As filed with the Securities and Exchange Commission on August 28, 2014.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
Great Western Bancorp, Inc.
(Exact Name of Registrant as Specified in Its Charter)
|
|
|
|
|
|
|
Delaware
|
|
6022
|
|
47-1308512
|
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
(IRS Employer
Identification Number)
|
100 North Phillips Avenue
Sioux Falls, South Dakota 57104
(605) 334-2548
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Donald J. Straka
General
Counsel
Great Western Bancorp, Inc.
100 North Phillips Avenue
Sioux Falls, South Dakota 57104
(605) 334-2548
(Name,
Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
|
|
|
|
|
Mark J. Menting
Catherine M. Clarkin
Sullivan & Cromwell LLP
125 Broad Street
New York,
NY 10004
(212) 558-4000
|
|
Craig E. Chapman
James O’Connor
Sidley
Austin LLP
787 Seventh Avenue
New York, NY 10019
(212) 839-5300
|
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following box.
¨
If this form is
filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering.
¨
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.
(Check one):
|
|
|
|
|
|
|
|
|
Large accelerated filer
|
|
¨
|
|
Accelerated filer
|
|
¨
|
|
Non-accelerated filer
|
|
x
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
|
|
¨
|
CALCULATION OF REGISTRATION FEE
|
|
|
|
|
|
|
|
|
Title of each class of
securities to be registered
|
|
Proposed
maximum
aggregate
offering price
(1)(2)
|
|
Amount of
registration fee
|
|
Common stock, par value $0.01 per share
|
|
$100,000,000
|
|
$12,880
|
|
|
|
|
|
(1)
|
Includes shares of common stock that the underwriters have the option to purchase from National Americas Holdings LLC.
|
|
(2)
|
Estimated solely for purposes of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
|
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. The
selling stockholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell, nor does it seek an offer to buy, these
securities in any jurisdiction where such offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated August 28, 2014
PROSPECTUS
Shares
Common Stock
This is the
initial public offering of shares of common stock of Great Western Bancorp, Inc. All of the shares are being sold by a subsidiary of National Australia Bank Limited, or NAB, our parent company, and we will not receive any of the proceeds from the
sale of shares by the NAB selling stockholder. Prior to this offering, there has been no public market for our common stock. We currently estimate that the initial public offering price per share of our common stock will be between
$ and $ per share. We intend to apply to list our common stock on the New York Stock Exchange under the symbol “GWB.”
After the completion of this offering, NAB will hold % of the voting power of all outstanding shares of our common
stock.
We are an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012 and have elected to
take advantage of certain reduced public company reporting and disclosure requirements in this prospectus, and we may take advantage of those reduced reporting and disclosure requirements in future filings.
Shares of our common stock are not saving accounts or deposits and are not insured by the Federal Deposit Insurance Corporation or any other
government agency.
Investing in our common stock involves significant risks. See “
Risk Factors
” beginning on page 23 of
this prospectus for a discussion of certain risks you should consider before deciding to invest in our common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
Share
|
|
|
Total
|
|
|
Public offering price
|
|
$
|
|
|
|
$
|
|
|
|
Underwriting discount*
|
|
$
|
|
|
|
$
|
|
|
|
Proceeds, before expenses, to the NAB selling stockholder
|
|
$
|
|
|
|
$
|
|
|
|
|
*
|
We refer you to “Underwriting” beginning on page 207 of this prospectus for additional information regarding underwriting compensation.
|
The NAB selling stockholder has granted the underwriters an option to purchase up to an additional
shares of our common stock from the NAB selling stockholder at the initial public offering price less the underwriting discount, within 30 days from the
date of this prospectus.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of
these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The shares of common stock will be ready for delivery on or about
, 2014.
Joint
Book-Running Managers
|
|
|
|
|
|
|
|
Deutsche Bank Securities
|
|
BofA Merrill Lynch
|
The date of this prospectus is
, 2014.
TABLE OF CONTENTS
Explanatory Note
Unless
we state otherwise or the context otherwise requires, references in this prospectus to:
|
|
•
|
|
“we,” “our,” “us” and our “company” refer to:
|
|
|
•
|
|
GWBI and its consolidated subsidiaries, for all periods prior to the completion of the Formation Transactions; and
|
|
|
•
|
|
Great Western Bancorp, Inc., a newly formed Delaware corporation, and its consolidated subsidiaries, for all periods after the completion of the Formation Transactions, after giving effect to the Formation Transactions;
|
|
|
•
|
|
“Great Western” refer to:
|
|
|
•
|
|
GWBI but not its consolidated subsidiaries, for all periods prior to the completion of the Formation Transactions; and
|
|
|
•
|
|
Great Western Bancorp, Inc., a newly formed Delaware corporation, excluding its consolidated subsidiaries, for all periods after the completion of the Formation Transactions;
|
|
|
•
|
|
“GWBI” refer to Great Western Bancorporation, Inc., an Iowa corporation;
|
|
|
•
|
|
our “bank” refer to Great Western Bank, a South Dakota banking corporation;
|
|
|
•
|
|
“NAB” refer to National Australia Bank Limited, an Australian public company and our ultimate parent company;
|
|
|
•
|
|
“NAB selling stockholder” refer to National Americas Holdings LLC, a Delaware limited liability company and wholly owned, indirect subsidiary of NAB that, immediately after the completion of the Formation
Transactions, will own all of our issued and outstanding shares of capital stock;
|
i
|
|
•
|
|
“NAI” refer to National Americas Investment, Inc., a Delaware corporation and wholly owned, indirect subsidiary of NAB;
|
|
|
•
|
|
our “stock” refer to our common stock and our non-voting common stock;
|
|
|
•
|
|
our “states” refer to the seven states (South Dakota, Iowa, Nebraska, Colorado, Arizona, Kansas and Missouri) in which we currently conduct our businesses;
|
|
|
•
|
|
our “markets” and our “footprint” refer to the geographic markets within our states in which we currently conduct our businesses;
|
|
|
•
|
|
“fiscal year” refer to our fiscal year, which is based on a twelve-month period ending September 30 of each year (
e.g.
, fiscal year 2013 refers to the twelve-month period ending September 30,
2013);
|
|
|
•
|
|
our “peers” refer, collectively, to all publicly listed U.S. bank holding companies with total assets between $5 billion and $15 billion at June 30, 2014, and all peer data is obtained from SNL Financial LC,
or SNL Financial; and
|
|
|
•
|
|
the “Formation Transactions” refer to the transactions described in “Prospectus Summary—Our Structure and Formation Transactions—Formation Transactions,” pursuant to which Great Western
Bancorp, Inc. was formed and GWBI will merge with and into Great Western Bancorp, Inc., with Great Western Bancorp, Inc. continuing as the surviving corporation and succeeding to all the assets, liabilities and businesses of GWBI, among other
related transactions.
|
About this Prospectus
We, NAB, the NAB selling stockholder and the underwriters have not authorized anyone to provide any information other than that contained in
this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We, NAB, the NAB selling stockholder and the underwriters take no responsibility for, and can provide no assurance as to the
reliability of, any other information that others may give you. We are not, and NAB, the NAB selling stockholder and the underwriters are not, making an offer of these securities in any jurisdiction where the offer is not permitted. You should not
assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.
We have proprietary rights to trademarks, trade names and service marks appearing in this prospectus that are important to our business. This
prospectus also contains additional trademarks, trade names and service marks belonging to NAB or one of its affiliates. Solely for convenience, the trademarks, trade names and service marks appearing in this prospectus are without the
®
and TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable
licensors to these trademarks, trade names and service marks. All trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners.
Any discrepancies included in this prospectus between totals and the sums of the percentages and dollar amounts presented are due to rounding.
Industry and Market Data
Within this prospectus, we reference certain industry and sector information and statistics. We have obtained this information and statistics
from various independent, third party sources. Nothing in the data used or derived from third party sources should be construed as advice. Some data and other information are also based on our good faith estimates, which are derived from our review
of internal surveys and independent sources. We believe that these external sources and estimates are reliable, but have not independently verified them. Statements as to our market position are based on market data currently available to us.
Although we are not aware of any misstatements regarding the demographic, economic, employment, industry and trade association data presented herein, these estimates involve inherent risks and uncertainties and are based on assumptions that are
subject to change.
ii
Implications of Being an Emerging Growth Company
As a company with less than $1.0 billion in revenues during our last fiscal year, we qualify as an “emerging growth company” under
the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to
public companies. As an emerging growth company:
|
|
•
|
|
we may present only two years of audited financial statements and only two years of related management discussion and analysis of financial condition and results of operations;
|
|
|
•
|
|
we are exempt from the requirement to obtain an attestation and report from our auditors on management’s assessment of our internal control over financial reporting under the Sarbanes-Oxley Act of 2002;
|
|
|
•
|
|
we are permitted to provide less extensive disclosure about our executive compensation arrangements; and
|
|
|
•
|
|
we are not required to give our stockholders non-binding advisory votes on executive compensation or golden parachute arrangements.
|
We have elected to take advantage of the scaled disclosure requirements and other relief described above in this prospectus and may take
advantage of these exemptions for so long as we remain an emerging growth company. We will remain an emerging growth company until the earliest of (i) the end of the fiscal year during which we have total annual gross revenues of $1.0 billion
or more, (ii) the end of the fiscal year following the fifth anniversary of the completion of this offering, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt and
(iv) the end of the fiscal year in which the market value of our equity securities that are held by non-affiliates exceeds $700 million as of June 30 of that year.
In addition to scaled disclosure and the other relief described above, the JOBS Act permits us an extended transition period for complying
with new or revised accounting standards affecting public companies. We do not intend to take advantage of this extended transition period, which means that the financial statements included in this prospectus, as well as any financial statements
that we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies.
iii
PROSPECTUS SUMMARY
This summary provides a brief overview of important information regarding key aspects of the offering contained elsewhere in this
prospectus. This summary does not contain all of the information that you should consider before deciding to invest in our common stock. You should read this entire prospectus carefully, including the more detailed information regarding the risks of
purchasing our common stock in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes
thereto, before making an investment decision.
Our Business
We are a full-service regional bank holding company focused on relationship-based business and agribusiness banking. We serve our customers
through 162 branches in attractive markets in seven states: South Dakota, Iowa, Nebraska, Colorado, Arizona, Kansas and Missouri. We were established more than 70 years ago and have achieved strong market positions by developing and maintaining
extensive local relationships in the communities we serve. By leveraging our business and agribusiness focus, presence in attractive markets, highly efficient operating model and robust approach to risk management, we have achieved significant and
profitable growth—both organically and through disciplined acquisitions. We have successfully completed eight acquisitions since 2006, including our 2010 Federal Deposit Insurance Corporation, or FDIC, assisted acquisition of TierOne Bank,
which represented approximately $2.5 billion in acquired assets. Our net income was $77.1 million for the nine months ended June 30, 2014 and $96.2 million for the twelve months ended September 30, 2013, representing a compound annual
growth rate, or CAGR, of 21% from fiscal year 2009 to fiscal year 2013 and a 32% increase from fiscal year 2012 to fiscal year 2013. Our cash net income, which is our net income excluding amortization and related tax effects associated with
intangible assets, was $88.1 million for the nine months ended June 30, 2014 and $112.3 million for fiscal year 2013, representing a 26% increase from fiscal year 2012 to fiscal year 2013. Our total assets were $9.29 billion at June 30, 2014,
and on an annualized basis, our net charge-offs for the nine months ended June 30, 2014 represented 14 basis points of our average total loans. Since fiscal year 2009, we have also operated with an efficiency ratio superior to our peer median.
(1)
For fiscal year 2013, we achieved a return on average total assets of 1.07% and a return on average tangible common equity of 17.5%. For more information on our cash net income and return on
average tangible common equity, see “—Summary Historical Consolidated Financial and Operating Information.”
The following
table illustrates our net income over the periods indicated:
Net Income ($MM)
(2)
|
(1)
|
As described below under “—Our Competitive Strengths—Highly Efficient Operating Model,” our efficiency ratio and those of our peers may not be directly comparable.
|
|
(2)
|
For the fiscal years ended September 30, except as otherwise indicated.
|
1
We focus on business and agribusiness banking, complemented by retail banking and wealth
management services. Our loan portfolio consists primarily of business loans, comprised of commercial and industrial, which we refer to as C&I or commercial non-real estate, and commercial real estate, or CRE, loans, and agribusiness loans. At
June 30, 2014, our business and agribusiness loans collectively accounted for 85% of our total loan portfolio. In addition, 61% of our aggregate loan portfolio, comprising our CRE loans (representing 36% of our aggregate loan portfolio), residential
real estate loans (representing 14% of our aggregate loan portfolio) and agriculture real estate loans (representing 11% of our aggregate loan portfolio), was primarily secured by interests in real estate predominantly located in the states in which
we operate at June 30, 2014, and some of our other lending occasionally involves taking real estate as primary or secondary collateral. We offer small and mid-sized businesses a focused suite of financial products and have established strong
relationships across a diversified range of sectors, including key areas supporting regional growth such as agribusiness services, freight and transport, healthcare and tourism. We have developed extensive expertise in agribusiness lending, which
serves one of the most prominent industries across our markets, and we offer a variety of financial services designed to meet the specific needs of our agribusiness customers. We also provide a range of deposit and loan products to our retail
customers through several channels, including our branch network, online banking system, mobile banking applications and customer care centers. In our wealth management business, we seek to expand our private banking, financial planning, investment
management and insurance operations to better position us to capture an increased share of the business of managing the private wealth of many of our business and agribusiness customers.
Our banking model seeks to balance the best of being a “big enough” & “small enough” bank, providing capabilities
typical of a much larger bank, such as diversified product specialists, customized banking solutions and multiple delivery channels, with a customer-focused culture usually associated with smaller banks. Our focus on balancing these capabilities
with a service-oriented culture is embedded within our operations and is enhanced by focusing on our core competencies. We are well recognized within our markets for our relationship-based banking model that provides for local, efficient decision
making. We believe we serve our customers in a manner that is responsive, flexible and accessible. Our relationship bankers strive to build deep, long-term relationships with customers and understand the customers’ specific needs to identify
appropriate financial solutions. We believe we have been successful in attracting customers from larger competitors because of our flexible approach and the speed and efficiency with which we provide customers with banking solutions while
maintaining disciplined underwriting standards.
2
Market Opportunity
We operate 162 branches located in 116 communities in seven states. In 2007, we began operating in Arizona with our acquisition of Sunstate
Bank. In 2009, we expanded our footprint into Colorado through our acquisition of First Community Bank’s Colorado franchise. In 2010, we significantly expanded our presence in Nebraska through our acquisition of TierOne Bank.
Geographic Footprint
We believe that the states in which we operate present attractive opportunities for our banking model.
The economies of Nebraska, Iowa and South Dakota are growing. According to the Bureau of Economic Analysis of the U.S. Department of Commerce,
or the Bureau of Economic Analysis, real GDP growth in these states from 2009 to 2013 has been faster than national real GDP growth, with real GDP in these states growing at a CAGR of 2.7% compared to 2.0% for the nation. According to the Bureau of
Labor Statistics of the U.S. Department of Labor, overall unemployment rates for May 2014 in these states were also below the 6.3% U.S. national seasonally adjusted unemployment rate for May 2014, with Nebraska tied for 3rd lowest, South Dakota tied
for 5th lowest and Iowa tied for 7th lowest seasonally adjusted unemployment rate in the country.
Markets in each of Arizona and Colorado
are recognized as fast-growing and dynamic economies. For example, according to data from SNL Financial, the populations of Phoenix and Denver are expected to grow by 5.3% and 9.9%, respectively, from 2014 through 2019. The U.S. Census Bureau
estimates that, as of July 1, 2013, Phoenix had a population of 1.5 million and was the sixth-largest city in the United States. According to Moody’s Analytics, Arizona ranks first among U.S. states for projected employment growth
from 2013 through 2018 and Colorado ranks fifth.
Nebraska, Iowa, South Dakota, Arizona and Colorado are each home to a number of small
and mid-sized businesses across a diverse range of sectors and together serve as the corporate headquarters for several Fortune
3
500 companies. The economies within these states represent a diverse range of industries, with manufacturing, trade, agriculture, professional and business services, finance and insurance, and
government accounting for approximately 56% of real GDP in these states in 2013 according to the Bureau of Economic Analysis. We expect strong population and job growth will lead to an increased need for business banking services, more deposits and
an increased credit demand to fund ongoing capital investments and working capital, cash management solutions and credit cards, among other products and services. We believe integrated banking support is important to providing a focused suite of
services to meet the evolving needs of business customers in our markets.
Agribusiness customers in Nebraska, Iowa, South Dakota, Arizona
and Colorado produce and raise a variety of grains, proteins and other produce, including corn, soybeans, wheat, dairy products, beef cattle, hogs and vegetables. These products are consumed globally as foods and also serve as inputs for goods made
by other industries. Agriculture, as defined by the Bureau of Economic Analysis, has grown faster than the U.S. economy as a whole, with real agricultural GDP growing at a CAGR of 3.4% nationally from 2009 to 2013 compared to a CAGR of 2.0% for the
United States over the same period. The value of U.S. agricultural exports is also expected to grow by 26% from 2014 through 2023 according to the United States Department of Agriculture, or USDA. In addition, there has been a growing emphasis on
research and development and technology in the agricultural sector, with consumers and producers focused on sustainable methods of food production, particularly with a view to decreasing their reliance on non-renewable inputs.
We believe increasing demand for agricultural products and changing agricultural industry dynamics will continue to drive the need for banking
services in our markets, particularly from banks such as ours that understand, and provide products and services that specifically address, the unique needs of our agribusiness customers. We believe that we are well positioned to continue to serve
the banking needs of small and mid-sized businesses and the agribusiness sector.
Our Competitive Strengths
We attribute our success to the following competitive strengths, among others:
Focus on Business Banking
We focus on business banking, and this focus contributes significantly to our profitability and growth. As of June 30, 2014, business banking
accounted for approximately 60% of our loan portfolio, with C&I loans representing 24%, owner-occupied CRE loans representing 17% and other CRE loans representing 19% of our total loan portfolio. From September 30, 2009 through June 30,
2014, our business banking loan portfolio has grown by over 80%. We believe we have developed a strong brand and market reputation in business banking within the markets we serve by focusing on our core competencies. We provide business banking
services to small and mid-sized businesses across a diverse range of industries that support economic growth in the markets in which our business banking customers operate. We offer our business banking customers focused banking services designed to
meet the specific needs of their businesses. We have a significant presence in attractive markets, particularly markets such as Omaha, Des Moines and Sioux Falls, which we believe are located in growing economies and present opportunities to
increase our business banking activities.
Specialized Agribusiness Expertise
In addition to business banking, we focus on agribusiness banking. According to the American Bankers Association, at March 31, 2014, we
were ranked the seventh-largest farm lender bank in the United States measured by total dollar volume of farm loans. We have been providing banking services to the agricultural community since our bank was founded in 1935. We have developed
extensive expertise and brand recognition in agribusiness lending, which is one of the fastest growing industries in our markets and is the largest single industry sector that we serve. At June 30, 2014, our agribusiness loan portfolio was balanced
among the major
4
types of agricultural production in our footprint—grains (primarily corn, soybeans and wheat) representing 38% of our agribusiness loan portfolio, proteins (primarily beef cattle, dairy
products and hogs) representing 47% of our agribusiness loan portfolio, and other (including cotton and vegetables) representing 15% of our agribusiness loan portfolio. We have grown our agribusiness lending significantly in recent years through our
focus on expansion within the markets in our footprint and the recruitment of specialist relationship bankers with a deep understanding of, and strong relationships with customers in, the agriculture industry. Our agribusiness loan portfolio
represented 25% of our total loan portfolio at June 30, 2014, having grown at a CAGR of 24% from September 30, 2009 to September 30, 2013. In our most recent fiscal year, our agribusiness loan portfolio grew 14% from September 30, 2012 to
September 30, 2013. In addition, we estimate that 10% of our C&I loans and owner-occupied CRE loans are agriculture-related loans, as of June 30, 2014.
Track Record of Strong and Disciplined Growth
We have a track record of combining organic expansion with strategic acquisitions to achieve strong overall growth. Our record of steadily
growing and successfully operating our business is demonstrated by our:
|
|
•
|
|
Balance sheet growth: From September 30, 2009 to September 30, 2013, we have grown our total assets at a CAGR of 15%, our loan portfolio at a CAGR of 17% and our deposit base at a CAGR of 16%. This growth was
primarily generated by our acquisition of TierOne Bank in 2010, which represented approximately $2.5 billion of our $3.1 billion total asset growth in fiscal year 2010. From September 30, 2012 to September 30, 2013 our total assets, loan portfolio
and deposit base grew by 1%, 4% and 1%, respectively, as our loan growth drove continued asset growth, despite being offset by a reduction in the size of our investment portfolio. At June 30, 2014, we had $9.29 billion in total assets, $6.68 billion
in loans and $7.07 billion in deposits, representing growth of 2%, 5% and 2%, respectively, compared with September 30, 2013;
|
|
|
•
|
|
Earnings growth: We have increased our net income to $96.2 million for fiscal year 2013, representing a CAGR of 21% from fiscal year 2009 and an increase of 32% from fiscal year 2012. Our net income was $77.1 million
for the nine months ended June 30, 2014, an increase of 10% compared with the same period in fiscal year 2013; and
|
|
|
•
|
|
Return on assets and equity: For fiscal year 2013, we achieved a 1.07% return on average total assets and a 17.5% return on average tangible common equity.
|
For more information on our return on average tangible common equity, see “—Summary Historical Consolidated Financial and Operating
Information.”
We have achieved organic growth by increasing our market share in select markets and entering new markets. We have
been successful at recruiting and retaining relationship bankers with extensive industry expertise. We have also developed streamlined processes that allow us to be responsive, flexible and accessible to our customers, which we believe has allowed
us to attract new customers and grow our loan portfolio and deposit base. We have achieved this growth while maintaining strong asset quality, with annual net charge-offs peaking at 88 basis points of average loans for fiscal year 2011 and declining
to 44 basis points of average loans for fiscal year 2013.
Our organic growth has been supplemented by our disciplined acquisition
strategy led by our experienced management team. We seek to maximize the success of our acquisitions through a well-established integration process. We have successfully leveraged our business banking model with our specialized agribusiness
expertise to expand our footprint through eight acquisitions since 2006, including our 2010 FDIC-assisted acquisition of TierOne Bank, which represented approximately $2.5 billion in acquired assets. We expect to continue to opportunistically pursue
acquisitions consistent with our strategic objectives, although we do not have any current agreements, arrangements or understandings regarding future acquisitions.
5
The following chart shows our loan portfolio and the portion of our loans acquired through
acquisitions completed since September 30, 2009:
Loans ($BN)
(1)
|
(1)
|
At September 30 of each year, other than 3Q 2014 information, which is at June 30, 2014.
|
|
(2)
|
Acquired loans includes all loans acquired in acquisitions completed after September 30, 2009.
|
Through organic growth and acquisitions, we have grown our total loan portfolio to $6.68 billion at June 30, 2014. As illustrated above, from
September 30, 2009 to June 30, 2014 our total loan portfolio, less acquired loans, has grown from $3.4 billion to $6.1 billion, representing a CAGR of 13%.
Highly Efficient Operating Model
We believe our highly efficient and scalable operating model has enabled us to operate profitably, remain competitive, increase market share
and develop new business. We emphasize company-wide operating principles focused on proactive expense management, targeted investment, disciplined lending practices and focused product offerings. We have achieved cost efficiencies by consolidating
our branch network through the closure of less profitable locations and through our demonstrated success in acquiring and integrating banks. We have also achieved significant cost efficiencies through the use of the
Kaizen
&
Lean
principles, which are management techniques for improving processes and reducing waste, to eliminate redundancies and improve the efficient allocation of resources throughout our operations. We believe our focus on operating efficiency has
contributed significantly to our return on equity, return on assets and net income and is reflected in our efficiency ratio presented below.
6
Efficiency Ratio
(1)
Peer Median Source
: SNL Financial.
|
(1)
|
For the twelve months ended September 30, except as otherwise indicated. For each period, the peer group excludes any bank holding company for which data was not available for such period.
|
|
(2)
|
Our efficiency ratio is calculated as the ratio of our noninterest expense to our total revenue (equal to the sum of net interest income and noninterest income). For purposes of calculating our efficiency ratio, our
noninterest expense and total revenue exclude the effects of changes in the fair value related to interest rates of certain of our long-term fixed-rate loans and related interest rate swaps used to manage the interest rate risk associated with these
loans, each of which is accounted for at fair value, and, in the case of our noninterest expense, also excludes amortization of core deposits and other intangibles. Any changes in fair value related to interest rates of our long-term fixed-rate
loans and related interest rate swaps associated with interest rate fluctuations are completely offset. Changes in fair value related to interest rates attributable to fixed-rate loans subject to fair value accounting are recorded in interest income
and changes attributable to the derivatives hedging these loans are recorded in noninterest expense. Inclusion of these amounts would increase or decrease either our interest income or noninterest expense in a way we believe does not reflect the
results of our operations, materially distorting our efficiency ratio. For more information on these adjusted measures, including a reconciliation to the most directly comparable GAAP financial measure, see “—Summary Historical
Consolidated Financial and Operating Information.”
|
|
(3)
|
Our “peers” refer, collectively, to all publicly listed U.S. bank holding companies with total assets between $5 billion and $15 billion at June 30, 2014. SNL Financial calculates peer efficiency ratios for
all twelve-month periods as the ratio of noninterest expense, which excludes amortization of intangible assets, to the sum of net interest income on a fully taxable equivalent basis and noninterest income. We calculated peer efficiency ratios for
the nine months ended June 30, 2014 based on the same methodology, with data obtained from SNL Financial. Our methodology of calculating efficiency ratios is different from SNL Financial’s because we exclude the effects of changes in the fair
value related to interest rates of certain of our long-term fixed-rate loans and related interest rate swaps used to manage the interest rate risk associated with these loans, each of which is accounted for at fair value. Inclusion of these amounts
would increase or decrease either our interest income or noninterest expense in a way we believe does not reflect the results of our operations, materially distorting our efficiency ratio. Our methodology also differs because we do not include the
tax-related benefit associated with our tax-advantaged loans and investments in net interest income for purposes of calculating our efficiency ratio. Therefore, our efficiency ratio and those of our peers may not be directly comparable.
|
7
Disciplined Risk Management
Risk management is a core competency of our business, and we believe that our risk management approach is more robust than that of most U.S.
banks our size. Following the acquisition of us by NAB, we expanded our risk management staff significantly to conform to NAB’s global standards. We have also implemented comprehensive policies and procedures for credit underwriting and
monitoring of our loan portfolio, including strong credit practices among our relationship bankers, allowing credit decisions to be made efficiently on a local basis consistent with our underwriting standards. We were able to remain profitable while
maintaining strong asset quality through the financial crisis, in part due to our focus on our core business and adherence to our disciplined risk management. We believe our robust approach to risk management has enabled us to grow our loan
portfolio without compromising credit quality. By focusing on our core areas of expertise, we largely avoided higher-risk lending practices that impacted other lenders in the industry during 2009 to 2011.
The following chart shows our annual net charge-offs as a percentage of average loans for fiscal year 2009 through fiscal year 2013, and for
the nine months ended June 30, 2014, compared to the median of our peers:
Annual Net Charge-offs as a Percentage of Average Loans
(1)
Peer Median Source:
SNL Financial
.
|
(1)
|
For the twelve months ended September 30, except as otherwise indicated. Information for the nine months ended June 30, 2014 is computed on an annualized basis. For each period, the peer group excludes any bank
holding company for which data was not available for such period.
|
|
(2)
|
Our “peers” refer, collectively, to all publicly listed U.S. bank holding companies with total assets between $5 billion and $15 billion at June 30, 2014.
|
Experienced Management Team With Local Market Experience
Our senior management team, led by Ken Karels, our President and Chief Executive Officer, has a long and successful history of managing
financial institutions in the region and, in particular, significant experience in business and agribusiness lending, with an average of over 25 years of banking experience. Our senior management team has a demonstrated track record of managing
profitable growth, successfully executing and integrating acquisitions, improving operating efficiencies, maintaining a strong risk management culture and implementing a relationship-based and service-focused approach to banking.
8
Our Business Strategy
We believe that stable long-term growth and profitability are the result of building strong customer relationships while maintaining
disciplined underwriting standards. We plan to focus on originating high-quality loans and growing our low-cost deposit base through our relationship-based business and agribusiness banking. We believe that continuing to focus on our core strengths
will enable us to gain market share, continue to improve our operational efficiency and increase profitability. The key components of our strategy for continued success and future growth include the following:
Attract and Retain High-Quality Relationship Bankers
A key component of our growth in our existing markets and entry into new markets has been our ability to attract and retain high-quality
relationship bankers. We have recruited approximately 40 new business and agribusiness relationship bankers since January 1, 2011 (out of a total of approximately 160 business and agribusiness relationship bankers at June 30, 2014), with
average industry experience of over 15 years when hired. We believe we have been successful in recruiting qualified relationship bankers due primarily to our decentralized management approach, focused product suite and flexible and customer-focused
culture while continuing to provide sophisticated banking capabilities to serve our customers’ needs. We intend to continue to hire experienced relationship bankers to execute our relationship-driven banking model. We utilize a variable
compensation structure designed to incentivize our relationship bankers by tying their compensation to their individual overall performance and the performance of the loans that they help originate, which we measure based on revenues, return on
assets and asset quality/risk, among other things. We believe this structure establishes the appropriate incentives to maximize performance and satisfy our risk management objectives. By leveraging the strong networks and reputation of our
experienced relationship bankers, we believe we can continue to grow our loan portfolio and deposit base as well as cross-sell other products and services.
Optimize Footprint in Existing and Complementary Markets
We pursue attractive growth opportunities to expand within our existing footprint and enter new markets aligned with our business model and
strategic plans. We believe we can increase our presence in under-represented areas in our existing markets and broaden our footprint in attractive markets adjacent and complementary to our current markets by continuing our emphasis on business and
agribusiness banking. Our branch strategy is guided by our ability to recruit experienced relationship bankers in under-represented and new markets. These bankers expand our banking relationships into these markets prior to opening a branch, which
increases our likelihood of expanding profitably by developing an asset base before we establish a branch in that market. We will continue to opportunistically consider opening new branches. We intend to capitalize on growth opportunities we believe
exist in growing economies in and adjacent to our existing markets.
Deepen Customer Relationships
We believe that our reputation, expertise and relationship-based banking model enables us to deepen our relationships with our customers. We
look to leverage our relationships with existing customers by cross-selling our products and services. We have sought to grow our low-cost customer deposit base by attracting more deposits from our business and agribusiness customers. We offer
alternative cash management solutions intended to help retain business customers. We seek to expand and enhance our wealth management platform through focused product offerings that we believe will appeal to our more affluent customers. We intend to
continue to capitalize on opportunities to capture more business from existing customers throughout our banking network.
9
Continue to Improve Efficiency and Lower Costs
We believe that our focus on operational efficiency, even in light of incremental costs from being a public company, is critical to our
profitability and future growth. We intend to carefully manage our cost structure and continuously refine and implement internal processes to create further efficiencies and enhance our earnings. We continue to optimize our branch network and have
commenced reviews of additional internal processes and our vendor relationships, with a view to identifying opportunities to further improve efficiency and enhance earnings. We are also continuing our efforts to shift our deposit base to lower-cost
customer deposits, a strategic initiative that has been primarily responsible for driving our cost of deposit funding down since September 30, 2012. We believe our scalable systems, risk management infrastructure and operating model will better
enable us to achieve further operational efficiencies as we grow our business.
Opportunistically Pursue Acquisitions
Our management team has extensive expertise and a successful track record in evaluating, executing and integrating attractive,
franchise-enhancing acquisitions. We will continue to consider acquisitions that are consistent with our business strategy and financial model as opportunities arise. Illustrated below, as of September 30 of each indicated year, is the growth
in our total assets as a result of our acquisitions in that fiscal year.
|
(1)
|
Acquired assets are the total of the fair value of assets acquired and the net cash and cash equivalents received at the time of acquisition in each indicated year.
|
We believe acquisition opportunities will continue to arise within our markets, as well as in familiar and complementary markets.
10
Our Structure and Formation Transactions
Our Structure
Great Western Bancorp, Inc. is an indirect, wholly owned subsidiary of National Australia Bank Limited, or NAB. National Australia Bank Limited
traces its history back to the establishment of the Bank of Australasia in 1858. NAB is a large Australian financial institution incorporated in 1893 and listed on the Australian Securities Exchange. NAB operates in Australia, New Zealand, the
United Kingdom, the United States and parts of Asia.
In July 2014, the NAB selling stockholder formed Great Western Bancorp, Inc., a
Delaware corporation, to be the publicly traded holding company for our bank. Great Western Bancorp, Inc. holds no assets other than the nominal amount of cash contributed as equity to it in connection with its formation and has not engaged in any
business or other activities other than in connection with its formation and as the registrant for this offering.
The diagram below
depicts our organizational structure at the date of this prospectus. Each entity in the diagram is a wholly owned subsidiary of the entity in the box directly above it. The diagram does not show NAB’s other subsidiaries, none of which hold an
ownership interest in us.
National Equities Limited, or NEL, is a wholly owned subsidiary of NAB and an Australian company
incorporated in 1972. NEL currently serves as a holding company for banking and other financial services businesses of NAB in New Zealand, the United Kingdom and the United States.
National Americas Holdings LLC, or the NAB selling stockholder, is a wholly owned subsidiary of NEL and a Delaware limited liability company
formed in 2008 to facilitate NAB’s purchase of our bank in 2008. The NAB selling stockholder currently serves as a holding company for investments by NAB in the United States.
National Americas Investment, Inc., or NAI, is a wholly owned subsidiary of the NAB selling stockholder and a Delaware corporation formed in
1998 to serve as a holding company for certain banking investments by NAB in the United States. NAI’s primary asset is its investment in the common stock of Great Western.
Great Western Bancorporation, Inc., or GWBI, is a wholly owned subsidiary of NAI and an Iowa corporation formed in 1962 and has been the
direct holding company for Great Western Bank. Prior to May 2006, GWBI filed public reports in connection with trust preferred securities listed on the American Stock Exchange.
11
Formation Transactions
Prior to the consummation of this offering, the following transactions will be taken in the order listed below:
|
|
•
|
|
the NAB selling stockholder will contribute all outstanding capital stock in NAI to Great Western Bancorp, Inc., resulting in NAI becoming a wholly owned subsidiary of Great Western Bancorp, Inc.;
|
|
|
•
|
|
NAI will merge with and into Great Western Bancorp, Inc., with Great Western Bancorp, Inc. continuing as the surviving corporation and succeeding to all the assets, liabilities and business of NAI; and
|
|
|
•
|
|
GWBI will merge with and into Great Western Bancorp, Inc., with Great Western Bancorp, Inc. continuing as the surviving corporation and succeeding to all the assets, liabilities and business of GWBI.
|
As a result of these transactions, Great Western Bancorp, Inc. will succeed to the business of GWBI, whose consolidated financial statements
and related notes thereto are included in this prospectus.
The Formation Transactions will not result in a change in our business or our
management team.
Following the completion of the Formation Transactions and this offering, we will be a publicly traded bank holding
company and will directly own all outstanding capital stock issued by our bank. The diagram below depicts our organizational structure immediately following the Formation Transactions and the completion of this offering.
Separation from and Relationship with NAB
Separation from NAB
On August 29, 2014 in Australia, NAB announced that it intends to divest itself of our bank, consistent with its strategy of focusing on its
core Australian and New Zealand franchise. This offering of shares of our common stock by the NAB selling stockholder, representing % of its ownership
interest in our outstanding capital stock, is the first stage of NAB’s planned divestment. After the completion of this offering, NAB will beneficially own % of our outstanding common stock (or %
if the underwriters’ option to purchase additional shares of common stock from the NAB selling stockholder is exercised in full).
12
Relationship with NAB
As an indirect, wholly owned subsidiary of NAB, we historically have received financial and administrative support from NAB and its affiliates
and have engaged in business transactions with them. Among other transactions, we and NAI have each borrowed from NAB from time to time, including through a revolving credit agreement and through certain subordinated capital notes. We have also
purchased securities from NAB from time to time in its role as dealer, and certain of our employees are or have been NAB employees or compensated in part with NAB securities. For more information on these and other transactions with NAB, see
“Our Relationship with NAB and Certain Other Related Party Transactions—Related Party Transactions with NAB.”
In
connection with this offering, we and NAB intend to enter into certain agreements that will provide a framework for our ongoing relationship, including a Stockholder Agreement governing NAB’s rights as a stockholder until such time as NAB
ceases to control us for purposes of the U.S. Bank Holding Company Act of 1956, as amended, or the BHC Act, a Transitional Services Agreement pursuant to which NAB will agree to continue to provide us with certain services for a transition period,
and a Registration Rights Agreement requiring that we register shares of our common stock beneficially owned by NAB under certain circumstances.
Stockholder Agreement.
We intend to enter into a Stockholder Agreement with NAB in connection with this offering that will provide NAB
with certain consent and other rights with respect to our business until NAB ceases to control us for purposes of the BHC Act. As a result, NAB will continue to have significant control over us following this offering. See “Our Relationship
with NAB and Certain Other Related Party Transactions—Relationship with NAB—Stockholder Agreement.” The Stockholder Agreement will provide NAB with the following rights, among others:
|
|
•
|
|
the ability to nominate candidates for election to our board of directors (with the number of designees depending on the level of NAB’s beneficial ownership of our outstanding common and non-voting common stock, as
described below);
|
|
|
•
|
|
the right to have its designees to our board of directors serve on committees of the board of directors in certain circumstances;
|
|
|
•
|
|
consent rights with respect to mergers, acquisitions, changes to our capital stock, business activities, corporate governance and various other significant corporate actions we may pursue;
|
|
|
•
|
|
the right to continue to access our internal information and to be consulted on our public disclosures and filings before we publish them; and
|
|
|
•
|
|
the right to exchange shares of our common stock for shares of our non-voting common stock.
|
Prior to the earlier of the one-year anniversary of the first date when NAB ceases to directly or indirectly beneficially own at least 50% of
our outstanding common stock and the date NAB ceases to control us for purposes of the BHC Act, NAB will have the right to designate for nomination and election a majority of our board of directors. Following such one-year anniversary until NAB
ceases to control us for purposes of the BHC Act, NAB will have the right to designate for nomination and election a number of individuals equal to the number of independent directors nominated to serve on our board of directors (other than any
independent directors who have been designated by NAB) minus two. After NAB ceases to control us for purposes of the BHC Act, NAB will have the right to designate one nominee for election to our board of directors as long as NAB continues to
beneficially own at least 5% of our outstanding common stock and non-voting common stock.
Transitional Services Agreement.
We
intend to enter into a Transitional Services Agreement with NAB prior to the completion of this offering. The Transitional Services Agreement will govern the continued provision of certain services to us by NAB for the applicable transition period,
including NAB continuing to act as a counterparty to us on interest rate swaps consistent with past practice and providing fair value calculations
13
related to specified loans and interest rate swaps, access to certain reporting systems and applications, certain risk, credit rating and tax oversight currently provided to us by a branch of NAB
and certain insurance coverage under NAB’s group-wide insurance policies. The fees for each of these services have been negotiated on arms’-length terms and are consistent with the fees we currently pay to NAB and its affiliates for these
services as part of NAB’s consolidated group. We currently expect to incur aggregate annual costs of approximately $1.8 million for all services provided by NAB under the Transitional Services Agreement, though our actual costs may vary. See
“Our Relationship with NAB and Certain Other Related Party Transactions—Relationship with NAB—Transitional Services Agreement.”
Registration Rights Agreement.
We intend to enter into a Registration Rights Agreement with NAB prior to the completion of the
offering. Pursuant to the Registration Rights Agreement, upon NAB’s request, we must use our reasonable best efforts to file a registration statement for, and affect the registration under applicable federal and state securities laws of, any
shares of our common stock beneficially owned by NAB following this offering. We will be generally responsible for all registration expenses, including expenses incurred by NAB, in connection with the registration, offer and sale of securities under
the Registration Rights Agreement, other than any applicable underwriting discounts or commissions. See “Our Relationship with NAB and Certain Other Related Party Transactions—Relationship with NAB—Registration Rights Agreement.”
NAB’s Control After This Offering.
NAB’s beneficial ownership of approximately
% of our common stock (or % if the underwriters’
option to purchase additional shares of common stock is exercised in full), along with its rights under the agreements summarized above, will result in NAB having significant control over us. NAB’s concentration of voting power and veto rights,
together with its control of our board of directors, could deprive stockholders of an opportunity to receive a premium for their shares of common stock as part of a sale of our company, among other opportunities. See “Risk Factors—Risks
Related to Our Controlling Stockholder—NAB will continue to have significant control over us following the completion of this offering, and its interests may conflict with ours or yours in the future.”
Current NAB Employees and Appointees.
Currently, two of our senior executive officers and two of our credit executives are employees of
NAB or Bank of New Zealand, a NAB subsidiary, who were temporarily seconded to work with us. In connection with this offering, we intend to enter into employment agreements with our Chief Financial Officer and Chief Risk Officer, and their
employment with NAB will terminate. The employment agreements are conditioned on the completion of this offering. The secondments of our Chief Credit Officer and Head of Credit—Agribusiness from NAB and Bank of New Zealand, respectively, will
terminate on December 31, 2014 in accordance with their current arrangements. See “Our Relationship with NAB and Certain Other Related Party Transactions—Related Party Transactions with NAB.” Further, five of Great Western Bancorp,
Inc.’s directors were nominated by NAB. See “Management—Directors and Executive Officers.”
Historical Transactions
with NAB.
NAB and its affiliates have provided certain services to us historically, including acting as counterparty on approximately $946.8 million in total notional amount of interest rate swaps outstanding at June 30, 2014 and providing the
services discussed above that will be provided pursuant to the Transitional Services Agreement. In addition, we and NAI have each borrowed from NAB from time to time, including through a revolving credit agreement and through certain subordinated
capital notes. See “Our Relationship with NAB and Certain Other Related Party Transactions—Related Party Transactions with NAB.” Notwithstanding these historical funding transactions, we will not be reliant on NAB and its affiliates
to satisfy future funding requirements associated with our business.
14
Risk Relating to Our Company
An investment in our common stock involves substantial risks and uncertainties. Investors should carefully consider all of the information in
this prospectus, including the detailed discussion of these risks under “Risk Factors” beginning on page 23, prior to investing in our common stock. Some of the more significant risks include the following:
|
|
•
|
|
Our business may be adversely affected by conditions in the financial markets and economic conditions in the markets in which we and our customers operate generally and in the Midwest region in particular.
|
|
|
•
|
|
We focus on originating business and agricultural loans, both of which may involve greater risk than residential mortgage lending and are dependent for repayment on various factors outside of the borrower’s
control.
|
|
|
•
|
|
Repayment of our agricultural loans is dependent on the successful operation of the farm property and on the health of the agricultural industry.
|
|
|
•
|
|
Our business depends on our ability to successfully manage risk.
|
|
|
•
|
|
Severe weather, natural disasters, acts of war or terrorism or other external events could significantly impact our business.
|
|
|
•
|
|
Our allowance for loan losses and our credit marks on acquired loan portfolios may be insufficient.
|
|
|
•
|
|
We may not be able to attract and retain key personnel and other skilled employees, successfully execute our strategic plan or manage our growth.
|
|
|
•
|
|
We operate in a highly competitive industry and market area.
|
|
|
•
|
|
The financial reporting resources we have put in place may not be sufficient to ensure the accuracy of the additional information we are required to disclose as a publicly listed company or remediate any existing
material weakness in our internal control over financial reporting.
|
|
|
•
|
|
NAB, through its wholly owned subsidiary, will be our controlling stockholder and will have certain approval rights with respect to our business, and its interests may conflict with ours or yours in the future.
|
|
|
•
|
|
Our stock price could decline due to the number of outstanding shares of our common stock eligible for future sale and NAB’s stated intent to sell its remaining ownership interest in us over time, although the
timing of such sale or sales is uncertain.
|
|
|
•
|
|
Our amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of stockholder-initiated actions and proceedings,
which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
|
|
|
•
|
|
We are subject to extensive regulation, and legislative or regulatory actions, including possible enforcement actions, taken now or in the future could have a significant adverse effect on our operations.
|
Our Corporate Information
Our principal executive office is located at 100 N. Phillips Ave, Sioux Falls, South Dakota 57104. Our telephone number is (605) 334-2548,
and our website address is greatwesternbank.com. The information contained on our website is not a part of, or incorporated by reference into, this prospectus.
15
THE OFFERING
|
Common stock offered by the NAB selling stockholder
|
shares
|
|
Option to purchase additional shares from the NAB selling stockholder
|
shares
|
|
Common and non-voting common stock outstanding
|
shares of common stock and no shares of non-voting common stock
|
|
Use of proceeds
|
We will not receive any of the proceeds from the sale of the shares of common stock being sold in this offering. All of the shares in this offering are being sold by the NAB selling stockholder.
|
|
Voting rights
|
Each holder of our common stock will be entitled to one vote per share on all matters on which our stockholders generally are entitled to vote. Holders of our non-voting common stock, when our non-voting common stock is issued, will not be
entitled to vote, except in certain limited circumstances. See “Description of Capital Stock” for more information.
|
|
Dividend policy
|
The declaration of dividends will be at the discretion of our board of directors and will depend on many factors, including the financial condition, earnings and liquidity requirements of our company and Great Western Bank, regulatory
constraints, corporate law and contractual restrictions, and any other factors that our board of directors deems relevant in making such a determination. Our ability to pay dividends is subject to restrictions under applicable banking laws and
regulations. In addition, dividends from Great Western Bank are the principal source of funds for the payment of dividends on our stock. Our bank is subject to certain restrictions under banking laws and regulations that may limit its ability to pay
dividends to us. Therefore, there can be no assurance that we will pay any dividends to holders of our stock, or as to the amount of any such dividends.
|
|
|
Following this offering, we intend to pay quarterly cash dividends on our common stock. Subject to the sole discretion of our board of directors and the considerations discussed under “Dividend Policy and
Dividends,” we intend to pay quarterly cash dividends on our common stock at an initial amount of approximately $ per share. See “Dividend Policy and Dividends” for more information.
|
|
Controlling stockholder
|
We are an indirect, wholly owned subsidiary of NAB. Upon completion of this offering, NAB will indirectly hold % of the voting power of all outstanding shares of our
common stock (or % if the underwriters’ option to purchase additional shares of common stock from the NAB selling stockholder is exercised in full). Pursuant to a Registration Rights Agreement we intend to enter into with
NAB
|
16
|
|
in connection with this offering, NAB may require us to register for resale all of the additional shares of our common stock beneficially owned by NAB following this offering.
|
|
|
For additional information regarding our relationship with NAB following completion of this offering, see “Our Relationship with NAB and Certain Other Related Party Transactions—Relationship with NAB.”
|
|
Preemptive rights
|
Purchasers of our common stock sold in this offering will not have any preemptive rights.
|
|
Listing
|
We intend to apply to list our common stock on the New York Stock Exchange, or NYSE, under the symbol “GWB.”
|
|
Risk factors
|
Investing in our common stock involves significant risks. See “Risk Factors” beginning on page 23 for a discussion of certain risks that you should consider before deciding to invest in our common stock.
|
All share information, other than share information presented in historical financial results, reflects a
-for-1 stock split of our common stock that will occur prior to completion of this offering. Unless otherwise noted, references in this prospectus to the number of shares of our
common stock outstanding after this offering exclude shares of common stock that may be granted under our equity incentive plans we intend to adopt in connection with this
offering, including certain grants to our named executive officers as described further under “Executive and Director Compensation—New Employment Arrangements.” Unless we specifically state otherwise, the information in this
prospectus assumes no exercise of the underwriters’ option to purchase additional shares of our common stock from the NAB selling stockholder and assumes that the common stock to be sold in this offering is sold at $
per share, which is the midpoint of the price range set forth on the front cover of this prospectus.
17
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING
INFORMATION
You should read the summary historical consolidated financial and operating data set forth below in conjunction with
the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Capitalization,” as well as our consolidated financial statements and the related notes included elsewhere in
this prospectus. The historical financial information as of and for the fiscal years ended September 30, 2013 and 2012 is derived from our audited financial statements included elsewhere in this prospectus. The historical financial information
as of and for the nine-month periods ended June 30, 2014 and 2013 is derived from our unaudited financial statements included elsewhere in this prospectus, which have been prepared on the same basis as our audited consolidated financial statements.
Our historical results may not be indicative of our future performance. In addition, results for the nine-month periods ended June 30, 2014 and 2013 may not be indicative of the results that may be expected for the full fiscal year. The historical
financial information below also contains non-GAAP financial measures, which have not been audited.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30,
|
|
|
Fiscal year ended September 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income
|
|
$
|
261,764
|
|
|
$
|
210,559
|
|
|
$
|
294,257
|
|
|
$
|
344,304
|
|
|
Interest expense
|
|
|
24,337
|
|
|
|
30,349
|
|
|
|
39,161
|
|
|
|
50,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
237,427
|
|
|
|
180,210
|
|
|
|
255,096
|
|
|
|
293,333
|
|
|
Provision (recovery) for loan losses
|
|
|
(2,065
|
)
|
|
|
14,034
|
|
|
|
11,574
|
|
|
|
30,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income, after provision (recovery) for loan losses
|
|
|
239,492
|
|
|
|
166,176
|
|
|
|
243,522
|
|
|
|
263,188
|
|
|
Noninterest income
|
|
|
45,583
|
|
|
|
59,614
|
|
|
|
77,692
|
|
|
|
88,975
|
|
|
Noninterest expense
|
|
|
166,436
|
|
|
|
116,188
|
|
|
|
171,073
|
|
|
|
235,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
118,639
|
|
|
|
109,602
|
|
|
|
150,141
|
|
|
|
117,153
|
|
|
Provision for income taxes
|
|
|
41,562
|
|
|
|
39,682
|
|
|
|
53,898
|
|
|
|
44,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
77,077
|
|
|
$
|
69,920
|
|
|
$
|
96,243
|
|
|
$
|
72,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash net income
(1)
|
|
$
|
88,092
|
|
|
$
|
82,087
|
|
|
$
|
112,289
|
|
|
$
|
89,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Info / Performance Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
(2)
|
|
|
3.93
|
%
|
|
|
3.07
|
%
|
|
|
3.24
|
%
|
|
|
3.98
|
%
|
|
Adjusted net interest margin
(2), (3)
|
|
|
3.73
|
%
|
|
|
3.78
|
%
|
|
|
3.76
|
%
|
|
|
3.72
|
%
|
|
Efficiency ratio
(4)
|
|
|
52.0
|
%
|
|
|
50.9
|
%
|
|
|
51.5
|
%
|
|
|
54.0
|
%
|
|
Return on average total assets
(2)
|
|
|
1.12
|
%
|
|
|
1.04
|
%
|
|
|
1.07
|
%
|
|
|
0.85
|
%
|
|
Return on average common equity
(2)
|
|
|
7.30
|
%
|
|
|
6.79
|
%
|
|
|
6.97
|
%
|
|
|
5.40
|
%
|
|
Return on average tangible common equity
(1),
(2)
|
|
|
17.1
|
%
|
|
|
17.3
|
%
|
|
|
17.5
|
%
|
|
|
15.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
September 30,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
(5)
|
|
$
|
6,678,501
|
|
|
$
|
6,362,673
|
|
|
$
|
6,138,574
|
|
|
Allowance for loan losses
|
|
|
47,038
|
|
|
|
55,864
|
|
|
|
71,878
|
|
|
Securities
|
|
|
1,395,768
|
|
|
|
1,480,449
|
|
|
|
1,581,875
|
|
|
Goodwill
|
|
|
697,807
|
|
|
|
697,807
|
|
|
|
697,807
|
|
|
Total assets
|
|
|
9,292,283
|
|
|
|
9,134,258
|
|
|
|
9,008,252
|
|
|
Total deposits
|
|
|
7,067,112
|
|
|
|
6,948,208
|
|
|
|
6,884,515
|
|
|
Total liabilities
|
|
|
7,861,319
|
|
|
|
7,717,044
|
|
|
|
7,619,689
|
|
|
Total stockholder’s equity
|
|
|
1,430,964
|
|
|
|
1,417,214
|
|
|
|
1,388,563
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At and for the nine
months ended
June 30, 2014
|
|
|
At and for the fiscal year ended
September 30,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Asset Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans / total loans
(6)
|
|
|
0.64
|
%
|
|
|
1.28
|
%
|
|
|
1.53
|
%
|
|
Allowance for loan losses / total loans
|
|
|
0.70
|
%
|
|
|
0.88
|
%
|
|
|
1.17
|
%
|
|
Net charge-offs / average total loans
(2)
|
|
|
0.14
|
%
|
|
|
0.44
|
%
|
|
|
0.54
|
%
|
|
|
|
|
|
|
Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital ratio
|
|
|
12.1
|
%
|
|
|
12.4
|
%
|
|
|
11.9
|
%
|
|
Total capital ratio
|
|
|
13.1
|
%
|
|
|
13.8
|
%
|
|
|
13.7
|
%
|
|
Tier 1 leverage ratio
|
|
|
9.3
|
%
|
|
|
9.2
|
%
|
|
|
8.3
|
%
|
|
Tangible common equity to tangible assets
(7)
|
|
|
8.3
|
%
|
|
|
8.2
|
%
|
|
|
7.8
|
%
|
|
(1)
|
Two of the financial measures we use to evaluate our profitability and performance are cash net income and return on average tangible common equity, which are not presented in accordance with U.S. generally accepted
accounting principles, or GAAP. We compute our cash net income by adding to net income (and thereby effectively excluding) amortization expense relating to intangible assets and related tax effects that have accumulated as a result of the
acquisition of us by NAB and our various acquisitions of other institutions as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Business and Financial
Statements—Goodwill and Amortization of Other Intangibles.” We compute our return on average tangible common equity as the ratio of our cash net income to our average tangible common equity, which is calculated by subtracting (and thereby
effectively excluding) amounts related to the effect of goodwill and other intangible assets described above from our average common equity. We believe each of these measures is helpful in highlighting trends associated with our financial condition
and results of operations by providing net income and return information based on our cash payments and receipts during the applicable period. The following table shows our cash net income and return on average tangible common equity as well as
reconciliations to our net income and return on average common equity, respectively, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30,
|
|
|
Fiscal year ended Sept. 30
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Cash net income and return on average tangible common equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
77,077
|
|
|
$
|
69,920
|
|
|
$
|
96,243
|
|
|
$
|
72,995
|
|
|
Add: Amortization of intangible assets
|
|
|
13,448
|
|
|
|
14,600
|
|
|
|
19,290
|
|
|
|
19,646
|
|
|
Add: Tax on amortization of intangible assets
|
|
|
(2,433
|
)
|
|
|
(2,433
|
)
|
|
|
(3,244
|
)
|
|
|
(3,244
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash net income
|
|
$
|
88,092
|
|
|
$
|
82,087
|
|
|
$
|
112,289
|
|
|
$
|
89,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized net income
|
|
$
|
103,050
|
|
|
$
|
93,483
|
|
|
|
|
|
|
|
|
|
|
Annualized cash net income
|
|
$
|
117,777
|
|
|
$
|
109,750
|
|
|
|
|
|
|
|
|
|
|
Average common equity
|
|
$
|
1,411,137
|
|
|
$
|
1,376,259
|
|
|
$
|
1,380,296
|
|
|
$
|
1,352,069
|
|
|
Less: Average goodwill and other intangible assets
|
|
|
721,630
|
|
|
|
740,576
|
|
|
|
738,140
|
|
|
|
756,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average tangible common equity
|
|
$
|
689,507
|
|
|
$
|
635,683
|
|
|
$
|
642,156
|
|
|
$
|
595,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average common equity
*
|
|
|
7.30
|
%
|
|
|
6.79
|
%
|
|
|
6.97
|
%
|
|
|
5.40
|
%
|
|
Return on average tangible common equity
*
|
|
|
17.1
|
%
|
|
|
17.3
|
%
|
|
|
17.5
|
%
|
|
|
15.0
|
%
|
|
|
*
|
Calculated as an annualized percentage for the nine months ended June 30, 2014 and 2013.
|
19
|
(2)
|
Calculated as an annualized percentage for the nine months ended June 30, 2014 and 2013, as applicable.
|
|
(3)
|
One of the financial measures we use to evaluate our profitability and efficiency is adjusted net interest margin, which is not presented in accordance with GAAP. We compute our adjusted net interest margin by adding to
net interest income changes in fair value related to interest rates associated with certain of our fixed-rate loans measured at fair value as described in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Key Factors Affecting Our Business and Financial Statements—Loans and Interest Rate Swaps Accounted for at Fair Value.” The changes in fair value related to interest rates of these loans are offset by changes in fair value
associated with the related fixed-to-floating interest rate swaps we enter into to manage our interest rate risk on these loans. We believe that our adjusted net interest margin is helpful in highlighting trends in our business that may not
otherwise be apparent when relying solely on our GAAP-calculated results by eliminating these matching and offsetting changes in fair value. The following table shows our adjusted net interest margin as well as a reconciliation to our net interest
margin for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30,
|
|
|
Fiscal year ended Sept. 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Adjusted net interest income and adjusted net interest margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
237,427
|
|
|
$
|
180,210
|
|
|
$
|
255,096
|
|
|
$
|
293,333
|
|
|
Less: Loan FV adjustment related to interest rates
|
|
|
12,119
|
|
|
|
(41,635
|
)
|
|
|
(40,305
|
)
|
|
|
19,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net interest income
|
|
$
|
225,308
|
|
|
$
|
221,845
|
|
|
$
|
295,401
|
|
|
$
|
273,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets
|
|
$
|
8,067,544
|
|
|
$
|
7,839,914
|
|
|
$
|
7,862,860
|
|
|
$
|
7,367,085
|
|
|
Net interest margin*
|
|
|
3.93
|
%
|
|
|
3.07
|
%
|
|
|
3.24
|
%
|
|
|
3.98
|
%
|
|
Adjusted net interest margin*
|
|
|
3.73
|
%
|
|
|
3.78
|
%
|
|
|
3.76
|
%
|
|
|
3.72
|
%
|
|
|
*
|
Calculated as annualized percentages for the nine months ended June 30, 2014 and 2013.
|
|
(4)
|
One of the financial measures we use to evaluate our efficiency is our efficiency ratio, which is not presented in accordance with GAAP. We compute our efficiency ratio as the ratio of our noninterest expense to our
total revenue (equal to the sum of our net interest income and noninterest income). For purposes of this computation, each of our noninterest expense and total revenue are adjusted from their GAAP computation by excluding changes in fair value
related to interest rates associated with certain of our fixed-rate loans measured at fair value and the matching fixed-to-floating interest rate swaps as described in “Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Key Factors Affecting Our Business and Financial Statements—Loans and Interest Rate Swaps Accounted for at Fair Value.” Our noninterest expense is also adjusted to exclude amounts related to the amortization of
core deposits and other intangibles, which are non-cash expense items. We believe that our efficiency ratio is helpful in highlighting trends in our business that may not otherwise be apparent when relying solely on our GAAP-calculated results by
eliminating fluctuations resulting from these matching and offsetting changes in fair value related to interest rates and from non-cash expense items which do not represent cash flow expenditures during the relevant period.
|
20
The following table shows our efficiency ratio as well as a reconciliation with the
components used in its calculation for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
June 30,
|
|
|
Fiscal year ended Sept. 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(dollars in thousands)
|
|
|
Adjusted noninterest expense and efficiency ratio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
283,010
|
|
|
$
|
239,824
|
|
|
$
|
332,788
|
|
|
$
|
382,308
|
|
|
$
|
389,434
|
|
|
$
|
300,832
|
|
|
$
|
186,434
|
|
|
Less: Loan FV adjustment related to interest rates
|
|
|
12,119
|
|
|
|
(41,635
|
)
|
|
|
(40,305
|
)
|
|
|
19,369
|
|
|
|
12,248
|
|
|
|
9,839
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted revenue
|
|
$
|
270,891
|
|
|
$
|
281,459
|
|
|
$
|
373,093
|
|
|
$
|
362,939
|
|
|
$
|
377,186
|
|
|
$
|
290,993
|
|
|
$
|
186,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense
|
|
$
|
166,436
|
|
|
$
|
116,188
|
|
|
$
|
171,073
|
|
|
$
|
235,010
|
|
|
$
|
228,645
|
|
|
$
|
170,025
|
|
|
$
|
101,621
|
|
|
Less: Derivatives, net (gain) loss
|
|
|
12,119
|
|
|
|
(41,635
|
)
|
|
|
(40,305
|
)
|
|
|
19,369
|
|
|
|
12,248
|
|
|
|
9,839
|
|
|
|
—
|
|
|
Less: Amortization of core deposit and other intangibles
|
|
|
13,448
|
|
|
|
14,600
|
|
|
|
19,290
|
|
|
|
19,646
|
|
|
|
20,429
|
|
|
|
14,488
|
|
|
|
9,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted noninterest expense
|
|
$
|
140,869
|
|
|
$
|
143,223
|
|
|
$
|
192,088
|
|
|
$
|
195,995
|
|
|
$
|
195,968
|
|
|
$
|
145,698
|
|
|
$
|
91,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency ratio
|
|
|
52.0
|
%
|
|
|
50.9
|
%
|
|
|
51.5
|
%
|
|
|
54.0
|
%
|
|
|
52.0
|
%
|
|
|
50.1
|
%
|
|
|
49.2
|
%
|
|
(5)
|
Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.
|
|
(6)
|
Numerator excludes loans subject to FDIC loss-sharing arrangements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Business and
Financial Statements—Asset Quality and Loss-Sharing Arrangements.”
|
|
(7)
|
One of the financial measures we use to evaluate our financial condition is our tangible common equity to tangible assets ratio, which is not presented in accordance with GAAP. We compute this figure as the ratio of our
tangible common equity to our tangible assets, each of which we calculate by subtracting (and thereby effectively excluding) the value of our goodwill and other intangible assets. We believe this measure is helpful in highlighting the common equity
component of our capital and because of its focus by federal bank regulators when reviewing the health and strength of financial institutions in recent years, and when considering regulatory approvals for certain actions, including capital actions.
|
21
The following table shows our tangible common equity to tangible assets ratio as well as a
reconciliation with the components used in its calculation for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
Sept. 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Tangible common equity and tangible common equity to tangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholder’s equity
|
|
$
|
1,430,964
|
|
|
$
|
1,398,533
|
|
|
$
|
1,417,214
|
|
|
$
|
1,388,563
|
|
|
Less: Goodwill, core deposits and other intangibles
|
|
|
714,803
|
|
|
|
732,941
|
|
|
|
728,251
|
|
|
|
747,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity
|
|
$
|
716,161
|
|
|
$
|
665,592
|
|
|
$
|
688,963
|
|
|
$
|
641,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
9,292,283
|
|
|
$
|
9,120,569
|
|
|
$
|
9,134,258
|
|
|
$
|
9,008,252
|
|
|
Less: Goodwill, core deposits and other intangibles
|
|
|
714,803
|
|
|
|
732,941
|
|
|
|
728,251
|
|
|
|
747,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible assets
|
|
$
|
8,577,480
|
|
|
$
|
8,387,628
|
|
|
$
|
8,406,007
|
|
|
$
|
8,260,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity to tangible assets
|
|
|
8.3
|
%
|
|
|
7.9
|
%
|
|
|
8.2
|
%
|
|
|
7.8
|
%
|
22
RISK FACTORS
Investing in our common stock involves a significant degree of risk. The material risks and uncertainties that management believes affect
us are described below. Before investing in our common stock, you should carefully consider the risks and uncertainties described below, in addition to the other information contained in this prospectus. Any of the following risks, as well as risks
that we do not know or currently deem immaterial, could have a material adverse effect on our business, financial condition or results of operations. As a result, the trading price of our common stock could decline, and you could lose some or all of
your investment. Further, to the extent that any of the information in this prospectus constitutes forward-looking statements, the risk factors below are cautionary statements identifying important factors that could cause actual results to differ
materially from those expressed in any forward-looking statements made by us or on our behalf. See “Cautionary Note Regarding Forward-Looking Statements.”
Risks Related to Our Business
Our
business may be adversely affected by conditions in the financial markets and economic conditions generally and in our states in particular.
Our financial performance generally, and in particular the ability of our borrowers to pay interest on and repay principal of outstanding loans
and the value of collateral securing those loans, as well as demand for loans and other products and services we offer and whose success we rely on to drive our future growth, is highly dependent upon the business environment in the markets in which
we operate, principally in our states, and in the United States as a whole. Unlike larger banks that are more geographically diversified, we provide banking and financial services to customers in South Dakota, Iowa, Nebraska, Colorado, Arizona,
Kansas and Missouri. The economic conditions in these local markets may be different from, and in some instances worse than, the economic conditions in the United States as a whole. Some elements of the business environment that affect our financial
performance include short-term and long-term interest rates, the prevailing yield curve, inflation and price levels (particularly for agricultural commodities), monetary policy, unemployment and the strength of the domestic economy and the local
economy in the markets in which we operate. Unfavorable market conditions can result in a deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the number of loan delinquencies, defaults
and charge-offs, additional provisions for loan losses, adverse asset values and an overall material adverse effect on the quality of our loan portfolio. Unfavorable or uncertain economic and market conditions can be caused by declines in economic
growth, business activity or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; natural disasters; state or local government
insolvency; or a combination of these or other factors.
In recent years, the U.S. economy has faced a severe economic crisis including a
major recession from which it is slowly recovering. Business growth across a wide range of industries and regions in the United States remains reduced, and local governments and many businesses continue to experience financial difficulty. Since the
recession, economic growth has been slow and uneven, unemployment levels generally remain elevated and there are continuing concerns related to the level of U.S. government debt and fiscal actions that may be taken to address that debt. There can be
no assurance that economic conditions will continue to improve, and these conditions could worsen. Economic pressure on consumers and uncertainty regarding continuing economic improvement may result in changes in consumer and business spending,
borrowing and saving habits. Such conditions could have a material adverse effect on the credit quality of our loans or our business, financial condition or results of operations.
The agricultural economy in our states has been affected by recent declines in prices and the rates of price growth for various crops. Weaker
crop prices themselves could increase the risk of default on agricultural loans. Similarly, weaker crop prices could reduce the cash flows generated by farms and the value of agricultural land in our local markets and thereby increase the risk of
default by our borrowers or reduce the foreclosure value of agricultural land and equipment that serve as collateral for certain of our loans. Moreover, weaker crop prices
23
might threaten farming operations in the United States, reducing market demand for agricultural lending. In particular, farm income has seen recent declines as a result of lower crop prices and
some drought conditions. In line with the downturn in farm income, farmland prices are coming under pressure.
In addition, certain local
economies in our states rely to varying extents on manufacturing, which has experienced steep declines in the United States over the last decade. Declines in agriculture or manufacturing in these local economies may cause the local commercial
environment to decline, which may impact the credit quality of our borrowers or reduce the demand for our products or services. Further, because unemployment is now slightly lower in certain of our states than nationwide, the economies of our states
may not improve as much as the economies of other regions in any nationwide economic recovery.
We focus on originating business
loans (in the form of commercial and industrial loans and commercial real estate loans), which may involve greater risk than residential mortgage lending.
As of June 30, 2014, our business lending, which consists of our C&I and CRE loans, represented approximately $4.03 billion, or 60%,
of our loan portfolio. Our C&I loans and CRE loans secured by borrower-occupied property, or owner-occupied CRE loans, which together form the core of our business banking focus, totaled approximately $2.74 billion, or 41%, of our loan portfolio
at June 30, 2014, with undisbursed loan commitments for these loans amounting to an additional $704 million. We also had approximately $1.29 billion of other CRE loans (
i.e.
, construction and development loans, multifamily residential
real estate loans and CRE loans secured by commercial property that is not borrower-occupied) at June 30, 2014, or 19% of our loan portfolio, including construction and development loans representing approximately 21% of our other CRE loans. Because
payments on C&I loans, owner-occupied CRE loans and other CRE loans are often dependent on the successful operation or development of the property or business involved, repayment of such loans may be more sensitive than other types of loans to
adverse conditions in the real estate market or the general economy. These types of loans may have a greater risk of loss than residential mortgage lending, in part because these loans are generally larger or more complex to underwrite than
residential mortgages. In particular, real estate construction, acquisition and development loans have certain risks not present in other types of loans, including risks associated with construction cost overruns, project completion risk, general
contractor credit risk and risks associated with the ultimate sale or use of the completed construction. If a decline in economic conditions or other issues cause difficulties for our borrowers of these types of business loans, if we fail to
evaluate the credit of these loans accurately when we underwrite them or if we do not continue to monitor adequately the performance of these loans, our lending portfolio could experience delinquencies, defaults and credit losses that could have a
material adverse effect on our business, financial condition or results of operations.
In addition to business loans, much of our
lending is agricultural, and agricultural loans are dependent for repayment on the successful operation and management of the farm property, the health of the agricultural industry broadly, and in the location of the borrower in particular, and
other factors outside of the borrower’s control.
At June 30, 2014, our agricultural loans, consisting primarily of
agricultural operating loans (
e.g.
, loans to farm and ranch owners and operators) and agricultural real estate loans, were $1.65 billion, representing 25% of our total loan portfolio. At June 30, 2014, agricultural operating loans totaled
$890 million, or 13% of our loan portfolio; and agricultural real estate loans totaled $759 million, or 11%, of our loan portfolio. The primary livestock of our customers to whom we have extended agricultural loans include dairy cows, hogs and
feeder cattle, and the primary crops of our customers to whom we have extended agricultural loans include corn, soybeans and, to a lesser extent, cotton and wheat. In addition, we estimate that 10% of our C&I loans and owner-occupied CRE loans
were agriculture-related loans at June 30, 2014.
Agricultural markets are highly sensitive to real and perceived changes in the supply
and demand of agricultural products. As over 80% of our agricultural lending (excluding C&I loans and owner-occupied CRE loans) is to farms producing grain, beef cattle, dairy products or hogs, our performance is closely related to the
24
performance of, and supply and demand in, these agricultural sub-sectors. Weaker crop prices, particularly for grains, could reduce the value of agricultural land in our local markets and thereby
increase the risk of default by our borrowers or reduce the foreclosure value of agricultural land and equipment that serves as collateral for certain of our loans.
Our agricultural loans are dependent on the profitable operation and management of the farm property securing the loan and its cash flows. The
success of a farm property may be affected by many factors outside the control of the borrower, including:
|
|
•
|
|
adverse weather conditions (such as hail, drought and floods), restrictions on water supply or other conditions that prevent the planting of a crop or limit crop yields;
|
|
|
•
|
|
loss of crops or livestock due to disease or other factors;
|
|
|
•
|
|
declines in the market prices or demand for agricultural products (both domestically and internationally), for any reason;
|
|
|
•
|
|
increases in production costs (such as the costs of labor, rent, feed, fuel and fertilizer);
|
|
|
•
|
|
adverse changes in interest rates, currency exchange rates, agricultural land values or other factors that may affect delinquency levels and credit losses on agricultural loans;
|
|
|
•
|
|
the impact of government policies and regulations (including changes in price supports, subsidies, government-sponsored crop insurance, minimum ethanol content requirements for gasoline, tariffs, trade barriers and
health and environmental regulations);
|
|
|
•
|
|
access to technology and the successful implementation of production technologies; and
|
|
|
•
|
|
changes in the general economy that could affect the availability of off-farm sources of income and prices of real estate for borrowers.
|
In addition, many farms are dependent on a limited number of key individuals whose injury or death could significantly affect the successful operation of the
farm. If the cash flow from a farming operation is diminished, the borrower’s ability to repay the loan may be impaired. Consequently, agricultural loans may involve a greater degree of risk than residential mortgage lending, particularly in
the case of loans that are unsecured or secured by rapidly depreciating assets such as farm equipment (some of which is highly specialized) or assets such as livestock or crops. In such cases, any repossessed collateral for a defaulted agricultural
operating loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation or because the assessed value of the collateral exceeds the eventual realization
value.
Our business is significantly dependent on the real estate markets where we operate, as a significant portion of our loan
portfolio is secured by real estate.
At June 30, 2014, 61% of our aggregate loan portfolio, comprising our CRE loans (representing
36% of our aggregate loan portfolio), residential real estate loans (representing 14% of our aggregate loan portfolio) and agriculture real estate loans (representing 11% of our aggregate loan portfolio), was primarily secured by interests in real
estate predominantly located in the states in which we operate. In addition, some of our other lending occasionally involves taking real estate as primary or secondary collateral. Real property values in these states may be different from, and in
some instances worse than, real property values in other markets or in the United States as a whole, and may be affected by a variety of factors outside of our control and the control of our borrowers, including national and local economic
conditions generally. Declines in real property prices, including prices for homes, commercial properties and farmland, in the states in which we operate could result in a deterioration of the credit quality of our borrowers, an increase in the
number of loan delinquencies, defaults and charge-offs, and reduced demand for our products and services generally. Our CRE loans, in particular, totaled approximately $2.41 billion at June 30, 2014, or 36% of our loan portfolio, and may have a
greater risk of loss than residential mortgage loans, in part because these loans are generally larger or more complex to
25
underwrite. Agricultural real estate loans may be affected by similar factors to those that affect agricultural loans generally, including adverse weather conditions, disease and declines in the
market prices for agricultural products or farm real estate. In addition, declines in real property values in the states in which we operate could reduce the value of any collateral we realize following a default on these loans and could adversely
affect our ability to continue to grow our loan portfolio consistent with our underwriting standards. Our failure to effectively mitigate these risks could have a material adverse effect on our business, financial condition or results of operations.
Our business depends on our ability to successfully manage credit risk.
The operation of our business requires us to manage credit risk. As a lender, we are exposed to the risk that our borrowers will be unable to
repay their loans according to their terms, and that the collateral securing repayment of their loans, if any, may not be sufficient to ensure repayment. In addition, there are risks inherent in making any loan, including risks with respect to the
period of time over which the loan may be repaid, risks relating to proper loan underwriting, risks resulting from changes in economic and industry conditions and risks inherent in dealing with individual borrowers. In order to successfully manage
credit risk, we must, among other things, maintain disciplined and prudent underwriting standards and ensure that our bankers follow those standards. The weakening of these standards for any reason, such as an attempt to attract higher yielding
loans, a lack of discipline or diligence by our employees in underwriting and monitoring loans, the inability of our employees to adequately adapt policies and procedures to changes in economic or any other conditions affecting borrowers and the
quality of our loan portfolio, may result in loan defaults, foreclosures and additional charge-offs and may necessitate that we significantly increase our allowance for loan losses, each of which could adversely affect our net income. As a result,
our inability to successfully manage credit risk could have a material adverse effect on our business, financial condition or results of operations.
Severe weather, natural disasters, acts of war or terrorism or other external events could significantly impact our business.
Severe weather, natural disasters, widespread disease or pandemics, acts of war or terrorism or other adverse external events
could have a significant impact on our ability to conduct business. In addition, such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans,
cause significant property damage, result in loss of revenue or cause us to incur additional expenses. Because of the concentration of agricultural loans in our lending portfolio and the volume of our borrowers in regions dependent on agriculture,
we could be disproportionally affected relative to others in the case of external events such as floods, droughts, and hail effecting the agricultural conditions in the markets we serve. The occurrence of any of these events in the future could have
a material adverse effect on our business, financial condition or results of operations.
Our allowance for loan losses, our fair
value adjustments related to credit on loans for which we have elected the fair value option and our credit marks (which reduce the fair value) on acquired loan portfolios may be insufficient, which could lead to additional losses on loans beyond
those currently anticipated.
We maintain an allowance for loan losses, which is a reserve established through a provision for loan
losses charged to expense representing management’s best estimate of probable losses that have been incurred within our existing portfolio of loans, fair value adjustments related to credit risk on our loans for which we have elected the fair
value option and credit marks, which are estimates of expected credit losses that reduce the fair value of certain loans acquired through acquisitions. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses
and risks inherent in the portfolio. The level of the allowance reflects management’s continuing evaluation of specific credit risks; the quality of the loan portfolio; the value of the underlying collateral; the level of nonaccruing loans; and
economic, political and regulatory conditions. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of
26
subjectivity and requires us to make significant estimates of current credit risks, all of which may undergo material changes. We also establish fair value adjustments related to our estimates of
expected credit losses for loans accounted for using the fair value option.
The application of the acquisition method of accounting in
our acquisitions has impacted our allowance for loan losses. Under the acquisition method of accounting, loans we acquired were recorded in our consolidated financial statements at their fair value at the time of acquisition and the related
allowance for loan loss was eliminated because credit quality, among other factors, was considered in the determination of fair value. To the extent that our estimates of fair value are too high, we will incur losses (some of which may be covered by
our loss-sharing arrangements with the FDIC) associated with the acquired loans.
Although our management has established an allowance for
loan losses it believes is adequate to absorb probable and reasonably estimable losses in our loan portfolio, this allowance may not be adequate. We could sustain credit losses that are significantly higher than the amount of our allowance for loan
losses. Higher credit losses could arise for a variety of reasons, such as growth in our loan portfolio, changes in economic conditions affecting borrowers, new information regarding our loans and other factors within and outside our control. For
example, if agricultural commodity prices or real estate values were to decline or if economic conditions in one or more of our principal markets were to deteriorate unexpectedly, additional loan losses not incorporated in the existing allowance for
loan losses might occur. Losses in excess of the existing allowance for loan losses will reduce our net income and could have a material adverse effect on our business, financial condition or results of operations.
In addition, bank regulatory agencies will periodically review our allowance for loan losses and the value attributed to nonaccrual loans or
to real estate we acquire through foreclosure. Such regulatory agencies may require us to adjust our determination of the value for these items, increase our allowance for loan losses or reduce the carrying value of owned real estate, reducing our
net income. Further, if charge-offs in future periods exceed the allowance for loan losses, we will need additional adjustments to increase the allowance for loan losses. These adjustments could have a material adverse effect on our business,
financial condition or results of operations.
We may not be able to attract and retain key personnel and other skilled employees.
Our success depends, in large part, on the skills of our management team and our ability to retain, recruit and motivate key
officers and employees. Our senior management team has significant industry experience, and their knowledge and relationships would be difficult to replace. Leadership changes will occur from time to time, and we cannot predict whether significant
resignations will occur or whether we will be able to recruit additional qualified personnel. Competition for senior executives and skilled personnel in the financial services and banking industry is intense, which means the cost of hiring,
incentivizing and retaining skilled personnel may continue to increase. We need to continue to attract and retain key personnel and to recruit qualified individuals to succeed existing key personnel to ensure the continued growth and successful
operation of our business. In addition, as a provider of relationship-based commercial and agribusiness banking services, we must attract and retain qualified banking personnel to continue to grow our business, and competition for such personnel can
be intense. Our ability to effectively compete for senior executives and other qualified personnel by offering competitive compensation and benefit arrangements may be restricted by applicable banking laws and regulations as discussed in
“Supervision and Regulation—Incentive Compensation.” The loss of the services of any senior executive or other key personnel, or the inability to recruit and retain qualified personnel in the future, could have a material adverse
effect on our business, financial condition or results of operations. In addition, to attract and retain personnel with appropriate skills and knowledge to support our business, we may offer a variety of benefits, which could reduce our earnings or
have a material adverse effect on our business, financial condition or results of operations.
