on following page
A-1-3
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
NARA STATUTORY TRUST II
Title: Administrator
CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the within-mentioned Declaration.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
as the Institutional Trustee
A-1-4
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Capital Security will be payable at an annual rate equal to 5.59% beginning on (and including) the date of original issuance and ending on (but excluding) June 26, 2002 and at an annual rate for each successive period beginning on (and including) June 26, 2002, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each a "Distribution Period"), equal to 3-Month LIBOR, determined as described below, plus 3.60% (the "Coupon Rate"); provided, however, that prior to March 26, 2007, the Coupon Rate shall not exceed 11.00%, applied to the stated liquidation amount of $1,000.00 per Capital Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than a quarterly period will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes payments of Interest and any principal on the Debentures held by the Institutional Trustee unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. As used herein, "Determination Date" means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period. In the event that any date on which a Distribution is payable on this Capital Security is not a Business Day, then a payment of the Distribution payable on such date will be made on the next succeeding day which is a Business Day (and without any Distribution or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. The amount of interest payable for any Distribution Period will be calculated by applying the Coupon Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360.
"3-Month LIBOR" as used herein, means the London interbank offered interest
rate for three-month U.S. dollar deposits determined by the Debenture Trustee in
the following order of priority: (i) the rate (expressed as a percentage per
annum) for U.S. dollar deposits having a three-month maturity that appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination
Date ("Telerate Page 3750" means the display designated as "Page 3750" on the
Dow Jones Telerate Service or such other page as may replace Page 3750 on that
service or such other service or services as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits); (ii) if such rate
cannot be identified on the related Determination Date, the Debenture Trustee
will request the principal London offices of four leading banks in the London
interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.
A-1-5
The Coupon Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.
All percentages resulting from any calculations on the Capital Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).
Except as otherwise described below, Distributions on the Capital Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears on March 26, June 26, September 26 and December 26 of each year, commencing on June 26, 2002. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures by extending the interest payment period for up to 20 consecutive quarterly periods (each an "Extension Period") on the Debentures, subject to the conditions described below, although such interest would continue to accrue on the Debentures at an annual rate equal to the Distribution Rate compounded quarterly to the extent permitted by law during any Extension Period. No Extension Period may end on a date other than a Distribution Payment Date. At the end of any such Extension Period the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date. Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trust's funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.
The Capital Securities shall be redeemable as provided in the Declaration.
A-1-6
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security Certificate to:
(Insert address and zip code of assignee) and irrevocably appoints
agent to transfer this Capital Security Certificate on the books of the Trust. The agent may substitute another to act for him or her.
(Sign exactly as your name appears on the other side of this Capital Security Certificate)
Signature Guarantee:(1)
A-1-7
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH SECTION 8.1
OF THE DECLARATION.
Certificate Number C-1 248 Common Securities
March 26, 2002
Certificate Evidencing Floating Rate Common Securities
of
Nara Statutory Trust II
Nara Statutory Trust II, a statutory trust created under the laws of the State of Connecticut (the "Trust"), hereby certifies that Nara Bancorp, Inc. (the "Holder") is the registered owner of common securities of the Trust representing undivided beneficial interests in the assets of the Trust (the "Common Securities"). The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued pursuant to, and shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of March 26, 2002, among Bon T. Goo, Timothy T. Chang and Christine Y. Oh, as Administrators, State Street Bank and Trust Company of Connecticut, National Association, as Institutional Trustee, Nara Bancorp, Inc., as Sponsor, and the holders from time to time of undivided beneficial interest in the assets of the Trust including the designation of the terms of the Common Securities as set forth in Annex I to such amended and restated declaration, as the same may be amended from time to time (the "Declaration"). Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Guarantee and the Indenture to the Holder without charge upon written request to the Sponsor at its principal place of business.
As set forth in the Declaration, where an Event of Default has occurred and is continuing, the rights of Holders of Common Securities to payment in respect of Distributions and payments upon Liquidation, redemption or otherwise are subordinated to the rights of payment of Holders of the Capital Securities.
Upon receipt of this Certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder.
By acceptance of this Certificate, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of undivided beneficial ownership in the Debentures.
This Common Security is governed by, and construed in accordance with, the laws of the State of Connecticut, without regard to principles of conflict of laws.
A-2-1
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
NARA STATUTORY TRUST II
Title: Administrator
A-2-2
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be identical in amount to the Distributions payable on each Capital Security, which is at an annual rate equal to 5.59% beginning on (and including) the date of original issuance and ending on (but excluding) June 26, 2002 and at an annual rate for each successive period beginning on (and including) June 26, 2002, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each a "Distribution Period"), equal to 3-Month LIBOR, determined as described below, plus 3.60% (the "Coupon Rate"); provided, however, that prior to March 26, 2007, the Coupon Rate shall not exceed 11.00%, applied to the stated liquidation amount of $1,000.00 per Common Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one period will bear interest thereon compounded at the Distribution Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes payments of Interest and any principal on the Debentures held by the Institutional Trustee unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. As used herein, "Determination Date" means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period. In the event that any date on which a Distribution is payable on this Common Security is not a Business Day, then a payment of the Distribution payable on such date will be made on the next succeeding day which is a Business Day (and without any Distribution or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. The amount of interest payable for any Distribution Period will be calculated by applying the Coupon Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360.
"3-Month LIBOR" as used herein, means the London interbank offered interest
rate for three-month U.S. dollar deposits determined by the Debenture Trustee in
the following order of priority: (i) the rate (expressed as a percentage per
annum) for U.S. dollar deposits having a three-month maturity that appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination
Date ("Telerate Page 3750" means the display designated as "Page 3750" on the
Dow Jones Telerate Service or such other page as may replace Page 3750 on that
service or such other service or services as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits); (ii) if such rate
cannot be identified on the related Determination Date, the Debenture Trustee
will request the principal London offices of four leading banks in the London
interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.
A-2-3
The Coupon Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.
All percentages resulting from any calculations on the Common Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).
Except as otherwise described below, Distributions on the Common Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears on March 26, June 26, September 26 and December 26 of each year, commencing on June 26, 2002. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures by extending the interest payment period for up to 20 consecutive quarterly periods (each an "Extension Period") on the Debentures, subject to the conditions described below, although such interest would continue to accrue on the Debentures at an annual rate equal to the Distribution Rate compounded quarterly to the extent permitted by law during any Extension Period. No Extension Period may end on a date other than an Interest Payment Date. At the end of any such Extension Period the Sponsor shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date. Prior to the termination of any Extension Period, the Sponsor may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Sponsor may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trust's funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.
The Common Securities shall be redeemable as provided in the Declaration.
A-2-4
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to:
(Insert address and zip code of assignee) and irrevocably appoints
------------------------------------------------------------ agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her.
(Sign exactly as your name appears on the other side of this Common Security Certificate)
(Sign exactly as your name appears on the other side of this common Security Certificate)
Signature Guarantee(2)
A-2-5
EXHIBIT B
SPECIMEN OF INITIAL DEBENTURE
(Exhibit B has been omitted, but will be furnished to the Securities and Exchange Commission upon request.)
EXHIBIT C
PLACEMENT AGREEMENT
(Exhibit C has been omitted, but will be furnished to the Securities and Exchange Commission upon request.)
Exhibit 4.10
NARA BANCORP, INC.,
AS ISSUER
INDENTURE
DATED AS OF MARCH 26, 2002
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION,
AS TRUSTEE
FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
DUE 2032
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS.......................................................1
Section 1.1. Definitions.................................................1
ARTICLE II. DEBENTURES.......................................................7
Section 2.1. Authentication and Dating...................................7
Section 2.2. Form of Trustee's Certificate of Authentication.............8
Section 2.3. Form and Denomination of Debentures.........................8
Section 2.4. Execution of Debentures.....................................8
Section 2.5. Exchange and Registration of Transfer of Debentures.........8
Section 2.6. Mutilated, Destroyed, Lost or Stolen Debentures.............10
Section 2.7. Temporary Debentures........................................11
Section 2.8. Payment of Interest and Additional Interest.................11
Section 2.9. Cancellation of Debentures Paid, etc........................13
Section 2.10. Computation of Interest.....................................13
Section 2.11. Extension of Interest Payment Period........................14
Section 2.12. CUSIP Numbers...............................................15
ARTICLE III. PARTICULAR COVENANTS OF THE COMPANY.............................16
Section 3.1. Payment of Principal, Premium and Interest; Agreed
Treatment of the Debentures.................................16
Section 3.2. Offices for Notices and Payments, etc.......................16
Section 3.3. Appointments to Fill Vacancies in Trustee's Office..........17
Section 3.4. Provision as to Paying Agent................................17
Section 3.5. Certificate to Trustee......................................18
Section 3.6. Additional Sums.............................................18
Section 3.7. Compliance with Consolidation Provisions....................18
Section 3.8. Limitation on Dividends.....................................18
Section 3.9. Covenants as to the Trust...................................19
Section 3.10. Additional Junior Indebtedness..............................19
ARTICLE IV. SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEE..................................................19
Section 4.1. Securityholders' Lists......................................19
Section 4.2. Preservation and Disclosure of Lists........................20
ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN
EVENT OF DEFAULT..................................................21
Section 5.1. Events of Default...........................................21
Section 5.2. Payment of Debentures on Default; Suit Therefor.............22
Section 5.3. Application of Moneys Collected by Trustee..................23
Section 5.4. Proceedings by Securityholders..............................24
Section 5.5. Proceedings by Trustee......................................24
Section 5.6. Remedies Cumulative and Continuing; Delay or
Omission Not a Waiver.......................................24
|
Page
----
Section 5.7. Direction of Proceedings and Waiver of Defaults by
Majority of Securityholders.................................25
Section 5.8. Notice of Defaults..........................................26
Section 5.9. Undertaking to Pay Costs....................................26
ARTICLE VI. CONCERNING THE TRUSTEE...........................................26
Section 6.1. Duties and Responsibilities of Trustee......................26
Section 6.2. Reliance on Documents, Opinions, etc........................27
Section 6.3. No Responsibility for Recitals, etc.........................28
Section 6.4. Trustee, Authenticating Agent, Paying Agents, Transfer
Agents or Registrar May Own Debentures......................28
Section 6.5. Moneys to be Held in Trust..................................28
Section 6.6. Compensation and Expenses of Trustee........................28
Section 6.7. Officers' Certificate as Evidence...........................29
Section 6.8. Eligibility of Trustee......................................29
Section 6.9. Resignation or Removal of Trustee...........................30
Section 6.10. Acceptance by Successor Trustee.............................31
Section 6.11. Succession by Merger, etc...................................31
Section 6.12. Authenticating Agents.......................................32
ARTICLE VII. CONCERNING THE SECURITYHOLDERS..................................33
Section 7.1. Action by Securityholders...................................33
Section 7.2. Proof of Execution by Securityholders.......................33
Section 7.3. Who Are Deemed Absolute Owners..............................33
Section 7.4. Debentures Owned by Company Deemed Not Outstanding..........34
Section 7.5. Revocation of Consents; Future Holders Bound................34
ARTICLE VIII. SECURITYHOLDERS' MEETINGS......................................34
Section 8.1. Purposes of Meetings........................................34
Section 8.2. Call of Meetings by Trustee.................................35
Section 8.3. Call of Meetings by Company or Securityholders..............35
Section 8.4. Qualifications for Voting...................................35
Section 8.5. Regulations.................................................35
Section 8.6. Voting......................................................35
Section 8.7. Quorum; Actions.............................................36
ARTICLE IX. SUPPLEMENTAL INDENTURES..........................................37
Section 9.1. Supplemental Indentures without Consent of Securityholders..37
Section 9.2. Supplemental Indentures with Consent of Securityholders.....38
Section 9.3. Effect of Supplemental Indentures...........................38
Section 9.4. Notation on Debentures......................................39
Section 9.5. Evidence of Compliance of Supplemental Indenture to be
Furnished to Trustee........................................39
ARTICLE X. REDEMPTION OF SECURITIES..........................................39
Section 10.1. Optional Redemption.........................................39
Section 10.2. Special Event Redemption....................................39
Section 10.3. Notice of Redemption; Selection of Debentures...............39
|
Page
----
Section 10.4. Payment of Debentures Called for Redemption.................40
ARTICLE XI. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE................40
Section 11.1. Company May Consolidate, etc., on Certain Terms.............40
Section 11.2. Successor Entity to be Substituted..........................41
Section 11.3. Opinion of Counsel to be Given to Trustee...................41
ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE.........................41
Section 12.1. Discharge of Indenture......................................41
Section 12.2. Deposited Moneys to be Held in Trust by Trustee.............42
Section 12.3. Paying Agent to Repay Moneys Held...........................42
Section 12.4. Return of Unclaimed Moneys..................................42
ARTICLE XIII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS......................................................42
Section 13.1. Indenture and Debentures Solely Corporate Obligations.......42
ARTICLE XIV. MISCELLANEOUS PROVISIONS........................................43
Section 14.1. Successors..................................................43
Section 14.2. Official Acts by Successor Entity...........................43
Section 14.3. Surrender of Company Powers.................................43
Section 14.4. Addresses for Notices, etc..................................43
Section 14.5. Governing Law...............................................43
Section 14.6. Evidence of Compliance with Conditions Precedent............43
Section 14.7. Non-Business Days...........................................44
Section 14.8. Table of Contents, Headings, etc............................44
Section 14.9. Execution in Counterparts...................................44
Section 14.10. Separability................................................44
Section 14.11. Assignment..................................................44
Section 14.12. Acknowledgment of Rights....................................44
ARTICLE XV. SUBORDINATION OF DEBENTURES......................................45
Section 15.1. Agreement to Subordinate....................................45
Section 15.2. Default on Senior Indebtedness..............................45
Section 15.3. Liquidation, Dissolution, Bankruptcy........................45
Section 15.4. Subrogation.................................................46
Section 15.5. Trustee to Effectuate Subordination.........................47
Section 15.6. Notice by the Company.......................................47
Section 15.7. Rights of the Trustee; Holders of Senior Indebtedness.......48
Section 15.8. Subordination May Not Be Impaired...........................48
Exhibit A Form of Junior Subordinated Deferrable Interest Debenture
|
THIS INDENTURE, dated as of March 26, 2002, between Nara Bancorp, Inc., a Delaware corporation (the "Company"), and State Street Bank and Trust Company of Connecticut, National Association, a national banking association organized under the laws of the United States of America, as debenture trustee (the "Trustee").
WITNESSETH:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its Floating Rate Junior Subordinated Deferrable Interest Debentures due 2032 (the "Debentures") under this Indenture to provide, among other things, for the execution and authentication, delivery and administration thereof, and the Company has duly authorized the execution of this Indenture; and
WHEREAS, all acts and things necessary to make this Indenture a valid agreement according to its terms, have been done and performed;
NOW, THEREFORE, This Indenture Witnesseth:
In consideration of the premises, and the purchase of the Debentures by the holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Debentures as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. DEFINITIONS. The terms defined in this Section 1.1 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.1. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles and the term "generally accepted accounting principles" means such accounting principles as are generally accepted in the United States at the time of any computation. 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.
"Additional Interest" means interest, if any, that shall accrue on any interest on the Debentures the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the Interest Rate, compounded quarterly (to the extent permitted by law).
"Additional Junior Indebtedness" means, without duplication and other than the Debentures, any indebtedness, liabilities or obligations of the Company, or any Subsidiary of the Company, under debt securities (or guarantees in respect of debt securities) initially issued after the date of this Indenture to any trust, or a trustee of a trust, partnership or other entity affiliated with the Company that is, directly or indirectly, a finance subsidiary (as such term is defined in Rule 3a-5 under the Investment Company Act of 1940) or other financing vehicle of the Company or any Subsidiary of the Company in connection with the issuance by that entity of preferred securities or other securities that are eligible to qualify for Tier 1 capital treatment (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or, if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the Additional Junior Indebtedness as Tier 1 capital shall not disqualify it as Additional Junior Indebtedness if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve now or may hereafter
accord Tier 1 capital treatment (including the Debentures) in excess of the amount which may qualify for treatment as Tier 1 capital under applicable capital adequacy guidelines.
"Additional Sums" has the meaning set forth in Section 3.6.
"Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder.
"Authenticating Agent" means any agent or agents of the Trustee which at the time shall be appointed and acting pursuant to Section 6.12.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.
"Board of Directors" means the board of directors or the executive committee or any other duly authorized designated officers of the Company.
"Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee.
"Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in New York City or Hartford, Connecticut are permitted or required by any applicable law to close.
"Capital Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with Common Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.
"Capital Securities Guarantee" means the guarantee agreement that the Company enters into with State Street Bank and Trust Company of Connecticut, National Association, as guarantee trustee, or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities of the Trust.
"Capital Treatment Event" means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of any amendment to, or change (including any announced prospective change) in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that the Company will not, within 90 days of the date of such opinion be entitled to treat an amount equal to the aggregate liquidation amount of the Debentures as "Tier 1 Capital" (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the liquidation amount of the Debentures as Tier l Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1 Capital treatment in excess of the amount which may now or hereafter qualify for treatment as Tier 1 Capital under applicable capital
adequacy guidelines; provided further, however, that the distribution of Debentures in connection with the liquidation of the Trust shall not in and of itself constitute a Capital Treatment Event unless such liquidation shall have occurred in connection with a Tax Event or an Investment Company Event.
"Certificate" means a certificate signed by any one of the principal executive officer, the principal financial officer or the principal accounting officer of the Company.
"Common Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with Capital Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.
"Company" means Nara Bancorp, Inc., a Delaware corporation, and, subject to the provisions of Article XI, shall include its successors and assigns.
"Coupon Rate" has the meaning set forth in Section 2.8.
"Debenture" or "Debentures" has the meaning stated in the first recital of this Indenture.
"Debenture Register" has the meaning specified in Section 2.5.
"Declaration" means the Amended and Restated Declaration of Trust of the Trust, as amended or supplemented from time to time.
"Default" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.
"Defaulted Interest" has the meaning set forth in Section 2.8.
"Distribution Period" has the meaning set forth in Section 2.8.
"Determination Date" has the meaning set forth in Section 2.10.
"Event of Default" means any event specified in Section 5.1, continued for the period of time, if any, and after the giving of the notice, if any, therein designated.
"Extension Period" has the meaning set forth in Section 2.11.
"Federal Reserve" means the Board of Governors of the Federal Reserve System and any successor federal agency that is primarily responsible for regulating the activities of bank holding companies.
"Indenture" means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented, or both.
"Institutional Trustee" has the meaning set forth in the Declaration.
"Interest Payment Date" means each March 26, June 26, September 26 and December 26 during the term of this Indenture.
"Interest Rate" means for the period beginning on (and including) the date of original issuance and ending on (but excluding) June 26, 2002 the rate per annum of 5.59% and for each Distribution Period thereafter, the Coupon Rate.
"Investment Company Event" means the receipt by the Company 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 written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures.
"Liquidation Amount" means the stated amount of $1,000.00 per Trust Security.
"Maturity Date" means March 26, 2032.
"Officers' Certificate" means a certificate signed by the Chairman of the Board, the Chief Executive Officer, the Vice Chairman, the President, any Managing Director or any Vice President, and by the Treasurer, an Assistant Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.
"Opinion of Counsel" means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, or may be other counsel reasonably satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.
"OTS" means the Office of Thrift Supervision and any successor federal agency that is primarily responsible for regulating the activities of savings and loan holding companies.
The term "outstanding," when used with reference to Debentures, means, subject to the provisions of Section 7.4, as of any particular time, all Debentures authenticated and delivered by the Trustee or the Authenticating Agent under this Indenture, except:
(a) Debentures theretofore canceled by the Trustee or the Authenticating Agent or delivered to the Trustee for cancellation;
(b) Debentures, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent); provided, however, that, if such Debentures, or portions thereof, are to be redeemed prior to maturity thereof, notice of such redemption shall have been given as provided in Section 10.3 or provision satisfactory to the Trustee shall have been made for giving such notice; and
(c) Debentures paid pursuant to Section 2.6 or in lieu of or in substitution for which other Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.6 unless proof satisfactory to the Company and the Trustee is presented that any such Debentures are held by bona fide holders in due course.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Debenture means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and, for purposes of this definition, any Debenture authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture.