27
We operate in a highly competitive industry and market area.
We operate in the highly competitive financial services industry and face significant competition for customers from financial institutions
located both within and beyond our principal markets. We compete with commercial banks, savings banks, credit unions, non-bank financial services companies and other financial institutions operating within or near the areas we serve, particularly
nationwide and regional banks and larger community banking institutions that target the same customers we do. We also face competition for agricultural loans from participants in the nationwide Farm Credit System and global banks. In addition, as
customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment
systems. Customer loyalty can be influenced by a competitor’s new products, especially offerings that could provide cost savings or a higher return to the customer. We may not be able to compete successfully with other financial institutions in
our market, and we may have to pay higher interest rates to attract deposits, accept lower yields to attract loans and pay higher wages for new employees, resulting in reduced profitability. Further, increased lending activity by competing banks
following the recent recession has led to increased competitive pressures on loan rates and terms for high-quality credits. Continued loan pricing pressure could have a further negative effect on our loan yields and net interest margin.
Many of our non-bank competitors are not subject to the same extensive regulations that govern our activities and may have greater flexibility
in competing for business. Several of our competitors are also larger and have significantly more resources, greater name recognition and larger market shares than we do, enabling them to maintain numerous banking locations, provide technology-based
banking tools we do not provide, maintain a wider range of product offerings, mount extensive promotional and advertising campaigns and be more aggressive than us in competing for loans and deposits. The financial services industry could become even
more competitive as a result of legislative, regulatory and technological changes and continued consolidation. In addition, some of our current commercial banking customers may seek alternative banking sources as they develop needs for credit
facilities larger than we may be able to accommodate. Our inability to compete successfully in the markets in which we operate could have a material adverse effect on our business, financial condition or results of operations.
We may not be able to successfully execute our strategic plan or manage our growth.
Our growth strategy requires us to manage several different elements simultaneously. Sustainable growth requires that we manage our risks by
following prudent loan underwriting standards, balancing loan and deposit growth without increasing interest rate risk or compressing our net interest margin, maintaining more than adequate capital at all times, hiring and retaining qualified
employees and successfully implementing strategic projects and initiatives. Our growth strategy may also change from time to time as a result of various internal and external factors. Our inability to manage our growth successfully could have a
material adverse effect on our business, financial condition or results of operations.
We may be adversely affected by risks
associated with completed and potential acquisitions.
We plan to continue to grow our business organically. However, from time to
time, we may consider potential acquisition opportunities that we believe support our business strategy and may enhance our profitability. Acquisitions involve numerous risks, including:
|
|
•
|
|
incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions, resulting in management’s attention being diverted from the operation of our
existing business;
|
|
|
•
|
|
using inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the target institution or assets;
|
|
|
•
|
|
the risk that the acquired business will not perform to our expectations;
|
28
|
|
•
|
|
difficulties, inefficiencies or cost overruns in integrating and assimilating the organizational cultures, operations, technologies, services and products of the acquired business with ours;
|
|
|
•
|
|
the risk of key vendors not fulfilling our expectations or not accurately converting data;
|
|
|
•
|
|
entering geographic and product markets in which we have limited or no direct prior experience;
|
|
|
•
|
|
the potential loss of key employees;
|
|
|
•
|
|
the potential for liabilities and claims arising out of the acquired businesses; and
|
|
|
•
|
|
the risk of not receiving required regulatory approvals or such approvals being restrictively conditional.
|
In addition, we face significant competition from numerous other financial services institutions, many of which will have greater financial
resources than we do, when considering acquisition opportunities. Accordingly, attractive acquisition opportunities may not be available to us. There can be no assurance that we will be successful in identifying or completing any future
acquisitions.
Acquisitions of financial institutions also involve operational risks and uncertainties, and acquired companies may have
unknown or contingent liabilities with no corresponding accounting allowance, exposure to unexpected asset quality problems that require write-downs or write-offs (as well as restructuring and impairment or other charges), difficulty retaining key
employees and customers and other issues that could negatively affect our business. We may not be able to realize any projected cost savings, synergies or other benefits associated with any such acquisition we complete. Acquisitions typically
involve the payment of a premium over book and market values and, therefore, some dilution of our tangible book value and net income per common share may occur in connection with any future transaction. Failure to successfully integrate the entities
we acquire into our existing operations could increase our operating costs significantly and have a material adverse effect on our business, financial condition and results of operations.
Failed bank acquisitions involve risks similar to acquiring operating banks even though the FDIC might provide assistance to mitigate certain
risks, such as sharing in exposure to loan losses and providing indemnification against certain liabilities of the failed institution. However, because these acquisitions are typically conducted by the FDIC in a manner that does not allow the time
typically taken for a due diligence review or for preparing the integration of an acquired institution, we may face additional risks in transactions with the FDIC. These risks include, among other things, accuracy or completeness of due diligence
materials, the loss of customers and core deposits, strain on management resources related to collection and management of problem loans and problems related to integration and retention of personnel and operating systems. There can be no assurance
that we will be successful in overcoming these risks or any other problems encountered in connection with acquisitions (including FDIC-assisted transactions), nor that any FDIC-assisted opportunities will be available to us in our markets. Our
inability to overcome these risks could have a material adverse effect on our business, financial condition or results of operations.
In
addition, we must generally satisfy a number of meaningful conditions prior to completing any acquisition, including, in certain cases, federal and state bank-regulatory approval. Bank regulators consider a number of factors when determining whether
to approve a proposed transaction, including the effect of the transaction on financial stability and the ratings and compliance history of all institutions involved, including the Community Reinvestment Act of 1977, or the CRA, examination results
and anti-money laundering and Bank Secrecy Act compliance records of all institutions involved. The process for obtaining required regulatory approvals has become substantially more difficult as a result of the financial crisis, which could affect
our future business. We may fail to pursue, evaluate or complete strategic and competitively significant business opportunities as a result of our inability, or our perceived inability, to obtain any required regulatory approvals in a timely manner
or at all.
Any proposed acquisition must in certain circumstances be approved by NAB pursuant to the Stockholder Agreement we intend to
enter into with NAB in connection with this offering, and, until such time as we cease to
29
be a subsidiary of NAB for purposes of the Corporations Act 2001 (Cth), the Australian Prudential Regulation Authority, or APRA. In addition, as long as NAB controls us for purposes of the BHC
Act, NAB’s regulatory status may impact our regulatory status, and hence our ability to expand by acquisition or engage in new activities, and NAB would be required to obtain BHC Act approvals for such acquisitions or activities as well. See
“Our Relationship with NAB and Certain Other Related Party Transactions—Relationship with NAB—Stockholder Agreement,” as well as “Supervision and Regulation—Regulatory Impact of Control by NAB.”
New lines of business, products, product enhancements or services may subject us to additional risks.
From time to time, we may implement or acquire new lines of business or offer new products and product enhancements as well as new services
within our existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In acquiring, developing or marketing new lines of business,
products, product enhancements or services, we may invest significant time and resources, although we may not assign the appropriate level of resources or expertise necessary to make these new lines of business, products, product enhancements or
services successful or to realize their expected benefits. Further, initial timetables for the introduction and development of new lines of business, products, product enhancements or services may not be achieved, and price and profitability targets
may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the ultimate implementation of a new line of business or offerings of new products, product
enhancements or services. Furthermore, any new line of business, product, product enhancement or service could have a significant impact on the effectiveness of our system of internal controls. Any material change from the scope of our business
immediately prior to this offering must also be approved by our parent, NAB, pursuant to the Stockholder Agreement we intend to enter into with NAB in connection with this offering. See “Our Relationship with NAB and Certain Other Related Party
Transactions—Relationship with NAB—Stockholder Agreement.” Failure to successfully manage these risks in the development and implementation of new lines of business or offerings of new products, product enhancements or services could
have a material adverse effect on our business, financial condition or results of operations.
If our techniques for managing risk
are ineffective, we may be exposed to material unanticipated losses.
In order to manage the significant risks inherent in our
business, we must maintain effective policies, procedures and systems that enable us to identify, monitor and control our exposure to material risks, such as credit, operational, legal and reputational risks. Our risk management methods may prove to
be ineffective due to their design, their implementation or the degree to which we adhere to them, or as a result of the lack of adequate, accurate or timely information or otherwise. If our risk management efforts are ineffective, we could suffer
losses that could have a material adverse effect on our business, financial condition or results of operations. In addition, we could be subject to litigation, particularly from our customers, and sanctions or fines from regulators. Our techniques
for managing the risks we face may not fully mitigate the risk exposure in all economic or market environments, including exposure to risks that we might fail to identify or anticipate.
We are subject to interest rate risk.
Fluctuations in interest rates may negatively impact our banking business and may weaken demand for some of our products. Our earnings and cash
flows are largely dependent on net interest income, which is the difference between the interest income we receive from interest-earning assets (
e.g.
, loans and investment securities) and the interest expense we pay on interest-bearing
liabilities (
e.g.
, deposits and borrowings). The level of net interest income is primarily a function of the average balance of interest-earning assets, the average balance of interest-bearing liabilities and the spread between the yield on
such assets and the cost of such liabilities. These factors are influenced by both the pricing and mix of interest-earning assets and interest-bearing liabilities. Interest rates are volatile and highly sensitive to many factors that are beyond our
control, such as economic conditions and policies of various governmental and regulatory agencies, and, in particular the monetary policy of the Federal Open Market Committee of the Federal Reserve System, or the FOMC. Changes
30
in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, but
also our ability to originate loans and deposits. Historically, there has been an inverse correlation between the demand for loans and interest rates. Loan origination volume usually declines during periods of rising or high interest rates and
increases during periods of declining or low interest rates. Changes in interest rates also have a significant impact on the carrying value of certain of our assets, including loans, real estate and investment securities, on our balance sheet. We
may incur debt in the future and that debt may also be sensitive to interest rates.
The cost of our deposits is largely based on
short-term interest rates, the level of which is driven primarily by the FOMC’s actions. However, the yields generated by our loans and securities are often difficult to re-price and are typically driven by longer-term interest rates, which are
set by the market or, at times, the FOMC’s actions, and vary over time. The level of net interest income is therefore influenced by movements in such interest rates and the pace at which such movements occur. If the interest rates paid on our
deposits and other borrowings increase at a faster pace than the interest rates on our loans and other investments, our net interest income may decline and, with it, a decline in our earnings may occur. Our net interest income and earnings would be
similarly affected if the interest rates on our interest-earning assets declined at a faster pace than the interest rates on our deposits and other borrowings. Any substantial, unexpected, prolonged change in market interest rates could have a
material adverse effect on our business, financial condition or results of operations.
Changes in interest rates can also affect the
level of loan refinancing activity, which impacts the amount of prepayment penalty income we receive on loans we hold. Because prepayment penalties are recorded as interest income when received, the extent to which they increase or decrease during
any given period could have a significant impact on the level of net interest income and net income we generate during that time. A decrease in our prepayment penalty income resulting from any change in interest rates or as a result of regulatory
limitations on our ability to charge prepayment penalties could therefore adversely affect our net interest income, net income or results of operations.
Changes in interest rates can also affect the slope of the yield curve. A decline in the current yield curve or a flatter or inverted yield
curve could cause our net interest income and net interest margin to contract, which could have a material adverse effect on our net income and cash flows, as well as the value of our assets. An inverted yield curve may also adversely affect the
yield on investment securities by increasing the prepayment risk of any securities purchased at a premium.
Changes in interest rates
could also have a negative impact on our results of operation by reducing the ability of borrowers to repay their current loan obligations or by reducing our margins and profitability. As of June 30, 2014, 44.4% of our loans were advanced to our
customers on a variable or adjustable-rate basis. As a result, an increase in interest rates could result in increased loan defaults, foreclosures and charge-offs and could necessitate further increases to the allowance for loan losses, any of which
could have a material adverse effect on our business, financial condition or results of operations. In addition, a decrease in interest rates could negatively impact our margins and profitability.
As of June 30, 2014, we had $1.29 billion of noninterest-bearing demand deposits and $3.95 billion of interest-bearing demand deposits. The
prohibition restricting depository institutions from paying interest on demand deposits, such as checking accounts, was repealed effective on July 21, 2011 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the
Dodd-Frank Act. We then began offering interest-bearing corporate checking accounts. Current interest rates for this product are very low because of current market conditions and, so far, the impact of the repeal has not been significant to us.
However, we do not know what market rates will eventually be and, therefore, we cannot estimate at this time the long-term impact of the repeal on our interest expense on deposits. If we need to offer higher interest rates on checking accounts to
maintain current clients or attract new clients, our interest expense will increase, perhaps materially. Furthermore, if we fail to offer interest in a sufficient amount to keep these demand deposits, our core deposits may be reduced, which would
require us to obtain funding in other ways or risk slowing our future asset growth.
31
We are subject to liquidity risk that may affect our ability to meet our obligations and
grow our business.
Liquidity risk is the risk that we will not be able to meet our obligations, including financial commitments,
as they come due and is inherent in our operations. This risk can increase due to a number of factors, including an over-reliance on a particular source of funding (including, for example, short-term and overnight funding) or market-wide phenomena
such as market dislocation and major disasters. Like many banking companies, we rely on customer deposits to meet a considerable portion of our funding, and we continue to seek customer deposits to maintain this funding base. We obtain deposits
directly from retail and commercial customers and through brokerage firms that offer our deposit products to their customers. As of June 30, 2014, we had $6.83 billion in direct deposits (which includes deposits from banks and financial institutions
and deposits related to prepaid cards) and $236.7 million in deposits originated through brokerage firms (including network deposit sweeps). A key part of our liquidity plan and funding strategy is to expand our direct deposits as a source of
funding. However, these deposits are subject to potentially dramatic fluctuations in availability or price due to certain factors outside our control, such as a loss of confidence by customers in us or the banking sector generally, customer
perceptions of our financial health and general reputation, increasing competitive pressures from other financial services firms for retail or corporate customer deposits, changes in interest rates and returns on other investment classes, which
could result in significant outflows of deposits within short periods of time or significant changes in pricing necessary to maintain current or attract additional deposits.
Competition among U.S. banks for customer deposits is intense, may increase the cost of retaining current deposits or procuring new deposits
and may otherwise negatively affect our ability to grow our deposit base. Any changes we make to the rates offered on our deposit products to remain competitive with other financial institutions may adversely affect our profitability and liquidity.
In addition, our ability to originate and maintain deposits could be adversely affected by the loss of our association with NAB following this offering and NAB’s strategic plan to reduce its ownership in our business. The demand for the deposit
products we offer may also be reduced due to a variety of factors, such as demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, regulatory actions that decrease customer access to particular
products or the availability of competing products. An inability to grow, or any material decrease in, our deposits could have a material adverse effect on our cost of funds and our ability to satisfy our liquidity needs. Further, the consequences
of our liquidity risk may be more severe than other institutions because we do not currently have a credit rating from any major agency.
Maintaining a diverse and appropriate funding strategy remains challenging, and any tightening of credit markets could have a material adverse
impact on us. In particular, our funding from corporate and financial institution counterparties may cease to be available if such counterparties seek to reduce their credit exposures to banks and other financial institutions, which could be
reflected, for example, in reductions in unsecured deposits supplied by these counterparties. Under such circumstances, we may need to seek funds from alternative sources, potentially at higher costs than our current sources.
Reductions in interchange fees would reduce our associated income.
An interchange fee is a fee merchants pay to the interchange network in exchange for the use of the network’s infrastructure and payment
facilitation, and which is paid to debit, credit and prepaid card issuers to compensate them for the costs associated with card issuance and operation. In the case of credit cards, this includes the risk associated with lending money to customers.
We earn interchange fees on these card transactions, including $4.4 million in fees during the nine months ended June 30, 2014. Merchants, trying to decrease their operating expenses, have sought to, and have had some success at, lowering
interchange rates. In particular, the Durbin Amendment to the Dodd-Frank Act limited the amount of interchange fees that may be charged for debit and prepaid card transactions. Several recent events and actions indicate a continuing focus on
interchange fees by both regulators and merchants. Beyond pursuing litigation, legislation and regulation, merchants are also pursuing alternate payment platforms as a means to lower payment processing costs. To the extent interchange fees are
further reduced, our income from those fees will be reduced, which could have a
32
material adverse effect on our business and results of operations. In addition, the payment card industry is subject to the operating regulations and procedures set forth by payment card
networks, and our failure to comply with these operating regulations, which may change from time to time, could subject us to various penalties or fees or the termination of our license to use the payment card networks, all of which could have a
material adverse effect on our business, financial condition or results of operations.
Operational risks are inherent in our
business.
Our operations depend on our ability to process a very large number of transactions efficiently and accurately while
complying with applicable laws and regulations. Operational risk and losses can result from internal and external fraud; errors by employees or third parties; failure to document transactions properly or to obtain proper authorization; failure to
comply with applicable regulatory requirements and conduct of business rules; equipment failures, including those caused by natural disasters or by electrical, telecommunications or other essential utility outages; business continuity and data
security system failures, including those caused by computer viruses, cyber-attacks or unforeseen problems encountered while implementing major new computer systems or upgrades to existing systems; or the inadequacy or failure of systems and
controls, including those of our suppliers or counterparties. Although we have implemented risk controls and loss mitigation actions, and substantial resources are devoted to developing efficient procedures, identifying and rectifying weaknesses in
existing procedures and training staff, it is not possible to be certain that such actions have been or will be effective in controlling each of the operational risks faced by us. Any weakness in these systems or controls, or any breaches or alleged
breaches of such laws or regulations, could result in increased regulatory scrutiny, enforcement actions or legal proceedings and could have an adverse impact on our business, financial condition or results of operations.
Cyber-attacks or other security breaches could have a material adverse effect on our business.
In the normal course of business, we collect, process and retain sensitive and confidential information regarding our customers. We also have
arrangements in place with other third parties through which we share and receive information about their customers who are or may become our customers. Although we devote significant resources and management focus to ensuring the integrity of our
systems through information security and business continuity programs, our facilities and systems, and those of third party service providers, are vulnerable to external or internal security breaches, acts of vandalism, computer viruses, misplaced
or lost data, programming or human errors or other similar events.
Information security risks for financial institutions like us have
increased recently in part because of new technologies, the use of the Internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of
organized crime, perpetrators of fraud, hackers, terrorists and others. In addition to cyber-attacks or other security breaches involving the theft of sensitive and confidential information, hackers recently have engaged in attacks against large
financial institutions, particularly denial of service attacks, that are designed to disrupt key business services, such as customer-facing web sites. We are not able to anticipate or implement effective preventive measures against all security
breaches of these types, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources. We employ detection and response mechanisms designed to contain and mitigate security incidents, but
early detection may be thwarted by sophisticated attacks and malware designed to avoid detection.
We also face risks related to
cyber-attacks and other security breaches in connection with credit card transactions that typically involve the transmission of sensitive information regarding our customers through various third parties, including merchant acquiring banks, payment
processors, payment card networks (
e.g.
, Visa, MasterCard) and our processors. Some of these parties have in the past been the target of security breaches and cyber-attacks, and because the transactions involve third parties and environments
such as the point of sale that we do not control or secure, future security breaches or cyber-attacks affecting any of these third parties
33
could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them. We also rely on numerous other third party service
providers to conduct other aspects of our business operations and face similar risks relating to them. While we regularly conduct security assessments on these third parties, we cannot be sure that their information security protocols are sufficient
to withstand a cyber-attack or other security breach.
The access by unauthorized persons to, or the improper disclosure by us of,
confidential information regarding our customers or our own proprietary information, software, methodologies and business secrets could result in significant legal and financial exposure, supervisory liability, damage to our reputation or a loss of
confidence in the security of our systems, products and services, which could have a material adverse effect on our business, financial condition or results of operations. In addition, recently there have been a number of well-publicized attacks or
breaches affecting others in our industry that have heightened concern by consumers generally about the security of using credit cards, which have caused some consumers, including our customers, to use our credit cards less in favor of alternative
methods of payment and has led to increased regulatory focus on, and potentially new regulations relating to, these matters. Further cyber-attacks or other breaches in the future, whether affecting us or others, could intensify consumer concern and
regulatory focus and result in reduced use of our cards and increased costs, all of which could have a material adverse effect on our business. To the extent we are involved in any future cyber-attacks or other breaches, our brand and reputation
could be affected, would could also have a material adverse effect on our business, financial condition or results of operations.
Our information systems may experience an interruption or breach in security.
Our communications, information and technology systems supporting our operations are important to our efficiency and vulnerable to unforeseen
problems. Our operations depend on our ability, as well as that of third party service providers, to protect computer systems and network infrastructure against damage from fires, other natural disasters or pandemics; power or telecommunications
failures; acts of terrorism or wars or other catastrophic events; or other physical break-ins. Any damage or failure that causes interruptions in operations or disruptions in our business could result in liability to clients, regulatory intervention
or reputational harm and, thus, could have a material adverse effect on our business, financial condition or results of operations.
We
rely heavily on communications and information systems to conduct our business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger,
deposit, loan or other systems. Moreover, if any such failures, interruptions or security breaches do occur, they may not be adequately addressed. If we experience a disruption in the provision of any functions or services performed by third
parties, we may have difficulty in finding alternate providers on terms favorable to us and in reasonable timeframes. The occurrence of any failures, interruptions or security breaches of our communications and information systems could damage our
reputation, result in a loss of customer business, subject us to additional regulatory scrutiny or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition
or results of operations.
We continually encounter technological change.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new, technology-driven
products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers
by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological
improvements than we do. We may not be able to effectively implement new, technology-driven products and services or be successful in marketing these products and services to our customers. In addition, the implementation of technological
34
changes and upgrades to maintain current systems and integrate new ones may also cause service interruptions, transaction processing errors and system conversion delays and may cause us to fail
to comply with applicable laws. Failure to successfully keep pace with technological change affecting the financial services industry and avoid interruptions, errors and delays could have a material adverse effect on our business, financial
condition or results of operations.
We expect that new technologies and business processes applicable to the consumer credit industry
will continue to emerge, and these new technologies and business processes may be better than those we currently use. Because the pace of technological change is high and our industry is intensely competitive, we cannot assure you that we will be
able to sustain our investment in new technology as critical systems and applications become obsolete or as better ones become available. A failure to maintain current technology and business processes could cause disruptions in our operations or
cause our products and services to be less competitive, all of which could have a material adverse effect on our business, financial condition or results of operations.
Our ability to maintain, attract and retain customer relationships is highly dependent on our reputation.
Our customers rely on us to deliver superior, personalized financial services with the highest standards of ethics, performance,
professionalism and compliance. Damage to our reputation could undermine the confidence of our current and potential customers in our ability to provide high-quality financial services. Such damage could also impair the confidence of our
counterparties and vendors and ultimately affect our ability to effect transactions. Maintenance of our reputation depends not only on our success in maintaining our service-focused culture and controlling and mitigating the various risks described
herein, but also on our success in identifying and appropriately addressing issues that may arise in areas such as potential conflicts of interest, anti-money laundering, client personal information and privacy issues, customer and other third party
fraud, record-keeping, regulatory investigations and any litigation that may arise from the failure or perceived failure of us to comply with legal and regulatory requirements. Maintaining our reputation also depends on our ability to successfully
prevent third parties from infringing on the “Great Western Bank” brand and associated trademarks and our other intellectual property. Defense of our reputation, trademarks and other intellectual property, including through litigation,
could result in costs that could have a material adverse effect on our business, financial condition or results of operations.
Employee misconduct could expose us to significant legal liability and reputational harm.
We are vulnerable to reputational harm because we operate in an industry in which integrity and the confidence of our customers are of critical
importance. Our employees could engage in misconduct that adversely affects our business. For example, if an employee were to engage in fraudulent, illegal or suspicious activities, we could be subject to regulatory sanctions and suffer serious harm
to our reputation (as a consequence of the negative perception resulting from such activities), financial position, customer relationships and ability to attract new customers. Our business often requires that we deal with confidential information.
If our employees were to improperly use or disclose this information, even if inadvertently, we could suffer serious harm to our reputation, financial position and current and future business relationships. It is not always possible to deter
employee misconduct, and the precautions we take to detect and prevent this activity may not always be effective. Misconduct by our employees, or even unsubstantiated allegations of misconduct, could result in a material adverse effect on our
business, financial condition or results of operations.
We may be adversely affected by changes in the actual or perceived
soundness or condition of other financial institutions.
Financial services institutions that deal with each other are
interconnected as a result of trading, investment, liquidity management, clearing, counterparty and other relationships. Within the financial services industry, loss of public confidence, including through default by any one institution, could lead
to liquidity challenges or to defaults by other institutions. Concerns about, or a default by, one institution could lead to significant liquidity
35
problems and losses or defaults by other institutions, as the commercial and financial soundness of many financial institutions is closely related as a result of these credit, trading, clearing
and other relationships. Even the perceived lack of creditworthiness of, or questions about, a counterparty may lead to market-wide liquidity problems and losses or defaults by various institutions. This systemic risk may adversely affect financial
intermediaries, such as clearing agencies, banks and exchanges with which we interact on a daily basis or key funding providers such as the Federal Home Loan Banks, any of which could have a material adverse effect on our access to liquidity or
otherwise have a material adverse effect on our business, financial condition or results of operations.
We may need to raise
additional capital in the future, and such capital may not be available when needed or at all.
We may need to raise additional
capital, in the form of additional debt or equity, in the future to have sufficient capital resources and liquidity to meet our commitments and fund our business needs and future growth, particularly if the quality of our assets or earnings were to
deteriorate significantly. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our financial condition. Economic conditions and
a loss of confidence in financial institutions may increase our cost of funding and limit access to certain customary sources of capital, including inter-bank borrowings, repurchase agreements and borrowings from the discount window of the Federal
Reserve System.
We cannot assure you that such capital will be available on acceptable terms—or at all. Any occurrence that may
limit our access to the capital markets, such as a decline in the confidence of debt purchasers, depositors of our bank or counterparties participating in the capital markets or other disruption in capital markets, may adversely affect our capital
costs and our ability to raise capital and, in turn, our liquidity. Further, if we need to raise capital in the future, we may have to do so when many other financial institutions are also seeking to raise capital and would then have to compete with
those institutions for investors. An inability to raise additional capital on acceptable terms when needed could have a material adverse effect on our business, financial condition or results of operations.
The value of our securities in our investment portfolio may decline in the future.
As of June 30, 2014, we owned $1.40 billion of investment securities. The fair value of our investment securities may be adversely affected by
market conditions, including changes in interest rates, and the occurrence of any events adversely affecting the issuer of particular securities in our investments portfolio. We analyze our securities on a quarterly basis to determine if an
other-than-temporary impairment has occurred. The process for determining whether impairment is other-than-temporary usually requires complex, subjective judgments about the future financial performance of the issuer in order to assess the
probability of receiving all contractual principal and interest payments on the security. Because of changing economic and market conditions affecting issuers, we may be required to recognize other-than-temporary impairment in future periods, which
could have a material adverse effect on our business, financial condition or results of operations.
The value of our goodwill and
other intangible assets may decline in the future.
As of June 30, 2014, we had $714.8 million of goodwill and other intangible
assets. Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as business acquisitions. We review our goodwill for impairment at least annually, or more
frequently if events or changes in circumstances indicate that the carrying value of the asset might be impaired. We determine impairment by comparing the implied fair value of the goodwill with the carrying amount of that goodwill. If the carrying
amount of the goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. A significant decline in our expected future cash flows, a material change in interest rates, a significant
adverse change in the business climate, slower growth rates or a significant or
36
sustained decline in the price of our common stock, when and if a market for our common stock is established, may necessitate taking charges in the future related to the impairment of our
goodwill and other intangible assets. We cannot assure you that we will not be required to record any charges for goodwill impairment in the future. If we conclude that such a write-down of goodwill and other intangible assets has become necessary,
we will record the appropriate charge in the period in which it becomes known to us, which could have a material adverse effect on our business, financial condition or results of operations.
We rely on the mortgage secondary market for some of our liquidity.
We originate and sell mortgage loans and their servicing rights, including $146.3 million of mortgage loans sold during the nine months ended
June 30, 2014. We rely on Federal National Mortgage Association, or FNMA, and other purchasers to purchase loans in order to reduce our credit risk and provide funding for additional loans we desire to originate. We cannot provide assurance that
these purchasers will not materially limit their purchases from us due to capital constraints or other factors, including, with respect to FNMA, a change in the criteria for conforming loans. In addition, various proposals have been made to reform
the U.S. residential mortgage finance market, including the role of FNMA. The exact effects of any such reforms are not yet known, but may limit our ability to sell conforming loans to FNMA. In addition, mortgage lending is highly regulated, and our
inability to comply with all federal and state regulations and investor guidelines regarding the origination, underwriting documentation and servicing of mortgage loans may also impact our ability to continue selling mortgage loans. If we are unable
to continue to sell loans in the secondary market, our ability to fund, and thus originate, additional mortgage loans may be adversely affected, which could have a material adverse effect on our business, financial condition or results of
operations.
We are subject to a variety of risks in connection with any sale of loans we may conduct.
When we sell mortgage loans we are required to make customary representations and warranties to the purchaser about the mortgage loans and the
manner in which they were originated and serviced. If any of these representations and warranties are incorrect, we may be required to indemnify the purchaser for any related losses, or we may be required to repurchase or provide substitute mortgage
loans for part or all of the effected loans. We may also be required to repurchase loans as a result of borrower fraud or in the event of early payment default by the borrower on a loan we have sold. If the level of repurchase and indemnity activity
becomes material, it could have a material adverse effect on our liquidity, business, financial condition or results of operations.
Mortgage lending is highly regulated. Our inability to comply with all federal and state regulations and investor guidelines regarding the
origination, underwriting documentation and servicing of mortgage loans may impact our ability to continue selling mortgage loans.
In
addition, we must report as held for sale any loans which we have undertaken to sell, whether or not a purchase agreement for the loans has been executed. We may therefore be unable to ultimately complete a sale for part or all of the loans we
classify as held for sale. We must exercise our judgment in determining when loans must be reclassified from held for investment status to held for sale status under applicable accounting guidelines. Any failure to accurately report loans as held
for sale could result in regulatory investigations and monetary penalties. Any of these actions could have a material adverse effect on our business, financial condition or results of operations. Our policy is to carry loans held for sale at the
lower of cost or fair value. As a result, prior to being sold, any loans classified as held for sale may be adversely affected by market conditions, including changes in interest rates, and by changes in the borrower’s creditworthiness, and the
value associated with these loans, including any loans originated for sale in the secondary market, may decline prior to being sold. We may be required to reduce the value of any loans we mark held for sale as a result, which could have a material
adverse effect on our business, financial condition or results of operations.
37
The appraisals and other valuation techniques we use in evaluating and monitoring loans
secured by real property may not accurately describe the net value of the collateral that we can realize.
In considering whether
to make a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made, and, as real estate values may change significantly
in value in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately describe the net value of the real property collateral after the loan is made. As a result, we may not be able
to realize the full amount of any remaining indebtedness when we foreclose on and sell the relevant property. In addition, we rely on appraisals and other valuation techniques to establish the value of our other real estate owned portfolio, or OREO,
and to determine certain loan impairments. If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our OREO, and our allowance for loan losses may not reflect accurate loan impairments.
This could have a material adverse effect on our business, financial condition or results of operations.
Our operations could be
interrupted if certain external vendors on which we rely experience difficulty, terminate their services or fail to comply with banking laws and regulations.
We depend to a significant extent on relationships with third party service providers. Specifically, we utilize third party core banking
services and receive credit card and debit card services, branch capture services, Internet banking services and services complementary to our banking products from various third party service providers. If these third party service providers
experience difficulties or terminate their services and we are unable to replace them with other service providers, our operations could be interrupted. It may be difficult for us to replace some of our third party vendors, particularly vendors
providing our core banking, credit card and debit card services, in a timely manner if they were unwilling or unable to provide us with these services in the future for any reason. If an interruption were to continue for a significant period of
time, it could have a material adverse effect on our business, financial condition or results of operations. Even if we are able to replace them, it may be at higher cost to us, which could have a material adverse effect on our business, financial
condition or results of operations. In addition, if a third party provider fails to provide the services we require, fails to meet contractual requirements, such as compliance with applicable laws and regulations, or suffers a cyber-attack or other
security breach, our business could suffer economic and reputational harm that could have a material adverse effect on our business, financial condition or results of operations.
We rely on dividends and other payments from our bank for substantially all of our revenue.
We are a separate and distinct legal entity from our bank, and we receive substantially all of our revenue from dividends and other payments
from our bank. These dividends and payments are the principal source of funds to pay dividends on our capital stock and interest and principal on any debt we may have. Various federal and state laws and regulations limit the amount of dividends that
our bank may pay to us. Also, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. In the event our bank is unable to pay
dividends to us, we may not be able to service debt, pay obligations, or pay dividends on our common stock. The inability to receive dividends from our bank could have a material adverse effect on our business, financial condition or results of
operations.
Loans that we make through certain federal programs are dependent on the federal government’s continuation and
support of these programs and on our compliance with their requirements.
We participate in various U.S. government agency
guarantee programs, including programs operated by the United States Department of Agriculture, Small Business Administration, Farm Service Administration and the United States Department of the Interior. We are responsible for following all
applicable U.S. government agency regulations, guidelines and policies whenever we originate loans as part of these guarantee programs. If we fail to follow any applicable regulations, guidelines or policies associated with a particular guarantee
program, any loans we originate as part of that program may lose the associated guarantee, exposing us to credit risk we would not
38
otherwise be exposed to or underwritten as part of our origination process for U.S. government agency guaranteed loans, or result in our inability to continue originating loans under such
programs. The loss of any guarantees for loans we have extended under U.S. government agency guarantee programs or the loss of our ability to participate in such programs could have a material adverse effect on our business, financial condition or
results of operations.
We depend on the accuracy and completeness of information about clients and counterparties.
In deciding whether to extend credit or enter into other transactions, we may rely on information furnished by or on behalf of customers and
counterparties, including financial statements, credit reports and other financial information. We may also rely on representations of those customers or counterparties or of other third parties, such as independent auditors, as to the accuracy and
completeness of that information. Reliance on inaccurate, fraudulent or misleading financial statements, credit reports or other financial information could result in loan losses, reputational damage or other effects that could have a material
adverse effect on our business, financial condition or results of operations.
Downgrades to the credit rating of the U.S.
government or of its securities or any of its agencies by one or more of the credit ratings agencies could have a material adverse effect on general economic conditions, as well as our business.
On August 5, 2011, Standard & Poor’s cut the credit rating of the U.S. federal government’s long-term sovereign debt
from AAA to AA+, while also keeping its outlook negative. Moody’s had lowered its own outlook for the same debt to “Negative” on August 2, 2011, and Fitch also lowered its outlook for the same debt to “Negative,” on
November 28, 2011. Last year, both Moody’s and Standard & Poor’s revised their outlooks from “Negative” to “Stable,” and on March 21, 2014, Fitch revised its outlook from “Negative” to
“Stable.” Further downgrades of the U.S. federal government’s sovereign credit rating, and the perceived creditworthiness of U.S. government-backed obligations, could impact our ability to obtain funding that is collateralized by
affected instruments and our ability to access capital markets on favorable terms. Such downgrades could also affect the pricing of funding, when funding is available. A downgrade of the credit rating of the U.S. government, or of its agencies,
government-sponsored enterprises or related institutions, agencies or instrumentalities, may also adversely affect the market value of such instruments and, further, exacerbate the other risks to which we are subject and any related adverse effects
on our business, financial condition or results of operations.
Our internal controls, processes and procedures may fail or be
circumvented.
Our internal controls, disclosure controls, processes and procedures, and corporate governance policies and
procedures are based in part on certain assumptions and can provide only reasonable (not absolute) assurances that the objectives of the system are met. Any failure or circumvention of our controls, processes and procedures or failure to comply with
regulations related to controls, processes and procedures could necessitate changes in those controls, processes and procedures, which may increase our compliance costs, divert management attention from our business or subject us to regulatory
actions and increased regulatory scrutiny. Any of these could have a material adverse effect on our business, financial condition or results of operations.
Our accounting estimates and risk management processes rely on analytical and forecasting techniques and models.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Our
management must exercise judgment in selecting and applying many of these accounting policies and methods so they comply with GAAP and reflect management’s judgment of the most appropriate manner to report our financial condition and results.
In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet which may result in our reporting materially different results than would have
been reported under a different alternative.
39
Certain accounting policies are critical to presenting our financial condition and results. They
require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. These critical accounting
policies include credit risk management, the allowance for loan losses and unfunded commitments, FDIC indemnification asset and clawback liability, goodwill, core deposits and other intangibles and income taxes. Because of the uncertainty of
estimates involved in these matters, we may be required to do one or more of the following: significantly increase the allowance for loan losses or sustain loan losses that are significantly higher than the reserve provided; recognize significant
impairment on goodwill and other intangible asset balances; reduce the carrying value of an asset measured at fair value; or significantly increase our accrued tax liability. Any of these could have a material adverse effect on our business,
financial condition or results of operations. For a discussion of our critical accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and the Impact
of Accounting Estimates.”
We rely extensively on models in managing many aspects of our business, and these models may be
inaccurate or misinterpreted.
We rely extensively on models in managing many aspects of our business, including liquidity and
capital planning, customer selection, credit and other risk management, pricing, reserving and collections management. The models may prove in practice to be less predictive than we expect for a variety of reasons, including errors in constructing,
interpreting or using the models or inaccurate assumptions (
e.g.
, failures to update assumptions appropriately or in a timely manner). Our assumptions may be inaccurate for many reasons as they often involve matters that are inherently
difficult to predict and beyond our control (
e.g
., macroeconomic conditions and their impact on behavior) and often involve complex interactions between a number of variables, factors and other assumptions. The errors or inaccuracies in our
models may be material, and could lead us to make wrong or sub-optimal decisions in managing our business, and this could have a material adverse effect on our business, financial condition or results of operations.
We may have exposure to tax liabilities that are larger than we anticipate.
The tax laws applicable to our business activities, including the laws of the United States, South Dakota and other jurisdictions, are subject
to interpretation and may change over time. From time to time, legislative initiatives, such as proposals for fundamental federal tax reform and corporate tax rate changes, which may impact our effective tax rate and could adversely affect our
deferred tax assets or our tax positions or liabilities. The taxing authorities in the jurisdictions in which we operate may challenge our tax positions, which could increase our effective tax rate and harm our financial position and results of
operations. In addition, our future income taxes could be adversely affected by earnings being higher than anticipated in jurisdictions that have higher statutory tax rates or by changes in tax laws, regulations or accounting principles. We are
subject to audit and review by U.S. federal and state tax authorities. Any adverse outcome of such a review or audit could have a negative effect on our financial position and results of operations. In addition, the determination of our provision
for income taxes and other liabilities requires significant judgment by management. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and could have a
material adverse effect on our financial results in the period or periods for which such determination is made.
Fulfilling our
public company financial reporting and other regulatory obligations will be expensive and time consuming and may strain our resources.
As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act,
and will be required to implement specific corporate governance practices and adhere to a variety of reporting requirements under the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, and the related rules and regulations of the SEC, as well as the
rules of the NYSE. The Exchange Act will require us to file
40
annual, quarterly and current reports with respect to our business and financial condition. Sarbanes-Oxley will require, among other things, that we maintain effective disclosure controls and
procedures and internal control over financial reporting. Compliance with these requirements will place significant additional demands on our legal, accounting and finance staff and on our accounting, financial and information systems and will
increase our legal and accounting compliance costs as well as our compensation expense as we may be required to hire additional accounting, tax, finance and legal staff. As a public company we may also need to enhance our investor relations and
corporate communications functions and attract additional qualified board members. These additional efforts may strain our resources and divert management’s attention from other business concerns, which could have a material adverse effect on
our business, financial condition or results of operations.
In accordance with Section 404 of Sarbanes-Oxley, our management will be
required to conduct an annual assessment of the effectiveness of our internal control over financial reporting and include a report on these internal controls in the annual reports we will file with the SEC on Form 10-K. Our independent registered
public accounting firm will not be required to formally attest to the effectiveness of our internal controls until the later of the year following the first annual report required to be filed with the SEC and the date on which we are no longer an
“emerging growth company.” When required, this process will require significant documentation of policies, procedures and systems, review of that documentation by our internal auditing and accounting staff and our outside independent
registered public accounting firm, and testing of our internal control over financial reporting by our internal auditing and accounting staff and our outside independent registered public accounting firm. This process will involve considerable time
and attention, may strain our internal resources, and will increase our operating costs. We may experience higher than anticipated operating expenses and outside auditor fees during the implementation of these changes and thereafter. If our
independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the
market price of our common stock could be negatively affected, and we could become subject to investigations by the NYSE, the SEC or other regulatory authorities, which could require additional financial and management resources.
We are in the process of reviewing our internal control over financial reporting and are establishing formal policies, processes and practices
related to financial reporting and to the identification of key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas and controls within our organization. If we are not able to implement the
requirements of Section 404 in a timely and capable manner, we may be subject to adverse regulatory consequences and there could be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of
our financial statements. This could have a material adverse effect on business, financial condition or results of operations.
The
financial reporting resources we have put in place may not be sufficient to ensure the accuracy of the additional information we are required to disclose as a publicly listed company.
As a result of this offering, we will transition from being a wholly owned subsidiary of a large publicly listed entity to becoming a publicly
listed company in our own right. As such we are now subject to the heightened financial reporting standards under GAAP and SEC rules, including more extensive levels of disclosure, which require enhancements to the design and operation of our
internal control over financial reporting. In the process of preparing additional disclosures required by the SEC for public companies contained within our consolidated financial statements under these heightened requirements in connection with this
offering, during the third quarter of fiscal 2014, we have identified a material weakness in the design and operation of our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. The material weakness identified resulted from the fact that
we did not have sufficient financial reporting and accounting staff with appropriate training and experience in GAAP and SEC rules and regulations assisting in the preparation and review of our consolidated financial statements. As such, our
controls over financial reporting were not operating effectively.
41
We have initiated a number of steps and plan to continue to implement measures designed to
improve our internal controls over financial reporting. We have contracted with two independent consulting firms to assist us in the preparation of our consolidated financial statements, and we plan to hire and utilize additional experienced,
qualified personnel within our financial reporting function in the future to assist with the preparation and review of future financial statements. Management continues to evaluate the design and operating effectiveness of these changes to our
control environment and we believe that further reporting periods, including a full year end reporting cycle, are required to confirm the remediation of the previously identified material weakness as well as the ongoing effectiveness of the revised
control environment. We therefore cannot assure you that we will be successful in implementing these measures or that these measures will significantly improve or remediate the material weakness identified in the design and operating effectiveness
of our internal control over financial reporting. The measures that we are seeking to implement may be insufficient to identify or prevent our existing material weakness or identify or prevent additional deficiencies in the design and operation of
our internal control over financial reporting.
If we fail to remediate our existing material weakness or we are unable to meet the
demands that will be placed upon us as a public company, including the requirements of Sarbanes-Oxley, we may be unable to accurately report our financial results, or report them within the timeframes required by law or stock exchange regulations.
Failure to comply with Sarbanes-Oxley, when and as applicable, could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities. Under such circumstances, we cannot assure you that we will be able to
implement the necessary internal controls in a timely manner, or at all, or that in the future, material weaknesses will not exist or otherwise be discovered. If our efforts to implement the improvements are not successful, or if material weaknesses
or other deficiencies occur, our ability to accurately and timely report our financial position could be impaired, which could result in late filings of our annual and quarterly reports under the Exchange Act, restatements of our consolidated
financial statements, a decline in our stock price, suspension or delisting of our common stock from the NYSE, and could have a material adverse effect on our business, results of operations or financial condition. Even if we are able to report our
financial statements accurately and in a timely manner, any failure in our efforts to implement the improvements or disclosure of material weaknesses in our future filings with the SEC could cause our reputation to be harmed and our stock price to
decline significantly.
We have not performed an evaluation of our internal control over financial reporting, as contemplated by
Section 404 of Sarbanes-Oxley, nor have we engaged our independent registered public accounting firm to perform an audit of our internal control over financial reporting as of any balance sheet date reported in our financial statements. Had we
performed such an evaluation or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional control deficiencies, including additional material weaknesses and significant
deficiencies, may have been identified. In addition, the JOBS Act provides that, so long as we qualify as an “emerging growth company,” we will be exempt from the provisions of Section 404(b) of Sarbanes-Oxley, which would require
that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting. We may take advantage of this exemption so long as we qualify as an “emerging growth
company.”
We are an emerging growth company within the meaning of the Securities Act, and if we decide to take advantage of
certain exemptions from various reporting and other requirements applicable to emerging growth companies, our common stock could be less attractive to investors.
For as long as we remain an “emerging growth company,” as defined in the JOBS Act, we will have the option to take advantage of
certain exemptions from various reporting and other requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of
Section 404 of Sarbanes-Oxley, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and
stockholder approval of any golden parachute payments not previously approved. We may take advantage of these and other exemptions until we are
42
no longer an emerging growth company. Further, the JOBS Act allows us to present only two years of audited financial statements and only two years of related management’s discussion and
analysis of financial condition and results of operations and provide less than five years of selected financial data in this prospectus.
The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B)
of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or
revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Our decision to opt out of the extended transition period is irrevocable.
We will remain an emerging growth company until the earliest of (i) the end of the fiscal year during which we have total annual gross
revenues of $1.0 billion or more, (ii) the end of the fiscal year following the fifth anniversary of the completion of this offering, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in
non-convertible debt and (iv) the end of the fiscal year in which the market value of our equity securities that are held by non-affiliates exceeds $700 million as of June 30 of that year.
We are subject to environmental liability risk associated with our bank branches and any real estate collateral we acquire upon
foreclosure.
During the ordinary course of business, we may foreclose on and take title to properties securing certain loans that
we have originated or acquired. We also have an extensive branch network, owning separate branch locations throughout the areas we serve. For any real property that we may possess, there is a risk that hazardous or toxic substances could be found on
these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage and costs of complying with applicable environmental regulatory requirements. Failure to comply
with such requirements can result in penalties. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition,
future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Environmental reviews of real property before initiating foreclosure actions may not be
sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, financial condition or results of
operations.
We may be alleged to have infringed upon intellectual property rights owned by others, or may be unable to protect our
intellectual property.
Competitors or other third parties may allege that we, or consultants or other third parties retained or
indemnified by us, infringe on their intellectual property rights. We also may face allegations that our employees have misappropriated intellectual property of their former employers or other third parties. Given the complex, rapidly changing and
competitive technological and business environment in which we operate, and the potential risks and uncertainties of intellectual property-related litigation, an assertion of an infringement claim against us may cause us to spend significant amounts
to defend the claim (even if we ultimately prevail); to pay significant money damages; to lose significant revenues; to be prohibited from using the relevant systems, processes, technologies or other intellectual property; to cease offering certain
products or services or to incur significant license, royalty or technology development expenses. Moreover, it has become common in recent years for individuals and groups to purchase intellectual property assets for the sole purpose of making
claims of infringement and attempting to extract settlements from companies like ours. Even in instances where we believe that claims and allegations of intellectual property infringement against us are without merit, defending against such claims
is time consuming and expensive and could result in the diversion of time and attention of our management and employees. In addition, although in some cases a third party may have agreed to indemnify us for such costs, such indemnifying party may
refuse, or be unable, to uphold its contractual obligations.
43
Moreover, we rely on a variety of measures to protect our intellectual property and proprietary
information, including copyrights, trademarks, patents and controls on access and distribution. These measures may not prevent misappropriation or infringement of our intellectual property or proprietary information and a resulting loss of
competitive advantage, and in any event, we may be required to litigate to protect our intellectual property and proprietary information from misappropriation or infringement by others, which is expensive, could cause a diversion of resources and
may not be successful. Third parties may challenge, invalidate or circumvent our intellectual property, or our intellectual property may not be sufficient to provide us with competitive advantages. In addition, the usage of branding that could be
confused with ours could create negative perceptions and risks to our brand and reputation. Our competitors or other third parties may independently design around or develop technology similar to ours or otherwise duplicate our services or products
such that we could not assert our intellectual property rights against them. In addition, our contractual arrangements may not effectively prevent disclosure of our intellectual property or confidential and proprietary information or provide an
adequate remedy in the event of an unauthorized disclosure.
We may be subject to claims and litigation pertaining to our fiduciary
responsibilities.
Some of the services we provide, such as trust and investment services, require us to act as fiduciaries for our
customers and others. From time to time, third parties make claims and take legal action against us pertaining to the performance of our fiduciary responsibilities. If these claims and legal actions are not resolved in a manner favorable to us, we
may be exposed to significant financial liability or our reputation could be damaged. Either of these results may adversely impact demand for our products and services or otherwise have a material adverse effect on our business, financial condition
or results of operations.
Changes in our accounting policies or in accounting standards could materially affect how we report our
financial results and condition.
From time to time, the Financial Accounting Standards Board, or the FASB, and SEC change the
financial accounting and reporting standards that govern the preparation of our financial statements. As a result of changes to financial accounting or reporting standards, whether promulgated or required by the FASB or other regulators, we could be
required to change certain of the assumptions or estimates we have previously used in preparing our financial statements, which could negatively impact how we record and report our results of operations and financial condition generally. For
additional information on the key areas for which assumptions and estimates are used in preparing our financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting
Policies and the Impact of Accounting Estimates.”
Risks Related to the Regulatory Oversight of Our Business
The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may
have a significant adverse effect on our operations.
The banking industry is extensively regulated and supervised under both
federal and state laws and regulations that are intended primarily for the protection of depositors, customers, federal deposit insurance funds and the banking system as a whole, not for the protection of our stockholders and creditors. We are
subject to regulation and supervision by the Board of Governors of the Federal Reserve System, or the Federal Reserve, and our bank is subject to regulation and supervision by the FDIC and the Division of Banking of the South Dakota Department of
Labor and Regulation, or the South Dakota Division of Banking. The laws and regulations applicable to us govern a variety of matters, including permissible types, amounts and terms of loans and investments we may make, the maximum interest rate that
may be charged, the amount of reserves we must hold against deposits we take, the types of deposits we may accept and the rates we may pay on such deposits, maintenance of adequate capital and liquidity, changes in the control of us and our bank,
restrictions on dividends and establishment of new offices. We must obtain approval from our regulators before engaging in certain activities, and there can be no assurance that any regulatory approvals we may require will be obtained, either in a
timely manner or at all. Our regulators also
44
have the ability to compel us to, or restrict us from, taking certain actions entirely, such as actions that our regulators deem to constitute an unsafe or unsound banking practice. Our failure
to comply with any applicable laws or regulations, or regulatory policies and interpretations of such laws and regulations, could result in sanctions by regulatory agencies, civil money penalties or damage to our reputation, all of which could have
a material adverse effect our business, financial condition or results of operations.
Since the recent financial crisis, federal and
state banking laws and regulations, as well as interpretations and implementations of these laws and regulations, have undergone substantial review and change. In particular, the Dodd-Frank Act drastically revised the laws and regulations under
which we operate. Financial institutions generally have also been subjected to increased scrutiny from regulatory authorities. These changes and increased scrutiny may result in increased costs of doing business, decreased revenues and net income,
may reduce our ability to effectively compete to attract and retain customers, or make it less attractive for us to continue providing certain products and services. Any future changes in federal and state law and regulations, as well as the
interpretations and implementations of such laws and regulations, could affect us in substantial and unpredictable ways, including those listed above or other ways that could have a material adverse effect on our business, financial condition or
results of operations.
We will be subject to heightened regulatory requirements if we exceed $10 billion in assets.
Based on our historic organic growth rates, we expect that our total assets and our bank’s total assets could exceed $10 billion over the
next two to five years, or sooner if we engage in any acquisitions. The Dodd-Frank Act and its implementing regulations impose various additional requirements on bank holding companies with $10 billion or more in total assets, including compliance
with portions of the Federal Reserve’s enhanced prudential oversight requirements and annual stress testing requirements. In addition, banks with $10 billion or more in total assets are primarily examined by the Consumer Financial Protection
Bureau, or CFPB, with respect to various federal consumer financial protection laws and regulations. Currently, our bank is subject to regulations adopted by the CFPB, but the FDIC is primarily responsible for examining our bank’s compliance
with consumer protection laws and those CFPB regulations. As a relatively new agency with evolving regulations and practices, there is uncertainty as to how the CFPB’s examination and regulatory authority might impact our business.
Compliance with these requirements may necessitate that we hire additional compliance or other personnel, design and implement additional
internal controls, or incur other significant expenses, any of which could have a material adverse effect on our business, financial condition or results of operations. Compliance with the annual stress testing requirements, part of which must be
publicly disclosed, may also be misinterpreted by the market generally or our customers and, as a result, may adversely affect our stock price or our ability to retain our customers or effectively compete for new business opportunities. To ensure
compliance with these heightened requirements when effective, our regulators may require us to fully comply with these requirements or take actions to prepare for compliance even before our or our bank’s total assets equal or exceed $10
billion. As a result, we may incur compliance-related costs before we might otherwise be required, including if we do not continue to grow at the rate we expect or at all. Our regulators may also consider our preparation for compliance with these
regulatory requirements when examining our operations generally or considering any request for regulatory approval we may make, even requests for approvals on unrelated matters.
We continue to be subject to regulation and supervision as a subsidiary of NAB.
As long as we continue to be controlled by NAB for purposes of the BHC Act, NAB’s regulatory status may impact our regulatory status and
hence our ability to expand by acquisition or engage in new activities. For example, unsatisfactory examination ratings or enforcement actions regarding NAB could impact our ability or preclude us from obtaining any necessary approvals or informal
clearance for the foregoing. Furthermore, to the extent that we are required to obtain regulatory approvals under the BHC Act to make acquisitions or expand our activities, as long as NAB controls us, NAB would also be required to obtain BHC Act
approvals for such acquisitions or activities as well. In addition, because we will continue to be partially owned by NAB for a period
45
of time following completion of this offering, we are also subject to indirect regulation and supervision by APRA through APRA’s broad powers to give legally enforceable directions to NAB in
certain circumstances. See “Supervision and Regulation—Regulatory Impact of Control by NAB” for more information.
We
are required to act as a source of financial and managerial strength for our bank in times of stress.
Under federal law and
longstanding Federal Reserve policy, we are expected to act as a source of financial and managerial strength to our bank, and to commit resources to support our bank if necessary. We may be required to commit additional resources to our bank at
times when we may not be in a financial position to provide such resources or when it may not be in our, or our stockholders’ or creditors’, best interests to do so. Providing such support is more likely during times of financial stress
for us and our bank, which may make any capital we are required to raise to provide such support more expensive than it might otherwise be. In addition, any capital loans we make to our bank are subordinate in right of payment to depositors and to
certain other indebtedness of our bank. In the event of our bankruptcy, any commitment by us to a federal banking regulator to maintain the capital of our bank will be assumed by the bankruptcy trustee and entitled to priority of payment.
We may be subject to more stringent capital requirements in the future.
We are subject to regulatory requirements specifying minimum amounts and types of capital that we must maintain. From time to time, the
regulators change these regulatory capital adequacy guidelines. If we fail to meet these minimum capital guidelines and other regulatory requirements, we or our subsidiaries may be restricted in the types of activities we may conduct and we may be
prohibited from taking certain capital actions, such as paying dividends and repurchasing or redeeming capital securities.
In particular,
the capital requirements applicable to us under the recently adopted capital rules implementing the Basel III capital framework in the United States will begin to be phased-in starting in 2015. Once these new rules take effect, we will be required
to satisfy additional, more stringent, capital adequacy standards than we have in the past. In addition, if we become subject to annual stress testing requirements, our stress test results may have the effect of requiring us to comply with even
greater capital requirements. While we expect to meet the requirements of the new Basel III-based capital rules, we may fail to do so. In addition, these requirements could have a negative impact on our ability to lend, grow deposit balances, make
acquisitions or make capital distributions in the form of dividends or share repurchases. Higher capital levels could also lower our return on equity.
Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments
or other requirements resulting in increased expenses or restrictions on our business activities.
Our business is subject to
increased litigation and regulatory risks as a result of a number of factors, including the highly regulated nature of the financial services industry and the focus of state and federal prosecutors on banks and the financial services industry
generally. This focus has only intensified since the recent financial crisis, with regulators and prosecutors focusing on a variety of financial institution practices and requirements, including foreclosure practices, compliance with applicable
consumer protection laws (including, in foreign jurisdictions, products similar to our fixed-term tailored business loan products), classification of held for sale assets and compliance with anti-money laundering statutes, the Bank Secrecy Act and
sanctions imposed by the Office of Foreign Assets Control of the U.S. Department of the Treasury.
In the normal course of business, from
time to time, we are or have been named as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our business activities. Certain of the legal actions included claims for
substantial compensatory or punitive damages or claims for indeterminate amounts of damages. In addition, while the arbitration provisions in certain of our customer agreements historically have limited our exposure to consumer class action
litigation, there can be no assurance that we will be successful in enforcing our arbitration clause in the future. We may also, from time to
46
time, be the subject of subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding our business. Any such legal or
regulatory actions may subject us to substantial compensatory or punitive damages, significant fines, penalties, obligations to change our business practices or other requirements resulting in increased expenses, diminished income and damage to our
reputation. Our involvement in any such matters, even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management attention from the operation of our business. Further, any
settlement, consent order or adverse judgment in connection with any formal or informal proceeding or investigation by government agencies may result in litigation, investigations or proceedings as other litigants and government agencies begin
independent reviews of the same activities. As a result, the outcome of legal and regulatory actions could be material to our business, results of operations, financial condition and cash flows depending on, among other factors, the level of our
earnings for that period, and could have a material adverse effect on our business, financial condition or results of operations.
Increases in FDIC insurance premiums may adversely affect our earnings.
Our bank’s deposits are insured by the FDIC up to legal limits and, accordingly, our bank is subject to FDIC deposit insurance
assessments. We generally cannot control the amount of premiums our bank will be required to pay for FDIC insurance. Once our bank exceeds $10 billion in assets, the method for calculating its FDIC assessments will change and we expect our
bank’s FDIC assessments will increase as a result. See “Supervision and Regulation—Deposit Insurance.” In addition, the FDIC recently increased the deposit insurance fund’s target reserve ratio to 2.0% of insured deposits
following the Dodd-Frank Act’s elimination of the 1.5% cap on the insurance fund’s reserve ratio and has put in place a restoration plan to restore the deposit insurance fund to its 1.35% minimum reserve ratio mandated by the Dodd-Frank
Act by September 30, 2020. Additional increases in assessment rates may be required in the future to achieve this targeted reserve ratio. In addition, higher levels of bank failures in recent years and increases in the statutory deposit
insurance limits have increased resolution costs to the FDIC and put pressure on the deposit insurance fund. In response, the FDIC increased assessment rates on insured institutions, charged a special assessment to all insured institutions as of
June 30, 2009, and required banks to prepay three years’ worth of premiums on December 30, 2009. If there are additional financial institution failures, our bank may be required to pay even higher FDIC insurance premiums than the
recently increased levels, or the FDIC may charge additional special assessments. Future increases of FDIC insurance premiums or special assessments could have a material adverse effect on our business, financial condition or results of operations.
We are subject to the CRA and fair lending laws, and our failure to comply with these laws could lead to material penalties.
The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose
nondiscriminatory lending requirements on financial institutions. The U.S. Department of Justice and other federal agencies are responsible for enforcing these laws and regulations. A successful challenge to an institution’s performance under
the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on mergers and acquisitions activity and
restrictions on expansion. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. The costs of defending, and any adverse outcome from, any such challenge
could damage our reputation or could have a material adverse effect on our business, financial condition or results of operations.
Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and
use personal information and adversely affect our business opportunities.
We are subject to various privacy, information security
and data protection laws, including requirements concerning security breach notification, and we could be negatively impacted by these laws. For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things:
(i) imposes certain limitations on
47
our ability to share nonpublic personal information about our customers with nonaffiliated third parties; (ii) requires that we provide certain disclosures to customers about our information
collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by us with nonaffiliated third parties (with certain exceptions) and (iii) requires we develop, implement and maintain a
written comprehensive information security program containing safeguards appropriate based on our size and complexity, the nature and scope of our activities, and the sensitivity of customer information we process, as well as plans for responding to
data security breaches. Various state and federal banking regulators and states have also enacted data security breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in certain
circumstances in the event of a security breach. Moreover, legislators and regulators in the United States are increasingly adopting or revising privacy, information security and data protection laws that potentially could have a significant impact
on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer or employee information, and some of our current or planned business activities.
This could also increase our costs of compliance and business operations and could reduce income from certain business initiatives. This includes increased privacy-related enforcement activity at the federal level, by the Federal Trade Commission,
as well as at the state level, such as with regard to mobile applications.
Compliance with current or future privacy, data protection and
information security laws (including those regarding security breach notification) affecting customer or employee data to which we are subject could result in higher compliance and technology costs and could restrict our ability to provide certain
products and services, which could have a material adverse effect on our business, financial conditions or results of operations. Our failure to comply with privacy, data protection and information security laws could result in potentially
significant regulatory or governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could have a material adverse effect on our business, financial condition or results of operations.
Our use of third party vendors and our other ongoing third party business relationships are subject to increasing regulatory
requirements and attention.
We regularly use third party vendors as part of our business. We also have substantial ongoing
business relationships with other third parties. These types of third party relationships are subject to increasingly demanding regulatory requirements and attention by our federal bank regulators. Recent regulation requires us to enhance our due
diligence, ongoing monitoring and control over our third party vendors and other ongoing third party business relationships. In certain cases we may be required to renegotiate our agreements with these vendors to meet these enhanced requirements,
which could increase our costs. We expect that our regulators will hold us responsible for deficiencies in our oversight and control of our third party relationships and in the performance of the parties with which we have these relationships. As a
result, if our regulators conclude that we have not exercised adequate oversight and control over our third party vendors or other ongoing third party business relationships or that such third parties have not performed appropriately, we could be
subject to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines as well as requirements for customer remediation, any of which could have a material adverse effect our business, financial
condition or results of operations.
Risks Related to Our FDIC-Assisted Acquisition of TierOne Bank
Our bank has purchased certain assets and assumed certain liabilities of TierOne Bank in an FDIC-assisted transaction.
On June 4, 2010, our bank acquired certain assets and assumed certain liabilities of TierOne Bank from the FDIC in an assisted
transaction, which could present additional risks to our business. Although this transaction provides for FDIC assistance to our bank to mitigate certain risks, such as sharing exposure to loan losses and providing indemnification against certain
liabilities of the former TierOne Bank, we are still subject to some of
48
the same risks we face in acquiring another bank in a negotiated transaction, including risks associated with maintaining customer relationships and failure to realize the anticipated acquisition
benefits in the amounts and within the timeframes we expect.
Our decisions regarding the fair value of assets acquired and our
estimated loss-sharing indemnification asset may be inaccurate.
We make various assumptions and judgments about the collectability
of acquired loan portfolios, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of secured loans. In the FDIC-assisted transaction, we recorded a fair value
adjustment and a related loss-sharing indemnification asset, representing 80% of expected credit losses. We have subsequently analyzed the portfolio on a regular basis, taking into account historical loss experience, volume and classification of
loans, volume and trends in delinquencies and nonaccruals, local economic conditions and other pertinent information. As a result of these analyses, we have recorded allowance for loan losses, partially offset by additional indemnification assets,
to address subsequent impairment in certain loans and pools of loans. While we believe that our current levels of fair value adjustments and allowance for loan losses are adequate to absorb future losses that may occur in the acquired loan
portfolio, if our assumptions are incorrect, our actual losses could be higher than estimated and increased loss reserves may be needed to respond to different economic conditions or adverse developments in the acquired loan portfolio. Any increase
in future loan losses could have a material adverse effect on our business, financial condition or results of operations.
Our
ability to obtain reimbursement under the loss-sharing agreements on covered assets depends on our compliance with the terms of the loss-sharing agreements.
The loss-sharing agreements contain specific terms and conditions regarding the management of the covered assets that our bank must follow to
receive reimbursement on losses from the FDIC. As of June 30, 2014, $259.7 million of loans and $14.0 million of OREO was eligible for reimbursement to our bank. Under the loss-sharing agreements, our bank must, among other things:
|
|
•
|
|
manage and administer the covered assets in a manner consistent with its usual and prudent business and banking practices and, with respect to single family shared-loss loans, the procedures (including collection
procedures) customarily employed by our bank in servicing and administering mortgage loans for its own account and the servicing procedures established by FNMA or the Federal Home Loan Mortgage Corporation, as in effect from time to time, and in
accordance with accepted mortgage servicing practices of prudent lending institutions;
|
|
|
•
|
|
exercise its best judgment in managing, administering and collecting amounts on covered assets;
|
|
|
•
|
|
use commercially reasonable efforts to maximize recoveries with respect to losses on single family shared-loss assets and best efforts to maximize collections with respect to commercial shared-loss assets;
|
|
|
•
|
|
retain sufficient staff to perform the duties under the loss-sharing agreements;
|
|
|
•
|
|
adopt and implement accounting, reporting, record-keeping and similar systems with respect to the commercial shared-loss assets;
|
|
|
•
|
|
comply with the terms of the modification guidelines approved by the FDIC or another federal agency for any single-family shared-loss loan;
|
|
|
•
|
|
provide notice with respect to proposed transactions pursuant to which a third party or affiliate will manage, administer or collect any commercial shared-loss assets;
|
|
|
•
|
|
file monthly and quarterly certificates with the FDIC specifying the amount of losses, charge-offs and recoveries;
|
|
|
•
|
|
undergo periodic reviews by the FDIC and their agents to assess our bank’s operations and compliance with these requirements; and
|
49
|
|
•
|
|
maintain books and records sufficient to ensure and document compliance with the terms of the loss- sharing agreements.
|
The terms of the loss-sharing agreements are extensive and failure to comply with any of the guidelines could result in a specific asset or
group of assets permanently losing their loss-sharing coverage. No assurances can be given that we will manage the covered assets in such a way as to always maintain loss-sharing coverage on all such assets and fully recover the value of our
loss-sharing asset, and any loss-sharing coverage could have a material adverse effect on our business, financial condition or results of operations.
Risks Related to Our Controlling Stockholder
NAB will continue to have significant control over us following the completion of this offering, and its interests may conflict with ours
or yours in the future.
Immediately following this offering, NAB will indirectly beneficially own approximately
% of our common stock (or % if the underwriters’ option to purchase additional shares of common stock is exercised in full). As a result, NAB will have significant control over us. Going forward,
NAB’s degree of control will depend on, among other things, its level of ownership of our common stock and its ability to exercise certain rights under the terms of the Stockholder Agreement that we will enter into with NAB in connection with
this offering.
Under the Stockholder Agreement, NAB will be entitled to designate nominees for election to our board of directors (the
number of which will depend on its level of ownership) and make certain appointments to committees of our board. For so long as NAB controls more than 50% of our outstanding common stock, it will be able to determine the outcome of all matters
requiring approval of stockholders, cause or prevent a change of control of our company and preclude all unsolicited acquisitions of our company, including transactions that may be in the best interests of our stockholders. Further, for the period
following the completion of this offering until the one-year anniversary of the date when NAB ceases to directly or indirectly beneficially own 50% of our outstanding common stock, NAB will have the right to designate a majority of the nominees for
election to our board of directors. In addition, for so long as NAB continues to control us for purposes of the BHC Act, we will still be required to obtain NAB’s prior written approval before undertaking (or permitting or authorizing any of
our subsidiaries to undertake) various significant corporate actions, including engaging in certain business activities, entrance into mergers or consolidations, entrance into amendments to or terminations of material agreements, issuance of capital
stock (subject to certain exceptions), incurrence or guarantee of indebtedness in excess of certain thresholds (subject to certain exceptions), termination of our or our bank’s Chief Executive Officer or Chief Financial Officer (other than for
cause) and certain other significant transactions. NAB’s concentration of voting power and veto rights could deprive stockholders of an opportunity to receive a premium for their shares of common stock as part of a sale of our company, and
could affect the market price of our common stock. In addition, NAB’s interests may differ from our interests or those of our other stockholders, and NAB may affect the management of our business or may not exercise its voting power or consent
rights in a manner favorable to our other stockholders. See “Our Relationship with NAB and Certain Other Related Party Transactions—Relationship with NAB—Stockholder Agreement.” We will also continue to be subject to the
regulatory supervision applicable to NAB and companies under its control. See “—Risks Related to the Regulatory Oversight of Our Business.” Accordingly, NAB’s control over us and the consequences of such control could have a
material adverse effect on our business and business prospects and negatively impact the trading price of our common stock.
We may
fail to replicate or replace functions, systems and infrastructure provided by NAB before this offering, and NAB may fail to perform the services provided for in the Transitional Services Agreement.
Although, historically, we have operated largely as a standalone company without significant services being received from NAB, NAB has provided
certain financial, personnel and administrative support to us. Following this offering, NAB will have no obligation to provide any support to us other than the limited services that will
50
be provided pursuant to a Transitional Services Agreement described in “Our Relationship with NAB and Certain Other Related Party Transactions—Relationship with NAB—Transitional
Services Agreement.” Under this agreement, NAB has agreed to continue to provide us with certain services currently provided to us by NAB for the applicable transitional period, including continuing to act as a counterparty to us on interest
rate swaps and providing fair value calculations related to specified loans and interest rate swaps consistent with past practice, access to certain reporting systems and applications, certain risk, credit rating and tax oversight currently provided
to us by NAB and certain insurance coverage under NAB’s group-wide insurance policies, for a period of time following the offering. NAB has also agreed to continue to provide us with access to NAB systems required for us to continue reporting
to NAB financial and other information consistent with our status immediately following this offering as a consolidated NAB subsidiary. We currently expect to incur aggregate annual costs of approximately $1.8 million for all services provided by
NAB under the Transitional Services Agreement, though our actual costs may vary. We do not intend to enter into transitional arrangements with NAB concerning other services necessary in connection with our transition to operation as a public company
which have not historically been provided to us by NAB, such as external financial reporting, external communications or investor relations services.
We are currently expanding our infrastructure to replicate or replace the services provided by NAB under the Transitional Services Agreement
that we will continue to need in the operation of our business following the termination of that agreement. Although we have negotiated the terms of the Transitional Services Agreement on an arms’-length basis, we cannot assure you that we
could obtain these services at the same or better levels or at the same or lower costs from third party providers. As a result, when NAB ceases providing these services to us, either as a result of the termination of the Transitional Services
Agreement or a failure by NAB to perform its obligations under the Transitional Services Agreement, our costs of procuring these services or comparable replacement services may increase, may result in service interruptions and may divert management
attention from other aspects of our operations. In particular, our cost of procuring insurance coverage for our business could increase following the termination of the Transitional Services Agreement as we lose the ability to leverage NAB’s
relationships with insurance providers. While we do not expect any increase in cost associated with replicating and replacing services provided to us under the Transitional Services Agreement to be material, there is a risk that these costs could
have a material adverse effect on our business, financial condition or results of operations.
As long as NAB owns a majority of our
common stock, we will rely on certain of the exemptions from the corporate governance requirements of the NYSE available for “controlled companies.”
Upon the completion of this offering, we will be a “controlled company” within the meaning of the corporate governance listing
standards of the NYSE because NAB will continue to own more than 50% of our outstanding common stock. A controlled company may elect not to comply with certain corporate governance requirements of the NYSE. Consistent with this, the Stockholder
Agreement will provide that, so long as we are a controlled company, we will not be required to comply with the requirements to have a majority of independent directors or to have the corporate governance and nominating committee and compensation
committee of our board of directors consist entirely of independent directors. Upon completion of this offering, as many as six of our nine directors, including at least one member of each of the corporate governance and nominating committee and
compensation committee of our board of directors may not qualify as “independent directors” under the applicable rules of the NYSE. As a result, you will not have certain of the protections afforded to stockholders of companies that are
subject to all of the corporate governance requirements of the NYSE.
NAB may not complete the divestiture of our common stock that
it owns as planned or at all.
On August 29, 2014 in Australia, NAB announced that it intends to divest itself of our bank,
consistent with its strategy of focusing on its core Australian and New Zealand franchise. This offering of shares of our common stock by the NAB selling stockholder,
representing % of its ownership interest in our outstanding
51
capital stock, is the first stage of NAB’s planned divestment. After the completion of this offering, NAB will beneficially own % of our outstanding common stock (or
% if the underwriters’ option to purchase additional shares of common stock from the NAB selling stockholder is exercised in full).
Although NAB has indicated that it intends to divest 100% of its ownership in our company over time, subject to market conditions and other
considerations, it may not be able to do so. Any delay by NAB in completing, or uncertainty about its ability or intention to complete, the divestiture of our common stock that it owns on the planned timetable, on the contemplated terms (including
at the contemplated capital and liquidity levels), or at all, could have a material adverse effect on our company and the market price for our common stock.
Conflicts of interest and other disputes may arise between NAB and us that may be resolved in a manner unfavorable to us and our other
stockholders.
Conflicts of interest and other disputes may arise between NAB and us in connection with our past and ongoing
relationships, and any future relationships we may establish in a number of areas, including, but not limited to, the following:
|
|
•
|
|
Contractual Arrangements
. We intend to enter into several agreements with NAB prior to the completion of this offering that will provide a framework for our ongoing relationship with NAB, including a Stockholder
Agreement, Transitional Services Agreement and Registration Rights Agreement. The Stockholder Agreement will provide NAB with certain governance rights, including board and committee membership rights, and approval rights over our business, as well
as obligate us to comply with certain covenants including certain information rights, access privileges and confidentiality matters. For example, we will be required to obtain the written consent of NAB prior to engaging in certain acquisitions and
similar transactions, acquiring or disposing of assets, liabilities or securities with a value in excess of $5 million or entering into, terminating or modifying a material contract, among other matters relating to our business and structure. The
Transitional Services Agreement will govern the continued provision of certain services to us by NAB for specified transition periods. The Registration Rights Agreement will govern our obligation to register shares of our common stock beneficially
owned by NAB under certain circumstances following this offering. Disagreements regarding the rights and obligations of NAB or us under each of these agreements could create conflicts of interest for certain of our directors and officers, as well as
actual disputes that may be resolved in a manner unfavorable to us and our other stockholders. Interruptions to or problems with services provided under the Transitional Services Agreement could result in conflicts between us and NAB that increase
our costs both for the processing of business and the potential remediation of disputes. Although we believe each of these agreements contains commercially reasonable terms, the terms of these agreements may later prove not to be in the best
interests of our future stockholders or may contain terms more or less favorable than we could obtain from third parties. In addition, certain of our officers negotiating these agreements may appear to have conflicts of interest as a result of their
current employment with NAB, although we intend to enter into employment agreements with these individuals that will become effective upon the completion of this offering. For a detailed description of these agreements, see “Our Relationship
with NAB and Certain Other Related Party Transactions—Relationship with NAB.”
|
|
|
•
|
|
Competing Business Activities.
In the ordinary course of its business, NAB may also engage in activities where NAB’s interests conflict or
are competitive with our or our other stockholders’ interests. These activities may include NAB’s interests in any transactions it conducts with us (including any interest rate swaps we may enter into with NAB to manage the interest rate
risk associated with certain of our long-term fixed-rate loans), any exercise by NAB of its rights to register and sell additional stock under the Registration Rights Agreement, any sale by NAB of a controlling interest in us to a third party or,
subject to the terms of the Stockholder Agreement, any investments by NAB in, or business activities conducted by NAB for, one or more of our competitors. Any of these
|
52
|
|
disputes or conflicts of interests that arise may be resolved in a manner adverse to us or to our stockholders other than NAB and its affiliates. Subject to the non-competition restrictions
contained in the Stockholder Agreement, NAB also may pursue acquisition and other opportunities that may be part of or complementary to our business, and, as a result, those acquisition opportunities may not be available to us. As a result, our
future competitive position and growth potential could be adversely affected.
|
|
|
•
|
|
Cross Officerships, Directorships and Stock Ownership.
Those members of our board of directors nominated by NAB may have, or appear to have, conflicts of interest with respect to certain of our operations as a
result of any roles they may have as officers or employees of NAB or any of its affiliates or any investments or interests they may own in companies that compete with our business. The ownership interests of our directors or executive officers in
the common stock of NAB could create, or appear to create, conflicts of interest when directors and executive officers are faced with decisions that could have different implications for the two companies. For example, these decisions could relate
to (i) the nature, quality and cost of services rendered to us by NAB, (ii) disagreement over the desirability of a potential business or acquisition opportunity or business plans, (iii) employee retention or recruiting or (iv) our dividend policy.
|
|
|
•
|
|
Business Opportunities.
Our Amended and Restated Certificate of Incorporation provides that, to the fullest extent permitted by law, none of NAB or any of its affiliates will have any duty to refrain from (i)
engaging in a corporate opportunity in the same or similar lines of business in which we or our affiliates now engage or propose to engage or (ii) otherwise competing with us or our affiliates. As a result of these charter provisions, our
future competitive position and growth potential could be adversely affected. See “Description of Capital Stock.”
|
These and other conflicts of interest and potential disputes could have a material adverse effect on our business, financial condition,
results of operations or on the market price of our common stock.
Risks Related to Our Common Stock
No prior public market exists for our common stock, and one may not develop.
Before this offering, there has not been a public trading market for our common stock, and an active trading market may not develop or be
sustained after this offering. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price—or at all. The initial public offering price for our common stock sold in this
offering will be determined by negotiations among the selling stockholder and the underwriters. This price may not be indicative of the price at which our common stock will trade after this offering. The market price of our common stock may decline
below the initial offering price, and you may not be able to sell your common stock at or above the price you paid in this offering—or at all.
Our stock price may be volatile, and you could lose part or all of your investment as a result.
Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive. Our
stock price may fluctuate significantly in response to a variety of factors including, among other things:
|
|
•
|
|
actual or anticipated variations in our quarterly results of operations;
|
|
|
•
|
|
recommendations or research reports about us or the financial services industry in general published by securities analysts;
|
|
|
•
|
|
the failure of securities analysts to cover, or continue to cover, us after this offering;
|
|
|
•
|
|
operating and stock price performance of other companies that investors deem comparable to us;
|
|
|
•
|
|
news reports relating to trends, concerns and other issues in the financial services industry;
|
53
|
|
•
|
|
perceptions in the marketplace regarding us, our competitors or other financial institutions;
|
|
|
•
|
|
future sales of our common stock;
|
|
|
•
|
|
departure of our management team or other key personnel;
|
|
|
•
|
|
new technology used, or services offered, by competitors;
|
|
|
•
|
|
significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors;
|
|
|
•
|
|
failure to integrate acquisitions or realize anticipated benefits from acquisitions;
|
|
|
•
|
|
changes or proposed changes in laws or regulations, or differing interpretations thereof affecting our business, or enforcement of these laws and regulations;
|
|
|
•
|
|
litigation and governmental investigations; and
|
|
|
•
|
|
geopolitical conditions such as acts or threats of terrorism or military conflicts.
|
If any of
the foregoing occurs, it could cause our stock price to fall and may expose us to litigation that, even if our defense is successful, could distract our management and be costly to defend. General market fluctuations, industry factors and general
economic and political conditions and events—such as economic slowdowns or recessions, interest rate changes or credit loss trends—could also cause our stock price to decrease regardless of operating results.
We may not pay dividends on our common stock in the future.
Holders of our common stock are entitled to receive only such dividends as our board of directors may declare out of funds legally available
for such payments. Our board of directors may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment of dividends entirely. In addition, we are a bank holding company, and our ability to declare and pay
dividends is dependent on certain federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends. See “Dividend Policy and Dividends” and “Supervision and
Regulation—Dividends; Stress Testing.” As a consequence of these various limitations and restrictions, we may not be able to make, or may have to reduce or eliminate, the payment of dividends on our common stock. Any change in the level of
our dividends or the suspension of the payment thereof could have a material adverse effect on the market price of our common stock.
Future sales of our common stock in the public market, including expected sales by NAB, could lower our stock price, and any additional
capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.
The market price of our
common stock could decline as a result of sales of a large number of shares of our common stock available for sale after completion of this offering or from the perception that such sales could occur. These sales, or the possibility that these sales
may occur, also may make it more difficult for us to raise additional capital by selling equity securities in the future, at a time and price that we deem appropriate. Upon completion of this offering we will have a total of
outstanding shares of common stock. Of the outstanding shares, the shares sold in this offering (or
shares if the underwriters exercise their option to purchase additional shares in full) will be freely tradable without restriction or further registration under the Securities Act, except that any shares held by our affiliates, as that term is
defined under Rule 144 of the Securities Act, may be sold only in compliance with the limitations described in “Shares Eligible for Future Sale.”
The remaining shares outstanding (or
shares if the underwriters exercise their option to purchase additional shares in full) beneficially owned by NAB after this offering, will be subject to certain restrictions
on resale. We have agreed with the underwriters not to offer, pledge, sell, or otherwise dispose of or hedge any shares of our common stock, subject to certain exceptions, for the 180-day period following the date of this prospectus, without the
prior consent of Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. The selling stockholder and our officers and directors have entered into similar lock-up
54
agreements with the underwriters. The underwriters may, at any time, release us, the selling stockholder or any of our officers or directors from this lock-up agreement and allow us to sell
shares of our common stock within this 180-day period. In addition, any shares purchased through the directed share program described in this prospectus are subject to the same 180-day lockup period. See “Underwriting—No Sales of Similar
Securities.”
Upon the expiration of the lock-up agreements described above, all of such shares will be eligible for resale in a
public market, subject, in the case of shares held by our affiliates, to volume, manner of sale and other limitations under Rule 144. We expect that NAB will be considered an affiliate 180 days after this offering based on its expected share
ownership, as well as its rights under the Stockholder Agreement we intend to enter into with NAB prior to the completion of this offering.
We intend to enter into a registration rights agreement with NAB prior to the completion of this offering that will grant NAB demand and
“piggyback” registration rights with respect to the shares of our common stock that NAB will be holding following the completion of this offering. NAB may exercise its demand and piggyback registration rights at any time, subject to
certain limitations, and any shares of our common stock registered pursuant to NAB’s registration rights will be freely tradable in the public market, other than any shares acquired by any of our affiliates. NAB has announced that this offering
is the first stage of its planned divestment of its U.S. retail banking operations and that, subject to market conditions and other considerations, it intends to divest 100% of its ownership in our company over time.
As restrictions on resale end, the market price of our shares of common stock could drop significantly. The timing and manner of the sale of
NAB’s remaining ownership of our common stock remains uncertain, and we have no control over the manner in which NAB may seek to divest such remaining shares. NAB could elect to sell its common stock in a number of different ways, including in
a number of tranches via future registrations or, alternatively, by the sale of all or a significant tranche of such remaining shares to a single third party purchaser. Any such sale would impact the price of our shares of common stock and there can
be no guarantee that the price at which NAB is willing to sell its remaining shares will be at a level that our board of directors would be prepared to recommend to holders of our common stock or that you determine adequately values our shares of
common stock.
We also intend to file a registration statement to register
shares of our common stock for issuance pursuant to awards granted under our omnibus incentive plan that we plan to adopt in connection with this offering. We may increase the
number of shares registered for this purpose from time to time. Once we register and issue these shares, their holders will be able to sell them in the public market.
We cannot predict the size of future issuances or sales of our common stock or the effect, if any, that future issuances or sales of shares of
our common stock may have on the market price of our common stock. Sales or distributions of substantial amounts of our common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may
cause the market price of our common stock to decline. See “Shares Eligible for Future Sale.”
NAB may sell a controlling
interest in us to a third party in a private transaction, which may not lead to your realization of any change-of-control premium on shares of our common stock and may subject us to the control of a presently unknown third party.
Following the completion of this offering, NAB will continue to beneficially own a significant equity interest of our company. NAB will have
the ability, should it choose to do so, to sell some or all of its shares of our common stock in a privately negotiated transaction, which, if sufficient in size, could result in a change of control of our company.
The ability of NAB to privately sell its shares of our common stock, with no requirement for a concurrent offer to be made to acquire all of
the shares of our outstanding common stock that will be publicly traded
55
hereafter, could prevent you from realizing any change-of-control premium on your shares of our common stock that may accrue to NAB on its private sale of our common stock. In addition, if NAB
privately sells its significant equity interest in our company, we may become subject to the control of a presently unknown third party. Such third party may have interests that conflict with those of other stockholders. In addition, if a third
party acquires a controlling interest in us, NAB may terminate the Transitional Services Agreement and other transitional arrangements, and our other commercial agreements and relationships could be impacted, all of which may adversely affect our
ability to run our business as described in this prospectus and could have a material adverse effect on our business, financial condition or results of operations.
Certain banking laws and certain provisions of our certificate of incorporation may have an anti-takeover effect.
Provisions of federal banking laws, including regulatory approval requirements, could make it difficult for a third party to acquire us, even
if doing so would be perceived to be beneficial to our stockholders. Acquisition of 10% or more of any class of voting stock of a bank holding company or depository institution, including shares of our common stock following completion of this
offering, generally creates a rebuttable presumption that the acquirer “controls” the bank holding company or depository institution. Also, a bank holding company must obtain the prior approval of the Federal Reserve before, among other
things, acquiring direct or indirect ownership or control of more than 5% of the voting shares of any bank, including our bank.
There
also are provisions in our amended and restated certificate of incorporation and amended and restated bylaws to be effective prior to the completion of this offering, such as limitations on the ability to call a special meeting of our stockholders,
and the classification of our board of directors into three separate classes each serving for three-year terms, that may be used to delay or block a takeover attempt. In addition, our board of directors will be authorized under our amended and
restated certificate of incorporation to issue shares of our preferred stock, and determine the rights, terms conditions and privileges of such preferred stock, without stockholder approval. These provisions may effectively inhibit a non-negotiated
merger or other business combination, which, in turn, could have a material adverse effect on the market price of our common stock.
Our amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware as the sole and
exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees
or agents.
Our amended and restated certificate of incorporation to be effective prior to the completion of this offering will
provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action
asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law,
or DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws or (iv) any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having
personal jurisdiction over the indispensable parties named as defendants therein and the claim not being one which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery or for which the Court of Chancery does
not have subject matter jurisdiction. Any person purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to this provision of our amended and restated certificate of
incorporation. This choice of forum provision may limit our stockholders’ ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such
lawsuits against us and our directors, officers, employees and agents even though an action, if successful, might benefit our stockholders. Stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in pursuing
any such claim, particularly if they do not reside in or near Delaware. The Court of Chancery may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be
56
located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. Alternatively, if a court were to find this provision of
our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other
jurisdictions, which could have a material adverse effect on our business, financial condition or results of operations.
57
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as
“may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,”
“estimate,” “intend,” “plan,” “projection,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or
forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of
which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties
that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by
the forward-looking statements.
A number of important factors could cause our actual results to differ materially from those indicated in
these forward-looking statements, including those factors identified in “Risk Factors” or “Management’s Discussion and Analysis of Financial Condition and Results of Operations” or the following:
|
|
•
|
|
current and future economic and market conditions in the United States generally or in our states in particular, including the rate of growth and employment levels;
|
|
|
•
|
|
changes in market interest rates;
|
|
|
•
|
|
the geographic concentration of our operations, and our concentration on originating business and agribusiness loans;
|
|
|
•
|
|
the relative strength or weakness of the agricultural and commercial credit sectors and of the real estate markets in the markets in which our borrowers are located;
|
|
|
•
|
|
declines in the market prices for agricultural products for any reason;
|
|
|
•
|
|
our ability to effectively execute our strategic plan and manage our growth;
|
|
|
•
|
|
our ability to successfully manage our credit risk and the sufficiency of our allowance for loan loss;
|
|
|
•
|
|
our ability to attract and retain skilled employees or changes in our management personnel;
|
|
|
•
|
|
our ability to effectively compete with other financial services companies and the effects of competition in the financial services industry on our business;
|
|
|
•
|
|
changes in the demand for our products and services;
|
|
|
•
|
|
the effectiveness of our risk management and internal disclosure controls and procedures;
|
|
|
•
|
|
fluctuations in the values of our assets and liabilities and off-balance sheet exposures;
|
|
|
•
|
|
our ability to attract and retain customer deposits;
|
|
|
•
|
|
our access to sources of liquidity and capital to address our liquidity needs;
|
|
|
•
|
|
possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations;
|
|
|
•
|
|
our ability to identify and address cyber-security risks;
|
|
|
•
|
|
any failure or interruption of our information and communications systems;
|
|
|
•
|
|
our ability to keep pace with technological changes;
|
58
|
|
•
|
|
our ability to successfully develop and commercialize new or enhanced products and services;
|
|
|
•
|
|
possible impairment of our goodwill and other intangible assets, or any adjustment of the valuation of our deferred tax assets;
|
|
|
•
|
|
the effects of problems encountered by other financial institutions;
|
|
|
•
|
|
the effects of geopolitical instability, including war, terrorist attacks, and man-made and natural disasters;
|
|
|
•
|
|
the effects of the failure of any component of our business infrastructure provided by a third party;
|
|
|
•
|
|
the impact of, and changes in applicable laws, regulations and accounting standards and policies;
|
|
|
•
|
|
market perceptions associated with our separation from NAB and other aspects of our business;
|
|
|
•
|
|
our likelihood of success in, and the impact of, litigation or regulatory actions;
|
|
|
•
|
|
our inability to receive dividends from our bank and to service debt, pay dividends to our common stockholders and satisfy obligations as they become due;
|
|
|
•
|
|
the effect of NAB’s control over us following completion of this offering;
|
|
|
•
|
|
the incremental costs of operating as a standalone public company;
|
|
|
•
|
|
our ability to retain service providers to perform oversight or control functions or services that have otherwise been performed in the past by NAB; and
|
|
|
•
|
|
damage to our reputation from any of the factors described above, in “Risk Factors” or in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
|
The foregoing factors should not be considered an exhaustive list and should be read together with the other cautionary
statements included in this prospectus. If one or more events related to this or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate.
Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking
statement, whether as a result of new information, future developments or otherwise.
59
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of common stock being sold in this offering. All of the shares in this
offering are being sold by the NAB selling stockholder. See “Principal and Selling Stockholder.” All proceeds from the sale of these shares, net of underwriters’ discounts and offering expenses, will be received by the NAB selling
stockholder, a subsidiary of NAB.
60
DIVIDEND POLICY AND DIVIDENDS
Dividend Policy
Following this offering,
we intend to pay quarterly cash dividends on our common stock at an initial amount of approximately $ per share.
Although we expect to pay dividends according to our dividend policy, we may elect not to pay dividends. Any declarations of dividends will be
at the discretion of our board of directors. In determining the amount of any future dividends, our board of directors will take into account: (i) our financial results; (ii) our available cash, as well as anticipated cash requirements
(including debt servicing); (iii) our capital requirements and the capital requirements of our subsidiaries (including our bank); (iv) contractual, legal, tax and regulatory restrictions on, and implications of, the payment of dividends by
us to our stockholders or by our bank to us; (v) general economic and business conditions; and (vi) any other factors that our board of directors may deem relevant. Therefore, there can be no assurance that we will pay any dividends to
holders of our stock, or as to the amount of any such dividends. See “Risk Factors—Risks Related to Our Common Stock—We may not pay dividends on our common stock in the future” and “Material U.S. Federal Tax Considerations
for Non-U.S. Holders of Our Common Stock—Dividends.”
Our ability to declare and pay dividends on our stock is also subject to
numerous limitations applicable to bank holding companies under federal and state banking laws, regulations and policies. Federal bank regulators are authorized to determine under certain circumstances relating to the financial condition of a bank
holding company or a bank that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. In addition, under the DGCL, we may only pay dividends from legally available surplus or, if there is no such surplus,
out of our net profits for the fiscal year in which the dividend is declared and the preceding fiscal year. Surplus is generally defined as the excess of the fair value of our total assets over the sum of the fair value of our total liabilities plus
the aggregate par value of our issued and outstanding capital stock.
Because we are a holding company and do not engage directly in other
business activities of a material nature, our ability to pay dividends on our stock depends primarily upon our receipt of dividends from our bank, the payment of which is subject to numerous limitations under federal and state banking laws,
regulations and policies. In general, dividends by our bank may only be declared from its net profits and may be declared no more than once per calendar quarter. The approval of the South Dakota Director of Banking is required if our bank seeks to
pay aggregate dividends during any calendar year that would exceed the sum of its net profits from the year to date and retained net profits from the preceding two years, minus any required transfers to surplus. Moreover, under the Federal Deposit
Insurance Act, or FDIA, an insured depository institution may not pay any dividends if the institution is undercapitalized or if the payment of the dividend would cause the institution to become undercapitalized. In addition, the federal bank
regulatory agencies have issued policy statements providing that FDIC-insured depository institutions and their holding companies should generally pay dividends only out of their current operating earnings. See “Supervision and
Regulation—Dividends; Stress Testing” for more information on federal and state banking laws, regulations and policies limiting our and our bank’s ability to declare and pay dividends. The current and future dividend policy of our
bank is also subject to the discretion of its board of directors. Our bank is not obligated to pay dividends to us. For additional information, see “Risk Factors—Risks Related to Our Business—We rely on dividends and other payments
from our bank for substantially all of our revenue” and “Risk Factors—Risks Related to Our Common Stock—We may not pay dividends on our common stock in the future.”
None of the indentures governing our outstanding junior subordinated debentures contain covenants limiting our ability or the ability of our
subsidiaries to pay dividends, absent a default under the terms of the indenture, or under our guarantee of the trust preferred securities issued by our affiliate that owns the applicable debentures, or a deferral of the payment of interest on such
debentures in accordance with the terms of the applicable indenture.
61
Under our amended and restated certificate of incorporation to be effective prior to the
completion of this offering, holders of our common stock and non-voting common stock will be equally entitled to receive ratably such dividends as may be declared from time to time by our board of directors out of legally available funds. No shares
of our non-voting common stock will be outstanding immediately following this offering.
Our Historical Dividends
Prior to this offering, GWBI declared and paid dividends to NAI, as the sole beneficial owner of its common stock, on a semi-annual basis. GWBI
declared and paid to NAI $68.0 million, $41.4 million and $41.8 million in aggregate dividends during the first nine months of fiscal year 2014 and during fiscal years 2013 and 2012, respectively. We expect that GWBI will declare and pay to NAI an
aggregate dividend of $34.0 million (related to our earnings during the second half of fiscal year 2014) during our fourth fiscal quarter prior to completion of the Formation Transactions.
62
CAPITALIZATION
The following table shows our capitalization, including regulatory capital ratios, on a consolidated basis at June 30, 2014, on an actual
basis, before giving effect to the Formation Transactions, and on an as adjusted basis after giving effect to the Formation Transactions and the effectiveness of our amended and restated certificate of incorporation. You should read the following
table in conjunction with the sections titled “Selected Historical Consolidated Financial and Operating Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our
consolidated financial statements and related notes appearing elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2014
|
|
|
|
|
Actual
|
|
|
As Adjusted
|
|
|
|
|
(dollars in thousands)
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
Short-Term Borrowings
|
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase
|
|
$
|
181,898
|
|
|
$
|
181,898
|
|
|
Related party notes payable
|
|
|
5,500
|
|
|
|
5,500
|
|
|
FHLB advances and other short-term borrowings
|
|
|
55,097
|
|
|
|
55,097
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term borrowings
|
|
$
|
242,495
|
|
|
$
|
242,495
|
|
|
|
|
|
|
Long-Term Borrowings
|
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase
|
|
$
|
3,722
|
|
|
|
3,722
|
|
|
FHLB advances
|
|
|
380,000
|
|
|
$
|
380,000
|
|
|
Related party notes payable
|
|
|
35,795
|
|
|
|
35,795
|
|
|
Subordinated debentures
|
|
|
56,083
|
|
|
|
56,083
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term borrowings
|
|
$
|
475,600
|
|
|
$
|
475,600
|
|
|
|
|
|
|
Stockholder’s Equity:
|
|
|
|
|
|
|
|
|
|
Common stock, par value $1 per share on an actual basis (250,000 shares authorized, 198,731 shares outstanding) and par value $0.01 per
share on an as adjusted basis ( shares authorized,
shares outstanding)
|
|
$
|
199
|
|
|
$
|
|
|
|
Non-voting common stock, par value $0.01 per share on an as adjusted basis
( shares authorized, no shares outstanding)
|
|
|
—
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
1,260,504
|
|
|
|
|
|
|
Retained earnings
|
|
|
172,669
|
|
|
|
|
|
|
Accumulated other comprehensive (loss)
|
|
|
(2,408
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholder’s equity
|
|
|
1,430,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
(1)
|
|
$
|
2,149,059
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Ratios:
|
|
|
|
|
|
|
|
|
|
Tier 1 capital ratio
|
|
|
12.1
|
%
|
|
|
12.1
|
%
|
|
Total capital ratio
|
|
|
13.1
|
%
|
|
|
13.1
|
%
|
|
Tier 1 leverage ratio
|
|
|
9.3
|
%
|
|
|
9.3
|
%
|
|
Tangible common equity to tangible assets
(2)
|
|
|
8.3
|
%
|
|
|
8.3
|
%
|
|
(1)
|
Excludes shares of our common stock reserved for future issuance under our equity incentive plans.
|
|
(2)
|
Our tangible common equity to tangible assets ratio is a non-GAAP financial measure. For more information on this financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see
“Prospectus Summary—Summary Historical Consolidated Financial and Operating Information.”
|
63
DILUTION
All shares of our common stock being sold in this offering were issued and outstanding prior to completion of this offering. As a result, this
offering will not have a dilutive effect on our stockholders. Dilution results from the fact that the per share offering price of our common stock is substantially in excess of the net tangible book value attributable to the existing equity holders.
Our net tangible book value represents the amount of total tangible assets less total liabilities, and our net tangible book value per share represents net tangible book value divided by the number of shares of common stock outstanding. Our net
tangible book value per share of our common stock, after giving effect to the Formation Transactions, will not be affected by the sale of shares of our common stock in this offering by the NAB selling stockholder and will be
$ immediately prior to and following the completion of this offering.
The following table summarizes, at
and after giving effect to the Formation Transactions, the number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid by the NAB selling stockholder and by investors participating in this offering, based upon an assumed initial public offering price of
$ per share, the mid-point of the range on the cover of this prospectus, and before deducting estimated underwriting discounts and commissions and estimated offering expenses
payable by us.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
Total Consideration
|
|
Average
Price Per
Share
|
|
|
|
Number
|
|
Percentage
|
|
Amount
|
|
Percentage
|
|
|
Existing stockholder
|
|
|
|
|
|
|
|
|
|
|
|
Purchasers in this offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective upon the completion of this offering, an additional
shares of our common stock will be reserved for future issuance under our equity incentive plans. As of the date of this prospectus, we estimate that,
in connection with and as soon as practicable following the completion of this offering, we will grant new awards under our equity incentive plans representing approximately
shares of our common stock, assuming the public offering price per share in this offering is at $ per share, which is the midpoint of the price range set forth on the front
cover of this prospectus. To the extent that new awards are issued under our equity incentive plans or we issue additional shares of common stock in the future, there may be dilution to investors participating in this offering.
64
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
You should read the selected historical consolidated financial and operating data set forth below in conjunction with the sections
titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Capitalization,” as well as our consolidated financial statements and the related notes included elsewhere in this
prospectus. The historical financial information as of and for the fiscal years ended September 30, 2013 and 2012 is derived from our audited financial statements included elsewhere in this prospectus. The historical financial information as of
and for the nine-month periods ended June 30, 2014 and 2013 is derived from our unaudited financial statements included elsewhere in this prospectus, which have been prepared on the same basis as our audited consolidated financial statements.
Our historical results may not be indicative of our future performance. In addition, results for the nine-month periods ended June 30, 2014 and 2013 may not be indicative of the results that may be expected for the full fiscal year. The
historical financial information below also contains non-GAAP financial measures, which have not been audited.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30,
|
|
|
Fiscal year ended September 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income
|
|
$
|
261,764
|
|
|
$
|
210,559
|
|
|
$
|
294,257
|
|
|
$
|
344,304
|
|
|
Interest expense
|
|
|
24,337
|
|
|
|
30,349
|
|
|
|
39,161
|
|
|
|
50,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
237,427
|
|
|
|
180,210
|
|
|
|
255,096
|
|
|
|
293,333
|
|
|
Provision (recovery) for loan losses
|
|
|
(2,065
|
)
|
|
|
14,034
|
|
|
|
11,574
|
|
|
|
30,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income, after provision (recovery) for loan losses
|
|
|
239,492
|
|
|
|
166,176
|
|
|
|
243,522
|
|
|
|
263,188
|
|
|
Noninterest income
|
|
|
45,583
|
|
|
|
59,614
|
|
|
|
77,692
|
|
|
|
88,975
|
|
|
Noninterest expense
|
|
|
166,436
|
|
|
|
116,188
|
|
|
|
171,073
|
|
|
|
235,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
118,639
|
|
|
|
109,602
|
|
|
|
150,141
|
|
|
|
117,153
|
|
|
Provision for income taxes
|
|
|
41,562
|
|
|
|
39,682
|
|
|
|
53,898
|
|
|
|
44,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
77,077
|
|
|
$
|
69,920
|
|
|
$
|
96,243
|
|
|
$
|
72,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash net income
(1)
|
|
$
|
88,092
|
|
|
$
|
82,087
|
|
|
$
|
112,289
|
|
|
$
|
89,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Info / Performance Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
(2)
|
|
|
3.93
|
%
|
|
|
3.07
|
%
|
|
|
3.24
|
%
|
|
|
3.98
|
%
|
|
Adjusted net interest margin
(1), (2)
|
|
|
3.73
|
%
|
|
|
3.78
|
%
|
|
|
3.76
|
%
|
|
|
3.72
|
%
|
|
Efficiency ratio
(1)
|
|
|
52.0
|
%
|
|
|
50.9
|
%
|
|
|
51.5
|
%
|
|
|
54.0
|
%
|
|
Return on average total assets
(2)
|
|
|
1.12
|
%
|
|
|
1.04
|
%
|
|
|
1.07
|
%
|
|
|
0.85
|
%
|
|
Return on average common equity
(2)
|
|
|
7.30
|
%
|
|
|
6.79
|
%
|
|
|
6.97
|
%
|
|
|
5.40
|
%
|
|
Return on average tangible common equity
(1), (2)
|
|
|
17.1
|
%
|
|
|
17.3
|
%
|
|
|
17.5
|
%
|
|
|
15.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
September 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
(3)
|
|
$
|
6,678,501
|
|
|
$
|
6,362,673
|
|
|
$
|
6,138,574
|
|
|
Allowance for loan losses
|
|
|
47,038
|
|
|
|
55,864
|
|
|
|
71,878
|
|
|
Securities
|
|
|
1,395,768
|
|
|
|
1,480,449
|
|
|
|
1,581,875
|
|
|
Goodwill
|
|
|
697,807
|
|
|
|
697,807
|
|
|
|
697,807
|
|
|
Total assets
|
|
|
9,292,283
|
|
|
|
9,134,258
|
|
|
|
9,008,252
|
|
|
Total deposits
|
|
|
7,067,112
|
|
|
|
6,948,208
|
|
|
|
6,884,515
|
|
|
Total liabilities
|
|
|
7,861,319
|
|
|
|
7,717,044
|
|
|
|
7,619,689
|
|
|
Total stockholder’s equity
|
|
|
1,430,964
|
|
|
|
1,417,214
|
|
|
|
1,388,563
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At and for the
nine months ended
June 30, 2014
|
|
|
At and for the fiscal year ended
September 30,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Asset Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans / total loans
(4)
|
|
|
0.64
|
%
|
|
|
1.28
|
%
|
|
|
1.53
|
%
|
|
Allowance for loan losses / total loans
|
|
|
0.70
|
%
|
|
|
0.88
|
%
|
|
|
1.17
|
%
|
|
Net charge-offs / average total loans
(2)
|
|
|
0.14
|
%
|
|
|
0.44
|
%
|
|
|
0.54
|
%
|
|
|
|
|
|
|
Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital ratio
|
|
|
12.1
|
%
|
|
|
12.4
|
%
|
|
|
11.9
|
%
|
|
Total capital ratio
|
|
|
13.1
|
%
|
|
|
13.8
|
%
|
|
|
13.7
|
%
|
|
Tier 1 leverage ratio
|
|
|
9.3
|
%
|
|
|
9.2
|
%
|
|
|
8.3
|
%
|
|
Tangible common equity to tangible assets
(1)
|
|
|
8.3
|
%
|
|
|
8.2
|
%
|
|
|
7.8
|
%
|
|
(1)
|
This is a non-GAAP financial measure. For more information on this non-GAAP financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see “Prospectus Summary—Summary
Historical Consolidated Financial and Operating Information.”
|
|
(2)
|
Calculated as an annualized percentage for the nine months ended June 30, 2014 and 2013, as applicable.
|
|
(3)
|
Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.
|
|
(4)
|
Numerator excludes loans subject to FDIC loss-sharing arrangements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Business and
Financial Statements—Asset Quality and Loss-Sharing Arrangements.”
|
66
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The historical consolidated financial data discussed below reflects our historical results of operations and financial condition and should
be read in conjunction with our financial statements and related notes thereto presented elsewhere in this prospectus. In addition to historical financial data, this discussion includes certain forward-looking statements regarding events and trends
that may affect our future results. Such statements are subject to risks and uncertainties that could cause our actual results to differ materially. See “Cautionary Note Regarding Forward-Looking Statements.” For a more complete discussion
of the factors that could affect our future results, see “Risk Factors.”
Overview
We are a full-service regional bank holding company focused on relationship-based business and agribusiness banking. We serve our customers
through 162 branches in attractive markets in seven states: South Dakota, Iowa, Nebraska, Colorado, Arizona, Kansas and Missouri. We were established more than 70 years ago and have achieved strong market positions by developing and maintaining
extensive local relationships in the communities we serve. By leveraging our business and agribusiness focus, presence in attractive markets, highly efficient operating model and robust approach to risk management, we have achieved significant and
profitable growth—both organically and through disciplined acquisitions. We provide financial results based on a fiscal year ending September 30 and as a single reportable segment.
Growth in our loan portfolio, which totaled $6.68 billion at June 30, 2014, has driven growth in our total assets during fiscal year 2013 and
the first half of fiscal year 2014. From September 30, 2009 to September 30, 2013, we have grown our total assets at a CAGR of 15%, our loan portfolio at a CAGR of 17% and our deposit base at a CAGR of 16%. This growth was primarily generated by our
acquisition of TierOne Bank in 2010, which represented approximately $2.5 billion of our $3.1 billion total asset growth in fiscal year 2010. From September 30, 2012 to September 30, 2013, our total assets, loan portfolio and deposit base
grew by 1%, 4% and 1%, respectively, as our loan growth drove continued asset growth, despite being offset by a reduction in the size of our investment portfolio. We achieved this overall loan growth while simultaneously increasing our percentage of
commercial non-real estate and agricultural loans as part of our overall loan portfolio. Our commercial non-real estate loans represent a range of sectors, including key areas such as agribusiness services, freight and transport, healthcare and
tourism. Our agriculture loan portfolio remains well diversified across the range of crops and livestock produced in our markets, including grains (primarily corn, soybeans and wheat), proteins (primarily beef cattle, dairy products and hogs) and
other (including cotton and vegetables). Adjusted for the effect of fixed-to-floating interest rate swaps matching certain of our fixed-rate loans, our loan portfolio generally has a short duration, with an average tenor of 1.4 years.
Our asset quality remains strong with continuing declines in nonperforming loans despite our overall loan growth. Total nonperforming loans,
which we define as loans on nonaccrual status excluding loans acquired as part of our acquisition of TierOne Bank subject to FDIC loss-sharing arrangements, have decreased from $93.8 million on September 30, 2012 to $81.5 million on
September 30, 2013 and $42.5 million on June 30, 2014. Excluding charge-offs on acquired loans subject to purchase accounting fair value adjustments, net charge-offs as a percentage of average total loans have also declined from 54 basis
points for fiscal year 2012 to 44 basis points for fiscal year 2013 and 14 basis points (annualized) for the nine months ended June 30, 2014. We had $259.7 million book value of loans subject to FDIC loss-sharing arrangements at
June 30, 2014, and we continue to run off portions of these loans that we do not consider core to our ongoing operations. To date, we have not had any indemnity claims arising from the FDIC loss-sharing arrangements rejected by the FDIC.
Net income was $77.1 million for the first nine months of fiscal year 2014, an increase of $7.2 million, or 10%, compared with the first nine
months of fiscal year 2013, and net income was $96.2 million for fiscal year 2013, an increase of $23.2 million, or 32%, compared with fiscal year 2012. Our net interest margin increased to 3.93% (annualized) during the first nine months of fiscal
year 2014 from 3.07% during the same period in fiscal
67
year 2013. On an adjusted basis excluding offsetting changes in fair value related to interest rates associated with certain of our loans and interest rate swaps, our adjusted net interest margin
of 3.73% (annualized) represented a decline of 5 basis points between the first nine months of fiscal year 2014 and the same period in fiscal year 2013, primarily due to competition for loan pricing across our footprint that was partially offset by
improvements in our deposit funding cost. Our noninterest income declined during the first nine months of fiscal year 2014 primarily as a result of slower home mortgage activity, particularly refinancings and the absence of gains on sales of
investment securities. For more information on our adjusted net interest margin, including a reconciliation to the most directly comparable GAAP financial measure, see “Prospectus Summary—Summary Historical Consolidated Financial and
Operating Information.”
We believe our operating efficiency is a key component of our growth and profitability. We continue to
monitor salary and benefits costs, optimize our branch network (which resulted in the net closure of 17 branches between June 30, 2013 and June 30, 2014) and focus on our core business and agribusiness banking competencies. Our efficiency
ratio increased to 52.0% for the first nine months of fiscal year 2014, compared to 50.9% for the same period in fiscal year 2013 driven by lower noninterest income, while adjusted noninterest expenses declined by 2% over the same period. Our
operating efficiency helped drive returns on average total assets and average tangible common equity for the first nine months of fiscal year 2014 which were 1.12% and 17.1%, respectively, compared to 1.04% and 17.3%, respectively, in the first nine
months of fiscal year 2013. While we expect to incur additional costs associated with operating as a public company following this offering, we believe our efficiency initiatives, including continuing to optimize our branch network, will allow us to
continue our historically efficient operations. For more information on our return on average tangible common equity, including a reconciliation to the most directly comparable GAAP financial measure, see “Prospectus Summary—Summary
Historical Consolidated Financial and Operating Information.”
We have achieved significant and profitable growth organically and
through disciplined acquisitions. We have successfully completed eight acquisitions since 2006, including our 2010 FDIC-assisted acquisition of TierOne Bank, which represented approximately $2.5 billion in acquired assets.
We maintain a solid funding position supported substantially by customer deposits, which have continued to grow in recent years. Our deposit
balances were $7.07 billion at June 30, 2014, an increase of $118.9 million compared with September 30, 2013 and of $182.6 million compared with September 30, 2012. In fiscal year 2013, we began a strategic initiative to
transition the composition of our deposit portfolio away from higher-cost term deposits (such as certificates of deposit, or CDs) toward more cost-effective transaction accounts (such as negotiable order of withdrawal, or NOW, accounts, money market
deposit accounts, or MMDAs, and savings accounts). As a result, CDs have decreased to 27% of our average deposits for the nine months ended June 30, 2014 compared to 37% for the nine months ended June 30, 2013. The effects of this
initiative have included declines in our deposit-related interest expense, with average cost of deposits at 0.37% for the nine months ended June 30, 2014, a decline of 11 basis points compared with the twelve months ended September 30,
2013 and 31 basis points compared with the twelve months ended September 30, 2012. We expect to continue to drive a transformation in our funding by focusing on attracting business deposits by leveraging our agribusiness and business banking
relationships.
Our capital position has remained strong, with Tier 1 capital, total capital and Tier 1 leverage ratios of 12.1%, 13.1%
and 9.3%, respectively, at June 30, 2014, compared to 12.4%, 13.8% and 9.2%, respectively, as of September 30, 2013. Our tangible common equity to tangible assets ratio was 8.3% at June 30, 2014 and 8.2% at September 30, 2013.
For more information on our tangible common equity to tangible assets ratio, including a reconciliation to the most directly comparable GAAP financial measure, see “Prospectus Summary—Summary Historical Consolidated Financial and Operating
Information.”
We are a wholly owned subsidiary of NAB, and our results have been part of NAB’s consolidated business operations
since NAB acquired us in 2008. NAB is a large financial institution incorporated in Australia and listed on the Australian Securities Exchange with operations in Australia, New Zealand, the United Kingdom, the
68
United States and parts of Asia. Historically, NAB and its affiliates have provided financial and administrative support to us. In connection with this offering, we and NAB intend to enter into
certain agreements that will provide a framework for our ongoing relationship, including a Stockholder Agreement governing NAB’s rights as a controlling stockholder and a Transitional Services Agreement pursuant to which NAB will agree to
continue to provide us with certain services for a transition period. We do not expect our costs associated with these services to be significant. These arrangements are described in greater detail below under “Our Relationship with NAB and
Certain Other Related Party Transactions.”
Formation Transactions
Following the formation of Great Western Bancorp, Inc. and prior to the consummation of this offering, the following transactions will be taken
in the order listed below:
|
|
•
|
|
the NAB selling stockholder will contribute all outstanding capital stock in NAI to Great Western Bancorp, Inc., resulting in NAI becoming a wholly owned subsidiary of Great Western Bancorp, Inc.;
|
|
|
•
|
|
NAI will merge with and into Great Western Bancorp, Inc., with Great Western Bancorp, Inc. continuing as the surviving corporation and succeeding to all the assets, liabilities and business of NAI; and
|
|
|
•
|
|
GWBI will merge with and into Great Western Bancorp, Inc., with Great Western Bancorp, Inc. continuing as the surviving corporation and succeeding to all the assets, liabilities and business of GWBI.
|
As a result of these transactions, Great Western Bancorp, Inc. will succeed to the business of GWBI, whose consolidated financial statements
and related notes thereto are included in this prospectus. The Formation Transactions will not result in a change in our business or our management team.
Following the completion of the Formation Transactions and this offering, we will be a publicly traded bank holding company and will directly
own all outstanding capital stock issued by our bank. See “Prospectus Summary—Our Structure and Formation Transactions.”
Key Factors
Affecting Our Business and Financial Statements
Economic Conditions
Our loan portfolio can be affected in several ways by changes in economic conditions in our local markets and across the country. For example,
declining local economic prospects can reduce borrowers’ willingness to take out new loans or our expectations of their ability to repay existing loans, while declining national conditions can limit the markets for our commercial and
agribusiness borrowers’ products. Conversely, rising consumer and business confidence can increase demand for loans to fund consumption and investments, which can lead to opportunities for us to grant new loans and further develop our banking
relationships with our customers. Some elements of the business environment that affect our financial performance include short-term and long-term interest rates, inflation and price levels (particularly for agricultural commodities), monetary
policy, unemployment and the strength of the domestic economy and the local economy in the markets in which we operate. Because commercial non-real estate and owner-occupied CRE borrowers are particularly exposed to external economic conditions such
as consumer sentiment, repayment of commercial non-real estate loans and owner-occupied CRE loans may be more sensitive than other types of loans to adverse conditions in the real estate market or the general economy. These loans totaled
approximately $2.74 billion, or 41%, of our loan portfolio as of June 30, 2014. In addition, agricultural loans, which comprised 25% of our loan portfolio as of June 30, 2014, depend on the health of the agricultural industry broadly and in the
location of the borrower in particular and on commodity prices. Overall, our markets continue to experience moderate economic growth, although leading indicators point to some softening. Farm income has seen recent declines as a result of lower crop
prices and some drought conditions. The United States Department of Agriculture expects farm income to
69
fall in 2014 but remain relatively high by historical standards. In line with the downturn in farm income, farmland prices are coming under pressure. Declines in economic conditions in our local
markets, or in farm incomes or farmland prices, could negatively impact our financial results.
See “Risk Factors—Risks Related
to Our Business—Our business may be adversely affected by conditions in the financial markets and economic conditions generally and in our states in particular.”
Interest Rates
Net interest income is our largest source of income and is the difference between the interest income we receive from interest-earning assets
(
e.g.
, loans and investment securities) and the interest expense we pay on interest-bearing liabilities (
e.g.
, deposits and borrowings). The level of net interest income is primarily a function of the average balance of
interest-earning assets, the average balance of interest-bearing liabilities and the spread between the yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing and mix of interest-earning assets and
interest-bearing liabilities. Interest rates can be volatile and are highly sensitive to many factors beyond our control, such as economic conditions, the policies of various governmental and regulatory agencies and, in particular, the monetary
policy of the FOMC.
The cost of our deposits and short-term borrowings is largely based on short-term interest rates, the level of which
is driven primarily by the Federal Reserve’s actions. However, the yields generated by our loans and securities are typically driven by longer-term interest rates, which are dictated by the market or, at times, the Federal Reserve’s
actions, and generally vary from day to day. The level of net interest income is therefore influenced by movements in such interest rates, the changing mix in our funding sources and the pace at which such movements occur. In 2013 and 2014,
short-term and long-term interest rates were very low by historical standards, with many benchmark rates, such as the federal funds rate and one- and three-month LIBOR, near zero. Further declines in the yield curve or a decline in longer-term
yields relative to short-term yields (a flatter yield curve) would have an adverse impact on our net interest margin and net interest income. Increases in the yield curve or an increase in longer-term yields relative to short-term yields (a steeper
yield curve) would have a positive impact on our net interest margin and net interest income.
See “Risk Factors—Risks Related
to Our Business—We are subject to interest rate risk” and “Quantitative and Qualitative Disclosures About Market Risk.”
Asset Quality and Loss-Sharing Arrangements
Our asset quality remained strong during the first nine months of fiscal year 2014 with continued declines in total nonperforming loans, net
charge-offs and allowance for loan losses. These declines helped drive reductions in our pre-tax provision for loan losses. We continue to run off assets from our acquisition of TierOne Bank that are not part of our core lending business, including
non-owner-occupied CRE loans and construction and development loans, particularly those outside our footprint. At June 30, 2014, we had approximately $290.0 million of loans acquired as part of the TierOne Bank acquisition. The majority of our loans
acquired from TierOne Bank are subject to loss-sharing arrangements with the FDIC where we are indemnified by the FDIC for 80% of our losses associated with any covered loans. Our ability to seek indemnification under the commercial loss-sharing
arrangement, which covered $129 million in loans at June 30, 2014, terminates in June of 2015, and the single-family loss-sharing arrangement, which covered $131 million in loans at June 30, 2014, terminates in June of 2020. The amount of
reimbursement we receive as a result of these indemnity payments, and the amount of income derived from the underlying loans, has decreased over time as the volume of covered loans we continue to hold declines. To date, we have not had any indemnity
claims arising from the FDIC loss-sharing arrangements rejected by the FDIC. Future indemnity claims may be denied if we fail to comply with the requirements of our loss-sharing arrangements with the FDIC, which could result in additional losses and
charge-offs related to these loans. See “Risk Factors—Risks Related to Our FDIC-Assisted Acquisition of TierOne Bank—Our ability to obtain reimbursement under the loss-sharing agreements on covered assets depends on our compliance
with the terms of the loss-sharing agreements.”
70
Banking Laws and Regulations
We are subject to extensive supervision and regulation under federal and state banking laws. See “Supervision and Regulation” and
“Risk Factors—Risks Related to the Regulatory Oversight of Our Business.” Financial institutions have been subject to increased regulatory scrutiny in recent years as significant structural changes in the bank regulatory framework
have been adopted in response to the recent financial crisis. In particular, federal bank regulators have increased regulatory expectations generally and with respect to consumer compliance, economic sanctions, anti-money laundering and Bank Secrecy
Act requirements. As a result of these heightened expectations, we may incur additional costs associated with legal compliance that may affect our financial results in the future.
Payment of Interest on Demand Deposits
. In addition, effective July 2011, the Dodd-Frank Act repealed the prohibition restricting
depository institutions from paying interest on demand deposits, such as checking accounts. We have begun offering an interest-bearing corporate checking account, but interest rates on this product remain low due to current market conditions.
Consequently, this change has not significantly affected our financial results. If interest rates on this product increase in the future, our business may be affected.
Basel III and Its Implementing Regulations
. In July 2013, the federal bank regulators approved new regulations implementing the Basel
III capital framework and various provisions of the Dodd-Frank Act. These regulations will become effective for us on January 1, 2015, subject to phase-in of various provisions. The most significant changes from the current risk-based capital
guidelines applicable to us will be the revisions affecting the numerator in regulatory capital calculations and the increased risk weightings for higher-volatility CRE loans, for revolving lines of credit of less than one year in duration and for
past-due and impaired loans. See “—Capital” for further information.
Interchange Fees
. We are currently subject to
the interchange fee cap adopted under the Durbin Amendment to the Dodd-Frank Act as a result of NAB’s ownership of us. Once NAB no longer controls us for bank regulatory purposes, we may be able to qualify for the small issuer exemption from
the interchange fee cap depending on our total assets at the time. The small issuer exemption applies to any debit card issuer that, together with its affiliates, has total assets of less than $10 billion as of the end of the previous calendar year.
In the event we qualify for the small issuer exemption, we will once again become subject to the interchange fee cap beginning July 1 following the time when our total assets reach or exceed $10 billion. Reliance on the small issuer exemption
would not exempt us from federal regulations prohibiting network exclusivity arrangements or from routing restrictions, however, and those regulations have negatively affected the interchange income we have received from our debit card network.
Heightened Prudential Requirements
. We and our bank both currently have less than $10 billion in total consolidated assets. Following
the fourth consecutive quarter (and any applicable phase-in period) where we or our bank exceeds this threshold, as applicable, we or our bank, as applicable, will become subject to a number of additional requirements (such as annual stress testing
requirements implemented pursuant to the Dodd-Frank Act and general oversight by the CFPB) that will impose additional compliance costs on our business. See “Supervision and Regulation—Heightened Requirements for Bank Holding Companies
with $10 Billion or More in Assets.” While neither we nor our bank is currently subject to these requirements, we have begun analyzing these rules to ensure we are prepared to comply with the rules when and if they become applicable. For
example, we have begun running periodic and selective stress tests on liquidity, interest rates and certain areas of our loan portfolio to prepare for compliance with FDIC stress testing requirements.
Competition
Our
profitability and growth are affected by the highly competitive nature of the financial services industry. We compete with commercial banks, savings banks, credit unions, non-bank financial services companies and other financial institutions
operating within the areas we serve, particularly nationwide and regional banks and larger community banks that target the same customers we do. We also face competition for agribusiness loans
71
from participants in the nationwide Farm Credit System and global banks. Recently, we have seen increased competitive pressures on loan rates and terms for high-quality credits, driven in part by
the prolonged low-interest rate environment. Continued loan pricing pressure may continue to affect our financial results in the future. See “Risk Factors—Risks Related to Our Business—We operate in a highly competitive industry and
market area.”
Operational Efficiency
We believe that our focus on operational efficiency is critical to our profitability and future growth, and our management has adopted numerous
processes to improve our level of operational efficiency. In contrast to some competitor banks, our business offers a focused range of profitable products. In addition, instead of using multiple information technology solutions, we have increased
the efficiency of our operations by using a single integrated third party core processing system across all of our locations. We continue to optimize our branch network and have commenced reviews of additional internal processes and our vendor
relationships, with a view to identifying opportunities to further improve efficiency and enhance earnings. We are also continuing our efforts to shift our deposit base to lower-cost customer deposits, a strategic initiative that has been primarily
responsible for driving our cost of deposit funding down since September 30, 2012. To foster a culture of operational efficiency, we have implemented the management principles of
Kaizen
&
Lean
across all of our
front-office and back-office operations. We feel that appropriate use of these management principles both encourages efficiency and contributes to the efficient integration of acquired businesses.
Following the completion of this offering, we expect to incur additional one-time and recurring expenses to support our operations as a
standalone public company, including expenses related to compliance with applicable legal and financial reporting standards and expansion of our investor relations and corporate communications functions. These expenses will adversely affect our
future financial results. See “Risk Factors—Risks Related to Our Business—Fulfilling our public company financial reporting and other regulatory obligations will be expensive and time consuming and may strain our resources.”
Goodwill and Amortization of Other Intangibles
Since 2006, we have completed eight acquisitions. We accounted for these transactions using the acquisition method of accounting, under which
the acquired company’s net assets are recorded at fair value at the date of acquisition and the difference between the purchase price and fair value of the net assets acquired is recorded as goodwill, if positive, and as bargain purchase gain,
if negative. At June 30, 2014, we had $697.8 million of goodwill, the majority of which relates to the acquisition of us by NAB in 2008, with the balance relating to subsequent acquisitions completed by us.
Under relevant accounting guidance, we are required to review goodwill for impairment annually, or more frequently if events or circumstances
indicate that the fair value of our business may be less than its carrying value. The valuation of goodwill is dependent on forward-looking expectations related to nationwide and local economic conditions and our associated financial performance. A
significant decline in our expected future cash flows, a material change in interest rates, a significant adverse change in the business climate, slower growth rates or a significant or sustained decline in the price of our common stock, when and if
a market for our common stock is established, may necessitate taking charges in the future related to the impairment of our intangible assets. Our recognition of any such impairment could adversely affect our future financial results. See “Risk
Factors—Risks Related to Our Business—The value of our goodwill and other intangible assets may decline in the future.”
As
a result of these acquisitions, including the acquisition of us by NAB in 2008, we also have recorded intangible assets related to core deposits, brand intangibles, customer relationships and other intangibles. Each of these intangible assets is
amortized as noninterest expense according to a specified schedule. The most significant component of these intangibles relates to our core deposits, of which $11.6 million was amortized as
72
noninterest expense during the nine months ended June 30, 2014. Total scheduled amortization for all intangible assets includes approximately $16 million for fiscal year 2014, approximately $7
million for fiscal year 2015, approximately $3 million for fiscal year 2016 and immaterial amounts for fiscal years 2017 through 2023. For additional information on these intangible assets and their respective amortization schedules, see “Note
1. Nature of Operations and Summary of Significant Accounting Policies—Core Deposits and Other Intangibles” and “Note 13. Core Deposits and Other Intangibles” contained in our audited consolidated financial statements included
elsewhere in this prospectus.
Loans and Interest Rate Swaps Accounted for at Fair Value
In the normal course of business, we enter into fixed-rate loans having original maturities of 5 years or greater (typically between 5 and 15
years) with certain of our business and agribusiness banking customers to assist them in facilitating their risk management strategies. We mitigate our interest rate risk associated with these loans by entering into equal and offsetting
fixed-to-floating interest rate swap agreements for these loans with NAB London Branch (a branch of National Australia Bank Limited), or NAB London Branch. We have elected to account for the loans at fair value under Accounting Standards
Codification, or ASC 825
Fair Value Option
. Changes in the fair value of these loans are recorded in earnings as a component of interest income in the relevant period. We also record an adjustment for credit risk in interest income based on
our loss history for similar loans, adjusted for our assessment of existing market conditions for the specific portfolio of loans. If a specific relationship becomes impaired, we measure the estimated credit loss and record that amount through the
credit risk adjustment.
The related interest rate swaps are recognized as either assets or liabilities in our financial statements and
any gains or losses on these swaps are recorded in earnings as a component of noninterest expense. The hedges are fully effective from an interest rate risk perspective, as gains and losses on our swaps are directly offset by changes in fair value
of the hedged loans (
i.e.
, swap interest rate risk adjustments are directly offset by associated loan interest rate risk adjustments). Consequently, any changes in interest income associated with changes in fair value resulting from interest
rate movement, as opposed to changes in credit quality, on the loans are directly offset by equal and opposite charges to, or reductions in, noninterest expense for the related interest rate swap. To ensure the correlation of movements in fair value
between the interest rate swap and the related loan, we pass on all economic costs associated with our hedging activity resulting from loan customer prepayments (partial or full) to the borrower. For additional information about the treatment of
interest rate swaps and related loans in our financial statements, see “Note 23. Fair Value of Financial Instruments and Interest Rate Risk” in our audited consolidated financial statements and “Note 16. Fair Value of Financial
Instruments and Interest Rate Risk” in our unaudited interim consolidated financial statements included elsewhere in this prospectus.
Certain Key
Performance Indicators
When we review our results of operations and financial condition, we focus on the indicators described below,
among other measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At and for the nine
months ended June 30,
|
|
|
At and for the fiscal year
ended Sept. 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Adjusted net interest income
|
|
$
|
225,308
|
|
|
$
|
221,845
|
|
|
$
|
295,401
|
|
|
$
|
273,964
|
|
|
Adjusted noninterest expense
|
|
$
|
140,869
|
|
|
$
|
143,223
|
|
|
$
|
192,088
|
|
|
$
|
195,995
|
|
|
Cash net income
|
|
$
|
88,092
|
|
|
$
|
82,087
|
|
|
$
|
112,289
|
|
|
$
|
89,397
|
|
|
Adjusted net interest margin
(1)
|
|
|
3.73
|
%
|
|
|
3.78
|
%
|
|
|
3.76
|
%
|
|
|
3.72
|
%
|
|
Efficiency ratio
(2)
|
|
|
52.0
|
%
|
|
|
50.9
|
%
|
|
|
51.5
|
%
|
|
|
54.0
|
%
|
|
Return on average tangible common equity
(1)
|
|
|
17.1
|
%
|
|
|
17.3
|
%
|
|
|
17.5
|
%
|
|
|
15.0
|
%
|
|
Tangible common equity / tangible assets
|
|
|
8.3
|
%
|
|
|
7.9
|
%
|
|
|
8.2
|
%
|
|
|
7.8
|
%
|
|
|
(1)
|
Calculated as an annualized percentage for the nine months ended June 30, 2014 and 2013.
|
|
|
(2)
|
We compute our efficiency ratio as the ratio of our noninterest expense to our total revenue (equal to the sum of our net interest income and noninterest income), in each case adjusted as discussed in “Prospectus
Summary—Summary Historical Consolidated Financial and Operating Information.”
|
73
Each of these measures is a non-GAAP financial measure. We believe that each of these measures is
helpful in highlighting trends in our business that may not otherwise be apparent when relying solely on our GAAP-calculated results. For more information on these non-GAAP financial measures, including a reconciliation to the most directly
comparable GAAP financial measures, see “Prospectus Summary—Summary Historical Consolidated Financial and Operating Information.”
Results of Operations—Nine Months Ended June 30, 2014 and June 30, 2013
Overview
The
following table highlights certain key financial and performance information at and for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
June 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(dollars in thousands)
|
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
Interest and dividend income
|
|
$
|
261,764
|
|
|
$
|
210,559
|
|
|
Interest expense
|
|
|
24,337
|
|
|
|
30,349
|
|
|
Noninterest income
|
|
|
45,583
|
|
|
|
59,614
|
|
|
Noninterest expense
|
|
|
166,436
|
|
|
|
116,188
|
|
|
Provision (recovery) for loan losses
|
|
|
(2,065
|
)
|
|
|
14,034
|
|
|
Net income
|
|
|
77,077
|
|
|
|
69,920
|
|
|
Cash net income
(1)
|
|
|
88,092
|
|
|
|
82,087
|
|
|
|
|
|
|
Performance Ratios:
|
|
|
|
|
|
|
|
|
|
Net interest margin
(2)
|
|
|
3.93
|
%
|
|
|
3.07
|
%
|
|
Adjusted net interest margin
(1), (2)
|
|
|
3.73
|
%
|
|
|
3.78
|
%
|
|
Return on average total assets
(2)
|
|
|
1.12
|
%
|
|
|
1.04
|
%
|
|
Return on average tangible common equity
(1), (2)
|
|
|
17.1
|
%
|
|
|
17.3
|
%
|
|
Efficiency ratio
(1)
|
|
|
52.0
|
%
|
|
|
50.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At and for the
nine months
ended
June 30, 2014
|
|
|
At and for the
fiscal year
ended
Sept. 30, 2013
|
|
|
|
|
(dollars in thousands)
|
|
|
Balance Sheet and Other Information:
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
9,292,283
|
|
|
$
|
9,134,258
|
|
|
Loans
(3)
|
|
|
6,678,501
|
|
|
|
6,362,673
|
|
|
Allowance for loan losses
|
|
|
47,038
|
|
|
|
55,864
|
|
|
Deposits
|
|
|
7,067,112
|
|
|
|
6,948,208
|
|
|
Stockholder’s equity
|
|
|
1,430,964
|
|
|
|
1,417,214
|
|
|
Tangible common equity
(1)
|
|
|
716,161
|
|
|
|
688,963
|
|
|
Tier 1 capital ratio
|
|
|
12.1
|
%
|
|
|
12.4
|
%
|
|
Total capital ratio
|
|
|
13.1
|
%
|
|
|
13.8
|
%
|
|
Tier 1 leverage ratio
|
|
|
9.3
|
%
|
|
|
9.2
|
%
|
|
Tangible common equity / tangible assets
(1)
|
|
|
8.3
|
%
|
|
|
8.2
|
%
|
|
Nonperforming loans / total loans
(4)
|
|
|
0.64
|
%
|
|
|
1.28
|
%
|
|
Net charge-offs / average total loans
(2)
|
|
|
0.14
|
%
|
|
|
0.44
|
%
|
|
Allowance for loan losses / total loans
|
|
|
0.70
|
%
|
|
|
0.88
|
%
|
|
(1)
|
This is a non-GAAP financial measure. For more information on this non-GAAP financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see “Prospectus
Summary—Summary Historical Consolidated Financial and Operating Information.”
|
|
(2)
|
Calculated as an annualized percentage for the nine months ended June 30, 2014 and 2013.
|
|
(3)
|
Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.
|
|
(4)
|
Nonperforming loans excludes loans covered by FDIC loss-sharing arrangements.
|
74
Our total assets were $9.29 billion at June 30, 2014 compared to $9.13 billion at
September 30, 2013. The increase in total assets from September 30, 2013 was principally attributable to organic loan growth, partially offset by a decline in the total carrying value of our investment portfolio. Loans as shown above
increased approximately 5% from September 30, 2013 to $6.68 billion at June 30, 2014, primarily due to growth in agricultural and commercial lending. Deposit balances increased by $0.12 billion from $6.95 billion at September 30, 2013 to
$7.07 billion at June 30, 2014.
For the nine months ended June 30, 2014:
|
|
•
|
|
net income was $77.1 million, an increase of $7.2 million, or 10%, compared with the nine months ended June 30, 2013, and cash net income was $88.1 million, an increase of $6.0 million, or 7%, compared with the nine
months ended June 30, 2013, in each case due in large part to continued improvement in the overall credit quality of our lending portfolio, leading to lower net charge-offs compared to the nine months ended June 30, 2013 and a $16.1 million pre-tax
reduction in the provision for loan losses;
|
|
|
•
|
|
net interest margin was 3.93% (annualized), an increase of 86 basis points compared with the nine months ended June 30, 2013, although our adjusted net interest margin was relatively flat, decreasing 5 basis points to
3.73% (annualized) compared with the nine months ended June 30, 2013. The increase in our net interest margin was primarily attributable to changes in fair value associated with certain of our long-term loans measured at fair value where we have
entered into interest rate swaps, while the decline in our adjusted net interest margin reflects declining asset yields, primarily due to pressure on loan pricing across our footprint that was partially offset by strategic efforts undertaken to
transition the composition of our deposit portfolio away from higher-cost term deposits toward more cost-effective transaction accounts, which lowered the overall cost of deposits;
|
|
|
•
|
|
net interest income was $237.4 million, an increase of $57.2 million, or 32%, compared with the nine months ended June 30, 2013, and adjusted net interest income was $225.3 million, a 2% increase from $221.8 million for
the nine months ended June 30, 2013. The increase in net interest income was primarily driven by a significant net increase related to the fair value of certain of our fixed-rate loans where we have entered into matching fixed-to-floating interest
rate swaps, while the increase in adjusted net interest income was driven by growth in interest-earning assets compared to interest-bearing liabilities and a relatively stable adjusted net interest margin;
|
|
|
•
|
|
provision (recovery) for loan losses was ($2.1) million, a decrease of $16.1 million, or 115%, compared with the nine months ended June 30, 2013. The decrease was driven by continued improvement in our incurred loss
history and reductions in impaired loans requiring specific reserves for loan losses;
|
|
|
•
|
|
noninterest income was $45.6 million, a decrease of $14.0 million, or 24%, compared with the nine months ended June 30, 2013, driven by a 65% decrease in gain on sale of loans based on lower home mortgage activity
(particularly in connection with refinancings), the absence of any gains on sales of investment securities and a reduction in vendor incentive payments recognized;
|
|
|
•
|
|
noninterest expense was $166.4 million, an increase of $50.2 million, or 43%, compared with the nine months ended June 30, 2013, and our adjusted noninterest expense decreased 2% compared with the nine months ended June
30, 2013. The increase in our noninterest expense was primarily attributable to changes in the fair value of the derivatives associated with certain of our long-term loans, while the decrease in our adjusted noninterest expense was driven primarily
by lower salary and benefit costs; and
|
|
|
•
|
|
return on average total assets (annualized) was 1.12%, an 8-basis point increase from 1.04% for the nine months ended June 30, 2013, while return on average tangible common equity (annualized) was 17.1%, compared to
17.3% for the nine months ended June 30, 2013.
|
Our cash net income, adjusted net interest margin, adjusted net interest
income, adjusted noninterest expense and return on average tangible common equity discussed above are all non-GAAP financial measures. For more information on these financial measures, including a reconciliation to the most directly comparable GAAP
financial measures, see “Prospectus Summary—Summary Historical Consolidated Financial and Operating Information.”
75
Net Interest Income
The following table presents net interest income, net interest margin and adjusted net interest margin for the nine months ended June 30, 2014
and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
June 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(dollars in thousands)
|
|
|
Net interest income:
|
|
|
|
|
|
|
|
|
|
Total interest and dividend income
|
|
$
|
261,764
|
|
|
$
|
210,559
|
|
|
Less: Total interest expense
|
|
|
24,337
|
|
|
|
30,349
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
237,427
|
|
|
|
180,210
|
|
|
Less: Provision (recovery) for loan losses
|
|
|
(2,065
|
)
|
|
|
14,034
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision (recovery) for loan losses
|
|
$
|
239,492
|
|
|
$
|
166,176
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin and adjusted net interest margin:
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets
|
|
$
|
8,067,544
|
|
|
$
|
7,839,914
|
|
|
Average interest-bearing liabilities
|
|
$
|
7,734,558
|
|
|
$
|
7,535,863
|
|
|
Net interest margin
(1)
|
|
|
3.93
|
%
|
|
|
3.07
|
%
|
|
Adjusted net interest margin
(1), (2)
|
|
|
3.73
|
%
|
|
|
3.78
|
%
|
|
|
(1)
|
Calculated as an annualized percentage for the nine months ended June 30, 2014 and 2013.
|
|
|
(2)
|
This is a non-GAAP financial measure. For more information on this non-GAAP financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see “Prospectus Summary—Summary
Historical Consolidated Financial and Operating Information.”
|
Net interest income was $237.4 million for the nine
months ended June 30, 2014, an increase of $57.2 million, or 32%, compared with $180.2 million for the nine months ended June 30, 2013. Average interest-earning assets for the first nine months of fiscal year 2014 increased 3% compared with the
same period in fiscal year 2013, and the average yield increased 75 basis points to 4.34% (annualized). Average interest-bearing liabilities for the first nine months of fiscal year 2014 increased 3% compared with the same period in fiscal year
2013, and the average rate decreased 12 basis points to 0.42% (annualized). The impact of these changes to the net interest margin for the first nine months of fiscal year 2014 was an increase of 86 basis points to 3.93% (annualized), compared with
3.07% (annualized) for the first nine months of fiscal year 2013. Net interest margin is calculated as annualized net interest income divided by average total interest-earning assets. Adjusted net interest margin remained relatively flat, decreasing
5 basis points to 3.73% (annualized) compared with the nine months ended June 30, 2013. For more information on our adjusted net interest margin, including a reconciliation to the most directly comparable GAAP financial measure, see “Prospectus
Summary—Summary Historical Consolidated Financial and Operating Information.”
The following table presents the distribution of
average assets, liabilities and equity, interest income and resulting yields on average interest-earning assets, and interest expense and rates on average interest-bearing liabilities for each of the nine months ended June 30, 2014 and 2013. Loans
on nonaccrual status, totaling $42.5 million and $75.3 million at June 30, 2014 and June 30, 2013, respectively, are included in the average balances below. Any interest that had accrued as of the date of nonaccrual is immediately reversed as
contra-interest income, while any interest subsequently recovered is recorded in the period of recovery. Tax exempt loans and securities, totaling $412.5 million at June 30, 2014 and $306.2 million at June 30, 2013, are typically entered at lower
interest rate arrangements than comparable non-exempt loans and securities. Interest income earned on these assets is presented below at the contractual rate, as opposed to a tax equivalent yield concept, with any tax benefit realized presented in
the provision for income taxes and reflected in the effective tax rate for the period. Loans acquired with deteriorated credit quality represent loans accounted for in accordance with ASC
76
310-30
Accounting for Purchased Loans
that were credit impaired at the time we acquired them. Loans other than loans acquired with deteriorated credit quality represent loans we have
originated and loans we have acquired that were not credit impaired at the time we acquired them.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yields/
Rates
(1)
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yields/
Rates
(1)
|
|
|
|
|
(dollars in thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
197,450
|
|
|
$
|
400
|
|
|
|
0.27
|
%
|
|
$
|
151,980
|
|
|
$
|
262
|
|
|
|
0.23
|
%
|
|
Investment securities
|
|
|
1,427,707
|
|
|
|
21,002
|
|
|
|
1.97
|
%
|
|
|
1,570,263
|
|
|
|
21,631
|
|
|
|
1.84
|
%
|
|
Loans, other than loans acquired with deterioriated credit quality,
net
(2)
|
|
|
6,239,191
|
|
|
|
236,036
|
|
|
|
5.06
|
%
|
|
|
5,826,250
|
|
|
|
175,074
|
|
|
|
4.02
|
%
|
|
Loans, acquired with deteriorated credit quality, net
|
|
|
203,196
|
|
|
|
4,326
|
|
|
|
2.85
|
%
|
|
|
291,421
|
|
|
|
13,592
|
|
|
|
6.24
|
%
|
|
Loans, net
|
|
|
6,442,387
|
|
|
|
240,362
|
|
|
|
4.99
|
%
|
|
|
6,117,671
|
|
|
|
188,666
|
|
|
|
4.12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
8,067,544
|
|
|
|
261,764
|
|
|
|
4.34
|
%
|
|
|
7,839,914
|
|
|
|
210,559
|
|
|
|
3.59
|
%
|
|
Other noninterest-earning assets
|
|
|
1,155,291
|
|
|
|
|
|
|
|
—
|
%
|
|
|
1,153,948
|
|
|
|
|
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
9,222,835
|
|
|
$
|
261,764
|
|
|
|
3.79
|
%
|
|
$
|
8,993,862
|
|
|
$
|
210,559
|
|
|
|
3.13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest demand deposits
|
|
$
|
1,232,354
|
|
|
|
|
|
|
|
|
|
|
$
|
1,155,126
|
|
|
|
|
|
|
|
|
|
|
NOW, MMDA and savings deposits
|
|
|
3,943,543
|
|
|
$
|
6,942
|
|
|
|
0.24
|
%
|
|
|
3,230,469
|
|
|
$
|
5,096
|
|
|
|
0.21
|
%
|
|
CDs
|
|
|
1,952,901
|
|
|
|
12,687
|
|
|
|
0.87
|
%
|
|
|
2,526,838
|
|
|
|
20,879
|
|
|
|
1.10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
7,128,798
|
|
|
|
19,629
|
|
|
|
0.37
|
%
|
|
|
6,912,433
|
|
|
|
25,975
|
|
|
|
0.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase
|
|
|
196,371
|
|
|
|
442
|
|
|
|
0.30
|
%
|
|
|
230,164
|
|
|
|
489
|
|
|
|
0.28
|
%
|
|
FHLB advances and other borrowings
|
|
|
312,011
|
|
|
|
2,591
|
|
|
|
1.11
|
%
|
|
|
295,888
|
|
|
|
2,158
|
|
|
|
0.98
|
%
|
|
Related party notes payable
|
|
|
41,295
|
|
|
|
690
|
|
|
|
2.23
|
%
|
|
|
41,295
|
|
|
|
714
|
|
|
|
2.31
|
%
|
|
Subordinated debentures and other
|
|
|
56,083
|
|
|
|
985
|
|
|
|
2.35
|
%
|
|
|
56,083
|
|
|
|
1,013
|
|
|
|
2.42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
|
605,760
|
|
|
|
4,708
|
|
|
|
1.04
|
%
|
|
|
623,430
|
|
|
|
4,374
|
|
|
|
0.94
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
7,734,558
|
|
|
|
24,337
|
|
|
|
0.42
|
%
|
|
|
7,535,863
|
|
|
|
30,349
|
|
|
|
0.54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing other liabilities
|
|
|
77,140
|
|
|
|
|
|
|
|
|
|
|
|
81,740
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
1,411,137
|
|
|
|
|
|
|
|
|
|
|
|
1,376,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
|
$
|
9,222,835
|
|
|
|
|
|
|
|
|
|
|
$
|
8,993,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
3.37
|
%
|
|
|
|
|
|
|
|
|
|
|
2.59
|
%
|
|
Net interest income and net interest margin
|
|
|
|
|
|
$
|
237,427
|
|
|
|
3.93
|
%
|
|
|
|
|
|
$
|
180,210
|
|
|
|
3.07
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net interest income and adjusted net interest margin
(3)
|
|
|
|
|
|
$
|
225,308
|
|
|
|
3.73
|
%
|
|
|
|
|
|
$
|
221,845
|
|
|
|
3.78
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Calculated as annualized percentages.
|
|
(2)
|
Interest income includes $12.1 million and $(41.6) million for the nine months ended June 30, 2014 and 2013, respectively, resulting from changes in fair value of certain of our fixed-rate loans where we have entered
into matching fixed-to-floating interest rate swaps, and $1.7 million and $0.9 million for the nine months ended June 30, 2014 and 2013, respectively, resulting from accretion of purchase accounting discount associated with acquired loans.
|
|
(3)
|
These are non-GAAP financial measures. For more information on these non-GAAP financial measures, including a reconciliations to the most directly comparable GAAP financial measures, see “Prospectus
Summary—Summary Historical Consolidated Financial and Operating Information.”
|
77
Interest and Dividend Income
The following table presents interest and dividend income for the nine months ended June 30, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
June 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(dollars in thousands)
|
|
|
Interest and dividend income:
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
240,362
|
|
|
$
|
188,666
|
|
|
Taxable securities
|
|
|
20,190
|
|
|
|
20,817
|
|
|
Nontaxable securities
|
|
|
61
|
|
|
|
113
|
|
|
Dividends on securities
|
|
|
751
|
|
|
|
701
|
|
|
Federal funds sold and other
|
|
|
400
|
|
|
|
262
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and dividend income
|
|
$
|
261,764
|
|
|
$
|
210,559
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and dividend income consists primarily of interest income on loans and interest and dividend
income on our investment portfolio. Total interest and dividend income for the nine months ended June 30, 2014 increased by $51.2 million, or 24%, to $261.8 million from $210.6 million for the nine months ended June 30, 2013. Significant components
of interest and dividend income are described in further detail below.
Loans.
Interest income on all loans increased $51.7
million, or 27%, to $240.4 million for the nine months ended June 30, 2014 from $188.7 million for the nine months ended June 30, 2013. In particular, interest income on our loans, other than loans acquired with deteriorated credit quality,
increased $62.0 million, or 35%, to $236.0 million for the nine months ended June 30, 2014 from $174.1 million for the nine months ended June 30, 2013. The most significant driver of this increase in interest income was a $53.8 million net increase
related to the fair value of certain of our fixed-rate loans where we have entered into matching fixed-to-floating interest rate swaps. Adjusted for the impact related to the net increase in fair value of these loans involving matching
fixed-to-floating interest rate swaps, our interest income on loans, other than loans acquired with deteriorated credit quality, increased $8.2 million, or 3%, primarily as a result of growth in this portion of our loan portfolio.
Interest
income on loans acquired with deteriorated credit quality decreased $9.3 million, or 68%, to $4.3 million for the nine months ended June 30, 2014 from $13.6 million for the nine months ended June 30, 2013, primarily as a result of continued runoff
in this portion of our loan portfolio.
Our yield on loans is affected by market rates, the level of adjustable rate loan indices,
interest rate floors and caps, customer repayment activity, the level of loans held for sale, portfolio mix, movement in the fair value of long-term fixed-rate loans accounted for under ASC 825
Fair Value Option
and the level of nonaccrual
loans. The average yield on loans, other than loans acquired with deteriorated credit quality, was 5.06% for the first nine months of fiscal year 2014, an increase of 1.04% from 4.02% for the same period in fiscal year 2013. Adjusted for the impact
related to the fair value of certain of our fixed-rate loans where we have entered into matching fixed-to-floating interest rate swaps, the average yield on our loans, other than loans acquired with deteriorated credit quality, for the first nine
months of fiscal year 2014 was 4.80%, a decrease of 17 basis points from 4.97% during the same period in fiscal year 2013. This decrease is attributable to the competitive interest rate environment for high quality commercial and agricultural
credits across our footprint. The average yield on loans acquired with deteriorated credit quality was 2.85% for the first nine months of fiscal year 2014, a decrease of 3.39% from 6.24% during the same period in fiscal year 2013. This significant
decrease represents the impact of accelerated amortization of the related FDIC indemnification assets as the overall portfolio performance has continued to improve resulting in lower indemnification amounts expected from the FDIC.
Average net loan balances for the nine months ended June 30, 2014 were $6.44 billion, compared to $6.12 billion for the nine months ended June
30, 2013, an increase of $0.32 billion, or 5%. The increase is attributable to continued organic growth in our agriculture and commercial non-real estate lending classes, partially offset by runoff of loans acquired as part of our acquisition of
TierOne Bank that are not considered core to our ongoing operations primarily because they are located outside our footprint.
78
Loan-related fee income of $6 million is included in interest income for the nine months ended
June 30, 2014, compared to $7 million for the nine months ended June 30, 2013. In addition, certain fees collected at loan origination are considered to be a component of yield on the underlying loans and are deferred and recognized into income over
the life of the loans. Amortization related to the FDIC indemnification assets of $12.0 million and $11.1 million for the nine months ended June 30, 2014 and 2013, respectively, is included as a reduction to interest income.
Investment Portfolio.
Interest and dividend income on investments includes income earned on investment securities and FHLB stock. For
the first nine months of fiscal year 2014, our investment portfolio consisted primarily of mortgage-backed securities, substantially all of which were residential agency mortgage-backed securities, and U.S. Treasury securities. Interest and dividend
income on investments decreased $0.6 million to $20.2 million for the nine months ended June 30, 2014 from $20.8 million for the nine months ended June 30, 2013. The decrease is due to a 9% reduction in the average balance of our
investment portfolio, partially offset by a 13 basis point increase in portfolio yield.
Interest Expense
The following table presents interest expense for the nine months ended June 30, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
June 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(dollars in thousands)
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
19,629
|
|
|
$
|
25,975
|
|
|
Securities sold under agreements to repurchase
|
|
|
442
|
|
|
|
489
|
|
|
FHLB advances and other borrowings
|
|
|
2,591
|
|
|
|
2,158
|
|
|
Related party notes payable
|
|
|
690
|
|
|
|
714
|
|
|
Subordinated debentures and other
|
|
|
985
|
|
|
|
1,013
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
24,337
|
|
|
$
|
30,349
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense consists primarily of interest expense on five components: deposits, securities sold
under agreements to repurchase, FHLB advances and other borrowings, borrowings from NAB and its affiliates (referred to as related party notes payable), and our outstanding subordinated debentures. Total interest expense for the nine months ended
June 30, 2014 decreased by $6.0 million, or 20%, to $24.3 million from $30.3 million for the nine months ended June 30, 2013. During the period, we continued to transition the composition of our deposit portfolio away from higher-cost term
deposits toward more cost-effective transaction accounts, which lowered the overall cost of deposits. The average cost of total interest-bearing liabilities for the nine months ended June 30, 2014 and 2013 was 0.42% and 0.54%, respectively.
Significant components of interest expense are described in further detail below.
Deposits
. Interest expense on deposits,
consisting of checking accounts, MMDAs, NOW accounts, savings accounts and CDs, decreased $6.3 million, or 24%, to $19.6 million for the nine months ended June 30, 2014 from $26.0 million for the nine months ended June 30, 2013. The average cost of
deposits decreased 13 basis points to 0.37% for the nine months ended June 30, 2014 from 0.50% for the nine months ended June 30, 2013, while average deposit balances increased 3% to $7.13 billion for the first nine months of fiscal 2014 from
$6.91 billion for the same period in fiscal year 2013. At June 30, 2014, our total deposits were $7.07 billion, compared with $6.95 billion at September 30, 2013.
Average noninterest-bearing demand account balances accounted for 17% of average total deposits for the nine months ended June 30, 2014 and
2013. Total average other liquid accounts, consisting of MMDAs, NOW accounts and savings accounts, were 56% of average total deposits for the nine months ended June 30, 2014 and 46% for the nine months ended June 30, 2013. CDs were 27% of average
total deposits for the nine months ended June 30, 2014 and 37% for the nine months ended June 30, 2013, and the average rate on these deposits decreased 23 basis points from 1.10% to 0.87%. This shift in our deposit composition accounted for much of
the improvement in the cost of our deposit funding between these two periods.
79
FHLB Advances and Other Borrowings.
For the nine months ended June 30, 2014 and 2013,
interest expense on FHLB advances and other borrowings was $2.6 million and $2.2 million, respectively, representing weighted average cost of 1.11% and 0.98%, respectively. Our total outstanding FHLB advances were $435.0 million at June 30, 2014,
and $390.5 million at September 30, 2013. The weighted average contractual rate on our FHLB advances was 0.77% at June 30, 2014, a decrease of 3 basis points compared with 0.80% at June 30, 2013. The average tenor of our FHLB advances was
52 months and 28 months at June 30, 2014 and 2013, respectively. The amount of other borrowings and related interest expense are immaterial in both periods.
We must collateralize FHLB advances by pledging residential real estate loans and investments. We pledge more assets than required by our
current level of borrowings in order to maintain additional borrowing capacity. Although we may substitute other loans for such pledged loans, we are restricted in our ability to sell or otherwise pledge these loans without substituting collateral
or prepaying a portion of the FHLB advances. At June 30, 2014, we had pledged $2.10 billion of loans to the FHLB.
Subordinated
Debentures and Other.
Interest expense on our outstanding subordinated debentures was $1.0 million for the nine months ended June 30, 2014 and 2013. At June 30, 2014 and September 30, 2013, the weighted average contractual rate on
outstanding subordinated notes was 2.29% and 2.31%, respectively.
Securities Sold Under Agreements to Repurchase; Related Party Notes
Payable.
Securities sold under agreements to repurchase represent retail purchase agreements with customers and, together with our related party notes payable, represent a small portion of our overall funding profile. The interest expense
associated with these two classes of liabilities remained largely consistent period-over-period.
Rate and Volume Variances
Net interest income is affected by changes in both volume and interest rates. Volume changes are caused by increases or decreases
during the year in the level of average interest-earning assets and average interest-bearing liabilities. Rate changes result from increases or decreases in the yields earned on assets or the rates paid on liabilities.
80
The following table presents for the nine months ended June 30, 2014 a summary of the changes in
interest income and interest expense resulting from changes in the volume of average asset and liability balances and changes in the average yields or rates compared with the nine months ended June 30, 2013. If significant, the change in interest
income or interest expense due to both volume and rate has been prorated between the volume and the rate variances based on the dollar amount of each variance. The table illustrates a trend of continued balance sheet growth, while margins remain
under pressure, particularly on the asset side of the balance sheet. The rate impact related to loans in the nine months ended June 30, 2014 is exacerbated by the impact of the change in fair value of fixed-rate loans where we have entered into
matching interest rate swaps; absent this change, we experienced continued pressure on loan pricing as a result of strong competition in the markets where we operate and the prolonged low-interest rate environment. The table also illustrates the
continuing favorable impact to rate and volume attributes of strategic efforts undertaken to shift the balance of our deposit portfolio away from CDs toward more cost-effective NOW accounts, MMDAs and savings accounts and to more closely monitor
deposit pricing and exceptions to rates set internally for specific deposit products.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30, 2014 vs.
nine months ended June 30, 2013
|
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
|
|
(dollars in thousands)
|
|
|
Increase (decrease) in interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
88
|
|
|
$
|
50
|
|
|
$
|
138
|
|
|
Investment securities
|
|
|
(2,492
|
)
|
|
|
1,863
|
|
|
|
(629
|
)
|
|
Loans, other than loans acquired with deteriorated credit quality
|
|
|
13,099
|
|
|
|
47,863
|
|
|
|
60,962
|
|
|
Loans acquired with deteriorated credit quality
|
|
|
(3,315
|
)
|
|
|
(5,951
|
)
|
|
|
(9,266
|
)
|
|
Loans
|
|
|
9,784
|
|
|
|
41,912
|
|
|
|
51,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total increase (decrease)
|
|
|
7,380
|
|
|
|
43,825
|
|
|
|
51,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW, MMDA & savings accounts
|
|
|
1,210
|
|
|
|
636
|
|
|
|
1,846
|
|
|
CDs
|
|
|
(4,220
|
)
|
|
|
(3,972
|
)
|
|
|
(8,192
|
)
|
|
Securities sold under agreements to repurchase
|
|
|
(79
|
)
|
|
|
32
|
|
|
|
(47
|
)
|
|
FHLB advances and other borrowings
|
|
|
122
|
|
|
|
311
|
|
|
|
433
|
|
|
Related party notes payable
|
|
|
—
|
|
|
|
(24
|
)
|
|
|
(24
|
)
|
|
Subordinated debentures
|
|
|
—
|
|
|
|
(28
|
)
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total increase (decrease)
|
|
|
(2,967
|
)
|
|
|
(3,045
|
)
|
|
|
(6,012
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in net interest income
|
|
$
|
10,347
|
|
|
$
|
46,870
|
|
|
$
|
(57,217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
We recognized a net recovery of provision for loan losses of $2.1 million for the nine months ended June 30, 2014 compared to a provision for
loan losses of $14.0 million for the nine months ended June 30, 2013, a change of $16.1 million or 115%. The net recovery for the nine months ended June 30, 2014 was driven by a variety of factors, including reductions in incurred loss history and
impaired loans requiring specific reserves leading to a $0.1 million credit to expense related to the portion of our loan portfolio that is not subject to purchase accounting implications or for which we have elected the fair value option and a
$1.9 million improvement associated with loans acquired with deteriorated credit quality. All loans acquired with deteriorated credit quality for which we recognized an improvement are covered by FDIC loss-sharing arrangements; we had no
provision associated with our loans covered by FDIC loss-sharing arrangements other than loans acquired with deteriorated credit quality during the nine months ended June 30, 2014. We believe the reductions in incurred loss history and impaired
loans requiring specific reserves during the nine months ended June 30, 2014 are representative of the continued improvement in the overall credit quality of our loan portfolio.