"Principal Office of the Trustee," or other similar term, means the office of the Trustee, at which at any particular time its corporate trust business shall be principally administered, which at the time of the execution of this Indenture shall be 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103.
"Redemption Date" has the meaning set forth in Section 10.1.
"Redemption Price" means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest on such Debentures to the Redemption Date.
"Responsible Officer" means, with respect to the Trustee, any officer within the Principal Office of the Trustee, including any vice-president, any assistant vice-president, any secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Principal Trust Office of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject.
"Securities Act" means the Securities Act of 1933, as amended from time to time or any successor legislation.
"Securityholder," "holder of Debentures," or other similar terms, means any Person in whose name at the time a particular Debenture is registered on the register kept by the Company or the Trustee for that purpose in accordance with the terms hereof.
"Senior Indebtedness" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of the
Company for money borrowed and (B) indebtedness evidenced by securities,
debentures, notes, bonds or other similar instruments issued by the Company;
(ii) all capital lease obligations of the Company; (iii) all obligations of the
Company issued or assumed as the deferred purchase price of property, all
conditional sale obligations of the Company and all obligations of the Company
under any title retention agreement; (iv) all obligations of the Company for the
reimbursement of any letter of credit, any banker's acceptance, any security
purchase facility, any repurchase agreement or similar arrangement, any interest
rate swap, any other hedging arrangement, any obligation under options or any
similar credit or other transaction; (v) all obligations of the type referred to
in clauses (i) through (iv) above of other Persons for the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise; and (vi)
all obligations of the type referred to in clauses (i) through (v) above of
other Persons secured by any lien on any property or asset of the Company
(whether or not such obligation is assumed by the Company), whether incurred on
or prior to the date of this Indenture or thereafter incurred. Notwithstanding
the foregoing, "Senior Indebtedness" shall not include (1) any Additional Junior
Indebtedness, (2) Debentures issued pursuant to this Indenture and guarantees in
respect of such Debentures, (3) trade accounts payable of the Company arising in
the ordinary course of business (such trade accounts payable being pari passu in
right of payment to the Debentures), or (4)
obligations with respect to which (a) in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are pari passu, junior or otherwise not superior in right of payment to the Debentures and (b) the Company, prior to the issuance thereof, has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve (if the Company is a bank holding company) or the OTS (if the Company is a savings and loan holding company). Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness.
"Special Event" means any of a Capital Treatment Event, an Investment Company Event or a Tax Event.
"Special Redemption Date" has the meaning set forth in Section 10.2.
"Special Redemption Price" means (i) 107.5% of the principal amount of the Debentures being redeemed on a Redemption Date that occurs before March 26, 2007 and (ii) 100% of the principal amount of the Debentures being redeemed on a Redemption Date that occurs on March 26, 2007 or after, plus accrued and unpaid interest on such Debentures to the Redemption Date.
"Subsidiary" means with respect to any Person, (i) any corporation at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture or similar entity, at least a majority of the outstanding partnership or similar interests of which shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, "voting stock" means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.
"Tax Event" means the receipt by the Company and 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 (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action")) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Company or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, 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 Debentures; (ii) interest payable by the Company on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust 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.
"3-Month LIBOR" has the meaning set forth in Section 2.10.
"Telerate Page 3750" has the meaning set forth in Section 2.10.
"Trust" shall mean Nara Statutory Trust II, a Connecticut statutory trust, or any other similar trust created for the purpose of issuing Capital Securities in connection with the issuance of Debentures under this Indenture, of which the Company is the sponsor.
"Trust Securities" means Common Securities and Capital Securities of the Trust.
"Trustee" means State Street Bank and Trust Company of Connecticut, National Association, and, subject to the provisions of Article VI hereof, shall also include its successors and assigns as Trustee hereunder.
ARTICLE II.
DEBENTURES
SECTION 2.1. AUTHENTICATION AND DATING. Upon the execution and delivery of this Indenture, or from time to time thereafter, Debentures in an aggregate principal amount not in excess of $8,248,000.00 may be executed and delivered by the Company to the Trustee for authentication, and the Trustee shall thereupon authenticate and make available for delivery said Debentures to or upon the written order of the Company, signed by its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, the President, one of its Managing Directors or one of its Vice Presidents without any further action by the Company hereunder. In authenticating such Debentures, and accepting the additional responsibilities under this Indenture in relation to such Debentures, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon:
(a) a copy of any Board Resolution or Board Resolutions relating thereto and, if applicable, an appropriate record of any action taken pursuant to such resolution, in each case certified by the Secretary or an Assistant Secretary of the Company, as the case may be; and
(b) an Opinion of Counsel prepared in accordance with Section 14.6 which shall also state:
(1) that such Debentures, when authenticated and delivered by the Trustee and issued by the Company in each case in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, subject to or limited by applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium and other statutory or decisional laws relating to or affecting creditors' rights or the reorganization of financial institutions (including, without limitation, preference and fraudulent conveyance or transfer laws), heretofore or hereafter enacted or in effect, affecting the rights of creditors generally; and
(2) that all laws and requirements in respect of the execution and delivery by the Company of the Debentures have been complied with and that authentication and delivery of the Debentures by the Trustee will not violate the terms of this Indenture.
The Trustee shall have the right to decline to authenticate and deliver any Debentures under this Section if the Trustee, being advised in writing by counsel, determines that such action may not lawfully be taken or if a Responsible Officer of the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing holders.
The definitive Debentures shall be typed, printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Debentures, as evidenced by their execution of such Debentures.
SECTION 2.2. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The Trustee's certificate of authentication on all Debentures shall be in substantially the following form:
This is one of the Debentures referred to in the within-mentioned Indenture.
State Street Bank and Trust Company of Connecticut, National Association, as Trustee
By__________________________
Authorized Signer
SECTION 2.3. FORM AND DENOMINATION OF DEBENTURES. The Debentures shall be substantially in the form of Exhibit A attached hereto. The Debentures shall be in registered, certificated form without coupons and in minimum denominations of $500,000.00 and any multiple of $1,000.00 in excess thereof. Any attempted transfer of the Debentures in a block having an aggregate principal amount of less than $500,000.00 shall be deemed to be voided and of no legal effect whatsoever. Any such purported transferee shall be deemed not to be a holder of such Debentures for any purpose, including, but not limited to the receipt of payments on such Debentures, and such purported transferee shall be deemed to have no interest whatsoever in such Debentures. The Debentures shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the officers executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof.
SECTION 2.4. EXECUTION OF DEBENTURES. The Debentures shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, President, one of its Managing Directors or one of its Executive Vice Presidents, Senior Vice Presidents or Vice Presidents. Only such Debentures as shall bear thereon a certificate of authentication substantially in the form herein before recited, executed by the Trustee or the Authenticating Agent by the manual signature of an authorized signer, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee or the Authenticating Agent upon any Debenture executed by the Company shall be conclusive evidence that the Debenture so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the Debentures shall cease to be such officer before the Debentures so signed shall have been authenticated and delivered by the Trustee or the Authenticating Agent, or disposed of by the Company, such Debentures nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Debentures had not ceased to be such officer of the Company; and any Debenture may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Debenture, shall be the proper officers of the Company, although at the date of the execution of this Indenture any such person was not such an officer.
Every Debenture shall be dated the date of its authentication.
SECTION 2.5. EXCHANGE AND REGISTRATION OF TRANSFER OF DEBENTURES. The Company shall cause to be kept, at the office or agency maintained for the purpose of registration of transfer and for exchange as provided in Section 3.2, a register (the "Debenture Register") for the Debentures issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide
for the registration and transfer of all Debentures as in this Article II provided. The Debenture Register shall be in written form or in any other form capable of being converted into written form within a reasonable time.
Debentures to be exchanged may be surrendered at the Principal Office of the Trustee or at any office or agency to be maintained by the Company for such purpose as provided in Section 3.2, and the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange therefor the Debenture or Debentures which the Securityholder making the exchange shall be entitled to receive. Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.2, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount. Registration or registration of transfer of any Debenture by the Trustee or by any agent of the Company appointed pursuant to Section 3.2, and delivery of such Debenture, shall be deemed to complete the registration or registration of transfer of such Debenture.
All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing.
No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.
The Company or the Trustee shall not be required to exchange or register a transfer of any Debenture for a period of 15 days next preceding the date of selection of Debentures for redemption.
Notwithstanding anything herein to the contrary, Debentures may not be transferred except in compliance with the restricted securities legend set forth below, unless otherwise determined by the Company, upon the advice of counsel expert in securities law, in accordance with applicable law:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYMENT RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $500,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $500,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
SECTION 2.6. MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES. In case any Debenture shall become mutilated or be destroyed, lost or stolen, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, a new Debenture bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debenture, or in lieu of and in substitution for the Debenture so destroyed, lost or stolen. In every case the applicant for a substituted Debenture shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to
the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of such Debenture and of the ownership thereof.
The Trustee may authenticate any such substituted Debenture and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Debenture, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Debenture which has matured or is about to mature or has been called for redemption in full shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debenture, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Debenture) if the applicant for such payment shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to the Company and to the Trustee of the destruction, loss or theft of such Debenture and of the ownership thereof.
Every substituted Debenture issued pursuant to the provisions of this
Section 2.6 by virtue of the fact that any such Debenture is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Debenture shall be found at any
time, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Debentures duly issued hereunder. All
Debentures shall be held and owned upon the express condition that, to the
extent permitted by applicable law, the foregoing provisions are exclusive with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Debentures and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the replacement or payment of negotiable instruments or other
securities without their surrender.
SECTION 2.7. TEMPORARY DEBENTURES. Pending the preparation of definitive Debentures, the Company may execute and the Trustee shall authenticate and make available for delivery temporary Debentures that are typed, printed or lithographed. Temporary Debentures shall be issuable in any authorized denomination, and substantially in the form of the definitive Debentures in lieu of which they are issued but with such omissions, insertions and variations as may be appropriate for temporary Debentures, all as may be determined by the Company. Every such temporary Debenture shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Debentures. Without unreasonable delay the Company will execute and deliver to the Trustee or the Authenticating Agent definitive Debentures and thereupon any or all temporary Debentures may be surrendered in exchange therefor, at the principal corporate trust office of the Trustee or at any office or agency maintained by the Company for such purpose as provided in Section 3.2, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange for such temporary Debentures a like aggregate principal amount of such definitive Debentures. Such exchange shall be made by the Company at its own expense and without any charge therefor except that in case of any such exchange involving a registration of transfer the Company may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Until so exchanged, the temporary Debentures shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures authenticated and delivered hereunder.
SECTION 2.8. PAYMENT OF INTEREST AND ADDITIONAL INTEREST. Interest at the Interest Rate and any Additional Interest on any Debenture that is payable, and is punctually paid or duly provided for, on any Interest Payment Date for Debentures shall be paid to the Person in whose name said Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment except that interest and any Additional Interest payable on the Maturity Date
shall be paid to the Person to whom principal is paid. In the event that any Debenture or portion thereof is called for redemption and the redemption date is subsequent to a regular record date with respect to any Interest Payment Date and prior to such Interest Payment Date, interest on such Debenture will be paid upon presentation and surrender of such Debenture.
Each Debenture shall bear interest for the period beginning on (and including) the date of original issuance and ending on (but excluding) June 26, 2002 at a rate per annum of 5.59%, and shall bear interest for each successive period beginning on (and including) June 26, 2002, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each, a "Distribution Period") at a rate per annum equal to the 3-Month LIBOR, determined as described in Section 2.10, plus 3.60% (the "Coupon Rate"); provided, however, that prior to March 26, 2007, the Coupon Rate shall not exceed 11.00%, applied to the principal amount thereof, until the principal thereof becomes due and payable, and on any overdue principal and to the extent that payment of such interest is enforceable under applicable law (without duplication) on any overdue installment of interest at the Interest Rate compounded quarterly. Interest shall be payable (subject to any relevant Extension Period) quarterly in arrears on each Interest Payment Date with the first installment of interest to be paid on June 26, 2002.
Any interest on any Debenture, including Additional Interest, that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (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 shall be paid by the Company to the Persons in whose names such Debentures (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 at least 25 days prior to the date of the proposed payment of the amount of Defaulted Interest proposed to be paid on each such Debenture 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 not be more than 15 nor 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 Securityholder at its address as it appears in the Debenture Register, not less than 10 days prior to 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 such Debentures (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable.
The Company may make payment of any Defaulted Interest on any Debentures in any other lawful manner after notice given by the Company to the Trustee of the proposed payment method; provided, however, the Trustee in its sole discretion deems such payment method to be practical.
Any interest scheduled to become payable on an Interest Payment Date occurring during an Extension Period shall not be Defaulted Interest and shall be payable on such other date as may be specified in the terms of such Debentures.
The term "regular record date" as used in this Section shall mean the close of business on the 15th day next preceding the applicable Interest Payment Date.
Subject to the foregoing provisions of this Section, each Debenture delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Debenture shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Debenture.
SECTION 2.9. CANCELLATION OF DEBENTURES PAID, ETC. All Debentures surrendered for the purpose of payment, redemption, exchange or registration of transfer, shall, if surrendered to the Company or any paying agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee or any Authenticating Agent, shall be promptly canceled by it, and no Debentures shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. All Debentures canceled by any Authenticating Agent shall be delivered to the Trustee. The Trustee shall destroy all canceled Debentures unless the Company otherwise directs the Trustee in writing. If the Company shall acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the same are surrendered to the Trustee for cancellation.
SECTION 2.10. COMPUTATION OF INTEREST. The amount of interest payable for the Distribution Period commencing on June 26, 2002 and each succeeding Distribution Period will be calculated by applying the Interest Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360. In the event that any date on which interest is payable on the Debentures is not a Business Day, then payment of interest payable on such date shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable. All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).
(a) "3-Month LIBOR" means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Trustee in the following order of priority:
(1) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (as defined below). "Telerate Page 3750" means the display designated as "Page 3750" on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits;
(2) if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks' offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations;
(3) if fewer than two such quotations are provided as requested in clause (2) above, the Trustee will request four major New York City banks to provide such banks' offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and
(4) if fewer than two such quotations are provided as requested in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period.
If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.
(b) The Coupon Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.
(c) "Determination Date" means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the particular Distribution Period for which a Coupon Rate is being determined.
(d) The Trustee shall notify the Company, the Institutional Trustee and any securities exchange or interdealer quotation system on which the Capital Securities are listed, of the Coupon Rate and the Determination Date for each Distribution Period, in each case as soon as practicable after the determination thereof but in no event later than the thirtieth (30th) day of the relevant Distribution Period. Failure to notify the Company, the Institutional Trustee or any securities exchange or interdealer quotation system, or any defect in said notice, shall not affect the obligation of the Company to make payment on the Debentures at the applicable Coupon Rate. Any error in the calculation of the Coupon Rate by the Trustee may be corrected at any time by notice delivered as above provided. Upon the request of a holder of a Debenture, the Trustee shall provide the Coupon Rate then in effect and, if determined, the Coupon Rate for the next Distribution Period.
(e) Subject to the corrective rights set forth above, all certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions relating to the payment and calculation of interest on the Debentures and distributions on the Capital Securities by the Trustee or the Institutional Trustee will (in the absence of willful default, bad faith and manifest error) be final, conclusive and binding on the Trust, the Company and all of the holders of the Debentures and the Capital Securities, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Trustee or the Institutional Trustee in connection with the exercise or non-exercise by either of them or their respective powers, duties and discretion.
SECTION 2.11. EXTENSION OF INTEREST PAYMENT PERIOD. So long as no Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest (including Additional Interest) shall be due and payable. No Extension Period may 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 Debentures (together
with Additional Interest thereon); provided, however, that no Extension Period
may extend beyond the Maturity Date; provided further, however, that during any
such Extension Period, the Company shall not and shall not permit any Affiliate
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 or
such Affiliate's capital stock (other than payments of dividends or
distributions to the Company) or make any guarantee payments with respect to the
foregoing or (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 or any
Affiliate that rank pari passu in all respects with or junior in interest to the
Debentures (other than, with respect to clauses (i) or (ii) above, (a)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Company in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, (b) as a result of any exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (c) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
stockholders' rights plan, or the issuance of rights, stock or other property
under any stockholders' rights plan, or the redemption or repurchase of rights
pursuant thereto, (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock and any
cash payments in lieu of fractional shares issued in connection therewith, or
(f) payments under the Capital Securities Guarantee). Prior to the termination
of any Extension Period, the Company may further extend such period, provided
that such period together with all such previous and further consecutive
extensions thereof shall not exceed 20 consecutive quarterly periods, or extend
beyond the Maturity Date. Upon the termination of any Extension Period and upon
the payment of all accrued and unpaid interest and Additional Interest, the
Company may commence a new Extension Period, subject to the foregoing
requirements. No interest or Additional Interest shall be due and payable during
an Extension Period, except at the end thereof, but each installment of interest
that would otherwise have been due and payable during such Extension Period
shall bear Additional Interest to the extent permitted by applicable law. The
Company must give the Trustee notice of its election to begin or extend such
Extension Period at least 5 Business Days prior to the earlier of (i) the date
interest on the Debentures would have been payable except for the election to
begin or extend such Extension Period or (ii) the date such interest is payable,
but in any event not less than 5 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 Securityholders.
SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Debentures may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Securityholders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Debentures or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Debentures, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the CUSIP numbers.
ARTICLE III.
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.1. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST; AGREED TREATMENT OF THE DEBENTURES.
(a) The Company covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and premium, if any, and interest and any Additional Interest on the Debentures at the place, at the respective times and in the manner provided in this Indenture and the Debentures. Each installment of interest on the Debentures may be paid (i) by mailing checks for such interest payable to the order of the holders of Debentures entitled thereto as they appear on the registry books of the Company if a request for a wire transfer has not been received by the Company or (ii) by wire transfer to any account with a banking institution located in the United States designated in writing by such Person to the paying agent no later than the related record date. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Institutional Trustee.
(b) The Company will treat the Debentures as indebtedness, and the amounts payable in respect of the principal amount of such Debentures as interest, for all United States federal income tax purposes. All payments in respect of such Debentures will be made free and clear of United States withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W8 BEN (or any substitute or successor form) establishing its non-United States status for United States federal income tax purposes.
(c) As of the date of this Indenture, the Company has no present intention to exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period.
(d) As of the date of this Indenture, the Company believes that the likelihood that it would exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period at any time during which the Debentures are outstanding is remote because of the restrictions that would be imposed on the Company's ability to declare or pay dividends or distributions on, or to redeem, purchase or make a liquidation payment with respect to, any of its outstanding equity and on the Company's ability to make any payments of principal of or interest on, or repurchase or redeem, any of its debt securities that rank pari passu in all respects with (or junior in interest to) the Debentures.
SECTION 3.2. OFFICES FOR NOTICES AND PAYMENTS, ETC. So long as any of the Debentures remain outstanding, the Company will maintain in Hartford, Connecticut, an office or agency where the Debentures may be presented for payment, an office or agency where the Debentures may be presented for registration of transfer and for exchange as in this Indenture provided and an office or agency where notices and demands to or upon the Company in respect of the Debentures or of this Indenture may be served. The Company will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof. Until otherwise designated from time to time by the Company in a notice to the Trustee, or specified as contemplated by Section 2.5, such office or agency for all of the above purposes shall be the office or agency of the Trustee. In case the Company shall fail to maintain any such office or agency in Hartford, Connecticut, or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Principal Office of the Trustee.
In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside Hartford, Connecticut, where the Debentures may be presented for registration of transfer and for exchange in the manner provided in this Indenture, and the Company may from time to time rescind such designation, as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain any such office or agency in Hartford, Connecticut, for the purposes above mentioned. The Company will give to the Trustee prompt written notice of any such designation or rescission thereof.
SECTION 3.3. APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.9, a Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 3.4. PROVISION AS TO PAYING AGENT.