81
Noninterest Income
The following table presents noninterest income for the nine months ended June 30, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
June 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(dollars in thousands)
|
|
|
Noninterest income:
|
|
|
|
|
|
Service charges and other fees
|
|
$
|
29,728
|
|
|
$
|
30,927
|
|
|
Net gain on sale of loans
|
|
|
3,885
|
|
|
|
11,108
|
|
|
Casualty insurance commissions
|
|
|
877
|
|
|
|
955
|
|
|
Investment center income
|
|
|
1,757
|
|
|
|
2,050
|
|
|
Net gain on sale of securities
|
|
|
6
|
|
|
|
1,741
|
|
|
Trust department income
|
|
|
2,847
|
|
|
|
2,601
|
|
|
Net gain from sale of repossessed property and other assets
|
|
|
2,413
|
|
|
|
2,235
|
|
|
Other
|
|
|
4,070
|
|
|
|
7,997
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
$
|
45,583
|
|
|
$
|
59,614
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income for the nine months ended June 30, 2014 decreased $14.0 million, or 24%, to
$45.6 million from $59.6 million for the nine months ended June 30, 2013. The principal drivers of the decrease were a decline in gain on sale of loans stemming from lower mortgage origination volumes as a result of rising interest rates and a
decline in gains on sale of investment securities. Significant components of noninterest income are described in further detail below.
Service Charges and Other Fees
. Service charges and other fees are primarily fees charged to deposit customers, including
overdrawn/non-sufficient funds, or OD/NSF, fees, commercial deposit account analysis and other charges, and ATM interchange and foreign activity fees. Service charges and other fees decreased to $29.7 million in the nine months ended June 30,
2014 from $30.9 million in the nine months ended June 30, 2013, a decrease of 4%. The decrease was primarily driven by a $1.7 million reduction in net OD/NSF fees, partially offset by higher commercial checking fee income. As a subsidiary of NAB, we
are subject to the limitations on permissible interchange fees contained in the Durbin Amendment to the Dodd-Frank Act, and its implementing regulations, which are reflected in the ATM interchange income we generated during the first nine months of
fiscal years 2014 and 2013. We estimate that the annual impact of this limitation is approximately $6.0 million.
Net Gain on Sale of
Loans
. The net gain on the sale of $146.3 million in aggregate principal balance of loans was $3.9 million for the nine months ended June 30, 2014. In comparison, the net gain on sale of loans was $11.1 million on loan sales of $355.4 million
for the nine months ended June 30, 2013. Our average net gain as a percentage of loans sold decreased nearly 20% between the two periods. Our loan sale activity in 2014 and 2013 has primarily been the sale of conforming residential mortgage loans to
FNMA, other commercial banks and, to a lesser extent, various state-sponsored first-time homebuyer programs. Net gain on sales of loans fluctuates with the volume of loans sold, the type of loans sold and market conditions, such as the current
interest rate environment. The volume of loans that we sell depends upon conditions in the mortgage origination, loan securitization and secondary loan sale markets. We have seen a substantial decline in overall mortgage loan volumes for the nine
months ended June 30, 2014 compared to the nine months ended June 30, 2013. The decline is primarily related to refinance volumes, which we believe are impacted by an increase in national mortgage interest rates and in home prices across our
footprint and by our customers’ ability and willingness to refinance based on these factors. Specifically, we believe that the majority of our existing and potential customers with qualifying home equity took advantage of historically low
mortgage rates from 2011 through mid-2013 to refinance and lock in lower rates on fixed-rate loans; as rates have risen, fewer potential borrowers have incentive to refinance. Volumes for home purchase transactions have remained much more consistent
over the same periods.
82
Net Gain on Sale of Securities
. Net gain on sale of securities represents the difference
between gross sale proceeds and carrying value at amortized cost of investment securities sold during the period. We received total proceeds of $49.4 million related to security sales during the nine months ended June 30, 2013, generating net gains
of $1.7 million, compared to proceeds of $4.5 million generating a negligible net gain in the nine months ended June 30, 2014.
Net
Gain from Sale of Repossessed Property and Other Assets
. Our net gain on the sale of repossessed property and other assets was $2.4 million for the nine months ended June 30, 2014, an increase of $0.2 million from $2.2 million for the nine
months ended June 30, 2013. The total value of assets sold and average sales price relative to carrying value remained consistent between the two periods.
Other income
. Other income includes rental income derived from leasing certain portions of bank-owned real estate, vendor incentive
payments and other miscellaneous income items. Other income decreased to $4.1 million in the nine months ended June 30, 2014 from $8.0 million in the nine months ended June 30, 2013, a decrease of 49%. The decrease was primarily driven by a decline
in vendor incentive payments recognized and lower rental income.
Noninterest Expense
The following table presents noninterest expense for the nine months ended June 30, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
June 30,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
(dollars in thousands)
|
|
|
Noninterest expense:
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
$
|
71,176
|
|
|
$
|
76,123
|
|
|
Occupancy expenses, net
|
|
|
13,613
|
|
|
|
13,919
|
|
|
Data processing
|
|
|
14,105
|
|
|
|
13,749
|
|
|
Equipment expenses
|
|
|
3,099
|
|
|
|
3,361
|
|
|
Advertising
|
|
|
3,385
|
|
|
|
4,684
|
|
|
Communication expenses
|
|
|
3,402
|
|
|
|
3,585
|
|
|
Professional fees
|
|
|
9,623
|
|
|
|
8,855
|
|
|
Derivatives, net (gain) loss
|
|
|
12,119
|
|
|
|
(41,635
|
)
|
|
Amortization of core deposits and other intangibles
|
|
|
13,448
|
|
|
|
14,600
|
|
|
Other
|
|
|
22,466
|
|
|
|
18,947
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
$
|
166,436
|
|
|
$
|
116,188
|
|
|
|
|
|
|
|
|
|
|
|
Our noninterest expense consists primarily of salaries and employee benefits, net occupancy expenses, data
processing, professional fees, net gain or loss on derivatives and the amortization of core deposits and other intangibles. Noninterest expense increased by $50.2 million, or 43%, to $166.4 million for the nine months ended June 30, 2014 from $116.2
million for the nine months ended June 30, 2013. The increase was driven by a $53.8 million change in derivatives, net (gain) loss, which is offset by a corresponding increase in net interest income related to our fair value loans. Adjusted for
this variance, our adjusted noninterest expenses decreased 2% to $140.9 million for the nine months ended June 30, 2014 from $143.2 million for the nine months ended June 30, 2013, and our efficiency ratio was 52.0% for the nine months ended
June 30, 2014, compared with 50.9% for the nine months ended June 30, 2013. For more information on these non-GAAP financial measures, including a reconciliation of each to the most directly comparable GAAP financial measures, see “Prospectus
Summary—Summary Historical Consolidated Financial and Operating Information.” The remaining portion of the reduction in noninterest expenses was driven by focused expense control across our organization, most notably a $4.9 million
reduction in salaries and benefit costs due to a net closure of 17 branches between June 30, 2013 and June 30, 2014, and efforts to streamline our retail structure. Significant components of noninterest expense are described in further detail
below.
83
Salaries and Employee Benefits
. Salaries and related benefits is the largest component of
noninterest expense and includes the cost of incentive compensation, benefit plans, health insurance and payroll taxes. These expenses were $71.2 million for the nine months ended June 30, 2014, a 6% decrease from $76.1 million for the nine months
ended June 30, 2013. The decrease was primarily due to lower salary costs driven by the net closure of 17 branches, as previously discussed, and disciplined management of staffing levels across our business.
Occupancy Expenses, Net
. Occupancy costs were $13.6 million for the nine months ended June 30, 2014, a 2% decrease from $13.9 million
for the nine months ended June 30, 2013. Occupancy expenses relate to our branch network and administrative office locations throughout our footprint, including both owned and leased locations. Both rent expense and depreciation expense declined
period-over-period, primarily as a result of the net closure of 17 branch locations as previously discussed.
Data Processing
.
These expenses include payments to vendors who provide software, data processing and services on an outsourced basis, costs related to supporting and developing Internet-based activities and depreciation of bank-owned hardware and software. Expenses
for data processing were $14.1 million for the nine months ended June 30, 2014, a 3% increase from $13.7 million for the nine months ended June 30, 2013. The increase was attributable to higher software expenses, primarily related to mobile and
online product offerings, and higher credit card processing charges due to increased volume.
Advertising
. Advertising expenses
have declined by $1.3 million to $3.4 million for the nine months ended June 30, 2014. The decrease was a result of more focused marketing campaigns and altered timing of spending.
Professional Fees
. Professional fees include legal services required to complete transactions, resolve legal matters or delinquent
loans, our FDIC and FICO assessments and the cost of accountants and other consultants. These expenses were $9.6 million for the nine months ended June 30, 2014, compared to $8.9 million for the same period of fiscal year 2013, an increase of 9%, as
lower legal fees were offset by costs related to preparing for this offering and new assessments imposed by NAB in connection with compliance costs associated with rules implementing various provisions of the Dodd-Frank Act incurred by NAB or its
other U.S. subsidiaries.
Derivatives, Net (Gain) Loss
. In the normal course of business, we use interest rate swaps to manage our
interest rate risk. These interest rate swap agreements are entered into in order to facilitate the risk management strategies of a small number of commercial real estate, commercial non-real estate and agriculture fixed-rate loan customers with
original maturities of 5 years or greater, and typically 5 to 15 years. We mitigate this risk by entering into equal and offsetting interest rate swap agreements with NAB. The related interest rate swaps are recognized as either assets or
liabilities in our financial statements, and any gains or losses on these swaps are recorded in earnings as a component of noninterest expense. These arrangements resulted in a $12.1 million net loss for the nine months ended June 30, 2014 compared
to a $41.6 million net gain for the nine months ended June 30, 2013, a fluctuation of $53.8 million, which is offset by a corresponding change in net interest income related to our fair value loans. For more information on these accounting
arrangements, including the accounting for the related fixed-term loans, see “—Key Factors Affecting Our Business and Financial Statements—Loans and Interest Rates Swaps Accounted for at Fair Value.”
Amortization of Core Deposits and Other Intangibles.
Amortization of core deposits and other intangibles represents the scheduled
amortization of specifically identifiable intangible assets arising from acquisitions, including NAB’s acquisition of us as well as subsequent acquisitions completed by us. The most significant component of amortization of core deposits and
other intangibles relates to core deposit intangible assets, which represented $11.6 million for the nine months ended June 30, 2014 compared to $12.8 million for the nine months ended June 30, 2013. Total scheduled amortization for all intangible
assets includes approximately $16 million for the full fiscal year 2014, approximately $7 million for fiscal year 2015, approximately $3 million for fiscal year 2016 and immaterial amounts for fiscal years 2017 through 2023.
Other
. Other noninterest expenses include costs related to OREO, business development and professional membership fees, travel and
entertainment costs and costs specific to integrating newly-acquired banks. Other
84
noninterest expenses increased from $18.9 million for the nine months ended June 30, 2013 to $22.5 million for the nine months ended June 30, 2014, an increase of 19%. The increase was primarily
driven by a $7.0 million increase in net OREO costs, largely related to the valuation of a single longstanding development loan that was foreclosed during fiscal year 2014, partially offset by lower travel and entertainment and office supply costs
as well as a reduction in costs related to developing an enhanced customer rating system and methodology.
Provision for Income
Taxes
Our provision for income taxes varies due to the amount of taxable income, the availability of tax-advantaged income and tax
credits and the rates charged by federal and state authorities. Our provision for income taxes of $41.6 million for the nine months ended June 30, 2014 represents an effective tax rate of 35.0%, compared with $39.7 million or 36.2% for the nine
months ended June 30, 2013, with the decrease in rate primarily due to a larger amount of tax-exempt interest and the mix of state and local taxes we recognized. We have historically calculated our provision for income taxes as though we were a
standalone company. As a result, we do not expect any material changes in our provisioning for income taxes following the completion of this offering.
85
Results of Operations—Fiscal Years Ended September 30, 2013 and September 30, 2012
Overview
The
following table highlights certain key financial and performance information at and for the years ended September 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended
September 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
Interest and dividend income
|
|
$
|
294,257
|
|
|
$
|
344,304
|
|
|
Interest expense
|
|
|
39,161
|
|
|
|
50,971
|
|
|
Noninterest income
|
|
|
77,692
|
|
|
|
88,975
|
|
|
Noninterest expense
|
|
|
171,073
|
|
|
|
235,010
|
|
|
Provision for loan losses
|
|
|
11,574
|
|
|
|
30,145
|
|
|
Net income
|
|
|
96,243
|
|
|
|
72,995
|
|
|
Cash net income
(1)
|
|
|
112,289
|
|
|
|
89,397
|
|
|
|
|
|
|
Performance Ratios:
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
3.24
|
%
|
|
|
3.98
|
%
|
|
Adjusted net interest margin
(1)
|
|
|
3.76
|
%
|
|
|
3.72
|
%
|
|
Return on average total assets
|
|
|
1.07
|
%
|
|
|
0.85
|
%
|
|
Return on average tangible common equity
(1)
|
|
|
17.5
|
%
|
|
|
15.0
|
%
|
|
Efficiency ratio
(1)
|
|
|
51.5
|
%
|
|
|
54.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At and for the fiscal year ended
September 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Balance Sheet and Other Information:
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
9,134,258
|
|
|
$
|
9,008,252
|
|
|
Loans
(2)
|
|
|
6,362,673
|
|
|
|
6,138,574
|
|
|
Allowance for loan losses
|
|
|
55,864
|
|
|
|
71,878
|
|
|
Deposits
|
|
|
6,948,208
|
|
|
|
6,884,515
|
|
|
Stockholder’s equity
|
|
|
1,417,214
|
|
|
|
1,388,563
|
|
|
Tangible common equity
(1)
|
|
|
642,156
|
|
|
|
595,920
|
|
|
Tier 1 capital ratio
|
|
|
12.4
|
%
|
|
|
11.9
|
%
|
|
Total capital ratio
|
|
|
13.8
|
%
|
|
|
13.7
|
%
|
|
Tier 1 leverage ratio
|
|
|
9.2
|
%
|
|
|
8.3
|
%
|
|
Tangible common equity / tangible assets
(1)
|
|
|
8.2
|
%
|
|
|
7.8
|
%
|
|
Nonperforming loans / total loans
(3)
|
|
|
1.28
|
%
|
|
|
1.53
|
%
|
|
Net charge-offs / average total loans
|
|
|
0.44
|
%
|
|
|
0.54
|
%
|
|
Allowance for loan losses / total loans
|
|
|
0.88
|
%
|
|
|
1.17
|
%
|
|
(1)
|
This is a non-GAAP financial measure. For more information on this non-GAAP financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see “Prospectus Summary—Summary
Historical Consolidated Financial and Operating Information.”
|
|
(2)
|
Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.
|
|
(3)
|
Nonperforming loans excludes loans covered by FDIC loss-sharing arrangements.
|
Our total
assets were $9.13 billion at September 30, 2013, compared with $9.01 billion at September 30, 2012. The increase in total assets from September 30, 2012 was principally attributable to organic loan growth, partially offset by a
reduction in the investment portfolio. At September 30, 2013, loans as shown above were $6.36 billion,
86
an increase of $224.1 million, or 4%, from $6.14 billion for the fiscal year ended September 30, 2012, primarily due to growth in agricultural and commercial lending. In our most recent
fiscal year, total deposits grew 1% to $6.95 billion from September 30, 2012 to September 30, 2013.
For the fiscal year ended
September 30, 2013:
|
|
•
|
|
net income was $96.2 million, an increase of $23.2 million, or 32%, compared with fiscal year 2012, and cash net income was $112.3 million, an increase of $22.9 million from $89.4 million for fiscal year 2012, in each
case due in large part to continued improvement in the overall credit quality of our lending portfolio, leading to lower net charge-offs compared to fiscal year 2012 and an $18.6 million pre-tax reduction in provision for loan losses;
|
|
|
•
|
|
net interest margin was 3.24%, a decrease of 74 basis points compared with fiscal year 2012, however, our adjusted net interest margin increased 4 basis points to 3.76% compared with fiscal year 2012. The decrease in
our net interest margin was primarily attributable to changes in fair value associated with certain of our long-term loans measured at fair value where we have entered into interest rate swaps, while the increase in our adjusted net interest margin
was primarily due to cost reductions from our strategic efforts undertaken to transition the composition of our deposit portfolio away from higher- cost term deposits toward more cost-effective transaction accounts;
|
|
|
•
|
|
net interest income was $255.1 million, a decrease of $38.2 million, or 13%, compared with fiscal year 2012, and our adjusted net interest income was $295.4 million, an 8% increase compared with fiscal year 2012. The
increase in our adjusted net interest income is primarily due to 7% growth in average interest-earning assets, which outpaced 6% growth in interest-bearing liabilities. The decline in our net interest income was primarily attributable to changes in
fair value associated with certain of our long- term loans measured at fair value where we have entered into interest rate swaps;
|
|
|
•
|
|
provision for loan losses was $11.6 million, a decrease of $18.6 million, or 62%, compared with fiscal year 2012. The decrease was driven by continued improvement in our incurred loss history and reductions in impaired
loans requiring specific reserves for loan losses;
|
|
|
•
|
|
noninterest income was $77.7 million, a decrease of $11.3 million, or 13%, compared with fiscal year 2012, due in large part to a $6.4 million decrease in gains on sales of investment securities and a $4.0 million
bargain purchase gain recorded on the purchase of North Central Bancshares, Inc. in fiscal year 2012, which was not a recurring item;
|
|
|
•
|
|
noninterest expense was $171.1 million, a decrease of $63.9 million, or 27%, compared with fiscal year 2012, and our adjusted noninterest expense decreased 2% compared with fiscal year 2012, driven in each case by our
focus on right-sizing our branch footprint, continued devotion of resources to process improvement initiatives across the organization and a decrease in our net OREO carrying costs and, in the case of our noninterest expense, by changes in fair
value associated with certain of our interest rate swaps used to manage interest rate risk associated with some of our long-term loans measured at fair value; and
|
|
|
•
|
|
return on average total assets increased 22 basis points, from 0.85% for fiscal year 2012 to 1.07% for fiscal year 2013, while return on average tangible common equity increased from 15.0% to 17.5% over the same period.
|
Our cash net income, adjusted net interest margin, adjusted net interest income, adjusted noninterest expense and return on
average tangible common equity discussed above are all non-GAAP financial measures. For more information on these financial measures, including a reconciliation to the most directly comparable GAAP financial measures, see “Prospectus
Summary—Summary Historical Consolidated Financial and Operating Information.”
87
Net Interest Income
The following table presents net interest income, net interest margin and adjusted net interest margin for fiscal years 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended
September 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Net interest income:
|
|
|
|
|
|
|
|
|
|
Total interest and dividend income
|
|
$
|
294,257
|
|
|
$
|
344,304
|
|
|
Less: Total interest expense
|
|
|
39,161
|
|
|
|
50,971
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
255,096
|
|
|
|
293,333
|
|
|
Less: Provision for loan losses
|
|
|
11,574
|
|
|
|
30,145
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provisions for loan losses
|
|
$
|
243,522
|
|
|
$
|
263,188
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin and adjusted net interest margin:
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets
|
|
$
|
7,862,860
|
|
|
$
|
7,367,085
|
|
|
Average interest-bearing liabilities
|
|
|
7,560,749
|
|
|
|
7,149,294
|
|
|
Net interest margin
|
|
|
3.24
|
%
|
|
|
3.98
|
%
|
|
Adjusted net interest margin
(1)
|
|
|
3.76
|
%
|
|
|
3.72
|
%
|
|
|
(1)
|
This is a non-GAAP financial measure. For more information on this financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see “Prospectus Summary—Summary
Historical Consolidated Financial and Operating Information.”
|
Net interest income was $255.1 million in fiscal year
2013, a decrease of $38.2 million, or 13%, from $293.3 million in fiscal year 2012. Net of the impact of the change in fair value on fixed-rate loans measured at fair value where we have entered into matching interest rate swaps, adjusted net
interest income increased to $295.4 million in fiscal year 2013 from $274.0 million in fiscal year 2012, an increase of 8%. Our average interest-earning assets grew 7% in fiscal year 2013, while our average interest-bearing liabilities grew 6%
during the period. In fiscal year 2013, the average yield on interest-earning assets decreased 93 basis points to 3.74% while the average rate on interest-bearing liabilities decreased 19 basis points to 0.52%. Net interest margin was 3.24% in
fiscal year 2013, compared with 3.98% in fiscal year 2012. Adjusted net interest margin remained relatively flat, increasing 4 basis points to 3.76% compared with the fiscal year 2012. For more information on our adjusted net interest margin,
including a reconciliation to the most directly comparable GAAP financial measure, see “Prospectus Summary—Summary Historical Consolidated Financial and Operating Information.”
The following table presents the distribution of average assets, liabilities and equity, interest income and resulting yields on average
interest-earning assets, and interest expense and rates on average interest-bearing liabilities for each of the last three fiscal years. Loans on nonaccrual status, totaling $81.5 million at September 30, 2013, $93.8 million at
September 30, 2012 and $143.2 million at September 30, 2011 are included in the average balances below. Any interest that had accrued as of the date of nonaccrual is immediately reversed as a reduction to interest income, while any
interest subsequently recovered is recorded in the period of recovery. Tax-exempt loans and securities, totaling $340.2 million at September 30, 2013, $273.9 million at September 30, 2012 and $95.1 million at September 30, 2011, are
typically entered at lower interest rate arrangements than comparable non-exempt loans and securities. Interest income earned on these assets is presented below at contractual rate, as opposed to a tax equivalent yield concept, with any tax benefit
realized presented in the provision for income taxes and reflected in the effective tax rate for the period. Loans acquired with deteriorated credit quality represent loans accounted for in accordance with ASC 310-30
Accounting for Purchased
Loans
that were credit impaired at the time we acquired them. Loans other than loans acquired with deteriorated credit quality represent loans we have originated and loans we have acquired that were not credit impaired at the time we acquired
them.
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended September 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yields/
Rates
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yields/
Rates
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yields/
Rates
|
|
|
|
|
(dollars in thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
132,517
|
|
|
$
|
336
|
|
|
|
0.25
|
%
|
|
$
|
141,722
|
|
|
$
|
331
|
|
|
|
0.23
|
%
|
|
$
|
183,603
|
|
|
$
|
682
|
|
|
|
0.37
|
%
|
|
Investment securities
|
|
|
1,575,343
|
|
|
|
29,588
|
|
|
|
1.88
|
%
|
|
|
1,746,789
|
|
|
|
33,791
|
|
|
|
1.93
|
%
|
|
|
1,607,413
|
|
|
|
38,977
|
|
|
|
2.42
|
%
|
|
Loans, other than acquired with deteriorated credit quality, net
(1)
|
|
|
5,876,116
|
|
|
|
249,527
|
|
|
|
4.25
|
%
|
|
|
5,093,013
|
|
|
|
291,692
|
|
|
|
5.73
|
%
|
|
|
4,536,907
|
|
|
|
288,997
|
|
|
|
6.37
|
%
|
|
Loans acquired with deteriorated credit quality, net
|
|
|
2,78,884
|
|
|
|
14,806
|
|
|
|
5.31
|
%
|
|
|
385,561
|
|
|
|
18,490
|
|
|
|
4.80
|
%
|
|
|
631,714
|
|
|
|
49,102
|
|
|
|
7.77
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
|
6,155,000
|
|
|
|
264,333
|
|
|
|
4.29
|
%
|
|
|
5,478,574
|
|
|
|
310,182
|
|
|
|
5.66
|
%
|
|
|
5,168,621
|
|
|
|
338,099
|
|
|
|
6.54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
7,862,860
|
|
|
|
294,257
|
|
|
|
3.74
|
%
|
|
|
7,367,085
|
|
|
|
344,304
|
|
|
|
4.67
|
%
|
|
|
6,959,637
|
|
|
|
377,758
|
|
|
|
5.43
|
%
|
|
Other noninterest-earning assets
|
|
|
1,158,231
|
|
|
|
|
|
|
|
|
|
|
|
1,210,866
|
|
|
|
|
|
|
|
|
|
|
|
1,319,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
9,021,091
|
|
|
$
|
294,257
|
|
|
|
3.26
|
%
|
|
$
|
8,577,951
|
|
|
$
|
344,304
|
|
|
|
4.01
|
%
|
|
$
|
8,279,418
|
|
|
$
|
377,758
|
|
|
|
4.56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest demand deposits
|
|
$
|
1,159,581
|
|
|
|
|
|
|
|
|
|
|
$
|
973,551
|
|
|
|
|
|
|
|
|
|
|
$
|
792,392
|
|
|
|
|
|
|
|
|
|
|
NOW, MMDA and savings deposits
|
|
|
3,296,745
|
|
|
$
|
6,921
|
|
|
|
0.21
|
%
|
|
|
2,748,001
|
|
|
$
|
6,967
|
|
|
|
0.25
|
%
|
|
|
2,430,520
|
|
|
$
|
7,925
|
|
|
|
0.33
|
%
|
|
CDs
|
|
|
2,447,553
|
|
|
|
26,196
|
|
|
|
1.07
|
%
|
|
|
2,799,666
|
|
|
|
37,449
|
|
|
|
1.34
|
%
|
|
|
3,222,237
|
|
|
|
51,784
|
|
|
|
1.61
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
6,903,879
|
|
|
|
33,117
|
|
|
|
0.48
|
%
|
|
|
6,521,218
|
|
|
|
44,416
|
|
|
|
0.68
|
%
|
|
|
6,445,149
|
|
|
|
59,709
|
|
|
|
0.93
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase
|
|
|
230,516
|
|
|
|
644
|
|
|
|
0.28
|
%
|
|
|
226,955
|
|
|
|
1,014
|
|
|
|
0.45
|
%
|
|
|
267,296
|
|
|
|
1,253
|
|
|
|
0.47
|
%
|
|
FHLB advances and other borrowings
|
|
|
328,976
|
|
|
|
3,103
|
|
|
|
0.94
|
%
|
|
|
303,743
|
|
|
|
3,098
|
|
|
|
1.02
|
%
|
|
|
140,297
|
|
|
|
2,962
|
|
|
|
2.11
|
%
|
|
Related party notes payable
|
|
|
41,295
|
|
|
|
950
|
|
|
|
2.30
|
%
|
|
|
41,295
|
|
|
|
1,007
|
|
|
|
2.44
|
%
|
|
|
48,295
|
|
|
|
930
|
|
|
|
1.93
|
%
|
|
Subordinated debentures and other
|
|
|
56,083
|
|
|
|
1,347
|
|
|
|
2.40
|
%
|
|
|
56,083
|
|
|
|
1,436
|
|
|
|
2.56
|
%
|
|
|
56,083
|
|
|
|
1,369
|
|
|
|
2.44
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
|
656,870
|
|
|
|
6,044
|
|
|
|
0.92
|
%
|
|
|
628,076
|
|
|
|
6,555
|
|
|
|
1.04
|
%
|
|
|
511,971
|
|
|
|
6,514
|
|
|
|
1.27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
7,560,749
|
|
|
|
39,161
|
|
|
|
0.52
|
%
|
|
|
7,149,294
|
|
|
|
50,971
|
|
|
|
0.71
|
%
|
|
|
6,957,120
|
|
|
|
66,223
|
|
|
|
0.95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing other liabilities
|
|
|
80,047
|
|
|
|
|
|
|
|
|
|
|
|
76,587
|
|
|
|
|
|
|
|
|
|
|
|
78,320
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
1,380,295
|
|
|
|
|
|
|
|
|
|
|
|
1,352,070
|
|
|
|
|
|
|
|
|
|
|
|
1,243,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
|
$
|
9,021,091
|
|
|
|
|
|
|
|
|
|
|
$
|
8,577,951
|
|
|
|
|
|
|
|
|
|
|
$
|
8,279,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
2.73
|
%
|
|
|
|
|
|
|
|
|
|
|
3.30
|
%
|
|
|
|
|
|
|
|
|
|
|
3.61
|
%
|
|
Net interest income and net interest margin
|
|
|
|
|
|
$
|
255,096
|
|
|
|
3.24
|
%
|
|
|
|
|
|
$
|
293,333
|
|
|
|
3.98
|
%
|
|
|
|
|
|
$
|
311,535
|
|
|
|
4.48
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net interest income and adjusted net interest margin
(2)
|
|
|
|
|
|
$
|
295,401
|
|
|
|
3.76
|
%
|
|
|
|
|
|
$
|
273,964
|
|
|
|
3.72
|
%
|
|
|
|
|
|
$
|
299,287
|
|
|
|
4.30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Interest income includes ($40.3) million, $19.4 million and $12.2 million for fiscal years 2013, 2012 and 2011, respectively, resulting from changes in fair value of certain of our fixed-rate loans where we have entered
into matching fixed-to-floating interest rate swaps, and $1.1 million, $6.3 million and $12.2 million for fiscal years 2013, 2012 and 2011, respectively, resulting from accretion of purchase accounting discount associated with acquired loans.
|
|
(2)
|
These are non-GAAP financial measures. For more information on these financial measures, including a reconciliation to the most directly comparable GAAP financial measures, see “Prospectus Summary—Summary
Historical Consolidated Financial and Operating Information.”
|
89
Interest and Dividend Income
The following table presents interest and dividend income for fiscal years 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended
September 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Interest and dividend income:
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
264,333
|
|
|
$
|
310,182
|
|
|
Taxable securities
|
|
|
28,552
|
|
|
|
32,581
|
|
|
Nontaxable securities
|
|
|
127
|
|
|
|
180
|
|
|
Dividends on securities
|
|
|
909
|
|
|
|
1,030
|
|
|
Federal funds sold and other
|
|
|
336
|
|
|
|
331
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and dividend income
|
|
$
|
294,257
|
|
|
$
|
344,304
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and dividend income consists primarily of interest income on loans and interest and dividend
income on our investment portfolio. Total interest and dividend income for fiscal year 2013 decreased by $50.0 million, or 15%, to $294.3 million from $344.3 million for fiscal year 2012. Significant components of interest and dividend income
are described in further detail below.
Loans.
Interest income on all loans decreased to $264.3 million in fiscal year 2013 from
$310.2 million in fiscal year 2012, a decrease of 15% during fiscal year 2013. In particular, interest income on our loans, other than loans acquired with deteriorated credit quality, decreased $42.2 million, or 14%, to $249.5 million for fiscal
year 2013 from $291.7 million for fiscal year 2012. The most significant driver of the decrease in interest income on loans was a $59.7 million difference in the net fair value change due to movements in interest rates on fixed-rate loans measured
at fair value where we had entered into matching interest rate swaps. Adjusted for the impact related to the net increase in fair value of these loans involving matching fixed-to-floating interest rate swaps, our interest income on loans, other than
loans acquired with deteriorated credit quality, increased $17.5 million, or 6%, primarily as a result of growth in this portion of our loan portfolio.
Interest income on loans acquired with deteriorated credit quality decreased $3.7 million,
or 20%, to $14.8 million for fiscal year 2013 from $18.5 million for fiscal year 2012, primarily as a result of continued runoff in this portion of our loan portfolio.
Our yield on loans is affected by market rates, the level of adjustable-rate loan indices, interest rate floors and caps, customer repayment
activity, the level of loans held for sale, portfolio mix, movement in the fair value of long-term fixed-rate loans accounted for under ASC 825
Fair Value Option,
and the level of nonaccrual loans. The average yield on loans, other than loans
acquired with deteriorated credit quality, was 5.31% for fiscal year 2013, an increase of 51 basis points from 4.80% for fiscal year 2012. Adjusted for the impact related to the fair value of certain of our fixed-rate loans where we have entered
into matching fixed-to-floating interest rate swaps, the average yield on our loans, other than loans acquired with deteriorated credit quality, for fiscal year 2013 was 4.93%, a decrease of 42 basis points from 5.35% for fiscal year 2012. This
decrease is attributable to the competitive interest rate environment for high quality commercial and agricultural credits across our footprint. The average yield on loans acquired with deteriorated credit quality was 5.31% for fiscal year 2013, an
increase of 51 basis points from 4.80% for fiscal year 2012.
Average net loan balances for fiscal year 2013 were $6.16 billion,
compared to $5.48 billion for fiscal year 2012, an increase of $676.4 million, or 12%. Growth in our loan portfolio is attributable to our acquisition of North Central Bancshares, Inc. in June 2012, which contributed approximately $311.6
million of outstanding loan balances, as well as organic growth through the year, primarily in our agriculture and commercial non-real estate loan categories.
Loan-related fee income of $9 million is included in interest income for fiscal year 2013 compared to $8 million for fiscal year 2012. In
addition, certain fees collected at loan origination are considered to be a component of yield on the underlying loans and are deferred and recognized into income over the life of the loans. Amortization related to the FDIC indemnification assets of
$17.6 million and $21.7 million for fiscal years 2013 and 2012, respectively, is included as a reduction to interest income.
90
Investment Portfolio.
Interest and dividend income on investments includes income earned
on investment securities and FHLB stock. In fiscal year 2013, our investment portfolio consisted primarily of mortgage-backed securities, substantially all of which were residential agency mortgage-backed securities. Interest and dividend income on
investments decreased to $29.6 million in fiscal year 2013, from $33.8 million in fiscal year 2012, a decrease of 12%. The average balance in our investment portfolio was $1.58 billion in fiscal year 2013 and $1.75 billion in fiscal year 2012, a
decrease of 10%, while the average yield decreased from 1.93% to 1.88%, a decrease of five basis points. The volume decrease is due to overall balance sheet composition, as the loan portfolio grew faster than the deposit portfolio, with the
investment portfolio decreased to balance liquidity and funding requirements. Due to the rate environment and specific securities available in the market, funds from maturing securities and new funds available for investment in fiscal year 2012 and
the first half of fiscal year 2013 were invested in purchases of new holdings of investment securities that generated much lower yields than the previous return levels in the portfolio, leading to lower total income and lower weighted yields. The
weighted average life of the portfolio was 3.9 years and 2.6 years at September 30, 2013 and 2012, respectively. Average investments in fiscal years 2013 and 2012 were 20% and 24%, respectively, of total average interest-earning assets. As of
September 30, 2013, the carrying value of investment securities and FHLB stock was $1.51 billion compared with $1.61 billion as of September 30, 2012.
Interest Expense
The following table presents interest expense for fiscal years 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended
September 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
33,117
|
|
|
$
|
44,416
|
|
|
Securities sold under agreements to repurchase
|
|
|
644
|
|
|
|
1,014
|
|
|
FHLB advances and other borrowings
|
|
|
3,103
|
|
|
|
3,098
|
|
|
Related party notes payable
|
|
|
950
|
|
|
|
1,007
|
|
|
Subordinated debentures and other
|
|
|
1,347
|
|
|
|
1,436
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
39,161
|
|
|
$
|
50,971
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense consists primarily of interest expense on five components: deposits, securities sold
under agreements to repurchase, FHLB advances and other borrowings, related party notes payable and our outstanding subordinated debentures. Total interest expense decreased to $39.2 million in fiscal year 2013, from $51.0 million in fiscal year
2012, a decrease of $11.8 million, or 23%. Average interest-bearing liabilities increased to $7.56 billion in fiscal year 2013 from $7.15 billion in fiscal year 2012, an increase of $0.41 billion, or 6%. The average cost of total interest-bearing
liabilities decreased to 0.52% in fiscal year 2013, compared with 0.71% in fiscal year 2012. Significant components of interest expense are described in further detail below.
Deposits.
Interest expense on deposits, consisting of checking accounts, MMDAs, NOW accounts, savings accounts and CDs, was $33.1
million in fiscal year 2013 compared with $44.4 million in fiscal year 2012, a decrease of $11.3 million, or 25%. Average deposit balances were $6.90 billion in fiscal year 2013, compared with $6.52 billion for fiscal year 2012. Our average deposits
increased 6% during fiscal year 2013, and the average rate paid on deposits decreased 20 basis points to 0.48% during fiscal year 2013. At September 30, 2013, our total deposits were $6.95 billion, an increase of 1% compared to
September 30, 2012.
Average non-interest-bearing demand account balances comprised 17% of average total deposits for fiscal year
2013, compared with 15% for fiscal year 2012. Total average other liquid accounts, consisting of money market and savings accounts, increased in fiscal year 2013 to 48% of total average deposits from 42% in fiscal
91
year 2012, while CD accounts decreased in fiscal year 2013 to 35% of total average deposits from 43% in fiscal year 2012. This shift in our deposit composition accounted for much of the
improvement in the cost of our deposit funding between these two periods.
FHLB Advances and Other Borrowings.
Interest expense on
FHLB advances and other borrowings was $3.1 million for both fiscal year 2013 and fiscal year 2012, reflecting weighted average cost of 0.94% and 1.02%, respectively. Our average balance for FHLB advances and other borrowings increased to
$329.0 million in fiscal year 2013 from $303.7 million in fiscal year 2012, an increase of 8%. The average rate paid on these liabilities decreased 8 basis points in fiscal year 2013 to 0.94%. Average FHLB advances and other borrowings as a
proportion of total average interest-bearing liabilities were 4% for both fiscal year 2013 and for fiscal year 2012. The average rate paid on FHLB advances is impacted by market rates and the various terms and repricing frequency of the specific
outstanding borrowings in each year. Our total outstanding FHLB advances were $390.5 million at September 30, 2013 compared with $305.5 million at September 30, 2012. The weighted average contractual rate paid on our FHLB advances was
1.05% at September 30, 2013 and 1.04% at September 30, 2012, an increase of one basis point over the year. The average tenor of our FHLB advances was 25 months and 10 months at September 30, 2013 and 2012, respectively. The amount of
other borrowings and related interest expense are immaterial in both periods.
We must collateralize FHLB advances by pledging real estate
loans or investments. We pledge more assets than required by our current level of borrowings in order to maintain additional borrowing capacity. Although we may substitute other loans for such pledged loans, we are restricted in our ability to sell
or otherwise pledge these loans without substituting collateral or prepaying a portion of the FHLB advances. At September 30, 2013, we had pledged $1.99 billion of loans to the FHLB, against which we had borrowed $390.5 million.
Subordinated Debentures and Other.
Interest expense on our outstanding subordinated debentures was $1.3 million and $1.4 million
for fiscal years 2013 and 2012, respectively. At September 30, 2013 and September 30, 2012, the weighted average contractual rate on outstanding subordinated notes was 2.31% and 2.45%, respectively.
Securities Sold Under Agreements to Repurchase; Related Party Notes Payable.
Securities sold under agreements to repurchase represent
retail repurchase agreements with customers and, together, with our related party notes payable, represent a small portion of our overall funding profile. The interest expense associated with these two classes of liabilities remained largely
consistent period-over-period.
Rate and Volume Variances
Net interest income is affected by changes in both volume and interest rates. Volume changes are caused by increases or decreases during the
year in the level of average interest-earning assets and average interest-bearing liabilities. Rate changes result from increases or decreases in the yields earned on assets or the rates paid on liabilities.
The following table presents for each of the last two fiscal years a summary of the changes in interest income and interest expense resulting
from changes in the volume of average asset and liability balances and changes in the average yields or rates compared with the preceding fiscal year. If significant, the change in interest income or interest expense due to both volume and rate has
been prorated between the volume and the rate variances based on the dollar amount of each variance. The table illustrates a trend of continued balance sheet growth over the last two fiscal years, while margins remain under pressure, particularly on
the asset side of the balance sheet. The rate impact related to loans in fiscal year 2013 is exacerbated by the impact of the change in fair value of fixed-rate loans where we have entered into matching interest rate swaps, whereas the rate impact
is muted in fiscal year 2012; absent this change, we experienced continued pressure on loan pricing as a result of strong competition in the markets where we operate and the prolonged low-interest rate environment. The table also illustrates the
favorable impact to rate and volume attributes of strategic efforts undertaken in fiscal year
92
2013 to shift the balance of our deposit portfolio away from CDs toward more cost-effective NOW accounts, MMDAs and savings accounts and to more closely monitor deposit pricing and exceptions to
rates set internally for specific deposit products.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 vs. 2012
|
|
|
2012 vs. 2011
|
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
|
|
(dollars in thousands)
|
|
|
Increase (decrease) in interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
(16
|
)
|
|
$
|
21
|
|
|
$
|
5
|
|
|
$
|
(134
|
)
|
|
$
|
(217
|
)
|
|
$
|
(351
|
)
|
|
Investment securities
|
|
|
(3,242
|
)
|
|
|
(961
|
)
|
|
|
(4,203
|
)
|
|
|
3,893
|
|
|
|
(9,079
|
)
|
|
|
(5,186
|
)
|
|
Loans, other than acquired with deteriorated credit quality
|
|
|
61,865
|
|
|
|
(104,030
|
)
|
|
|
(42,165
|
)
|
|
|
33,463
|
|
|
|
(30,768
|
)
|
|
|
2,695
|
|
|
Loans, acquired with deteriorated credit quality
|
|
|
(6,009
|
)
|
|
|
2,325
|
|
|
|
(3,684
|
)
|
|
|
(15,437
|
)
|
|
|
(15,175
|
)
|
|
|
(30,612
|
)
|
|
Loans
|
|
|
55,856
|
|
|
|
(101,705
|
)
|
|
|
(45,849
|
)
|
|
|
18,026
|
|
|
|
(45,943
|
)
|
|
|
(27,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total increase (decrease)
|
|
|
52,598
|
|
|
|
(102,645
|
)
|
|
|
(50,047
|
)
|
|
|
21,785
|
|
|
|
(55,239
|
)
|
|
|
(33,454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW, MMDA & savings accounts
|
|
|
(330
|
)
|
|
|
284
|
|
|
|
(46
|
)
|
|
|
1,363
|
|
|
|
(2,321
|
)
|
|
|
(958
|
)
|
|
CDs
|
|
|
(4,346
|
)
|
|
|
(6,906
|
)
|
|
|
(11,252
|
)
|
|
|
(6,291
|
)
|
|
|
(8,044
|
)
|
|
|
(14,335
|
)
|
|
Securities sold under agreements to repurchase
|
|
|
16
|
|
|
|
(386
|
)
|
|
|
(370
|
)
|
|
|
(182
|
)
|
|
|
(56
|
)
|
|
|
(238
|
)
|
|
FHLB advances and other borrowings
|
|
|
56
|
|
|
|
(51
|
)
|
|
|
5
|
|
|
|
245
|
|
|
|
(109
|
)
|
|
|
136
|
|
|
Related party notes payable
|
|
|
—
|
|
|
|
(57
|
)
|
|
|
(57
|
)
|
|
|
(92
|
)
|
|
|
169
|
|
|
|
77
|
|
|
Subordinated debentures
|
|
|
—
|
|
|
|
(90
|
)
|
|
|
(90
|
)
|
|
|
—
|
|
|
|
67
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total increase (decrease)
|
|
|
(4,604
|
)
|
|
|
(7,206
|
)
|
|
|
(11,810
|
)
|
|
|
(4,957
|
)
|
|
|
(10,294
|
)
|
|
|
(15,251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in net interest income
|
|
$
|
57,202
|
|
|
$
|
(95,439
|
)
|
|
$
|
(38,237
|
)
|
|
$
|
26,742
|
|
|
$
|
(44,945
|
)
|
|
$
|
(18,203
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
We recognized a provision for loan losses of $11.6 million for fiscal year 2013 compared to a provision for loan losses of $30.1 million for
fiscal year 2012, a reduction of $18.5 million, or 62%. A reduction in both the level of impaired loans requiring specific reserves and in our incurred loss history resulted in a $13.7 million provision for loan losses for fiscal year 2013
related to the portion of our loan portfolio that is not subject to purchase accounting implications or for which we have elected the fair value option, which represented a reduction of $2.7 million, or 17%, related to this portion of the
portfolio compared to fiscal year 2012. We believe the reduction in provision for loan losses compared to the prior fiscal year, despite continued growth in this portion of the portfolio and the level of charge-offs that we recognized during fiscal
year 2013, is representative of improvement in the overall credit quality of the portfolio. We also recorded an improvement of $2.1 million during fiscal year 2013 associated with loans acquired with deteriorated credit quality. This compares to
provision for loan losses of $13.8 million related to this portion of the portfolio recorded in fiscal year 2012, a reduction of $15.9 million. All loans acquired with deteriorated credit quality for which we recognized an improvement in fiscal
year 2013 are covered by FDIC loss-sharing arrangements; we had no provision associated with our loans covered by FDIC loss-sharing arrangements other than loans acquired with deteriorated credit quality during fiscal year 2013. The change in the
amount of provision for loan losses related to this portion of the portfolio was driven by improvements in the level of customer principal and interest cash flows that we received and expect to receive in future periods.
93
Noninterest Income
The following table presents noninterest income for fiscal years 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended
September 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
Service charges and other fees
|
|
$
|
41,692
|
|
|
$
|
38,937
|
|
|
Net gain on sale of loans
|
|
|
13,724
|
|
|
|
11,794
|
|
|
Casualty insurance commissions
|
|
|
1,426
|
|
|
|
1,383
|
|
|
Investment center income
|
|
|
3,137
|
|
|
|
1,847
|
|
|
Net gain on sale of securities
|
|
|
917
|
|
|
|
7,305
|
|
|
Trust department income
|
|
|
3,545
|
|
|
|
3,241
|
|
|
Net gain from sale of repossessed property and other assets
|
|
|
2,788
|
|
|
|
6,822
|
|
|
Gain on acquisition of business
|
|
|
—
|
|
|
|
3,950
|
|
|
Other
|
|
|
10,463
|
|
|
|
13,696
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
$
|
77,692
|
|
|
$
|
88,975
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income was $77.7 million for fiscal year 2013, compared with $89.0 million for fiscal year 2012, a
decrease of 13%. The principal drivers of the decrease were declines in gains on sales of investment securities and a $4.0 million bargain purchase gain recorded on the purchase of North Central Bancshares, Inc. in fiscal year 2012 that was not a
recurring item. Significant components of noninterest income are described in further detail below.
Service Charges and Other
Fees
. Service charges and other fees are primarily fees charged to deposit customers, including OD/NSF fees, commercial deposit account analysis and other charges, and ATM interchange and foreign activity fees. Service charges and other fees
increased to $41.7 million in fiscal year 2013 from $38.9 million in fiscal year 2012, an increase of 7%. The increase was primarily driven by higher ATM usage volumes, an increase in customer OD/NSF fees, and charges generated from the launch of a
new fee-based consumer checking product offering. As a subsidiary of NAB, we are subject to the limitations on permissible interchange fees contained in the Durbin Amendment to the Dodd-Frank Act, and the implementing regulations, which are
reflected in the ATM interchange income we generated during the fiscal years 2013 and 2012. We estimate that the annual impact of this limitation is approximately $6.0 million.
Net Gain on Sale of Loans
. The net gain on the sale of $450.0 million in aggregate principal balance of loans was $13.7 million in
fiscal year 2013. In comparison, the net gain on sale of loans was $11.8 million on loan sales of $417.0 million in fiscal year 2012. Our average gain as a percentage of loans sold increased approximately 20 basis points in fiscal year 2013 compared
to fiscal year 2012, as we focused on improving pricing, timing and delivery to the market. Our loan sale activity in fiscal years 2013 and 2012 was primarily the sale of conforming residential mortgage loans to FNMA, other commercial banks and, to
a lesser extent, various state-sponsored first-time homebuyer programs. Net gain on sales of loans fluctuates with the volume of loans sold, the type of loans sold and market conditions such as the current interest rate environment. The volume of
loans that we sell depends upon conditions in the mortgage origination, loan securitization and secondary loan sale markets. We experienced similar volumes in fiscal year 2013 and fiscal year 2012 but capitalized on better pricing outcomes on sales
into the secondary market to deliver a more favorable revenue outcome in fiscal year 2013.
Investment Center Income
. Investment
center income consists of revenues from the investment advisory and wealth management services, other than trust services, we make available to our customers. Investment center income increased to $3.1 million for fiscal year 2013, a $1.3 million
increase from $1.8 million for fiscal year 2012. This increase was primarily the result of an increase in assets under management based on positive market conditions and trends.
94
Net Gain on Sale of Securities
. Net gain on sale of securities represents the difference
between gross sale proceeds and carrying value at amortized cost of investment securities sold during the period. We received total proceeds related to security sales of $542.8 million during fiscal year 2012, generating net gains of $7.3 million,
compared to the $0.9 million of gains on the sale of securities on total proceeds of $72.4 million during fiscal year 2013. The decrease in fiscal year 2013 is primarily attributable to lower volumes of security sales in fiscal year 2013 compared to
fiscal year 2012.
Net Gain from Sale of Repossessed Property and Other Assets
. Our net gain on the sale of repossessed property
and other assets was $2.8 million for fiscal year 2013, a decline of $4.0 million from $6.8 million for fiscal year 2012. This decline was primarily the result of a decrease in the number and carrying value of properties held as OREO and available
for sale, resulting in fewer sales and lower cumulative gains in fiscal year 2013 compared to fiscal year 2012.
Other income
.
Other income includes rental income derived from leasing certain portions of bank-owned real estate, vendor incentive payments and other miscellaneous income items. Other income decreased to $10.5 million in fiscal year 2013 from $13.7 million in
fiscal year 2012, a decrease of 24%.
Noninterest Expense
The following table presents noninterest expense for fiscal years 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended
September 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Noninterest expense:
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
$
|
100,660
|
|
|
$
|
97,689
|
|
|
Occupancy expenses, net
|
|
|
18,532
|
|
|
|
17,366
|
|
|
Data processing
|
|
|
18,980
|
|
|
|
15,270
|
|
|
Equipment expenses
|
|
|
4,518
|
|
|
|
5,438
|
|
|
Advertising
|
|
|
6,267
|
|
|
|
8,169
|
|
|
Communication expenses
|
|
|
4,609
|
|
|
|
4,826
|
|
|
Professional fees
|
|
|
12,547
|
|
|
|
13,049
|
|
|
Derivatives, net (gain) loss
|
|
|
(40,305
|
)
|
|
|
19,369
|
|
|
Amortization of core deposits and other intangibles
|
|
|
19,290
|
|
|
|
19,646
|
|
|
Other
|
|
|
25,975
|
|
|
|
34,188
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
$
|
171,073
|
|
|
$
|
235,010
|
|
|
|
|
|
|
|
|
|
|
|
Our noninterest expense consists primarily of salaries and employee benefits, net occupancy expenses, data
processing, professional fees, net gain or loss on derivatives and amortization of core deposits and other intangibles. Noninterest expense decreased to $171.1 million in fiscal year 2013 from $235.0 million in fiscal year 2012, a decrease of 27%. A
substantial portion of the decrease was driven by a $59.7 million change in derivatives, net (gain) loss, which is offset by a corresponding loss in net interest income related to our fair value loans. Adjusted for this variance, our adjusted
noninterest expenses decreased 2% from $215.6 million in fiscal year 2012 to $211.4 million in fiscal year 2013. Our efficiency ratio was 51.5% for fiscal year 2013 and 54.0% for fiscal year 2012, a decrease of 3%. For more information on these
non-GAAP financial measures, including a reconciliation of each to the most directly comparable GAAP financial measures, see “Prospectus Summary—Summary Historical Consolidated Financial and Operating Information.” The remaining
portion of the reduction in noninterest expense was driven primarily by decreases in costs related to OREO, including valuation declines and property maintenance and protection, and integration expenses. Significant components of noninterest expense
are described in further detail below.
95
Salaries and Employee Benefits
. Salaries and employee benefits are the largest component
of noninterest expense and include the cost of incentive compensation, benefit plans, health insurance and payroll taxes. These expenses were $100.7 million for fiscal year 2013, a 3% increase from $97.7 million for fiscal year 2012. The increase
was driven primarily by the impact of a standard annual increase in wages and higher costs of employee benefits including health insurance, retirement plan contributions and other fringe benefits.
Occupancy Expenses
. Occupancy costs were $18.5 million for fiscal year 2013, a 7% increase from $17.4 million for fiscal year 2012.
Occupancy expenses relate to our branch network and administrative office locations throughout our footprint, including both owned and leased locations. Although on average the footprint remained substantially consistent year-over-year, all classes
of expenses increased marginally, including utilities, rent,
insurance and real estate taxes.
Data Processing
. These expenses include payments to vendors who provide software, data processing, and services on an outsourced basis,
costs related to supporting and developing Internet-based activities, and depreciation of bank-owned hardware and software. Expenses for data processing were $19.0 million for fiscal year 2013, a 24% increase from $15.3 million for fiscal year 2012.
The year-over-year increase was primarily driven by higher depreciation and third party vendor expenditures, mostly related to online and mobile applications, and higher credit card processing expenses on increased volumes.
Advertising
. Advertising expenses declined by $1.9 million to $6.3 million for fiscal year 2013. The decrease was a result of more
focused marketing campaigns.
Professional Fees
. Professional fees include legal services required to complete transactions,
resolve legal matters or delinquent loans, our FDIC and FICO assessments, and the cost of accountants and other consultants. These expenses were $12.5 million for fiscal year 2013, a 4% decrease from $13.0 million for fiscal year 2012. The decrease
was primarily driven by a 66% decline in consulting fees resulting from a renewed focus on controlling third party expenses.
Derivatives, Net (Gain) Loss
. In the normal course of business, we use interest rate swaps to manage our interest rate risk. The
interest rate swap agreements are entered into in order to facilitate the risk management strategies of a small number of commercial real estate, commercial non-real estate and agriculture fixed-rate loan customers with original maturities 5 years
or greater, and typically 5 to 15 years. We mitigate this risk by entering into equal and offsetting interest rate swap agreements with NAB. The related interest rate swaps are recognized as either assets or liabilities in our financial statements
and any gains or losses on these swaps are recorded in earnings as a component of noninterest expense. These arrangements resulted in a $40.3 million net gain in fiscal year 2013 compared to a $19.4 million net loss in fiscal year 2012, a
fluctuation of $59.7 million, which is offset by a corresponding loss in net interest income related to our fair value loans. For more information on these accounting arrangements, including the accounting for the related fixed-term loans, see
“—Key Factors Affecting Our Business and Financial Statements—Loans and Interest Rates Swaps Accounted for at Fair Value.”
Amortization of Core Deposits and Other Intangibles
. Amortization of core deposits and other intangibles represents the scheduled
amortization of specifically-identifiable intangible assets arising from acquisitions, including NAB’s acquisition of us as well as subsequent acquisitions completed by us. The most significant component of amortization of core deposits and
other intangibles relates to core deposit intangible assets, which represented $16.8 million in fiscal year 2013 compared to $17.2 million in fiscal year 2012. The intangible assets currently recorded are scheduled to amortize through May 2023.
Total scheduled amortization for all intangible assets includes approximately $16 million for fiscal year 2014, approximately $7 million for fiscal year 2015, approximately $3 million for fiscal year 2016 and immaterial amounts for fiscal years 2017
through 2023.
Other
. Other noninterest expenses include costs related to OREO, business development and professional membership
fees, travel and entertainment costs and costs specific to integrating newly acquired banks. Other
96
noninterest expenses decreased from $34.2 million in fiscal year 2012 to $26.0 million in fiscal year 2013, a decrease of 24%. The decrease was driven primarily by a $6.5 million decrease in net
OREO costs and a $7.1 million decrease in integration expenses, partially offset by a $2.5 million increase related to the FDIC clawback liability recorded in conjunction with our FDIC loss-sharing arrangements.
Provision for Income Taxes
The provision for income taxes varies due to the amount of taxable income, the investments in tax-advantaged securities and tax credit funds
and the rates charged by federal and state authorities. The provision for income taxes of $53.9 million in fiscal year 2013 represents an effective tax rate of 35.9%, compared with $44.2 million or 37.7% for fiscal year 2012, with the decrease in
rate primarily due to a larger amount of tax exempt interest and the mix of state and local taxes we recognized. We have historically calculated our provision for income taxes as though we were a standalone company. As a result, we do not expect any
material changes in our provisioning for income taxes following the completion of this offering.
Return on Assets and Equity
The table below presents our return on average total assets, return on average common equity, dividend payout ratio, average
common equity to average assets ratio and net income per average common share at and for the dates presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At and for the fiscal year ended
Sept. 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
Return on average total assets
|
|
|
1.07
|
%
|
|
|
0.85
|
%
|
|
|
0.76
|
%
|
|
Return on average common equity
|
|
|
6.97
|
%
|
|
|
5.40
|
%
|
|
|
5.04
|
%
|
|
Dividend payout ratio
|
|
|
43
|
%
|
|
|
57
|
%
|
|
|
60
|
%
|
|
Average common equity to average assets ratio
|
|
|
15.30
|
%
|
|
|
15.76
|
%
|
|
|
15.02
|
%
|
|
Net income per average common share
|
|
$
|
484.29
|
|
|
$
|
367.31
|
|
|
$
|
315.76
|
|
97
Analysis of Financial Condition
Loan Portfolio
The
following table presents our loan portfolio by category at the end of the most recent quarter and each of the last five fiscal years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
Sept. 30,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Unpaid principal balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, other than loans acquired with deteriorated credit quality
|
|
$
|
1,612,236
|
|
|
$
|
1,469,834
|
|
|
$
|
1,334,760
|
|
|
$
|
941,009
|
|
|
$
|
875,458
|
|
|
$
|
590,623
|
|
|
Loans acquired with deteriorated credit quality
|
|
|
9,713
|
|
|
|
11,922
|
|
|
|
19,042
|
|
|
|
29,859
|
|
|
|
83,343
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,621,949
|
|
|
|
1,481,756
|
|
|
|
1,353,802
|
|
|
|
970,868
|
|
|
|
958,801
|
|
|
|
590,623
|
|
|
Agriculture
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, other than loans acquired with deteriorated credit quality
|
|
$
|
1,648,856
|
|
|
$
|
1,587,248
|
|
|
$
|
1,396,472
|
|
|
$
|
1,091,755
|
|
|
$
|
923,015
|
|
|
$
|
662,634
|
|
|
Loans acquired with deteriorated credit quality
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,648,856
|
|
|
|
1,587,248
|
|
|
|
1,396,472
|
|
|
|
1,091,755
|
|
|
|
923,015
|
|
|
|
662,634
|
|
|
Commercial real estate
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, other than loans acquired with deteriorated credit quality
|
|
$
|
2,332,388
|
|
|
$
|
2,208,816
|
|
|
$
|
2,196,543
|
|
|
$
|
2,083,289
|
|
|
$
|
2,113,863
|
|
|
$
|
1,566,411
|
|
|
Loans acquired with deteriorated credit quality
|
|
|
74,537
|
|
|
|
103,158
|
|
|
|
167,556
|
|
|
|
259,179
|
|
|
|
430,498
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,406,925
|
|
|
|
2,311,974
|
|
|
|
2,364,099
|
|
|
|
2,342,468
|
|
|
|
2,544,361
|
|
|
|
1,566,411
|
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, other than loans acquired with deteriorated credit quality
|
|
$
|
793,966
|
|
|
$
|
765,390
|
|
|
$
|
757,947
|
|
|
$
|
532,198
|
|
|
$
|
616,412
|
|
|
$
|
427,784
|
|
|
Loans acquired with deteriorated credit quality
|
|
|
117,347
|
|
|
|
141,079
|
|
|
|
182,278
|
|
|
|
244,498
|
|
|
|
376,128
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
911,313
|
|
|
|
906,469
|
|
|
|
940,225
|
|
|
|
776,696
|
|
|
|
992,540
|
|
|
|
427,784
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, other than loans acquired with deteriorated credit quality
|
|
$
|
88,652
|
|
|
$
|
97,874
|
|
|
$
|
119,644
|
|
|
$
|
87,409
|
|
|
$
|
103,825
|
|
|
$
|
85,930
|
|
|
Loans acquired with deteriorated credit quality
|
|
|
2,267
|
|
|
|
3,603
|
|
|
|
7,592
|
|
|
|
15,742
|
|
|
|
65,645
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
90,919
|
|
|
|
101,477
|
|
|
|
127,236
|
|
|
|
103,151
|
|
|
|
169,470
|
|
|
|
85,930
|
|
|
Other lending
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, other than loans acquired with deteriorated credit quality
|
|
$
|
30,323
|
|
|
$
|
24,630
|
|
|
$
|
15,028
|
|
|
$
|
7,814
|
|
|
$
|
21,684
|
|
|
$
|
90,595
|
|
|
Loans acquired with deteriorated credit quality
|
|
|
40
|
|
|
|
81
|
|
|
|
386
|
|
|
|
456
|
|
|
|
524
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
30,363
|
|
|
|
24,711
|
|
|
|
15,414
|
|
|
|
8,270
|
|
|
|
22,208
|
|
|
|
90,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, other than loans acquired with deteriorated credit quality
|
|
$
|
6,506,421
|
|
|
$
|
6,153,792
|
|
|
$
|
5,820,394
|
|
|
$
|
4,743,474
|
|
|
$
|
4,654,257
|
|
|
$
|
3,423,977
|
|
|
Total loans acquired with deterioriated credit quality
|
|
|
203,904
|
|
|
|
259,843
|
|
|
|
376,854
|
|
|
|
549,734
|
|
|
|
956,138
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unpaid principal balance
|
|
|
6,710,325
|
|
|
|
6,413,635
|
|
|
|
6,197,248
|
|
|
|
5,293,208
|
|
|
|
5,610,395
|
|
|
|
3,423,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Unamortized discount on acquired loans
|
|
|
(27,732
|
)
|
|
|
(34,717
|
)
|
|
|
(55,836
|
)
|
|
|
(94,475
|
)
|
|
|
(184,622
|
)
|
|
|
—
|
|
|
Less: Unearned net deferred fees and costs and loans in process
|
|
|
(4,092
|
)
|
|
|
(16,245
|
)
|
|
|
(2,838
|
)
|
|
|
(4,692
|
)
|
|
|
(5,053
|
)
|
|
|
(3,573
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
6,678,501
|
|
|
|
6,362,673
|
|
|
|
6,138,574
|
|
|
|
5,194,041
|
|
|
|
5,420,720
|
|
|
|
3,420,404
|
|
|
Allowance for loan losses
|
|
|
(47,038
|
)
|
|
|
(55,864
|
)
|
|
|
(71,878
|
)
|
|
|
(71,543
|
)
|
|
|
(55,620
|
)
|
|
|
(33,762
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
$
|
6,631,463
|
|
|
$
|
6,306,809
|
|
|
$
|
6,066,696
|
|
|
$
|
5,122,498
|
|
|
$
|
5,365,100
|
|
|
$
|
3,386,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate
swaps to hedge our interest rate risk. See “—Key Factors Affecting Our Business and Financial Statements—Loans and Interest Rate Swaps Accounted for at Fair Value” for more information.
|
98
From September 30, 2010 to September 30, 2013, net of the change in the balance of
acquired credit-impaired loans from our acquisition of TierOne Bank that are accounted for in accordance with ASC 310-30
Accounting for Purchased Loans
, our loan portfolio grew at a CAGR of 11%. During the first nine months of fiscal year
2014 and all of fiscal year 2013, we continued to focus growth efforts on our commercial non-real estate and agriculture loan categories. Over the same time period, CRE loan balances remained mostly static but declined as a percentage of the overall
portfolio, while residential real estate and consumer loans are gradually running off in real dollar terms and as a percentage of the portfolio. A large portion of those loans are acquired and continue to run off faster than we originate similar
loans.
The following tables present an analysis of the unpaid principal balance of our loan portfolio at June 30, 2014 and
September 30, 2013, by borrower and collateral type and by each of the four major geographic areas we use to manage our markets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
Nebraska
|
|
|
Iowa / Kansas /
Missouri
|
|
|
South Dakota
|
|
|
Arizona /
Colorado
|
|
|
Other
(2)
|
|
|
Total
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
Commercial non-real estate
(1)
|
|
$
|
380,098
|
|
|
$
|
712,837
|
|
|
$
|
301,579
|
|
|
$
|
188,910
|
|
|
$
|
38,525
|
|
|
$
|
1,621,949
|
|
|
|
24.2
|
%
|
|
Agriculture
(1)
|
|
|
137,988
|
|
|
|
437,278
|
|
|
|
575,544
|
|
|
|
494,176
|
|
|
|
3,870
|
|
|
|
1,648,856
|
|
|
|
24.6
|
%
|
|
Commercial real estate
(1)
|
|
|
518,432
|
|
|
|
687,614
|
|
|
|
682,039
|
|
|
|
451,888
|
|
|
|
66,952
|
|
|
|
2,406,925
|
|
|
|
35.9
|
%
|
|
Residential real estate
|
|
|
226,477
|
|
|
|
321,272
|
|
|
|
160,904
|
|
|
|
132,578
|
|
|
|
70,082
|
|
|
|
911,313
|
|
|
|
13.6
|
%
|
|
Consumer
|
|
|
25,047
|
|
|
|
30,191
|
|
|
|
26,668
|
|
|
|
6,130
|
|
|
|
2,883
|
|
|
|
90,919
|
|
|
|
1.4
|
%
|
|
Other lending
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,363
|
|
|
|
30,363
|
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,288,042
|
|
|
$
|
2,189,192
|
|
|
$
|
1,746,734
|
|
|
$
|
1,273,682
|
|
|
$
|
212,675
|
|
|
$
|
6,710,325
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% by location
|
|
|
19.2
|
%
|
|
|
32.6
|
%
|
|
|
26.0
|
%
|
|
|
19.0
|
%
|
|
|
3.2
|
%
|
|
|
100
|
%
|
|
|
|
|
|
(1)
|
Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate
swaps to hedge our interest rate risk. See “—Key Factors Affecting Our Business and Financial Statements—Loans and Interest Rate Swaps Accounted for at Fair Value” for more information.
|
|
(2)
|
Balances in this column represent acquired workout loans and certain other loans managed by our staff, commercial and consumer credit card loans, fair value adjustments related to acquisitions and loans for which we
have elected the fair value option, which could result in a negative carrying amount in the event of a net negative fair value adjustment.
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|
|
|
Nebraska
|
|
|
Iowa / Kansas
/ Missouri
|
|
|
South Dakota
|
|
|
Arizona /
Colorado
|
|
|
Other
(2)
|
|
|
Total
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
Commercial non-real estate
(1)
|
|
$
|
374,530
|
|
|
$
|
594,063
|
|
|
$
|
279,006
|
|
|
$
|
197,395
|
|
|
$
|
36,762
|
|
|
$
|
1,481,756
|
|
|
|
23.1
|
%
|
|
Agriculture
(1)
|
|
|
139,829
|
|
|
|
458,128
|
|
|
|
518,214
|
|
|
|
459,998
|
|
|
|
11,079
|
|
|
|
1,587,248
|
|
|
|
24.7
|
%
|
|
Commercial real estate
(1)
|
|
|
483,074
|
|
|
|
641,439
|
|
|
|
703,569
|
|
|
|
387,941
|
|
|
|
95,951
|
|
|
|
2,311,974
|
|
|
|
36.0
|
%
|
|
Residential real estate
|
|
|
218,928
|
|
|
|
343,844
|
|
|
|
150,812
|
|
|
|
107,057
|
|
|
|
85,828
|
|
|
|
906,469
|
|
|
|
14.1
|
%
|
|
Consumer
|
|
|
26,311
|
|
|
|
34,809
|
|
|
|
29,501
|
|
|
|
6,983
|
|
|
|
3,873
|
|
|
|
101,477
|
|
|
|
1.6
|
%
|
|
Other lending
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,711
|
|
|
|
24,711
|
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,242,672
|
|
|
$
|
2,072,283
|
|
|
$
|
1,681,102
|
|
|
$
|
1,159,374
|
|
|
$
|
258,504
|
|
|
$
|
6,413,635
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% by location
|
|
|
19.4
|
%
|
|
|
32.3
|
%
|
|
|
26.2
|
%
|
|
|
18.1
|
%
|
|
|
4.0
|
%
|
|
|
100
|
%
|
|
|
|
|
|
(1)
|
Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate
swaps to hedge our interest rate risk. See “—Key Factors Affecting Our Business and Financial Statements—Loans and Interest Rate Swaps Accounted for at Fair Value” for more information.
|
|
(2)
|
Balances in this column represent acquired workout loans and certain other loans managed by our staff, commercial and consumer credit card loans, fair value adjustments related to acquisitions and loans for which we
have elected the fair value option, which could result in a negative carrying amount in the event of a net negative fair value adjustment.
|
The following table presents additional detail regarding our agriculture, CRE and residential real estate loans at June 30, 2014 and
September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
Sept. 30,
2013
|
|
|
|
|
(dollars in thousands)
|
|
|
Commercial non-real estate
|
|
$
|
1,621,949
|
|
|
$
|
1,481,756
|
|
|
Agriculture real estate
|
|
|
758,528
|
|
|
|
699,479
|
|
|
Agriculture operating loans
|
|
|
890,328
|
|
|
|
887,769
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
|
|
1,648,856
|
|
|
|
1,587,248
|
|
|
Construction and development
|
|
|
273,970
|
|
|
|
294,314
|
|
|
Owner-occupied CRE
|
|
|
1,116,507
|
|
|
|
1,010,159
|
|
|
Non-owner-occupied CRE
|
|
|
877,024
|
|
|
|
820,916
|
|
|
Multifamily residential real estate
|
|
|
139,424
|
|
|
|
186,585
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
2,406,925
|
|
|
|
2,311,974
|
|
|
Home equity lines of credit
|
|
|
338,537
|
|
|
|
318,092
|
|
|
Closed-end first lien
|
|
|
444,968
|
|
|
|
445,899
|
|
|
Closed-end junior lien
|
|
|
67,721
|
|
|
|
80,230
|
|
|
Residential construction
|
|
|
60,087
|
|
|
|
62,248
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
|
911,313
|
|
|
|
906,469
|
|
|
Consumer
|
|
|
90,919
|
|
|
|
101,477
|
|
|
Other
|
|
|
30,363
|
|
|
|
24,711
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unpaid principal balance
|
|
$
|
6,710,325
|
|
|
$
|
6,413,635
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Non-Real Estate.
Commercial non-real estate, or business lending, represents one of our core
competencies. We believe that providing a tailored range of integrated products and services, including lending, to small- and medium-enterprise customers is the business at which we excel and through which we can generate favorable returns for our
stockholders. We offer a number of different products including working capital and
100
other shorter-term lines of credit, fixed-rate loans over a wide range of terms including our tailored business loans, for which we enter into matching interest rate swaps that give us floating
payments for all deals over five years, and variable-rate loans with varying terms.
Agriculture.
Agriculture loans include farm
operating loans and loans collateralized by farm land. According to the American Bankers Association, at March 31, 2014, we were ranked the seventh-largest farm lender bank in the United States measured by total dollar volume of farm loans, and
we take great pride in our knowledge of the agricultural industry across our footprint. We consider agriculture lending one of our core competencies. In 2008, agriculture loans comprised approximately 15% of our overall loan portfolio, compared to
25% as of June 30, 2014. We target a 20% to 35% portfolio composition for agriculture loans according to our risk appetite statement approved by our board of directors. Within our agriculture portfolio, we are further diversified across a wide
range of subsectors with the majority of the portfolio concentrated within various types of grain, livestock and dairy products, and across different geographical segments within our footprint. Total agriculture lending grew by approximately $191
million, or 14%, during fiscal year 2013, from September 30, 2012 to September 30, 2013, consistent with our strategic initiatives and focused investment in agriculture lending growth.
Commercial Real Estate.
CRE includes both owner-occupied CRE and non-owner-occupied CRE and construction and development lending. While
CRE lending will remain a significant component of our overall loan portfolio, we are committed to managing our exposure to riskier non-owner-occupied CRE and construction and development deals specifically, and to CRE lending in general, by
targeting relationships with relatively low loan-to-value positions, priced to reflect the amount of risk we accept as the lender. This focus on rebalancing the portfolio is reflected in the fact that CRE lending comprised nearly 50% of the
portfolio at the time of the NAB acquisition in 2008, compared to 36% as of June 30, 2014. During fiscal year 2013, outstanding CRE lending decreased by 2%, from $2.36 billion at September 30, 2012 to $2.31 billion at September 30, 2013, then
returned to $2.41 billion at June 30, 2014. Construction and development loans totaled $274.0 million at June 30, 2014, a decline of $20.3 million, or 7%, from $294.3 million at September 30, 2013.
Residential Real Estate.
Residential real estate lending reflects 1-to-4-family real estate construction loans, closed-end first-lien
mortgages (primarily single-family long-term first mortgages resulting from acquisitions of other banks), closed-end junior-lien mortgages and home equity lines of credit, or HELOCs. Our closed-end first-lien mortgages include a small percentage of
single-family first mortgages that we originate and cannot subsequently sell into the secondary market, including jumbo products, adjustable-rate mortgages and rural home mortgages. Conversely, a large percentage of our total single-family first
mortgage originations are sold into the secondary market in order to meet our interest rate risk management objectives.
Consumer.
Our consumer lending offering comprises a relatively small portion of our total loan portfolio, and predominantly reflects small-balance secured and unsecured products marketed by our retail branches.
Other Lending.
Other lending includes all other loan relationships that do not fit within the categories above, primarily consumer and
commercial credit cards and customer deposit account overdrafts.
The following table presents the maturity distribution of our loan
portfolio as of September 30, 2013. The maturity dates were determined based on the contractual maturity date of the loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year or Less
|
|
|
>1 Through 5
Years
|
|
|
>5 Years
|
|
|
Total
|
|
|
|
|
(dollars in thousands)
|
|
|
Maturity distribution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate
|
|
$
|
538,471
|
|
|
$
|
522,329
|
|
|
$
|
420,956
|
|
|
$
|
1,481,756
|
|
|
Agriculture
|
|
|
767,346
|
|
|
|
552,224
|
|
|
|
267,678
|
|
|
|
1,587,248
|
|
|
Commercial real estate
|
|
|
385,901
|
|
|
|
1,012,831
|
|
|
|
913,242
|
|
|
|
2,311,974
|
|
|
Residential real estate
|
|
|
126,432
|
|
|
|
357,560
|
|
|
|
422,477
|
|
|
|
906,469
|
|
|
Consumer
|
|
|
18,338
|
|
|
|
61,369
|
|
|
|
21,770
|
|
|
|
101,477
|
|
|
Other lending
|
|
|
24,711
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,861,199
|
|
|
$
|
2,506,313
|
|
|
$
|
2,046,123
|
|
|
$
|
6,413,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
The following table presents the distribution, as of September 30, 2013, of our loans that
were due after one year between fixed and variable interest rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
|
|
|
Variable
|
|
|
Total
|
|
|
|
|
(dollars in thousands)
|
|
|
Maturity distribution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate
|
|
$
|
629,545
|
|
|
$
|
313,740
|
|
|
$
|
943,285
|
|
|
Agriculture
|
|
|
607,393
|
|
|
|
212,509
|
|
|
|
819,902
|
|
|
Commercial real estate
|
|
|
1,051,769
|
|
|
|
874,304
|
|
|
|
1,926,073
|
|
|
Residential real estate
|
|
|
240,888
|
|
|
|
539,149
|
|
|
|
780,037
|
|
|
Consumer
|
|
|
74,161
|
|
|
|
8,978
|
|
|
|
83,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,603,756
|
|
|
$
|
1,948,680
|
|
|
$
|
4,552,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OREO
In the normal course of business, we obtain title to parcels of real estate and other assets when borrowers are unable to meet their
contractual obligations and we initiate foreclosure proceedings, or via deed in lieu of foreclosure actions. OREO assets are considered nonperforming assets. When we obtain title to an asset, we evaluate how best to maintain and protect our interest
in the property and seek to liquidate the assets at an acceptable price in a timely manner. Our total OREO carrying value was $54.2 million as of June 30, 2014, a decrease of $3.2 million compared to September 30, 2013. The amount of OREO
covered by FDIC loss sharing arrangements was $14.0 million as of June 30, 2014 and $24.4 million as of September 30, 2013. The following table presents our OREO balances for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
June 30, 2014
|
|
|
Fiscal year ended Sept. 30,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Beginning balance
|
|
$
|
57,422
|
|
|
$
|
68,526
|
|
|
$
|
99,640
|
|
|
Additions to OREO
|
|
|
31,493
|
|
|
|
28,980
|
|
|
|
62,158
|
|
|
Valuation adjustments and other
|
|
|
(13,035
|
)
|
|
|
(6,884
|
)
|
|
|
(14,060
|
)
|
|
Sales
|
|
|
(21,690
|
)
|
|
|
(33,200
|
)
|
|
|
(79,212
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
54,190
|
|
|
$
|
57,422
|
|
|
$
|
68,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
The following table presents the amortized cost of each category of our investment portfolio at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
Sept. 30,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
U.S. Treasury securities
|
|
$
|
148,733
|
|
|
$
|
—
|
|
|
$
|
5,005
|
|
|
$
|
5,012
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Association
|
|
|
1,235,906
|
|
|
|
1,470,822
|
|
|
|
1,502,442
|
|
|
|
1,450,250
|
|
|
Federal National Mortgage Association
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
States and political subdivision securities
|
|
|
2,218
|
|
|
|
3,513
|
|
|
|
5,757
|
|
|
|
6,561
|
|
|
Corporate debt securities
|
|
|
11,771
|
|
|
|
11,889
|
|
|
|
32,878
|
|
|
|
15,700
|
|
|
Other
|
|
|
1,007
|
|
|
|
5,449
|
|
|
|
5,449
|
|
|
|
5,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,399,636
|
|
|
$
|
1,491,674
|
|
|
$
|
1,551,532
|
|
|
$
|
1,482,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have historically invested excess deposits in high-quality, liquid investment securities including
residential agency mortgage-backed securities and, to a lesser extent, U.S. Treasury securities, corporate debt securities and issuances of U.S. states and political subdivisions. Our investment portfolio serves as a means to
102
collateralize FHLB borrowings and public funds deposits, to earn net spread income on excess deposits and to maintain liquidity and balance interest rate risk. As of June 30,
2014, September 30, 2013, and for fiscal years 2011 through 2013, the portfolio composition was heavily weighted toward Government National Mortgage Association residential agency mortgage-backed securities to fit the risk appetite and
financial return targets of NAB; however, we rebalanced approximately $150 million of the portfolio into U.S. Treasury securities in the third quarter of fiscal year 2014 to balance our interest rate risk exposures. During fiscal year 2013, the
total amortized cost of the portfolio decreased by $59.9 million, from September 30, 2012 to September 30, 2013, as our loan portfolio growth outpaced deposit growth and certain holdings were liquidated to ensure interest rate risk metrics remained
within policy limits.
The following tables present the aggregate amortized cost of each investment category of the investment portfolio
and the weighted average yield for each investment category for each maturity period at June 30, 2014 and September 30, 2013. Maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying
the securities may be called or prepaid without any penalties. The weighted-average yield on these assets is presented below based on the contractual rate, as opposed to a tax equivalent yield concept.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
Due in one year or less
|
|
|
Due after one year
through five years
|
|
|
Due after five years
through ten years
|
|
|
Due after ten years
|
|
|
Mortgage-backed
securities
|
|
|
Securities without
contractual maturities
|
|
|
Total
|
|
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
|
|
(dollars in thousands)
|
|
|
U.S. Treasury securities
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
148,733
|
|
|
|
1.17
|
%
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
148,733
|
|
|
|
1.17
|
%
|
|
Mortgage-backed securities
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
1,235,907
|
|
|
|
1.89
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
1,235,907
|
|
|
|
1.89
|
%
|
|
States and political subdivision securities
|
|
|
470
|
|
|
|
5.78
|
%
|
|
|
444
|
|
|
|
3.31
|
%
|
|
|
1,304
|
|
|
|
5.30
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
2,218
|
|
|
|
5.00
|
%
|
|
Corporate debt securities
|
|
|
6,776
|
|
|
|
2.41
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
4,995
|
|
|
|
1.75
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
11,771
|
|
|
|
2.13
|
%
|
|
Other
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
1,007
|
|
|
|
—
|
%
|
|
|
1,007
|
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,246
|
|
|
|
2.63
|
%
|
|
$
|
149,177
|
|
|
|
1.17
|
%
|
|
$
|
6,299
|
|
|
|
2.48
|
%
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
1,235,907
|
|
|
|
1.89
|
%
|
|
$
|
1,007
|
|
|
|
—
|
%
|
|
$
|
1,399,636
|
|
|
|
1.82
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|
|
|
Due in one year or less
|
|
|
Due after one year
through five years
|
|
|
Due after five years
through ten years
|
|
|
Due after ten years
|
|
|
Mortgage-backed
securities
|
|
|
Securities without
contractual
maturities
|
|
|
Total
|
|
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
Amount
|
|
|
Weighted
average
rate
|
|
|
|
|
(dollars in thousands)
|
|
|
Mortgage-backed securities
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
1,470,823
|
|
|
|
2.08
|
%
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
1,470,823
|
|
|
|
2.08
|
%
|
|
States and political subdivision securities
|
|
|
1,497
|
|
|
|
4.23
|
%
|
|
|
94
|
|
|
|
4.60
|
%
|
|
|
1,922
|
|
|
|
3.71
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
3,513
|
|
|
|
3.95
|
%
|
|
Corporate debt securities
|
|
|
—
|
|
|
|
—
|
%
|
|
|
6,894
|
|
|
|
2.41
|
%
|
|
|
4,995
|
|
|
|
1.77
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
11,889
|
|
|
|
2.14
|
%
|
|
Other
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
5,449
|
|
|
|
—
|
%
|
|
|
5,449
|
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,497
|
|
|
|
4.23
|
%
|
|
$
|
6,988
|
|
|
|
2.44
|
%
|
|
$
|
6,917
|
|
|
|
2.31
|
%
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
1,470,823
|
|
|
|
2.08
|
%
|
|
$
|
5,449
|
|
|
|
—
|
%
|
|
$
|
1,491,674
|
|
|
|
2.08
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality
We place an asset on nonaccrual status when any installment of principal or interest is more than 90 days past due (except for loans that are
well secured and in the process of collection) or earlier when management determines the ultimate collection of all contractually due principal or interest to be unlikely. Restructured loans for which we grant payment or significant interest rate
concessions are placed on nonaccrual status until collectability improves and a satisfactory payment history is established, generally by the receipt of at least six consecutive payments. Our collection policies related to delinquent and charged-off
loans are highly focused on individual relationships, and we believe that these policies are in compliance with all applicable laws and regulations.
103
The following table presents the dollar amount of nonaccrual loans, OREO, restructured performing
loans and accruing loans over 90 days past due, at the end of the dates indicated. Loans covered by FDIC loss-sharing arrangements are generally pooled with other similar loans and are generally accreting purchase discount into income each period.
Subject to compliance with the applicable loss-sharing agreement, we are generally indemnified by the FDIC at a rate of 80% for any future credit losses on loans covered by FDIC loss-sharing arrangements through June 4, 2015 for commercial
loans and June 4, 2020 for single-family real estate loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
Sept. 30,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(dollars in thousands)
|
|
|
Nonaccrual loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans covered by FDIC loss-sharing arrangements
|
|
$
|
2,365
|
|
|
$
|
2,947
|
|
|
$
|
9,898
|
|
|
$
|
18,223
|
|
|
$
|
43,774
|
|
|
$
|
—
|
|
|
Loans not covered by FDIC loss-sharing arrangements
|
|
|
4,380
|
|
|
|
6,641
|
|
|
|
7,394
|
|
|
|
12,359
|
|
|
|
14,168
|
|
|
|
12,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,745
|
|
|
|
9,588
|
|
|
|
17,292
|
|
|
|
30,582
|
|
|
|
57,942
|
|
|
|
12,322
|
|
|
Agriculture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans covered by FDIC loss-sharing arrangements
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,197
|
|
|
$
|
—
|
|
|
Loans not covered by FDIC loss-sharing arrangements
|
|
|
11,381
|
|
|
|
8,236
|
|
|
|
3,757
|
|
|
|
6,200
|
|
|
|
5,109
|
|
|
|
299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,381
|
|
|
|
8,236
|
|
|
|
3,757
|
|
|
|
6,200
|
|
|
|
7,306
|
|
|
|
299
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans covered by FDIC loss-sharing arrangements
|
|
$
|
23,759
|
|
|
$
|
31,151
|
|
|
$
|
48,822
|
|
|
$
|
120,141
|
|
|
$
|
179,341
|
|
|
$
|
—
|
|
|
Loans not covered by FDIC loss-sharing arrangements
|
|
|
19,978
|
|
|
|
57,652
|
|
|
|
71,455
|
|
|
|
116,465
|
|
|
|
45,741
|
|
|
|
12,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
43,737
|
|
|
|
88,803
|
|
|
|
120,277
|
|
|
|
236,606
|
|
|
|
225,082
|
|
|
|
12,196
|
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans covered by FDIC loss-sharing arrangements
|
|
$
|
12,221
|
|
|
$
|
13,401
|
|
|
$
|
16,890
|
|
|
$
|
21,513
|
|
|
$
|
37,323
|
|
|
$
|
—
|
|
|
Loans not covered by FDIC loss-sharing arrangements
|
|
|
6,615
|
|
|
|
8,746
|
|
|
|
10,798
|
|
|
|
7,377
|
|
|
|
6,334
|
|
|
|
7,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
18,836
|
|
|
|
22,147
|
|
|
|
27,688
|
|
|
|
28,890
|
|
|
|
43,657
|
|
|
|
7,188
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans covered by FDIC loss-sharing arrangements
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
1,173
|
|
|
$
|
—
|
|
|
Loans not covered by FDIC loss-sharing arrangements
|
|
|
139
|
|
|
|
226
|
|
|
|
401
|
|
|
|
823
|
|
|
|
686
|
|
|
|
789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
139
|
|
|
|
226
|
|
|
|
401
|
|
|
|
840
|
|
|
|
1,859
|
|
|
|
789
|
|
|
Other lending
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans covered by FDIC loss-sharing arrangements
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Loans not covered by FDIC loss-sharing arrangements
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
Sept. 30,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(dollars in thousands)
|
|
|
Total nonaccrual loans covered by FDIC loss-sharing arrangements
|
|
$
|
38,345
|
|
|
$
|
47,499
|
|
|
$
|
75,610
|
|
|
$
|
159,894
|
|
|
$
|
263,808
|
|
|
$
|
—
|
|
|
Total nonaccrual loans not covered by FDIC loss-sharing arrangements
|
|
|
42,493
|
|
|
|
81,501
|
|
|
|
93,805
|
|
|
|
143,224
|
|
|
|
72,038
|
|
|
|
32,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonaccrual loans
|
|
|
80,838
|
|
|
|
129,000
|
|
|
|
169,415
|
|
|
|
303,118
|
|
|
|
335,846
|
|
|
|
32,794
|
|
|
OREO
|
|
|
54,190
|
|
|
|
57,422
|
|
|
|
68,526
|
|
|
|
99,640
|
|
|
|
132,988
|
|
|
|
5,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets
|
|
|
135,028
|
|
|
|
186,422
|
|
|
|
237,941
|
|
|
|
402,758
|
|
|
|
468,834
|
|
|
|
38,149
|
|
|
Restructured performing loans
|
|
|
37,434
|
|
|
|
39,130
|
|
|
|
40,009
|
|
|
|
14,244
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming and restructured assets
|
|
$
|
172,462
|
|
|
$
|
225,552
|
|
|
$
|
277,950
|
|
|
$
|
417,002
|
|
|
$
|
468,834
|
|
|
$
|
38,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing loans 90 days or more past due
|
|
$
|
—
|
|
|
$
|
227
|
|
|
$
|
1,832
|
|
|
$
|
352
|
|
|
$
|
203
|
|
|
$
|
39
|
|
|
Nonperforming restructured loans included in total nonaccrual loans
|
|
$
|
29,844
|
|
|
$
|
63,140
|
|
|
$
|
50,305
|
|
|
$
|
14,244
|
|
|
|
*
|
|
|
|
*
|
|
|
Nonaccretable difference outstanding related to loans acquired with deteriorated credit quality
|
|
$
|
72,769
|
|
|
$
|
92,541
|
|
|
$
|
179,199
|
|
|
$
|
303,413
|
|
|
$
|
495,665
|
|
|
$
|
—
|
|
|
Percent of total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans not covered by FDIC loss-sharing arrangements
|
|
|
0.46
|
%
|
|
|
0.89
|
%
|
|
|
1.04
|
%
|
|
|
1.75
|
%
|
|
|
0.87
|
%
|
|
|
0.63
|
%
|
|
Total
|
|
|
0.87
|
%
|
|
|
1.41
|
%
|
|
|
1.88
|
%
|
|
|
3.70
|
%
|
|
|
4.05
|
%
|
|
|
0.63
|
%
|
|
OREO
|
|
|
0.58
|
%
|
|
|
0.63
|
%
|
|
|
0.76
|
%
|
|
|
1.22
|
%
|
|
|
1.61
|
%
|
|
|
0.10
|
%
|
|
Nonperforming assets
(1)
|
|
|
1.45
|
%
|
|
|
2.04
|
%
|
|
|
2.64
|
%
|
|
|
4.92
|
%
|
|
|
5.66
|
%
|
|
|
0.73
|
%
|
|
Nonperforming and restructured assets
(1)
|
|
|
1.86
|
%
|
|
|
2.47
|
%
|
|
|
3.09
|
%
|
|
|
5.09
|
%
|
|
|
5.66
|
%
|
|
|
0.73
|
%
|
|
*
|
Information not available for periods indicated.
|
|
(1)
|
Includes nonperforming restructured loans.
|
At September 30, 2013, our nonperforming
assets were approximately 2.04% of total assets, compared to 2.64% at September 30, 2012. At June 30, 2014, our nonperforming assets totaled $135.0 million, or 1.45% of total assets.
Excluding loans covered by FDIC loss-sharing arrangements, we had simple average nonaccrual loans of $87.6 million outstanding during fiscal
year 2013. Based on the average loan portfolio yield for these loans for the year of 4.29%, we estimate that we would have received approximately $3 million to $4 million of additional interest income during the year if that entire portion of the
portfolio had been performing. During the same period, the amount of net interest income that we recorded on these loans was immaterial.
We have experienced a decline in nonaccrual loans and total nonperforming assets in both total-dollar terms and as a percentage of total
assets since both measures peaked in fiscal year 2011. Most notably, nonaccrual commercial real estate loans not covered by FDIC loss-sharing arrangements have declined from $116.5 million at September 30, 2011 to $20.0 million at June 30, 2014, a
reduction of 83%. This change was driven by our focused workout through restructure and foreclosure of a number of problem loans that were written primarily prior to 2009, supported by our overall focus on managing our exposure to non-owner-occupied
commercial real estate and construction and development loans, which we believe are relatively riskier than owner-occupied CRE loans. Nonaccrual agriculture loans not covered by FDIC loss-sharing arrangements have increased since the end of fiscal
year 2011; however, this increase was driven by a small number of specific loans that we do not believe
105
are representative of our broader agriculture lending portfolio. Further, this increase is proportionate to growth in our overall agriculture loan portfolio since September 30, 2011. Our OREO
assets decreased by $3.2 million from September 30, 2013 to June 30, 2014.
Nonaccrual loans covered by FDIC loss-sharing
arrangements have declined by 85% since peaking after our acquisition of TierOne Bank in fiscal year 2010, and we expect these loans to continue to decline due to the expiration of the commercial loss-sharing arrangement on June 4, 2015 and the
natural runoff through payment or foreclosure of the underlying assets.
We consistently monitor all loans internally rated
“watch” or worse because that rating indicates we have identified some potential weakness emerging; but loans rated “watch” will not necessarily become problem loans or become impaired. Aside from the loans on the watch list, we
do not believe we have any potential problem loans that are not already identified as nonaccrual, past due or restructured as it is our policy to promptly reclassify loans as soon as we become aware of doubts as to the borrowers’ ability to
meet repayment terms. We do not have any material interest-bearing assets that would be disclosed as nonperforming loans or restructured performing loans if they were loans.
When we grant concessions to borrowers that we would not otherwise grant if not for the borrowers’ financial difficulties, such as
reduced interest rates or extensions of loan periods, we consider these modifications troubled debt restructurings, or TDRs. The table below outlines total TDRs, split between performing and nonperforming loans, at each of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
Sept. 30,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Commercial non-real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing TDRs
|
|
$
|
6,312
|
|
|
$
|
4,769
|
|
|
$
|
14,235
|
|
|
Nonperforming TDRs
|
|
|
1,606
|
|
|
|
5,007
|
|
|
|
5,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,918
|
|
|
|
9,776
|
|
|
|
19,954
|
|
|
Agriculture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing TDRs
|
|
$
|
1,032
|
|
|
$
|
4,326
|
|
|
$
|
410
|
|
|
Nonperforming TDRs
|
|
|
8,723
|
|
|
|
7,268
|
|
|
|
352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,755
|
|
|
$
|
11,594
|
|
|
$
|
762
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing TDRs
|
|
$
|
29,165
|
|
|
$
|
29,373
|
|
|
$
|
25,323
|
|
|
Nonperforming TDRs
|
|
|
18,728
|
|
|
|
49,736
|
|
|
|
41,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
47,893
|
|
|
$
|
79,109
|
|
|
$
|
67,278
|
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing TDRs
|
|
$
|
884
|
|
|
$
|
662
|
|
|
$
|
41
|
|
|
Nonperforming TDRs
|
|
|
773
|
|
|
|
1,100
|
|
|
|
2,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,657
|
|
|
$
|
1,762
|
|
|
$
|
2,320
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing TDRs
|
|
$
|
41
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Nonperforming TDRs
|
|
|
14
|
|
|
|
29
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
55
|
|
|
$
|
29
|
|
|
$
|
—
|
|
|
Other lending
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing TDRs
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Nonperforming TDRs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total performing TDRs
|
|
$
|
37,434
|
|
|
$
|
39,130
|
|
|
$
|
40,009
|
|
|
Total nonperforming TDRs
|
|
|
29,844
|
|
|
|
63,140
|
|
|
|
50,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total TDRs
|
|
$
|
67,278
|
|
|
$
|
102,270
|
|
|
$
|
90,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106
We entered into loss-sharing arrangements with the FDIC related to certain assets (loans and
OREO) acquired from TierOne Bank on June 4, 2010. We are generally indemnified by the FDIC at a rate of 80% for any future credit losses through June 4, 2015 for commercial loans and OREO and June 4, 2020 for single-family real estate loans and
OREO. The table below presents nonaccrual loans, TDRs, and OREO covered by loss-sharing arrangements; a rollforward of the allowance for loan losses for loans covered by loss-sharing arrangements; a rollforward of allowance for loan losses for only
those loans purchased with deteriorated credit quality covered by loss-sharing arrangements; and a rollforward of OREO covered by loss-sharing arrangements at and for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At and for the
nine months
ended
June 30, 2014
|
|
|
At and for the fiscal year ended Sept. 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(dollars in thousands)
|
|
|
Assets covered by FDIC loss-sharing arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
38,345
|
|
|
$
|
47,499
|
|
|
$
|
75,610
|
|
|
$
|
159,894
|
|
|
$
|
263,808
|
|
|
$
|
—
|
|
|
TDRs
|
|
|
9,530
|
|
|
|
6,145
|
|
|
|
1,939
|
|
|
|
1,859
|
|
|
|
—
|
|
|
|
—
|
|
|
OREO
|
|
|
13,967
|
|
|
|
24,412
|
|
|
|
44,332
|
|
|
|
83,417
|
|
|
|
108,578
|
|
|
|
—
|
|
|
Allowance for loan losses, loans covered by FDIC loss-sharing
arrangements
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
7,246
|
|
|
$
|
14,470
|
|
|
$
|
12,542
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Additional impairment recorded
|
|
|
1,142
|
|
|
|
2,509
|
|
|
|
20,232
|
|
|
|
18,841
|
|
|
|
—
|
|
|
|
—
|
|
|
Recoupment of previously-recorded impairment
|
|
|
(3,082
|
)
|
|
|
(4,585
|
)
|
|
|
(6,387
|
)
|
|
|
(874
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Charge-offs
|
|
|
(777
|
)
|
|
|
(4,638
|
)
|
|
|
(11,917
|
)
|
|
|
(5,425
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Recoveries
|
|
|
—
|
|
|
|
(510
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
4,529
|
|
|
$
|
7,246
|
|
|
$
|
14,470
|
|
|
$
|
12,542
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OREO covered by FDIC loss-sharing arrangement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
24,412
|
|
|
$
|
44,332
|
|
|
$
|
83,417
|
|
|
$
|
108,578
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Additions to OREO
|
|
|
917
|
|
|
|
6,100
|
|
|
|
28,395
|
|
|
|
66,299
|
|
|
|
123,167
|
|
|
|
—
|
|
|
Valuation adjustments and other
|
|
|
(3,439
|
)
|
|
|
(3,754
|
)
|
|
|
(11,851
|
)
|
|
|
(33,280
|
)
|
|
|
(7,749
|
)
|
|
|
—
|
|
|
Sales
|
|
|
(7,923
|
)
|
|
|
(22,266
|
)
|
|
|
(55,629
|
)
|
|
|
(58,180
|
)
|
|
|
(6,840
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
13,967
|
|
|
$
|
24,412
|
|
|
$
|
44,332
|
|
|
$
|
88,417
|
|
|
$
|
108,578
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
All loans represented in the allowance for loans covered by FDIC loss-sharing arrangements are loans acquired with deteriorated credit quality.
|
Allowance for Loan Losses
We establish an allowance for the inherent risk of probable losses within our loan portfolio. The allowance for loan losses is
management’s best estimate of probable credit losses that are incurred in the loan portfolio. We determine the allowance for loan losses based on an ongoing evaluation, driven primarily by monitoring changes in loan risk grades, delinquencies
and other credit risk indicators, which is an inherently subjective process. We consider the uncertainty related to certain industry sectors and the extent of credit exposure to specific borrowers within the portfolio. In addition, we consider
concentration risks associated with the various loan portfolios and current economic conditions that might impact the portfolio. All of these estimates are susceptible to significant change. Changes to the allowance for loan losses are made by
charges to the provision for loan losses. Loans deemed to be uncollectible are charged off against the allowance for loan losses. Recoveries of amounts previously charged-off are credited to the allowance for loan losses.
107
Our allowance for loan losses consists of two components. For non-impaired loans, we calculate a
weighted average ratio of 12-, 36- and 60-month historical realized losses by collateral type; adjust as necessary for our interpretation of current economic conditions and current portfolio trends including credit quality, concentrations, aging of
the portfolio and/or significant policy and underwriting changes not entirely covered by the calculated historical loss rates; and apply the loss rates to outstanding loan balances in each collateral category. We calculate the weighted average ratio
of 12-, 36- and 60-month historical realized losses for each collateral type by dividing the average net annual charge-offs by the average outstanding loans of such type subject to the calculation for each of the 12-, 36- and 60-month periods, then
averaging those three results. For impaired loans, we estimate our exposure for each individual relationship, given the current payment status of the loan, the present value of expected payments and the value of the underlying collateral as
supported by third party appraisals, broker’s price opinions, and/or the borrower’s audited financial statements, each adjusted for liquidation costs. Any shortfall between the liquidation value of the underlying collateral and the
recorded investment value of the loan is considered the required specific reserve amount. Actual losses in any period may exceed allowance amounts. We evaluate and adjust our allowance for loan losses, and the allocation of the allowance between
loan categories, each month.
The following table presents an analysis of our allowance for loan losses, including provisions for loan
losses, charge-offs and recoveries, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At and for the
nine months
ended
June 30, 2014
|
|
|
At and for the fiscal year ended Sept. 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(dollars in thousands)
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
55,864
|
|
|
$
|
71,878
|
|
|
$
|
71,543
|
|
|
$
|
55,620
|
|
|
$
|
33,762
|
|
|
$
|
26,047
|
|
|
Provision charged to expense
|
|
|
(125
|
)
|
|
|
13,650
|
|
|
|
16,300
|
|
|
|
43,810
|
|
|
|
48,711
|
|
|
|
13,870
|
|
|
Purchase accounting adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,813
|
|
|
Impairment of loans acquired with deteriorated credit quality
|
|
|
(1,940
|
)
|
|
|
(2,076
|
)
|
|
|
13,845
|
|
|
|
17,967
|
|
|
|
—
|
|
|
|
—
|
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate
|
|
|
(2,883
|
)
|
|
|
(3,636
|
)
|
|
|
(7,304
|
)
|
|
|
(9,482
|
)
|
|
|
(10,966
|
)
|
|
|
(4,101
|
)
|
|
Agriculture
|
|
|
(2,652
|
)
|
|
|
(4,069
|
)
|
|
|
(49
|
)
|
|
|
(1,075
|
)
|
|
|
(1,155
|
)
|
|
|
(15
|
)
|
|
Commercial real estate
|
|
|
(3,733
|
)
|
|
|
(19,648
|
)
|
|
|
(24,854
|
)
|
|
|
(32,862
|
)
|
|
|
(11,911
|
)
|
|
|
(3,119
|
)
|
|
Residential real estate
|
|
|
(581
|
)
|
|
|
(1,766
|
)
|
|
|
(1,625
|
)
|
|
|
(3,900
|
)
|
|
|
(5,207
|
)
|
|
|
(1,252
|
)
|
|
Consumer
|
|
|
(191
|
)
|
|
|
(244
|
)
|
|
|
(1,137
|
)
|
|
|
(526
|
)
|
|
|
(192
|
)
|
|
|
(538
|
)
|
|
Other lending
|
|
|
(1,154
|
)
|
|
|
(1,851
|
)
|
|
|
(1,764
|
)
|
|
|
(1,521
|
)
|
|
|
(1,044
|
)
|
|
|
(875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge-offs
|
|
|
(11,194
|
)
|
|
|
(31,214
|
)
|
|
|
(36,733
|
)
|
|
|
(49,366
|
)
|
|
|
(30,475
|
)
|
|
|
(9,900
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate
|
|
|
1,228
|
|
|
|
1,206
|
|
|
|
1,386
|
|
|
|
1,156
|
|
|
|
1,853
|
|
|
|
653
|
|
|
Agriculture
|
|
|
29
|
|
|
|
22
|
|
|
|
160
|
|
|
|
201
|
|
|
|
3
|
|
|
|
—
|
|
|
Commercial real estate
|
|
|
1,521
|
|
|
|
689
|
|
|
|
3,268
|
|
|
|
761
|
|
|
|
830
|
|
|
|
407
|
|
|
Residential real estate
|
|
|
190
|
|
|
|
279
|
|
|
|
630
|
|
|
|
379
|
|
|
|
218
|
|
|
|
76
|
|
|
Consumer
|
|
|
136
|
|
|
|
396
|
|
|
|
226
|
|
|
|
241
|
|
|
|
27
|
|
|
|
130
|
|
|
Other lending
|
|
|
1,329
|
|
|
|
1,034
|
|
|
|
1,253
|
|
|
|
774
|
|
|
|
691
|
|
|
|
666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries
|
|
|
4,433
|
|
|
|
3,626
|
|
|
|
6,923
|
|
|
|
3,512
|
|
|
|
3,622
|
|
|
|
1,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loan (charge-offs) recoveries
|
|
|
(6,761
|
)
|
|
|
(27,588
|
)
|
|
|
(29,810
|
)
|
|
|
(45,854
|
)
|
|
|
(26,853
|
)
|
|
|
(7,968
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
47,038
|
|
|
$
|
55,864
|
|
|
$
|
71,878
|
|
|
$
|
71,543
|
|
|
$
|
55,620
|
|
|
$
|
33,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average total loans for the period
(1)
|
|
$
|
6,442,387
|
|
|
$
|
6,223,009
|
|
|
$
|
5,549,685
|
|
|
$
|
5,226,325
|
|
|
$
|
4,147,054
|
|
|
$
|
2,906,490
|
|
|
Total loans at period end
(1)
|
|
$
|
6,678,501
|
|
|
$
|
6,362,673
|
|
|
$
|
6,138,574
|
|
|
$
|
5,194,041
|
|
|
$
|
5,420,720
|
|
|
$
|
3,420,404
|
|
|
Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs (recoveries) to average total loans
(2)
|
|
|
0.14
|
%
|
|
|
0.44
|
%
|
|
|
0.54
|
%
|
|
|
0.88
|
%
|
|
|
0.65
|
%
|
|
|
0.27
|
%
|
|
Allowance for loan losses to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
0.70
|
%
|
|
|
0.88
|
%
|
|
|
1.17
|
%
|
|
|
1.38
|
%
|
|
|
1.03
|
%
|
|
|
0.99
|
%
|
|
Nonaccruing loans
|
|
|
110.70
|
%
|
|
|
68.54
|
%
|
|
|
76.62
|
%
|
|
|
49.95
|
%
|
|
|
147.86
|
%
|
|
|
102.95
|
%
|
|
(1)
|
Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.
|
|
(2)
|
Calculated as an annualized percentage for the nine months ended June 30, 2014, as applicable.
|
108
In fiscal year 2013, we recorded net charge-offs of $27.6 million, compared to net charge-offs of
$29.8 million in fiscal year 2012. Net charge-offs as a percentage of average total loans were 0.44% in fiscal year 2013 compared to 0.54% in fiscal year 2012. In the first nine months of fiscal year 2014, we recorded net charge-offs of $6.8
million. Net charge-offs as a percentage of average total loans were 0.14% (annualized) in the first nine months of fiscal year 2014.
Total charge-offs and net charge-offs have each decreased since fiscal year 2011. The majority of charge-offs in fiscal years 2011, 2012 and
2013 were related to commercial real estate loans, primarily loans that were written prior to 2009. We believe this continued decline is reflective of our focus on managing our exposure to non-owner-occupied commercial real estate and construction
and development loans, which we believe are relatively riskier than owner-occupied CRE loans, and represents that the majority of our most problematic commercial real estate loans have been worked out of our portfolio. Agriculture charge-offs
increased in fiscal year 2013 and the first nine months of fiscal year 2014; however, these increases are related to a small number of specific loans and, we believe, are not representative of underlying issues in our broader agriculture portfolio.
At September 30, 2013, the allowance for loan losses was 0.88% of our total loan portfolio, compared with 1.17% at
September 30, 2012. At June 30, 2014, our allowance for loan losses was 0.70% of total loans. Our allowance for loan losses, both in total dollars and as a percentage of total loans, has declined since September 30, 2012. Since that point
in time we have experienced a consistent decline in annual net charge-offs as a percentage of total loans which impacts the allowance calculation for non-impaired loans, a reduction in nonperforming (and typically impaired) loans which generally
require higher specific reserves, and a reduction in our relative exposure to commercial real estate loans which have historically driven a large proportion of our net charge-offs. Additionally, certain of our loans which are carried at fair value,
totaling $932 million and $842 million at June 30, 2014 and September 30, 2013, respectively, have no associated allowance for loan losses, but rather have a fair value adjustment related to credit risk, which is reflected in interest income,
thus driving the overall ratio of allowance for loan losses to total loans lower. The amount of fair value adjustment related to credit risk on these loans was $4.6 million and $6.0 million at June 30, 2014 and
September 30, 2013, respectively.
The following tables present management’s historical allocation of the allowance for
loan losses by loan category, in both dollars and percentage of our total allowance for loan losses, to specific loans in those categories at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
Sept. 30,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(dollars in thousands)
|
|
|
Allocation of allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate
|
|
$
|
9,587
|
|
|
$
|
11,222
|
|
|
$
|
18,979
|
|
|
$
|
16,450
|
|
|
$
|
14,687
|
|
|
$
|
17,945
|
|
|
Agriculture
|
|
|
7,740
|
|
|
|
9,296
|
|
|
|
6,906
|
|
|
|
2,509
|
|
|
|
2,298
|
|
|
|
1,469
|
|
|
Commercial real estate
|
|
|
18,055
|
|
|
|
22,562
|
|
|
|
30,234
|
|
|
|
40,733
|
|
|
|
31,593
|
|
|
|
9,927
|
|
|
Residential real estate
|
|
|
10,414
|
|
|
|
11,779
|
|
|
|
14,761
|
|
|
|
10,758
|
|
|
|
6,026
|
|
|
|
1,869
|
|
|
Consumer
|
|
|
392
|
|
|
|
312
|
|
|
|
542
|
|
|
|
832
|
|
|
|
624
|
|
|
|
2,313
|
|
|
Other lending
|
|
|
850
|
|
|
|
693
|
|
|
|
456
|
|
|
|
261
|
|
|
|
392
|
|
|
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
47,038
|
|
|
$
|
55,864
|
|
|
$
|
71,878
|
|
|
$
|
71,543
|
|
|
$
|
55,620
|
|
|
$
|
33,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
Sept. 30,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Allocation of allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate
|
|
|
20.4
|
%
|
|
|
20.1
|
%
|
|
|
26.4
|
%
|
|
|
23.0
|
%
|
|
|
26.4
|
%
|
|
|
53.2
|
%
|
|
Agriculture
|
|
|
16.5
|
%
|
|
|
16.6
|
%
|
|
|
9.6
|
%
|
|
|
3.5
|
%
|
|
|
4.1
|
%
|
|
|
4.4
|
%
|
|
Commercial real estate
|
|
|
38.4
|
%
|
|
|
40.4
|
%
|
|
|
42.1
|
%
|
|
|
56.9
|
%
|
|
|
56.8
|
%
|
|
|
29.4
|
%
|
|
Residential real estate
|
|
|
22.1
|
%
|
|
|
21.1
|
%
|
|
|
20.5
|
%
|
|
|
15.0
|
%
|
|
|
10.8
|
%
|
|
|
5.5
|
%
|
|
Consumer
|
|
|
0.8
|
%
|
|
|
0.6
|
%
|
|
|
0.8
|
%
|
|
|
1.2
|
%
|
|
|
1.1
|
%
|
|
|
6.8
|
%
|
|
Other lending
|
|
|
1.8
|
%
|
|
|
1.2
|
%
|
|
|
0.6
|
%
|
|
|
0.4
|
%
|
|
|
0.8
|
%
|
|
|
0.7
|
%
|
109
Management will continue to evaluate the loan portfolio and assess economic conditions in order
to determine future allowance levels and the amount of loan loss provisions. We review the appropriateness of our allowance for loan losses on a monthly basis. Management monitors closely all past due and restructured loans in assessing the
appropriateness of its allowance for loan losses. In addition, we follow procedures for reviewing and grading all substantial commercial and agriculture relationships at least annually. Based predominantly upon the review and grading process, we
determine the appropriate level of the allowance in response to our assessment of the probable risk of loss inherent in our loan portfolio. Management will make additional loan loss provisions when the results of its problem loan assessment
methodology or overall allowance appropriateness test indicate additional provisions are required.
The review of problem loans is an
ongoing process during which management may determine that additional charge-offs are required or additional loans should be placed on nonaccrual status. We recorded a release of provision for loan losses of $2.1 million during the first nine months
of fiscal year 2014. We recorded provisions for loan losses of $11.6 million and $30.1 million during fiscal years 2013 and 2012, respectively. We have also recorded an allowance for unfunded lending-related commitments that represents our estimate
of incurred losses on the portion of lending commitments that borrowers have not advanced. The balance of the allowance for unfunded lending-related commitments was $0.4 million at June 30, 2014 and September 30, 2013.
Deposits
We
obtain funds from depositors by offering consumer and business demand deposit accounts, MMDAs, NOW accounts, savings accounts and term CDs. At June 30, 2014 and September 30, 2013, our total deposits were $7.07 billion and $6.95 billion,
respectively. Deposits increased 2% at June 30, 2014 as compared to September 30, 2013. Our accounts are federally insured by the FDIC up to the legal maximum. We advertise in newspapers, on the Internet and on television and radio to attract
deposits and perform limited direct telephone solicitation of potential institutional depositors such as investment managers, public depositors and pension plans. We have significantly shifted the composition of our deposit portfolio away from CDs
toward demand, NOW, MMDA and savings accounts over the last 18 months. This has dramatically reduced our overall cost of deposit funding, in addition to the fact that we have greatly increased adherence to internally published rate offerings for
various types of deposit account offerings. The following table presents the balances and weighted average cost of our deposit portfolio at the following dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept. 30
|
|
|
|
|
June 30, 2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
Amount
|
|
|
Weighted
Avg. Cost
|
|
|
Amount
|
|
|
Weighted
Avg. Cost
|
|
|
Amount
|
|
|
Weighted
Avg. Cost
|
|
|
Amount
|
|
|
Weighted
Avg. Cost
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Non-interest-bearing demand
|
|
$
|
1,294,131
|
|
|
|
—
|
%
|
|
$
|
1,199,427
|
|
|
|
—
|
% $
|
|
|
1,076,437
|
|
|
|
—
|
%
|
|
$
|
848,414
|
|
|
|
—
|
%
|
|
NOW accounts, money market and savings
|
|
|
3,951,996
|
|
|
|
0.23
|
%
|
|
|
3,601,796
|
|
|
|
0.21
|
%
|
|
|
3,037,382
|
|
|
|
0.22
|
%
|
|
|
2,532,143
|
|
|
|
0.26
|
%
|
|
Time certificates, $100,000 or more
|
|
|
712,952
|
|
|
|
0.98
|
%
|
|
|
850,817
|
|
|
|
1.04
|
%
|
|
|
1,178,095
|
|
|
|
1.36
|
%
|
|
|
1,106,665
|
|
|
|
1.53
|
%
|
|
Other time certificates
|
|
|
1,108,033
|
|
|
|
0.85
|
%
|
|
|
1,296,168
|
|
|
|
0.97
|
%
|
|
|
1,592,601
|
|
|
|
1.27
|
%
|
|
|
1,784,527
|
|
|
|
1.45
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,067,112
|
|
|
|
0.36
|
%
|
|
$
|
6,948,208
|
|
|
|
0.48
|
%
|
|
$
|
6,884,515
|
|
|
|
0.68
|
%
|
|
$
|
6,271,749
|
|
|
|
0.93
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal public deposits constituted $873 million of our deposit portfolio at September 30, 2013, of
which $666 million were required to be collateralized, which has contributed to declines in our overall cost of deposits. Municipal public deposits constituted $982 million of our deposit portfolio at June 30, 2014, against which we were required to
hold $728 million of collateral. Our top 10 depositors were responsible for 8% of our total deposits at June 30, 2014 and 9% at September 30, 2013.
110
The following table presents deposits by region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
Sept. 30,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Nebraska
|
|
$
|
2,422,553
|
|
|
$
|
2,455,229
|
|
|
$
|
2,481,965
|
|
|
Iowa / Kansas / Missouri
|
|
|
2,113,663
|
|
|
|
2,103,593
|
|
|
|
1,827,833
|
|
|
South Dakota
|
|
|
1,342,709
|
|
|
|
1,315,652
|
|
|
|
1,428,004
|
|
|
Arizona / Colorado
|
|
|
1,140,309
|
|
|
|
1,038,201
|
|
|
|
1,100,562
|
|
|
Corporate and other
|
|
|
47,878
|
|
|
|
35,533
|
|
|
|
46,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
7,067,112
|
|
|
$
|
6,948,208
|
|
|
$
|
6,884,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We fund a portion of our assets with CDs that have balances of $100,000 or more and that have maturities
generally in excess of six months. At June 30, 2014 and September 30, 2013, our CDs of $100,000 or more totaled $713 million and $851 million, respectively. The following table presents the maturities of our CDs of $100,000 or more and less
than $100,000 in size at September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater than
or equal to $100,000
|
|
|
Less than $100,000
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
Remaining maturity:
|
|
|
|
|
|
|
|
|
|
Three months or less
|
|
$
|
199,049
|
|
|
$
|
270,769
|
|
|
Over three through six months
|
|
|
116,418
|
|
|
|
249,901
|
|
|
Over six through twelve months
|
|
|
224,609
|
|
|
|
308,915
|
|
|
Over twelve months
|
|
|
310,741
|
|
|
|
466,583
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
850,817
|
|
|
$
|
1,296,168
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of total deposits
|
|
|
12.2
|
%
|
|
|
18.7
|
%
|
At June 30, 2014 and September 30, 2013, the average remaining maturity of all CDs was approximately 13
months. The average CD amount per account was approximately $28,599 and $29,584 at June 30, 2014 and September 30, 2013, respectively.
We have acquired term CDs that matured prior to June 30, 2014 from a source that was deemed to be a broker. The total amount of these deposits
was approximately $0.4 million September 30, 2013. We no longer acquire deposits from this source.
Derivatives
In the normal course of business, we enter into fixed-rate loans having original maturities of 5 years or greater (typically between 5 and 15
years) with certain of our commercial and agribusiness banking customers to assist them in facilitating their risk management strategies. We mitigate our interest rate risk associated with these loans by entering into equal and offsetting
fixed-to-floating interest rate swap agreements for these loans with NAB London Branch. We have elected to account for the loans at fair value under ASC 825
Fair Value
Option
. Changes in the fair value of these loans are recorded in
earnings as a component of interest income in the relevant period. The related interest rate swaps are recognized as either assets or liabilities in our financial statements and any gains or losses on these swaps are recorded in earnings as a
component of noninterest expense. The economic hedges are fully effective from an interest rate risk perspective, as gains and losses on our swaps are directly offset by changes in fair value of the hedged loans (
i.e.
, swap interest rate risk
adjustments are directly offset by associated loan interest rate risk adjustments). Consequently, any changes in interest income associated with changes in fair value resulting from interest rate movement, as opposed to changes in credit quality, on
the loans are directly offset by equal and opposite charges to or reductions in noninterest expense for the related interest rate swap. To ensure the
111
correlation of movements in fair value between the interest rate swap and the related loan, we pass on all economic costs associated with our hedging activity resulting from loan customer
prepayments (partial or full) to the customer.
Short-Term Borrowings
Our primary sources of short-term borrowings include securities sold under repurchase agreements and certain FHLB advances maturing within 12
months. Our short-term borrowings position did not change materially between September 30, 2013 and June 30, 2014. The following table presents certain information with respect to only our borrowings with original maturities less than 12 months
at fiscal year-end for each of our last three fiscal years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the
nine months ended
June 30, 2014
|
|
|
As of and for the
fiscal year ended Sept. 30,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
(dollars in thousands)
|
|
|
Short-term borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances
|
|
$
|
55,000
|
|
|
$
|
50,000
|
|
|
$
|
150,000
|
|
|
$
|
—
|
|
|
Securities sold under agreements to repurchase
|
|
|
181,898
|
|
|
|
213,940
|
|
|
|
231,247
|
|
|
|
207,621
|
|
|
Related party notes payable
|
|
|
5,500
|
|
|
|
5,500
|
|
|
|
5,500
|
|
|
|
12,500
|
|
|
Other short-term borrowings
|
|
|
97
|
|
|
|
107
|
|
|
|
121
|
|
|
|
884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term borrowings
|
|
$
|
242,495
|
|
|
$
|
269,547
|
|
|
$
|
386,868
|
|
|
$
|
221,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum amount outstanding at any month-end during the period
|
|
$
|
264,345
|
|
|
$
|
387,769
|
|
|
$
|
447,274
|
|
|
$
|
416,115
|
|
|
Average amount outstanding during the period
|
|
$
|
214,466
|
|
|
$
|
315,611
|
|
|
$
|
347,937
|
|
|
$
|
282,108
|
|
|
Weighted average rate for the period
(1)
|
|
|
0.30
|
%
|
|
|
0.30
|
%
|
|
|
0.36
|
%
|
|
|
0.37
|
%
|
|
Weighted average rate as of date indicated
|
|
|
0.34
|
%
|
|
|
0.29
|
%
|
|
|
0.34
|
%
|
|
|
0.36
|
%
|
|
(1)
|
Calculated as an annualized percentage for the nine months ended June 30, 2014.
|
Great Western
also has a $10 million revolving line of credit issued by NAB that is due on demand. There were outstanding advances of $5.5 million on this line of credit at each of June 30, 2014 and September 30, 2013. For more information on this line of
credit, see “Our Relationship with NAB and Certain Other Related Party Transactions—Related Party Transactions with NAB—Indebtedness Held by NAB and Its Affiliates.”
Other Borrowings
Great Western has outstanding $56.1 million of junior subordinated debentures to affiliated trusts in connection with the issuance of trust
preferred securities by such trusts as of June 30, 2014, September 30, 2013, and September 30, 2012. We are permitted under applicable laws and regulations to count these trust preferred securities as part of our Tier 1 capital.
Great Western also has outstanding a subordinated capital note issued to NAB New York Branch (a branch of National Australia Bank Limited), or
NAB New York Branch, having an aggregate principal amount of approximately $35.8 million maturing in 2018. For more information on this note, see “Our Relationship with NAB and Certain Other Related Party Transactions—Related Party
Transactions with NAB—Indebtedness Held by NAB and Its Affiliates.”
112
Off-Balance Sheet Commitments, Commitments, Guarantees and Contractual Obligations
The following table summarizes the maturity of our contractual obligations and other commitments to make future payments at September 30,
2013. Customer deposit obligations categorized as “not determined” include noninterest-bearing demand accounts, NOW accounts, MMDAs and passbook accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 1
Year
|
|
|
1 to 2 Years
|
|
|
2 to 5
Years
|
|
|
> 5 Years
|
|
|
Not
Determined
|
|
|
Total
|
|
|
|
|
(dollars in thousands)
|
|
|
Contractual Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer deposits
|
|
$
|
1,369,276
|
|
|
$
|
448,934
|
|
|
$
|
307,557
|
|
|
$
|
21,218
|
|
|
$
|
4,801,223
|
|
|
$
|
6,948,208
|
|
|
Securities sold under agreement to repurchase
|
|
|
214,023
|
|
|
|
805
|
|
|
|
2,734
|
|
|
|
—
|
|
|
|
—
|
|
|
|
217,562
|
|
|
FHLB advances and other borrowings
|
|
|
160,607
|
|
|
|
65,000
|
|
|
|
140,000
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
390,607
|
|
|
Related party notes payable
|
|
|
5,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35,795
|
|
|
|
—
|
|
|
|
41,295
|
|
|
Subordinated debentures
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
56,083
|
|
|
|
—
|
|
|
|
56,083
|
|
|
Accrued interest payable
|
|
|
6,790
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,790
|
|
|
Operating leases, net of sublease income
|
|
|
4,324
|
|
|
|
3,644
|
|
|
|
7,265
|
|
|
|
2,327
|
|
|
|
—
|
|
|
|
17,560
|
|
|
Interest on FHLB advances
|
|
|
3,207
|
|
|
|
2,700
|
|
|
|
4,224
|
|
|
|
4,423
|
|
|
|
—
|
|
|
|
14,554
|
|
|
Interest on related party notes payable
(1)
|
|
|
827
|
|
|
|
827
|
|
|
|
2,266
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,920
|
|
|
|
|
|
|
|
|
|
|
Other Commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit—non-credit card
|
|
$
|
1,153,512
|
|
|
$
|
91,715
|
|
|
$
|
252,042
|
|
|
$
|
91,488
|
|
|
$
|
16,614
|
|
|
$
|
1,605,371
|
|
|
Commitments to extend credit—credit card
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
108,498
|
|
|
|
108,498
|
|
|
Letters of credit
|
|
|
51,893
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
51,893
|
|
|
(1)
|
The outstanding balance on our $10 million line of credit with NAB New York Branch and our subordinated debentures can be prepaid at any time without penalty; therefore, no future interest payments, other than those
already accrued, are reflected.
|
Instruments with Off-Balance Sheet Risk
In the normal course of business, we enter into various transactions that are not included in our consolidated financial statements in
accordance with GAAP. These transactions include commitments to extend credit to our customers and letters of credit. Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in
the commitment. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Letters of credit are conditional commitments issued primarily to
support or guarantee the performance of a customer’s obligations to a third party. The credit risk involved in issuing letters of credit is essentially the same as originating a loan to the customer. We manage the risks associated with these
arrangements by evaluating each customer’s creditworthiness prior to issuance through a process similar to that used by us in deciding whether to extend credit to the customer.
The following table presents the total notional amounts of all commitments by us to extend credit and letters of credit as of the dates
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept. 30,
|
|
|
|
|
June 30, 2014
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(dollars in thousands)
|
|
|
Commitments to extend credit
|
|
$
|
1,764,808
|
|
|
$
|
1,713,869
|
|
|
$
|
1,451,680
|
|
|
Letters of credit
|
|
|
54,238
|
|
|
|
51,893
|
|
|
|
61,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,819,046
|
|
|
$
|
1,765,762
|
|
|
$
|
1,512,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113
Liquidity
Liquidity refers to our ability to maintain cash flow that is adequate to fund operations and meet present and future financial obligations
through either the sale or maturity of existing assets or by obtaining additional funding through liability management. We consider the effective and prudent management of liquidity to be fundamental to our health and strength. Our objective is to
manage our cash flow and liquidity reserves so that they are adequate to fund our obligations and other commitments on a timely basis and at a reasonable cost.
Our liquidity risk is managed through a comprehensive framework of policies and limits overseen by our bank’s asset and liability
committee. We continuously monitor and make adjustments to our liquidity position by adjusting the balance between sources and uses of funds as we deem appropriate. Our primary measures of liquidity include monthly cash flow analyses under ordinary
business activities and conditions and under situations simulating a severe run on our bank. We also monitor our bank’s deposit to loan ratio to ensure high quality funding is available to support our strategic lending growth objectives, and
have internal management targets for the FDIC’s liquidity ratio, net short-term non-core funding dependence ratio and non-core liabilities to total assets ratio. The results of these measures and analyses are incorporated into our contingency
funding plan, which provides the basis for the identification of our liquidity needs.
Great Western
. Great Western’s primary
source of liquidity is cash obtained from dividends by our bank. We primarily use our cash for the payment of dividends, when and if declared by our board of directors, and the payment of interest on our outstanding junior subordinated debentures
and related party notes payable. We also use cash, as necessary, to satisfy the needs of our bank through equity contributions and for acquisitions. At June 30, 2014, Great Western had $4.3 million of cash. We expect that GWBI will declare and
pay to NAI an aggregate dividend of $34.0 million (related to our earnings in the second half of fiscal year 2014) during our fourth fiscal quarter prior to completion of the Formation Transactions. The outstanding amounts under our revolving line
of credit with NAB and subordinated capital note issued to NAB New York Branch together totaled $41.3 million at June 30, 2014. Our management believes that the sources of available liquidity are adequate to meet all reasonably foreseeable
short-term and intermediate-term demands.
Great Western Bank
. Our bank maintains sufficient liquidity by maintaining minimum
levels of excess cash reserves (measured on a daily basis), a sufficient amount of unencumbered, highly liquid assets and access to contingent funding with the FHLB. At June 30, 2014, our bank had cash of $230.8 million and $1.40 billion of
highly-liquid securities held in our investment portfolio, of which $1.17 billion were pledged as collateral on public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law. The balance
could be sold to meet liquidity requirements. Our bank also had $435.0 million in FHLB borrowings at June 30, 2014, with additional available lines of $806.2 million. Our bank primarily uses liquidity to meet loan requests and commitments (including
commitments under letters of credit), to accommodate outflows in deposits and to take advantage of interest rate market opportunities. At June 30, 2014, we had a total of $1.82 billion of outstanding exposure under commitments to extend credit and
issued letters of credit. Our management believes that the sources of available liquidity are adequate to meet all our bank’s reasonably foreseeable short-term and intermediate-term demands.
Capital
As a bank holding company, we
must comply with the capital requirements established by the Federal Reserve, and our bank must comply with the capital requirements established by the FDIC. The current risk-based guidelines applicable to us and our bank are based on the Basel I
framework, as implemented by the federal bank regulators. See “Supervision and Regulation—Regulatory Capital Requirements.”
114
The following table presents our regulatory capital ratios at June 30, 2014 and the standards for
both well-capitalized depository institutions and minimum capital requirements. Our capital ratios exceeded applicable regulatory requirements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
Minimum
Capital
Requirement
Ratio
|
|
|
Well
Capitalized
Ratio
|
|
|
|
|
Capital Amount
|
|
|
Ratio
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
Great Western
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital
|
|
$
|
785,919
|
|
|
|
12.1
|
%
|
|
|
4.0
|
%
|
|
|
6.0
|
%
|
|
Total capital
|
|
|
854,433
|
|
|
|
13.1
|
%
|
|
|
8.0
|
%
|
|
|
10.0
|
%
|
|
Tier 1 leverage
|
|
|
785,919
|
|
|
|
9.3
|
%
|
|
|
4.0
|
%
|
|
|
5.0
|
%
|
|
|
|
|
|
|
|
Great Western Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital
|
|
$
|
818,677
|
|
|
|
12.6
|
%
|
|
|
4.0
|
%
|
|
|
6.0
|
%
|
|
Total capital
|
|
|
865,715
|
|
|
|
13.3
|
%
|
|
|
8.0
|
%
|
|
|
10.0
|
%
|
|
Tier 1 leverage
|
|
|
818,677
|
|
|
|
9.6
|
%
|
|
|
4.0
|
%
|
|
|
5.0
|
%
|
At June 30, 2014 and September 30, 2013, our Tier 1 capital included an aggregate of $56.1 million of
trust preferred securities issued by our subsidiaries. At June 30, 2014, our Tier 2 capital included $47.0 million of the allowance for loan losses and $21.5 million of an intercompany subordinated capital note, subject to phase-out and a current
haircut of 60%. At September 30, 2013, our Tier 2 capital included $55.9 million of the allowance for loan losses and $28.6 million of subordinated intercompany notes payable, subject to phase-out and a current haircut of 80%. Our total
risk-weighted assets were $6.52 billion at June 30, 2014. Prior to the completion of this offering with the Formation Transactions, we expect to repay our outstanding $35.8 million intercompany subordinated capital note due on June 3, 2018 as
discussed in “—Liquidity.”
In July 2013, the federal bank regulators approved the New Capital Rules (as defined and
discussed in “Supervision and Regulation—Regulatory Capital Requirements”), which implement the Basel III capital framework and various provisions of the Dodd-Frank Act. We and our bank will be required to comply with these rules
beginning on January 1, 2015, subject to the phase-in of certain provisions. In addition to other changes, the New Capital Rules establish a new common equity Tier 1 capital ratio. At June 30, 2014, calculated on a fully phased-in basis, our
common equity Tier 1 capital ratio would have been 10.8%, which exceeds the 4.5% minimum ratio requirement in the rules (and the 7.0% minimum ratio requirement after including the full phase-in of the capital conservation buffer). At June 30, 2014,
calculated on a fully phased-in basis, our bank’s common equity Tier 1 capital ratio would have been 12.1%.
The New Capital Rules
also make changes to the calculation of Tier 1 capital and total capital, as well as changing the risk weightings associated with calculating our risk weighted assets. We believe the most significant changes from the current risk-based capital
guidelines currently applicable to us will be the increased risk weightings for higher-volatility CRE, revolving lines of credit with less than a one year term and on past-due and impaired loans. In addition, our outstanding trust preferred
securities will continue to qualify as additional Tier 1 capital under the New Capital Rules until we exceed $15 billion in consolidated total assets. At June 30, 2014, calculated on a fully phased-in basis, our Tier 1 capital ratio calculated under
the New Capital Rules was 11.6%, and our bank’s Tier 1 capital ratio calculated under the New Capital Rules was 12.1%. We believe that, as of June 30, 2014, we and our bank would meet all capital adequacy requirements under the New Capital
Rules on a fully phased-in basis as if such requirements were then in effect.
The common equity Tier 1 capital and Tier 1 capital ratio
calculated under the New Capital Rules for both us and our bank are unaudited, non-GAAP financial measures. These ratios are calculated based on our estimates of the required adjustments under the New Capital Rules to the current regulatory-required
calculation of risk-weighted assets and estimates of the application of provisions of the New Capital Rules to be phased in over time. We believe these estimates are reasonable, but they may ultimately be incorrect as we finalize our
115
calculations under the New Capital Rules. A reconciliation our and our bank’s common equity Tier 1 capital and Tier 1 capital ratio calculated under the New Capital Rules at June 30, 2014 to
our and our bank’s current regulatory-required Tier 1 capital ratios are presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
Great
Western
|
|
|
Great
Western Bank
|
|
|
|
|
(dollars in thousands)
|
|
|
Common equity Tier 1 capital:
|
|
|
|
|
|
|
|
|
|
Total Tier 1 capital
|
|
$
|
785,919
|
|
|
$
|
818,677
|
|
|
Less: Trust preferred securities
|
|
|
56,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common equity Tier 1 capital
|
|
$
|
729,836
|
|
|
$
|
818,677
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-weighted assets
|
|
$
|
6,517,451
|
|
|
$
|
6,516,556
|
|
|
Add: Net change in risk-weighted assets
|
|
|
253,000
|
|
|
|
253,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Basel III risk-weighted assets
|
|
$
|
6,770,451
|
|
|
$
|
6,779,556
|
|
|
|
|
|
|
|
|
|
|
|
|
Current regulatory Tier 1 capital ratio
|
|
|
12.1
|
%
|
|
|
12.6
|
%
|
|
Common equity Tier 1 capital ratio
|
|
|
10.8
|
%
|
|
|
12.1
|
%
|
|
Basel III Tier 1 capital ratio
|
|
|
11.6
|
%
|
|
|
12.1
|
%
|
Internal Control Over Financial Reporting
As a result of this offering, we will transition from being a wholly owned subsidiary of a large publicly listed entity to becoming a publicly
listed company in our own right. As such we are now subject to the heightened financial reporting standards under GAAP and SEC rules, including more extensive levels of disclosure, which require enhancements to the design and operation of our
internal control over financial reporting. In the process of preparing additional disclosures required by the SEC for public companies contained within our consolidated financial statements under these heightened requirements in connection with this
offering, during the third quarter of fiscal 2014, we have identified a material weakness in the design and operation of our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. The material weakness identified resulted from the fact that
we did not have sufficient financial reporting and accounting staff with appropriate training and experience in GAAP and SEC rules and regulations assisting in the preparation and review of our consolidated financial statements. As such, our
controls over financial reporting were not operating effectively.
We have initiated a number of steps and plan to continue to implement
measures designed to improve our internal controls over financial reporting. We have contracted with two independent consulting firms to assist us in the preparation of our consolidated financial statements, and we plan to hire and utilize
additional experienced, qualified personnel within our financial reporting function in the future to assist with the preparation and review of future financial statements. Management continues to evaluate the design and operating effectiveness of
these changes to our control environment and we believe that further reporting periods, including a full year end reporting cycle, are required to confirm the remediation of the previously identified material weakness as well as the ongoing
effectiveness of the revised control environment. We therefore cannot assure you that we will be successful in implementing these measures or that these measures will significantly improve or remediate the material weakness identified in the design
and operating effectiveness of our internal control over financial reporting. The measures that we are seeking to implement may be insufficient to identify or prevent our existing material weakness or identify or prevent additional deficiencies in
the design and operation of our internal control over financial reporting. See “Risk Factors—Risks Relating to Our Business—The financial reporting resources we have put in place may not be sufficient to ensure the accuracy of the
additional information we are required to disclose as a publicly listed company.”
116
Impact of Inflation and Changing Prices
Our financial statements included in this prospectus have been prepared in accordance with GAAP, which requires us to measure financial
position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession generally are not considered. The primary effect of inflation on our operations is reflected in increased
operating costs. In our management’s opinion, changes in interest rates affect the financial condition of a financial institution to a far greater degree than changes in the inflation rate. While interest rates are greatly influenced by changes
in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Interest rates are highly sensitive to many factors that are beyond our control, including changes in the expected rate of
inflation, the influence of general and local economic conditions and the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities.
Recent Accounting Pronouncements
In
December 2011, the FASB issued Accounting Standards Update, or ASU, 2011-11
Disclosures about Offsetting Assets and Liabilities
. Under the ASU, an entity is required to disclose both gross and net information about instruments and
transactions eligible for offset in the balance sheet, as well as instruments and transactions subject to an agreement similar to a master netting agreement. In January 2013, the FASB released ASU 2013-01
Clarifying the Scope of Disclosures about
Offsetting Assets and Liabilities
, which amended ASU 2011-11 to specifically include only derivatives accounted for under Topic 815, repurchase and reverse repurchase agreements, and securities borrowing and lending transactions that are either
offset or subject to an enforceable master netting arrangement. The disclosure requirements became effective for annual reporting periods beginning on or after January 1, 2013, and interim periods therein, with retrospective application
required. The adoption of these accounting pronouncements did not have a material impact on our consolidated financial statements.
In
October 2012, the FASB released ASU 2012-06
Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution
. The new guidance clarifies that
when a reporting entity recognizes an indemnification asset as a result of a government-assisted acquisition of a financial institution and subsequently a change in the cash flows expected to be collected on the indemnification asset occurs, the
reporting entity should account for the change in the measurement of the indemnification asset on the same basis as the change in the assets subject to indemnification. Any amortization of changes in value should be limited to the lesser of the
contractual term of the indemnification agreement or the remaining life of the indemnified assets. This guidance became effective for annual reporting periods beginning on or after December 15, 2012, and interim periods therein. The Company
previously accounted for its indemnification asset in accordance with this guidance; accordingly, the adoption of this guidance did not have a material impact on our consolidated financial position, results of operations or cash flows.
In February 2013, the FASB issued ASU 2013-02
Comprehensive Income (Topic 220): Reporting of
Amounts Reclassified Out of Accumulated
Other Comprehensive Income
. The update amends existing literature to require an entity to provide information about the amounts reclassified out of other comprehensive income by component, and it also requires enhanced disclosure and cross
reference on items reclassified out of accumulated other comprehensive income during the reporting period. The update became effective for reporting periods beginning after December 15, 2012. The adoption of the update did not have a
significant impact on our consolidated financial statements.
In January 2014, the FASB issued ASU 2014-04
Receivables—Troubled
Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure
. The update amends existing literature to eliminate diversity in practice by clarifying and
defining when an in substance repossession or foreclosure occurs. The terms “in substance a repossession or foreclosure” and “physical possession” are not currently defined in the accounting literature, resulting in diversity in
practice
117
when a creditor derecognizes a loan receivable and recognizes the real estate property collateralizing the loan receivable as an asset. Additionally, the update requires interim and annual
disclosures of both the amount of foreclosed residential real estate property and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure. The update is effective
for annual periods and the interim periods within those annual periods beginning after December 15, 2014. The adoption of the update to existing standards is not expected to have a material impact on our consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09
Revenue from Contracts with Customers (Topic 606)
, which does not apply to financial
instruments. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods and services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The amendments can be applied retrospectively to each prior
reporting period or retrospectively with the cumulative effect of initially applying this update recognized at the date of initial application. Early application is not permitted. The Company is assessing the impact of ASU 2014-09 on its accounting
and disclosures.
Critical Accounting Policies and the Impact of Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been
prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates, including those related to allowance for loan losses, credit risks, estimated loan lives, interest rate risk, investments, intangible assets, income taxes, contingencies, litigation
and other operational risks. We base these estimates on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Credit Risk Management
Our strategy for credit risk management includes well-defined, centralized credit policies, uniform underwriting criteria and ongoing risk
monitoring and review processes for all credit exposures. The strategy also emphasizes diversification on a geographic, industry and customer level; regular credit examinations; and management reviews of loans exhibiting deterioration of credit
quality. The credit risk management strategy also includes a credit risk assessment process that performs assessments of compliance with commercial and consumer credit policies, risk ratings, and other critical credit information. Loan decisions are
documented with respect to the borrower’s business, purpose of the loan, evaluation of the repayment source and the associated risks, evaluation of collateral, covenants and monitoring requirements and risk rating rationale.
For purposes of managing credit risk, we separate our loan portfolio into a number of classes, including: commercial non-real estate,
agriculture, CRE, residential real estate, consumer and other lending.
The commercial non-real estate lending class includes loans made
to small and middle market businesses and loans made to public sector customers. Loans in this class are secured by the operations and cash flows of the borrowers, and any guarantors. Historical loss history and updated loan-to-value information on
collateral-dependent loans are the primary factors in determining the allowance for loan losses for the commercial non real estate lending class. Key risk characteristics relevant to the commercial non real estate lending class include the industry
and geography of the borrower’s business, purpose of the loan, repayment source, borrower’s debt capacity and financial performance, loan covenants and nature of pledged collateral. We consider these risk characteristics in assigning risk
ratings and estimating environmental factors considered in determining the allowance for loan losses.
118
The agriculture lending class includes loans made to small and mid-size agricultural individuals
and businesses. Loans in this class are secured by agricultural real estate, production, cash flows and any guarantors. Historical loss history and updated loan-to-value information on collateral-dependent loans are the primary factors in
determining the allowance for loan losses for the agriculture lending class. Key risk characteristics relevant to the agriculture lending class include the geography of the borrower’s operations, commodity prices and weather patterns, purpose
of the loan, repayment source, borrower’s debt capacity and financial performance, loan covenants, and nature of pledged collateral. We consider these risk characteristics in assigning risk ratings and estimating environmental factors
considered in determining the allowance for loan losses.
The CRE lending class includes loans made to small and middle market businesses,
including multifamily properties. Loans in this class are secured by CRE. Historical loss history and updated loan-to-value information on collateral-dependent loans are the primary factors in determining the allowance for loan losses for the CRE
lending class. Key risk characteristics relevant to the CRE lending class include the industry and geography of the borrower’s business, purpose of the loan, repayment source, borrower’s debt capacity and financial performance, loan
covenants, and nature of pledged collateral. We consider these risk characteristics in assigning risk ratings and estimating environmental factors considered in determining the allowance for loan losses.
The residential real estate lending class includes loans made to consumer customers including residential mortgages, residential construction
loans and home equity loans and lines. These loans are typically fixed-rate loans secured by residential real estate. Home equity lines are revolving accounts giving the borrower the ability to draw and repay balances repeatedly, up to a maximum
commitment, and are secured by residential real estate. Home equity lines typically have variable-rate terms that are benchmarked to a prime rate. Historical loss history is the primary factor in determining the allowance for loan losses for the
residential real estate lending class. Key risk characteristics relevant to residential real estate lending class loans primarily relate to the borrower’s capacity and willingness to repay and include unemployment rates and other economic
factors, and customer payment history. These risk characteristics, among others, are reflected in the environmental factors considered in determining the allowance for loan losses.
The consumer lending class includes loans made to consumer customers including loans secured by automobiles and other installment loans, and
the other lending class includes credit card loans and unsecured revolving credit lines. Historical loss history is the primary factor in determining the allowance for loan losses for the consumer and other lending classes. Key risk characteristics
relevant to loans in the consumer and other lending classes primarily relate to the borrower’s capacity and willingness to repay and include unemployment rates and other economic factors, and customer payment history. These risk
characteristics, among others, are reflected in the environmental factors considered in determining the allowance for loan losses.
We
classify all non-consumer loans by credit quality ratings. These ratings are Pass, Watch, Substandard, Doubtful, and Loss. Loans with a Pass and Watch rating represent those loans not classified on our rating scale for problem credits, with loans
with a Watch rating being monitored and updated at least quarterly by management. Substandard loans are those where a well-defined weakness has been identified that may put full collection of contractual cash flows at risk. Doubtful loans are those
where a well-defined weakness has been identified and a loss of contractual cash flows is known. Substandard and doubtful loans are monitored and updated monthly. All loan risk ratings are updated and monitored on a continuous basis. We generally do
not risk rate consumer loans unless a default event such as bankruptcy or extended nonperformance takes place. Alternatively, standard credit scoring systems are used to assess credit risks of consumer loans.
Allowance for Loan Losses and Unfunded Commitments
We maintain an allowance for loan losses at a level management believes is appropriate to reserve for credit losses inherent in our loan
portfolio. The allowance for loan losses is determined based on an ongoing evaluation, driven primarily by monitoring changes in loan risk grades, delinquencies and other credit risk indicators, that is inherently subjective.
119
We consider the uncertainty related to certain industry sectors and the extent of credit exposure
to specific borrowers within the portfolio. In addition, consideration is given to concentration risks associated with the various loan portfolios and current economic conditions that might impact the portfolio. We also consider changes, if any, in
underwriting activities, the loan portfolio composition (including product mix and geographic, industry, or customer-specific concentrations), trends in loan performance, the level of allowance coverage relative to similar banking institutions and
macroeconomic factors, such as changes in unemployment rates, gross domestic product and consumer bankruptcy filings.
All of these
estimates are susceptible to significant change. Changes to the allowance for loan losses are made by charges to the provision for loan losses, which is reflected in the consolidated statement of comprehensive income. Loans deemed to be
uncollectible are charged off against the allowance for loan losses. Recoveries of amounts previously charged-off are credited to the allowance for loan losses.
The allowance for loan losses consists of reserves for probable losses that have been identified related to specific borrowing relationships
that are individually evaluated for impairment, which we refer to in this prospectus as the “specific reserve,” as well as probable losses inherent in our loan portfolio that are not specifically identified, which we refer to in this
prospectus as the “collective reserve.”
The specific reserve relates to impaired loans. A loan is impaired when, based on
current information and events, it is probable that we will be unable to collect all amounts due (interest as well as principal) according to the contractual terms of the loan agreement. Specific reserves are determined on a loan-by-loan basis based
on management’s best estimate of our exposure, given the current payment status of the loan, the present value of expected payments, and the value of any underlying collateral. Impaired loans also include loans modified in troubled debt
restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other
actions intended to maximize collection. Generally, the impairment related to troubled debt restructurings is measured based on the fair value of the collateral, less cost to sell, or the present value of expected payments relative to the unpaid
principal balance. If the impaired loan is identified as collateral dependent, then the fair value of the collateral method of measuring the amount of the impairment is used. This method requires obtaining an independent appraisal of the collateral
and applying a discount factor to the appraised value, if necessary, and including costs to sell.
Management’s estimate for
collective reserves reflects losses incurred in the loan portfolio as of the consolidated balance sheet reporting date. Incurred loss estimates are primarily based on historical loss experience and portfolio mix. Incurred loss estimates may be
adjusted to reflect current economic conditions and current portfolio trends including credit quality, concentrations, aging of the portfolio, and/or significant policy and underwriting changes.
While management uses the best information available to establish the allowance for loan losses, future adjustments may be necessary if
economic conditions differ substantially from the assumptions used in performing the estimates.
Unfunded residential mortgage loan
commitments entered into in connection with mortgage loans to be held for sale are considered derivatives and recorded at fair value on the consolidated balance sheet with changes in fair value recorded in other interest income. All other unfunded
loan commitments are generally related to providing credit facilities to customers and are not considered derivatives. For purchased loans, the fair value of the unfunded credit commitments is considered in determination of the fair value of the
loans recorded at the date of acquisition. Reserves for credit exposure on all other unfunded credit commitments are recorded in other liabilities.
FDIC Indemnification Asset and Clawback Liability
We entered into two loss-sharing agreements with the FDIC in connection with our FDIC-assisted acquisition of TierOne Bank, one covering
certain single family residential mortgage loans and one covering
120
commercial loans and other assets. The agreements cover a portion of realized losses on loans, foreclosed real estate and certain other assets. We have recorded assets on the consolidated balance
sheets—that is, indemnification assets—representing estimated future amounts recoverable from the FDIC.
Fair values of loans
covered by the loss-sharing agreements at the acquisition date were estimated based on projected cash flows available based on the expected probability of default, default timing and loss given default, the expected reimbursement rates (generally
80%) from the FDIC and other relevant terms of the loss-sharing agreements. The initial fair value was established by discounting these expected cash flows with a market discount rate for instruments with like maturity and risk characteristics.
The loss-sharing assets are measured separately from the related loans and foreclosed real estate and recorded as an FDIC indemnification
asset on the consolidated balance sheets because they are not contractually embedded in the loans and are not transferrable with the loans should we choose to dispose of them. Subsequent to the acquisition date, reimbursements received from the FDIC
for actual incurred losses reduce the carrying amount of the loss-sharing assets. Reductions to expected losses, to the extent such reductions to expected losses are the result of an improvement to the actual or expected cash flows from the covered
assets, also reduce the carrying amount of the loss-sharing assets. Additional expected losses, to the extent such expected losses result in the recognition of an allowance for loan losses, increase the carrying amount of the loss-sharing assets.
The corresponding accretion or amortization is recorded as a component of interest income on the consolidated statements of comprehensive income. Although these assets are contractual receivables from the FDIC, there are no contractual interest
rates.
As part of the loss-sharing agreements, we also assumed a liability, which we refer to as the FDIC Clawback Liability, to be paid
within 45 days subsequent to the maturity or termination of the loss-sharing agreements that is contingent upon actual losses incurred over the life of the agreements relative to expected losses considered in the consideration paid at acquisition
date and the amount of losses reimbursed to us under the loss-sharing agreements. The liability was recorded at fair value as of the acquisition date. The fair value was based on a discounted cash flow calculation that considered the formula defined
in the loss-sharing agreements and projected losses. The difference between the fair value at acquisition date and the projected losses is amortized through other noninterest expense. As projected losses and reimbursements are updated, as described
above, the FDIC Clawback Liability is adjusted and a gain or loss is recorded in other noninterest expense.
Goodwill
Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted
for as business acquisitions. Goodwill is evaluated annually for impairment on the basis of a single reportable segment, consistent with how we prepare and evaluate our financial results. We perform our impairment evaluation in the fourth quarter of
each fiscal year. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill are not recognized in the
consolidated financial statements.
Core Deposits and Other Intangibles
Intangible assets consist of core deposits, brand intangible, customer relationships and other intangibles. Core deposits represent the
identifiable intangible value assigned to core deposit bases arising from purchase acquisitions. Brand intangible represents the value associated with our bank’s charter and our name. Customer relationships intangible represents the
identifiable intangible value assigned to customer relationships arising from a purchase acquisition. Other intangibles represent contractual franchise arrangements under which the franchiser grants the franchisee the right to perform certain
functions within a designated geographical area.
121
The methods and lives used to amortize intangible assets are as follows:
|
|
|
|
|
|
|
Intangible
|
|
Method
|
|
Years
|
|
Core deposit
|
|
Straight-line or effective yield
|
|
4.75–6.20
|
|
Brand intangible
|
|
Straight-line
|
|
15
|
|
Customer relationships
|
|
Straight-line
|
|
8.5
|
|
Other intangibles
|
|
Straight-line
|
|
5
|
Intangible assets are evaluated for impairment if indicators of impairment are identified.
Income Taxes
We
file a consolidated income tax return with NAI (a wholly owned subsidiary of NAB). Income taxes are allocated pursuant to a tax-sharing arrangement, whereby we pay federal and state income taxes as if we were filing on a standalone basis. Income tax
expense includes two components: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over
income. We determine deferred income taxes using the liability, or balance sheet, method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax basis of assets and
liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods.
Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some
portion or all of a deferred tax asset will not be realized.
Liabilities related to uncertain tax positions are recognized if it is more
likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination (including upon resolution of the related appeals or litigation processes, if any). References to “more likely than not”
refer to a likelihood of more than 50 percent. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of
being realized upon settlement with a taxing authority that has full knowledge of all relevant information.
The determination of whether
or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment.
We recognize interest and/or penalties related to income tax matters in other interest and noninterest expense.
122
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risk is interest rate risk, which is defined as the risk of loss of net interest income or net interest margin because of
changes in interest rates.
We seek to measure and manage the potential impact of interest rate risk. Interest rate risk occurs when
interest-earning assets and interest-bearing liabilities mature or re-price at different times, on a different basis or in unequal amounts. Interest rate risk also arises when our assets, liabilities and off-balance sheet contracts each respond
differently to changes in interest rates, including as a result of explicit and implicit provisions in agreements related to such assets and liabilities and in off-balance sheet contracts that alter the applicable interest rate and cash flow
characteristics as interest rates change. The two primary examples of such provisions that we are exposed to are the duration and rate sensitivity associated with indeterminate-maturity deposits (
e.g.
, non-interest-bearing checking accounts,
NOW accounts, savings accounts and MMDAs) and the rate of prepayment associated with fixed-rate lending and mortgage-backed securities. Interest rates may also affect loan demand, credit losses, mortgage origination volume and other items affecting
earnings.
Our management of interest rate risk is overseen by our bank’s asset and liability committee based on a risk management
infrastructure approved by our board of directors that outlines reporting and measurement requirements. In particular, this infrastructure sets limits and management targets, calculated monthly, for various metrics, including our economic value
sensitivity, our economic value of equity and net interest income simulations involving parallel shifts in interest rate curves, steepening and flattening yield curves, and various prepayment and deposit duration assumptions. Our risk management
infrastructure also requires a periodic review of all key assumptions used, such as identifying appropriate interest rate scenarios, setting loan prepayment rates based on historical analysis, non-interest-bearing and interest-bearing demand deposit
durations based on historical analysis, and the targeted investment term of capital.
We manage the interest rate risk associated with our
interest-bearing liabilities by managing the interest rates and tenors associated with our borrowings from the FHLB and deposits from our customers that we rely on for funding. In particular, from time to time we use special offers on deposits to
alter the interest rates and tenors associated with our interest-bearing liabilities. We manage the interest rate risk associated with our interest-earning assets by managing the interest rates and tenors associated with our investment and loan
portfolios, from time to time purchasing and selling investment securities and selling residential mortgage loans in the secondary market.
We rely on interest rate swaps to hedge our interest rate exposure on commercial non-real estate, CRE and agricultural loans with fixed
interest rates of more than 5 years, such as our tailored business loans. As of June 30, 2014, we had a notional amount of $946.8 million of interest rate swaps outstanding. The overall effectiveness of our hedging strategies is subject to
market conditions, the quality of our execution, the accuracy of our valuation assumptions, the associated counterparty credit risk and changes in interest rates.
We do not engage in speculative trading activities relating to interest rates, foreign exchange rates, commodity prices, equities or credit.
We do not maintain a portfolio of mortgage servicing rights.
Evaluation of Interest Rate Risk
We use
a net interest income simulation model to measure and evaluate potential changes in our net interest income. We run various hypothetical interest rate scenarios at least monthly and compare these results against a scenario with no changes in
interest rates. Our net interest income simulation model incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results such as: (1) the timing of changes in interest rates, (2) shifts
or rotations in the yield curve, (3) re-pricing characteristics for
123
market-rate-sensitive instruments on and off balance sheet, (4) differing sensitivities of financial instruments due to differing underlying rate indices, (5) varying loan prepayment
speeds for different interest rate scenarios, (6) the effect of interest rate limitations in our assets, such as floors and caps, (7) the effect of our interest rate swaps, and (8) overall growth and repayment rates and product mix of
assets and liabilities. Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a
means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk.
Potential changes
to our net interest income in hypothetical rising and declining rate scenarios calculated as of September 30, 2013 are presented in the following table. The projections assume (1) immediate, parallel shifts downward of the yield curve of
100 basis points and immediate, parallel shifts upward of the yield curve of 100, 200, 300 and 400 basis points and (2) gradual shifts downward of 100 basis points over 12 months and gradual shifts upward of 100, 200, 300 and 400 basis points
over 12 months. In the current interest rate environment, a downward shift of the yield curve of 200, 300 and 400 basis points does not provide us with meaningful results. In a downward parallel shift of the yield curve, interest rates at the
short-end of the yield curve are not modeled to decline any further than 0%. For the immediate-shift scenarios, we assume short-term rates follow a forward yield curve throughout the forecast period that is dictated by the instantaneously shocked
yield curve from the as of date. In the gradual-shift scenarios, we take each rate across the yield curve from the as of date and shock it by 1/12th of the total change in rates each month for twelve months.
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Increase (Decrease) in Net Interest
Income
|
|
Change in Market Interest Rates as of
September 30, 2013
|
|
Fiscal Year Ending
September 30, 2014
|
|
|
Fiscal Year Ending
September 30, 2015
|
|
|
Immediate Shifts
|
|
|
|
|
|
|
|
|
|
+400 basis points
|
|
|
22.11
|
%
|
|
|
17.61
|
%
|
|
+300 basis points
|
|
|
16.48
|
%
|
|
|
13.30
|
%
|
|
+200 basis points
|
|
|
10.75
|
%
|
|
|
8.89
|
%
|
|
+100 basis points
|
|
|
5.03
|
%
|
|
|
4.48
|
%
|
|
-100 basis points
|
|
|
(4.56
|
)%
|
|
|
(5.13
|
)%
|
|
|
|
|
|
Gradual Shifts
|
|
|
|
|
|
|
|
|
|
+400 basis points
|
|
|
5.91
|
%
|
|
|
|
|
|
+300 basis points
|
|
|
4.21
|
%
|
|
|
|
|
|
+200 basis points
|
|
|
2.59
|
%
|
|
|
|
|
|
+100 basis points
|
|
|
1.06
|
%
|
|
|
|
|
|
-100 basis points
|
|
|
(0.77
|
)%
|
|
|
|
|
We have achieved these results primarily through using interest rate swaps to ensure long-term fixed-rate
loans are effectively re-priced as short-term rates change.
Our bank’s asset and liability committee recently conducted an
assessment of the assumptions used to manage our asset and liability position, including an assessment of the assumptions used in our net interest income sensitivity analysis presented above. Although the results of this assessment are not yet
final, we believe recent changes in the composition of our deposit base and our loan prepayment expectations have resulted in a shift in our net interest income sensitivity since the end of fiscal year 2013. In particular, we believe the average
duration of our deposit mix has shifted since the end of fiscal year 2013 as portions of our deposits have shifted from time deposits, which are less interest rate sensitive as a result of their fixed duration and interest rate, to demand and money
market deposits, which re-price more rapidly in a changing interest rate environment and are more interest rate sensitive. We also expect a reduction in the rate of loan prepayments compared with the end of fiscal year 2013 in an environment with
gradually rising interest rates. Revising the assumptions of our simulation to account for these adjusted expectations, we believe our net interest income is significantly less interest rate sensitive than at the end of fiscal year 2013, with our
change in net interest income under immediate and gradual shifts upward of 100, 200, 300 and 400 basis points in particular declining in excess of 50%.