(a) If the Company shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provision of this Section 3.4,
(1) that it will hold all sums held by it as such agent for the payment of the principal of and premium, if any, or interest, if any, on the Debentures (whether such sums have been paid to it by the Company or by any other obligor on the Debentures) in trust for the benefit of the holders of the Debentures;
(2) that it will give the Trustee prompt written notice of any failure by the Company (or by any other obligor on the Debentures) to make any payment of the principal of and premium, if any, or interest, if any, on the Debentures when the same shall be due and payable; and
(3) that it will, at any time during the continuance of any Event of Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent.
(b) If the Company shall act as its own paying agent, it will, on or before each due date of the principal of and premium, if any, or interest, if any, on the Debentures, set aside, segregate and hold in trust for the benefit of the holders of the Debentures a sum sufficient to pay such principal, premium or interest so becoming due and will notify the Trustee in writing of any failure to take such action and of any failure by the Company (or by any other obligor under the Debentures) to make any payment of the principal of and premium, if any, or interest, if any, on the Debentures when the same shall become due and payable.
Whenever the Company shall have one or more paying agents for the Debentures, it will, on or prior to each due date of the principal of and premium, if any, or interest, if any, on the Debentures, deposit with a paying agent a sum sufficient to pay the principal, premium or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless such paying agent is the Trustee) the Company shall promptly notify the Trustee in writing of its action or failure to act.
(c) Anything in this Section 3.4 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Debentures, or for any other reason, pay, or direct any paying agent to pay to the Trustee all sums held in trust by the Company or any such paying agent, such sums to be held by the Trustee upon the trusts herein contained.
(d) Anything in this Section 3.4 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.4 is subject to Sections 12.3 and 12.4.
SECTION 3.5. CERTIFICATE TO TRUSTEE. The Company will deliver to the Trustee on or before 120 days after the end of each fiscal year, so long as Debentures are outstanding hereunder, a Certificate stating that in the course of the performance by the signers of their duties as officers of the Company they would normally have knowledge of any default during such fiscal year by the Company in the performance of any covenants contained herein, stating whether or not they have knowledge of any such default and, if so, specifying each such default of which the signers have knowledge and the nature and status thereof.
SECTION 3.6. ADDITIONAL SUMS. If and for so long as the Trust is the holder of all Debentures and the Trust is required to pay any additional taxes, duties, assessments or other governmental charges as a result of a Tax Event, the Company will pay such additional amounts ("Additional Sums") on the Debentures as shall be required so that the net amounts received and retained by the Trust after paying taxes, duties, assessments or other governmental charges will be equal to the amounts the Trust would have received if no such taxes, duties, assessments or other governmental charges had been imposed. Whenever in this Indenture or the Debentures there is a reference in any context to the payment of principal of or interest on the Debentures, such mention shall be deemed to include mention of 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 during an Extension Period pursuant to Section 2.11 shall not defer the payment of any Additional Sums that may be due and payable.
SECTION 3.7. COMPLIANCE WITH CONSOLIDATION PROVISIONS. The Company will not, while any of the Debentures remain outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article XI hereof are complied with.
SECTION 3.8. LIMITATION ON DIVIDENDS. If Debentures are initially issued to the Trust or a trustee of such trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock or its Affiliates' capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Company's capital stock (or any capital stock of
a subsidiary of the Company) for any class or series of the Company's capital
stock or of any class or series of the Company's indebtedness for any class or
series of the Company's capital stock, (3) the purchase of fractional interests
in shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(4) any declaration of a dividend in connection with any stockholders' rights
plan, or the issuance of rights, stock or other property under any stockholders'
rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any
dividend in the form of stock, warrants, options or other rights where the
dividend stock or the stock issuable upon exercise of such warrants, options or
other rights is the same stock as that on which the dividend is being paid or
ranks pari passu with or junior to such stock and any cash payments in lieu of
fractional shares issued in connection therewith, or (6) payments under the
Capital Securities Guarantee).
SECTION 3.9. COVENANTS AS TO THE TRUST. For so long as the Trust
Securities remain outstanding, the Company shall maintain 100% ownership of the
Common Securities; provided, however, that any permitted successor of the
Company under this Indenture may succeed to the Company's ownership of such
Common Securities. The Company, as owner of the Common Securities, shall, except
in connection with a distribution of Debentures to the holders of Trust
Securities in liquidation of the Trust, the redemption of all of the Trust
Securities or certain mergers, consolidations or amalgamations, each as
permitted by the Declaration, cause the Trust (a) to remain a statutory trust,
(b) to otherwise continue to be classified as a grantor trust for United States
federal income tax purposes, and (c) to cause each holder of Trust Securities to
be treated as owning an undivided beneficial interest in the Debentures.
SECTION 3.10. ADDITIONAL JUNIOR INDEBTEDNESS. The Company shall not, and it shall not cause or permit any Subsidiary of the Company to, incur, issue or be obligated on any Additional Junior Indebtedness, either directly or indirectly, by way of guarantee, suretyship or otherwise, other than: (i) Additional Junior Indebtedness that, by its terms, is expressly stated to be either junior and subordinate or pari passu in all respects to the Debentures, and (ii) Additional Junior Indebtedness of which the Company has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve, if the Company is a bank holding company, or the OTS, if the Company is a savings and loan holding company.
ARTICLE IV.
SECURITYHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
SECTION 4.1. SECURITYHOLDERS' LISTS. The Company covenants and agrees that it will furnish or caused to be furnished to the Trustee:
(a) on each regular record date for the Debentures, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Securityholders of the Debentures as of such record date; 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;
except that no such lists need be furnished under this Section 4.1 so long as the Trustee is in possession thereof by reason of its acting as Debenture registrar.
SECTION 4.2. PRESERVATION AND DISCLOSURE OF LISTS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Debentures (1) contained in the most recent list furnished to it as provided in
Section 4.1 or (2) received by it in the capacity of Debentures registrar (if so
acting) hereunder. The Trustee may destroy any list furnished to it as provided
in Section 4.1 upon receipt of a new list so furnished.
(b) In case three or more holders of Debentures (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Debenture for a period of at least 6 months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of Debentures with respect to their rights under this Indenture or under such Debentures and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall within 5 Business Days after the receipt of such application, at its election, either:
(1) afford such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, or
(2) inform such applicants as to the approximate number of holders of Debentures whose names and addresses appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Securityholder whose name and address appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2 a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Securities and Exchange Commission, if permitted or required by applicable law, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the holders of all Debentures, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said Commission, as permitted or required by applicable law, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, said Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application.
(c) Each and every holder of Debentures, by receiving and holding the
same, agrees with Company and the Trustee that neither the Company nor the
Trustee nor any paying agent shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the holders
of Debentures in accordance with the provisions of subsection (b) of this
Section 4.2, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).
ARTICLE V.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
UPON AN EVENT OF DEFAULT
SECTION 5.1. EVENTS OF DEFAULT. "Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(a) the Company defaults in the payment of any interest upon any Debenture when it becomes due and payable, and fails to cure such default for a period of 30 days; provided, however, that a valid extension of an interest payment period by the Company in accordance with the terms of this Indenture shall not constitute a default in the payment of interest for this purpose; or
(b) the Company defaults in the payment of all or any part of the principal of (or premium, if any, on) any Debentures as and when the same shall become due and payable either at maturity, upon redemption, by declaration of acceleration or otherwise; or
(c) the Company defaults in the performance of, or breaches, any of its
covenants or agreements in this Indenture or in the terms of the Debentures
established as contemplated in this Indenture (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere in this
Section specifically dealt with), and continuance of such default or breach for
a period of 60 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 the holders
of at least 25% in aggregate principal amount of the outstanding Debentures, 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
(d) a court of competent jurisdiction shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or
(e) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or
(f) the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of the Debentures to holders of such Trust Securities in liquidation of their interests in the Trust, (ii) the redemption of all of the outstanding Trust Securities or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration.
If an Event of Default occurs and is continuing with respect to the Debentures, then, and in each and every such case, unless the principal of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by
Securityholders), may declare the entire principal of the Debentures and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable.
The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Debentures shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Debentures and the principal of and premium, if any, on the Debentures which shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and Additional Interest) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and all other amounts due to the Trustee pursuant to Section 6.6, and if any and all Events of Default under this Indenture, other than the non-payment of the principal of or premium, if any, on Debentures which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein - then and in every such case the holders of a majority in aggregate principal amount of the Debentures then outstanding, by written notice to the Company and to the Trustee, may waive all defaults and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the holders of the Debentures shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the holders of the Debentures shall continue as though no such proceeding had been taken.
SECTION 5.2. PAYMENT OF DEBENTURES ON DEFAULT; SUIT THEREFOR. The
Company covenants that upon the occurrence of an Event of Default pursuant to
Section 5.1(a) or Section 5.1(b) then, upon demand of the Trustee, the Company
will pay to the Trustee, for the benefit of the holders of the Debentures the
whole amount that then shall have become due and payable on all Debentures for
principal and premium, if any, or interest, or both, as the case may be, with
Additional Interest accrued on the Debentures (to the extent that payment of
such interest is enforceable under applicable law and, if the Debentures are
held by the Trust or a trustee of such Trust, without duplication of any other
amounts paid by the Trust or a trustee in respect thereof); and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including a reasonable compensation to the Trustee, its
agents, attorneys and counsel, and any other amounts due to the Trustee under
Section 6.6. In case the Company shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any actions or proceedings at law
or in equity for the collection of the sums so due and unpaid, and may prosecute
any such action or proceeding to judgment or final decree, and may enforce any
such judgment or final decree against the Company or any other obligor on such
Debentures and collect in the manner provided by law out of the property of the
Company or any other obligor on such Debentures wherever situated the moneys
adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Debentures under Bankruptcy Law, or in case a receiver or trustee shall have been appointed for the property of the Company or such other obligor, or in the case of any other similar judicial proceedings relative to the Company or other obligor upon the Debentures, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the
principal of the Debentures shall then be due and payable as therein expressed or by declaration of acceleration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.2, shall be entitled and empowered, by intervention in such proceedings or otherwise,
(i) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Debentures and, in case of any judicial proceedings,
(ii) to file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of
the Trustee (including any claim for reasonable compensation
to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and counsel, and for
reimbursement of all other amounts due to the Trustee under
Section 6.6), and of the Securityholders allowed in such
judicial proceedings relative to the Company or any other
obligor on the Debentures, or to the creditors or property of
the Company or such other obligor, unless prohibited by
applicable law and regulations, to vote on behalf of the
holders of the Debentures in any election of a trustee or a
standby trustee in arrangement, reorganization, liquidation or
other bankruptcy or insolvency proceedings or Person
performing similar functions in comparable proceedings,
(iii) to collect and receive any moneys or other property payable or deliverable on any such claims, and
(iv) to distribute the same after the deduction of its charges and expenses.
Any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other amounts due to the Trustee under Section 6.6.
Nothing herein contained shall be construed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any holder thereof or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under any of the Debentures, may be enforced by the Trustee without the possession of any of the Debentures, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the holders of the Debentures.
In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the holders of the Debentures, and it shall not be necessary to make any holders of the Debentures parties to any such proceedings.
SECTION 5.3. APPLICATION OF MONEYS COLLECTED BY TRUSTEE. Any moneys collected by the Trustee pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Debentures in respect of which moneys have been collected, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid:
First: To the payment of costs and expenses incurred by, and reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all other amounts due to the Trustee under Section 6.6;
Second: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XV;
Third: To the payment of the amounts then due and unpaid upon Debentures for principal (and premium, if any), and interest on the Debentures, in respect of which or for the benefit of which money has been collected, ratably, without preference or priority of any kind, according to the amounts due on such Debentures for principal (and premium, if any) and interest, respectively; and
Fourth: The balance, if any, to the Company.
SECTION 5.4. PROCEEDINGS BY SECURITYHOLDERS. No holder of any Debenture shall have any right to institute any suit, action or proceeding for any remedy hereunder, unless such holder previously shall have given to the Trustee written notice of an Event of Default with respect to the Debentures and unless the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding shall have given the Trustee a written request to institute such action, suit or proceeding and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding.
Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Debenture to receive payment of the principal of, premium, if any, and interest, on such Debenture when due, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder and by accepting a Debenture hereunder it is expressly understood, intended and covenanted by the taker and holder of every Debenture with every other such taker and holder and the Trustee, that no one or more holders of Debentures shall have any right in any manner whatsoever by virtue or by availing itself of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other Debentures, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debentures. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.
SECTION 5.5. PROCEEDINGS BY TRUSTEE. In case of an Event of Default hereunder the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.
SECTION 5.6. REMEDIES CUMULATIVE AND CONTINUING; DELAY OR OMISSION NOT A WAIVER. Except as otherwise provided in Section 2.6, all powers and remedies given by this Article V to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to the Debentures, and no delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or
power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.4, every power and remedy given by this Article V or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders.
No delay or omission of the Trustee or any Securityholder 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 any Securityholder may be exercised from time to time, and as often as may be deemed expedient, by the Trustee (in accordance with its duties under Section 6.1 hereof) or by such holder, as the case may be.
SECTION 5.7. DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY MAJORITY OF SECURITYHOLDERS. The holders of a majority in aggregate principal amount of the Debentures affected (voting as one class) at the time outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such Debentures; provided, however, that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine that the action so directed would be unjustly prejudicial to the holders not taking part in such direction or if the Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if a Responsible Officer of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability.
The holders of a majority in aggregate principal amount of the Debentures at the time outstanding may on behalf of the holders of all of the Debentures waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9; provided, however, that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided, further, that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section, said default or Event of Default shall for all purposes of the Debentures and this Indenture be deemed to have been cured and to be not continuing.
SECTION 5.3. NOTICE OF DEFAULTS. The Trustee shall, within 90 days
after the actual knowledge by a Responsible Officer of the Trustee of the
occurrence of a default with respect to the Debentures, mail to all
Securityholders, as the names and addresses of such holders appear upon the
Debenture Register, notice of all defaults with respect to the Debentures known
to the Trustee, unless such defaults shall have been cured before the giving of
such notice (the term "defaults" for the purpose of this Section 5.8 being
hereby defined to be the events specified in clauses (a), (b), (c), (d), (e) and
(f) of Section 5.1, not including periods of grace, if any, provided for
therein); provided, however, that, except in the case of default in the payment
of the principal of, premium, if any, or interest on any of the Debentures, the
Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the
Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders.
SECTION 5.9. UNDERTAKING TO PAY COSTS. All parties to this Indenture agree, and each holder of any Debenture 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 and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section 5.9 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in principal amount of the Debentures outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Debenture against the Company on or after the same shall have become due and payable.
ARTICLE VI.
CONCERNING THE TRUSTEE
SECTION 6.1. DUTIES AND RESPONSIBILITIES OF TRUSTEE. With respect to the holders of Debentures issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Debentures and after the curing or waiving of all Events of Default which may have occurred, with respect to the Debentures, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default with respect to the Debentures has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
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:
(a) prior to the occurrence of an Event of Default with respect to Debentures and after the curing or waiving of all Events of Default which may have occurred
(1) the duties and obligations of the Trustee with respect to Debentures shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations with respect to the Debentures 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 the part of the Trustee, the 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 Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith, in accordance with the direction of the Securityholders pursuant to Section 5.7, 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.
None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is ground for believing that the repayment of such funds or liability is not assured to it under the terms of this Indenture or indemnity satisfactory to the Trustee against such risk is not reasonably assured to it.
SECTION 6.2. RELIANCE ON DOCUMENTS, OPINIONS, ETC. Except as otherwise provided in Section 6.1:
(a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its selection and any advice or 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 accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default with respect to the Debentures (that has not been cured or waived) to exercise with respect to Debentures such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs;
(f) the Trustee shall not be 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, coupon or other paper or document, unless requested in writing to do so by the holders of not less than a majority in aggregate principal amount of the outstanding Debentures affected thereby; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such expense or liability as a condition to so proceeding;
(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents (including any Authenticating Agent) or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care; and
(h) with the exceptions of defaults under Sections 5.1(a) or 5.1(b), the Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Debentures unless a written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any other obligor on the Debentures or by any holder of the Debentures.
SECTION 6.3. NO RESPONSIBILITY FOR RECITALS, ETC. The recitals contained herein and in the Debentures (except in the certificate of authentication of the Trustee or the Authenticating Agent) shall be taken as the statements of the Company, and the Trustee and the Authenticating Agent assume no responsibility for the correctness of the same. The Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of the Debentures. The Trustee and the Authenticating Agent shall not be accountable for the use or application by the Company of any Debentures or the proceeds of any Debentures authenticated and delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this Indenture.
SECTION 6.4. TRUSTEE, AUTHENTICATING AGENT, PAYING AGENTS, TRANSFER AGENTS OR REGISTRAR MAY OWN DEBENTURES. The Trustee or any Authenticating Agent or any paying agent or any transfer agent or any Debenture registrar, in its individual or any other capacity, may become the owner or pledgee of Debentures with the same rights it would have if it were not Trustee, Authenticating Agent, paying agent, transfer agent or Debenture registrar.
SECTION 6.5. MONEYS TO BE HELD IN TRUST. Subject to the provisions of
Section 12.4, all moneys received by the Trustee or any paying agent shall,
until used or applied as herein provided, be held in trust for the purpose for
which they were received, but need not be segregated from other funds except to
the extent required by law. The Trustee and any paying agent shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company. So long as no Event of Default shall have
occurred and be continuing, all interest allowed on any such moneys shall be
paid from time to time upon the written order of the Company, signed by the
Chairman of the Board of Directors, the Chief Executive Officer, the President,
a Managing Director, a Vice President the Treasurer or an Assistant Treasurer of
the Company.
SECTION 6.6. COMPENSATION AND EXPENSES OF TRUSTEE. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as shall be agreed to in writing between the Company and the Trustee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), and the Company will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or willful misconduct. The Company also covenants to indemnify each of the Trustee or any predecessor Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense including taxes (other than taxes based on the income of the Trustee) incurred without negligence or willful misconduct on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of
defending itself against any claim of liability. The obligations of the Company under this Section 6.6 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Debentures upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debentures.
Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1(d), Section 5.1(e) or Section 5.1(f), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the resignation or removal of the Trustee and the defeasance or other termination of this Indenture.
Notwithstanding anything in this Indenture or any Debenture to the contrary, the Trustee shall have no obligation whatsoever to advance funds to pay any principal of or interest on or other amounts with respect to the Debentures or otherwise advance funds to or on behalf of the Company.
SECTION 6.7. OFFICERS' CERTIFICATE AS EVIDENCE. Except as otherwise provided in Sections 6.1 and 6.2, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or willful misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.
SECTION 6.8. ELIGIBILITY OF TRUSTEE. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia or a corporation or other Person authorized under such laws to exercise corporate trust powers, having (or whose obligations under this Indenture are guaranteed by an affiliate having) a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00) and subject to supervision or examination by federal, state, territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.8 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 records of condition so published.
The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee.
In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.8, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.9.
If the Trustee has or shall acquire any "conflicting interest" within the meaning of ss.310(b) of the Trust Indenture Act of 1939, the Trustee shall either eliminate such interest or resign, to the extent and in the manner described by this Indenture.
SECTION 6.9. RESIGNATION OR REMOVAL OF TRUSTEE
(a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof, at the Company's expense, to the holders of the Debentures at their addresses as they shall appear on the Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee or trustees by written instrument, in duplicate, executed by order of its Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor Trustee. If no successor Trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation to the affected Securityholders, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee.
(b) In case at any time any of the following shall occur --
(1) the Trustee shall fail to comply with the provisions of Section 6.8 after written request therefor by the Company or by any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months, or
(2) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.8 and shall fail to resign after written request therefor by the Company or by any such Securityholder, 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, the Company may remove the Trustee and appoint a successor Trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, or, subject to the provisions of Section 5.9, any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint successor Trustee.
(c) Upon prior written notice to the Company and the Trustee, the holders of a majority in aggregate principal amount of the Debentures at the time outstanding may at any time remove the Trustee and nominate a successor Trustee, which shall be deemed appointed as successor Trustee unless within 10 Business Days after such nomination the Company objects thereto, in which case, or in the case of a failure by such holders to nominate a successor Trustee, the Trustee so removed or any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this Section 6.9 provided, may petition any court of competent jurisdiction for an appointment of a successor.
(d) Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor Trustee as provided in
Section 6.10. ACCEPTANCE BY SUCCESSOR TRUSTEE. Any successor Trustee
appointed as provided in Section 6.9 shall execute, acknowledge and deliver to
the Company and to its predecessor Trustee an instrument accepting such
appointment hereunder, 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, duties
and obligations with respect to the Debentures of its predecessor hereunder,
with like effect as if originally named as Trustee herein; but, nevertheless, on
the written request of the Company or of the successor Trustee, the Trustee
ceasing to act shall, upon payment of any amounts then due it pursuant to the
provisions of Section 6.6, execute and deliver an instrument transferring to
such successor Trustee all the rights and powers of the Trustee so ceasing to
act and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee thereunder. Upon request of any
such successor Trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
Trustee all such rights and powers. Any Trustee ceasing to act shall,
nevertheless, retain a lien upon all property or funds held or collected by
such Trustee to secure any amounts then due it pursuant to the provisions of
Section 6.6.
If a successor Trustee is appointed, the Company, the retiring Trustee and the successor Trustee shall execute and deliver an indenture supplemental hereto which 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 Debentures as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and 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 Trust 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.
No successor Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 6.8.
In no event shall a retiring Trustee be liable for the acts or omissions of any successor Trustee hereunder.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 6.10, the Company shall mail notice of the succession of such Trustee
hereunder to the holders of Debentures at their addresses as they shall appear
on the Debenture Register. If the Company fails to mail such notice within 10
Business Days after the acceptance of appointment by the successor Trustee, the
successor Trustee shall cause such notice to be mailed at the expense of the
Company.
SECTION 6.11. SUCCESSION BY MERGER, ETC. 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 without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided such corporation shall be otherwise eligible and qualified under this Article.
In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Debentures shall have been authenticated but not delivered, any such successor to the
Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Debentures so authenticated; and in case at that time any of the Debentures shall not have been authenticated, any successor to the Trustee may authenticate such Debentures either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debentures or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Debentures in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.
SECTION 6.12. AUTHENTICATING AGENTS. There may be one or more Authenticating Agents appointed by the Trustee upon the request of the Company with power to act on its behalf and subject to its direction in the authentication and delivery of Debentures issued upon exchange or registration of transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver Debentures; provided, however, that the Trustee shall have no liability to the Company for any acts or omissions of the Authenticating Agent with respect to the authentication and delivery of Debentures. Any such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States or of any state or territory thereof or of the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of at least $50,000,000.00 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 6.12 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 an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section 6.12 without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any Authenticating Agent with respect to the Debentures by giving written notice of termination 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 any Authenticating Agent shall cease to be eligible under this Section 6.12, the Trustee may, and upon the request of the Company shall, promptly appoint a successor Authenticating Agent eligible under this Section 6.12, shall give written notice of such appointment to the Company and shall mail notice of such appointment to all holders of Debentures as the names and addresses of such holders appear on the Debenture Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein.
The Company agrees to pay to any Authenticating Agent from time to time reasonable compensation for its services. Any Authenticating Agent shall have no responsibility or liability for any action taken by it as such in accordance with the directions of the Trustee.
ARTICLE VII.
CONCERNING THE SECURITYHOLDERS
SECTION 7.1. ACTION BY SECURITYHOLDERS. Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Debentures may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action) the fact that at the time of taking any such action the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Securityholders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Debentures voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Securityholders or (d) by any other method the Trustee deems satisfactory.
If the Company shall solicit from the Securityholders any request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, the Company may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for such Debentures for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of outstanding Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, and for that purpose the outstanding Debentures shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than 6 months after the record date.
SECTION 7.2. PROOF OF EXECUTION BY SECURITYHOLDERS. Subject to the provisions of Section 6.1, 6.2 and 8.5, proof of the execution of any instrument by a Securityholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The ownership of Debentures shall be proved by the Debenture Register or by a certificate of the Debenture registrar. The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary.
The record of any Securityholders' meeting shall be proved in the manner provided in Section 8.6.
SECTION 7.3. WHO ARE DEEMED ABSOLUTE OWNERS. Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.
SECTION 7.4. DEBENTURES OWNED BY COMPANY DEEMED NOT OUTSTANDING. In determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent or waiver under this Indenture, Debentures which are owned by the Company or any other obligor on the Debentures or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Debentures shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided, however, that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.4 if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Debentures and that the pledgee is not the Company or any such other obligor or Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.
SECTION 7.5. REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the holders of the percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action, any holder (in cases where no record date has been set pursuant to Section 7.1) or any holder as of an applicable record date (in cases where a record date has been set pursuant to Section 7.1) of a Debenture (or any Debenture issued in whole or in part in exchange or substitution therefor) the serial number of which is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee at the Principal Office of the Trustee and upon proof of holding as provided in Section 7.2, revoke such action so far as concerns such Debenture (or so far as concerns the principal amount represented by any exchanged or substituted Debenture). Except as aforesaid any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture, and of any Debenture issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture or any Debenture issued in exchange or substitution therefor.
ARTICLE VIII.
SECURITYHOLDERS' MEETINGS
SECTION 8.1. PURPOSES OF MEETINGS. A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article V;
(b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article VI;
(c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.2; or
(d) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of such Debentures under any other provision of this Indenture or under applicable law.
SECTION 8.2. CALL OF MEETINGS BY TRUSTEE. The Trustee may at any time call a meeting of Securityholders to take any action specified in Section 8.1, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Debentures affected at their addresses as they shall appear on the Debentures Register and, if the Company is not a holder of Debentures, to the Company. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting.
SECTION 8.3. CALL OF MEETINGS BY COMPANY OR SECURITYHOLDERS. In case at
any time the Company pursuant to a Board Resolution, or the holders of at least
10% in aggregate principal amount of the Debentures, as the case may be, then
outstanding, shall have requested the Trustee to call a meeting of
Securityholders, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within 20 days after receipt of such request,
then the Company or such Securityholders may determine the time and the place
for such meeting and may call such meeting to take any action authorized in
Section 8.1, by mailing notice thereof as provided in Section 8.2.
SECTION 8.4. QUALIFICATIONS FOR VOTING. To be entitled to vote at any meeting of Securityholders a Person shall (a) be a holder of one or more Debentures with respect to which the meeting is being held or (b) a Person appointed by an instrument in writing as proxy by a holder of one or more such Debentures. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.
SECTION 8.5. REGULATIONS. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Debentures and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders as provided in Section 8.3, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 7.4, at any meeting each holder of Debentures with respect to which such meeting is being held or proxy therefor shall be entitled to one vote for each $1,000.00 principal amount of Debentures held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Debenture challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Debentures held by him or instruments in writing as aforesaid duly designating him as the Person to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 8.2 or 8.3 may be adjourned from time to time by a majority of those present, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.
SECTION 8.6. VOTING. The vote upon any resolution submitted to any meeting of holders of Debentures with respect to which such meeting is being held shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or
numbers of the Debentures held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.2. The record shall show the serial numbers of the Debentures voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the matters therein stated.
SECTION 8.7. QUORUM; ACTIONS. The Persons entitled to vote a majority in principal amount of the Debentures then outstanding shall constitute a quorum for a meeting of Securityholders; provided, however, that if any action is to be taken at such meeting with respect to a consent, waiver, request, demand, notice, authorization, direction or other action which may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding, the Persons holding or representing such specified percentage in principal amount of the Debentures then outstanding will constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Securityholders, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 8.2, except that such notice need be given only once not less than 5 days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Debentures then outstanding which shall constitute a quorum.
Except as limited by the provisos in the first paragraph of Section 9.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the holders of a majority in principal amount of the Debentures then outstanding; provided, however, that, except as limited by the provisos in the first paragraph of Section 9.2, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action which this Indenture expressly provides may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid only by the affirmative vote of the holders of a not less than such specified percentage in principal amount of the Debentures then outstanding.
Any resolution passed or decision taken at any meeting of holders of Debentures duly held in accordance with this Section shall be binding on all the Securityholders, whether or not present or represented at the meeting.
ARTICLE IX.
SUPPLEMENTAL INDENTURES
SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF SECURITYHOLDERS. The Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto, without the consent of the Securityholders, for one or more of the following purposes:
(a) to evidence the succession of another Person to the Company, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Company, pursuant to Article XI hereof;
(b) to add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the holders of Debentures as the Board of Directors shall consider to be for the protection of the holders of such Debentures, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant restriction or condition such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default;
(c) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture; provided that any such action shall not materially adversely affect the interests of the holders of the Debentures;
(d) to add to, delete from, or revise the terms of Debentures, including, without limitation, any terms relating to the issuance, exchange, registration or transfer of Debentures, including to provide for transfer procedures and restrictions substantially similar to those applicable to the Capital Securities as required by Section 2.5 (for purposes of assuring that no registration of Debentures is required under the Securities Act); provided, however, that any such action shall not adversely affect the interests of the holders of the Debentures then outstanding (it being understood, for purposes of this proviso, that transfer restrictions on Debentures substantially similar to those that were applicable to Capital Securities shall not be deemed to materially adversely affect the holders of the Debentures);
(e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Debentures 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;
(f) to make any change (other than as elsewhere provided in this paragraph) that does not adversely affect the rights of any Securityholder in any material respect; or
(g) to provide for the issuance of and establish the form and terms and conditions of the Debentures, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or the Debentures, or to add to the rights of the holders of Debentures.
The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be
therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to, but may in its discretion, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section 9.1 may be executed by the Company and the Trustee without the consent of the holders of any of the Debentures at the time outstanding, notwithstanding any of the provisions of Section 9.2.
SECTION 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS. With the consent (evidenced as provided in Section 7.1) of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding affected by such supplemental indenture (voting as a class), the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time 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 any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture; provided further, however, that if the Debentures are held by a trust or a trustee of such trust, such supplemental indenture shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities shall have consented to such supplemental indenture; provided further, however, that if the consent of the Securityholder of each outstanding Debenture is required, such supplemental indenture shall not be effective until each holder of the Trust Securities shall have consented to such supplemental indenture.
Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.
Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage prepaid, a notice, prepared by the Company, setting forth in general terms the substance of such supplemental indenture, to the Securityholders as their names and addresses appear upon the Debenture Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under this
Section 9.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 9.3. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Debentures
shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
SECTION 9.4. NOTATION ON DEBENTURES. Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a notation as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Debentures so modified as to conform, in the opinion of the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company, authenticated by the Trustee or the Authenticating Agent and delivered in exchange for the Debentures then outstanding.
SECTION 9.5. EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE FURNISHED TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall, in addition to the documents required by Section 14.6, receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article IX. The Trustee shall receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article IX is authorized or permitted by, and conforms to, the terms of this Article IX and that it is proper for the Trustee under the provisions of this Article IX to join in the execution thereof.
ARTICLE X.
REDEMPTION OF SECURITIES
SECTION 10.1. OPTIONAL REDEMPTION. The Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve, if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS if then required under applicable capital guidelines or policies of the OTS), to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any March 26, June 26, September 26 or December 26 on or after March 26, 2007 (the "Redemption Date"), at the Redemption Price.
SECTION 10.2. SPECIAL EVENT REDEMPTION. If a Special Event shall occur and be continuing, the Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS if then required under applicable capital guidelines or policies of the OTS) to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event (the "Special Redemption Date") at the Special Redemption Price.
SECTION 10.3. NOTICE OF REDEMPTION; SELECTION OF DEBENTURES. In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Debentures, it shall cause to be mailed a notice of such redemption at least 30 and not more than 60 days prior to the Redemption Date or the Special Redemption Date to the holders of Debentures so to be redeemed as a whole or in part at their last addresses as the same appear on the Debenture Register. Such mailing shall be by first class mail. 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, failure to give such notice by mail or any defect in the notice to the holder of any Debenture designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debenture.
Each such notice of redemption shall specify the CUSIP number, if any, of the Debentures to be redeemed, the Redemption Date or the Special Redemption Date, as applicable, the Redemption Price or the Special Redemption Price, as applicable, at which Debentures are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Debentures are to be redeemed the notice of redemption shall specify the numbers of the Debentures to be redeemed. In case the Debentures are to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof will be issued.
Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price, together with accrued interest to the Redemption Date or Special Redemption Date, as applicable.
If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed.
SECTION 10.4. PAYMENT OF DEBENTURES CALLED FOR REDEMPTION. If notice of redemption has been given as provided in Section 10.3, the Debentures or portions of Debentures with respect to which such notice has been given shall become due and payable on the Redemption Date or Special Redemption Date, as applicable, and at the place or places stated in such notice at the applicable Redemption Price or Special Redemption Price, together with interest accrued to the Redemption Date or Special Redemption Date, as applicable, and on and after said date (unless the Company shall default in the payment of such Debentures at the Redemption Price or Special Redemption Price, as applicable, together with interest accrued to said date) interest on the Debentures or portions of Debentures so called for redemption shall cease to accrue. On presentation and surrender of such Debentures at a place of payment specified in said notice, such Debentures or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price or Special Redemption Price, together with interest accrued thereon to the Redemption Date or Special Redemption Date, as applicable.
Upon presentation of any Debenture redeemed in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Company, a new Debenture or Debentures of authorized denominations, in principal amount equal to the unredeemed portion of the Debenture so presented.
ARTICLE XI.
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 11.1. COMPANY MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. Nothing contained in this Indenture or in the Debentures shall prevent any consolidation or merger of the Company with or into any other Person (whether or not affiliated with the Company) or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property or capital stock of the Company or its successor or successors as an entirety, or substantially as an entirety, to any other Person (whether or not affiliated
with the Company, or its successor or successors) authorized to acquire and operate the same; provided, however, that the Company hereby covenants and agrees that, upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other disposition, the due and punctual payment of the principal of (and premium, if any) and interest on all of the Debentures in accordance with their terms, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company, shall be expressly assumed by supplemental indenture satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company shall have been merged, or by the entity which shall have acquired such property or capital stock.
SECTION 11.2. SUCCESSOR ENTITY TO BE SUBSTITUTED. In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor entity, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and premium, if any, and interest on all of the Debentures and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the Company, and thereupon the predecessor entity shall be relieved of any further liability or obligation hereunder or upon the Debentures. Such successor entity thereupon may cause to be signed, and may issue in its own name, any or all of the Debentures issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee or the Authenticating Agent; and, upon the order of such successor entity instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate and deliver any Debentures which previously shall have been signed and delivered by the officers of the Company, to the Trustee or the Authenticating Agent for authentication, and any Debentures which such successor entity thereafter shall cause to be signed and delivered to the Trustee or the Authenticating Agent for that purpose. All the Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debentures theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debentures had been issued at the date of the execution hereof.
SECTION 11.3. OPINION OF COUNSEL TO BE GIVEN TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall receive, in addition to the Opinion of Counsel required by Section 9.5, an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale, conveyance, transfer or other disposition, and any assumption, permitted or required by the terms of this Article XI complies with the provisions of this Article XI.
ARTICLE XII.
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 12.1. DISCHARGE OF INDENTURE. When
(a) the Company shall deliver to the Trustee for cancellation all Debentures theretofore authenticated (other than any Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) and not theretofore canceled, or
(b) all the Debentures not theretofore canceled or delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within 1 year or are to be called for redemption within 1 year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee, in trust, funds, which shall be immediately due and payable,
sufficient to pay at maturity or upon redemption all of the Debentures
(other than any Debentures which shall have been destroyed, lost or
stolen and which shall have been replaced or paid as provided in
Section 2.6) not theretofore canceled or delivered to the Trustee for
cancellation, including principal and premium, if any, and interest
due or to become due to such date of maturity or redemption date, as
the case may be, but excluding, however, the amount of any moneys for
the payment of principal of, and premium, if any, or interest on the
Debentures (1) theretofore repaid to the Company in accordance with
the provisions of Section 12.4, or (2) paid to any state or to the
District of Columbia pursuant to its unclaimed property or similar
laws,
and if in the case of either clause (a) or clause (b) the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect except for the provisions of Sections 2.5, 2.6, 2.8, 3.1, 3.2, 3.4, 6.6, 6.8, 6.9 and 12.4 hereof shall survive until such Debentures shall mature and be paid. Thereafter, Sections 6.6 and 12.4 shall survive, and the Trustee, on demand of the Company accompanied by 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, and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. The Company agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with this Indenture or the Debentures.
SECTION 12.2. DEPOSITED MONEYS TO BE HELD IN TRUST BY TRUSTEE. Subject to the provisions of Section 12.4, all moneys deposited with the Trustee pursuant to Section 12.1 shall be held in trust in a non-interest bearing account and applied by it to the payment, either directly or through any paying agent (including the Company if acting as its own paying agent), to the holders of the particular Debentures for the payment of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal, and premium, if any, and interest.
SECTION 12.3. PAYING AGENT TO REPAY MONEYS HELD. Upon the satisfaction and discharge of this Indenture all moneys then held by any paying agent of the Debentures (other than the Trustee) shall, upon demand of the Company, be repaid to it or paid to the Trustee, and thereupon such paying agent shall be released from all further liability with respect to such moneys.
SECTION 12.4. RETURN OF UNCLAIMED MONEYS. Any moneys deposited with or paid to the Trustee or any paying agent for payment of the principal of, and premium, if any, or interest on Debentures and not applied but remaining unclaimed by the holders of Debentures for 2 years after the date upon which the principal of, and premium, if any, or interest on such Debentures, as the case may be, shall have become due and payable, shall, subject to applicable escheatment laws, be repaid to the Company by the Trustee or such paying agent on written demand; and the holder of any of the Debentures shall thereafter look only to the Company for any payment which such holder may be entitled to collect, and all liability of the Trustee or such paying agent with respect to such moneys shall thereupon cease.
ARTICLE XIII.
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 13.1. INDENTURE AND DEBENTURES SOLELY CORPORATE OBLIGATIONS. No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator,
stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Debentures.
ARTICLE XIV.
MISCELLANEOUS PROVISIONS
SECTION 14.1. SUCCESSORS. All the covenants, stipulations, promises and agreements of the Company in this Indenture shall bind its successors and assigns whether so expressed or not.
SECTION 14.2. OFFICIAL ACTS BY SUCCESSOR ENTITY. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee, officer or other authorized Person of any entity that shall at the time be the lawful successor of the Company.
SECTION 14.3. SURRENDER OF COMPANY POWERS. The Company by instrument in writing executed by authority of at least 2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company and thereupon such power so surrendered shall terminate both as to the Company, and as to any permitted successor.
SECTION 14.4. ADDRESSES FOR NOTICES, ETC. Any notice, consent, direction, request, authorization, waiver or demand which by any provision of this Indenture is required or permitted to be given, made, furnished or served by the Trustee or by the Securityholders on or to the Company may be given or served in writing by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company, with the Trustee for the purpose) to the Company, 3701 Wilshire Boulevard, Los Angeles, California 90010, Attention: Timothy T. Chang. Any notice, consent, direction, request, authorization, waiver or demand by any Securityholder or the Company to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the office of the Trustee, addressed to the Trustee, 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103 Attention: Vice President, Corporate Trust Department, with a copy to State Street Bank and Trust Company, P.O. Box 778, Boston, Massachusetts 02102-0778, Attention: Paul D. Allen, Corporate Trust Department. Any notice, consent, direction, request, authorization, waiver or demand on or to any Securityholder shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the address set forth in the Debenture Register.
SECTION 14.5. GOVERNING LAW. This Indenture and each Debenture shall be deemed to be a contract made under the law of the State of New York, and for all purposes shall be governed by and construed in accordance with the law of said State, without regard to conflict of laws principles thereof.
SECTION 14.6. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that in the opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not in the opinion of such person, such condition or covenant has been complied with.