124
The results of this simulation analysis are hypothetical, and a variety of factors might cause
actual results to differ substantially from what is depicted. For example, if the timing and magnitude of interest rate changes differ from those projected, our net interest income might vary significantly. Non-parallel yield curve shifts such as a
flattening or steepening of the yield curve or changes in interest rate spreads, would also cause our net interest income to be different from that depicted. An increasing interest rate environment could reduce projected net interest income if
deposits and other short-term liabilities re-price faster than expected or faster than our assets re-price. Actual results could differ from those projected if we grow assets and liabilities faster or slower than estimated, if we experience a net
outflow of deposit liabilities or if our mix of assets and liabilities otherwise changes. Actual results could also differ from those projected if we experience substantially different repayment speeds in our loan portfolio than those assumed in the
simulation model. Finally, these simulation results do not contemplate all the actions that we may undertake in response to potential or actual changes in interest rates, such as changes to our loan, investment, deposit, funding or hedging
strategies.
125
BUSINESS
Our Business
We are a full-service
regional bank holding company focused on relationship-based business and agribusiness banking. We serve our customers through 162 branches in attractive markets in seven states: South Dakota, Iowa, Nebraska, Colorado, Arizona, Kansas and Missouri.
We were established more than 70 years ago and have achieved strong market positions by developing and maintaining extensive local relationships in the communities we serve. By leveraging our business and agribusiness focus, presence in attractive
markets, highly efficient operating model and robust approach to risk management, we have achieved significant and profitable growth—both organically and through disciplined acquisitions. We have successfully completed eight acquisitions since
2006, including our 2010 FDIC-assisted acquisition of TierOne Bank, which represented approximately $2.5 billion in acquired assets. Our net income was $77.1 million for the nine months ended June 30, 2014 and $96.2 million for the twelve months
ended September 30, 2013, representing a CAGR of 21% from fiscal year 2009 to fiscal year 2013 and a 32% increase from fiscal year 2012 to fiscal year 2013. Our cash net income, which is our net income excluding amortization and related tax
effects associated with intangible assets, was $88.1 million for the nine months ended June 30, 2014 and $112.3 million for fiscal year 2013, representing a 26% increase from fiscal year 2012 to fiscal year 2013. Our total assets were $9.29 billion
at June 30, 2014, and on an annualized basis, our net charge-offs for the nine months ended June 30, 2014 represented 14 basis points of our average total loans. Since fiscal year 2009, we have also operated with an efficiency ratio superior to our
peer median.
(1)
For fiscal year 2013, we achieved a return on average total assets of 1.07% and a return on average tangible common equity of 17.5%. For more information on our cash net income and
return on average tangible common equity, see “—Summary Historical Consolidated Financial and Operating Information.”
The
following table illustrates our net income over the periods indicated:
Net Income
($MM)
(2)
|
(1)
|
As described below under “—Our Competitive Strengths—Highly Efficient Operating Model,” our efficiency ratio and those of our peers may not be directly comparable.
|
|
(2)
|
For the fiscal years ended September 30, except as otherwise indicated.
|
126
We focus on business and agribusiness banking, complemented by retail banking and wealth
management services. Our loan portfolio consists primarily of business loans, comprised of C&I loans and CRE loans, and agribusiness loans. At June 30, 2014, our business and agribusiness loans collectively accounted for 85% of our total loan
portfolio. In addition, 61% of our aggregate loan portfolio, comprising our CRE loans (representing 36% of our aggregate loan portfolio), residential real estate loans (representing 14% of our aggregate loan portfolio) and agriculture real estate
loans (representing 11% of our aggregate loan portfolio), was primarily secured by interests in real estate predominantly located in the states in which we operate at June 30, 2014, and some of our other lending occasionally involves taking real
estate as primary or secondary collateral. We offer small and mid-sized businesses a focused suite of financial products and have established strong relationships across a diversified range of sectors, including key areas supporting regional growth
such as agribusiness services, freight and transport, healthcare and tourism. We have developed extensive expertise in agribusiness lending, which serves one of the most prominent industries across our markets, and we offer a variety of financial
services designed to meet the specific needs of our agribusiness customers. We also provide a range of deposit and loan products to our retail customers through several channels, including our branch network, online banking system, mobile banking
applications and customer care centers. In our wealth management business, we seek to expand our private banking, financial planning, investment management and insurance operations to better position us to capture an increased share of the business
of managing the private wealth of many of our business and agribusiness customers.
Our banking model seeks to balance the best of being a
“big enough” & “small enough” bank, providing capabilities typical of a much larger bank, such as diversified product specialists, customized banking solutions and multiple delivery channels, with a customer-focused
culture usually associated with smaller banks. Our focus on balancing these capabilities with a service-oriented culture is embedded within our operations and is enhanced by focusing on our core competencies. We are well recognized within our
markets for our relationship-based banking model that provides for local, efficient decision making. We believe we serve our customers in a manner that is responsive, flexible and accessible. Our relationship bankers strive to build deep, long-term
relationships with customers and understand the customers’ specific needs to identify appropriate financial solutions. We believe we have been successful in attracting customers from larger competitors because of our flexible approach and the
speed and efficiency with which we provide customers with banking solutions while maintaining disciplined underwriting standards.
127
Market Opportunity
We operate 162 branches located in 116 communities in seven states. In 2007, we began operating in Arizona with our acquisition of Sunstate
Bank. In 2009, we expanded our footprint into Colorado through our acquisition of First Community Bank’s Colorado franchise. In 2010, we significantly expanded our presence in Nebraska through our acquisition of TierOne Bank.
Geographic Footprint
We believe that the states in which we operate present attractive opportunities for our banking model.
The economies of Nebraska, Iowa and South Dakota are growing. According to the Bureau of Economic Analysis, real GDP growth in these states
from 2009 to 2013 has been faster than national real GDP growth, with real GDP in these states growing at a CAGR of 2.7% compared to 2.0% for the nation. According to the Bureau of Labor Statistics of the U.S. Department of Labor, overall
unemployment rates for May 2014 in these states were also below the 6.3% U.S. national seasonally adjusted unemployment rate for May 2014, with Nebraska tied for 3rd lowest, South Dakota tied for
5
th
lowest and Iowa tied for 7
th
lowest seasonally adjusted unemployment rate in the country.
Markets in each of Arizona and Colorado are recognized as fast-growing and dynamic economies. For example, according to data from SNL
Financial, the populations of Phoenix and Denver are expected to grow by 5.3% and 9.9%, respectively, from 2014 through 2019. The U.S. Census Bureau estimates that, as of July 1, 2013, Phoenix had a population of 1.5 million and was the
sixth-largest city in the United States. According to Moody’s Analytics, Arizona ranks first among U.S. states for projected employment growth from 2013 through 2018 and Colorado ranks fifth.
128
Nebraska, Iowa, South Dakota, Arizona and Colorado are each home to a number of small and
mid-sized businesses across a diverse range of sectors and together serve as the corporate headquarters for several Fortune 500 companies. The economies within these states represent a diverse range of industries, with manufacturing, trade,
agriculture, professional and business services, finance and insurance, and government accounting for approximately 56% of real GDP in these states in 2013 according to the Bureau of Economic Analysis. We expect strong population and job growth will
lead to an increased need for business banking services, more deposits and an increased credit demand to fund ongoing capital investments and working capital, cash management solutions and credit cards, among other products and services. We believe
integrated banking support is important to providing a focused suite of services to meet the evolving needs of business customers in our markets.
Agribusiness customers in Nebraska, Iowa, South Dakota, Arizona and Colorado produce and raise a variety of grains, proteins and other
produce, including corn, soybeans, wheat, dairy products, beef cattle, hogs and vegetables. These products are consumed globally as foods and also serve as inputs for goods made by other industries. Agriculture, as defined by the Bureau of Economic
Analysis, has grown faster than the U.S. economy as a whole, with real agricultural GDP growing at a CAGR of 3.4% nationally from 2009 to 2013 compared to a CAGR of 2.0% for the United States over the same period. The value of U.S. agricultural
exports is also expected to grow by 26% from 2014 through 2023 according to the USDA. In addition, there has been a growing emphasis on research and development and technology in the agricultural sector, with consumers and producers focused on
sustainable methods of food production, particularly with a view to decreasing their reliance on non-renewable inputs.
We believe
increasing demand for agricultural products and changing agricultural industry dynamics will continue to drive the need for banking services in our markets, particularly from banks such as ours that understand, and provide products and services that
specifically address, the unique needs of our agribusiness customers. We believe that we are well positioned to continue to serve the banking needs of small and mid-sized businesses and the agribusiness sector.
Our Competitive Strengths
We attribute
our success to the following competitive strengths, among others:
Focus on Business Banking
We focus on business banking, and this focus contributes significantly to our profitability and growth. As of June 30, 2014, business banking
accounted for approximately 60% of our loan portfolio, with C&I loans representing 24%, owner-occupied CRE loans representing 17% and other CRE loans representing 19% of our total loan portfolio. From September 30, 2009 through June 30,
2014, our business banking loan portfolio has grown by over 80%. We believe we have developed a strong brand and market reputation in business banking within the markets we serve by focusing on our core competencies. We provide business banking
services to small and mid-sized businesses across a diverse range of industries that support economic growth in the markets in which our business banking customers operate. We offer our business banking customers focused banking services designed to
meet the specific needs of their businesses. We have a significant presence in attractive markets, particularly markets such as Omaha, Des Moines and Sioux Falls, which we believe are located in growing economies and present opportunities to
increase our business banking activities.
Specialized Agribusiness Expertise
In addition to business banking, we focus on agribusiness banking. According to the American Bankers Association, at March 31, 2014, we
were ranked the seventh-largest farm lender bank in the United States measured by total dollar volume of farm loans. We have been providing banking services to the agricultural community since our bank was founded in 1935. We have developed
extensive expertise and brand recognition
129
in agribusiness lending, which is one of the fastest growing industries in our markets and is the largest single industry sector that we serve. At June 30, 2014, our agribusiness loan portfolio
was balanced among the major types of agricultural production in our footprint—grains (primarily corn, soybeans and wheat) representing 38% of our agribusiness loan portfolio, proteins (primarily beef cattle, dairy products and hogs)
representing 47% of our agribusiness loan portfolio, and other (including cotton and vegetables) representing 15% of our agribusiness loan portfolio. We have grown our agribusiness lending significantly in recent years through our focus on expansion
within the markets in our footprint and the recruitment of specialist relationship bankers with a deep understanding of, and strong relationships with customers in, the agriculture industry. Our agribusiness loan portfolio represented 25% of our
total loan portfolio at June 30, 2014, having grown at a CAGR of 24% from September 30, 2009 to September 30, 2013. In our most recent fiscal year, our agribusiness loan portfolio grew 14% from September 30, 2012 to September 30, 2013. In
addition, we estimate that 10% of our C&I loans and owner-occupied CRE loans are agriculture-related loans, as of June 30, 2014.
Track Record of Strong and Disciplined Growth
We have a track record of combining organic expansion with strategic acquisitions to achieve strong overall growth. Our record of steadily
growing and successfully operating our business is demonstrated by our:
|
|
•
|
|
Balance sheet growth: From September 30, 2009 to September 30, 2013, we have grown our total assets at a CAGR of 15%, our loan portfolio at a CAGR of 17% and our deposit base at a CAGR of 16%. This growth was
primarily generated by our acquisition of TierOne Bank in 2010, which represented approximately $2.5 billion of our $3.1 billion total asset growth in fiscal year 2010. From September 30, 2012 to September 30, 2013, our total assets, loan
portfolio and deposit base grew by 1%, 4% and 1%, respectively, as our loan growth drove continued asset growth, despite being offset by a reduction in the size of our investment portfolio. At June 30, 2014, we had $9.29 billion in total assets,
$6.68 billion in loans and $7.07 billion in deposits, representing growth of 2%, 5% and 2%, respectively, compared with September 30, 2013;
|
|
|
•
|
|
Earnings growth: We have increased our net income to $96.2 million for fiscal year 2013, representing a CAGR of 21% from fiscal year 2009 and an increase of 32% from fiscal year 2012. Our net income was $77.1 million
for the nine months ended June 30, 2014, an increase of 10% compared with the same period in fiscal year 2013; and
|
|
|
•
|
|
Return on assets and equity: For fiscal year 2013, we achieved a 1.07% return on average total assets and a 17.5% return on average tangible common equity.
|
For more information on our return on average tangible common equity, see “Prospectus Summary—Summary Historical Consolidated Financial and
Operating Information.”
We have achieved organic growth by increasing our market share in select markets and entering new markets.
We have been successful at recruiting and retaining relationship bankers with extensive industry expertise. We have also developed streamlined processes that allow us to be responsive, flexible and accessible to our customers, which we believe has
allowed us to attract new customers and grow our loan portfolio and deposit base. We have achieved this growth while maintaining strong asset quality, with annual net charge-offs peaking at 88 basis points of average loans for fiscal year 2011 and
declining to 44 basis points of average loans for fiscal year 2013.
Our organic growth has been supplemented by our disciplined
acquisition strategy led by our experienced management team. We seek to maximize the success of our acquisitions through a well-established integration process. We have successfully leveraged our business banking model with our specialized
agribusiness expertise to expand our footprint through eight acquisitions since 2006, including our 2010 FDIC-assisted acquisition of TierOne Bank, which represented approximately $2.5 billion in acquired assets. We expect to continue to
opportunistically pursue acquisitions consistent with our strategic objectives, although we do not have any current agreements, arrangements or understandings regarding future acquisitions.
130
The following chart shows our loan portfolio and the portion of our loans acquired through
acquisitions completed since September 30, 2009:
Loans ($BN)
(1)
|
(1)
|
At September 30 of each year, other than 3Q 2014 information, which is at June 30, 2014.
|
|
(2)
|
Acquired loans includes all loans acquired in acquisitions completed after September 30, 2009.
|
Through organic growth and acquisitions, we have grown our total loan portfolio to $6.68 billion at June 30, 2014. As illustrated above, from
September 30, 2009 to June 30, 2014 our total loan portfolio, less acquired loans, has grown from $3.4 billion to $6.1 billion, representing a CAGR of 13%.
131
Highly Efficient Operating Model
We believe our highly efficient and scalable operating model has enabled us to operate profitably, remain competitive, increase market share
and develop new business. We emphasize company-wide operating principles focused on proactive expense management, targeted investment, disciplined lending practices and focused product offerings. We have achieved cost efficiencies by consolidating
our branch network through the closure of less profitable locations and through our demonstrated success in acquiring and integrating banks. We have also achieved significant cost efficiencies through the use of the
Kaizen
&
Lean
principles, which are management techniques for improving processes and reducing waste, to eliminate redundancies and improve the efficient allocation of resources throughout our operations. We believe our focus on operating efficiency
has contributed significantly to our return on equity, return on assets and net income and is reflected in our efficiency ratio presented below.
Efficiency Ratio
(1)
|
Peer
|
Median Source:
SNL Financial.
|
|
(1)
|
For the twelve months ended September 30, except as otherwise indicated. For each period, the peer group excludes any bank holding company for which data was not available for such period.
|
|
(2)
|
Our efficiency ratio is calculated as the ratio of our noninterest expense to our total revenue (equal to the sum of net interest income and noninterest income). For purposes of calculating our efficiency ratio, our
noninterest expense and total revenue exclude the effects of changes in the fair value related to interest rates of certain of our long-term fixed-rate loans and related interest rate swaps used to manage the interest rate risk associated with these
loans, each of which is accounted for at fair value, and, in the case of our noninterest expense, also excludes amortization of core deposits and other intangibles. Any changes in fair value related to interest rates of our long-term fixed-rate
loans and related interest rate swaps associated with interest rate fluctuations are completely offset. Changes in fair value related to interest rates attributable to fixed-rate loans subject to fair value accounting are recorded in interest income
and changes attributable to the derivatives hedging these loans are recorded in noninterest expense. Inclusion of these amounts would increase or decrease either our interest income or noninterest expense in a way we believe does not reflect the
results of our operations, materially distorting our efficiency ratio. For more information on these adjusted measures, including a reconciliation to the most directly comparable GAAP financial measure, see “Prospectus Summary—Summary
Historical Consolidated Financial and Operating Information.”
|
|
(3)
|
Our “peers” refer, collectively, to all publicly listed U.S. bank holding companies with total assets between $5 billion and $15 billion at June 30, 2014. SNL Financial calculates peer efficiency ratios for
all twelve-month periods as the ratio of noninterest expense, which excludes amortization of intangible assets, to the sum of net interest income on a fully taxable equivalent basis and noninterest income. We calculated peer efficiency ratios for
the nine months ended June 30, 2014 based on the same methodology, with data obtained from SNL Financial. Our methodology of calculating efficiency ratios is different from SNL Financial’s because we exclude the effects of changes in the fair
value related to interest rates of certain of our long-term fixed-rate loans and related interest rate swaps used to manage the interest rate risk associated with these loans, each of which is accounted for at fair value. Inclusion of these amounts
would increase or decrease either our interest income or noninterest expense in a way we believe does not reflect the results of our operations, materially distorting our efficiency ratio. Our methodology also differs because we do not include the
tax-related benefit associated with our tax-advantaged loans and investments in net interest income for purposes of calculating our efficiency ratio. Therefore, our efficiency ratio and those of our peers may not be directly comparable.
|
132
Disciplined Risk Management
Risk management is a core competency of our business, and we believe that our risk management approach is more robust than that of most U.S.
banks our size. Following the acquisition of us by NAB, we expanded our risk management staff significantly to conform to NAB’s global standards. We have also implemented comprehensive policies and procedures for credit underwriting and
monitoring of our loan portfolio, including strong credit practices among our relationship bankers, allowing credit decisions to be made efficiently on a local basis consistent with our underwriting standards. We were able to remain profitable while
maintaining strong asset quality through the financial crisis, in part due to our focus on our core business and adherence to our disciplined risk management. We believe our robust approach to risk management has enabled us to grow our loan
portfolio without compromising credit quality. By focusing on our core areas of expertise, we largely avoided higher-risk lending practices that impacted other lenders in the industry during 2009 to 2011.
The following chart shows our annual net charge-offs as a percentage of average loans for fiscal year 2009 through fiscal year 2013, and for
the nine months ended June 30, 2014, compared to the median of our peers:
Annual Net Charge-offs as a Percentage of Average Loans
(1)
Peer Median Source:
SNL Financial
.
|
(1)
|
For the twelve months ended September 30, except as otherwise indicated. Information for the nine months ended June 30, 2014 is computed on an annualized basis. For each period, the peer group excludes any bank
holding company for which data was not available for such period.
|
|
(2)
|
Our “peers” refer, collectively, to all publicly listed U.S. bank holding companies with total assets between $5 billion and $15 billion at June 30, 2014.
|
Experienced Management Team With Local Market Experience
Our senior management team, led by Ken Karels, our President and Chief Executive Officer, has a long and successful history of managing
financial institutions in the region and, in particular, significant experience in business and agribusiness lending, with an average of over 25 years of banking experience. Our senior management team has a demonstrated track record of managing
profitable growth, successfully executing and integrating acquisitions, improving operating efficiencies, maintaining a strong risk management culture and implementing a relationship-based and service-focused approach to banking.
133
Our Business Strategy
We believe that stable long-term growth and profitability are the result of building strong customer relationships while maintaining
disciplined underwriting standards. We plan to focus on originating high-quality loans and growing our low-cost deposit base through our relationship-based business and agribusiness banking. We believe that continuing to focus on our core strengths
will enable us to gain market share, continue to improve our operational efficiency and increase profitability. The key components of our strategy for continued success and future growth include the following:
Attract and Retain High-Quality Relationship Bankers
A key component of our growth in our existing markets and entry into new markets has been our ability to attract and retain high-quality
relationship bankers. We have recruited approximately 40 new business and agribusiness relationship bankers since January 1, 2011 (out of a total of approximately 160 business and agribusiness relationship bankers at June 30, 2014), with
average industry experience of over 15 years when hired. We believe we have been successful in recruiting qualified relationship bankers due primarily to our decentralized management approach, focused product suite and flexible and customer-focused
culture while continuing to provide sophisticated banking capabilities to serve our customers’ needs. We intend to continue to hire experienced relationship bankers to execute our relationship-driven banking model. We utilize a variable
compensation structure designed to incentivize our relationship bankers by tying their compensation to their individual overall performance and the performance of the loans that they help originate, which we measure based on revenues, return on
assets and asset quality/risk, among other things. We believe this structure establishes the appropriate incentives to maximize performance and satisfy our risk management objectives. By leveraging the strong networks and reputation of our
experienced relationship bankers, we believe we can continue to grow our loan portfolio and deposit base as well as cross-sell other products and services.
Optimize Footprint in Existing and Complementary Markets
We pursue attractive growth opportunities to expand within our existing footprint and enter new markets aligned with our business model and
strategic plans. We believe we can increase our presence in under-represented areas in our existing markets and broaden our footprint in attractive markets adjacent and complementary to our current markets by continuing our emphasis on business and
agribusiness banking. Our branch strategy is guided by our ability to recruit experienced relationship bankers in under-represented and new markets. These bankers expand our banking relationships into these markets prior to opening a branch, which
increases our likelihood of expanding profitably by developing an asset base before we establish a branch in that market. We will continue to opportunistically consider opening new branches. We intend to capitalize on growth opportunities we believe
exist in growing economies in and adjacent to our existing markets.
Deepen Customer Relationships
We believe that our reputation, expertise and relationship-based banking model enables us to deepen our relationships with our customers. We
look to leverage our relationships with existing customers by cross-selling our products and services. We have sought to grow our low-cost customer deposit base by attracting more deposits from our business and agribusiness customers. We offer
alternative cash management solutions intended to help retain business customers. We seek to expand and enhance our wealth management platform through focused product offerings that we believe will appeal to our more affluent customers. We intend to
continue to capitalize on opportunities to capture more business from existing customers throughout our banking network.
Continue
to Improve Efficiency and Lower Costs
We believe that our focus on operational efficiency, even in light of incremental costs from
being a public company, is critical to our profitability and future growth. We intend to carefully manage our cost structure and continuously refine and implement internal processes to create further efficiencies and enhance our earnings. We
134
continue to optimize our branch network and have commenced reviews of additional internal processes and our vendor relationships, with a view to identifying opportunities to further improve
efficiency and enhance earnings. We are also continuing our efforts to shift our deposit base to lower-cost customer deposits, a strategic initiative that has been primarily responsible for driving our cost of deposit funding down since
September 30, 2012. We believe our scalable systems, risk management infrastructure and operating model will better enable us to achieve further operational efficiencies as we grow our business.
Opportunistically Pursue Acquisitions
Our management team has extensive expertise and a successful track record in evaluating, executing and integrating attractive,
franchise-enhancing acquisitions. We will continue to consider acquisitions that are consistent with our business strategy and financial model as opportunities arise. Illustrated below, as of September 30 of each indicated year, is the growth
in our total assets as a result of our acquisitions in that fiscal year.
|
(1)
|
Acquired assets are the total of the fair value of assets acquired and the net cash and cash equivalents received at the time of acquisition in each indicated year.
|
We believe acquisition opportunities will continue to arise within our markets, as well as in familiar and complementary markets.
Our Business Lines
Business
Banking
Business banking is a key focus of our business model and is one of our core competencies. We provide business banking
services to small and mid-sized businesses across a diverse range of industries, including key sectors supporting regional growth such as ancillary agribusiness services (
e.g.
, farm equipment suppliers and grain and seed merchants), freight
and transport, healthcare (
e.g.
, hospitals, physicians, care facilities and dentists) and tourism. We offer our business banking customers a focused range of financial products, including loans, lines of credit, cash management services,
online business deposit and wire transfer services, in addition to
135
checking and savings accounts and corporate credit cards. At June 30, 2014, business banking represented $2.08 billion in deposits and $4.03 billion in loans, representing 30% and 60%,
respectively, of our total volumes.
Our business banking model is based on a fundamental understanding of the communities we serve and
the banking needs of our customers. Our bank employs experienced relationship bankers across our footprint, each of whom offers our bank’s suite of business banking products and services to our customers. Our relationship bankers strive to
build deep, long-term customer relationships with our banking customers and to understand our customers’ specific needs to identify appropriate financial solutions.
Our business banking lending portfolio comprises C&I and CRE loans. C&I loans represent one of our core competencies in business
banking. We offer a focused range of lending products to our C&I customers, including working capital and other shorter-term lines of credit, fixed-rate loans over a wide range of terms, including our tailored business loans, and variable-rate
loans with varying terms. CRE loans include both owner-occupied CRE and non-owner-occupied CRE loans, multifamily residential real estate loans and construction and development loans. CRE lending is a significant component of our overall loan
portfolio, but we are focused on managing our exposure to non-owner-occupied CRE and construction and development lending, which we believe are relatively riskier than owner-occupied CRE lending. The composition of our business lending, as of June
30, 2014, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
Nebraska
|
|
|
Iowa /
Kansas /
Missouri
|
|
|
South
Dakota
|
|
|
Arizona /
Colorado
|
|
|
Other
(1)
|
|
|
Total
|
|
|
% of Total
Loan
Unpaid
Principal
Balance
|
|
|
|
|
(dollars in thousands)
|
|
|
C&I loans
|
|
$
|
380,098
|
|
|
$
|
712,837
|
|
|
$
|
301,579
|
|
|
$
|
188,910
|
|
|
$
|
38,525
|
|
|
$
|
1,621,949
|
|
|
|
24.2
|
%
|
|
Owner-occupied CRE loans
|
|
|
241,152
|
|
|
|
357,747
|
|
|
|
254,867
|
|
|
|
252,110
|
|
|
|
10,631
|
|
|
|
1,116,507
|
|
|
|
16.6
|
%
|
|
Non-owner-occupied CRE loans
|
|
|
147,891
|
|
|
|
236,139
|
|
|
|
315,203
|
|
|
|
155,594
|
|
|
|
22,197
|
|
|
|
877,024
|
|
|
|
13.1
|
%
|
|
Construction and development loans
|
|
|
89,795
|
|
|
|
69,242
|
|
|
|
72,950
|
|
|
|
23,501
|
|
|
|
18,482
|
|
|
|
273,970
|
|
|
|
4.1
|
%
|
|
Multifamily residential real estate loans
|
|
|
39,594
|
|
|
|
24,486
|
|
|
|
39,019
|
|
|
|
20,683
|
|
|
|
15,642
|
|
|
|
139,424
|
|
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total business loans
|
|
$
|
898,530
|
|
|
$
|
1,400,451
|
|
|
$
|
983,618
|
|
|
$
|
640,798
|
|
|
$
|
105,477
|
|
|
$
|
4,028,874
|
|
|
|
60.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Balances in this column represent acquired workout loans and certain other loans managed by our staff, commercial credit card loans, fair value adjustments related to acquisitions and loans for which we have elected the
fair value option, which could result in a negative carrying amount in the event of a net negative fair value adjustment.
|
Agribusiness Banking
In addition to business banking, we consider agribusiness lending one of our core competencies. We have developed extensive expertise in
agribusiness lending and provide loans and banking services to agribusiness customers across our geographic footprint. We predominantly lend to grain and protein producers who produce a range of agricultural commodities. Our agribusiness customers
range in size from small, family farms to large, commercial farming operations.
At June 30, 2014, our gross agribusiness loan portfolio
was $1.65 billion, representing 25% of our bank’s $6.71 billion in total gross lending. Our agribusiness loan portfolio is balanced among the major types of agricultural production undertaken in our footprint, with grains (primarily corn,
soybeans and wheat) representing 38% of our agribusiness loan portfolio; proteins representing 47% of our agribusiness loan portfolio
136
(primarily beef cattle, dairy products and hogs); and other products representing 15% of our agribusiness loan portfolio (including cotton, trees, fruits and nuts and vegetables, among others),
as set forth below:
Agribusiness Loan Portfolio
The composition of our agribusiness lending portfolio is also geographically diversified across our
locations in our four business regions, as set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
Agribusiness Loans
|
|
|
% of Agribusiness
Loan Portfolio
|
|
|
|
|
(dollars in millions)
|
|
|
South Dakota
|
|
$
|
576
|
|
|
|
34.9
|
%
|
|
Arizona and Colorado
|
|
|
494
|
|
|
|
30.0
|
%
|
|
Iowa, Kansas and Missouri
|
|
|
437
|
|
|
|
26.5
|
%
|
|
Nebraska
|
|
|
138
|
|
|
|
8.4
|
%
|
|
Other
(1)
|
|
|
4
|
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,649
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Balances in this row represent acquired workout loans and certain other loans managed by our staff, fair value adjustments related to acquisitions and loans for which we have elected the fair value option, which could
result in a negative carrying amount in the event of a net negative fair value adjustment.
|
We offer a number of products to
meet our agribusiness customers’ banking needs, from short-term working capital funding to long-term land-related lending, as well as other tailored services. Through relationships with insurance agencies, we offer and sell crop insurance that
can provide farms with options for financial protection from various events, including flood, drought, hail, fire, disease, insect damage, wildfire and earthquake. We service our agribusiness customers through dedicated relationship bankers with
deep industry/sector knowledge, supplemented by a team of local bankers focused on agriculture who build long-term relationships with customers.
137
Retail Banking
Retail banking provides a source of low-cost funds and deposit-related fee income. Our branch network consists of 162 branch offices located in
116 communities. Our branch network enhances our ability to gather deposits, expand our brand presence, service our customers’ needs, originate loans and maintain our lending relationships.
We offer traditional banking products to our retail customers, including checking accounts, savings and money market accounts, individual
retirement accounts, or IRAs, and CDs. As the banking industry continues to experience broader customer acceptance of online and mobile banking tools for conducting basic banking functions and retail customers use branch locations with less
frequency than they have historically, we serve our customers through a wide range of non-branch channels, including online, telephone and mobile banking platforms. In addition, we continue to optimize our branch network and have closed less
profitable branches. We continue to strive to optimize the effectiveness of our distribution channels and increase our operational efficiency to adapt to increasing customer preferences for self-service banking capabilities. We have ATMs at 155, or
96%, of our branches and have another 41 company-owned ATMs at off-site locations. We are part of the MoneyPass, SHAZAM and NETS networks, enabling our customers to take out cash surcharge-free and service charge-free at over 25,000 ATM locations
across the country.
Our retail branch network is spread among our four regions as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
Number of branches
|
|
|
% of branches
|
|
|
South Dakota
|
|
|
25
|
|
|
|
15
|
%
|
|
Arizona and Colorado
|
|
|
27
|
|
|
|
17
|
%
|
|
Iowa, Kansas and Missouri
|
|
|
54
|
|
|
|
33
|
%
|
|
Nebraska
|
|
|
56
|
|
|
|
35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
162
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
We also provide a variety of loan products to individuals. At June 30, 2014, our residential real estate and
consumer portfolio was $1.00 billion, representing 15% of our total lending, and comprised residential mortgage loans, home equity loans and home equity lines of credit and general lines of credit, and auto loans and other loans. We also have a
small amount of consumer credit card balances outstanding. In addition to retail loans held in our portfolio, we also originate residential mortgage loans for resale (including their servicing) on the secondary market and, in the nine months ended
June 30, 2014, we originated $149.0 million of these loans. We have a retail and mortgage loan officer base of 411 individuals. Home equity originations (including residential mortgages) are sourced almost exclusively through our branch network. Our
home equity loan portfolio is conservatively underwritten, including assessment of the borrower’s FICO score and the loan-to-value ratio. See “—Loans—Underwriting Principles” for discussion of our credit underwriting
standards.
Wealth Management
We also provide our customers with a selection of wealth management solutions, including financial planning, private banking, investment
management and trust services through associations with third party vendors, including a registered broker-dealer and investment adviser. Our investment representatives offer our customers investment management services through our branch network
that entail overseeing and recommending investment allocations between asset classes based on review of a client’s risk tolerance, and they can offer and sell insurance solutions, including life insurance. We also offer trust services,
including personal trusts and estate planning. At June 30, 2014 our investment representatives had $517 million in assets under management, and, through our trust services group, we had $710 million in assets under management, for a combined total
of $1.23 billion in assets under management. Enhancing and expanding our wealth management business is an important component of our strategic plan, as we believe it can deepen our customer relationships, create cross-selling opportunities and drive
stable and recurring revenue.
138
Loans
Overview
Our loan
portfolio consists primarily of C&I, CRE and agribusiness loans. We also originate residential real estate loans, personal loans, home equity loans, lines of credit, credit cards and auto loans. As described below, our loan portfolio is
diversified across our customer base, and less than 1% of the portfolio is unsecured.
The following chart sets forth the composition of
our loan portfolio by loan category as of June 30, 2014:
Our underwriting standards, discussed below, require portfolio diversification across geographies,
industries and customers. Our lending is spread among our four geographic regions, with each region representing between 19% and 33% of our lending portfolio at June 30, 2014. Within each region, our lending is also diversified across our lending
categories referenced above. We are also diversified within these categories. For example, within agribusiness lending, our portfolio is diversified across grain, protein and other types of agribusiness, and we offer our customers federally
subsidized crop insurance for a range of crops. Our business lending categories, including owner-occupied CRE, are well diversified, with no individual industry comprising more than 6% of our business lending. See “—Our Business
Lines—Agribusiness Banking” for information about the composition of our agribusiness loan portfolio and “—Our Business Lines—Business Banking” for information about the composition of our business banking loan
portfolio. At a customer level, our largest exposure represents 1% of our total loan book, and our top ten loan exposures represent 7% of our total lending at June 30, 2014.
Underwriting Principles
General.
We apply consistent credit principles in our assessment of lending proposals, whether CRE, commercial non-real estate,
agriculture, residential real estate, consumer or other lending. We are cash flow-focused lenders, which means our assessment of any potential loan includes an analysis of whether the customer can generate sufficient cash flow, not only in normal
operating conditions but in a range of circumstances, to ensure the likelihood that the borrowers’ repayment obligations to our bank can be fully met. Our underwriting procedures include an assessment of the borrower’s cash flow
sustainability, the acceptability of the borrowing purpose, the borrower’s liquidity, collateral quality and adequacy, industry dynamics, and management capability, integrity and experience. For residential real estate, consumer and other
lending, our underwriting process is intended to assess the prospective borrower’s credit standing and ability to repay (which we analyze based on the borrower’s cash flow, liquidity, credit standing, employment history and overall
financial condition) and the value and adequacy of any collateral.
139
We establish conservative collateral guidelines that recognize the potential effects of
volatility or deterioration of the value of collateral we accept, such as real estate, inventory, receivables and machinery. We manage this risk in a number of ways, including through advance rate guidelines for the various types of collateral we
typically accept. In addition, where we take real estate as collateral, and for some other specialized assets, we require assessment of value based on appropriate methodology and benchmarks. For our larger real estate commitments, this can include
an independent third party appraisal review and, where appropriate, additional reviews.
We also assess the presence and viability of one
or more acceptable secondary sources of repayment to mitigate potential future borrower cash flow deterioration. To improve the reliability of secondary sources of repayment, we prefer originating loans on a secured basis, and at June 30, 2014, less
than 1% of our total lending was on an unsecured basis. We typically engage in unsecured lending only in situations involving long-standing customers of sound net worth and above-average liquidity with strong repayment ability (other than in
connection with credit cards we issue).
We have a delegated commitment authorities framework that provides a conservative level of
lending authority to our bankers commensurate with their role and lending experience. Commitments above the lending thresholds established for a banker require the approval, depending on the size of the commitment, of our regional credit managers,
central credit senior managers, Chief Credit Officer or Chief Risk Officer or, for our largest commitments, our transactional credit committee. Loan analyses and decisions are documented and form part of the loan’s continual monitoring and
relationship management record. We believe this framework provides the necessary separation of authority and independence in the credit underwriting process while providing flexibility to expedite appropriate credit decisions and provide competitive
customer service.
Agribusiness.
The underwriting principles described above generally apply to our agribusiness lending, although
our assessment of cash flow sustainability, acceptability of borrowing purpose, borrower liquidity, industry environment, and management capability, integrity and experience are considered in light of the unique attributes of agribusiness lending.
For example, we review the adequacy and sustainability of an agribusiness customer’s operating cash flows to determine adequate coverage of interest and principal repayments, and, generally, require a minimum of 1.25 times average coverage over
a medium term of two to five years. We ensure that we understand the purpose of the loan and are willing to fund it. We work with the borrower to select the appropriate funding facility, such as working capital funding for short-term needs,
medium-term borrowing to fund purchases of durables like machinery or equipment and long-term real estate loans, which are typically committed for five to ten years, with a maximum of 15 years. All of our agribusiness real estate loans are fully
amortizing, based on full loan repayment over 15 to 25 years, and, for fixed-rate loans longer than five years, we typically enter into matching fixed-to-floating interest rate swaps as described in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Key Factors Affecting Our Business and Financial Statements—Loans and Interest Rate Swaps Accounted for at Fair Value.”
As described above, we establish conservative collateral guidelines for our lending that recognize the volatility of asset prices. We also
tailor the structure of certain loans, apply additional policies and require appropriate covenants to ensure our bank is well protected against the key potential risks. For livestock, we adopt conservative valuations to reduce the effects of
cyclical trends before applying our collateral guidelines. For growing grain crops, we generally limit our lending to the coverage provided by crop insurance.
As is the case with all types of lending, external risks beyond a customer’s business and operations can affect repayment. Our
agribusiness lending, in particular, is subject to several external risks that we manage in various ways, including:
|
|
•
|
|
Price cycles and volatility
—Agricultural commodity prices are both cyclical and volatile, and we seek to manage these factors by diversifying our portfolio across a range of agribusiness customers including
grain producers and protein producers (
e.g.,
generally low grain prices assist protein producers since their businesses use grains as inputs) and by determining and applying appropriate advance rate guidelines to agricultural commodities used
as collateral, as discussed above.
|
140
|
|
•
|
|
Weather, disease and other perils
—Severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact our business and the business of our borrowers. We seek to
mitigate our exposure to this risk through our geographic diversification across seven states and a number of agricultural products. Federally subsidized crop insurance coverage is also available for over 120 kinds of crops, typically of 50% to 85%
of a grower’s average yield, against various agriculture-related perils, including flood, drought, hail, fire, disease, insect damage, wildlife and earthquake.
|
|
|
•
|
|
Land prices
—As discussed above, we focus on cash flow lending, which helps farms to ensure that they have sufficient cash flow to service debt and support their businesses, and generally take land as
secondary collateral, with conservative advance rate guidelines in assessing collateral adequacy.
|
Deposits
Deposits are our primary source of funds to support our revenue-generating assets. We offer traditional deposit products to businesses and
other customers with a variety of rates and terms. Deposits at our bank are insured by the FDIC up to statutory limits. We price our deposit products with a view to maximizing our share of each customer’s financial services business and
prudently managing our cost of funds. At June 30, 2014, we held $7.07 billion of total deposits, which have grown at a CAGR of 15% from September 30, 2009 to September 30, 2013 (attributable primarily to growth in fiscal year 2010 as a
result of our acquisition of TierOne Bank) and 9.3% in fiscal year 2013. At June 30, 2014, our deposit base consisted of $2.70 billion, or 38%, in checking accounts, $2.55 billion, or 36%, in money market checking, savings and passbook accounts, and
$1.82 billion, or 26%, in CDs and IRAs.
Our deposit base is diversified across our geographic footprint, as illustrated by the following
table showing the composition of our deposit base by the geographic region of our branches at June 30, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
State
|
|
Number of
Branches
|
|
|
Deposits
(in thousands)
|
|
|
% of Deposits
|
|
|
Nebraska
|
|
|
56
|
|
|
$
|
2,422,553
|
|
|
|
34.3
|
%
|
|
Iowa, Kansas and Missouri
|
|
|
54
|
|
|
|
2,113,663
|
|
|
|
29.9
|
%
|
|
South Dakota
|
|
|
25
|
|
|
|
1,342,709
|
|
|
|
19.0
|
%
|
|
Arizona and Colorado
|
|
|
27
|
|
|
|
1,140,309
|
|
|
|
16.1
|
%
|
|
Corporate and other
|
|
|
—
|
|
|
|
47,878
|
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
162
|
|
|
$
|
7,067,112
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our deposit base is also diversified by client type. As of June 30, 2014, no individual depositor represented
more than 2% of our total deposits, and our top ten depositors represented only 8% of our total deposits. The composition of our deposit mix has recently changed with an increased proportion of non-interest-bearing deposits and a lower proportion of
more expensive time deposits as a result of a strategic initiative launched during fiscal year 2013. This shift in deposit mix has been largely responsible for the recent declines in our average cost of deposits from 0.85% at September 30, 2011
to 0.33% at June 30, 2014. At June 30, 2014, our deposit base included $982 million of municipal deposits, against which we were required to hold $728 million of collateral. These deposits were from municipalities representing approximately 577
customers with an average balance per customer of $1.7 million.
141
The graph below shows our non-interest-bearing deposits, interest-bearing demand deposits and
time deposits at the end of each period, as well as weighted average costs of deposits for each period presented:
|
(3)
|
Weighted average cost of deposits presented for the twelve months ended September 30, except as otherwise indicated.
|
Risk Oversight and Management
Risk
management is a core competency of our business. As a result of the acquisition of us by NAB, we have expanded our risk management staff and risk capabilities significantly in recent years. We believe that our risk management is more robust than
that of most banks our size. These robust risk capabilities are embedded into our operations.
Our risk management consists of
comprehensive policies and processes and seeks to emphasize personal ownership and accountability for risk with all our employees. We expect our people to focus on managing our risks, and we support this with appropriate oversight and governance and
79 risk management employees as of June 30, 2014. We delegate authority for our risk management oversight and governance to a number of executive management committees, each responsible for overseeing various aspects of our risk management process.
Various board committees provide oversight over our risk management function. The roles of each of the committees of our board of directors regarding risk management are discussed under “Management—Board Oversight of Risk Management.”
Our executive risk committee is responsible for oversight and governance of all risks across the enterprise. These responsibilities
include monitoring our bank’s overall risk profile to ensure it remains within the board-approved risk appetite and adjusting activities as appropriate, assessing new and emerging risks, monitoring our risk management culture, assessing
acceptability of the risk impacts of any material changes (or additions) to our products, vendor relationships, partnerships or other processes and overseeing compliance with regulatory expectations and requirements. The executive risk committee is
chaired by our President and Chief Executive Officer and includes our Chief Risk Officer and executives representing our business and support areas together with senior risk managers. The executive risk committee is supported by the following four
subcommittees, each with specific responsibility to monitor, oversee and approve changes in their respective areas of focus relating to risks: asset & liability committee, operational risk & compliance committee, transactional
credit committee and technology committee. Our transactional credit committee reviews and approves our largest lending exposures (
i.e.
, those over $25 million).
142
Our Chief Risk Officer leads our integrated risk management function that oversees all enterprise
risk, including credit risk, compliance risk, regulatory risk, operational risk, legal risk, reputational risk and strategic risk, as well as overseeing ongoing enhancements to our risk management processes. Our Chief Risk Officer, a member of our
executive committee, reports to our President and Chief Executive Officer and has direct access to the risk committee of our board of directors. In addition, our executive leadership team and other members of management have responsibility for
oversight and management of risk across business and operational lines.
Risk Framework and Appetite
Our risk framework is structured to guide decisions regarding the appropriate balance between risk and return considerations in our business.
Our risk framework is informed by our strategy, risk appetite and financial plans approved by our board of directors. This framework includes risk policies, procedures, limits and targets, and reporting. Our board of directors approves our stated
risk appetites, which set forth the amount and type of risk we are willing to accept in pursuit of our strategy, business and financial objectives. Our risk appetites provide the context for our risk management tools, including, among others, risk
policies, delegated authorities, limits, portfolio composition, underwriting standards and operational processes.
We manage risk through
three lines of defense that allocate responsibility and accountability for risk management throughout our business. Our first line of defense is our business lines and support functions, which are accountable for being aware of and managing the
risks in their respective business areas and for operating within our established risk framework and appetite. Our second line of defense is our risk team, which provides monitoring, control, oversight and advice on risk to our business lines, and
our third line of defense is our internal audit function, which provides independent oversight that risks are being managed to an acceptable level and that our internal control frameworks are operating effectively.
Credit Risk Management
Credit risk is the potential for loss arising from a customer, counterparty or issuer failing to meet its contractual obligations to us. Our
strategy for managing credit risk includes well-defined, centralized credit policies, uniform underwriting criteria, clearly delegated authority levels and accountability, ongoing risk monitoring and review processes for credit exposures and
portfolio diversification by geography, industry and customer. We segment our loan portfolio into a number of asset classes for purposes of developing and documenting our credit risk management procedures and determining associated allowance for
loan losses, including real estate, CRE, commercial non-real estate, agriculture, consumer and other lending. For a discussion of our underwriting standards, see “—Loans—Underwriting Principles.”
We emphasize regular credit examinations and management reviews of loans with deteriorating credit quality as part of our credit risk
management strategy. As part of this process, we perform assessments of asset quality, compliance with commercial and consumer credit policies and other critical credit information. We also monitor and update risk ratings on our non-consumer loans
on an ongoing basis. With respect to consumer loans, we typically use standard credit scoring systems to assess our credit risks. We also rely on a dedicated risk asset review team to provide independent assurance of portfolio asset quality and
policy compliance.
We have well-established procedures for managing loans that either show early signs of weakness or appear to have
actually weakened. These procedures include moving a loan to our “watch” list when we have early concerns. Loans on our watch list receive more intense focus, along with more senior-level monitoring and reporting, a requirement of higher
credit authority approval for any further lending increase and action plans for improving the prospects for such loans. Loans that we rate “substandard” (or lower) will generally fall under the management or consultation of our strategic
business services team, or SBS, our specialist loan rehabilitations, workout and OREO asset team. These loans are actively managed, with the primary goal of SBS rehabilitating the loans to “performing” status. If rehabilitation is not
feasible, a loan workout strategy is developed and put into execution to maximize our bank’s recovery of loan proceeds and other costs to which it is legally entitled.
143
SBS also oversees the litigation of troubled assets, when appropriate. In addition, appropriate reserves and charge-offs are made based on assessment of potential realization levels and related
costs.
Our non-lending activities also give rise to credit risk, including exposures resulting from our investment in securities and our
entry into interest rate swap contracts for balance sheet hedging purposes. For more information on these activities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Analysis of Financial
Condition—Investments” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Analysis of Financial Condition—Derivatives.”
Operational Risk
Operational risk is the risk of loss arising from inadequate or failed processes, people or systems, external events (such as natural
disasters), or compliance, reputational or legal matters. We have a framework in place that includes the reporting and assessment of any operational risk events, including narrowly avoided operational risk events, and the assessment of our
mitigating strategies within our key business lines. This framework is implemented through our policies, processes and reporting requirements, including those governing business and information technology continuity, information security and
cyber-security, technological capability, fraud-risk management, operational risk profiling and vendor management. Our operational risk review process is a core part of our assessment of any material new or modified business or support initiative.
Our operational risks related to legal and compliance matters are heightened by the heavily regulated environment in which we operate. We
have designed our processes and systems, and provide education of applicable legal and regulatory standards to our employees, to comply with these requirements. For information on the legal framework in which we operate, and which our operational
risk processes and systems are designed to address, see “Supervision and Regulation.”
Competition
The financial services industry and each of the markets in which we operate in particular are highly competitive. We face strong competition in
gathering deposits, making loans and obtaining client assets for management by our investment or trust operations. We compete for deposits and loans by seeking to provide a higher level of personal service than is generally offered by our larger
competitors, many of whom have more assets, capital and resources and higher lending limits than we do and may be able to conduct more intensive and broader based promotional efforts to reach both commercial and retail customers. We also compete
based on advertising impact and interest rates. Our principal competitors for deposits, loans and client assets for management by our investment or trust operations include U.S. Bank, Wells Fargo, Bank of America, First National Bank of Omaha and
various other nationwide, regional and community banks operating in our markets.
Competition for deposits is also affected by the ease
with which customers can transfer deposits from one institution to another. Our cost of funds fluctuates with market interest rates and may be affected by higher rates being offered by other financial institutions. In certain interest rate
environments, additional significant competition for deposits may be expected to arise from corporate and government debt securities and money market mutual funds. Our management believes that our most direct competition for deposits comes from
nationwide and regional banks, savings banks and associations, credit unions, insurance companies, money market funds, brokerage firms, other non-bank financial services companies and service-focused community banks that target the same customers we
do.
We compete for loans principally through the quality of service we provide to borrowers while maintaining competitive interest rates,
loan fees and other loan terms. We emphasize personalized relationship banking services and the local and efficient decision-making of our banking businesses. Because of economies of scale, our larger, nationwide competitors may offer loan pricing
that is more attractive than loan pricing we can offer.
144
Our most direct competition for loans comes from larger regional and national banks, savings banks and associations, credit unions, insurance companies and service-focused community banks that
target the same customers we do. We also face competition for agribusiness loans from participants in the nationwide Farm Credit System and global banks.
We compete for wealth management clients on the basis of the level of investment performance, fees and personalized client service. Our
competition in wealth management services comes primarily from other institutions, particularly larger regional and national banks, providing similar services, wealth management companies and brokerage firms, many of which are larger than us and
provide a wider array of products and services.
Intellectual Property
In the highly competitive banking industry in which we operate, intellectual property is important to the success of our business. We own a
variety of trademarks, service marks, trade names and logos and spend time and resources maintaining this intellectual property portfolio. We control access to our intellectual property through license agreements, confidentiality procedures,
non-disclosure agreements with third parties, employment agreements and other contractual rights to protect our intellectual property.
Information
Technology Systems
We devote significant resources to maintain stable, reliable, efficient and scalable information technology
systems. We utilize a single, highly integrated core processing system from a third party vendor across our business that improves cost efficiency and acquisition integration. We work with our third party vendors to monitor and maximize the
efficiency of our use of their applications. We use integrated systems to originate and process loans and deposit accounts, which reduces processing time, improves customer experience and reduces costs. Most customer records are maintained
digitally. We are also currently executing several initiatives to enhance our online and mobile banking services to further improve the overall client experience. During a transition period following this offering, we will continue to rely on NAB
for certain non-core banking information technology needs. See “Our Relationship with NAB and Certain Other Related Party Transactions—Relationship with NAB—Transitional Services Agreement.”
Protecting our systems to ensure the safety of our customers’ information is critical to our business. We use multiple layers of
protection to control access and reduce risk, including conducting a variety of vulnerability and penetration tests on our platforms, systems and applications to reduce the risk that any attacks are successful. To protect against disasters, we have
a backup offsite core processing system and recovery plans.
We invested in an enterprise data warehouse system in order to capture,
analyze and report key metrics associated with customer and product profitability. Data that previously was arduous to collect across multiple systems is now available daily through standard and ad hoc reports to assist with managing our business
and competing effectively in the marketplace.
Employees
As of June 30, 2014, we had 1,480 total employees, which included 1,280 full-time employees, 183 part-time employees and 17 temporary
employees. Of our 1,480 employees, 1,106 are in core banking (
i.e.
, non-line of business branch network employees, including relationship bankers), 81 employees are in lines of business (
e.g.
, mortgage, credit cards, investments), 29
employees are in finance, 146 employees are in support services (
i.e.
, employees in operations, IT and projects), 79 employees are in risk management and 39 employees are in other functions. We believe our relationship with our employees to
be generally good. We have not experienced any material employment-related issues or interruptions of services due to labor disagreements and are not a party to any collective bargaining agreements.
145
Properties
Our corporate headquarters is located at 100 N. Phillips Ave, Sioux Falls, South Dakota 57104, and we have two leased facilities in Sioux Falls
for our data center and operations centers. In addition to our corporate headquarters, we operate from 162 branch offices located in 116 communities in South Dakota, Iowa, Nebraska, Colorado, Arizona, Kansas and Missouri. We lease 36 of our branch
offices, all on market terms, and we own the remainder of our offices, including our main office. All of our banking offices are in free-standing, permanent facilities. We generally believe our existing and contracted-for facilities are adequate to
meet our requirements.
Legal Proceedings
From time to time we are a party to various litigation matters incidental to the conduct of our business. We are not presently party to any
legal proceedings the resolution of which we believe would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operation, cash flows or capital levels.
146
SUPERVISION AND REGULATION
We and our subsidiaries are subject to extensive regulation under federal and state banking laws that establish a comprehensive framework
for our operations. This framework may materially impact our growth potential and financial performance and is intended primarily for the protection of depositors, customers, federal deposit insurance funds and the banking system as a whole, not for
the protection of our stockholders and creditors. Significant elements of the statutes, regulations and policies applicable to us and our subsidiaries are described below. This description is qualified in its entirety by reference to the full text
of the statutes, regulations and policies described.
Regulatory Agencies
Great Western is a bank holding company under the BHC Act. Consequently, Great Western and its subsidiaries are subject to supervision,
regulation and examination by the Federal Reserve. The BHC Act provides generally for “umbrella” regulation of bank holding companies and functional regulation of holding company subsidiaries by applicable regulatory agencies. Great
Western Bank, our bank subsidiary, is an FDIC-insured commercial bank chartered under the laws of South Dakota. Our bank is not a member of the Federal Reserve System. Consequently, the FDIC and the South Dakota Division of Banking are the primary
regulators of our bank and also regulate our bank’s subsidiaries. As the owner of a South Dakota-chartered bank, Great Western is also subject to supervision and examination by the South Dakota Division of Banking. Following the completion of
this offering, Great Western will also be subject to the disclosure and regulatory requirements of the Exchange Act administered by the SEC, and, following the listing of our common stock, the rules adopted by the NYSE applicable to listed
companies. We offer certain insurance and investment products through one of our bank’s subsidiaries that is subject to regulation and supervision by applicable state insurance regulatory agencies and by FINRA as a result of a contractual
relationship we have with a third party broker-dealer relating to the provision of some of wealth management and investment services to customers.
Regulatory Impact of Control by NAB
As
long as we are controlled by NAB for purposes of the BHC Act, NAB’s regulatory status may impact our regulatory status as well as our regulatory burden and hence our ability to expand by acquisition or engage in new activities. For example,
unsatisfactory examination ratings or enforcement actions regarding NAB could impact our ability to obtain or preclude us from obtaining any necessary approvals or informal clearance for the foregoing. Furthermore, to the extent that we are required
to obtain regulatory approvals under the BHC Act to make acquisitions or expand our activities, as long as NAB controls us, NAB would also be required to obtain BHC Act approvals for such acquisitions or activities as well. In addition, U.S.
regulatory restrictions and requirements on non-U.S. banks such as NAB that have a certain amount of assets may result in additional restrictions and burdens on us that would not otherwise be applicable.
NAB is also an Australian authorized deposit-taking institution regulated by APRA under the Banking Act 1959 (Cth), or the Banking Act. NAB
does not guarantee our obligations. Pursuant to the Banking Act, APRA has issued a legally enforceable prudential standard that restricts associations between an authorized deposit-taking institution (such as NAB) and its related entities. Any
provision of material financial support by NAB to us or our bank would need to comply with the requirements of the prudential standard.
APRA also has broad powers under the Banking Act to give legally enforceable directions to NAB in circumstances, for example, where it
considers that NAB has not complied with prudential standards or that it is in the interests of NAB’s deposit holders to do so. In the event that NAB becomes unlikely to be able to meet its obligations, APRA has the power to take control of
NAB’s business or appoint an administrator for NAB’s affairs. The priority of creditors of NAB in the event that NAB is unable to meet its obligations is governed by various Australian laws, including the Banking Act. The Banking Act
provides that the assets of NAB in Australia are to be available to meet liabilities to certain governmental agencies and deposit holders in Australia in priority to all other liabilities.
147
Permissible Activities for Bank Holding Companies
In general, the BHC Act limits the business of bank holding companies to banking, managing or controlling banks and other activities that the
Federal Reserve has determined to be so closely related to banking as to be a proper incident thereto.
Bank holding companies that
qualify and elect to be treated as “financial holding companies” may engage in a broad range of additional activities that are (i) financial in nature or incidental to such financial activities or (ii) complementary to a
financial activity and do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. These activities include securities underwriting and dealing, insurance underwriting and making merchant
banking investments. We have not elected to be treated as a financial holding company and currently have no plans to make a financial holding company election.
The BHC Act does not place territorial restrictions on permissible non-banking activities of bank holding companies. The Federal Reserve has
the power to order any bank holding company or its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when the Federal Reserve has reasonable grounds to believe that continuing such activity, ownership
or control constitutes a serious risk to the financial soundness, safety or stability of any bank subsidiary of the bank holding company.
Permissible
Activities for Banks
As a South Dakota-chartered commercial bank, our bank’s business is generally limited to activities
permitted by South Dakota law and any applicable federal laws. Under the South Dakota Banking Code, our bank may generally engage in all usual banking activities, including taking commercial and saving deposits; lending money on personal and real
security; issuing letters of credit; buying, discounting, and negotiating promissory notes, bonds, drafts and other forms of indebtedness; buying and selling currency and, subject to certain limitations, certain investment securities; engaging in
all facets of the insurance business; and maintaining safe deposit boxes on premises. Subject to prior approval by the Director of the South Dakota Division of Banking, our bank may also permissibly engage in any activity permissible as of
January 1, 2008 for a national bank doing business in South Dakota.
South Dakota law also imposes restrictions on our bank’s
activities and corporate governance requirements intended to ensure the safety and soundness of our bank. For example, South Dakota law requires our bank’s officers to be elected annually and the election of each officer to be confirmed by the
Director of the South Dakota Division of Banking. In addition, South Dakota law also requires at least 75% of our bank’s board of directors be U.S. citizens. Our bank is also restricted under South Dakota law from investing in certain types of
investment securities and is generally limited in the amount of money it can lend to a single borrower or invest in securities issued by a single issuer (in each case, 20% of our bank’s capital stock and surplus plus 10% of our bank’s
undivided profits).
Acquisitions by Bank Holding Companies
The BHC Act, the Bank Merger Act, the South Dakota Banking Code and other federal and state statutes regulate acquisitions of commercial banks
and other FDIC-insured depository institutions. We must obtain the prior approval of the Federal Reserve before (i) acquiring more than 5% of the voting stock of any FDIC-insured depository institution or other bank holding company (other than
directly through our bank), (ii) acquiring all or substantially all of the assets of any bank or bank holding company or (iii) merging or consolidating with any other bank holding company. Under the Bank Merger Act, the prior approval of
the FDIC is required for our bank to merge with another bank or purchase all or substantially all of the assets or assume any of the deposits of another FDIC-insured depository institution. In reviewing applications seeking approval of merger and
acquisition transactions, bank regulators consider, among other things, the competitive effect and public benefits of the transactions, the capital position and managerial resources of the combined organization, the risks to the
148
stability of the U.S. banking or financial system, the applicant’s performance record under the CRA, the applicant’s compliance with fair housing and other consumer protection laws and
the effectiveness of all organizations involved in combating money laundering activities. In addition, failure to implement or maintain adequate compliance programs could cause bank regulators not to approve an acquisition where regulatory approval
is required or to prohibit an acquisition even if approval is not required.
Dividends; Stress Testing
Great Western is a legal entity separate and distinct from its banking and other subsidiaries. As a bank holding company, Great Western is
subject to certain restrictions on its ability to pay dividends under applicable banking laws and regulations. Federal bank regulators are authorized to determine under certain circumstances relating to the financial condition of a bank holding
company or a bank that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. In particular, federal bank regulators have stated that paying dividends that deplete a banking organization’s capital base
to an inadequate level would be an unsafe and unsound banking practice and that banking organizations should generally pay dividends only out of current operating earnings. In addition, in the current financial and economic environment, the Federal
Reserve has indicated that bank holding companies should carefully review their dividend policy and has discouraged payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong.
A significant portion of our income comes from dividends from our bank, which is also the primary source of our liquidity. In addition to the
restrictions discussed above, our bank is subject to limitations under South Dakota law regarding the level of dividends that it may pay to us. In general, dividends by our bank may only be declared from its net profits and may be declared no more
than once per calendar quarter. The approval of the South Dakota Director of Banking is required if our bank seeks to pay aggregate dividends during any calendar year that would exceed the sum of its net profits from the year to date and retained
net profits from the preceding two years, minus any required transfers to surplus.
In October 2012, as required by the Dodd-Frank Act,
the Federal Reserve and the FDIC published final rules regarding company-run stress testing. These rules require bank holding companies and banks with average total consolidated assets greater than $10 billion to conduct an annual company-run stress
test of capital, consolidated earnings and losses under one base and at least two stress scenarios provided by the federal bank regulators. Although our assets are currently below this threshold, we have nevertheless commenced a project to ensure
that we are able to meet these requirements in a timely fashion. Neither we nor our bank is currently subject to the stress testing requirements, but we expect that once we are subject to those requirements, the Federal Reserve, the FDIC and the
South Dakota Division of Banking will consider our results as an important factor in evaluating our capital adequacy, and that of our bank, in evaluating any proposed acquisitions and in determining whether any proposed dividends or stock
repurchases by us or by our bank may be an unsafe or unsound practice.
Transactions with Affiliates
Transactions between our bank and its subsidiaries, on the one hand, and Great Western or any other subsidiary, on the other hand, are
regulated under federal banking law. The Federal Reserve Act imposes quantitative and qualitative requirements and collateral requirements on covered transactions by Great Western Bank with, or for the benefit of, its affiliates, and generally
requires those transactions to be on terms at least as favorable to our bank as if the transaction were conducted with an unaffiliated third party. Covered transactions are defined by statute to include a loan or extension of credit, as well as a
purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the Federal Reserve) from the affiliate, certain derivative transactions that create a credit exposure to an affiliate, the acceptance of securities
issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an
149
affiliate. In general, any such transaction by our bank or its subsidiaries must be limited to certain thresholds on an individual and aggregate basis and, for credit transactions with any
affiliate, must be secured by designated amounts of specified collateral.
Federal law also limits a bank’s authority to extend
credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons. Among other things, extensions of credit to insiders are required to be made on terms that are substantially the same as, and follow
credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons. Also, the terms of such extensions of credit may not involve more than the normal risk of non-repayment or
present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons individually and in the aggregate.
Source of Strength
Federal Reserve
policy and federal law require bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. Under this requirement, we are expected to commit resources to support our bank, including at times when we may
not be in a financial position to provide such resources, and it may not be in our, or our stockholders’ or creditors’, best interests to do so. In addition, any capital loans we make to our bank are subordinate in right of payment to
depositors and to certain other indebtedness of our bank. In the event of our bankruptcy, any commitment by us to a federal bank regulatory agency to maintain the capital of our bank will be assumed by the bankruptcy trustee and entitled to priority
of payment.
Regulatory Capital Requirements
Current Capital Guidelines
The Federal Reserve monitors the capital adequacy of our holding company on a consolidated basis, and the FDIC and the South Dakota Division of
Banking monitor the capital adequacy of our bank. The bank regulators currently use a combination of risk-based guidelines and a leverage ratio to evaluate capital adequacy. The current risk-based capital guidelines applicable to us and our bank are
based on the 1988 capital accord, known as Basel I, of the Basel Committee on Banking Supervision, or the Basel Committee, as implemented by the federal bank regulators. The current risk-based guidelines are intended to make regulatory capital
requirements sensitive to differences in credit and market risk profiles among banks and bank holding companies, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items
are assigned to weighted risk categories, and capital is classified in one of the two following tiers depending on its characteristic:
|
|
•
|
|
Tier 1 (Core) Capital—Tier 1 capital includes common equity, retained earnings, qualifying non-cumulative perpetual preferred stock, minority interests in equity accounts of consolidated subsidiaries (and, under
existing standards, a limited amount of qualifying trust preferred securities at the holding company level), less goodwill, most intangible assets and certain other assets.
|
|
|
•
|
|
Tier 2 (Supplementary) Capital—Tier 2 capital includes perpetual preferred stock and trust preferred securities not meeting the definition of Tier 1 capital, qualifying mandatory convertible debt securities,
qualifying subordinated debt and a limited amount of allowances for loan and lease losses.
|
Under current requirements, we
must maintain Tier 1 capital and total capital (that is, Tier 1 capital plus Tier 2 capital, less certain deductions) equal to at least 4% and 8%, respectively, of our total risk-weighted assets (including various off-balance sheet items such as
letters of credit). Our bank must maintain similar capital ratios. To be considered “well capitalized” under the regulatory framework for a variety of purposes, we and our bank must maintain Tier 1 and total capital ratios of at least 6%
and 10%, respectively. See “—Prompt Corrective Action Framework.”
150
Bank holding companies and banks are also currently required to comply with minimum leverage
requirements, measured based on the ratio of a bank holding company’s or a bank’s, as applicable, Tier 1 capital to adjusted quarterly average total assets (as defined for regulatory purposes). These requirements generally necessitate a
minimum Tier 1 leverage ratio of 4% for all bank holding companies and banks, with a lower 3% minimum for bank holding companies and banks meeting certain specified criteria, including having the highest composite regulatory supervisory rating. To
be considered “well capitalized” under the regulatory framework for prompt corrective action, our bank must maintain minimum Tier 1 leverage ratios of at least 5%. See “—Prompt Corrective Action Framework.”
Basel III and the New Capital Rules
In July 2013, the federal bank regulators approved final rules, or the New Capital Rules, implementing the Basel Committee’s December 2010
final capital framework for strengthening international capital standards, known as Basel III, and various provisions of the Dodd-Frank Act. The New Capital Rules substantially revise the risk-based capital requirements applicable to bank holding
companies and banks, including us and our bank, compared to the current risk-based capital rules. The New Capital Rules revise the components of capital and address other issues affecting the numerator in regulatory capital ratio calculations. The
New Capital Rules also address risk weights and other issues affecting the denominator in regulatory capital ratio calculations, including by replacing the existing risk-weighting approach derived from Basel I with a more risk-sensitive approach
based, in part, on the standardized approach adopted by the Basel Committee in its 2004 capital accords, known as Basel II. The New Capital Rules also implement the requirements of Section 939A of the Dodd-Frank Act to remove references to
credit ratings from the federal bank regulators’ rules. Subject to a phase-in period for various provisions, the New Capital Rules are effective for us and for our bank beginning on January 1, 2015.
The New Capital Rules, among other things, (i) introduce a new capital measure called “Common Equity Tier 1,” or CET1,
(ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting specified requirements, (iii) define CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures
be made to CET1 and not to the other components of capital and (iv) expand the scope of the deductions/adjustments to capital as compared to existing regulations.
Under the New Capital Rules, the minimum capital ratios as of January 1, 2015 will be (i) 4.5% CET1 to risk-weighted assets,
(ii) 6% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets and (iii) 8% total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets.
The New Capital Rules also introduce a new capital conservation buffer designed to absorb losses during periods of economic stress. The
capital conservation buffer is composed entirely of CET1, on top of these minimum risk-weighted asset ratios. In addition, the New Capital Rules provide for a countercyclical capital buffer applicable only to certain covered institutions. We do not
expect the countercyclical capital buffer to be applicable to us or our bank. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer (or below the combined capital conservation
buffer and countercyclical capital buffer, when the latter is applied) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.
The implementation of the capital conservation buffer will begin on January 1, 2016 at the 0.625% level and will be phased in over a
three-year period (increasing by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019). When fully phased-in, the New Capital Rules will require us, and our bank, to maintain such additional capital conservation
buffer of 2.5% of CET1, effectively resulting in minimum ratios of (i) 7% CET1 to risk-weighted assets, (ii) 8.5% Tier 1 capital to risk-weighted assets, and (iii) 10.5% total capital to risk-weighted assets. The New Capital Rules
also eliminate the more permissive 3% minimum Tier 1 leverage ratio under the current capital guidelines, resulting in a 4% minimum Tier 1 leverage ratio for all bank holding companies and banks.
151
The New Capital Rules provide for a number of deductions from and adjustments to CET1. These
include, for example, the requirement that mortgage servicing rights, certain deferred tax assets and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1
or all such categories in the aggregate exceed 15% of CET1. Implementation of the deductions and other adjustments to CET1 will begin on January 1, 2015 and will be phased in over a four-year period (beginning at 40% on January 1, 2015 and
an additional 20% per year thereafter). The New Capital Rules also generally preclude certain hybrid securities, such as trust preferred securities, from being counted as Tier 1 capital for most bank holding companies. Bank holding companies
such as us who had less than $15 billion in assets as of December 31, 2009 (and who continue to have less than $15 billion in assets) are permitted to include trust preferred securities issued prior to May 19, 2010 as Additional Tier 1
capital under the New Capital Rules, however.
The New Capital Rules also prescribe a new standardized approach for risk weightings that
expands the risk-weighting categories from the current four Basel I-derived categories (0%, 20%, 50% and 100%) to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0%, for U.S.
government and agency securities, to 600%, for certain equity exposures, and resulting in higher risk weights for a variety of asset categories.
With respect to our bank, the New Capital Rules also revise the prompt corrective action regulations pursuant to Section 38 of the FDIA.
See “—Prompt Corrective Action Framework.”
We believe that, as of June 30, 2014, we and our bank would meet all capital
adequacy requirements under the New Capital Rules on a fully phased-in basis as if such requirements were then in effect.
Liquidity Requirements
Historically, the regulation and monitoring of bank and bank holding company liquidity has been addressed as a supervisory matter,
without required formulaic measures. The Basel III final framework requires banks and bank holding companies to measure their liquidity against specific liquidity tests that, although similar in some respects to liquidity measures historically
applied by banks and regulators for management and supervisory purposes, going forward would be required by regulation. One test, referred to as the liquidity coverage ratio, or LCR, is designed to ensure that the banking entity maintains an
adequate level of unencumbered high-quality liquid assets equal to the entity’s expected net cash outflow for a 30-day time horizon (or, if greater, 25% of its expected total cash outflow) under an acute liquidity stress scenario. The other
test, referred to as the net stable funding ratio, or NSFR, is designed to promote more medium- and long-term funding of the assets and activities of banking entities over a one-year time horizon. These requirements will incentivize banking entities
to increase their holdings of U.S. Treasury securities and other sovereign debt as a component of assets and increase the use of long-term debt as a funding source.
In October 2013, the federal bank regulators proposed rules implementing the LCR for advanced approaches banking organizations (
i.e.
,
banking organizations with over $250 billion in total consolidated assets or over $10 billion in total on-balance sheet foreign exposure) and a modified version of the LCR for bank holding companies with at least $50 billion in total consolidated
assets that are not advanced approach banking organizations, neither of which would apply to us or our bank. The federal bank regulators have not yet proposed rules to implement the NSFR, but the Federal Reserve has stated its intent to adopt a
version of this measure as well.
Prompt Corrective Action Framework
The FDIA requires the federal bank regulators to take prompt corrective action in respect of depository institutions that fail to meet
specified capital requirements. The FDIA establishes five capital categories (“well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically
152
undercapitalized”), and the federal bank regulators are required to take certain mandatory supervisory actions, and are authorized to take other discretionary actions, with respect to
institutions that are undercapitalized, significantly undercapitalized or critically undercapitalized. The severity of these mandatory and discretionary supervisory actions depends upon the capital category in which the institution is placed.
Generally, subject to a narrow exception, the FDIA requires the regulator to appoint a receiver or conservator for an institution that is critically undercapitalized.
Currently, an insured depository institution generally will be classified in the following categories based on the capital measures indicated:
|
|
|
|
|
“Well capitalized”
|
|
“Adequately capitalized”
|
|
• Total capital ratio of at least 10%,
|
|
• Total capital ratio of at least 8%,
|
|
• Tier 1 capital ratio of at least 6%,
|
|
• Tier 1 capital ratio of at least 4%, and
|
|
• Tier 1 leverage ratio of at least 5%, and
|
|
• Tier 1 leverage ratio of at least 4%.
|
|
• Not subject to any order or written directive requiring a specific capital level.
|
|
|
|
|
|
|
“Undercapitalized”
|
|
“Significantly undercapitalized”
|
|
• Total capital ratio of less than 8%,
|
|
• Total capital ratio of less than 6%,
|
|
• Tier 1 capital ratio of less than 4%, or
|
|
• Tier 1 capital ratio of less than 3%, or
|
|
• Tier 1 leverage ratio of less than 4%.
|
|
• Tier 1 leverage ratio of less than 3%.
|
|
|
|
|
“Critically undercapitalized”
|
|
|
|
• Tangible equity to average quarterly tangible assets of 2% or less.
|
An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by
its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. A bank’s capital category is determined solely for the purpose of applying
prompt corrective action regulations, and the capital category may not constitute an accurate representation of the bank’s overall financial condition or prospects for other purposes.
The New Capital Rules revise the current prompt corrective action requirements effective January 1, 2015 by (i) introducing a CET1
ratio requirement at each level (other than critically undercapitalized), with the required CET1 ratio being 6.5% for well-capitalized status; (ii) increasing the minimum Tier 1 capital ratio requirement for each category (other than critically
undercapitalized), with the minimum Tier 1 capital ratio for well-capitalized status being 8% (as compared to the current 6%); and (iii) eliminating the current provision that provides that a bank with a composite supervisory rating of 1 may
have a 3% leverage ratio and still be adequately capitalized. The New Capital Rules do not change the total risk-based capital requirement for any prompt corrective action category.
As of June 30, 2014, we and our bank were well capitalized with Tier 1 capital ratios of 12.1% and 12.6%, respectively, total capital ratios
of 13.1% and 13.3%, respectively, and Tier 1 leverage ratios of 9.3% and 9.6%, respectively, in each case calculated under the currently applicable risk-based capital guidelines. As of June 30, 2014, we and our bank also had a CET1 ratio of 10.8%
and 12.1%, respectively, and a Tier 1 capital ratio of 11.6% and 12.1%, respectively, each calculated as if the New Capital Rules were fully phased in as of the calculation date. The CET1 ratios and Tier 1 capital ratios calculated in accordance
with the New Capital Rules presented are unaudited, non-GAAP financial measures. These ratios are calculated based on our estimates of the required adjustments under the New Capital Rules to the current regulatory-required calculation of
risk-weighted assets and estimates of the application of provisions of the New Capital Rules to be phased in over time. We believe these estimates are reasonable, but they may ultimately be incorrect as we finalize our calculations under
153
the New Capital Rules. For more information on these financial measures, including reconciliations to our and our bank’s Tier 1 capital ratio, see “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Capital.”
An institution that is categorized as undercapitalized,
significantly undercapitalized or critically undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal bank regulator. Under the FDIA, in order for the capital restoration plan to be accepted by the
appropriate federal banking agency, a bank holding company must guarantee that a subsidiary depository institution will comply with its capital restoration plan, subject to certain limitations. The bank holding company must also provide appropriate
assurances of performance. The obligation of a controlling bank holding company under the FDIA to fund a capital restoration plan is limited to the lesser of 5% of an undercapitalized subsidiary’s assets or the amount required to meet
regulatory capital requirements. An undercapitalized institution is also generally prohibited from increasing its average total assets, making acquisitions and capital distributions, establishing any branches or engaging in any new line of business,
except in accordance with an accepted capital restoration plan or with the approval of the FDIC. Institutions that are undercapitalized or significantly undercapitalized and either fail to submit an acceptable capital restoration plan or fail to
implement an approved capital restoration plan may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of
receipt of deposits from correspondent banks. Critically undercapitalized depository institutions failing to submit or implement an acceptable capital restoration plan are subject to appointment of a receiver or conservator.
In addition, the FDIA prohibits an insured depository institution from accepting brokered deposits or offering interest rates on any deposits
significantly higher than the prevailing rate in the bank’s normal market area or nationally (depending upon where the deposits are solicited), unless it is well capitalized or is adequately capitalized and receives a waiver from the FDIC. A
depository institution that is adequately capitalized and accepts brokered deposits under a waiver from the FDIC may not pay an interest rate on any deposit in excess of 75 basis points over certain prevailing market rates.
Safety and Soundness Standards
The FDIA
requires the federal bank regulators to prescribe standards, by regulations or guidelines, relating to internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset
growth, asset quality, earnings, stock valuation and compensation, fees and benefits, and such other operational and managerial standards as the agencies deem appropriate. Guidelines adopted by the federal bank regulatory agencies establish general
standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation, fees and benefits. In general, these guidelines require, among
other things, appropriate systems and practices to identify and manage the risk and exposures specified in the guidelines. These guidelines also prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive
when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal stockholder. In addition, the agencies adopted regulations that authorize, but do not require, an agency to
order an institution that has been given notice by an agency that it is not satisfying any of such safety and soundness standards to submit a compliance plan. If, after being so notified, an institution fails to submit an acceptable compliance plan
or fails in any material respect to implement an acceptable compliance plan, the bank regulator must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types to which an undercapitalized
institution may be subject under the FDIA. See “—Prompt Corrective Action Framework.” If an institution fails to comply with such an order, the bank regulator may seek to enforce such order in judicial proceedings and to impose civil
money penalties.
154
Deposit Insurance
FDIC Insurance Assessments
As an FDIC-insured bank, our bank must pay deposit insurance assessments to the FDIC based on its average total assets minus its average
tangible equity. As an institution with less than $10 billion in assets, our bank’s assessment rates are based on its risk classification (
i.e.
, the level of risk it poses to the FDIC’s deposit insurance fund). Institutions
classified as higher risk pay assessments at higher rates than institutions that pose a lower risk. For institutions with $10 billion or more in assets, the FDIC uses a performance score and a loss-severity score that are used to calculate an
initial assessment rate. In calculating these scores, the FDIC uses a bank’s capital level and regulatory supervisory ratings and certain financial measures to assess an institution’s ability to withstand asset-related stress and
funding-related stress. The FDIC also has the ability to make discretionary adjustments to the total score based upon significant risk factors that are not adequately captured in the calculations. In addition to ordinary assessments described above,
the FDIC has the ability to impose special assessments in certain instances.
The FDIC’s deposit insurance fund is currently
underfunded, and the FDIC has raised assessment rates and imposed special assessments on certain institutions during recent years to raise funds. Under the Dodd-Frank Act, the minimum designated reserve ratio for the deposit insurance fund is 1.35%
of the estimated total amount of insured deposits. In October 2010, the FDIC adopted a restoration plan to ensure that the fund reserve ratio reaches 1.35% by September 30, 2020, as required by the Dodd-Frank Act. At least semi-annually, the
FDIC will update its loss and income projections for the fund and, if needed, will increase or decrease assessment rates, following notice-and-comment rulemaking if required.
Under the FDIA, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is
in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
Other Assessments
In addition, the Deposit Insurance Funds Act of 1996 authorized the Financing Corporation to impose assessments on deposit insurance fund
applicable deposits in order to service the interest on the Financing Corporation’s bond obligations from deposit insurance fund assessments. The amount assessed on individual institutions is in addition to the amount, if any, paid for deposit
insurance according to the FDIC’s risk-related assessment rate schedules. Assessment rates may be adjusted quarterly to reflect changes in the assessment base.