SECTION 14.7. NON-BUSINESS DAYS. In any case where the date of payment of interest on or principal of the Debentures will be a day that is not a Business Day, the payment of such interest on or principal of the Debentures need not be made on such date but may be made on the next succeeding Business Day, except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the original date of payment, and no interest shall accrue for the period from and after such date.
SECTION 14.8. TABLE OF CONTENTS, HEADINGS, ETC. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.
SECTION 14.9. EXECUTION IN COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.
SECTION 14.10. SEPARABILITY. In case any one or more of the provisions contained in this Indenture or in the Debentures shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Debentures, but this Indenture and such Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.
SECTION 14.11. ASSIGNMENT. The Company will have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company, provided that, in the event of any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties hereto.
SECTION 14.12. ACKNOWLEDGMENT OF RIGHTS. The Company agrees that, with respect to any Debentures held by the Trust or the Institutional Trustee of the Trust, if the Institutional Trustee of the Trust fails to enforce its rights under this Indenture as the holder of Debentures held as the assets of such Trust after the holders of a majority in Liquidation Amount of the Capital Securities of such Trust have so directed such Institutional Trustee, a holder of record of such Capital Securities may, to the fullest extent permitted by law, institute legal proceedings directly against the Company to enforce such Institutional Trustee's rights under this Indenture without first instituting any legal proceedings against such trustee or any other Person. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest (or premium, if any) or principal on the Debentures on the date such interest (or premium, if any) or principal is otherwise payable (or in the case of redemption, on the redemption date), the Company agrees that a holder of
record of Capital Securities of the Trust may directly institute a proceeding against the Company for enforcement of payment to such holder directly of the principal of (or premium, if any) or interest on the Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Capital Securities of such holder on or after the respective due date specified in the Debentures.
ARTICLE XV.
SUBORDINATION OF DEBENTURES
SECTION 15.1. AGREEMENT TO SUBORDINATE. The Company covenants and agrees, and each holder of Debentures by such Securityholder's acceptance thereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article XV; and each holder of a Debenture, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions.
The payment by the Company of the principal of, and premium, if any, and interest on all Debentures shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred; provided, however, that the Debentures shall rank pari passu in right of payment with the Company's Fixed Rate Junior Subordinated Deferrable Interest Debentures due June 8, 2031 issued pursuant to an Indenture dated March 28, 2001 by and between the Company and Wilmington Trust Company.
No provision of this Article XV shall prevent the occurrence of any default or Event of Default hereunder.
SECTION 15.2. DEFAULT ON SENIOR INDEBTEDNESS. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company following any grace period, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default and such acceleration has not been rescinded or canceled, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption) of, or premium, if any, or interest on the Debentures.
In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 15.2, such payment shall, subject to Section 15.7, be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee in writing within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness.
SECTION 15.3. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company, on account of the principal (and premium, if any) or interest on the Debentures. Upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, which the Securityholders or the Trustee would be entitled to receive from the Company, except for the provisions of this Article XV, shall be paid
by the Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness.
For purposes of this Article XV, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article XV with respect to
the Debentures to the payment of all Senior Indebtedness, that may at the time
be outstanding, provided that (i) such Senior Indebtedness is assumed by the new
corporation, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of such Senior Indebtedness are not, without the
consent of such holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company into, another
corporation or the liquidation or dissolution of the Company following the
conveyance or transfer of its property as an entirety, or substantially as an
entirety, to another corporation upon the terms and conditions provided for in
Article XI of this Indenture shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section if such other
corporation shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article XI of this Indenture.
Nothing in Section 15.2 or in this Section shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 6.6 of this Indenture.
SECTION 15.4. SUBROGATION. Subject to the payment in full of all Senior Indebtedness, the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Debentures shall be paid in full. For the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Securityholders or the Trustee would be entitled except for the provisions of this Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit of the holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Debentures be deemed to be a payment or distribution by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XV are
and are intended solely for the purposes of defining the relative rights of the holders of the Securities, on the one hand, and the holders of such Senior Indebtedness, on the other hand.
Nothing contained in this Article XV or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debentures the principal of (and premium, if any) and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debentures and creditors of the Company, other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to in this Article XV, the Trustee, subject to the provisions of Article VI of this Indenture, and the Securityholders shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Securityholders, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness 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 XV.
SECTION 15.5. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Securityholder by such Securityholder's acceptance thereof authorizes and directs the Trustee on such Securityholder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XV and appoints the Trustee such Securityholder's attorney-in-fact for any and all such purposes.
SECTION 15.6. NOTICE BY THE COMPANY. The Company shall give prompt written notice to a Responsible Officer of the Trustee at the Principal Office of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV. Notwithstanding the provisions of this Article XV or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV, unless and until a Responsible Officer of the Trustee at the Principal Office of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least 2 Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debenture), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within 2 Business Days prior to such date.
The Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself to be a holder
of Senior Indebtedness (or a trustee or representative on behalf of such holder), to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XV, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XV, 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 15.7. RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XV, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Article VI of this Indenture, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Securityholders, the Company or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise.
Nothing in this Article XV shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6.
SECTION 15.8. SUBORDINATION MAY NOT BE IMPAIRED. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Securityholders, without incurring responsibility to the Securityholders and without impairing or releasing the subordination provided in this Article XV or the obligations hereunder of the holders of the Debentures to the holders of such Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company, and any other Person.
Signatures appear on the following page
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written.
NARA BANCORP, INC.
By /s/ Bon T. Goo
------------------------------------------
Name: Bon T. Goo
Title: Executive Vice President and Chief
Financial Officer
|
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, as
Trustee
By /s/ Paul D. Allen ------------------------------------------- Name: Paul D. Allen Title: Vice President |
FORM OF JUNIOR SUBORDINATED DEBENTURE
[FORM OF FACE OF SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATIONS UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYMENT RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY
A-1-1
EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE
WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $500,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $500,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
Floating Rate Junior Subordinated Deferrable Interest Debenture
of
NARA BANCORP, INC.
March 26, 2002
Nara Bancorp, Inc., a Delaware corporation (the "Company" which term includes any successor Person under the Indenture hereinafter referred to), for value received promises to pay to State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity but solely as Institutional Trustee for Nara Statutory Trust II (the "Holder") or registered assigns, the principal sum of eight million two hundred forty eight thousand and 00/100 dollars ($8,248,000.00) on March 26, 2032, and to pay interest on said principal sum from March 26, 2002, or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 26, June 26, September 26 and December 26 of each year commencing June 26, 2002, at an annual rate equal to 5.59% beginning on (and including) the date of original issuance and ending on (but excluding) June 26, 2002 and at an annual rate for each successive period beginning on (and including) June 26, 2002, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each a "Distribution Period"), equal to 3-Month LIBOR, determined as described below, plus 3.60% (the "Coupon Rate"); provided, however, that prior to March 26, 2007, the Coupon Rate shall not exceed 11.00%, applied to the principal amount hereof, until the principal hereof is paid or duly provided for or made available for payment, and on any overdue principal and (without duplication) on any overdue installment of interest at the same rate per annum, compounded quarterly, from the dates such amounts are due until they are paid or made available for payment. The amount of interest payable for any period will be computed on the basis of the actual number of days in the Distribution Period concerned divided by 360. In the event that any date on which interest is payable on this Debenture 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), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment
A-1-2
was originally payable. 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 Debenture (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 fifteen days prior to the day on which the relevant Interest Payment Date occurs. 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 be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date.
"3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Trustee in
the following order of priority: (i) the rate (expressed as a percentage per
annum) for U.S. dollar deposits having a three-month maturity that appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination
Date ("Telerate Page 3750" means the display designated as "Page 3750" on the
Dow Jones Telerate Service or such other page as may replace Page 3750 on that
service or such other service or services as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits); (ii) if such rate
cannot be identified on the related Determination Date, the Trustee will request
the principal London offices of four leading banks in the London interbank
market to provide such banks' offered quotations (expressed as percentages per
annum) to prime banks in the London interbank market for U.S. dollar deposits
having a three-month maturity as of 11:00 a.m. (London time) on such
Determination Date. If at least two quotations are provided, 3-Month LIBOR will
be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Trustee will
request four major New York City banks to provide such banks' offered quotations
(expressed as percentages per annum) to leading European banks for loans in U.S.
dollars as of 11:00 a.m. (London time) on such Determination Date. If at least
two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of
such quotations; and (iv) if fewer than two such quotations are provided as
requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR
determined with respect to the Distribution Period immediately preceding such
current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date. As used
herein, "Determination Date" means the date that is two London Banking Days
(i.e., a business day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the commencement of the
relevant Distribution Period.
The Coupon Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.
All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).
The principal of and interest on this Debenture shall be payable at the office or agency of the Trustee (or other paying agent appointed by the Company) maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made by check mailed to the registered holder at such address as shall appear in the Debenture Register if a request for a wire transfer
A-1-3
by such holder has not been received by the Company or by wire transfer to an account appropriately designated by the holder hereof. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Trustee.
So long as no Event of Default has occurred and is continuing, the
Company shall have the right, from time to time, and without causing an Event of
Default, to defer payments of interest on the Debentures by extending the
interest payment period on the Debentures at any time and from time to time
during the term of the Debentures, for up to 20 consecutive quarterly periods
(each such extended interest payment period, an "Extension Period"), during
which Extension Period no interest (including Additional Interest) shall be due
and payable. No Extension Period may 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 Debentures (together with Additional
Interest thereon); provided, however, that no Extension Period may extend beyond
the Maturity Date; provided further, however, that during any such Extension
Period, the Company shall not and shall not permit any Affiliate 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 or such Affiliate's
capital stock (other than payments of dividends or distributions to the Company)
or make any guarantee payments with respect to the foregoing or (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 or any Affiliate that rank pari
passu in all respects with or junior in interest to the Debentures (other than,
with respect to clauses (i) and (ii) above, (a) repurchases, redemptions or
other acquisitions of shares of capital stock of the Company in connection with
any employment contract, benefit plan or other similar arrangement with or for
the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or in
connection with the issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
(b) as a result of any exchange or conversion of any class or series of the
Company's capital stock (or any capital stock of a subsidiary of the Company)
for any class or series of the Company's capital stock or of any class or series
of the Company's indebtedness for any class or series of the Company's capital
stock, (c) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholders' rights plan, or the issuance of
rights, stock or other property under any stockholders' rights plan, or the
redemption or repurchase of rights pursuant thereto, (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock and any cash payments in lieu of fractional shares
issued in connection therewith, or (f) payments under the Capital Securities
Guarantee). Prior to the termination of any Extension Period, the Company may
further extend such period, provided that such period together with all such
previous and further consecutive extensions thereof shall not exceed 20
consecutive quarterly periods, or extend beyond the Maturity Date. Upon the
termination of any Extension Period and upon the payment of all accrued and
unpaid interest and Additional Interest, the Company may commence a new
Extension Period, subject to the foregoing requirements. No interest or
Additional Interest shall be due and payable during an Extension Period, except
at the end thereof, but each installment of interest that would otherwise have
been due and payable during such Extension Period shall bear Additional
Interest. The Company must give the Trustee notice of its election to begin or
extend such Extension Period at least 5 Business Days prior to the earlier of
(i) the date interest on the Debentures would have been payable except for the
election to begin such Extension Period or (ii) the date such interest is
payable, but in any event not less than 5 Business Days prior to such record
date.
A-1-4
The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by or on behalf of the Trustee.
Capitalized terms used and not defined in this Debenture shall have the meanings assigned in the Indenture dated as of the date of original issuance of this Debenture between the Trustee and the Company.
Signatures appear on the following page
A-1-5
IN WITNESS WHEREOF, the Company has duly executed this certificate.
NARA BANCORP, INC.
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures referred to in the within-mentioned Indenture.
State Street Bank and Trust Company of Connecticut, National Association, as Trustee
A-1-6
Exhibit 4.11
GUARANTEE AGREEMENT
BY AND BETWEEN
NARA BANCORP, INC.
AND
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION
DATED AS OF MARCH 26, 2002
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (this "Guarantee"), dated as of March 26, 2002, is executed and delivered by Nara Bancorp, Inc., a Delaware corporation (the "Guarantor"), and State Street Bank and Trust Company of Connecticut, National Association, a national banking association, organized under the laws of the United States of America, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of Nara Statutory Trust II, a Connecticut statutory trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of the date hereof among State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity but solely as institutional trustee, the administrators of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof those undivided beneficial interests, having an aggregate liquidation amount of $8,000,000.00 (the "Capital Securities"); and
WHEREAS, as incentive for the Holders to purchase the Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee, to pay to the Holders of Capital 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 the Capital Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. DEFINITIONS AND INTERPRETATION. In this Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;
(b) a term defined anywhere in this Guarantee has the same meaning throughout;
(c) all references to "the Guarantee" or "this Guarantee" are to this Guarantee as modified, supplemented or amended from time to time;
(d) all references in this Guarantee to "Articles" or "Sections" are to Articles or Sections of this Guarantee, unless otherwise specified;
(e) terms defined in the Declaration as at the date of execution of this Guarantee have the same meanings when used in this Guarantee, unless otherwise defined in this Guarantee or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder.
"Beneficiaries" means any Person to whom the Issuer is or hereafter becomes indebted or liable.
"Capital Securities" has the meaning set forth in the recitals to this Guarantee.
"Common Securities" means the common securities issued by the Issuer to the Guarantor pursuant to the Declaration.
"Corporate Trust Office" means the office of the Guarantee Trustee at which the corporate trust business of the Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Guarantee is located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103.
"Covered Person" means any Holder of Capital Securities.
"Debentures" means the debt securities of the Guarantor designated the Floating Rate Junior Subordinated Deferrable Interest Debentures due 2032 held by the Institutional Trustee (as defined in the Declaration) of the Issuer.
"Declaration Event of Default" means an "Event of Default" as defined in the Declaration.
"Event of Default" has the meaning set forth in Section 2.4(a).
"Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) which are required to be paid on such Capital Securities to the extent the Issuer shall have funds available therefor, (ii) the Redemption Price to the extent the Issuer has funds available therefor, with respect to any Capital Securities called for redemption by the Issuer, (iii) the Special Redemption Price to the extent the Issuer has funds available therefor, with respect to Capital Securities redeemed upon the occurrence of a Special Event, and (iv) upon a voluntary or involuntary liquidation, dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Debentures to the Holders of the Capital Securities in exchange therefor as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Capital Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution").
"Guarantee Trustee" means State Street Bank and Trust Company of Connecticut, National Association, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee and thereafter means each such Successor Guarantee Trustee.
"Guarantor" means Nara Bancorp, Inc. and each of its successors and assigns.
"Holder" means any holder, as registered on the books and records of the Issuer, of any Capital Securities; provided, however, that, in determining whether the Holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Guarantee Trustee.
"Indenture" means the Indenture dated as of the date hereof between the Guarantor and State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity but solely as trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued to the institutional trustee of the Issuer.
"Issuer" has the meaning set forth in the opening paragraph to this Guarantee.
"Liquidation Distribution" has the meaning set forth in the definition of "Guarantee Payments" herein.
"Majority in liquidation amount of the Capital Securities" means Holder(s) of outstanding Capital Securities, voting together as a class, but separately from the holders of Common Securities, of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Capital Securities then outstanding.
"Obligations" means any costs, expenses or liabilities (but not including liabilities related to taxes) of the Issuer other than obligations of the Issuer to pay to holders of any Trust Securities the amounts due such holders pursuant to the terms of the Trust Securities.
"Officer's Certificate" means, with respect to any Person, a certificate signed by one Authorized Officer of such Person. Any Officer's Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee shall include:
(a) a statement that the officer signing the Officer's 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 the officer in rendering the Officer's Certificate;
(c) a statement that the 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 the officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.
"Redemption Price" has the meaning set forth in the Indenture.
"Responsible Officer" means, with respect to the Guarantee Trustee, any officer within the Corporate Trust Office of the Guarantee Trustee including any Vice President, Assistant Vice President, Secretary, Assistant Secretary or any other officer of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject.
"Special Event" has the meaning set forth in the Indenture.
"Special Redemption Price" has the meaning set forth in the Indenture.
"Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 3.1.
"Trust Securities" means the Common Securities and the Capital Securities.
ARTICLE II
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
SECTION 2.1. POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.
(a) This Guarantee shall be held by the Guarantee Trustee for the benefit of the Holders of the Capital Securities, and the Guarantee Trustee shall not transfer this Guarantee to any Person except a Holder of Capital Securities exercising his or her rights pursuant to Section 4.4(b) 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, 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 actually known to a Responsible Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee for the benefit of the Holders of the Capital Securities.
(c) The Guarantee Trustee, before the occurrence of any Event of Default and after curing all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee, and no implied covenants shall be read into this Guarantee against the Guarantee Trustee. In case an Event of Default has occurred (that has not been waived pursuant to Section 2.4) and is actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee 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, 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, and no implied covenants or obligations shall be read into this Guarantee against the Guarantee Trustee; and
(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; but in the case of any such certificates or opinions that by any provision hereof 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;
(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 such Responsible Officer of the Guarantee Trustee or 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 written direction of the Holders of not less than a Majority in liquidation amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or relating to the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; and
(iv) no provision of this Guarantee 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 is not reasonably assured to it under the terms of this Guarantee or security and indemnity, reasonably satisfactory to the Guarantee Trustee, against such risk or liability is not reasonably assured to it.
SECTION 2.2. CERTAIN RIGHTS OF GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 2.1:
(i) The Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this Guarantee shall be sufficiently evidenced by an Officer's Certificate.
(iii) Whenever, in the administration of this Guarantee, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting 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 conclusively rely upon an Officer's Certificate of the Guarantor which, upon receipt of such request, shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any re-recording, refiling or re-registration thereof).
(v) The Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and
in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee from any court of competent jurisdiction.
(vi) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such security and indemnity, reasonably satisfactory to the Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided, however, that nothing contained in this Section 2.2(a)(vi) shall 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.
(vii) 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.
(viii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.
(ix) Any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders of the Capital Securities, and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Guarantee, both of which shall be conclusively evidenced by the Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Guarantee 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 (i) may request instructions from the
Holders of a Majority in liquidation amount of the Capital Securities,
(ii) may refrain from enforcing such remedy or right or taking such
other action until such instructions are received, and (iii) shall be
protected in conclusively relying on or acting in accordance with such
instructions.
(xi) The Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Guarantee.
(b) No provision of this Guarantee 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.
SECTION 2.3. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE. The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee.
SECTION 2.4. EVENTS OF DEFAULT; WAIVER.
(a) An Event of Default under this Guarantee will occur upon the failure of the Guarantor to perform any of its payment or other obligations hereunder.
(b) The Holders of a Majority in liquidation amount of the Capital Securities may, voting or consenting as a class, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and shall be deemed to have been cured, for every purpose of this Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.
SECTION 2.5. EVENTS 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 of the Capital Securities and the Guarantor, notices of all Events of Default actually known to a Responsible Officer of the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, however, that the Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Capital Securities.
(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 from the Guarantor or a Holder of the Capital Securities (except in the case of a payment default), or a Responsible Officer of the Guarantee Trustee charged with the administration of this Guarantee shall have obtained actual knowledge thereof.
ARTICLE III
GUARANTEE TRUSTEE
SECTION 3.1. 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 corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or Person authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 3.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 3.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 3.2(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 shall either eliminate such interest or resign to the extent and in the manner provided by, and subject to this Guarantee.
SECTION 3.2. APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE TRUSTEE.
(a) Subject to Section 3.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default.
(b) The Guarantee Trustee shall not be removed in accordance with
Section 3.2(a) 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 to office 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 an 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 3.2 within 60 days after delivery of an instrument of removal or resignation, the Guarantee Trustee resigning or being removed may petition 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.
(e) No Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Guarantee Trustee.
(f) Upon termination of this Guarantee or removal or resignation of the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay to the Guarantee Trustee all amounts owing to the Guarantee Trustee under Sections 7.2 and 7.3 accrued to the date of such termination, removal or resignation.
ARTICLE IV
GUARANTEE
SECTION 4.1. GUARANTEE.
(a) The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense (except the defense of payment by the Issuer), right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders.
(b) The Guarantor hereby also agrees to assume any and all Obligations of the Issuer and in the event any such Obligation is not so assumed, subject to the terms and conditions hereof, the Guarantor hereby irrevocably and unconditionally guarantees to each Beneficiary the full payment, when and as due, of any and all Obligations to such Beneficiaries. This Guarantee 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 4.2. WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives notice of acceptance of this 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 Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands.
SECTION 4.3. OBLIGATIONS NOT AFFECTED. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of or in connection with, the Capital Securities (other than an extension of time for payment of Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture);
(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 Capital Securities, or any action on the part of the Issuer 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 Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Capital 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 4.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 4.4. RIGHTS OF HOLDERS.
(a) The Holders of a Majority in liquidation amount of the Capital
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 or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under this Guarantee; provided, however, that (subject to
Section 2.1) the Guarantee Trustee shall have the right to decline to follow any
such direction if the Guarantee Trustee being advised by counsel determines that
the action or proceeding so directed may not lawfully be taken or if the
Guarantee Trustee in good faith by its board of directors or trustees, executive
committees or a trust committee of directors or trustees and/or Responsible
Officers shall determine that the action or proceedings so directed would
involve the Guarantee Trustee in personal liability.
(b) Any Holder of Capital Securities may institute a legal proceeding directly against the Guarantor to enforce the Guarantee Trustee's rights under this Guarantee, without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other Person. The Guarantor waives any right or remedy to require that any such action be brought first against the Issuer, the Guarantee Trustee or any other Person before so proceeding directly against the Guarantor.
SECTION 4.5. GUARANTEE OF PAYMENT. This Guarantee creates a guarantee of payment and not of collection.
SECTION 4.6. SUBROGATION. The Guarantor shall be subrogated to all (if any) rights of the Holders of Capital Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if, after giving effect to 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 4.7. INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Capital 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 notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 4.3 hereof.
SECTION 4.8. ENFORCEMENT BY A BENEFICIARY. A Beneficiary may enforce the obligations of the Guarantor contained in Section 4.1(b) directly against the Guarantor and the Guarantor waives any right or remedy to require that any action be brought against the Issuer or any other person or entity before proceeding against the Guarantor. The Guarantor shall be subrogated to all rights (if any) of any Beneficiary against the Issuer in respect of any amounts paid to the Beneficiaries by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if at the time of any such payment, and after giving effect to such payment, any amounts are due and unpaid under this Guarantee.
ARTICLE V
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 5.1. LIMITATION OF TRANSACTIONS. So long as any Capital
Securities remain outstanding, if (a) there shall have occurred and be
continuing an Event of Default or a Declaration Event of Default or (b) the
Guarantor shall have selected an Extension Period as provided in the Declaration
and such period, or any extension thereof, shall have commenced and be
continuing, then the Guarantor shall not and shall not permit any Affiliate to
(x) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Guarantor's
or such Affiliate's capital stock (other than payments of dividends or
distributions to the Guarantor) or make any guarantee payments with respect to
the foregoing or (y) make any payment of principal of or interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Guarantor or
any Affiliate that rank pari passu in all respects with or junior in interest to
the Debentures (other than, with respect to clauses (x) and (y) above, (i)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Guarantor in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Guarantor (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the occurrence of the Event of Default, Declaration Event of Default or
Extension Period, as applicable, (ii) as a result of any exchange or conversion
of any class or series of the Guarantor's capital stock (or any capital stock of
a subsidiary of the Guarantor) for any class or series of the Guarantor's
capital stock or of any class or series of the Guarantor's indebtedness for any
class or series of the Guarantor's capital stock, (iii) the purchase of
fractional interests in shares of the Guarantor's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (iv) any declaration of a dividend in connection with
any stockholders' rights plan, or the issuance of rights, stock or other
property under any stockholders' rights plan, or the redemption or repurchase of
rights pursuant thereto, (v) any dividend in the form of stock, warrants,
options or other rights where the dividend stock or the stock issuable upon
exercise of such warrants, options or other rights is the same stock as that on
which the dividend is being paid or ranks pari passu with or junior to such
stock and any cash payments in lieu of fractional shares issued in connection
therewith, or (vi) payments under this Guarantee).
SECTION 5.2. RANKING. This Guarantee will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined in the Indenture) of the Guarantor. By their acceptance thereof, each Holder of Capital Securities agrees to the foregoing provisions of this Guarantee and the other terms set forth herein.
The right of the Guarantor to participate in any distribution of assets of any of its subsidiaries upon any such subsidiary's liquidation or reorganization or otherwise is subject to the prior claims of creditors of that subsidiary, except to the extent the Guarantor may itself be recognized as a creditor of that subsidiary. Accordingly, the Guarantor's obligations under this Guarantee will be effectively subordinated to all existing and future liabilities of the Guarantor's subsidiaries, and claimants should look only to the assets of the Guarantor for payments hereunder. This Guarantee does not limit the incurrence or issuance of other secured or unsecured debt of the Guarantor, including Senior Indebtedness of the Guarantor, under any indenture that the Guarantor may enter into in the future or otherwise.
ARTICLE VI
TERMINATION
SECTION 6.1. TERMINATION. This Guarantee shall terminate as to the Capital Securities (i) upon full payment of the Redemption Price or Special Redemption Price of all Capital Securities then outstanding, (ii) upon the distribution of all of the Debentures to the Holders of all of the Capital Securities or (iii) upon full payment of the amounts payable in accordance with the Declaration upon dissolution of the Issuer. This Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Capital Securities must restore payment of any sums paid under the Capital Securities or under this Guarantee.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1. EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Issuer or the Guarantor and upon such information, opinions, reports or statements presented to the Issuer or the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who, if selected by such Indemnified Person, has been selected with reasonable care by such Indemnified Person, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Capital Securities might properly be paid.
SECTION 7.2. INDEMNIFICATION.
(a) The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, liability, damage, claim or expense incurred without negligence or willful misconduct on the part of the Indemnified Person, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including, but not limited to, the costs and expenses (including reasonable legal fees and expenses) of the Indemnified Person defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of the Indemnified Person's powers or duties hereunder. The obligation to indemnify as set forth in this Section 7.2 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.
(b) Promptly after receipt by an Indemnified Person under this Section
7.2 of notice of the commencement of any action, such Indemnified Person will,
if a claim in respect thereof is to be made against the Guarantor under this
Section 7.2, notify the Guarantor in writing of the commencement thereof; but
the failure so to notify the Guarantor (i) will not relieve the Guarantor from
liability under
paragraph (a) above unless and to the extent that the Guarantor did not otherwise learn of such action and such failure results in the forfeiture by the Guarantor of substantial rights and defenses and (ii) will not, in any event, relieve the Guarantor from any obligations to any Indemnified Person other than the indemnification obligation provided in paragraph (a) above. The Guarantor shall be entitled to appoint counsel of the Guarantor's choice at the Guarantor's expense to represent the Indemnified Person in any action for which indemnification is sought (in which case the Guarantor shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person or Persons except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the Indemnified Person. Notwithstanding the Guarantor's election to appoint counsel to represent the Guarantor in an action, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Guarantor shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the Guarantor to represent the Indemnified Person would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the Indemnified Person and the Guarantor and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it and/or other Indemnified Person(s) which are different from or additional to those available to the Guarantor, (iii) the Guarantor shall not have employed counsel satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action or (iv) the Guarantor shall authorize the Indemnified Person to employ separate counsel at the expense of the Guarantor. The Guarantor will not, without the prior written consent of the Indemnified Persons, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Persons are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Person from all liability arising out of such claim, action, suit or proceeding.
SECTION 7.3. COMPENSATION; REIMBURSEMENT OF EXPENSES. The Guarantor agrees:
(a) to pay to the Guarantee Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree to 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); and
(b) except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by it in accordance with any provision of this Guarantee (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 willful misconduct.
The provisions of this Section 7.3 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. SUCCESSORS AND ASSIGNS. All guarantees and agreements contained in this Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding. Except in connection with any merger or consolidation of the Guarantor with or into another entity or any sale, transfer or lease of the Guarantor's assets to another entity, in each case, to the extent permitted under the Indenture, the
Guarantor may not assign its rights or delegate its obligations under this Guarantee without the prior approval of the Holders of at least a Majority in liquidation amount of the Capital Securities.
SECTION 8.2. AMENDMENTS. Except with respect to any changes that do not adversely affect the rights of Holders of the Capital Securities in any material respect (in which case no consent of Holders will be required), this Guarantee may be amended only with the prior approval of the Holders of not less than a Majority in liquidation amount of the Capital Securities. The provisions of the Declaration with respect to amendments thereof apply to the giving of such approval.
SECTION 8.3. NOTICES. All notices provided for in this Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows:
(a) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Holders of the Capital Securities and the Guarantor):
State Street Bank and Trust Company of Connecticut, National
Association
225 Asylum Street, Goodwin Square
Hartford, Connecticut 06103
Attention: Corporate Trust Department
Telecopy: 860-244-1889
With a copy to:
State Street Bank and Trust Company
P.O. Box 778
Boston, Massachusetts 02102-0778
Attention: Paul D. Allen, Corporate Trust Department
Telecopy: 617-662-1462
(b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Capital Securities and to the Guarantee Trustee):
Nara Bancorp, Inc.
3701 Wilshire Boulevard
Los Angeles, California 90010
Attention: Timothy T. Chang
Telecopy: 213-380-2240
(c) If given to any Holder of the Capital Securities, at the address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.
SECTION 8.4. BENEFIT. This Guarantee is solely for the benefit of the Beneficiaries and, subject to Section 2.1(a), is not separately transferable from the Capital Securities.
SECTION 8.5. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
SECTION 8.6. COUNTERPARTS. This Guarantee may be executed in one or more counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same instrument.
SECTION 8.7 SEPARABILITY. In case one or more of the provisions contained in this Guarantee shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Guarantee, but this Guarantee shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.
Signatures appear on the following page
THIS GUARANTEE is executed as of the day and year first above written.
NARA BANCORP, INC., as Guarantor
By: /s/ Bon T. Goo
------------------------------------------
Name: Bon T. Goo
Title: Executive Vice President and
Chief Financial Officer
|
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, as
Guarantee Trustee
By: /s/ Paul D. Allen
------------------------------------------
Name: Paul D. Allen
Title: Vice President
|
EXHIBIT 10.3
(C) 2001 BANK COMPENSATION STRATEGIES
THIS DOCUMENT IS PROVIDED TO ASSIST YOUR LEGAL COUNSEL IN DOCUMENTING YOUR SPECIFIC ARRANGEMENT. IT IS NOT A FORM TO BE SIGNED, NOR IS IT TO BE CONSTRUED AS LEGAL ADVICE. FAILURE TO ACCURATELY DOCUMENT YOUR ARRANGEMENT COULD RESULT IN SIGNIFICANT LOSSES, WHETHER FROM CLAIMS OF THOSE PARTICIPATING IN THE ARRANGEMENT, FROM THE HEIRS AND BENEFICIARIES OF PARTICIPANTS, OR FROM REGULATORY AGENCIES SUCH AS THE INTERNAL REVENUE SERVICE AND THE DEPARTMENT OF LABOR. LICENSE IS HEREBY GRANTED TO YOUR LEGAL COUNSEL TO USE THESE MATERIALS IN DOCUMENTING SOLELY YOUR ARRANGEMENT.
[NAME OF BANK]
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made this _______ day of ________________, 2001, by and between [NAME OF BANK], a [state/nationally-] chartered commercial bank, located in [City], [State] (the "Company"), and [NAME OF EXECUTIVE] (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the Company is willing to provide to the Executive a deferred compensation opportunity [TOGETHER WITH MATCHING CONTRIBUTIONS BY THE COMPANY]. The Company will pay the Executive's benefits from the Company's general assets.
AGREEMENT
The Executive and the Company agree as follows:
ARTICLE 1
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have the meanings specified:
1.1 "Anniversary Date" means December 31 of each year.
1.2 "Change of Control" means the transfer of shares of the Company's voting common stock such that one entity or one person acquires (or is deemed to acquire when applying Section 318 of the Code) more than 50 percent of the Company's outstanding voting common stock
followed within twelve (12) months by the Executive's Termination of Employment for reasons other than death, Disability or retirement.
1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.4 "Compensation" means the total salary and bonus paid to the Executive during a Plan Year.
1.5 "Deferral Account" means the Company's accounting of the Executive's accumulated Deferrals plus accrued interest.
1.6 "Deferrals" means the amount of the Executive's Compensation, which the Executive elects to defer according to this Agreement.
1.7 "Disability" means, if the Executive is covered by a Company sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Executive is not covered by such a policy, Disability means the Executive suffering a sickness, accident or injury, which, in the judgment of a physician satisfactory to the Company, prevents the Executive from performing substantially all of the Executive's normal duties for the Company. As a condition to any Disability benefits, the Company may require the Executive to submit to such physical or mental evaluations and tests as the Company's Board of Directors deems appropriate.
1.8 "Effective Date" means __________________________.
1.9 "Election Form" means the Form attached as Exhibit 1.
1.10 "Normal Retirement Age" means the Executive's ______ birthday.
1.11 "Normal Retirement Date" means the later of the Normal Retirement Age or Termination of Employment.
1.12 "Plan Year" means the calendar year.
1.13 "Termination of Employment" means that the Executive ceases to be employed by the Company for any reason whatsoever other than by reason of a leave of absence, which is approved by the Company. For purposes of this Agreement, if there is a dispute over the employment status of the Executive or the date of the Executive's Termination of Employment, the Company shall have the sole and absolute right to decide the dispute.
ARTICLE 2
DEFERRAL ELECTION
2.1 Initial Election. The Executive shall make an initial deferral election under this Agreement by filing with the Company a signed Election Form within thirty (30) days after the Effective Date of this Agreement. The Election Form shall set forth the amount of Compensation to be deferred and shall be effective to defer only Compensation earned after the date the Election Form is received by the Company.
2.2 Election Changes
2.2.1 Generally. Upon the Company's approval, the Executive may modify the amount of Compensation to be deferred annually by filing a new Election Form with the Company prior to the beginning of the Plan Year in which the Compensation is to be deferred. The modified deferral election shall not be effective until the calendar year following the year in which the subsequent Election Form is received and approved by the Company.
2.2.2 Hardship. If an unforeseeable financial emergency arising from the death of a family member, divorce, sickness, injury, catastrophe or similar event outside the control of the Executive occurs, the Executive, by written instructions to the Company, may reduce future deferrals under this Agreement.
ARTICLE 3
DEFERRAL ACCOUNT
3.1 Establishing and Crediting. The Company shall establish a Deferral Account on its books for the Executive and shall credit to the Deferral Account the following amounts:
3.1.1 Deferrals. The Compensation deferred by the Executive as of the time the Compensation would have otherwise been paid to the Executive.
[MATCHING OPTION:
3.1.2 Matching Contribution. A matching contribution equal to (and credited to the Deferral Account at the same time as) the amounts credited to the Deferral Account under Section 3.1.1, subject to an annual maximum matching contribution of [OPTION: $______________] [OPTION: THE LESSER OF $______________ OR _____% OF THE EXECUTIVE'S COMPENSATION] [OPTION: _____% OF THE EXECUTIVE'S COMPENSATION] [OPTION: _____% OF THE COMPENSATION DEFERRED BY THE EXECUTIVE]. ]
3.1.3 Interest. On each Anniversary Date of this Agreement and immediately prior to the payment of any benefits, but only until commencement of the benefit payments under this Agreement, interest is to be accrued on the account balance and compounded at an annual rate equal to ________ percent, compounded monthly [OPTION: THE WALL STREET JOURNAL PRIME RATE [PLUS ONE PERCENT] ON THE FIRST BUSINESS DAY OF THE PLAN YEAR, COMPOUNDED MONTHLY].
3.2 Statement of Accounts. The Company shall provide to the Executive, within 120 days after each Anniversary Date, a statement setting forth the Deferral Account balance.
3.3 Accounting Device Only. The Deferral Account is solely a device for measuring amounts to be paid under this Agreement. The Deferral Account is not a trust fund of any kind. The Executive is a general unsecured creditor of the Company for the payment of benefits. The benefits represent the mere Company promise to pay such benefits. The Executive's rights are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by the Executive's creditors.
ARTICLE 4
LIFETIME BENEFITS
4.1 Normal Retirement Benefit. Upon the Normal Retirement Date, the Company shall pay to the Executive the benefit described in this Section 4.1 in lieu of any other benefit under this Agreement.
4.1.1 Amount of Benefit. The benefit under this Section 4.1 is the Deferral Account balance at the Executive's Normal Retirement Date.
4.1.2 Payment of Benefit. The Company shall pay the benefit to the
Executive in [months] equal monthly installments commencing on the first
day of the month following the Executive's Normal Retirement Date. The
Company shall credit interest [OPTION: PURSUANT TO SECTION ____] [OPTION:
AT AN ANNUAL RATE OF _____ PERCENT, COMPOUNDED MONTHLY] on the remaining
account balance during any applicable installment period.
4.2 Early Retirement Benefit. Upon Termination of Employment prior to the
Normal Retirement Age for reasons other than death, Change of Control or
Disability, the Company shall pay to the Executive the benefit described in this
Section 4.2 in lieu of any other benefit under this Agreement.
4.2.1 Amount of Benefit. The benefit under this Section 4.2 is the
Deferral Account balance at the Executive's Termination of Employment
[OPTION: CALCULATED BY RECOMPUTING THE DEFERRAL ACCOUNT BALANCE FROM ITS
INCEPTION WITH THE FOLLOWING MODIFICATION:
[OPTION:
(a) INTEREST RATE REDUCTION. THE INTEREST RATE UNDER SECTION
3.1.3 SHALL BE REDUCED [OPTION: TO ____%] [OPTION: BY ____
PERCENTAGE POINTS]. ]
[OPTION:
(b) COMPANY MATCH REDUCTION. THE COMPANY'S MATCHING CONTRIBUTIONS
UNDER SECTION _____ SHALL BE [OPTION: ELIMINATED] [OPTION: REDUCED
BY _____ PERCENT]. ]]
4.2.2 Payment of Benefit. The Company shall pay the benefit to the
Executive in [months] equal monthly installments commencing on the first
day of the month following the Executive's Normal Retirement Age. The
Company shall credit interest [OPTION: PURSUANT TO SECTION _____] [OPTION:
AT AN ANNUAL RATE OF _____ PERCENT, COMPOUNDED MONTHLY] on the remaining
account balance during any applicable installment period.
4.3 Disability Benefit. If the Executive terminates employment due to Disability prior to Normal Retirement Age, the Company shall pay to the Executive the benefit described in this Section 4.3 in lieu of any other benefit under this Agreement.
4.3.1 Amount of Benefit. The benefit under this Section 4.3 is the Deferral Account balance at the Executive's Termination of Employment.
4.3.2 Payment of Benefit. The Company shall pay the benefit to the
Executive in [months] equal monthly installments commencing on the first
day of the month following the Executive's Termination of Employment. The
Company shall credit interest [OPTION: PURSUANT TO SECTION _____] [OPTION:
AT AN ANNUAL RATE OF _____ PERCENT, COMPOUNDED MONTHLY] on the remaining
account balance during any applicable installment period.
4.4 Change of Control Benefit. Upon a Change of Control, the Company shall pay to the Executive the benefit described in this Section 4.4 in lieu of any other benefit under this Agreement.
4.4.1 Amount of Benefit. The benefit under this Section 4.4 is the Deferral Account balance on the Executive's Termination of Employment.
4.4.2 Payment of Benefit. The Company shall pay the benefit to the Executive in a lump sum within 60 days after the Executive's Termination of Employment.
4.4.3 Excess Parachute Payment. Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement to the extent the benefit would create an excise tax under the excess parachute rules of Section 280G of the Code.
4.5 Hardship Distribution. Upon the Board of Director's determination (following petition by the Executive) that the Executive has suffered an unforeseeable financial emergency as described in Section 2.2.2, the Company shall distribute to the Executive all or a portion of the Deferral Account balance as determined by the Company, but in no event shall the distribution be greater than is necessary to relieve the financial hardship.