Heightened Requirements for Bank Holding Companies with $10 Billion or More in Assets
Various federal banking laws and regulations, including rules adopted by the Federal Reserve pursuant to the requirements of the Dodd-Frank
Act, impose heightened requirements on certain large banks and bank holding companies. Most of these rules apply primarily to bank holding companies with at least $50 billion in total consolidated assets, but certain rules also apply to banks and
bank holding companies with at least $10 billion in total consolidated assets. Following the fourth consecutive quarter (and any applicable phase-in period) where our or our bank’s total consolidated assets, as applicable, equal or exceed $10
billion, we or our bank, as applicable, will, among other requirements:
|
|
•
|
|
be required to perform annual stress tests as described above in “—Dividends; Stress Testing;”
|
|
|
•
|
|
be required to establish a dedicated risk committee of our board of directors responsible for overseeing our enterprise-wide risk management policies, which must be commensurate with our capital structure, risk profile,
complexity, activities, size and other appropriate risk-related factors, and including as a member at least one risk management expert;
|
|
|
•
|
|
calculate our FDIC deposit assessment base using the performance score and a loss-severity score system described above in “—Deposit Insurance;” and
|
155
|
|
•
|
|
be examined for compliance with federal consumer protection laws primarily by the Consumer Financial Protection Bureau, or CFPB, as described below in “—Consumer Financial Protection.”
|
While neither we nor our bank currently have $10 billion or more in total consolidated assets, we have begun analyzing these rules to ensure
we are prepared to comply with the rules when and if they become applicable. Upon the completion of this offering, our board of directors will have established a risk committee compliant with these rules. In addition, we have begun running periodic
and selective stress tests on liquidity, interest rates and certain areas of our loan portfolio to prepare for compliance with FDIC stress testing requirements. Based on our historic organic growth rates, we expect that our total assets and our
bank’s total assets could exceed $10 billion over the next two to five years, or sooner if we engage in any acquisitions.
The Volcker Rule
The Dodd-Frank Act prohibits banks and their affiliates from engaging in proprietary trading and investing in and sponsoring hedge
funds and private equity funds. The statutory provision is commonly called the “Volcker Rule.” In December 2013, federal regulators adopted final rules to implement the Volcker Rule that became effective in April 2014. The Federal Reserve,
however, issued an order extending the period that institutions have to conform their activities to the requirements of the Volcker Rule to July 21, 2015. Banks with less than $10 billion in total consolidated assets, such as our bank, that do
not engage in any covered activities, other than trading in certain government, agency, state or municipal obligations, do not have any significant compliance obligations under the rules implementing the Volcker Rule. We are continuing to evaluate
the effects of the Volcker Rules on our business, but we do not currently anticipate that the Volcker Rule will have a material effect on our operations.
Depositor Preference
Under federal law,
depositors (including the FDIC with respect to the subrogated claims of insured depositors) and certain claims for administrative expenses of the FDIC as receiver would be afforded a priority over other general unsecured claims against such an
institution in the “liquidation or other resolution” of such an institution by any receiver.
Interchange Fees
Under the Durbin Amendment to the Dodd-Frank Act, the Federal Reserve adopted rules establishing standards for assessing whether the
interchange fees that may be charged with respect to certain electronic debit transactions are “reasonable and proportional” to the costs incurred by issuers for processing such transactions.
Interchange fees, or “swipe” fees, are charges that merchants pay to us and other card-issuing banks for processing electronic
payment transactions. Under the final rules, the maximum permissible interchange fee is equal to no more than 21 cents plus 5 basis points of the transaction value for many types of debit interchange transactions. The Federal Reserve also adopted a
rule to allow a debit card issuer to recover 1 cent per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements required by the Federal Reserve. The Federal Reserve also has rules governing routing
and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product.
On
July 31, 2013, the U.S. District Court for the District of Columbia found the interchange fee cap and the exclusivity provision adopted by the Federal Reserve to be invalid. The U.S. Court of Appeals for the District of Columbia reversed this
decision on March 21, 2014, generally upholding the Federal Reserve’s interpretation of the Durbin Amendment and the Federal Reserve’s rules implementing it. We continue to monitor developments in the litigation surrounding these
rules.
Currently, we are subject to the interchange fee cap as a result of NAB’s ownership of us. Once NAB no longer controls us for
bank regulatory purposes, we may be able to qualify for the small issuer exemption from
156
the interchange fee cap depending on our total assets at the time. The small issuer exemption applies to any debit card issuer that, together with its affiliates, has total assets of less than
$10 billion as of the end of the previous calendar year. In the event we qualify for the small issuer exemption, we will once again become subject to the interchange fee cap beginning July 1 of the year following the time when our total assets
reaches or exceeds $10 billion. Reliance on the small issuer exemption would not exempt us from federal regulations prohibiting network exclusivity arrangements or from routing restrictions, however, and these regulations have negatively affected
the interchange income we have received from our debit card network.
Consumer Financial Protection
We are subject to a number of federal and state consumer protection laws that extensively govern our relationship with our customers. These
laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair
Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service Members Civil Relief Act and these laws’ respective state-law counterparts, as well as state usury laws and laws regarding unfair and
deceptive acts and practices. These and other federal laws, among other things, require disclosures of the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate
the use of credit report information, provide financial privacy protections, prohibit unfair, deceptive and abusive practices, restrict our ability to raise interest rates and subject us to substantial regulatory oversight. Violations of applicable
consumer protection laws can result in significant potential liability from litigation brought by customers, including actual damages, restitution and attorneys’ fees. Federal bank regulators, state attorneys general and state and local
consumer protection agencies may also seek to enforce consumer protection requirements and obtain these and other remedies, including regulatory sanctions, customer rescission rights, action by the state and local attorneys general in each
jurisdiction in which we operate and civil money penalties. Failure to comply with consumer protection requirements may also result in our failure to obtain any required bank regulatory approval for merger or acquisition transactions we may wish to
pursue or our prohibition from engaging in such transactions even if approval is not required.
The Dodd-Frank Act created a new,
independent federal agency, the CFPB, which was granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws. The CFPB is also authorized to engage in consumer financial education, track
consumer complaints, request data and promote the availability of financial services to underserved consumers and communities. Although all institutions are subject to rules adopted by the CFPB and examination by the CFPB in conjunction with
examinations by the institution’s primary federal regulator, the CFPB has primary examination and enforcement authority over institutions with assets of $10 billion or more. The FDIC has primary responsibility for examination of our bank and
enforcement with respect to federal consumer protection laws so long as our bank has total consolidated assets of less than $10 billion, and state authorities are responsible for monitoring our compliance with all state consumer laws. The CFPB also
has the authority to require reports from institutions with less than $10 billion in assets, such as our bank, to support the CFPB in implementing federal consumer protection laws, supporting examination activities, and assessing and detecting risks
to consumers and financial markets.
The consumer protection provisions of the Dodd-Frank Act and the examination, supervision and
enforcement of those laws and implementing regulations by the CFPB have created a more intense and complex environment for consumer finance regulation. The CFPB has significant authority to implement and enforce federal consumer finance laws,
including the Truth in Lending Act, the Equal Credit Opportunity Act and new requirements for financial services products provided for in the Dodd-Frank Act, as well as the authority to identify and prohibit unfair, deceptive or abusive acts and
practices. The review of products and practices to prevent such acts and practices is a continuing focus of the CFPB, and of banking regulators more broadly. The ultimate impact of this heightened scrutiny is uncertain but could result in changes to
pricing, practices, products and procedures. It could also result in increased costs related to regulatory oversight, supervision and examination, additional remediation efforts and possible penalties. In addition, the Dodd-Frank Act provides the
157
CFPB with broad supervisory, examination and enforcement authority over various consumer financial products and services, including the ability to require reimbursements and other payments to
customers for alleged legal violations and to impose significant penalties, as well as injunctive relief that prohibits lenders from engaging in allegedly unlawful practices. The CFPB also has the authority to obtain cease and desist orders
providing for affirmative relief or monetary penalties. The Dodd-Frank Act does not prevent states from adopting stricter consumer protection standards. State regulation of financial products and potential enforcement actions could also adversely
affect our business, financial condition or results of operations.
Community Reinvestment Act of 1977
Under the CRA, our bank has an obligation, consistent with safe and sound operations, to help meet the credit needs of the market areas where
it operates, which includes providing credit to low- and moderate-income individuals and communities. In connection with its examination of our bank, the FDIC is required to assess our bank’s compliance with the CRA. Our bank’s failure to
comply with the CRA could, among other things, result in the denial or delay in certain corporate applications filed by us or our bank, including applications for branch openings or relocations and applications to acquire, merge or consolidate with
another banking institution or holding company. Our bank received a rating of “satisfactory” in its most recently completed CRA examination.
Financial Privacy
The federal bank
regulators have adopted rules limiting the ability of banks and other financial institutions to disclose non-public information about consumers to unaffiliated third parties. These limitations require disclosure of privacy policies to consumers and,
in some circumstances, allow consumers to prevent disclosure of certain personal information to an unaffiliated third party. These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to
outside vendors.
Anti-Money Laundering and the USA PATRIOT ACT
A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist
financing. The USA PATRIOT Act of 2001, or the USA Patriot Act, substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes
and penalties and expanding the extra-territorial jurisdiction of the United States. Financial institutions are also prohibited from entering into specified financial transactions and account relationships and must use enhanced due diligence
procedures in their dealings with certain types of high-risk customers and implement a written customer identification program. Financial institutions must take certain steps to assist government agencies in detecting and preventing money laundering
and report certain types of suspicious transactions. Regulatory authorities routinely examine financial institutions for compliance with these obligations, and failure of a financial institution to maintain and implement adequate programs to combat
money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the institution, including causing applicable bank regulatory authorities not to approve
merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required. Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions
found to be violating these obligations.
Office of Foreign Assets Control Regulation
The U.S. Treasury Department’s Office of Foreign Assets Control, or OFAC, administers and enforces economic and trade sanctions against
targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others. OFAC publishes lists of specially designated targets and countries. We and our bank are responsible for, among
other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting
158
blocked transactions after their occurrence. Failure to comply with these sanctions could have serious legal and reputational consequences, including causing applicable bank regulatory
authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required.
Incentive Compensation
The Dodd-Frank
Act requires the federal bank regulators and the SEC to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities, including us and our bank, having at least $1 billion in total assets
that encourage inappropriate risks by providing an executive officer, employee, director or principal stockholder with excessive compensation, fees, or benefits or that could lead to material financial loss to the entity. In addition, these
regulators must establish regulations or guidelines requiring enhanced disclosure to regulators of incentive-based compensation arrangements. The agencies proposed such regulations in April 2011, but the regulations have not been finalized. If the
regulations are adopted in the form initially proposed, they will impose limitations on the manner in which we may structure compensation for our executives.
In June 2010, the Federal Reserve and FDIC issued comprehensive final guidance on incentive compensation policies intended to ensure that the
incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers all employees that have the ability to materially affect the
risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (1) provide incentives that appropriately balance risk
and financial results in a manner that does not encourage employees to expose their organizations to imprudent risk, (2) be compatible with effective internal controls and risk management and (3) be supported by strong corporate
governance, including active and effective oversight by the organization’s board of directors. These three principles are incorporated into the proposed joint compensation regulations under the Dodd-Frank Act, discussed above.
The Federal Reserve will review, as part of the regular, risk-focused examination process, the incentive compensation arrangements of banking
organizations, such as us, that are not “large, complex banking organizations.” These reviews will be tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive
compensation arrangements. The findings of the supervisory initiatives will be included in reports of examination. Deficiencies will be incorporated into the organization’s supervisory ratings, which can affect the organization’s ability
to make acquisitions and take other actions. Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk management control or governance processes, pose a risk to the
organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.
Future
Legislation and Regulation
Congress may enact legislation from time to time that affects the regulation of the financial services
industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states. Federal and state regulatory agencies also periodically propose and adopt changes
to their regulations or change the manner in which existing regulations are applied. The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of the proposed
legislation could impact the regulatory structure under which we operate and may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital and modify our business
strategy, and limit our ability to pursue business opportunities in an efficient manner. Our business, financial condition, results of operations or prospects may be adversely affected, perhaps materially, as a result.
159
MANAGEMENT
Directors and Executive Officers
The
following table and the descriptions below set forth biographical information regarding Great Western Bancorp, Inc.’s directors and executive officers as of the date of this prospectus:
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position
|
|
Ken Karels
|
|
|
57
|
|
|
President, Chief Executive Officer and Director
|
|
Nathan Butler
|
|
|
42
|
|
|
Director
|
|
Swati Dave
|
|
|
51
|
|
|
Director
|
|
Frances Grieb
|
|
|
54
|
|
|
Director
|
|
Andrew Hove
|
|
|
79
|
|
|
Director
|
|
Rolfe Lakin
|
|
|
53
|
|
|
Director
|
|
Richard Rauchenberger
|
|
|
51
|
|
|
Director
|
|
Daniel Rykhus
|
|
|
49
|
|
|
Director
|
|
Richard Sawers
|
|
|
60
|
|
|
Director
|
|
Peter Chapman
|
|
|
40
|
|
|
Chief Financial Officer and Executive Vice President
|
|
Stephen Ulenberg
|
|
|
56
|
|
|
Chief Risk Officer and Executive Vice President
|
|
Allen Shafer
|
|
|
52
|
|
|
Executive Vice President of Support Services
|
|
Doug Bass
|
|
|
53
|
|
|
Regional President and Executive Vice President
|
|
Bryan Kindopp
|
|
|
47
|
|
|
Regional President and Executive Vice President
|
Ken Karels
has served as GWBI’s President and Chief Executive Officer and on its board of
directors since 2010, as well as the President and Chief Executive Officer and on the board of directors of Great Western Bancorp, Inc. since July 2014. Mr. Karels is also the President and Chief Executive Officer of Great Western Bank and
serves on the boards of directors of Great Western Bank and our other subsidiaries. Mr. Karels’s duties include overall leadership and executive oversight of Great Western Bank. Mr. Karels has 37 years of banking experience and
expertise in all areas of bank management and strategic bank acquisitions. He has served in several different capacities at Great Western Bank since 2002, including Regional President and Chief Operating Officer for the bank’s branch
distribution channel including agriculture, business and retail lending and deposits functions. During his executive tenure, Mr. Karels has helped grow Great Western Bank from $5.2 billion in assets to over $9 billion in assets today. Before
joining Great Western Bank, Mr. Karels served as President and Chief Executive Officer at Marquette Bank, Milbank, SD, where he was employed for 25 years.
Mr. Karels’s qualifications to serve on Great Western Bancorp, Inc.’s board of directors include his operating, management and
leadership experience as Great Western’s President and Chief Executive Officer. Mr. Karels has extensive knowledge of, and has made significant contributions to, the growth of Great Western and our bank. Mr. Karels also brings to
Great Western Bancorp, Inc.’s board of directors his expertise in the banking industry. Until such time as NAB ceases to control us for purposes of the BHC Act, Mr. Karels’s service on Great Western’s board will be required pursuant
to the Stockholder Agreement we intend to enter into with NAB in connection with this offering as long as he remains President and Chief Executive Officer.
Nathan Butler
joined NAB in 2001 and has served as a General Counsel at NAB for several years, leading its corporate legal department
since 2007 and serving as General Counsel, Governance, Corporate & Enterprise Services since 2013. He has served on Great Western Bancorp, Inc.’s board of directors since July 2014. Mr. Butler has almost 20 years of experience as
a corporate and commercial lawyer and has advised boards and senior managers on a broad range of strategic matters, including mergers & acquisitions, equity financings, major litigation, regulatory inquiries and legal and regulatory
reform. He also advised NAB on its acquisition of GWBI in 2007 and 2008. Mr. Butler is a member of the Corporations Committee of the Law Council of Australia and of the Advisory Board to the Asian Law Centre of the University of Melbourne and
is also chairman of a number of NAB Group subsidiary companies.
160
Mr. Butler’s qualifications to serve on Great Western Bancorp, Inc.’s board of
directors include his operating, management and leadership experience throughout the NAB corporate organization. Mr. Butler also has extensive experience in corporate governance, financial services regulation and investigation and mergers,
acquisitions and business development in multiple jurisdictions across the United States, Europe and Australasia. Mr. Butler was nominated to Great Western Bancorp, Inc.’s board of directors by NAB consistent with its anticipated rights under
the Stockholder Agreement we intend to enter into with NAB in connection with this offering.
Swati Dave
is currently Acting
Executive General Manager of NAB’s Lending & Deposits Group. From March 2009 to July 2014, Mrs. Dave served as Executive General Manager of NAB’s Specialised Finance business and had responsibility for leading the Project and
Infrastructure Finance, Asset Finance and Leasing and Export Credit Agency businesses. She has served on Great Western Bancorp, Inc.’s board of directors since July 2014. Mrs. Dave joined NAB in 2005 and has over 25 years of total commercial
banking and finance experience with NAB, Deutsche Bank, AMP Henderson Global Investors, Bankers Trust Australia, Westpac Banking Corporation and Commonwealth Bank of Australia. She is a member of the NAB Product and Markets Executive Committee and
the NAB Product and Markets Risk Management Committee and is a director on the NAB Wealth responsible entity boards. Mrs. Dave is also a non-executive director of Australian Hearing, an Australian authority that provides hearing health services and
undertakes hearing research, and the chair of its Audit and Risk Management Committee.
Mrs. Dave’s qualifications to serve on Great
Western Bancorp, Inc.’s board of directors include her operating, management and leadership experience throughout the NAB corporate organization and in the banking and finance industry more generally. Mrs. Dave was nominated to Great Western
Bancorp, Inc.’s board of directors by NAB consistent with its anticipated rights under the Stockholder Agreement we intend to enter into with NAB in connection with this offering.
Frances Grieb
has served on the boards of directors of Great Western Bancorp, Inc. and Great Western Bank since July 2014. Mrs. Grieb
has 29 years of public accounting experience with Deloitte LLP, the international professional services firm, and five years of banking industry experience with Packers National Bank, Omaha, NE. Mrs. Grieb was a Lead Client Service Partner and Audit
Partner at Deloitte LLP’s Omaha, NE office from 1994 until her retirement in 2010. She also serves on the National Advisory Board of the College of Business at the University of Nebraska at Omaha and on the Millard Public Schools Business
Advisory Council.
Mrs. Grieb’s qualifications to serve on Great Western Bancorp, Inc.’s board include her 34 years of relevant
business experience and with the financial services industry in particular, including banking, insurance, broker-dealer, investment company and real estate audit and consulting. She has extensive experience working closely with companies of various
sizes and has focused on accounting and technical matters, internal controls and reporting requirements and has significant experience with corporate governance and regulatory matters.
Andrew Hove
has served on the board of directors of Great Western Bancorp, Inc. since July 2014. Mr. Hove has also served on the
board of directors of our bank since 2001. From 2001 to 2009, Mr. Hove was also a director of both Sovereign Bank, Wyomissing, PA and Sovereign Bancorporation, Philadelphia, PA. Mr. Hove has over 50 years of banking experience, with over 40
years in retail banking in our states. Before joining Great Western Bank’s board, Mr. Hove worked at Minden Exchange Bank & Trust Co., Minden, Nebraska for 30 years, including as Chairman and Chief Executive Officer, and at the FDIC for
over 10 years, including as Acting Chairman for a total of three years. Mr. Hove is also a director of the Federal Home Loan Bank of Topeka and an advisory director at Promontory Financial Group, Washington, DC.
Mr. Hove’s qualifications to serve on Great Western Bancorp, Inc.’s board include his leadership experience at Great Western Bank
and Great Western and organizational, management and leadership experience in the broader financial services industry. In addition to his extensive banking and bank regulatory experience, Mr. Hove also brings to Great Western Bancorp,
Inc.’s board of directors his extensive personal relationships stemming from his years of experience in the financial industry and in government.
161
Rolfe Lakin
joined NAB in 1996 and has served as General Manager and Chief Financial
Officer for NAB New York Branch, NAB London Branch and NAB’s Specialised Group Assets line of business since 2009, as well as for NAB’s U.K. CRE line of business since 2012. The businesses for which he is Chief Financial Officer primarily
involve wholesale banking activities. Mr. Lakin has served on Great Western Bancorp, Inc.’s board of directors since July 2014, and on a number of boards for other NAB Group subsidiary companies since 1998, and holds a Certificate in Company
Direction from the U.K. Institute of Directors. He has over 35 years of banking experience, with over 25 years in wholesale banking markets in London. Mr. Lakin also has expertise in treasury management and has served on the NAB London Branch
managing Executive Committee for many years. Before working at NAB, Mr. Lakin worked at The Co-operative Bank p.l.c. for 19 years in various roles.
Mr. Lakin’s qualifications to serve on Great Western Bancorp, Inc.’s board of directors include his operating, management and
leadership experience throughout the NAB corporate organization. Mr. Lakin also has extensive experience in financial services and, more specifically, wholesale banking markets. Mr. Lakin was nominated to Great Western Bancorp, Inc.’s board of
directors by NAB consistent with its anticipated rights under the Stockholder Agreement we intend to enter into with NAB in connection with this offering.
Richard Rauchenberger
has served on Great Western Bancorp, Inc.’s board of directors since July 2014. Mr. Rauchenberger has also
served on GWBI’s board of directors, the board of directors of our bank and the boards of directors of certain affiliated companies since 2011. Mr. Rauchenberger has been the General Manager and Head of NAB New York Branch since 2009. He
is directly responsible for all activities under the NAB brand in the United States, except for our business. The activities for which he is responsible primarily involve wholesale banking operations. Mr. Rauchenberger has been with NAB since
1996 and has a total of 29 years of international banking experience. He has expertise in risk management and services, having served in numerous roles, including Head of Risk and Chief Operating Officer for NAB New York Branch and NAB’s global
wholesale bank, respectively. Before working at NAB, Mr. Rauchenberger worked at Lloyds Bank’s New York Branch for nine years and at National Westminster Bank USA for two years. He is a director and member of the executive committee of the
Institute of International Bankers and of the American Australian Association.
Mr. Rauchenberger’s qualifications to serve on
Great Western Bancorp, Inc.’s board of directors include his operating, management and leadership experience as one of Great Western’s directors and throughout the NAB corporate organization. Mr. Rauchenberger also has an extensive
knowledge of our business and the financial services industry generally. Mr. Rauchenberger was nominated to Great Western Bancorp, Inc.’s board of directors in July 2014 by NAB consistent with its anticipated rights under the Stockholder
Agreement we intend to enter into with NAB in connection with this offering.
Daniel Rykhus
has served on Great Western Bancorp,
Inc.’s board of directors since July 2014. Mr. Rykhus joined Great Western Bank as a director and Audit Committee member in 2011. He has served as President and CEO of Raven Industries, a publicly-listed corporation that manufactures plastic,
electronic and specialized-apparel products, since August 2010 and has been a member of the board of directors of Raven Industries since 2008. He has worked in various managerial capacities at Raven Industries since 1991, starting as Manufacturing
Manager of the Applied Technology Division and serving from 1999 to 2008 as the Division’s General Manager. From 2008 to 2010, Mr. Rykhus was the Executive Vice President of Raven Industries. In addition, Mr. Rykhus serves on the boards of
directors of the Sioux Empire United Way, the Sioux Falls Chamber of Commerce and Face It Together, a nonprofit organization that employs innovative approaches to combating drug and alcohol addiction.
Mr. Rykhus’s qualifications to serve on Great Western Bancorp, Inc.’s board of directors include his 23 years of managerial
experience and his three years of experience as a director and audit committee member for Great Western Bank. As the leader of a publicly listed company with a market capitalization of over $1 billion as of August 2014, Mr. Rykhus also brings
several years of public company corporate governance experience to Great Western Bancorp, Inc.’s board.
162
Richard Sawers
has served on NAB’s Group Executive Committee since 2009, during which
time he led NAB’s global Wholesale Banking business and in 2013 established NAB’s Product and Markets division. He has served on Great Western Bancorp, Inc.’s board of directors since July 2014. Mr. Sawers is a member of the NAB Group
Risk and Return Management Committee and a director of National Australia Group (Europe) Limited and Clydesdale Bank PLC. He is also a board member (and former chairman) of the Australian Financial Markets Association, a senior fellow of the
Financial Services Institute of Australia, a graduate member of the Australia Institute of Company Directors and a life member of the Financial Markets Foundation for Children.
Mr. Sawers has 43 years of commercial and international banking experience, including assignments in London, New York, Los Angeles, Tokyo,
Sydney and Melbourne. He has successfully led a number of large frontline businesses and, in his broader role as a Group Executive at NAB, Mr. Sawers has also performed key functions in the areas of risk governance, people and culture and financial
oversight. Early in his career, Mr. Sawers worked in financial markets (including capital markets, funding, liquidity and fixed income, money markets, FX and interest rate risk management) where he led trading, sales and treasury functions and, at
times, was responsible for technology, operations and risk areas. He has also had assignments in retail banking, trade finance and payments.
Mr. Sawers’s qualifications to serve as chairman of Great Western Bancorp, Inc.’s board of directors include his operating,
management and leadership experience throughout the NAB corporate organization and in the broader financial services industry. In addition to his extensive banking experience, Mr. Sawers also brings to Great Western Bancorp, Inc.’s board of
directors his extensive personal relationships stemming from his years of experience in the financial industry. Mr. Sawers was nominated to Great Western Bancorp, Inc.’s board of directors by NAB consistent with its anticipated rights under the
Stockholder Agreement we intend to enter into with NAB in connection with this offering.
Peter Chapman
has served as Great
Western’s Chief Financial Officer and Executive Vice President and on its board of directors since January 2013. Mr. Chapman is also the Chief Financial Officer and Executive Vice President of Great Western Bank. Mr. Chapman is
responsible for all aspects of our financial and regulatory reporting together with planning and strategy and treasury management of our balance sheet. Prior to joining us, Mr. Chapman held a number of senior finance roles within NAB and its
various business units, including responsibility for NAB’s external and internal reporting. Prior to joining NAB, Mr. Chapman was with Ernst & Young’s financial services practice for nine years.
Stephen Ulenberg
has served as Great Western’s Chief Risk Officer and Executive Vice President since 2012. Mr. Ulenberg has
also served as the Chief Risk Officer and Executive Vice President of Great Western Bank since 2010. Mr. Ulenberg is responsible for ensuring that risk is effectively managed and overseen across our enterprise. Mr. Ulenberg has over 30
years of experience in the financial services industry, including a 24-year career with NAB and its subsidiaries, where he has worked in a number of senior positions including frontline business leadership in commercial and wholesale banking, risk
management and major, cross-organizational strategic initiatives—at both Bank of New Zealand (a NAB subsidiary) and NAB. Immediately prior to joining Great Western Bank, Mr. Ulenberg was responsible for the leadership of Bank of New
Zealand’s enterprise risk management capability across a $60 billion lending portfolio. In that role, Mr. Ulenberg provided related analytics, risk reporting, portfolio metrics, risk insights, asset quality information and oversight of
decision analysis, managed provisioning, risk appetite and advanced Basel models and led ongoing enhancements to Bank of New Zealand’s risk management capabilities.
Allen Shafer
has served as the Executive Vice President of Support Services of Great Western Bank since August 2012. Mr. Shafer is
responsible for our operations and information technology groups, along with our project management office. Mr. Shafer joined Great Western Bank in December 2002 and has held the positions of Chief Credit Officer, Regional President and Group
President at Great Western Bank. Mr. Shafer has 29 years of banking experience. Prior to joining Great Western Bank, he served as Market Manager at Wells Fargo after Wells Fargo acquired Brenton Bank in Iowa. At Brenton Bank, Mr. Shafer
held a variety of positions from 1991
163
to 2001, including President of Business Banking and Regional Manager of Commercial Banking. In 1987, Mr. Shafer joined First Interstate Bank, Seattle, WA, as a Commercial Banking Manager.
Mr. Shafer began his banking career in 1985 at Citizen’s Bank and Trust, Belle Plaine, IA.
Doug Bass
has served as a Regional
President of Great Western Bank since 2010 and is also an Executive Vice President of Great Western Bank. Mr. Bass oversees all of our banking operations within the states of Arizona, Colorado, Iowa, Kansas and Missouri, as well as our wealth
management, brokerage and mortgage banking business lines. Mr. Bass has worked in various capacities with Great Western Bank since 2009 and has expertise in all areas of bank management within Great Western Bank. Before joining Great Western
Bank, Mr. Bass served as President of First American Bank Group. Previously Mr. Bass served in various capacities over 15 years with Firstar Corporation, which is now known as US Bank, including as President and Chief Executive Officer of
Firstar’s Sioux City and Council Bluffs operations in Western Iowa and as Manager of Correspondent Banking for its Eastern Iowa operations, which included also responsibility for commercial banking and agribusiness lending.
Bryan Kindopp
has served as a Regional President of Great Western Bank since 2011 and is also an Executive Vice President of Great
Western Bank. Mr. Kindopp oversees all of our banking operations within the states of South Dakota and Nebraska. In these two states, Mr. Kindopp is responsible for branch operations of 83 of our locations and 600 of our employees.
Mr. Kindopp has 23 years of banking experience. Mr. Kindopp has expertise in all areas of bank management and strategic bank acquisitions and has served in several different capacities at Great Western Bank since 2001.
Mr. Kindopp’s roles have included Market President and Group President for the bank’s branch distribution channel. In these roles, Mr. Kindopp had responsibility for agriculture and commercial business and retail lending and
deposit functions. Before joining Great Western Bank, Mr. Kindopp served as Vice President and Market Manager for three years at Marquette Bank, Kimball, SD, where he was employed for a total of ten years.
Status as a “Controlled Company”
Our common stock will be listed on the NYSE and, as a result, we will be subject to NYSE corporate governance listing standards. However, a
listed company that satisfies the definition of a “controlled company” (
i.e.
, a company of which more than 50% of the voting power is held by a single entity or group) may elect not to comply with certain of these requirements. As
part of our separation from NAB, we intend to enter into the Stockholder Agreement, which will provide NAB with certain rights relating to the composition of our board of directors consistent with the requirements applicable to a “controlled
company.” In particular, so long as NAB directly or indirectly owns more than 50% of our outstanding common stock and we are therefore a “controlled company,” and during the 12-month transition phase following the date on which we are
no longer a “controlled company” as a result of NAB’s ownership of shares of our outstanding common stock, we will elect not to comply with the corporate governance standards of the NYSE requiring: (1) a majority of independent
directors on the board of directors, (2) a fully independent corporate governance and nominating committee and (3) a fully independent compensation committee. As discussed below, five of our nine directors, including at least one member of
each of the corporate governance and nominating committee, compensation committee and risk committee of our board of directors are directors designated by NAB and will not necessarily qualify as “independent directors” under the applicable
rules of the NYSE. See “Our Relationship with NAB and Certain Other Related Party Transactions—Relationship with NAB—Stockholder Agreement.”
Composition and Classification of Our Board of Directors
Great Western Bancorp, Inc.’s current board of directors is composed of nine members, consisting of our President and Chief Executive
Officer, five directors designated for nomination and election by NAB and three other directors who will be “independent” under the listing standards of the NYSE.
Under our amended and restated certificate of incorporation to be effective prior to the completion of this offering, the number of directors
constituting our board of directors will be fixed from time to time by resolution
164
of our board of directors. The Stockholder Agreement will provide that we cannot change the size of our board of directors without NAB’s prior written approval, other than as contemplated in
the Stockholder Agreement, until the Non-Control Date, as defined in “Our Relationship with NAB and Certain Other Related Party Transactions” below.
Each of our directors is currently elected for a one-year term. Prior to the completion of this offering, we intend to amend our certificate
of incorporation to classify our board of directors into three staggered classes, with directors in each class serving staggered three-year terms. At each annual meeting of stockholders, upon the expiration of the term of a class of directors, the
successor to each such director in the class will be elected to serve from the time of election and qualification until the third annual meeting following his or her election and until his or her successor is duly elected and qualified, in
accordance with our amended and restated certificate of incorporation. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will
consist of one-third of the directors serving on our board of directors.
Until NAB ceases to beneficially own at least 5% of our common
stock and non-voting common stock, in connection with any meeting of our stockholders at which directors are to be elected, the Stockholder Agreement will provide NAB the right to designate a number of individuals for nomination and election to our
board of directors determined by a formula described in the agreement. We will be required to recommend and solicit proxies in favor of, and to otherwise use our best efforts to cause the election of, each person designated by NAB whose nomination
has been approved.
See “Our Relationship with NAB and Certain Other Related Party Transactions—Relationship with
NAB—Stockholder Agreement” for more information.
Committees of Our Board of Directors
The standing committees of our board of directors consist of an audit committee, a corporate governance and nominating committee, a
compensation committee, a risk committee and an executive committee. The responsibilities of these committees are described below. Our board of directors may also establish various other committees to assist it in its responsibilities. However, the
Stockholder Agreement provides that, until the Non-Control Date, without NAB’s prior written approval, we may not form, or delegate any authority to, any new committee of our board of directors or to any subcommittee thereof.
Audit Committee
. The audit committee will assist the board of directors in fulfilling its responsibilities for general oversight of the
integrity of our financial statements, our compliance with legal and regulatory requirements, our independent auditors’ qualifications and independence, the performance of our internal audit function and independent auditors and our risk
assessment and risk management. Among other things, the audit committee will:
|
|
•
|
|
appoint, oversee and determine the compensation of our independent auditors;
|
|
|
•
|
|
review and discuss our financial statements and the scope of our annual audit to be conducted by our independent auditors and approve all audit fees;
|
|
|
•
|
|
review and discuss our financial reporting activities, including our annual report, and the accounting standards and principles followed in connection with those activities;
|
|
|
•
|
|
discuss with our independent auditors and management the adequacy and effectiveness of our framework for assessing and managing our overall risk exposure (and the steps management has taken to monitor and control these
risks and reviewing reports from management on the status of and changes to risk exposures, policies and practices);
|
|
|
•
|
|
pre-approve audits and non-audit services provided by our independent auditors;
|
|
|
•
|
|
meet with management and our independent auditors to review and discuss our financial statements and financial disclosure;
|
165
|
|
•
|
|
establish and oversee procedures for the treatment of complaints regarding accounting and auditing matters;
|
|
|
•
|
|
review the scope and staffing of our internal audit function and our disclosure and internal controls; and
|
|
|
•
|
|
monitor our legal, ethical and regulatory compliance.
|
Under the Stockholder Agreement, the
audit committee must consist of at least three members. These members are Mrs. Frances Grieb (Chairperson) and Messrs. Andrew Hove and Daniel Rykhus, all of whom will be “independent” under the listing standards of the NYSE and meet the
requirements of Rule 10A-3 of the Exchange Act. Currently, Frances Grieb serves as the audit committee’s “audit committee financial expert.” Under the Stockholder Agreement, until the Non-Control Date, if any of the directors
designated for nomination and election to our board of directors by NAB qualifies as an independent director and satisfies the requirements of Rule 10A-3 and the NYSE listing standards, at least one member of the audit committee will be a director
designated for nomination and election to our board of directors by NAB.
The audit committee will adopt a written charter that specifies
the scope of its rights and responsibilities, including those listed above. The charter will be available on our website at greatwesternbank.com.
Compensation Committee
. The compensation committee will be responsible for discharging the responsibilities of our board of directors
relating to compensation of our executives and directors. Among other things, the compensation committee will:
|
|
•
|
|
review no less than annually our compensation programs and incentive plans to determine whether they are properly coordinated and achieving their intended purpose;
|
|
|
•
|
|
review our overall compensation philosophy with a view to appropriately balancing risk and financial results in a manner that does not encourage employees to expose us to imprudent risks; is consistent with safety,
soundness, the goals and objectives of these plans and the compensation practices of any relevant peer group of competitive companies; and reviewing (with input from our Chief Risk Officer) the relationship between risk management policies and
practices, corporate strategy and senior executive compensation;
|
|
|
•
|
|
review and discuss with management our compensation discussion and analysis, recommend its inclusion in our annual proxy statement or report and prepare our compensation committee report;
|
|
|
•
|
|
review and oversee incentive compensation plans and programs, including any equity-based or other compensation or benefit plans;
|
|
|
•
|
|
recommend to our board of directors any changes in compensation for directors; and
|
|
|
•
|
|
evaluate our compensation strategies.
|
Under the Stockholder Agreement, the compensation
committee must consist of at least three members. These members are Messrs. Rykhus (Chairperson), Hove and Rauchenberger. Under the Stockholder Agreement, at all times prior to the date when NAB ceases to beneficially own at least 50% of our
outstanding common stock, at least one of the members of the compensation committee will initially be a director designated for nomination and election to our board of directors by NAB. After NAB ceases to beneficially own at least 50% of our common
stock, the compensation committee will transition to full compliance with Section 303A.05 of the Listed Company Manual of the NYSE, or the NYSE Manual, as follows. On or before 90 days after the date when NAB ceases to beneficially own at least 50%
of our outstanding common stock, the compensation committee will consist of a majority of independent directors. On the date one year after the date that NAB ceases to beneficially own at least 50% of our outstanding common stock, the committee will
consist solely of independent directors. After such time as the compensation committee transitions to full independence, but prior to the Non-Control Date, if any of the directors designated for nomination and election to our board of directors by
NAB qualifies as an independent director, at least one such director will be a member of the compensation committee.
166
The compensation committee will adopt a written charter that specifies the scope of its rights
and responsibilities, including those listed above. The charter will be available on our website at greatwesternbank.com.
Corporate
Governance and Nominating Committee
. The corporate governance and nominating committee will be responsible for ensuring an effective and efficient system of governance for Great Western by clarifying the roles of our board of directors and its
committees; identifying, evaluating and recommending to our board of directors candidates for directorships; and reviewing and making recommendations with respect to the size and composition of our board of directors. In addition, the corporate
governance and nominating committee will be responsible for reviewing and overseeing our corporate governance guidelines and for making recommendations to our board of directors concerning governance matters. Among other things, the corporate
governance and nominating committee will:
|
|
•
|
|
identify individuals qualified to be directors consistent with our corporate governance guidelines and evaluate and recommend director nominees for approval by our board of directors;
|
|
|
•
|
|
review and make recommendations to our board of directors concerning the structure and membership of board committees;
|
|
|
•
|
|
develop and annually review our corporate governance guidelines;
|
|
|
•
|
|
oversee the annual self-evaluation of our board of directors and its committees;
|
|
|
•
|
|
oversee management continuity planning;
|
|
|
•
|
|
review and approve or, where warranted, ratify transactions with related persons required to be disclosed under SEC rules; and
|
|
|
•
|
|
oversee risks related to corporate governance.
|
The members of the corporate governance and
nominating committee are Mr. Butler (Chairperson), Mrs. Grieb and Mr. Rykhus. Under the Stockholder Agreement, at all times prior to the date when NAB ceases to beneficially own at least 50% of our outstanding common stock, at least one member
of the corporate governance and nominating committee will be a director designated for nomination and election to our board of directors by NAB. After NAB ceases to beneficially own at least 50% of our common stock, the corporate governance and
nominating committee will transition to full compliance with Section 303A.06 of the NYSE Manual, as follows. On or before 90 days after the date when NAB ceases to beneficially own at least 50% of our outstanding common stock, the corporate
governance and nominating committee will consist of a majority of independent directors. On the date one year after NAB ceases to be beneficial owner of at least 50% of our outstanding common stock, the committee will consist solely of independent
directors. After such time as the corporate governance and nominating committee transitions to full independence, but prior to the Non-Control Date, if any of the directors designated for nomination and election to our board of directors by NAB
qualifies as an independent director, at least one such director will be a member of the corporate governance and nominating committee.
The corporate governance and nominating committee will adopt a written charter that specifies the scope of its rights and responsibilities,
including those listed above. The charter will be available on our website at greatwesternbank.com.
Risk Committee
. The risk
committee will assist the board of directors in fulfilling its responsibilities for oversight of our enterprise-wide risk management framework, including reviewing our overall risk appetite, risk management strategy, and policies and practices
established by our management to identify and manage risks we face. Among other things, the risk committee will:
|
|
•
|
|
review reports on and oversee our enterprise-wide risk management framework, including processes and resources necessary for us to execute our risk program effectively;
|
|
|
•
|
|
consider the alignment of our risk profile with our strategic plan, goals, objectives and risk appetite;
|
167
|
|
•
|
|
review reports from management on any significant new business or strategic initiatives expected;
|
|
|
•
|
|
consult at least on an annual basis with the Chief Executive Officer, Chief Risk Officer and other executive management as required to review our overall risk appetite and make recommendations to our board of directors;
|
|
|
•
|
|
consider, where necessary or appropriate, communications from regulatory authorities, including those pertaining to examinations;
|
|
|
•
|
|
review minutes of all meetings of our management risk committee;
|
|
|
•
|
|
review with the Chief Risk Officer and management their assessment of our risk position and profile, matters of note, trends and emerging risks; and
|
|
|
•
|
|
assist in promoting a risk-based culture and reinforcing achievement of a balance between risk and return.
|
Under the Stockholder Agreement, from the completion of this offering until one year after the date NAB ceases to beneficially own at least
50% of our outstanding common stock, the risk committee will consist of at least two members. The members of the risk committee are Mrs. Dave (Chairperson), Mrs. Grieb and Mr. Rauchenberger. Under the Stockholder Agreement, at least one of the
members of the risk committee will be a director designated for nomination and election to our board of directors by NAB and at least one member of our risk committee must have experience in identifying, assessing and managing the risk exposures of
large, complex firms.
The risk committee will adopt a written charter that specifies the scope of its rights and responsibilities,
including those listed above. The charter will be available on our website at greatwesternbank.com.
Executive Committee
. The
executive committee will be responsible for providing guidance and counsel to Great Western’s management team on significant matters affecting Great Western and taking action on behalf of our board where required in exigent circumstances where
it is impracticable or infeasible to convene, or obtain the unanimous written consent of, our full board of directors. Under the Stockholder Agreement, from the completion of this offering until one year after the date NAB ceases to beneficially own
at least 50% of our outstanding common stock, the executive committee will consist of (i) our Chief Executive Officer, (ii) one independent director who is not a NAB independent director and (iii) two NAB Directors, one of whom is
designated and treated as an alternate to serve in the absence of the other NAB-appointed member. The members of the executive committee are Messrs. Sawers (Chairperson), Karels and Hove. Mr. Rauchenberger has been appointed as alternate to Mr.
Sawers as Chairperson. Until one year after the date NAB ceases to beneficially own at least 50% of our outstanding common stock, any act of the executive committee must include the consent of the acting NAB Director serving on the executive
committee.
Board Leadership Structure and Qualifications
We believe that our directors should have the highest professional and personal ethics and values, consistent with our longstanding values and
standards. They should have broad experience at the policy-making level in business, government or banking. They should be committed to enhancing stockholder value and should have sufficient time to carry out their duties and to provide insight and
practical wisdom based on experience. Their service on boards of other companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties. Each director must represent the
interests of all stockholders. When considering potential director candidates, our board of directors also considers the candidate’s character, judgment, diversity, skills, including financial literacy, and experience in the context of our
needs and those of the board of directors.
Our board of directors does not have a policy regarding the separation of the roles of Chief
Executive Officer and Chairperson of the Board. Currently, our President and Chief Executive Officer does not serve as the Chairperson of the Board.
168
Board Oversight of Risk Management
Our board of directors believes that effective risk management and control processes are critical to our safety and soundness, our ability to
predict and manage the challenges that we face and, ultimately, our long-term corporate success. Our board of directors, both directly and through its committees, is responsible for overseeing our risk management processes, with each of the
committees of our board of directors assuming a different and important role in overseeing the management of the risks we face.
The risk
committee of our board of directors oversees our enterprise-wide risk management framework, which establishes our overall risk appetite and risk management strategy and enables our management to understand, manage and report on the risks we face.
Our risk committee also reviews and oversees policies and practices established by management to identify, assess, measure and manage key risks we face, including the risk appetite metrics developed by management and approved by our board of
directors. The audit committee of our board of directors is responsible for overseeing risks associated with financial matters (particularly financial reporting, accounting practices and policies, disclosure controls and procedures and internal
control over financial reporting), reviewing and discussing generally the identification, assessment, management and control of our risk exposures on an enterprise-wide basis and engaging as appropriate with our risk committee to assess our
enterprise-wide risk framework. The compensation committee of our board of directors has primary responsibility for risks and exposures associated with our compensation policies, plans and practices, regarding both executive compensation and the
compensation structure generally. In particular, our compensation committee, in conjunction with our President and Chief Executive Officer and Chief Risk Officer and other members of our management as appropriate, reviews our incentive compensation
arrangements to ensure these programs are consistent with applicable laws and regulations, including safety and soundness requirements, and do not encourage imprudent or excessive risk-taking by our employees. The corporate governance and nominating
committee of our board of directors oversees risks associated with the independence of our board of directors and potential conflicts of interest.
Our senior management is responsible for implementing and reporting to our board of directors regarding our risk management processes,
including by assessing and managing the risks we face, including strategic, operational, regulatory, investment and execution risks, on a day-to-day basis. Our senior management is also responsible for creating and recommending to our board of
directors for approval appropriate risk appetite metrics reflecting the aggregate levels and types of risk we are willing to accept in connection with the operation of our business and pursuit of our business objectives.
The role of our board of directors in our risk oversight is consistent with our leadership structure, with our President and Chief Executive
Officer and the other members of senior management having responsibility for assessing and managing our risk exposure, and our board of directors and its committees providing oversight in connection with those efforts. We believe this division of
risk management responsibilities presents a consistent, systemic and effective approach for identifying, managing and mitigating risks throughout our operations.
Compensation Committee Interlocks and Insider Participation
When our compensation committee is formed, no member of our compensation committee will be or have been one of our officers or employees, and
none will have any relationships with us of the type that is required to be disclosed under Item 404 of Regulation S-K. None of our executive officers serves or has served as a member of the board of directors, compensation committee or other
board committee performing equivalent functions of any entity that has one or more executive officers serving as one of our directors or on our compensation committee.
Corporate Governance Guidelines and Code of Ethics
Our board of directors has adopted corporate governance guidelines, accessible through our principal corporate website at greatwesternbank.com,
which set forth a framework within which our board of directors, assisted by board committees, will direct the company’s affairs. These guidelines address among other things, the composition and functions of our board of directors, director
independence, compensation of directors, management succession and review, board committees and selection of new directors.
169
Our board of directors has adopted a code of business conduct applicable to our principal
executive, financial and accounting officers. A copy of that code will be available on our investor relations website, accessible through our principal corporate website at greatwesternbank.com. We expect that any amendments to the code, or any
waivers of its requirements, will be disclosed on our principal corporate website at greatwesternbank.com as required by applicable law or listing requirements.
170
EXECUTIVE AND DIRECTOR COMPENSATION
Summary Compensation Table
The following
table presents compensation awarded in the fiscal year ended September 30, 2013 to our principal executive officer and our two other most highly compensated persons serving as executive officers as of September 30, 2013 or paid to or
accrued for those executive officers for services rendered during fiscal 2013. We refer to these executive officers as our “named executive officers.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name & Principal Position
|
|
Fiscal year
ended Sept. 30,
|
|
Salary
|
|
|
Bonus
(4)
|
|
|
Stock
Awards
(5), (6)
|
|
|
All Other
Compensation
(7)
|
|
|
Total
|
|
|
Kenneth Karels
(1)
|
|
2013
|
|
$
|
550,000
|
|
|
$
|
237,187
|
|
|
$
|
1,391,208
|
|
|
$
|
17,234
|
|
|
$
|
2,195,629
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Chapman
(1), (2)
|
|
2013
|
|
|
358,700
|
|
|
|
81,059
|
|
|
|
177,823
|
|
|
|
88,989
|
|
|
|
706,571
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Ulenberg
(1), (3)
|
|
2013
|
|
|
180,368
|
|
|
|
60,474
|
|
|
|
193,926
|
|
|
|
201,064
|
|
|
|
635,832
|
|
|
Executive Vice President and Chief Risk Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Mr. Chapman was seconded to us from NAB during fiscal 2013 beginning in January 2013, and Mr. Ulenberg was seconded to us from Bank of New Zealand, a wholly owned subsidiary of NAB, for all of fiscal 2013. In
connection with this offering, their employment will be transferred to us. We intend to enter into new employment agreements with our Chief Executive Officer, Chief Financial Officer and Chief Risk Officer. See “—New Employment
Arrangements” for further details.
|
|
(2)
|
In addition to amounts in the stock awards column, the following items of Mr. Chapman’s compensation for fiscal 2013 have been converted from Australian dollars to U.S. dollars using an exchange rate as of
September 30, 2013 of A$1.00 = US$0.9309: base salary paid by NAB before Mr. Chapman was seconded to us, the portion of the bonus attributable to the period of the 2013 fiscal year before Mr. Chapman was seconded to us, contributions
to an Australian superannuation fund, certain expatriate benefits and premiums for medical coverage. The remaining items were paid in U.S. dollars.
|
|
(3)
|
The following items were provided to Mr. Ulenberg by NAB or Bank of New Zealand for fiscal 2013 and have been converted from New Zealand dollars to U.S. dollars using an exchange rate as of September 30, 2013
of NZ$1.00 = US$0.8270: about 35% of base salary, bonus, contributions to a New Zealand superannuation fund, certain expatriate benefits and premiums for medical coverage. The remaining items (including tax equalization payments) were paid in U.S.
dollars.
|
|
(4)
|
The amounts in this column represent the cash portion of each named executive officer’s 2013 annual incentive under the NAB Group Short Term Incentive Plan, or the NAB STI Plan. These amounts do not include the
portion of the 2013 annual incentive that was subject to mandatory deferral and granted in February 2014 in the form of deferred shares of NAB common stock. See “—Annual Cash and Deferred Equity-Based Incentive Compensation” for
further details.
|
|
(5)
|
The amounts in this column reflect the aggregate grant date fair value under FASB ASC Topic 718 of NAB equity-based awards granted to the named
executive officers in fiscal 2013. For each of the named executive officers, the amounts include the portion of the 2012 annual incentive that was subject to mandatory deferral and granted in November 2012 (and, for Mr. Karels, May 2013) in the
form of deferred shares of NAB common stock, with the following grant date fair values: Mr. Karels—$155,324, Mr. Chapman—$39,985, and Mr. Ulenberg—$30,400. The amounts also include: (1) for Messrs. Karels and
Ulenberg, a long-term equity incentive award of performance shares of NAB common stock granted in December 2012 (with a grant date fair value of $246,805 and $114,060, respectively), which will vest based on NAB’s total stockholder return
performance against two peer groups from December 2012 to December 2016, (2) for Mr. Chapman, two long-term equity incentive awards of restricted shares of NAB common stock each granted in December 2012 (with grant date fair values of $934
and $2,855) in recognition of NAB’s 2012 fiscal year performance, and (3) for each of Messrs. Karels, Chapman and Ulenberg, a special, one-time
|
171
|
|
award of restricted shares of NAB common stock granted in November 2012, February 2013 and November 2012, respectively (with a grant date fair value of $989,079, $134,049 and $49,466,
respectively), in recognition of their contributions.
|
|
(6)
|
The amounts in this column have been converted from Australian dollars to U.S. dollars using an exchange rate as of September 30, 2013 of A$1.00 = US$0.9309.
|
|
(7)
|
The amounts in this column include:
|
|
|
•
|
|
For Mr. Karels: a matching contribution of $6,375 and a profit sharing contribution of $10,625 under our 401(k) plan; and company-paid premiums for group life insurance of $234.
|
|
|
•
|
|
For Mr. Chapman: a contribution of $12,568 by NAB to an Australian superannuation fund; expatriate benefits in connection with his international assignment from Australia to the U.S. of $58,414 (comprised of
$15,000 in housing expenses, $18,963 in airfare and $24,451 in other benefits); and premiums for medical coverage of $18,007.
|
|
|
•
|
|
For Mr. Ulenberg: a contribution of $6,662 by Bank of New Zealand to a New Zealand superannuation scheme; expatriate benefits in connection with his international assignment from New Zealand to the U.S. of $164,690
(comprised of $118,934 in tax equalization payments, $36,000 in housing expenses and $9,756 in other benefits); and premiums for medical coverage of $29,712.
|
Outstanding Equity Awards at Fiscal Year End
As of September 30, 2013, none of the named executive officers held any outstanding Great Western equity-based awards. The following table
provides information about the outstanding NAB equity-based awards held by each of our named executive officers as of September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Number of Shares or
Units of
Stock That
Have Not Vested
(#)
|
|
|
Market Value of
Shares or Units of
Stock That
Have Not Vested
(1)
|
|
|
Equity Incentive Plan
Awards: Number of
Unearned Shares,
Units or Other Rights
That
Have Not Vested
(#)
|
|
|
Equity Incentive Plan
Awards: Market or Payout
Value of Unearned Shares,
Units or
Other Rights That
Have Not Vested
(1)
|
|
|
Kenneth Karels
|
|
|
37,871
|
(2)
|
|
$
|
1,209,921
|
|
|
|
9,510
|
(12)
|
|
$
|
303,830
|
|
|
|
|
|
5,754
|
(3)
|
|
|
183,832
|
|
|
|
6,694
|
(13)
|
|
|
213,863
|
|
|
|
|
|
184
|
(4)
|
|
|
5,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,241
|
(5)
|
|
|
103,545
|
|
|
|
|
|
|
|
|
|
|
Peter Chapman
|
|
|
4,234
|
(6)
|
|
|
135,270
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
1,531
|
(7)
|
|
|
48,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146
|
(8)
|
|
|
4,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
184
|
(4)
|
|
|
5,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162
|
(9)
|
|
|
5,176
|
|
|
|
|
|
|
|
|
|
|
Stephen Ulenberg
|
|
|
1,164
|
(3)
|
|
|
37,188
|
|
|
|
4,395
|
(12)
|
|
|
140,414
|
|
|
|
|
|
1,894
|
(10)
|
|
|
60,510
|
|
|
|
2,861
|
(13)
|
|
|
91,405
|
|
|
|
|
|
230
|
(11)
|
|
|
7,348
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The market value was determined by multiplying the number of shares or units by the closing price of a share of NAB common stock on September 30, 2013, converted into U.S. dollars at an exchange rate as of
September 30, 2013 of A$1.00 = US$0.9309, resulting in a value of approximately US$31.95 per share.
|
|
(2)
|
Represents a special, one-time award of restricted shares granted in November 2012 in recognition of Mr. Karels’ contributions. The shares are scheduled to vest on October 31, 2015.
|
|
(3)
|
Represents deferred shares under the NAB STI Plan granted in respect of the 2012 fiscal year in November 2012 and May 2013. 50% of the shares vested on November 7, 2013 and 50% are scheduled to vest on
November 7, 2014.
|
|
(4)
|
Represents a long-term equity incentive award of restricted shares granted in respect of the 2010 fiscal year in December 2010. The shares vested on December 15, 2013.
|
172
|
(5)
|
Represents deferred shares under the NAB STI Plan granted in respect of the 2011 fiscal year in November 2011. The shares vested on November 23, 2013.
|
|
(6)
|
Represents a special, one-time award of restricted shares granted in February 2013 in recognition of Mr. Chapman’s contributions. 50% of the shares vested on November 1, 2013 and 50% are scheduled to vest
on November 1, 2014.
|
|
(7)
|
Represents deferred shares under the NAB STI Plan granted in respect of the 2012 fiscal year in November 2012. The shares vested on November 7, 2013.
|
|
(8)
|
Represents two long-term equity incentive awards of restricted shares granted in respect of the 2012 fiscal year in December 2012. The shares are scheduled to vest on December 12, 2015.
|
|
(9)
|
Represents two long-term equity incentive awards of restricted shares granted in respect of the 2011 fiscal year in December 2011. The shares are scheduled to vest on December 14, 2014.
|
|
(10)
|
Represents a special, one-time award of restricted shares granted in November 2012 in recognition of Mr. Ulenberg’s contributions. 50% of the shares vested on October 15, 2013 and 50% are scheduled to
vest on October 15, 2015.
|
|
(11)
|
Represents two long-term equity incentive awards of restricted shares granted in respect of the 2010 fiscal year in December 2010. The shares vested on December 15, 2013.
|
|
(12)
|
Represents the maximum number of unearned performance shares granted in December 2012. The performance shares are scheduled to vest on December 19, 2016. The actual number of performance shares that vest will be
based on NAB’s total stockholder return performance against two different peer groups from December 2012 to December 2016. Any performance shares that are unvested after the first performance period are scheduled to vest on December 19,
2017, based on performance from December 2012 to December 2017. Any performance shares that do not vest following the second performance period will be forfeited.
|
|
(13)
|
Represents the maximum number of unearned performance shares granted in December 2011. The performance shares are scheduled to vest on December 14, 2014. The actual number of performance shares that vest will be
based on NAB’s total stockholder return performance against two different peer groups from October 2011 to September 2014. Any performance shares that do not vest following the performance period will be forfeited.
|
Annual Cash and Deferred Equity-Based Incentive Compensation
For the 2013 fiscal year, our named executive officers participated in the NAB STI Plan. The NAB STI Plan rewards achievement of four key
business drivers: financial and risk management; strategic projects; employees and culture; and customer and community. Each named executive officer’s target short-term incentive, or STI, was established prior to the beginning of the 2013
fiscal year, and the actual STI earned reflects both individual and business performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Base Salary
|
|
|
STI Target
Percentage
|
|
|
STI Target
Amount
|
|
|
Business STI
Multiple
|
|
|
Individual
STI Multiple
|
|
|
Earned STI
|
|
|
Kenneth Karels
|
|
$
|
550,000
|
|
|
|
75
|
%
|
|
$
|
412,500
|
|
|
|
1
|
|
|
|
1.15
|
|
|
$
|
474,375
|
|
|
Peter Chapman
(1)
|
|
|
310,000
|
|
|
|
30
|
%
|
|
|
93,000
|
|
|
|
1
|
|
|
|
1.15
|
|
|
|
106,950
|
|
|
Stephen Ulenberg
(2)
|
|
|
206,750
|
|
|
|
30
|
%
|
|
|
62,025
|
|
|
|
1
|
|
|
|
1.30
|
|
|
|
80,633
|
|
|
(1)
|
Mr. Chapman received a target STI opportunity of 30% from us, pursuant to the terms of his secondment letter agreement.
|
|
(2)
|
Amounts for Mr. Ulenberg have been converted from New Zealand dollars to U.S. dollars using an exchange rate as of September 30, 2013 of NZ$1.00 = US$0.8270.
|
Determination of Earned STI Award.
The business STI multiple can range from 0 up to 1.3 for exceptional business performance, and was
determined by NAB’s board at the end of the fiscal year after taking into account NAB’s management of business risks, stockholder expectations and the quality of NAB’s financial results. For the 2013 fiscal year, NAB’s board
determined that a business STI multiple of one (1) was appropriate after
173
considering NAB’s growth in cash earnings (increased by $503 million or 9.3% against 2012), return on equity (increased by 30 basis points to 14.5%) and achievement of NAB’s return on
total allocated equity plan.
The individual STI multiple can range from 0 up to 2.0 for outstanding performance and was determined by
each named executive officer’s direct manager after assessing individual performance against pre-established metrics. The following key achievements were considered in determining the individual STI multiple for 2013: for Mr. Karels,
achievement of Great Western Bank cash earnings and return on equity targets despite strong market competition, proactive leadership of risk management at Great Western Bank, implementation of a strong sales culture at Great Western Bank and
development of a strong executive team; for Mr. Chapman, strong overall Great Western Bank financial results (including cash earnings of more than $112 million, representing a 13% increase over the prior fiscal year), leadership in driving
refinements of Great Western Bank’s return on equity model to support long-term business objectives and growth targets, and successful development of a robust process for reporting to regulatory bodies; and for Mr. Ulenberg, successful
management of Great Western Bank within risk appetite parameters, maintenance of a sound risk profile in connection with sustainable growth, and continued improvements in talent management and customer satisfaction.
In addition, our named executive officers were subject to a compliance gateway. Senior executives of NAB are subject to a reduction in their
STI, either in part or in full depending on the severity of the breach, if they do not pass the compliance expectations of their role. No such reduction was applied to the STI awards earned by our named executive officers for 2013.
Mandatory Deferral of Earned STI Award.
Under the NAB STI Plan, a portion of our named executive officers’ earned STI awards were
subject to mandatory deferral to instill an appropriate focus on business performance beyond the current year, allow for alignment with risk outcomes, support achievement of targets, and encourage an appropriate level of shareholding by senior
executives. For Mr. Karels, 50% of his earned STI award was deferred, and he was granted NAB deferred shares in February 2014 that will be payable in two equal installments on December 4, 2014 and December 4, 2015. For each of Messrs.
Chapman and Ulenberg, 25% was deferred and they were granted NAB deferred shares in February 2014 that will be payable on December 4, 2014. Receipt of the deferred shares is contingent on meeting the compliance gateway described above in future
years and certain performance conditions.
Current Employment Arrangements
Employment Agreement with Mr. Karels
. We have entered into an employment agreement with Mr. Karels, which became effective on
January 16, 2014. The agreement will continue until terminated by us or Mr. Karels in accordance with its terms. During the term of the agreement, Mr. Karels will serve as our President and Chief Executive Officer. Material terms of
the employment agreement include: an annual base salary of $550,000 (with any increase at our and NAB’s sole discretion); eligibility to participate in the NAB STI Plan with a target opportunity equal to 75% of base salary; and eligibility to
participate in our executive long-term incentive plan.
If we terminate Mr. Karels’ employment without “cause,” he
will be entitled to receive either fifty-two (52) weeks’ prior written notice or fifty-two (52) weeks of base salary in lieu of notice. “Cause” generally means failure to comply with the terms and conditions of the
employment agreement (including, without limitation, a formal indictment or charge with any felonious criminal violation, or violent crimes; conviction of any crime or offense involving monies or other property, or commission of fraud or
embezzlement; willful or continual neglect or failure to discharge his duties; or violation of any material law, or any other conduct, which reveals or demonstrates behavior or character traits which are reasonably considered detrimental to us).
If Mr. Karels becomes wholly disabled from continuing his duties of employment, he will be entitled to ninety (90) days of base
salary and, at the conclusion of the ninety (90) days, will be terminated by us. If Mr. Karels’ employment is terminated due to death, his estate will be entitled to the compensation which would otherwise be payable to him up to the
date of death.
174
The employment agreement also contains a confidentiality provision, which applies indefinitely,
and non-competition restrictions which apply during the term of the employment agreement and for one year following Mr. Karels’ termination for any reason.
International Assignment Arrangements with Messrs. Chapman and Ulenberg
. Mr. Chapman was seconded to us from NAB during fiscal
2013 beginning in January 2013, and Mr. Ulenberg was seconded to us from Bank of New Zealand for all of fiscal 2013. Under their letter agreements, Messrs. Chapman and Ulenberg serve as our Chief Financial Officer and Chief Risk Officer,
respectively. Material terms of their agreements include: an annual base salary of US$310,000 for Mr. Chapman and NZ$300,000 for Mr. Ulenberg; eligibility to participate in the NAB STI Plan with a target opportunity equal to 30%; and
expatriate benefits in accordance with NAB’s international assignment policy. In addition, we increased Mr. Chapman’s annual base salary to US$320,012, effective January 1, 2014.
New Employment Arrangements
We intend to
enter into employment agreements that will become effective upon the completion of this offering with each of Messrs. Karels, Chapman and Ulenberg. Under the employment agreements, the executives will continue to serve in their current positions as
President and Chief Executive Officer; Chief Financial Officer and Executive Vice President; and Chief Risk Officer and Executive Vice President, respectively. We expect that the term of each employment agreement will be for an unspecified duration
and will constitute “at will” employment.
We expect that each employment agreement will provide for, among other things:
(i) an annual base salary of $715,000 for Mr. Karels, $345,000 for Mr. Chapman and $285,000 for Mr. Ulenberg (effective retroactive to the later of (A) August 1, 2014 and (B) the date that is six months prior to the completion of this
offering), (ii) an annual incentive bonus with a target STI opportunity of 75% of for Mr. Karels and 50% for Messrs. Chapman and Ulenberg (except that Mr. Ulenberg’s target STI opportunity for fiscal year 2014 will be 30%), with the actual
amount earned ranging from 0% to 200% of target based on actual achievement against performance metrics, (iii) annual long-term incentive compensation awards with a value of $670,000 for Mr. Karels, $225,000 for Mr. Chapman and $175,000 for
Mr. Ulenberg for the 2015 fiscal year, and eligibility to receive future annual long-term incentive compensation awards in form and amount determined in the sole discretion of the board of directors and (iv) participation in our employee
benefit and welfare plans. The annual long-term incentive compensation awards for the 2015 fiscal year will be 50% in the form of time-based restricted stock units that vest in three equal annual installments on each of the first three anniversaries
of the grant date and 50% in the form of performance-based restricted stock units that cliff vest based on performance over a three-year performance period. We expect that each of Messrs. Chapman and Ulenberg will also receive an additional $10,000
per month for twelve months as they transition from their international assignments.
We expect that the executives will also receive a
special one-time grant of performance-based restricted stock units (the “IPO Grant”) as soon as practicable following the completion of this offering with a value of $1,000,000 for Mr. Karels, $225,000 for Mr. Chapman and $175,000 for Mr.
Ulenberg. The IPO Grant will cliff vest based on performance over a three-year performance period.
Upon a termination of any
executive’s employment by the company without “cause” or by the executive for “good reason”, subject to a general release of claims in favor of the company, we expect that the executive will be entitled to: (i) a prorated
annual incentive bonus for the year of termination based on actual performance, (ii) a severance payment equal to two times for Mr. Karels, and one times for Messrs. Chapman and Ulenberg, the sum of (A) the executive’s then-current
annual base salary and (B) the executive’s then-current target annual incentive bonus, paid in 52 or 26 equal installments, respectively, in accordance with the company’s normal payroll practices, (iii) either (A) continued benefits
under the company’s group healthcare, vision and dental plans through the second anniversary of termination of employment for Mr. Karels, and through the first
175
anniversary for Messrs. Chapman and Ulenberg, or (B) a lump-sum payment (grossed up for applicable taxes) equal to 24 times for Mr. Karels, and 12 times for Messrs. Chapman and Ulenberg, the
monthly COBRA cost of continued health and medical coverage and (iv) continued vesting of any outstanding equity compensation awards as if the executive had remained employed through the applicable vesting dates. In the event that the
executive’s employment is terminated by the company without “cause” or by the executive for “good reason” within two years following a “change in control”, subject to a general release of claims in favor of the
company, we expect that the executive will be entitled to the payments and benefits described above, except that (i) the severance payment will be paid in a lump sum and be equal to three times for Mr. Karels, and two times for Messrs. Chapman
and Ulenberg, the sum of (A) the executive’s then-current annual base salary and (B) the executive’s then-current target annual incentive bonus, and (ii) in lieu of the benefits described in clause (iii) of the prior sentence, all
executives will receive a lump-sum healthcare payment (grossed up for applicable taxes) equal to 24 times the monthly COBRA cost. In addition, we expect that the employment agreements will provide that, notwithstanding anything to the contrary, the
company will not be required to provide any payment or benefit that is prohibited by the Australian Corporations Act 2001 (Cth) in the absence of shareholder approval so long as NAB continues to hold shares of our common stock, or that would
otherwise be a prohibited golden parachute payment within the meaning of Section 18(k) of the FDIA.
We expect that “cause”
generally will mean the executive’s: (i) conviction of, or plea of guilty or no contest to, any felony or any crime involving fraud, dishonesty or moral turpitude, (ii) engagement in gross misconduct that causes material financial or reputation
harm to the company, (iii) repeated failure to substantially perform his duties and responsibilities to the company, (iv) material violation of any contract or agreement between the executive and the company or any written company policy or (v)
disqualification or bar by any governmental or self-regulatory authority from serving in the capacity required by the executive’s job description, or loss of any governmental or self-regulatory license that is reasonably necessary for the
executive to perform his duties or responsibilities.
We expect that “good reason” generally will mean, in the absence of the
executive’s written consent: (i) any material and adverse change in the executive’s position or authority with the company; (ii) the transfer of the executive’s primary work site to a new location that is more than 50 miles from that
in effect immediately prior to such transfer; (iii) a diminution of the executive’s base salary by more than 10%, unless such diminution applies to all other senior executives or (iv) a material breach of the employment agreement by Great
Western or our bank.
We expect that “change in control” will have the meaning defined in the Great Western Bancorp, Inc. 2014
Omnibus Incentive Plan. See “—2014 Omnibus Incentive Compensation Plan—Change in Control” for more information.
We
expect that each employment agreement will also contain confidentiality and non-disparagement provisions, which will apply indefinitely, and non-competition as well as client and employee non-solicitation provisions that will apply during the term
of the employment agreement and for one year following a termination of employment for any reason.
Potential Payments upon Termination or Change in
Control
Other than Mr. Karels’ employment agreement (described above), we do not currently have any agreements, plans or
other arrangements that provide for payments upon termination or a change in control.
Savings Plans
We maintain the Great Western 401(k) Profit Sharing Plan and Trust, or the 401(k) Plan, which is a tax-qualified defined contribution savings
plan, for the benefit of all eligible U.S. employees of the company (including Mr. Karels). Employee contributions, including after-tax contributions, are permitted by means of pay reduction. The 401(k) Plan also provides for discretionary
employer matching contributions and discretionary employer profit sharing contributions. During fiscal 2013, the company matched 100% of employee contributions up to 2.5% of a participant’s plan compensation, and made a discretionary profit
sharing
176
contribution of 4.25% ($2,082,406) allocated proportionately to eligible participants based on their 2013 plan compensation. All employee contributions and earnings on employee contributions are
at all times fully vested. Beginning with the second year of service, employer matching contributions and employer profit sharing contributions are vested at a rate of 25% per year of service and are completely vested after five years of
service.
In addition, during fiscal 2013, NAB contributed to a defined contribution superannuation fund on behalf all eligible Australian
employees (including Mr. Chapman) in an amount equal to 10.0% of the employee’s 2013 base salary, up to the maximum contribution base determined by the Australian Taxation Office. All eligible New Zealand employees (including
Mr. Ulenberg) participate in a New Zealand superannuation scheme, pursuant to which Bank of New Zealand provides an employer matching contribution equal to 5% of the employee’s 2013 base salary into a defined contribution retirement plan.
Pension Benefits; Nonqualified Deferred Compensation
We do not currently offer any defined pension plans or any nonqualified deferred compensation plans to our named executive officers.
Anticipated Changes to Our Compensation Program Following the Offering
In connection with this offering, we plan to adopt incentive plans, under which we will be permitted to grant a variety of equity-based and
cash-based incentive awards. For more information on these plans, see “—2014 Omnibus Incentive Compensation Plan,” “—2014 Non-Employee Director Plan” and “—Executive Incentive Compensation Plan.”
Following the completion of this offering, our employees, including the named executive officers, will no longer participate in NAB’s compensation programs and plans, except that any outstanding NAB equity-based awards held by our employees
will continue to vest in accordance with their terms.
2014 Omnibus Incentive Compensation Plan
Our board of directors expects to adopt, and our stockholder expects to approve, the Great Western Bancorp, Inc. 2014 Omnibus Incentive
Compensation Plan (the “2014 Plan”) in connection with this offering. The 2014 Plan will be effective on the date the 2014 Plan is approved by our stockholder.
The purposes of the 2014 Plan is to help us attract, retain and motivate key employees (including prospective employees) and consultants
(other than non-employee directors of our company), align the interests of those individuals with the company’s shareholders and promote ownership of the company’s equity. To accomplish these purposes, the 2014 Plan provides for the grant
of stock options (both stock options intended to be “incentive stock options” intended to meet the requirements under Section 422 of the Code and “non-qualified stock options” that do not meet such requirements), stock
appreciation rights (“SARs”), restricted stock, restricted stock units, dividend equivalent rights, other equity-based, equity-related or cash-based awards (including performance share awards and performance units settled in cash)
(collectively, “awards”). Incentive stock options may be granted only to employees; all other awards may be granted to employees and consultants. Our non-employee directors are not permitted to participate in the 2014 Plan.
Shares Subject to the 2014 Plan
A total of shares of our common stock will be reserved and available
for issuance under the 2014 Plan. If an award granted under the 2014 Plan expires, is forfeited or is settled in cash, the shares of our common stock not acquired pursuant to the award will again become available for subsequent issuance under the
2014 Plan. Shares of our common stock subject to awards that are assumed, converted or substituted under the 2014 Plan as a result of our acquisition of another company will not be counted against the number of shares that may be granted under the
2014 Plan. The following types of shares under the 2014 Plan will not become available for the grant of new awards under the 2014 Plan: (i) shares withheld to satisfy any tax withholding obligation and (ii) shares tendered to, or withheld by, us to
pay the exercise price of an option.
177
The aggregate number of shares of our common stock that may be granted to any employee during a
fiscal year in the form of awards (other than stock options and SARs) that comply with Section 162(m) of the Code, may not exceed 1,000,000 shares. The maximum number of shares of our common stock that may be granted to any single individual during
a fiscal year in the form of stock options may not exceed 1,000,000 shares. The maximum number of shares of our common stock that may be granted to any single individual during a fiscal year in the form of SARs may not exceed 1,000,000 shares.
Administration of the 2014 Plan
The 2014 Plan will be administered by the compensation committee of our board of directors (the “compensation committee”). Subject to
the terms of the 2014 Plan, the compensation committee will determine which employees and consultants will receive awards under the 2014 Plan, the dates of grant, the number and types of awards to be granted, the exercise or purchase price of each
award, and the terms and conditions of the awards, including the period of their exercisability and vesting and the fair market value applicable to a stock award.
In addition, the compensation committee has the authority to determine whether any award may be settled in cash, shares of our common stock,
other securities, or other awards or property. The compensation committee has the authority to interpret the 2014 Plan and may adopt any administrative rules, regulations, procedures and guidelines governing the 2014 Plan or any awards granted
under the 2014 Plan as it deems to be appropriate. The compensation committee may also delegate any of its powers, responsibilities or duties to any person who is not a member of the compensation committee or any administrative group within the
company. Our board of directors may also grant awards or administer the 2014 Plan.
Conditions on Awards
All of the awards described below are subject to the conditions, limitations, restrictions, vesting and forfeiture provisions determined by the
compensation committee, in its sole discretion, subject to certain limitations provided in the 2014 Plan. Each award granted under the 2014 Plan will be evidenced by an award agreement, which will govern that award’s terms and conditions. To
the extent necessary to do so, in the case of any conflict or potential inconsistency between the 2014 Plan and a provision of any award or award agreement with respect to an award, the 2014 Plan will govern.
The compensation committee may condition the vesting of or the lapsing of any applicable vesting restrictions or conditions on awards upon the
attainment of performance goals, continuation of service, or any other term or conditions. If performance goals are established by the compensation committee in connection with the grant of an award, they will be based upon performance criteria
which may include one or more of the following (“Performance Criteria”): measures of efficiency (including operating efficiency, productivity ratios or other similar measures); measures of achievement of expense targets, costs reductions,
working capital, cash levels or general expense ratios; asset growth; earnings per share; enterprise value or value creation targets; combined net worth; debt to equity ratio; revenue sales net revenues or net sales measures; gross profit or
operating profit measures (before or after taxes); investment performance; income or operating income measures (with or without investment income or income taxes, before or after risk adjustment, or other similar measures); cash flow; margin; net
income (before or after taxes); earnings before interest, taxes, depreciation and/or amortization; return measures (including return on capital, total capital, tangible capital, expenses, tangible expenses, equity, revenue, assets or net assets or
total shareholder return or similar measures); market share measures; measures of balance sheet achievements (including debt reductions, leverage ratios or other similar measures) and increase in the fair market value of the company’s common
stock
. The vesting conditions placed on any award need not be the same with respect to each grantee and the compensation committee will have the sole discretion to amend any outstanding award to accelerate or waive any or all restrictions,
vesting provisions or conditions set forth in the award agreement. Any of the above criteria may be used with or without adjustment for extraordinary items or nonrecurring items and may be measured in absolute terms or relative to historic
178
performance or the performance of other companies or an index, and to the extent permitted under Section 162(m) of the Code (taking into account any transition relief available thereunder), the
compensation committee may provide for objectively determinable adjustments, modifications or amendments, as determined in accordance with GAAP, to any of the Performance Criteria for one or more of the items of gain, loss, profit or expense.
Types of Awards
The 2014 Plan provides for the grant of stock options intended to meet the requirements of “incentive stock options” under Section
422 of the Code as well as “non-qualified stock options” that do not meet such requirements, SARs, restricted stock, restricted stock units, dividend equivalent rights and other equity based, equity related or cash based awards (including
performance based awards). Incentive stock options may be granted only to employees. All other awards may be granted to employees and consultants. Our non-employee directors are not permitted to participate in the 2014 Plan.
Stock Options
An
award of a stock option gives a grantee the right to purchase a certain number of shares of our common stock during a specified term in the future, after a vesting period, at an exercise price equal to at least 100% of the fair market value of our
common stock on the grant date. The term of a stock option may not exceed 10 years from the date of grant. Incentive stock options may only be granted from a plan that has been approved by our stockholders and will be exercisable in any fiscal year
only to the extent that the aggregate fair market value of our common stock with respect to which the incentive stock options are exercisable for the first time does not exceed $100,000. No incentive stock option may be granted to any person who, at
the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any of our affiliates unless (i) the option exercise price is at least 110% of the fair market value of the stock subject to
the option on the date of grant and (ii) the term of the incentive stock option does not exceed five years from the date of grant. The exercise price of any stock option may be paid using (i) cash, check or certified bank check, (ii) shares of our
common stock, (iii) a net exercise of the stock option, (iv) other legal consideration approved by the company and permitted by applicable law and (v) any combination of the foregoing.
Stock Appreciation Rights
A SAR entitles the grantee to receive an amount equal to the difference between the fair market value of our common stock on the exercise date
and the exercise price of the SAR (which may not be less than 100% of the fair market value of a share of our common stock on the grant date), multiplied by the number of shares subject to the SAR. The term of a SAR may not exceed 10 years from the
date of grant. Payment to a grantee upon the exercise of a SAR may be either in cash or shares of our common stock as determined by the compensation committee.
Restricted Stock
A restricted stock award is an award of outstanding shares of our common stock that does not vest until a specified period of time has elapsed,
or other vesting conditions have been satisfied as determined by the compensation committee, and which will be forfeited if the conditions to vesting are not met. The compensation committee will issue a certificate in respect to the shares of
restricted stock, registered in the name of the grantee, and the company may hold the certificate until the restrictions upon the award have lapsed. During the period that any restrictions apply, the transfer of stock awards is generally prohibited.
Grantees have full voting rights with respect to their restricted shares. All dividend payments will be retained by the company for the account of the relevant grantee during the vesting period. Such dividend payments will revert back to the company
if the restricted share upon which such dividends were paid reverts back to the company. Upon vesting of the restricted share, any dividend payments will be paid to the grantee (without interest).
179
Restricted Stock Units
A restricted stock unit is an unfunded and unsecured obligation to issue a share of common stock (or an equivalent cash amount) to the grantee
in the future. Restricted stock units become payable on terms and conditions determined by the compensation committee and will be settled either in cash or shares of our common stock as determined by the compensation committee.
Dividend Equivalent Rights
Dividend equivalent rights entitle the grantee to receive amounts equal to all or any of the ordinary cash dividends that are paid on the
shares underlying a grant while the grant is outstanding. Dividend equivalent rights may be paid in cash, in shares of our common stock or in another form. The compensation committee will determine whether dividend equivalent rights will be
conditioned upon the vesting or payment of the grant to which they relate and the other terms and conditions of the grant.
Other
Stock-Based or Cash-Based Awards
Under the 2014 Plan, the compensation committee may grant other types of equity-based,
equity-related or cash-based awards subject to such terms and conditions that the compensation committee may determine. Such awards may include the grant or offer for sale of unrestricted shares of our common stock, performance share awards, and
performance units settled in cash.