ARTICLE 5
DEATH BENEFITS
5.1 Death During Active Service. If the Executive dies while in the employment of the Company, the Company shall pay to the Executive's beneficiary the benefit described in this Section 5.1 in lieu of any other benefit under this Agreement.
5.1.1 Amount of Benefit. The benefit under Section 5.1 is the greater of: a) the Deferral Account balance; or b) $__________________.
5.1.2 Payment of Benefit. The Company shall pay the benefit to the beneficiary in [months] equal monthly installments commencing on the first day of the month following the Executive's death. The Company shall credit interest [OPTION: PURSUANT TO SECTION _____] [OPTION: AT AN ANNUAL RATE OF _____ PERCENT, COMPOUNDED MONTHLY] on the remaining account balance during any applicable installment period.
5.2 Death During Payment of a Lifetime Benefit. If the Executive dies after any Lifetime Benefit payments have commenced under this Agreement but before receiving all such payments, the Company shall pay the remaining benefits to the Executive's beneficiary at the same time and in the same amounts they would have been paid to the Executive had the Executive survived.
5.3 Death After Termination of Employment But Before Payment of a Lifetime Benefit Commences. If the Executive is entitled to a Lifetime Benefit under this Agreement, but dies prior to the commencement of said benefit payments, the Company shall pay the same benefit payments to the Executive's beneficiary that the Executive was entitled to prior to death except that the benefit payments shall commence on the first day of the month following the date of the Executive's death.
ARTICLE 6
BENEFICIARIES
6.1 Beneficiary Designations. The Executive shall designate a beneficiary by filing a written designation with the Company. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Executive and accepted by the Company during the Executive's lifetime. The Executive's beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executive's estate.
6.2 Facility of Payment. If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Company may pay such benefit to the guardian, legal representative or person having the care or
custody of such minor, incompetent person or incapable person. The Company may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Company from all liability with respect to such benefit.
ARTICLE 7
GENERAL LIMITATIONS
7.1 Termination for Cause. Notwithstanding any provision of this Agreement
to the contrary, the Company shall not pay any benefit under this Agreement that
is in excess of the Executive's Deferrals ([THE COMPANY MATCH CREDITED UNDER
SECTION 3.1.2 AND] the interest earned on the Deferral Account) if the Company
terminates the Executive's employment for:
(a) Gross negligence or gross neglect of duties to the Company;
(b) Commission of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive's employment with the Company; or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Company policy committed in connection with the Executive's employment and resulting in an adverse effect on the Company.
7.2 Suicide or Misstatement. Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any death benefit under this Agreement exceeding the Deferral Account if the Executive commits suicide within two years after the date of this Agreement, or if the Executive has made any material misstatement of fact on any application for life insurance purchased by the Company.
ARTICLE 8
CLAIMS AND REVIEW PROCEDURES
8.1 Claims Procedure. The Company shall notify any person or entity that makes a claim against the Agreement (the "Claimant") in writing, within 90 days of Claimant's written application for benefits, of his or her eligibility or non-eligibility for benefits under the Agreement. If the Company determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Agreement's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Company determines that there are special circumstances requiring additional time to make a decision, the Company shall notify the Claimant of the special
circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90 days.
8.2 Review Procedure. If the Claimant is determined by the Company not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Company by filing a petition for review with the Company within 60 days after receipt of the notice issued by the Company. Said petition shall state the specific reasons which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt by the Company of the petition, the Company shall afford the Claimant (and counsel, if any) an opportunity to present his or her position to the Company verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Company shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Company, but notice of this deferral shall be given to the Claimant.
ARTICLE 9
AMENDMENTS AND TERMINATION
This Agreement may be amended or terminated only by a written agreement signed by the Company and the Executive.
[OPTION
Notwithstanding the previous paragraph in this Article 9, the Company may
amend or terminate this Agreement at any time if, pursuant to legislative,
judicial or regulatory action, continuation of the Agreement would (i) cause
benefits to be taxable to the Executive prior to actual receipt, or (ii) result
in significant financial penalties or other significantly detrimental
ramifications to the Company (other than the financial impact of paying the
benefits). In no event shall this Agreement be terminated under this section
without payment to the Executive of the Deferral Account balance attributable to
the Executive's Deferrals and interest credited on such amounts. ]
ARTICLE 10
MISCELLANEOUS
10.1 Binding Effect. This Agreement shall bind the Executive and the Company and their beneficiaries, survivors, executors, administrators and transferees.
10.2 No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain an employee of the Company, nor does it interfere with the Company's right to discharge the Executive. It also does not require the Executive to
remain an employee nor interfere with the Executive's right to terminate employment at any time.
10.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
10.4 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.
10.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of [State], except to the extent preempted by the laws of the United States of America.
10.6 Unfunded Arrangement. The Executive and the Executive's beneficiary are general unsecured creditors of the Company for the payment of benefits under this Agreement. The benefits represent the mere promise by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive's life is a general asset of the Company to which the Executive and the Executive's beneficiary have no preferred or secured claim.
10.7 Reorganization. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement. Upon the occurrence of such event, the term "Company" as used in this Agreement shall be deemed to refer to the successor or survivor company
10.8 Entire Agreement. This Agreement constitutes the entire agreement between the Company and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.
10.9 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:
(a) Interpreting the provisions of the Agreement;
(b) Establishing and revising the method of accounting for the Agreement;
(c) Maintaining a record of benefit payments; and
(d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.
10.10 Named Fiduciary. For purposes of the Employee Retirement Income Security Act of
1974, if applicable, the Company shall be the named fiduciary and plan administrator under this Agreement. The named fiduciary may delegate to others certain aspects of the management and operation responsibilities of the plan including the employment of advisors and the delegation of ministerial duties to qualified individuals.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have signed this Agreement.
EXECUTIVE: COMPANY:
[NAME OF BANK]
BY
----------------------------------- ---------------------------------------
[NAME OF EXECUTIVE] TITLE
------------------------------------
|
EXHIBIT 1
TO
[NAME OF BANK]
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
DEFERRAL ELECTION
I elect to defer my Compensation received under this Agreement with the Company, as follows:
AMOUNT OF DEFERRAL DURATION
------------------ --------
[INITIAL AND COMPLETE ONE] [INITIAL ONE]
____ I elect to defer ____% of my ____ One Year only
Compensation.
____ For ______ [INSERT
____ I elect to defer $_____ of all NUMBER] Years
Compensation.
____ Until Termination
____ I elect not to defer any of my of Employment
Compensation.
____ Until ___________,
___________ (date)
|
Upon the Company's approval, I understand that I may change the amount and duration of my deferrals by filing a new election form with the Company; provided, however, that any subsequent election will not be effective until the calendar year following the year in which the new election is received by the Company.
Accepted by the Company this day of , 2001.
----- ----------
By
-------------------------------------------
Title
--------------------------------
|
BENEFICIARY DESIGNATION
[NAME OF BANK]
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
I designate the following as beneficiary of benefits under this Agreement payable following my death:
NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE(s) AND THE EXACT NAME AND DATE OF THE TRUST AGREEMENT.
I understand that I may change these beneficiary designations by filing a new written designation with the Company. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.
Acknowledged by the Company this day of , 2001.
----- ----------
By
--------------------------------------------
Title
--------------------------------
|
EXHIBIT 10.11
TAX SHARING AGREEMENT
AMONG
NARA BANCORP, INC.,
AND
NARA BANK, N.A.
AND
NARA BANCORP CAPITAL TRUST I
AND
NARA LOAN CENTER CORPORATION
Nara Bank, N.A. ("Bank"), Nara Bancorp, Inc., ("Bancorp"), Nara Bancorp Capital Trust I (a wholly owned subsidiary of Bancorp) ("Nara Capital") and Nara Loan Center Corporation (a wholly owned subsidiary of Bank) ("Nara Loan") hereby enter into this Agreement effective as of the _____ day of __________, 2002 pursuant to which tax liabilities or refunds will be allocated properly among Bank, Bancorp, Nara Capital and Nara Loan.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the parties agree as follows:
AGREEMENT
ARTICLE I
DEFINITIONS
Unless otherwise indicated, the following terms shall, for the purposes of this Agreement, be defined as follows:
1.1 Code shall mean the Internal Revenue Code of 1986, as amended.
1.2 Independent Public Accountant shall mean the firm of certified independent public accountants as may from time to time be retained by Bancorp.
ARTICLE II
TAX SHARING
2.1 Federal Income Tax.
(a) It is the desire and intent of the parties to this Agreement to establish a method for allocating the consolidated tax liability of each member among the Affiliated Group (hereinafter defined), for reimbursing each member for payment of such tax liability, for compensating members of the Affiliated Group for use of their losses or tax credits, and to provide for the allocation and payment of any refunds arising from a carryback of losses or tax credits from subsequent taxable years.
(b) For purposes of this Article II, the term "Affiliated Group" shall have the meaning assigned to it in Code Section 1504(a) and shall include all members of the group included in the filing of Bancorp consolidated tax return for federal income tax purposes. Bancorp, Bank, Nara Loan, and Nara Capital are members of the Affiliated Group. In the event additional corporations become members of the Affiliated Group, the parties to this Agreement shall use their best efforts to include such corporations as parties to this Agreement.
(c) A U.S. consolidated income tax return will be filed by Bancorp for each taxable year for which this Agreement is in effect and for which members of the Affiliated Group are required or permitted to file a consolidated tax return. The members of the Affiliated Group shall execute and file such consents, elections and other documents that may be required or appropriate for the proper filing of such returns.
(d) For each taxable period, members of the Affiliated Group shall compute their separate tax liability as if they had filed a separate tax return. The separate return tax liability of the members of the Affiliated Group shall be computed in a manner consistent with the provisions of Treasury Regulation Section 1.1552-1(a)(2)(ii), provided that the carryover of any tax attribute from a prior taxable year, which is not available in determining the consolidated tax liability of the Affiliated Group for such taxable period, shall be disregarded. Moreover, the parties agree to reimburse any member which has tax losses or credits in an amount equal to 100% of the tax benefits realized by the other members of the Affiliated Group as a result of the utilization by them of such member's tax losses or credits. It is the intent of the members of the Affiliated Group that the tax liability will be allocated in accordance with the "percentage method" of Section 1.1502-33(d)(3) of the Treasury Regulations and that the percentage referred to in Section 1.1502-33(d)(3)(i) shall be 100%. Bancorp is authorized to elect the "percentage method" in accordance with the procedures specified in Section 1.1502-33(d)(5) of the Treasury Regulations.
(e) Payment of the consolidated tax liability for a taxable period shall include the payment of estimated tax installments due for such taxable period and members of the Affiliated Group shall promptly pay to Bank their estimated tax payments as computed in
paragraph 2.1(d) upon receiving notice of such payments from Bancorp, but in no event later than the due date for each estimated tax payment. Upon receipt of the estimated tax payment by the members of the Affiliated Group, Bank will make the tax payment pursuant to the Treasury Regulations. Overpayments of estimated tax by members of the Affiliated Group as determined by Bancorp shall be refunded promptly to the appropriate members of the Affiliated Group.
(f) If part or all of an unused loss or tax credit is
allocated to a member of the Affiliated Group pursuant to Treasury Regulation
Section 1.1502-79, and is carried back or forward to a year in which the
Affiliated Group member filed a separate return or a consolidated return with
another affiliated group, any refund or reduction in tax liability arising from
the carryback or carry forward shall be retained by the subject Affiliated Group
member. Notwithstanding the above, Bancorp shall determine whether an election
shall be made not to carry back part or all of a consolidated net operating loss
for any taxable year in accordance with Section 172(b)(3) of the Code.
(g) If the consolidated tax liability is adjusted for any taxable period, whether by means of an amended return, claim for refund, or after a tax audit by the Internal Revenue Service, the liability of the Affiliated Group members shall be recomputed by Bancorp to give effect to such adjustments. In the case of a refund, Bancorp shall promptly make payment to each Affiliated Group member for its share of the refund, determined in the same manner as in paragraph (d) above, after Bancorp receives the refund. In the case of an increase in tax liability, each Affiliated Group member shall promptly pay to Bank its allocable share of such increased tax liability after receiving notice of such liability from Bancorp, but in no event later than the due date for tax payment.
(h) The parties agree that it is their express intent that this Agreement shall at all times be construed in a manner consistent with any law or regulation applicable to any member as now or hereafter in effect. Anything to the contrary herein notwithstanding, (1) Bank shall not pay to members an amount greater than the tax which Bank would have been required to pay had it filed a separate tax return, taking maximum advantage of available reductions in taxable income; (2) any payments made pursuant to paragraphs 2.1(e), (f) and (g) of this Agreement shall be made only with reference to the time taxes are actually paid or refunds or credits are actually received, it being understood that Bank shall at no time make advance payments with respect to the foregoing to any member, and (3) any funds (i) received by Bancorp from any member for the payment by Bank of taxes or (ii) received by Bancorp from any taxing authority by reason of any refund, credit or overpayment and properly allocable to another member, shall at all times be held by Bancorp in a segregated account solely as agent for such member and shall at no time be commingled with any other funds held by Bancorp.
2.2 Certain State Taxes. For each taxable period, members of the Affiliated Group shall compute their separate state tax liability. The separate return state tax liability of the members of the Affiliated Group shall be computed in a manner consistent with the relevant state law provisions. After the computation of their state tax liability, members of the Affiliated Group shall promptly pay to Bank their estimated tax payments, but in no event later than the due date for each estimated tax payment. Upon receipt of the estimated tax payment by the members of the Affiliated Group, Bank will make the tax payment pursuant to the relevant state
taxing authorities. Overpayments of estimated tax by members of the Affiliated Group, as determined by Bancorp, shall be refunded promptly to the appropriate members of the Affiliated Group. If the state tax return is reviewed by a state taxing authority and adjustments are made which will either increase or decrease the tax previously reported and paid, the Affiliated Group members affected by such adjustments shall pay all costs or receive all benefits from such adjustment.
2.3 Other Taxes. The other Affiliated Group members may from time to time become subject to additional taxes by federal, state or local authorities. In such event the members of the Affiliated Group shall consult with each other to determine a mutually acceptable form of allocation or apportionment of such taxes; provided, however, that Bancorp shall pay the Delaware franchise tax.
2.4 Procedural Matters.
(a) Bancorp shall prepare and file consolidated returns, and any other returns, documents or statements required to be filed with the Internal Revenue Service or any other relevant taxing authority with respect to the determination of the tax liability of Bancorp and the Affiliated Group members for all taxable periods commencing with the tax period applicable as of the date of the execution of this Agreement. Bancorp shall have the right, in its sole discretion: (i) to determine (A) the manner in which such returns shall be prepared and filed, including, without limitation, the manner in which any item of income, gain, loss, deduction or credit shall be reported; provided, however, that Bancorp shall consider in good faith any treatment proposed by the Affiliated Group members, (B) whether any extensions of the statute of limitations may be granted and (C) the elections that will be made pursuant to the Code (or applicable state tax laws) on behalf of any member of the consolidated group (it being agreed, however, that Bancorp shall not unreasonably withhold its consent to any elections that members of the Affiliated Group desire to make); (ii) to contest, compromise or settle any adjustment or deficiency proposed, asserted or assessed as a result of any audit of any such returns; (iii) to file, prosecute, compromise or settle any claim for refund; and (iv) to determine whether any refunds to which the consolidated group may be entitled shall be paid by way of refund or credited against the tax liability of the consolidated group.
(b) Bancorp, to the extent such information is available, shall promptly notify the members of the Affiliated Group of any tax liability or refund issue, and shall advise and consult in good faith with such members with respect to contest, compromise or settlement thereof.
(c) In the event of any disagreement as to the method of, or principles followed in, the computation, or as to the amount of income, deduction, gain, loss or credit, the parties shall submit the dispute to the Independent Public Accountant and the determination of such firm shall be conclusive and binding.
2.5 Cooperation.
(a) At all times during which this Agreement is in force, the parties shall make available to each other during normal business hours and in a manner which will not interfere with the other party's business, its tax, accounting and legal staff to the extent reasonably required in connection with the preparation of tax returns and other tax matters.
(b) In the event of the termination of this Agreement, the parties will use their best efforts to make available to the others, upon written request, its officers and employees in connection with any tax proceedings.
ARTICLE III
MISCELLANEOUS
3.1 Entire Agreement. This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein. No alteration, amendment or modification of any of the terms of this Agreement shall be valid unless made by an instrument signed by an authorized officer of the parties hereto.
3.2 Law Governing. This Agreement has been made in and shall be construed and enforced in accordance with the laws of the State of California, as such laws may from time to time be amended or revised.
3.3 Headings. The headings contained in this Agreement are inserted for convenience only and shall not constitute a part hereof.
3.4 Notices. Any notice, demand, claim or other communication under this Agreement shall be in writing and shall be deemed to have been given upon the delivery or mailing thereof, as the case may be, if delivered personally or sent by certified mail, return receipt requested, postage prepaid, to the parties at the following addresses (or at such other address as a party may specify by notice to the others):
If to Bancorp, to: 3701 Wilshire Blvd., Suite 220
Los Angeles, CA 90010
Attn: Bon T. Goo, CFO and Executive VP
If to Bank, to: 3701 Wilshire Blvd., Suite 220
Los Angeles, CA 90010
Attn: Bon T. Goo, CFO and Executive VP
If to Nara Capital, to: 3701 Wilshire Blvd., Suite 220
Los Angeles, CA 90010
Attn: Bon T. Goo, Administrative Trustee
If to Nara Loan, to: 3701 Wilshire Blvd., Suite 220
Los Angeles, CA 90010
Attn: Bon T. Goo, CFO
|
3.5 No Assignment Or Subcontracting. This agreement is not assignable in whole or in part by the parties without the other parties' prior written consent. Any attempted assignment without such consent will be null and void.
3.6 Successors. Subject to the restrictions on assignment set forth above, this agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns.
3.7 Authority. The parties represent and warrant that they have the full right, power and authority to enter into and perform this agreement in accordance with its terms and that the execution and delivery of this agreement have been duly authorized by proper corporate action.
3.8 Severability. If any provision of this agreement is determined
to be illegal, unenforceable or void, this agreement shall be construed as if
not containing that provision, and the rest of the agreement shall remain in
full force and effect. If any provision of this agreement or any other agreement
incorporating this agreement is determined to violate Federal Reserve Act
Section 23A or 23B the parties agree to amend the provision, nunc pro tunc, in a
manner which brings it into compliance with the law.
3.9 No Third Party Beneficiaries. Nothing in this agreement shall be construed to confer any right or benefit on any person who is not a party to this agreement.
IN WITNESS WHEREOF, each party has caused their name to be subscribed and executed by their respective authorized officer on the dates indicated, affective as of the date first set forth above.
NARA BANK, N.A. NARA LOAN CENTER CORPORATION
Date: Date:
----------------------- ----------------------
By: By:
------------------------- ------------------------
Its: Its:
------------------------ -----------------------
|
NARA BANCORP, INC. NARA BANCORP CAPITAL TRUST I
Date: Date:
----------------------- ----------------------
By: By:
------------------------- ------------------------
Its: Its:
------------------------ -----------------------
|
EXHIBIT 10.12
AFFILIATE AGREEMENT
This agreement is entered into as of _____________________, 2002, by and between Nara Bank, N.A. ("Bank") and Nara Bancorp, Inc., ("Affiliate"), with respect to the following facts.
A. The Bank and Affiliate are affiliated entities.
B. From time to time, Bank may request goods and/or services from Affiliate or may seek the services of certain of its employees. Bank may also provide goods, services or employees to Affiliate.
C. It is the intention of the parties that this agreement be interpreted and implemented in a manner which complies with applicable federal law, including Sections 23A and 23B of the Federal Reserve Act.
D. The parties may incorporate the terms of this agreement from time to time in connection with other agreements and transactions they conduct with each other.
Bank and Affiliate agree as follows:
1. SHARED EMPLOYEES. From time to time, one party (the "Primary Employer") may lend one or more of its employees to the other party for specific projects or for unspecified services. These "Shared Employees" will remain employees on the books of the Primary Employer at all times and will work for the other party only for the number of hours (or percentage of their normal working time) as the parties may agree. Any significant change in the agreed upon workload of a Shared Employee must be approved in writing by the Primary Employer.
Neither party makes any representation or warranty to the other party regarding Shared Employees. Each party acknowledges that it has done or will do an independent review of the background and qualifications of each Shared Employee for the work it wishes the Shared Employee to perform. The Primary Employer assumes no responsibility for any loss incurred by the other party as a result of the actions or omissions of Shared Employees while in the service of the other party.
Either party may terminate this agreement with respect to one or more Shared Employees, with or without cause, by giving the other party ten days' prior written notice. Any party may terminate this agreement immediately with respect to a particular Shared Employee who is believed to have violated either party's Code of Conduct, any law or regulation.
2. SUPERVISION OF SHARED EMPLOYEES. Shared Employees will be under the direct supervision of the Primary Employer for all work performed for that employer, and shall be under the direct supervision of the other party when performing work for the other party. The Primary Employer will not direct the work of a Shared Employee while the Shared Employee is acting on behalf of the other party.
The Primary Employer will have the right to terminate, suspend or otherwise change its employment terms with any Shared Employee. The Primary Employer will notify the other party of any change in the employment status or compensation of any Shared Employee which might materially affect the other party's use of the Shared Employee, or its rights, responsibilities or reasonable expectations under this agreement.
No party, other than the Primary Employer, is authorized to make any representation regarding the employment status of the Shares Employee. Neither party shall enter into any agreement with, or make promises to, Shared Employees on behalf of the other party without its prior written consent.
Each party will be solely responsible for monitoring the activities of Shared Employees while they are performing its work. Neither party will direct Shared Employees to take any action for or in the name of the other party. Shared Employees who deal with third parties will be directed by the parties to clearly disclose on whose behalf they are acting. Whenever possible, the Primary Employer's stationery shall be used by Shared Employees for its correspondence, and the other party's stationery shall be used for its correspondence. In order to maintain the confidentiality of proprietary and/or privileged information, the parties will instruct Shared Employees not to commingle Bank and Affiliate files, or to place one party's correspondence or documentation in the general records of the other party.
Neither party will direct Shared Employees to work for third parties without the Primary Employer's prior written consent. Unless the Primary Employer agrees in writing, the other party shall not offer employment to a Shared Employee until one year following the termination of the Shared Employee's employment with the Primary Employer.
3. FEES FOR SHARED EMPLOYEES. The Primary Employer shall be entitled to a monthly fee ("Monthly Fee") for the use of its Shared Employees by the other party. The Primary Employer shall be solely responsible for the payment of any compensation and benefits to Shared Employees. No fee will be paid to Shared Employees by the other party without the Primary Employer's written consent.
The Monthly Fee will be equal to the monthly costs (including all base salaries, bonuses, retirement contributions, fringe benefits, social security taxes, unemployment insurance premiums, accrued vacation rights, and all other costs associated with such employees) multiplied by the percentage of each Shared Employee's total working time that is devoted to the rendering of services to the other party under this agreement (the "Percentage").
The parties will mutually agree on the initial Percentage for each Shared Employee. That Percentage and the Monthly Fee will be adjusted annually (or more frequently, as necessary) to reflect the actual percentage of time spent by Shared Employees on work for the other party.
Either party may survey Shared Employees from time to time to determine whether the Percentage for any Shared Employee should be adjusted. The results of any survey
favoring an adjustment shall be presented to other party in writing. The other party will then have 30 days to review the survey and to provide written comments. Unless the parties disagree on the proposed new Percentage, the new Percentage shall become effective on the date the other party receives the survey results.
The parties acknowledge that issues regarding the calculation of the
appropriate Monthly Fee for individual Shared Employees are likely to
arise which are not addressed by this section. If that occurs, the parties
will work with each other in good faith to establish an appropriate
methodology for determining the Monthly Fee for such employees. In doing
so, the parties will be guided by the general principles reflected in
Section 19 of this agreement.
4. OUT-OF-POCKET EXPENSES. Each party agrees to reimburse the other party promptly for all reasonable out-of-pocket expenses (e.g., phone, secretarial service, office space, postage, etc.) the other party incurs on its behalf while rendering services in accordance with this agreement. Unless otherwise agreed by the parties, neither party shall be obligated to advance funds to cover any cost incurred by Shared Employees on behalf of the other party.
5. PAYMENT OF FEES. Bank and Affiliate agree to pay any amounts owing under this agreement on the first day of each calendar month (or, if that day is on a weekend or bank holiday, then the next following business day). Bank is authorized to charge Affiliate's account with Bank for any fees owed to Bank under this agreement.
6. PERFORMANCE STANDARDS. Whenever one party performs services for the other party, its level of performance, including timeliness and accuracy, shall meet or exceed the general industry standards for such service and the level at which it provides comparable services on its own behalf. In performing services, each party shall abide by the policies and procedures agreed upon in advance by the parties.
7. CONFIDENTIALITY AND DATA OWNERSHIP. Unless otherwise agreed upon in writing, neither party will convey or obtain any right in the programs, systems, data, proprietary information or materials (including any confidential customer information or customer lists) that are utilized or provided by the other party in connection with any service under this agreement. Each party will take reasonable steps to protect the security and confidentiality of such information, and will use such information only for the purposes contemplated by this agreement. Neither party will disclose such information to employees who do not have a need to know such information for the performance of this agreement.
This provision shall not apply to information that: (a) was known by the receiving party prior to its disclosure by the other party; (b) becomes generally available to the public other than as a result of a breach of this agreement; or (c) becomes lawfully available on a nonconfidential basis from a third party who is not under an obligation of confidence to the other party.
8. REGULATION. The parties understand that the performance of this agreement may be subject to regulation and examination by federal and state regulatory agencies. Each party agrees to submit to the examination of such agencies and to furnish such reports as are required by law. Each party will notify the other party promptly of any governmental examination or request for information related to this agreement, unless such notice is prohibited by law.
9. INDEMNIFICATION. Each party will indemnify, defend and hold the other
party and its directors, officers, employees and agents ("Indemnified
Parties") harmless from and against all claims, actions, damages, losses,
penalties, costs, attorney's fees and liabilities ("Losses") that are
caused by or result from: (a) the indemnifying party's gross negligence or
willful act or omission in connection with this agreement or its services;
(b) any act or omission of the Indemnified Parties taken or omitted at the
express direction of the indemnifying party, except to the extent the Loss
is due to the willful misconduct, negligence, or violation of law by the
Indemnified Parties; or (c) the indemnifying party's violation of any law
or regulation.
Each party acknowledges that the compensation for this agreement was negotiated in contemplation of the foregoing indemnification and the other limitations on liability set forth in this agreement.
10. NOTICES. Any written notice required or permitted to be given by this agreement shall be mailed or delivered to the other party at the following address, or such other address as the party may designate in writing:
11. INDEPENDENT CONTRACTOR STATUS. The relationship of the Bank and Affiliate under this agreement is that of independent contractors. Nothing in this agreement shall be construed as constituting a partnership, joint venture or agency between the parties hereto.
12. NO ASSIGNMENT OR SUBCONTRACTING. This agreement is not assignable in whole or in part by either party without the other party's prior written consent. Any attempted assignment without such consent will be null and void.
13. SUCCESSORS. Subject to the restrictions on assignment set forth above, this agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns.
14. AUTHORITY. Each party represents and warrants that it has the full right, power and authority to enter into and perform this agreement in accordance with its terms and that the execution and delivery of this agreement have been duly authorized by proper corporate action.
15. WAIVER. Either party may delay enforcing its rights under this agreement without losing them. Any waiver must be in writing and shall not be deemed a waiver of other rights or of the same right at another time.
16. COMPLIANCE WITH LAWS AND REGULATIONS. Each party agrees that it will obtain all licenses and other governmental authorizations and approvals required for the performance of its obligations under this agreement, and that it will perform its obligations in accordance with all applicable federal, state and local laws, rules and regulations now or hereafter in effect.
17. GOVERNING LAW. To the extent this agreement is subject to the laws of any state, it will be governed by and construed in accordance with the laws of California, without regard to its conflict of law provisions.
18. ENTIRE AGREEMENT. This agreement constitutes the only agreement between the parties with respect to its subject matter and supersedes all prior negotiations and understandings between the parties. Unless otherwise agreed, the terms of this agreement will govern the service and employee sharing arrangements between the parties.
19. ARM'S LENGTH AGREEMENT. The parties acknowledge that the terms of this agreement are substantially the same as, or at least as favorable to the Bank, as those prevailing at the time for comparable transactions with or involving nonaffiliated companies or, in the absence of comparable transactions, on terms and under circumstances at least as favorable to Bank that in good faith would be offered or applied to nonaffiliated companies.
20. MODIFICATION. This agreement may not be amended or modified except in a written document signed by both parties.
21. SEVERABILITY. If any provision of this agreement is determined to be illegal, unenforceable or void, this agreement shall be construed as if not containing that provision, and the rest of the agreement shall remain in full force and effect.
If any provision of this agreement or any other agreement incorporating this agreement is determined to violate Federal Reserve Act Section 23A or 23B, the parties agree to
amend the provision, nunc pro tunc, in a manner which brings it into compliance with the law.
22. FORCE MAJEURE. Neither party will be liable for a delay in performance or a failure to perform any obligation under this agreement to the extent that the delay or failure is due to causes beyond its reasonable control, acts of God, labor disputes, governmental regulations or orders, civil disturbances, war conditions, fires, or a failure by the other party to satisfy its obligations under this agreement.
23. NO THIRD PARTY BENEFICIARIES. Nothing in this agreement shall be construed to confer any right or benefit on any person who is not a party to this agreement.
24. TERMINATION. Either party may terminate this agreement or any service provided in connection with this agreement:
(a) upon 60 days' prior written notice to the other party (unless the parties agree to a longer period of notice);
(b) immediately upon written notice to the other party if it materially breaches this agreement;
(c) upon written notice to the other party if the other party fails to cure any nonmaterial breach of this agreement within 30 days of its receipt of notice of the breach;
(d) immediately upon written notice to the other party in the event the other party becomes the subject of a bankruptcy, insolvency, reorganization, dissolution, liquidation of debt, receivership, conservatorship or other similar proceeding under federal or state bankruptcy, debtors relief, securities, bank regulatory or other law; or
(e) immediately upon notice to the other party if the other party suspends its business, becomes insolvent, or transfers a substantial portion of its property or business.
If this agreement terminates, each party will promptly deliver to the other party all data, files, records and documents maintained by it on behalf of the other party under this agreement, and shall fully cooperate in the transfer of any servicing functions pursuant to this agreement to the other party or its designated agent. If this agreement is terminated for any reason other than (a), above, or the mutual agreement of the parties, the terminating party shall be reimbursed for its reasonable conversion costs (if any) by the other party. Sections 7, 8 and 9 shall survive the termination of this agreement.
NARA BANK, N.A. Date:
--------------------
By:
--------------------------------------
Its:
-------------------------------------
NARA BANCORP, INC. Date:
"Affiliate" --------------------
By:
--------------------------------------
Its:
-------------------------------------
|
EXHIBIT 10.13
Grant No.
NARA BANCORP, 2001
NARA BANK 2000 CONTINUATION LONG TERM INCENTIVE PLAN
STOCK OPTION AGREEMENT
Nara Bancorp, Inc. (the "COMPANY"), hereby grants to the Optionholder named below an option to purchase the number of shares of the Company's common stock set forth below. The terms and conditions of the Option are set forth in this Stock Option Agreement (the "AGREEMENT") and in the Company's 2001 Nara Bank 2000 Continuation Long Term Incentive Plan (the "PLAN") and the Notice of Exercise, all of which are enclosed herewith and incorporated herein in their entirety. Capitalized terms not defined herein shall have the meanings assigned to them in the Plan.
Optionholder:
Date of Grant:
Number of Shares Subject to Option:
Exercise Price Per Share:
Expiration Date: Type of Grant: [ ] Incentive Stock Option [ ] Non-statutory Stock Option Vesting Schedule: |
Exercise Schedule:
Payment: By one or a combination of the following items (as described in
Section 3 of this Agreement):
By cash or check
Pursuant to a Regulation T Program
By delivery of already-owned shares
ACKNOWLEDGEMENTS: By signing this cover sheet, you acknowledge receipt
|
of, and understand and agree to, all of the terms and conditions described in this Agreement and in the Plan and Notice of Exercise, copies of which also are enclosed. Further, you acknowledge that as of the Date of Grant, this Agreement and the Plan and Notice of Exercise set forth the entire understanding between you and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements (including, without limitation, any employment agreement with the Company) on that subject.
NARA BANCORP, INC.: OPTIONHOLDER:
By:
------------------------------- -----------------------------------
Signature Signature
Name: Date:
----------------------------- -----------------------------
Title:
----------------------------
Date:
-----------------------------
|
ENCLOSURES: Copy of the 2000 Long Term Incentive Plan and Notice of Exercise
NARA BANCORP, INC. 2001
NARA BANK 2000 CONTINUATION LONG TERM INCENTIVE PLAN
STOCK OPTION AGREEMENT
The details of your Option are as follows:
1. VESTING. Subject to the limitations contained herein, your Option will vest as provided in the cover sheet of this Agreement, provided that vesting will cease upon the termination of your Continuous Service. For purposes of this Agreement, the term "CONTINUOUS SERVICE" means that your service with the Company or a Subsidiary, whether as an employee or director, is not interrupted or terminated. Your Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which you render services to the Company or a Subsidiary as an employee or director or a change in the entity for which you render such service, provided that there is no interruption or termination of your Continuous Service. For example, a change in status from an employee of the Company to a director of the Company will not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party's sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares subject to your Option and your exercise price per share referenced in the cover sheet of this Agreement may be adjusted from time to time for adjustments upon changes in capitalization, as provided in the Plan.
3. METHOD OF PAYMENT. Payment of the exercise price is due in full upon exercise of all or any part of your Option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted in the cover sheet of this Agreement, which may include one or more of the following:
(a) In the Company's sole discretion at the time your Option is exercised, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board which, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.
(b) In the Company's sole discretion at the time your Option is exercised, by delivery of already-owned shares of Common Stock that either have been held for the period required to avoid a charge to the Company's reported earnings (generally six months) or were not acquired, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. "Delivery" for these purposes, in the sole discretion of the Company at the time your Option is exercised, shall include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, your Option may not be exercised by tender to the Company of Common Stock to the extent such tender would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company's stock.
4. WHOLE SHARES. Your Option may only be exercised for whole shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, your Option may not be exercised unless the shares issuable upon exercise of your Option are then registered under the Securities Act or, if such shares are not then so registered, the
Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your Option must also comply with other applicable laws and regulations governing the Option, and the Option may not be exercised if the Company determines that the exercise would not be in material compliance with such laws and regulations.
6. TERM. The term of your Option commences on the Date of Grant and expires upon the earliest of the following:
(a) three (3) months after the termination of your Continuous Service for any reason other than Disability or death, provided that if during any part of such three (3) month period the Option is not exercisable solely because of the condition set forth in paragraph 5, the Option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service;
(b) twelve (12) months after the termination of your Continuous Service due to Disability (as defined in the Plan);
(c) twelve (12) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates;
(d) the Expiration Date indicated in the cover sheet of this Agreement; or
(e) the tenth (10th) anniversary of the Date of Grant.
If your Option is an Incentive Stock Option, note that, to obtain the federal income tax advantages associated with an "Incentive Stock Option," the Code requires that at all times beginning on the date of grant of the Option and ending on the day three (3) months before the date of the Option's exercise, you must be an employee of the Company or a Subsidiary, except in the event of your death or your Disability. The Company has provided for extended exercisability of your Option under certain circumstances for your benefit, but cannot guarantee that your Option will necessarily be treated as an "Incentive Stock Option" if you provide services to the Company or any Subsidiary as a director or if you exercise your Option more than three (3) months after the date your employment with the Company or a Subsidiary terminates.
7. EXERCISE.
(a) You may exercise the vested portion of your Option during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.
(b) By exercising your Option you agree that, as a condition to any exercise of your Option, the Company may require you to enter an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your Option or (2) the lapse of any substantial risk of forfeiture to which the shares are subject at the time of exercise.
(c) If your Option is an Incentive Stock Option, by exercising your Option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your Option that occurs within two
years after the date of your Option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of your Option.
8. TRANSFERABILITY. Your Option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your Option.
9. OPTION NOT A SERVICE CONTRACT. Your Option is not an employment or service contract, and nothing in your Option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or a Subsidiary, or of the Company or a Subsidiary to continue your employment. In addition, nothing in your Option shall obligate the Company or a Subsidiary, their respective stockholders, Boards of Directors, officers or employees to continue any relationship that you might have as a director for the Company or a Subsidiary.
10. WITHHOLDING OBLIGATIONS.
(a) At the time your Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a "cashless exercise" pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or a Subsidiary, if any, which arise in connection with your Option.
(b) Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable conditions or restrictions of law, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your Option a number of whole shares having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.
(c) Your Option is not exercisable unless the tax withholding obligations of the Company and/or any Subsidiary are satisfied. Accordingly, you may not be able to exercise your Option when desired even though your Option is vested, and the Company shall have no obligation to issue a certificate for such shares or release such shares from any escrow provided for herein.
11. NOTICES. Any notices provided for in your Option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
12. GOVERNING PLAN DOCUMENT. Your Option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Option, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Option and those of the Plan, the provisions of the Plan shall control.
By signing the cover sheet of this Agreement, you agree to all of the term and conditions described above and in the Plan.
NOTICE OF STOCK OPTION EXERCISE
NARA BANCORP, INC. 2001
NARA BANK 2000 CONTINUATION LONG TERM INCENTIVE PLAN (THE "PLAN")
Ladies and Gentlemen:
This constitutes notice under my Option that I elect to purchase the number of shares for the price set forth below.
Type of option (check one): Incentive [ ] Nonstatutory [ ]
Stock option dated:
------------------------------------
Number of shares as to which
option is exercised: ------------------------------------
Certificates to be issued in name
of: ------------------------------------
Total exercise price:
------------------------------------
Cash payment delivered
herewith: ------------------------------------
|
By this exercise, I agree (a) to provide such additional documents as you may require pursuant to the terms of the 2000 Long Term Incentive Plan, (b) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option, and (c) if this exercise relates to an Incentive Stock Option, to notify you in writing within fifteen (15) days after the date of any disposition of any of the shares of Common Stock issued upon exercise of this option that occurs within two (2) years after the date of grant of this option or within one year after such shares of Common Stock are issued upon exercise of this option.
I hereby make the following certifications and representations with respect to the number of shares of Common Stock of the Company listed above (the "SHARES"), which are being acquired by me for my own account upon exercise of the Option as set forth above:
I acknowledge that I will only be able to resell the Shares under Rule 144 promulgated under the Securities Act or another available exemption.
I further acknowledge that all certificates representing any of the Shares subject to the provisions of the Option shall have endorsed thereon appropriate legends reflecting the foregoing in limitations, as well as any legends reflecting restrictions pursuant to the Company's organizational documents and/or applicable securities laws.
I further acknowledge that there may be tax consequences as a result of the purchase or disposition of the Shares, and I have consulted with any tax consultants I wished to consult and I am not relying on the Company for any tax advise.
Very truly yours,
EXHIBIT 21.1
NARA BANCORP, INC.
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction of Incorporation
Name or Organization Type
---- ----------------------------- ----
Nara Bank, National Association United States National Bank
Nara Bancorp Capital Trust I Delaware Statutory Business Trust
Nara Loan Center Corporation New Jersey Corporation
Nara Statutory Trust II Connecticut Statutory Business Trust
|
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of Nara Bancorp, Inc. on Form S-8 (No. 333-58508) of our report dated March 26, 2002, appearing in the Annual Report on Form 10-K of Nara Bancorp, Inc. and Subsidiaries for the year ended December 31, 2001.
Los Angeles, California
April 1, 2002