Performance-Based Awards
At the discretion of the compensation committee, other stock-based or cash-based awards may be granted in a manner which is intended to be
deductible by the company under Section 162(m) of the Code (taking into account any transition relief available thereunder). In such event, the performance-based award will be determined based on the attainment of written objective performance goals
based on one or more of the Performance Criteria, and may be measured in absolute terms or relative to historic performance or the performance of other companies or an index. The performance goal(s) must be approved by the compensation committee for
a performance period established by the compensation committee (i) while the outcome for that performance period is substantially uncertain and (ii) no more than 90 days after the commencement of the performance period to which the performance goal
relates or, if the performance period is less than one year, the number of days which is equal to 25% of the relevant performance period. When setting performance goals, the compensation committee will also prescribe a formula to determine the
amount of the performance-based award that may be payable upon the level of attainment of the performance goals during the performance period. Following the completion of each performance period, the compensation committee will have the sole
discretion to determine whether the applicable performance goals have been met with respect to each individual, and if they have, will certify the amount of the applicable performance-based award.
Adjustments
In
connection with a recapitalization, stock split, reverse stock split, stock dividend, spinoff, split up, combination, reclassification or exchange of shares, merger, consolidation, rights offering, separation, reorganization or liquidation, or any
other change in the corporate structure or shares, including any extraordinary dividend or extraordinary distribution, the compensation committee will make adjustments as it deems appropriate in (i) the maximum number of shares of our common stock
reserved for issuance as grants, (ii) the maximum number of stock options and SARs that any individual participating in the 2014 Plan may be granted in any fiscal year, (iii) the number and kind of shares covered by outstanding grants, (iv) the kind
of shares that may be issued under the 2014 Plan and (v) the terms of any outstanding stock awards, including exercise or strike price, if applicable.
180
Amendment; Termination
Our board of directors or the compensation committee may amend or terminate the 2014 Plan at any time, provided that no such amendment may
materially adversely impair the rights of a grantee of an award without the grantee’s consent. Our stockholders must approve any amendment if their approval is required in order to comply with the Code, applicable laws, or applicable stock
exchange requirements. Unless terminated sooner by our board of directors or extended with stockholder approval, the 2014 Plan will terminate on the day immediately preceding the tenth anniversary of the date on which our stockholder approved the
2014 Plan, but any outstanding award will remain in effect until the underlying shares are delivered or the award lapses.
Change in
Control
Unless the compensation committee determines otherwise, or as otherwise provided in the applicable award agreement, if a
participant’s employment is terminated by us without “cause” (as defined in the 2014 Plan) or the participant resigns his or her employment for “good reason” (as defined in the 2014 Plan), in either case, on or within two
years after a “change in control” (as defined in the 2014 Plan), (i) all outstanding awards will become fully vested (including lapsing of all restrictions and conditions), and, as applicable, exercisable, (ii) any outstanding
performance-based awards will be deemed earned at target level with respect to all open performance periods and (iii) any shares deliverable pursuant to restricted stock units will be delivered promptly following the termination. In the event of a
change in control, the compensation committee may also (i) provide for the assumption of or the issuance of substitute awards, (ii) provide that for a period of at least 20 days prior to the change in control, stock options or SARs that would not
otherwise become exercisable prior to a change in control will be exercisable as to all shares of common stock, as the case may be, subject thereto and that any stock options or SARs not exercised prior to the consummation of the change in control
will terminate and be of no further force or effect as of the consummation of the change in control, (iii) modify the terms of such awards to add events or conditions (including the termination of employment within a specified period after a change
in control) upon which the vesting of such awards will accelerate, (iv) deem any performance conditions satisfied at target, maximum or actual performance through closing or provide for the performance conditions to continue (as is or as adjusted by
the compensation committee) after closing or (v) settle awards for an amount (as determined in the sole discretion of the compensation committee) of cash or securities (in the case of stock options and SARs that are settled in cash, the amount paid
will be equal to the in-the-money spread value, if any, of such awards).
In general terms, except in connection with any initial public
offering, a change in control under the 2014 Plan occurs if following the completion of this offering:
|
|
•
|
|
following the earlier to occur of (A) the Non-Control Date and (B) the date on which NAB owns less than 5% of our outstanding common stock, during any period of not more than 36 months, individuals who constitute the
board of directors as of the beginning of the period whose appointment or election is endorsed by two-thirds of the incumbent directors no longer constitute a majority of the board;
|
|
|
•
|
|
a person, other than NAB or any of its direct or indirect subsidiaries or a transferee thereof or any of such transferee’s affiliates, becomes a beneficial owner of our capital stock representing 30% of the voting
power of our outstanding capital stock;
|
|
|
•
|
|
we merge into another entity, unless (i) the business combination is with NAB or any of its direct or indirect subsidiaries or a transferee thereof or any of such transferee’s affiliates or (ii) (a) more than 50%
of the combined voting power of the merged entity or its parent is represented by our voting securities that were outstanding immediately prior to the merger, (b) the board of directors prior to the merger constitutes at least 50% of the board of
the merged entity or its parent following the merger and (c) no person is or becomes the beneficial owner of 30% or more of the combined voting power of the outstanding capital stock eligible to elect directors of the merged entity or its parent;
|
|
|
•
|
|
we sell or dispose of all or substantially all of our assets (other than to NAB or any of its direct or indirect subsidiaries or a transferee thereof and such transferee’s affiliates or a company affiliate); or
|
|
|
•
|
|
we are liquidated or dissolved.
|
181
Clawback
All awards under the 2014 Plan will be subject to any clawback or recapture policy that we may adopt from time to time.
2014 Non-Employee Director Plan
Our
board of directors expects to adopt, and our stockholder expects to approve, the Great Western Bancorp, Inc. 2014 Non-Employee Director Plan (the “2014 Director Plan”) in connection with this offering. The 2014 Director Plan will be
effective on the date the 2014 Director Plan is approved by our stockholder.
The description of the 2014 Director Plan is the same as the
description for the 2014 Plan, except for the following key differences: (i) a total of shares of our common stock will be reserved and available for issuance under the 2014
Director Plan; (ii) the aggregate awards that may be granted to any single non-employee director during a fiscal year, solely with respect to his or her service as a director of the board, may not exceed $1,000,000; (iii) there is no separate limit
on the number of shares of our common stock that may be granted to any single individual during a fiscal year in the form of stock options or SARs; (iv) our non-employee directors are the only permitted grantees in the 2014 Director Plan; (v)
incentive stock options may not be granted to non-employee directors; and (vi) unless the compensation committee determines otherwise, in the event of a change in control, all outstanding awards will become fully vested (including lapsing of all
restrictions and conditions) and, as applicable, exercisable.
Executive Incentive Compensation Plan
Our board of directors expects to adopt, and our stockholder expects to approve, the Great Western Bancorp, Inc. Executive Incentive
Compensation Plan (the “Bonus Plan”) in connection with this offering. The Bonus Plan will be effective on the date the Bonus Plan is approved by our stockholder.
The purposes of the Bonus Plan are to help us attract, retain and motivate participating eligible executives by providing incentive awards
that ensure a strong pay-for-performance linkage, and to permit the incentive awards to qualify as performance-based compensation under Section 162(m) of the Code (taking into account any transition relief available thereunder). To accomplish these
purposes, the Bonus Plan provides for the grant of cash-based or equity-based awards (collectively, “awards”) to any employee who, in the discretion of the compensation committee, is likely to be a “covered employee” under 162(m)
of the Code for the year in which an award is payable and any other executives selected by the compensation committee for participation in the Bonus Plan.
Administration of the Bonus Plan
The Bonus Plan will be administered by the compensation committee. Subject to the terms of the Bonus Plan, the compensation committee will
select the persons to be granted awards under the Bonus Plan, determine the time when awards will be granted, determine whether objectives and conditions for earning awards have been met, determine whether awards will be paid at the end of the
performance period or deferred, and determine whether an award should be reduced or eliminated. In addition, the compensation committee will interpret the Bonus Plan and may adopt written policies or rules as it deems necessary or desirable for the
implementation and administration of the Bonus Plan. The compensation committee generally may delegate its powers, responsibilities or duties to employees of the Company as it deems necessary or appropriate.
182
Types of Awards
Awards may be paid in cash or in the form of equity-based awards. Awards that are granted and denominated in cash may be paid under the Bonus
Plan, the 2014 Plan or any other plan maintained by the Company, and awards that are granted in the form of equity-based awards will be issued pursuant to the 2014 Plan or any other plan maintained by the Company for equity-based awards at the time
of grant.
Award Limitations
No participant may receive with respect to any fiscal year an award under the Bonus Plan of more than $5,000,000 or more than 1,000,000 shares.
In the event the performance period for an award is more than one fiscal year, then for purposes of these limits, the award amount will be proportionately spread across the actual performance period (provided that for this purpose, the award amount
may not be spread across more than four years).
Performance-Based Awards
In connection with the grant of each award under the Bonus Plan, the compensation committee will (i) establish the performance goal(s) and the
performance period applicable to such award, (ii) establish the formula for determining the amounts payable based on achievement of the applicable performance goal(s), (iii) determine the consequences of the participant’s termination of
employment or demotion or promotion during the performance period and (iv) establish such other terms and conditions for the award as the compensation committee deems appropriate. Performance goals will be based on one or more of the Performance
Criteria, and may be measured in absolute terms or relative to historic performance or the performance of other companies or an index.
The foregoing will be accomplished (i) while the outcome for the performance period is substantially uncertain and (ii) no more than 90
days after the commencement of the performance period to which the performance goal relates or, if the performance period is less than one year, the number of days which is equal to 25% of the relevant performance period. Following the completion of
each performance period, the compensation committee will certify in writing the degree to which the applicable performance goals have been met with respect to each participant. The award for each participant will be determined by applying the
applicable formula for the performance period based upon the level of achievement of the performance goals. The compensation committee may, in its sole discretion, reduce or eliminate (but not increase) any award payable to any participant for any
reason, including without limitation to reflect individual or business performance and/or unanticipated or subjective factors.
Amendment; Termination
In general, the compensation committee may amend the Bonus Plan at any time, except that no amendment may be effective without the approval of
our shareholders if such approval is necessary to comply with the exemption for performance-based compensation from the limitation on deductibility imposed by Section 162(m) of the Code. The Bonus Plan will continue to be in effect until terminated
by the compensation committee.
Clawback
All awards under the Bonus Plan will be subject to any clawback or recapture policy that we may adopt from time to time.
183
Director Compensation
Our directors were not compensated for their services on our board during fiscal 2013. In connection with this offering, we have adopted a
directors’ compensation program that provides the following compensation for independent non-employee members of our board:
|
|
•
|
|
an annual cash retainer of $30,000;
|
|
|
•
|
|
an annual equity award with a value of $40,000;
|
|
|
•
|
|
an additional annual cash retainer of $12,000 for the chair of the audit committee;
|
|
|
•
|
|
an additional annual cash retainer of $10,000 for the chair of the compensation committee;
|
|
|
•
|
|
an additional annual cash retainer of $6,000 for each of the chairs of the corporate governance and nominating committee and risk committee; and
|
|
|
•
|
|
an additional annual membership fee of $6,000 for each member of the audit committee and/or compensation committee, and of $3,000 for each member of the corporate governance and nominating committee and/or risk
committee.
|
Directors who are employees of us or any of our affiliate companies (including NAB) will receive no compensation
for their services as directors of our board. We also expect to reimburse all directors for reasonable out-of-pocket expenses incurred in connection with the performance of their duties as directors, including without limitation travel expenses in
connection with their attendance in-person at board and committee meetings. Additional details will be disclosed as the terms of our new director compensation program are finalized. We reserve the right to change the manner and amount of
compensation to our non-employee directors at any time.
184
PRINCIPAL AND SELLING STOCKHOLDER
Prior to the completion of this offering, all shares of our common stock were owned by the NAB selling stockholder, an indirect subsidiary of
NAB. Upon completion of this offering, we will have shares of common stock issued and outstanding, of which NAB (through the NAB selling stockholder) will indirectly
beneficially own approximately % (or % assuming the underwriters exercise their option to purchase additional shares of our common stock from the NAB selling stockholder in full).
The following table sets forth information, as of the date of this prospectus, regarding the beneficial ownership of our common stock,
immediately prior to the consummation of this offering and as adjusted to reflect the sale of common stock in this offering by the NAB selling stockholder, by:
|
|
•
|
|
all persons known by us to own beneficially more than 5% of our outstanding common stock;
|
|
|
•
|
|
the selling stockholder;
|
|
|
•
|
|
each of our named executive officers;
|
|
|
•
|
|
each of our directors and director nominees; and
|
|
|
•
|
|
all of our directors, director nominees and executive officers as a group.
|
Beneficial
ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to such securities. Except as
otherwise indicated, all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. Except as otherwise indicated, the address for each stockholder
listed below is c/o Great Western Bancorp, Inc., 100 N. Phillips Ave, Sioux Falls, South Dakota 57104.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership
Prior to the Completion
of this Offering
|
|
|
Number of
Shares to be
Sold in this
Offering
|
|
|
Beneficial Ownership
After the Completion of
this Offering
|
|
Name and Address of Beneficial Owner
|
|
Number
|
|
|
Percentage
|
|
|
|
Number
|
|
Percentage
|
|
NAB
(1)
|
|
|
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors and Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ken Karels
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Peter Chapman
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Richard Rauchenberger
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Stephen Ulenberg
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors, director nominees and executive officers as a group (7 persons)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
(1)
|
NAB, as the ultimate parent of the NAB selling stockholder, beneficially owns all shares of our common stock owned of record by the NAB selling stockholder. NAB’s investment decisions are made by its board of
directors. NAB is a public company with shares listed on the Australian Securities Exchange. The address of NAB and the NAB selling stockholder is 245 Park Avenue, New York, New York 10167.
|
185
OUR RELATIONSHIP WITH NAB AND CERTAIN OTHER RELATED PARTY
TRANSACTIONS
Relationship with NAB
We are a wholly owned subsidiary of NAB, and our results have been part of NAB’s consolidated business operations since NAB acquired us in
2008. NAB is a large financial institution incorporated in Australia and listed on the Australian Securities Exchange with operations in Australia, New Zealand, the United Kingdom, the United States and parts of Asia. Prior to this offering, our
business represented NAB’s retail banking operations in the United States. Consistent with its strategy of focusing on its core Australian and New Zealand franchise, this offering represents the first stage of NAB’s planned divestment of
our business. Following the offering, we expect that NAB will continue to beneficially own a majority of our outstanding common stock, and as a result NAB will continue to have significant control of our business, including pursuant to the
agreements described below. See “Risk Factors—Risks Related to Our Controlling Stockholder.” In addition, we expect that, following this offering, NAB will continue to consolidate our financial results in its financial statements.
Historically, NAB and its affiliates have provided financial and administrative support to us and have engaged in business transactions
with us. Among other transactions, we and NAI have each borrowed from NAB from time to time including through a revolving credit agreement and certain subordinated capital notes. We have also purchased securities from NAB in its role as dealer, and
certain of our employees have been NAB employees or compensated in part with NAB securities. In addition, NAB London Branch has acted and continues to act as a counterparty for all our interest rate swaps. For more information on these and other
transactions with NAB, see “—Related Party Transactions with NAB.”
Further, in connection with this offering, we and NAB
intend to enter into certain agreements that will provide a framework for our ongoing relationship, including a Stockholder Agreement governing NAB’s rights as a stockholder, a Transitional Services Agreement pursuant to which NAB will continue
to provide us with certain services for a transition period, and a Registration Rights Agreement requiring that we register shares of our common stock beneficially owned by NAB under certain circumstances.
The agreements summarized below have been filed as exhibits to the registration statement of which this prospectus forms a part. The summaries
of these agreements are qualified in their entirety by reference to the full text of the agreements.
Stockholder Agreement
We intend to enter into a Stockholder Agreement with NAB prior to the completion of this offering, which we refer to in this
prospectus as the “Stockholder Agreement.” The Stockholder Agreement will govern the relationship between NAB and us following this offering, including matters related to our corporate governance and NAB’s right to approve certain
actions we might desire to take in the future.
Corporate Governance.
Until such time as NAB ceases to control us for purposes of
the BHC Act as provided for in a written determination from the Board of Governors of the Federal Reserve System to NAB or as provided for in a written notice by NAB to the Company to such effect, which we refer to in this prospectus as the
“Non-Control Date,” NAB will be entitled to designate individuals for nomination and election to our board of directors, each, a NAB Director. The number of designees will depend on the level of NAB’s beneficial ownership of our
outstanding common and non-voting common stock. Prior to the earlier of the Non-Control Date and the one-year anniversary of the first date when NAB ceases to directly or indirectly beneficially own at least 50% of our outstanding common stock,
which date of share ownership cessation we refer to in this prospectus as the “Less Than Majority Holder Date,” we and NAB will together use our best efforts to ensure that a majority of our board of directors consists of NAB Directors.
186
From and after the one-year anniversary of the Less Than Majority Holder Date, our board of
directors will be required to consist of a majority of independent directors, consistent with NYSE listing standards. From and after the one-year anniversary of the Less Than Majority Holder Date, if the Non-Control Date has not occurred, NAB will
have the right to designate for nomination and election a number of individuals equal to the number of independent directors nominated to serve on our board of directors (other than any independent directors who are NAB Directors) minus two. Our
President and Chief Executive Officer will also serve as a member of our board of directors at all times following the completion of this offering until the Non-Control Date. As a result, from and after the Less Than Majority Holder Date if the
Non-Control Date has not occurred, our board of directors will consist of a majority of independent directors (other than any independent directors who are NAB Directors), our President and Chief Executive Officer and the NAB Directors.
NAB will also be entitled to have its designees to our board of directors serve on the audit committee, corporate governance and nominating
committee, compensation committee, risk committee and executive committee of our board of directors under certain circumstances. The composition of these committees will be as follows:
|
|
•
|
|
until the Non-Control Date, if any of the NAB Directors satisfies the applicable independence requirements established by the SEC and the NYSE, at least one member of the audit committee will be an independent NAB
Director designated by NAB;
|
|
|
•
|
|
until the Less Than Majority Holder Date, at least one member of each of the compensation committee and corporate governance and nominating committee will be a NAB Director designated by NAB. After the Less Than
Majority Holder Date, the compensation and corporate governance and nominating committees will transition in accordance with NYSE rules to being comprised solely of directors satisfying the applicable independence requirements established by the SEC
and the NYSE. Following this transition and until the Non-Control Date, if any of the NAB Directors satisfies the applicable independence requirements established by the SEC and the NYSE, at least one member of each of the compensation and corporate
governance and nominating committees will be an independent NAB Director designated by NAB;
|
|
|
•
|
|
until the one-year anniversary of the Less Than Majority Holder Date, at least one member of the risk committee will be a NAB Director designated by NAB; and
|
|
|
•
|
|
until the one-year anniversary of the Less Than Majority Holder Date, two members of the executive committee will be NAB directors designated by NAB, one of whom will be designated and treated as an alternate.
|
In addition, until the one-year anniversary of the Less Than Majority Holder Date, any act of the executive committee of our board of
directors must include the consent of the acting NAB Director serving on the executive committee.
Until the one-year anniversary of the
Less Than Majority Holder Date, and subject to any applicable laws or regulations, NAB will have the right to appoint up to two directors to serve on the board of directors of our bank subsidiary. The Stockholder Agreement will prohibit NAB from
appointing more than 25% of the members of our bank subsidiary. Until the Non-Control Date, we will not, nor will we cause our bank subsidiary to, reduce the size of the board of directors of our bank subsidiary to fewer than eight members without
the prior consent to NAB. Any NAB Director will be entitled to attend any meeting of the board of our bank subsidiary as a non-voting observer.
Following the Non-Control Date, NAB will have the right to designate one nominee for election to our board of directors as long as NAB
continues to beneficially own at least 5% of our outstanding common stock and non-voting common stock. NAB has informed us that it currently intends to seek a non-control determination from the Federal Reserve with respect to NAB’s ownership
interest in us at such time as it believes there is a reasonable opportunity to obtain such a non-control determination and the benefits of such a non-control determination to NAB outweigh the loss of the governance and consent rights described in
this section. We and
187
NAB believe that NAB will not have a reasonable opportunity to seek such a determination until NAB owns less than 25% of our outstanding common stock, although NAB’s ownership interest may
need to be substantially less than 25% in order for NAB to obtain a non-control determination. In connection with obtaining any non-control determination, NAB may, in its sole discretion, agree to enter into passivity commitments with the Federal
Reserve or irrevocably waive any or all of its rights discussed herein.
Stockholder Approval Rights.
Until the Non-Control Date,
we may not (either directly or indirectly through a subsidiary, or through one or a series of related transactions) take any of the following actions without NAB’s prior written consent:
|
|
•
|
|
merge, consolidate or engage in any similar transaction (or any amendment to our termination of an agreement to enter into such a transaction), other than any merger, consolidation or similar transaction involving only
us and one or more of our wholly owned subsidiaries;
|
|
|
•
|
|
acquire or dispose of securities, assets or liabilities involving an equity value greater than $5 million or an asset value greater than $5 million, subject to certain exceptions;
|
|
|
•
|
|
increase or decrease our authorized capital stock, or create a new class or series of our capital stock (including any class or series of preferred stock);
|
|
|
•
|
|
issue capital stock or acquire capital stock issued by us or any of our subsidiaries, subject to certain exceptions;
|
|
|
•
|
|
issue or acquire any debt security issued by us or any of our subsidiaries, in each case involving an aggregate principal amount exceeding $10 million;
|
|
|
•
|
|
incur or guaranty any debt obligation having a principal amount exceeding $5 million, other than debt obligations incurred and guaranty or similar undertakings given by our bank in the ordinary course;
|
|
|
•
|
|
enter into or terminate any joint venture arrangements involving assets having a value exceeding $5 million;
|
|
|
•
|
|
list or delist any of our capital stock then listed on a national securities exchange;
|
|
|
•
|
|
amend (or approve or recommend the amendment of) our or any of our subsidiaries’ constituent documents (
i.e.
, certificate of incorporation and bylaws);
|
|
|
•
|
|
materially change the scope of our business as conducted immediately prior to the completion of this offering;
|
|
|
•
|
|
change our independent public accountants, except as required by applicable law or listing standards;
|
|
|
•
|
|
other than as required by applicable law, form, or delegate authority to, any new committee of our board of directors, or any subcommittee thereof, of our board of directors, or delegate authority to any existing
committee or subcommittee thereof not set forth in the committee’s charter immediately prior to the completion of this offering;
|
|
|
•
|
|
enter into, terminate or make any material amendment to any material contract other than, in each case, (i) any employment agreement or (ii) any contract involving neither aggregate payments of $3 million or
more nor aggregate annual payments of $1 million or more;
|
|
|
•
|
|
change our legal or ownership structure, or the legal or ownership structure of any of our subsidiaries;
|
|
|
•
|
|
settle any material litigation or proceeding (whether formal or informal) involving us or any of our subsidiaries;
|
|
|
•
|
|
change any material policy relating to loans or other risk appetite settings, investments, asset-liability management or derivatives or any other policy that could reasonably be deemed to have a material effect on our
consolidated results of operations or financial condition;
|
|
|
•
|
|
enter into any material written agreement with, or any material written commitment to, a regulatory agency, or any material enforcement action;
|
188
|
|
•
|
|
elect, hire or dismiss (other than a dismissal for cause) our or our bank’s Chief Executive Officer or Chief Financial Officer;
|
|
|
•
|
|
make any bankruptcy filing, petition or similar action, by or with respect to us or any of our subsidiaries, or take actions to affect our dissolution or winding-up;
|
|
|
•
|
|
increase or decrease the size of our board of directors, other than as contemplated in the Stockholder Agreement; or
|
|
|
•
|
|
enter into any agreement or commitment providing for any of the foregoing.
|
Information
Rights.
As long as NAB is required under applicable accounting standards to consolidate our financial statements with theirs, and in any case for all financial periods commencing before the earlier of the Non-Control Date and the one-year
anniversary of the Less Than Majority Holder Date, we will be required to provide to NAB information and data relating to our business and financial results, including access to our personnel, data and systems, in the same manner and to the same
extent as we provided immediately prior to this offering. In addition, during this period, we and our subsidiaries will be required to maintain accounting principles, systems and reporting formats that are consistent with NAB’s financial
accounting practices in effect as of the completion of this offering, and in good faith to consider any changes to such principles, systems or reporting formats requested by NAB. Furthermore, the Stockholder Agreement will require us during this
time to maintain appropriate disclosure controls and procedures and internal control over financial reporting, and to provide quarterly certifications from our relevant officers and employees regarding such matters in accordance with NAB’s
internal standards, and to inform NAB promptly of any events or developments that might reasonably be expected to materially affect our financial results. After NAB is no longer required to consolidate our financial statements with theirs, we must
continue to provide NAB with certain information and data relating to our business and financial results, including access to our personnel, data and systems, to the extent required by NAB to meet its legal, financial or regulatory obligations or
requirements (as determined by NAB in its reasonable judgment) for as long as NAB is required under applicable accounting standards to account for its investment in us under the equity accounting method.
The Stockholder Agreement will also provide that, until the Non-Control Date, NAB will have certain access and cooperation rights with respect
to the independent public registered accounting firm responsible for the audit of our financial statements and to our internal audit function. We will be required, upon reasonable notice, to authorize our independent auditor to make available to
NAB’s independent auditor both the personnel responsible for conducting our quarterly reviews and annual audit and work papers related to the quarterly review or annual audit, in all cases within a reasonable time after our independent
auditor’s opinion date.
The Stockholder Agreement will also provide that, until the Non-Control Date, we shall consult and
coordinate with NAB with respect to public disclosures and filings, including in connection with our quarterly and annual financial results. Among other requirements, we will, to the extent practicable, provide NAB with a copy of any public release
at least two business days prior to publication and consider in good faith incorporating any comments provided by NAB. The Stockholder Agreement will also provide that, until the Non-Control Date, NAB will consult and coordinate with us with respect
to public disclosures and filings containing material information relating to our business. Among other requirements, NAB will, to the extent practicable, provide us with a copy of any public release of material information relating to our business
at least two business days prior to publication and consider in good faith incorporating any comments provided by us reasonably in advance of publication.
In addition, for a period of ten years following the Non-Control Date, subject to an extension of up to five years upon the demonstration of a
legal, tax or regulatory requirement for such extension, we and NAB will have mutual rights with respect to any information and access each may require in connection with regulatory or supervisory reporting obligations or inquiries. The Stockholder
Agreement will permit us to restrict access to the types of information described in this paragraph to that subset of NAB employees who NAB reasonably determines have a need to access such information.
189
Share Exchange.
At NAB’s option, we will be required to exchange some or all of the
outstanding common stock beneficially owned by NAB for an equal number of shares of our non-voting common stock. See “Description of Capital Stock—Common Stock and Non-Voting Common Stock” for a description of the rights and
preferences associated with our non-voting common stock.
Directors and Officer Indemnification and Insurance.
Until at least the
last day on which a NAB director, officer or employee, or a person designated by NAB to be a member of our board of directors, is our employee or officer, or a member of our board of directors, we will indemnify each such officer, employee or
director indemnification to the greatest extent permitted by Section 145 of the Delaware General Corporation Law and other applicable law. This indemnification will be available irrespective of any change to our indemnification or advancement
policies. In addition, under the Stockholder Agreement, we will commit to providing NAB directors, officers or employees serving as our officers or employees or as members of our board with agreed insurance coverage with respect to director and
officer liability, fiduciary liability and liability under U.S. federal and state securities laws.
Indemnification.
Each party to
the Stockholder Agreement will indemnify the other and the other’s subsidiaries for breaches of the Stockholder Agreement. NAB will also indemnify us for certain liabilities relating to historical matters pre-dating NAI’s merger as part of
the Formation Transactions.
Non-Competition
. Until the two-year anniversary of the earlier of the Non-Control Date and the
one-year anniversary of the Less Than Majority Holder Date, neither NAB nor any of its subsidiaries will be permitted to:
|
|
•
|
|
control, for purposes of the BHC Act, a bank or insured institution with a main office or one or more branches in any of our states; or
|
|
|
•
|
|
own, manage or operate, or participate in the ownership, management or operation of, any business principally engaged in consumer lending to individuals or in lending to businesses in our states with total annual
revenues of less than $250 million.
|
These restrictions are subject to certain exceptions and will not apply to any business
or activity conducted by NAB New York Branch during the fire years preceding the date of the Stockholder Agreement.
Non-Solicitation
. Neither NAB nor any of its subsidiaries will be permitted to solicit for employment or hire any of our officers or
employees or any officer or employee of our subsidiaries. This restriction will remain in effect until the second anniversary of the earlier of the Non-Control Date and the one-year anniversary of the Less Than Majority Holder Date and is subject to
certain customary exceptions, including exceptions for general solicitations, persons no longer employed by us or our subsidiaries and persons that approach NAB and its subsidiaries on an unsolicited basis.
Other Provisions.
The Stockholder Agreement will also contain covenants and provisions with respect to:
|
|
•
|
|
confidentiality of our and NAB’s information, subject to certain exceptions permitting our directors to share information with NAB and APRA;
|
|
|
•
|
|
restrictions on our ability to take any actions that would cause NAB or any of its subsidiaries to violate any applicable law or regulation; and
|
|
|
•
|
|
our obligation to consult with NAB prior to issuing any internal communications which could reasonably be expected to be material either to NAB or to NAB’s control of us for purposes of the BHC Act.
|
Each of the covenants, obligations and other agreements contained in the Stockholder Agreement will have no further effect
after such covenants, obligations and other agreements are fully performed or satisfied in accordance with their terms, or are no longer required to be performed or satisfied.
As a result of the Stockholder Agreement, NAB will have significant control over us following the completion of this offering. See “Risk
Factors—Risks Related to our Controlling Stockholder—NAB will continue to have significant control over us following the completion of this offering, and its interests may conflict with ours or yours in the future.”
190
Registration Rights Agreement
We intend to enter into a Registration Rights Agreement with NAB prior to the completion of this offering, which we refer to in this prospectus
as the “Registration Rights Agreement.” Pursuant to the Registration Rights Agreement, upon NAB’s request, we will use our reasonable best efforts to file a registration statement for, and effect the registration under applicable
federal and state securities laws of, any shares of our common stock beneficially owned by NAB or its wholly owned subsidiaries following this offering. The rights of NAB and its majority-owned subsidiaries under the Registration Rights Agreement
will remain in effect with respect to all shares covered by the agreement until those shares are sold pursuant to an effective registration statement under the Securities Act, sold pursuant to Rule 144 of the Securities Act to someone other than NAB
or its wholly owned subsidiaries, transferred in a transaction where subsequent public distribution of the shares would not require registration under the Securities Act or no longer outstanding.
Demand Registration.
NAB will be able to request registration under the Securities Act of all or any portion of our shares covered by
the agreement and we will be obligated, subject to limited exceptions, to use reasonable best efforts to register such shares as requested by NAB. NAB will be able to request that we complete five demand registrations while the agreement is in
effect subject to limitations on, among other things, minimum offering size. NAB will be able to designate the terms of each offering effected pursuant to a demand registration, subject to market “cut-back” exceptions regarding the size of
the offering.
Subject to certain exceptions, we may delay the filing of a registration statement after a demand request has been made if
at the time of such request our board of directors determines that such registration or offering would materially interfere with or jeopardize any pending or proposed material transaction or would materially adversely affect us.
Piggyback
Registration
. Prior to the Non-Control Date, we may only register common stock for our own account in limited
circumstances. If we, at any time after the Non-Control Date, intend to file on our behalf or on behalf of any of our other security holders a registration statement in connection with a public offering of any of our securities on a form and in a
manner that would permit the registration for the offer and sale of our common stock held by NAB, NAB will have the right to include its shares of our common stock in that offering if we continue to pursue it. NAB’s ability to participate in
any such offering will be subject to market “cut-back” exceptions.
S-3 Registration.
When we are eligible to use a
registration statement on Form S-3 under the Securities Act, or a Form S-3, NAB will be able to request such registration and we will be obligated, subject to limited exceptions, to use reasonable best efforts to file the Form S-3 and cause it to
become effective. NAB will be able to request that we complete three S-3 registrations while the agreement is in effect subject to limitations on, among other things, minimum offering size. NAB will be able to sell shares of our common stock that it
beneficially owns upon not less than three business days’ prior notice to us, subject to market “cut-back” exceptions regarding the size of the offering.
Subject to certain exceptions, we may delay the filing of a registration statement after an S-3 registration request has been made in the same
circumstances as we may do so for demand registrations.
Registration Procedures Expenses.
We will be generally responsible for all
registration expenses, including expenses incurred by NAB, in connection with the registration, offer and sale of securities under the Registration Rights Agreement. NAB will be responsible for any applicable underwriting discounts or commissions.
The Registration Rights Agreement will set forth customary registration procedures, including an agreement by us to make our management available for road show presentations in connection with any underwritten offerings. We will also agree to
indemnify NAB and its permitted transferees with respect to liabilities resulting from untrue statements or omissions in any registration statement used in any such registration, other than untrue statements or omissions resulting from information
furnished to us for use in the registration statement by NAB or wholly owned subsidiaries of NAB.
191
Transitional Services Agreement
We intend to enter into a Transitional Services Agreement with NAB prior to the completion of this offering, which we refer to in this
prospectus as the “Transitional Services Agreement.” The Transitional Services Agreement will govern the continued provision of certain services to us by NAB for the applicable transition period, including the provision of the following
services:
|
|
•
|
|
access to computer databases and risk modeling applications and simulations that we deploy as part of our risk management framework;
|
|
|
•
|
|
continuing to act as counterparty to us on any interest rate swaps we may desire to obtain for purposes of hedging our loan portfolio;
|
|
|
•
|
|
daily and month-end fair value calculations for use in our month-end accounting of certain of our loans and interest rate swaps;
|
|
|
•
|
|
access to systems and applications used to report financial information and risk positions to NAB for consolidation in NAB’s overall financial results and risk management processes;
|
|
|
•
|
|
certain risk, credit rating and tax oversight currently provided to us by NAB New York Branch through its systems;
|
|
|
•
|
|
certain insurance coverage for us and our operations under NAB’s group-wide insurance policies; and
|
|
|
•
|
|
access to a specialized data circuit used for our computer systems.
|
We do not intend to enter into
transitional arrangements with NAB regarding other matters such as external financial reporting, external communications or investor relations services, which we will source internally or through third party service providers. In addition, we
generally expect to hire personnel or contract with third party vendors to provide the services NAB will provide under the Transitional Services Agreement prior to the expiration of the applicable transition period.
Interest Rate Swaps.
NAB London Branch currently acts as counterparty for all our interest rate swaps. As of June 30, 2014, the total
notional amount of swaps outstanding was approximately $946.8 million. Based upon a periodic review we have undertaken in consultation with a third party alternative pricing source, we believe these swaps were entered into on commercially reasonable
terms that could have been negotiated with an independent third party. During fiscal year 2013, we entered into new lending relationships with our customers that generated approximately $2.8 million in revenue related to our interest rate
swaps, of which approximately $0.8 million was paid to us by NAB London Branch under the terms of our revenue sharing relationship with NAB London Branch. Following the completion of this offering, we plan to continue to hold our existing
interest rate swap portfolio to maturity with NAB London Branch continuing to serve as counterparty. As of June 30, 2014, the average remaining duration on our interest rate swaps with NAB London Branch was 6.3 years.
The Transitional Services Agreement will provide that from the completion of this offering until the Less Than Majority Holder Date, NAB
London Branch will continue to act as counterparty on any interest rate swaps we may desire to obtain consistent with past practice, on terms set in a manner consistent with past practice and based on then-prevailing market terms. During this
period, we also expect to begin contracting with one or more third parties to act as counterparty on new interest rate swaps, although we expect to continue to transact with NAB London Branch as well. By the Less Than Majority Holder Date, we expect
to develop relationships with counterparties other than NAB London Branch sufficient to permit us to continue entering into interest rate swaps in the future. We do not anticipate that our costs of entering into these swap transactions with third
party counterparties will be materially different than our costs of entering into these swap transactions with NAB London Branch.
Fair
Value Calculations.
From the completion of this offering until the later of the Less Than Majority Holder Date and the maturity of our interest rate swap portfolio held with NAB London Branch, NAB will continue to provide us with fair value
calculations used in the mark-to-market accounting of certain of our loans
192
and interest rate swaps for financial and regulatory reporting purposes. No commission or other payment was made for these services during fiscal year 2013, and we will not be required to pay for
these services under the terms of the Transitional Services Agreement.
Systems and Application Access.
Upon the completion of this
offering, we will remain a consolidated subsidiary of NAB for purposes of its financial and regulatory reporting. From the completion of this offering until the time NAB is no longer required to consolidate us in its financial results, NAB will
provide us access to systems and applications used by NAB to report and consolidate its aggregate financial results and risk positions across its enterprise. During fiscal year 2013, we paid NAB approximately $100,000 in fees for these services. We
expect the fees we will pay for these services under the Transitional Services Agreement will be materially consistent with the fees we paid as a wholly owned subsidiary of NAB. We will not require these services once our financial results are no
longer consolidated by NAB.
Risk, Credit Rating and Tax Oversight.
Following the completion of this offering, NAB will continue to
provide us with certain risk, credit rating and tax oversight currently provided to us and recorded through NAB’s systems by NAB employees. During the period when these services are being provided, we expect to engage one or more additional
third party vendors to begin providing similar services to ensure an orderly transition following NAB’s cessation of these services, which will result in some duplicate costs for a period of time during the transition period, which we do not
expect will be material. NAB will continue to provide all of these services, other than tax oversight services, until the later of the Less Than Majority Holder Date and the one-year anniversary of the completion of this offering, and will continue
providing tax oversight services until the one-year anniversary of the Less Than Majority Holder Date. During fiscal year 2013, we paid NAB approximately $200,000 in fees for these services. We expect the fees we will pay for these services under
the Transitional Services Agreement will be materially consistent with the fees we paid as a wholly owned subsidiary of NAB.
Insurance.
For a period of time following the completion of this offering until one year after the Less Than Majority Holder Date, NAB
will continue to provide us with various insurance-related services currently provided to us by NAB. Prior to this date, we intend to transition these services to enable our personnel to handle all insurance-related matters, including by contracting
with third parties as appropriate. During fiscal year 2013, we paid NAB approximately $935,000 in fees for these services. These fees were based on then-prevailing rates in the insurance market. The fees we will pay for these services under the
Transitional Services Agreement will also be based on prevailing market rates.
Other Provisions.
We and NAB will work together in
good faith to mutually agree to migration plans for each of the services being provided under the Transitional Services Agreement and have agreed to discuss in good faith the mitigation of any risks or issues relating to the migration of any of the
services as part of the migration planning process. We may terminate any of the services provided under the Transitional Services Agreement earlier, however, as mutually agreed by both us and NAB, upon our delivery of at least 60 days’ prior
written notice to NAB or in certain other circumstances, provided that in such case we will be responsible for any fees or expenses incurred by NAB as a result of such termination.
Except for breaches of certain intellectual property licenses, breaches of confidentiality and data protection provisions and breaches of
applicable law in connection with provision or receipt of the services being provided under the Transitional Services Agreement, neither we nor NAB will be liable for claims in connection with or arising out of the Transitional Services Agreement in
an aggregate amount exceeding the aggregate payments made for services under the Transitional Services Agreement.
Although we believe the
Transitional Services Agreement contains commercially reasonable terms (including fees for the services provided) that could have been negotiated with an independent third party, the terms of the agreement may later prove to be more or less
favorable than arrangements we could make to provide these services internally or to obtain them from unaffiliated service providers in the future.
193
Related Party Transactions with NAB
Services Subject to the Transitional Services Agreement
As discussed above, NAB has provided certain services to us historically and will continue to provide these services for a limited transitional
period. For a discussion of these services and the fees we have paid NAB for the fiscal year ended September 30, 2013, see “—Relationship with NAB—Transitional Services Agreement.”
Indebtedness Held by NAB and Its Affiliates
NAB and its affiliates have provided funding to us. Described below are certain subordinated capital notes issued to NAB and a credit line
provided by NAB.
2018 Subordinated Capital Note
. In connection with NAB’s acquisition of us in 2008, Great Western issued to
NAB New York Branch a $35.8 million subordinated capital note due on June 3, 2018. Interest on the note is payable quarterly and accrues at a rate equal to the London inter-bank offered rate, or LIBOR, for three-month U.S. dollar deposits plus
205 basis points. The interest rate on the note is recalculated every quarter and was 2.27% at June 30, 2014. We paid $0.9 million in interest on the note during the year ended September 30, 2013 and paid $0.6 million in interest during the
nine-month period ended June 30, 2014. Subject to receipt of regulatory approval, we may prepay the note at any time, in whole but not in part, without penalty.
Revolving Line of Credit
. Great Western has a $10.0 million revolving line of credit issued by NAB, which is due on demand. Amounts
outstanding under the line of credit bear interest at a rate equal to LIBOR for three-month U.S. dollar deposits plus 125 basis points, with interest payable quarterly. The interest rate is recalculated every quarter and was 1.41% at June 30, 2014.
There were outstanding advances of $5.5 million on this line of credit at both June 30, 2014 and September 30, 2013. We incurred $93,000 in interest on outstanding amounts under the line of credit during the year ended September 30, 2013
and incurred $68,000 in interest during the nine-month period ended June 30, 2014. We may prepay all amounts outstanding under the revolving line of credit without penalty.
2020 and 2021 Subordinated Capital Notes
. In 2010, NAI issued to NAB New York Branch an $85.0 million subordinated capital note
due April 30, 2020. In 2011, NAI also issued to NAB New York Branch a $100.0 million subordinated capital note due June 30, 2021. The consolidated financial information included elsewhere in this prospectus is for Great Western and its
consolidated subsidiaries at and for the period presented. Since NAI is not a subsidiary of Great Western or otherwise included in Great Western’s consolidated financial information, these subordinated capital notes and the interest payable
thereon are not included in such financial information. Prior to the contribution of NAI to Great Western Bancorp, Inc., NAI intends to prepay all outstanding amounts under these subordinated capital notes prior to the completion of the Formation
Transactions.
Other
NAB is a dealer of certain securities we purchase from time to time. We purchased approximately $56.1 million of securities from NAB
during the year ended September 30, 2013. No commission was paid in connection with those purchases.
Prior to the offering, NAB
provided certain of our employees with restricted shares of NAB common stock in connection with the satisfaction of short- and long-term incentive goals. We record a liability in favor of NAB based on the value and vesting schedule of the issued
shares. The aggregate amounts of this liability were $3.2 million and $4.3 million as of June 30, 2014 and September 30, 2013, respectively. Following the completion of this offering, we expect that these restricted shares will continue to vest
in accordance with their terms, and we will provide NAB with any information NAB reasonably requests to permit vesting of these shares in accordance with their terms. NAB will also provide us with information regarding the value, vesting schedule
and outstanding amount of restricted shares upon our reasonable request.
194
Our Chief Financial Officer and Chief Credit Officer are NAB employees, and our Head of
Credit—Agribusiness is a Bank of New Zealand employee, who were temporarily seconded to work with us beginning in January 2013, November 2010 and December 2010, respectively, and continuing through December 31, 2014. In addition, our Chief Risk
Officer is an employee of Bank of New Zealand, a NAB subsidiary, who was temporarily seconded to work with us beginning in December 2010 and continuing through October 2015. We are generally responsible for paying the salary and benefits of these
individuals. In connection with this offering, our Chief Financial Officer’s and Chief Risk Officer’s employment will be transferred to us and we intend to enter into employment agreements with them. The secondments of our Chief Credit
Officer and Head of Credit—Agribusiness will terminate in December 31, 2014 in accordance with their current arrangements. In addition, an employee of NAB New York Branch who works from our offices in Omaha, NE assists us in providing pricing
terms for certain of our long-term fixed-rate loans for which we enter into interest rate swaps. We do not pay any portion of this person’s salary or benefits. We will continue to receive services provided by this person under the Transitional
Services Agreement.
During fiscal year 2013, NAB apportioned to its U.S. operations, including us, certain costs associated with
NAB’s compliance with rules implemented pursuant to authority granted under the Dodd-Frank Act. These costs were apportioned based on the aggregate amount of assets of each of NAB’s U.S. operations relative to the total assets of all of
NAB’s U.S. operations. During fiscal year 2013, we paid NAB approximately $200,000 related to these apportioned costs.
Other Related Party
Transactions
In the ordinary course of our business, we have engaged and expect to continue engaging in ordinary banking transactions
with our directors, executive officers, their immediate family members and companies in which they may have a 5% or more beneficial ownership interest, including loans to such persons. Any such loan was made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time such loan was made as loans made to persons who were not related to us. These loans do not involve more than the normal credit collection risk and do not present any other
unfavorable features.
Mr. Karels’s son owns a 22.5% interest in Sioux Falls Financial Services, LLC, which leases to us certain
property in South Dakota we use as an operations center. The lease agreement for this property commenced on April 1, 2011 and contains customary and standard terms for similar lease arrangements. The term of the lease runs through
March 31, 2020, at which point we have the option to renew the lease for an additional five year term. During fiscal year 2013, payments under this lease totaled approximately $133,000.
At our request, the underwriters have reserved for sale, at the initial public offering price, up to 5% of the shares offered by this
prospectus for sale to some of our directors, officers, employees, friends, family, customers and related persons through a reserved share program. See “Underwriting—Reserved Share Program” for additional information regarding the
reserved share program.
Related Party Transaction Policy
Our board of directors has adopted a written policy governing the review, approval or ratification of transactions between us or any of our
subsidiaries and any related party in which the amount involved since the beginning of our last completed fiscal year will or may be expected to exceed $120,000 and in which one of our executive officers, directors, director nominees or stockholders
beneficially owning more than 5% of our outstanding common stock (or their immediate family members) has a direct or indirect material interest. The policy calls for the related person transactions to be reviewed and, if deemed appropriate, approved
or ratified by our corporate governance and nominating committee. In determining whether or not to approve or ratify a related person transaction, our corporate governance and nominating committee takes into account, among other factors it deems
important, whether the related person transaction is in our best interests and whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances. In the event
a member of our corporate governance and nominating committee is not disinterested with respect to the related person transaction under review, that member may not participate in the review, approval or ratification of that related person
transaction.
195
Certain decisions and transactions are not subject to the related person transaction approval
policy, including: (i) decisions on compensation or benefits relating to directors or executive officers and (ii) indebtedness to us in the ordinary course of business, on substantially the same terms, including interest rate and
collateral, as those prevailing at the time for comparable loans with persons not related to us and not presenting more than the normal risk of collectability or other unfavorable features.
196
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock is a summary of the material terms of our amended and restated certificate of incorporation
and amended and restated bylaws. Reference is made to the more detailed provisions of, and the descriptions are qualified in their entirety by reference to, these documents, forms of which are filed with the SEC as exhibits to the registration
statement of which this prospectus is a part, and applicable law. This description assumes the effectiveness of our amended and restated certificate of incorporation and amended and restated bylaws, which will take effect prior to the consummation
of this offering.
General
Our
authorized capital stock consists of shares of common stock, par value $0.01 per share, which we refer to in this prospectus as “common stock,”
shares of non-voting common stock, par value $0.01 per share, which we refer to in this prospectus as “non-voting common stock,” and
shares of preferred stock, par value $0.01 per share. As of
, 2014, we had shares of our common stock issued and
outstanding, and no shares of our non-voting common stock or preferred stock were issued and outstanding. The authorized but unissued shares of our capital stock will be available for future issuance without stockholder approval, unless otherwise
required by applicable law or the rules of any applicable securities exchange and subject to NAB’s consent pursuant to the terms of the Stockholder Agreement. All of our issued and outstanding shares of capital stock are validly issued, fully
paid and non-assessable.
Common Stock and Non-Voting Common Stock
Subject to the rights and preferences granted to holders of our preferred stock then outstanding, and except with respect to voting rights,
conversion rights and certain distributions of our capital stock, holders of our common stock and our non-voting common stock will rank equally with respect to distributions and have identical rights, preferences, privileges and restrictions,
including the right to attend meetings and receive any information distributed by us with respect to such meetings.
Dividends.
Holders of our common stock and non-voting common stock are equally entitled to receive ratably such dividends as may be declared from time to time by our board of directors out of legally available funds. In no event will any stock dividends or
stock splits or combinations of stock be declared or made on common stock or non-voting common stock unless the shares of common stock and non-voting common stock at the time outstanding are treated equally and identically, provided that, in the
event of a dividend of common stock or non-voting common stock, shares of common stock shall only be entitled to receive shares of common stock and shares of non-voting common stock shall only be entitled to receive shares of non-voting common
stock. The ability of our board of directors to declare and pay dividends on our common stock and non-voting common stock is subject to the laws of the state of Delaware, applicable federal and state banking laws and regulations, and the terms of
any senior securities (including preferred stock) we may then have outstanding. Our principal source of income is dividends that are declared and paid by our bank on its capital stock. Therefore, our ability to pay dividends is dependent upon the
receipt of dividends from our bank. See “Dividend Policy and Dividends.”
Voting Rights.
Each holder of our common stock
is entitled to one vote for each share of record held on all matters submitted to a vote of stockholders, except as otherwise required by law and subject to the rights and preferences of the holders of any outstanding shares of our preferred stock.
Holders of our common stock are not entitled to cumulative voting in the election of directors. Directors are elected by a plurality of the votes cast. The holders of non-voting common stock do not have any voting power and are not entitled to vote
on any matter, except as otherwise required by law and as described herein. In addition to any other vote required by law, the affirmative vote of a majority of the outstanding shares of common stock or non-voting common stock, each voting
separately as a class, as the case may be, will be required to amend, alter or repeal (including by merger, consolidation or otherwise) any provision of our amended and restated certificate of incorporation that adversely
197
affects the rights, preferences or privileges of the common stock or non-voting common stock, respectively, in a manner that is materially adverse from the effect of such amendment, alteration or
repeal on the other class of our capital stock, as applicable.
Conversion of Non-Voting Common Stock.
Any holder of non-voting
common stock may convert any number of shares of non-voting common stock into an equal number of shares of common stock at the option of the holder if such conversion is in connection with a transfer (i) that is part of a widely distributed
public offering of our common stock, (ii) to an underwriter for the purpose of conducting a widely distributed public offering, (iii) that is part of a transfer of non-voting common stock not requiring registration under the Securities Act
in which no one transferee (or group of associated transferees) acquires the right to purchase in excess of 2% of our common stock then outstanding (including pursuant to a related series of transfers), or (iv) that is part of a transaction
approved by the Federal Reserve and the FDIC. We will reserve for issuance a number of shares of common stock into which all outstanding shares of non-voting common stock may be converted.
Liquidation Rights.
In the event of our liquidation, dissolution or winding up, holders of common stock and non-voting common stock are
entitled to share ratably in all of our assets remaining after payment of liabilities, including but not limited to the liquidation preference of any then outstanding preferred stock. Because we are a bank holding company, our rights and the rights
of our creditors and stockholders to receive the assets of any subsidiary upon liquidation or recapitalization may be subject to prior claims of our subsidiary’s creditors, except to the extent that we may be a creditor with recognized claims
against our subsidiary.
Preemptive and Other Rights.
Holders of our common stock and our non-voting common stock are not entitled
to any preemptive, subscription or redemption rights, and no sinking fund will be applicable to our common stock or our non-voting common stock.
Preferred Stock
Our amended and restated
certificate of incorporation authorizes our board of directors to establish one or more series of preferred stock. Unless required by law or any stock exchange, the authorized shares of preferred stock will be available for issuance without further
action by the stockholders, subject to NAB’s consent pursuant to the terms of the Stockholder Agreement. Our board of directors is authorized to divide the preferred stock into series and, with respect to each series, to fix and determine the
designation, terms, preferences, limitations and relative rights thereof, including dividend rights, dividend rates, conversion rights, voting rights, redemption rights and terms, liquidation preferences, sinking fund provisions and the number of
shares constituting the series. Subject to the rights of the holders of any series of preferred stock, the number of authorized shares of any series of preferred stock may be increased (but not above the total number of shares of preferred stock
authorized under our amended and restated certificate of incorporation) or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the outstanding shares.
Without stockholder approval, but subject to NAB’s consent pursuant to the terms of the Stockholder Agreement, we could issue preferred stock that could impede or discourage an acquisition attempt or other transaction that some, or a majority,
of our stockholders may believe is in their best interests or in which they may receive a premium for their common stock over the market price of the common stock.
Authorized but Unissued Capital Stock
The DGCL does not generally require stockholder approval for the issuance of authorized shares. These additional shares may be used for a
variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions. However, the listing requirements of the NYSE, which would apply so long as the common stock remains listed on the NYSE,
require stockholder approval of certain issuances equal to or exceeding 20% of the then outstanding voting power or then outstanding number of shares of common stock. In addition, our ability to issue additional shares of capital stock is subject to
NAB’s consent pursuant to the terms of the Stockholder Agreement.
198
One of the effects of the existence of unissued and unreserved common stock or preferred stock
may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or
otherwise, and thereby protect the continuity of our management and possibly deprive our stockholders of opportunities they may believe are in their best interests or in which they may receive a premium for their common stock over the market price
of the common stock.
Anti-Takeover Effects of Provisions of Applicable Law and Our Amended and Restated Certificate of Incorporation and Amended and
Restated Bylaws
Business Combination Statute.
We are a Delaware corporation subject to Section 203 of the DGCL.
Section 203 provides that, subject to certain exceptions specified in the law, we may not engage in any “business combination” with any “interested stockholder” for a three-year period following the time such stockholder
became an interested stockholder unless:
|
|
•
|
|
prior to such time, our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
|
|
|
•
|
|
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction
commenced, excluding certain shares as specified in Section 203; or
|
|
|
•
|
|
at or subsequent to such time, the business combination is approved by our board of directors and authorized at a meeting of stockholders (and not by written consent) by the affirmative vote of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested stockholder.
|
Generally, a “business combination”
includes, among other things, a merger or asset or stock sale of us or any of our majority-owned subsidiaries or any of certain other transaction resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an
“interested stockholder” is a person who, together with that person’s affiliates and associates, owns, or within the previous three years did own, 15% or more of our voting stock. Our amended and restated certificate of incorporation,
however, generally exempts NAB and all of its affiliates, and all transferees of our stock or preferred stock receiving shares from NAB or any of its affiliates, or any affiliate of any such transferee, from the definition of interested stockholder
for purposes of Section 203 of the DGCL.
Under certain circumstances, Section 203 makes it more difficult for a person who
would be an “interested stockholder” to effect various business combinations with a corporation for a three-year period. The provisions of Section 203 may encourage companies interested in acquiring us to negotiate in advance with our
board of directors because the stockholder approval requirement described above would be avoided if our board of directors approves either the business combination or the transaction that results in the stockholder becoming an interested
stockholder. These provisions also may make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.
Federal Banking Law.
The ability of a third party to acquire our stock is also limited under applicable U.S. banking laws, including
regulatory approval requirements. The BHC Act requires any “bank holding company” to obtain the approval of the Federal Reserve before acquiring, directly or indirectly, more than 5% of our outstanding common stock. Any
“company,” as defined in the BHC Act, other than a bank holding company is required to obtain the approval of the Federal Reserve before acquiring “control” of us. “Control” generally means (i) the ownership or
control of 25% or more of a class of voting securities, (ii) the ability to elect a majority of the directors or (iii) the ability otherwise to exercise a controlling influence over management and policies. A person, other than an
individual, that controls us for purposes of the BHC Act is subject to regulation and supervision as a bank holding company under the BHC Act. In addition, under the Change in Bank Control Act of 1978, as amended, and the Federal Reserve’s
regulations thereunder, any person, either individually or acting through or in concert with one or more persons, is required to provide notice to the Federal Reserve prior to acquiring, directly or indirectly, 10% or more of our outstanding common
stock (or any other class of our voting securities).
199
Classified Board.
Our amended and restated certificate of incorporation provides that our
board of directors shall be divided into three classes of directors, with the classes as nearly equal in number as possible. As a result, approximately one-third of our board of directors will be elected each year. The classification of directors
has the effect of making it more difficult for stockholders to change the composition of our board of directors.
Requirements for
Advance Notification of Stockholder Nominations and Proposals.
Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and nomination of candidates for election as directors. These procedures
provide that notice of such stockholder approval must be timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal executive offices
not less than 90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. The notice must contain certain information required to be provided by our amended and restated bylaws.
Limits on Written Consents.
Our amended and restated certificate of incorporation provides that any action to be taken by the
stockholders that the stockholders are required or permitted to take must be effected at a duly called annual or special meeting of stockholders. Our stockholders are not permitted to take action by written consent.
Annual Meetings; Limits on Special Meetings.
We expect to have annual meetings of stockholders beginning in 2015. Subject to the rights
of the holders of any series of preferred stock, special meetings of the stockholders may be called only by (i) our board of directors, (ii) the Chairperson of the Board, (iii) our Chief Executive Officer and (iv) prior to the
Non-Control Date, NAB.
Amendments to our Governing Documents.
Generally, the amendment of our amended and restated certificate of
incorporation requires approval by our board of directors and a majority vote of stockholders; however, certain material amendments (including amendments with respect to provisions governing board composition and actions by written consent) require
the approval of at least 75% of the votes entitled to be cast by the outstanding capital stock in the elections of our board of directors. Any amendment to our amended and restated bylaws requires the approval of either a majority of our board of
directors or holders of at least 75% of the votes entitled to be cast by the outstanding capital stock in the election of our board of directors. The approval of at least 75% of our board of directors is also required to amend our amended and
restated bylaws to increase the number of directors and, prior to the Non-Control Date, no such amendment shall increase the number of directors to more than thirteen or decrease the number of directors to fewer than five. In addition, to any other
vote required by law, the affirmative vote of a majority of the outstanding shares of common stock or non-voting common stock, each voting separately as a class, as the case may be, will be required to amend, alter or repeal (including by merger,
consolidation or otherwise) any provision of our amended and restated certificate of incorporation that adversely affects the privileges, preferences or rights of our common stock or non-voting common stock, respectively, in a manner that is
materially adverse from the effect of such amendment, alteration or repeal on the other class of our capital stock, as applicable. Any amendment to our amended and restated certificate of incorporation (whether by merger, consolidation or otherwise)
to increase or decrease the authorized shares of any class of common stock must be approved by a majority of the votes entitled to be cast by the holders of the shares affected by the amendment, voting as a separate class or series, as applicable.
Sole and Exclusive Forum
Our
amended and restated certificate of incorporation provides that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or
proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to
any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws or (iv) any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of
Chancery having personal jurisdiction over the
200
indispensable parties named as defendants therein and the claim not being one which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery or for which the
Court of Chancery does not have subject matter jurisdiction. Any person purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to this provision of our amended and
restated certificate of incorporation. This choice of forum provision may have the effect of discouraging lawsuits against us and our directors, officers, employees and agents. The enforceability of similar choice of forum provisions in other
companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with one or more actions or proceedings described above, a court could find the provision of our amended and restated
certificate of incorporation to be inapplicable or unenforceable.
Indemnification and Limitation of Liability
Our amended and restated bylaws provide generally that we will indemnify and hold harmless, to the full extent permitted by law, our directors,
officers, employees and agents, as well as other persons who have served as our directors, officers, employees or agents and other persons who serve or have served at our request at another corporation, limited liability company, public limited
company, partnership, joint venture, trust, employee benefit plan, fund or other enterprise in connection with any actual or threatened action, suit or proceeding, subject to limited exceptions. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to our directors, officers and controlling persons, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. Finally, our ability to provide indemnification to our directors and officers is limited by federal banking laws and regulations.
Our amended and restated certificate of incorporation limits, to the full extent permitted by law, the personal liability of our directors in
actions brought on our behalf or on behalf of our stockholders for monetary damages as a result of a director’s breach of fiduciary duty while acting in a capacity as a director. Our amended and restated certificate of incorporation does not
eliminate or limit our right or the right of our stockholders to seek injunctive or other equitable relief not involving monetary damages.
Business
Opportunities
Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, none of NAB
or any of its affiliates will have any duty to refrain from (i) engaging in a corporate opportunity in the same or similar lines of business in which we or our affiliates now engage or propose to engage or (ii) otherwise competing with us or
our affiliates. NAB will agree, as part of the Stockholder Agreement, to refrain and to cause its subsidiaries to refrain from engaging in certain activities competitive with our business, subject to certain exceptions. See “Our Relationship
with NAB and Certain Other Related Party Transactions—Relationship with NAB—Stockholder Agreement.”
Listing
We intend to apply to list our common stock on the NYSE under the symbol “GWB.”
Transfer Agent and Registrar
The
transfer agent and registrar for our common stock and our non-voting common stock is .
201
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock. Future sales of substantial amounts of our common stock in the public
market, or the perception that such sales may occur, could adversely affect market prices prevailing from time to time. Furthermore, because only a limited number of shares will be available for sale shortly after this offering due to existing
contractual and legal restrictions on resale as described below, there may be sales of substantial amounts of our common stock in the public market after the restrictions lapse. This may adversely affect the prevailing market price and our ability
to raise equity capital in the future.
Upon completion of this offering, we will have
shares of common stock outstanding. Of these shares, shares of our common stock (or
shares if the underwriters exercise their option to purchase additional shares of common stock from the NAB selling stockholder in full) sold in this offering will be freely
transferable without restriction or further registration under the Securities Act, except for any shares purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act. The remaining
shares of our common stock (or shares if the underwriters exercise their option to purchase additional
shares of common stock from the NAB selling stockholder in full) outstanding are “restricted shares” as defined in Rule 144, all of which will be beneficially owned by NAB. Restricted shares may be sold in the public market only if
registered under the Securities Act or if they qualify for an exemption from registration under Rule 144. As a result of the contractual 180-day lock-up period described below and the provisions of Rule 144, these shares will be available for sale
in the public market only after 180 days from the date of this prospectus (generally subject to volume and other offering limitations).
Subject to market conditions and other considerations, NAB intends to divest 100% of its ownership in us over time. See “Risk
Factors—Risks Related to Our Common Stock—Future sales of our common stock in the public market, including expected sales by NAB, could lower our stock price, and any additional capital raised by us through the sale of equity or
convertible securities may dilute your ownership in us.”
Rule 144
In general, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell such
securities, provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, the sale and (ii) we are subject to the Exchange Act periodic reporting requirements
for at least 90 days before the sale. Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or any time during the 90 days preceding, the sale, would be subject
to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of the following:
|
|
•
|
|
1% of the number of shares of our common stock then outstanding, which will equal approximately shares immediately after this offering; or
|
|
|
•
|
|
the average weekly trading volume of our common stock on during the four calendar weeks preceding the filing of a notice on Form 144 with respect
to the sale;
|
provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90 days before
the sale. Such sales both by affiliates and by non-affiliates must also comply with the manner of sale and notice provisions of Rule 144 to the extent applicable.
Registration Rights
Upon completion of
this offering, subject to the lock-up agreements described below, NAB will be entitled to require us to register under the Securities Act of shares of our common stock (or
shares of our
202
common stock if the underwriters exercise their option to purchase additional shares of our common stock from the NAB selling stockholder in full) that NAB will continue to beneficially own
immediately following the completion of this offering. Registration and sale of these shares under the Securities Act would result in these shares, other than shares purchased by any of our affiliates, becoming freely tradable without restriction
under the Securities Act immediately upon the effectiveness of the registration statement. See “Our Relationship with NAB and Certain Other Related Party Transactions—Relationship with NAB—Registration Rights Agreement” for more
information on NAB’s registration rights following the completion of this offering.
Registration Statement on Form S-8
In connection with or as soon as practicable following the completion of this offering, we intend to file a registration statement with the SEC
on Form S-8 to register an aggregate of shares of common stock reserved for issuance under our incentive plans, as described further under “Executive and Director
Compensation—2014 Omnibus Incentive Compensation Plan” and “Executive and Director Compensation—2014 Non-Employee Director Plan.” That registration statement will become effective upon filing and shares of common stock
covered by such registration statement will be eligible for sale in the public market immediately after the effective date of such registration statement (unless held by affiliates) subject to the lock-up agreements described below.
Lock-up Agreements
We, NAB, the NAB
selling stockholder and each of our directors and executive officers have agreed, subject to certain limited exceptions, not to offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant for the sale of, otherwise dispose of or transfer any shares of our common stock or any securities convertible into or exchangeable or exercisable for common stock for a period of 180 days after the date of this
prospectus, without the prior written consent of Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf of the underwriters. See “Underwriting.” The underwriters do not have any present intention
or arrangement to release any shares of our common stock subject to lock-up agreements prior to the expiration of the 180-day lock-up period.
203
MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF OUR
COMMON STOCK
This section summarizes the material United States federal income and estate tax consequences of the ownership and
disposition of shares of our common stock by a non-U.S. holder (as defined below). It applies to you only if you acquire your shares of common stock in this offering and you hold the shares of common stock as capital assets for U.S. federal income
tax purposes. You are a “non-U.S. holder” if you are, for United States federal income tax purposes:
|
|
•
|
|
a nonresident alien individual;
|
|
|
•
|
|
a foreign corporation; or
|
|
|
•
|
|
an estate or trust that in either case is not subject to United States federal income tax on a net income basis on income or gain from the common stock.
|
This section does not consider the specific facts and circumstances that may be relevant to a particular non-U.S. holder and does not address
the treatment of a non-U.S. holder under the laws of any state, local or foreign taxing jurisdiction. In addition, it does not represent a detailed description of the United States federal income tax consequences applicable to you if you are subject
to special treatment under the United States federal income tax laws (including if you are a United States expatriate, “controlled foreign corporation,” “passive foreign investment company” or a partnership or other pass-through
entity for United States federal income tax purposes). This section is based on the tax laws of the United States, including the Internal Revenue Code, as amended, or the Code, existing and proposed regulations, and administrative and judicial
interpretations, all as currently in effect. These laws are subject to change, possibly on a retroactive basis.
If a partnership holds
the shares of our common stock, the United States federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding shares of our common stock
should consult its tax adviser with regard to the United States federal income tax treatment of an investment in our common stock.
You should consult a tax adviser regarding the United States federal tax consequences of acquiring, holding
and disposing of shares of our common stock in your particular circumstances, as well as any tax consequences that may arise under the laws of any state, local or foreign taxing jurisdiction.
Dividends
Except as described below, if
you are a non-U.S. holder of shares of our common stock, distributions paid to you that are characterized as dividends for United States federal income tax purposes are subject to withholding of United States federal income tax at a 30% rate or at a
lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate. In addition, even if you are eligible for a lower treaty rate, we and other payors will generally be required to withhold at a 30% rate (rather
than the lower treaty rate) on dividend payments to you, unless you have furnished to us or another payor:
|
|
•
|
|
a valid Internal Revenue Service Form W-8BEN, W-8BEN-E or an acceptable substitute form upon which you certify, under penalties of perjury, your status as a non-United States person and your entitlement to the lower
treaty rate with respect to such payments; or
|
|
|
•
|
|
in the case of payments made outside the United States to an offshore account (generally, an account maintained by you at an office or branch of a bank or other financial institution at any location outside the United
States), other documentary evidence establishing your entitlement to the lower treaty rate in accordance with U.S. Treasury regulations.
|
204
If you are eligible for a reduced rate of United States withholding tax under a tax treaty, you
may obtain a refund of any amounts withheld in excess of that rate by filing a refund claim with the United States Internal Revenue Service.
If dividends paid to you are “effectively connected” with your conduct of a trade or business within the United States, and, if
required by a tax treaty, the dividends are attributable to a permanent establishment that you maintain in the United States, we and other payors generally are not required to withhold tax from the dividends, provided that you have furnished to us
or another payor a valid Internal Revenue Service
Form W-8ECI
or an acceptable substitute form upon which you represent, under penalties of perjury, that:
|
|
•
|
|
you are a non-United States person; and
|
|
|
•
|
|
the dividends are effectively connected with your conduct of a trade or business within the United States and are includible in your gross income.
|
“Effectively connected” dividends are taxed at rates applicable to United States citizens, resident aliens and domestic United
States corporations.
If you are a corporate non-U.S. holder, “effectively connected” dividends that you receive may, under
certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.
Gain on Disposition of Common Stock
If
you are a non-U.S. holder, you generally will not be subject to United States federal income tax on gain that you recognize on a disposition of shares of our common stock unless:
|
|
•
|
|
the gain is “effectively connected” with your conduct of a trade or business in the United States, and the gain is attributable to a permanent establishment that you maintain in the United States, if that is
required by an applicable income tax treaty as a condition for subjecting you to United States taxation on a net income basis;
|
|
|
•
|
|
you are an individual, you hold the shares of our common stock as a capital asset, you are present in the United States for 183 or more days in the taxable year of the sale and certain other conditions exist; or
|
|
|
•
|
|
we are or have been a United States real property holding corporation for federal income tax purposes and you held, directly or indirectly, at any time during the five-year period ending on the date of disposition, more
than 5% of our common stock and you are not eligible for any treaty exemption.
|
If you are a non-U.S. holder and the gain
from the disposition of shares of our common stock is effectively connected with your conduct of a trade or business in the United States (and the gain is attributable to a permanent establishment that you maintain in the United States, if that is
required by an applicable income tax treaty as a condition for subjecting you to United States taxation on a net income basis), you will be subject to tax on the net gain derived from the sale at rates applicable to United States citizens, resident
aliens and domestic United States corporations. If you are a corporate non-U.S. holder, “effectively connected” gains that you recognize may also, under certain circumstances, be subject to an additional “branch profits tax” at a
30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate. If you are an individual non-U.S. holder described in the second bullet point immediately above, you will be subject to a flat
30% tax or a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate, on the gain derived from the sale, which may be offset by United States source capital losses, even though you are not considered a
resident of the United States.
We have not been, are not and do not anticipate becoming a United States real property holding corporation
for United States federal income tax purposes.
205
Federal Estate Taxes
Shares of our common stock held by a non-U.S. holder at the time of death will be included in the holder’s gross estate for United States
federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.
Backup Withholding and Information Reporting
In general (except as described below), backup withholding and information reporting will not apply to a distribution of dividends on shares of
our common stock paid to you or to proceeds from the disposition of shares of our common stock by you, in each case, if you certify under penalties of perjury that you are a non-United States person, and neither we nor our paying agent (or other
payor) have actual knowledge or reason to know to the contrary. In general, if the shares of our common stock are not held through a qualified intermediary, the amount of dividends, the name and address of the beneficial owner and the amount, if
any, of tax withheld may be reported to the Internal Revenue Service.
Any amounts withheld under the backup withholding rules will
generally be allowed as a credit against your United States federal income tax liability or refunded, provided the required information is timely furnished to the Internal Revenue Service.
FATCA Withholding Taxes
Under
legislation enacted in 2010 and existing guidance issued thereafter, a 30% withholding tax will be imposed on dividends paid in respect of shares of our common stock, and on gross proceeds from the sale of shares of our common stock after
December 31, 2016, if such shares are held by or through certain foreign financial institutions (including investment funds). This withholding tax does not apply if such institution either (i) enters into an agreement with the U.S.
Treasury Department to report, on an annual basis, information with respect to certain interests in, and accounts maintained by, the institution to the extent such interests or accounts are held by certain U.S. persons or by certain non-U.S.
entities that are wholly or partially owned by U.S. persons, or (ii) is based in a country that has entered into an agreement with the United States which requires such institutions to report such information.
Accordingly, the entity through which shares of our common stock is held will affect the determination of whether such withholding is
required. Similarly, dividends in respect of, and gross proceeds from the sale of, shares of our common stock held by an investor that is a non-financial non-U.S. entity that does not qualify under certain exceptions will be subject to withholding
at a rate of 30% beginning after the dates noted above, unless such entity either (i) certifies to us (or another applicable withholding agent) that such entity does not have any “substantial U.S. owners” or (ii) provides certain
information regarding the entity’s “substantial U.S. owners,” which we (or another applicable withholding agent) will in turn provide to the U.S. Treasury Department. We will not pay any additional amounts to holders in respect of any
amounts withheld. Non-U.S. holders are encouraged to consult with their tax advisers regarding the possible implications of these rules on their investment in shares of our common stock.
206
UNDERWRITING
Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as representatives of each of the
underwriters named below. Subject to the terms and conditions set forth in an underwriting agreement among us, the NAB selling stockholder, NAB and the underwriters, the NAB selling stockholder has agreed to sell to the underwriters, and each of the
underwriters has agreed, severally and not jointly, to purchase from the NAB selling stockholder, the number of shares of common stock set forth opposite its name below.
|
|
|
|
|
Underwriter
|
|
Number
of Shares
|
|
Deutsche Bank Securities Inc.
|
|
|
|
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed,
severally and not jointly, to purchase all of the shares of common stock sold under the underwriting agreement if any of these shares are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the
non-defaulting underwriters may be increased or the underwriting agreement may be terminated.
We, NAB and the NAB selling stockholder
have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.
The underwriters are offering the shares of our common stock, subject to prior sale, when, as and if sold to and accepted by them, subject to
approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officer’s certificates and legal opinions. The
underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Commissions and Discounts
The representatives have advised us and the NAB selling stockholder that the underwriters propose initially to offer the shares of our
common stock to the public at the public offering price set forth on the cover page of this prospectus and to dealers at that price less a concession not in excess of $ per share. After the initial
offering, the public offering price, concession or any other term of the offering may be changed.
The following table shows the public
offering price, underwriting discount and proceeds before expenses to the NAB selling stockholder. We will not receive any proceeds from the sale of shares by the NAB selling stockholder. The information assumes either no exercise or full exercise
by the underwriters of their option to purchase additional shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
Without Option
|
|
|
With Option
|
|
|
Public offering price
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Underwriting discount
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Proceeds, before expenses, to the NAB selling stockholder
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
207
We estimate that the total amount of expenses payable by us relating to this offering, not
including the underwriting discount, are $ . We have agreed to reimburse the underwriters for certain expenses (including fees of counsel and FINRA-related matters) incurred in
connection with this offering up to a maximum of $ .
Option to Purchase Additional Shares
The
NAB selling stockholder has granted an option to the underwriters, exercisable for 30 days after the date of this prospectus, to purchase up to additional shares of our common
stock at the public offering price, less the underwriting discount. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the underwriting agreement, to purchase a number of additional shares
proportionate to that underwriter’s initial amount reflected in the above table.
No Sales of Similar Securities
We, the NAB selling stockholder, NAB and our executive officers and directors have agreed not to sell or transfer any common stock or
securities convertible into, exchangeable for, exercisable for, or repayable with common stock, for 180 days after the date of this prospectus without first obtaining the written consent of Deutsche Bank Securities Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated. Specifically, we and these other persons have agreed, with certain limited exceptions, not to directly or indirectly:
|
|
•
|
|
offer, pledge, sell or contract to sell any common stock;
|
|
|
•
|
|
sell any option or contract to purchase any common stock;
|
|
|
•
|
|
purchase any option or contract to sell any common stock;
|
|
|
•
|
|
grant any option, right or warrant for the sale of any common stock;
|
|
|
•
|
|
dispose of or transfer any common stock;
|
|
|
•
|
|
file a registration statement related to the common stock; or
|
|
|
•
|
|
enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common stock whether any such swap or transaction is to be settled by delivery of shares or other
securities, in cash or otherwise.
|
This lock-up provision applies to common stock and to securities convertible into or
exchangeable or exercisable for or repayable with common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of
disposition.
Listing
We intend to
apply to list our common stock on the NYSE under the symbol “GWB.”
Before this offering, there has been no public market for our
common stock. The initial public offering price will be determined through negotiations among us, the NAB selling stockholder and the representatives. In addition to prevailing market conditions, the factors to be considered in determining the
initial public offering price are:
|
|
•
|
|
the valuation multiples of publicly traded companies that the representatives believe to be comparable to us;
|
|
|
•
|
|
our financial information;
|
|
|
•
|
|
the history of, and the prospects for, us and the industry in which we compete;
|
208
|
|
•
|
|
an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues;
|
|
|
•
|
|
the present state of our development; and
|
|
|
•
|
|
the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.
|
An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public
market at or above the initial public offering price.
The underwriters do not expect to sell more than 5% of the shares in the aggregate
to accounts over which they exercise discretionary authority.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing
our common stock. However, the representatives may engage in transactions that stabilize the price of the common stock, such as bids or purchases to peg, fix or maintain that price.
In connection with the offering, the underwriters may purchase and sell our common stock in the open market. These transactions may include
short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering.
“Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares described above. The underwriters may close out any covered short position by either exercising their option to
purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the
open market as compared to the price at which they may purchase shares through the option granted to them. “Naked” short sales are sales in excess of such option. The underwriters must close out any naked short position by purchasing
shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common stock in the open market after pricing that could adversely affect
investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of shares of common stock made by the underwriters in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales may have the effect of raising or
maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. The
underwriters may conduct these transactions on the , in
the over-the-counter market or otherwise.
Neither we nor any of the underwriters make any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these
transactions or that these transactions, once commenced, will not be discontinued without notice.
209
Electronic Distribution
In connection with the offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as
e-mail.
Other Relationships
Some of
the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive,
customary fees and commissions for these transactions.
In addition, in the ordinary course of their business activities, the underwriters
and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their
customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research
views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Reserved Share Program
At our request,
the underwriters have reserved for sale, at the initial public offering price, up to 5% of the shares offered by this prospectus for sale to some of our directors, officers, employees, friends, family, customers and related persons. If these persons
purchase reserved shares, it will reduce the number of shares available for sale to the general public. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares
offered by this prospectus.
Notice to Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area, each, a Relevant Member State, no offer of shares may be made to the public in
that Relevant Member State other than:
|
|
A.
|
to any legal entity which is a qualified investor as defined in the Prospectus Directive;
|
|
|
B.
|
to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus
Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives; or
|
|
|
C.
|
in any other circumstances falling within Article 3(2) of the Prospectus Directive,
|
provided
that no such offer of shares shall require us or the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
Each person in a Relevant Member State who initially acquires any shares or to whom any offer is made will be deemed to have represented,
acknowledged and agreed that it is a “qualified investor” within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive. In the case of any shares being offered to a financial
intermediary as that term is used in Article 3(2) of the Prospectus Directive, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a
non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Relevant Member
State to qualified investors as so defined or in circumstances in which the prior consent of the representatives has been obtained to each such proposed offer or resale.
210
We and the representatives and their affiliates will rely upon the truth and accuracy of the
foregoing representations, acknowledgements and agreements.
This prospectus has been prepared on the basis that any offer of shares in
any Relevant Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of shares. Accordingly any person making or intending to make an offer in that Relevant Member
State of shares which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for us or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus
Directive in relation to such offer. Neither we nor the underwriters have authorized, nor do we or they authorize, the making of any offer of shares in circumstances in which an obligation arises for us or the underwriters to publish a prospectus
for such offer.
For the purpose of the above provisions, the expression “an offer to the public” in relation to any shares in
any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same
may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (including the 2010 PD Amending Directive, to
the extent implemented in the Relevant Member States) and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
Notice to Prospective Investors in the United Kingdom
In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may
only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or the Order, and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the
Order, which persons together we refer to in this prospectus as “relevant persons.” This document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or
investment activity to which this document relates is only available to, and will be engaged in with, relevant persons.
Notice to Prospective
Investors in Switzerland
The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or
SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or
the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing
material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither
this document nor any other offering or marketing material relating to the offering, us or our common stock have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the
offer of shares of our common stock will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, or FINMA, and the offer of our common stock has not been and will not be authorized under the Swiss Federal Act on Collective
Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares of our common stock.
211
Notice to Prospective Investors in the Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or DFSA.
This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying
any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be
illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized
financial advisor.
Notice to Prospective Investors in Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and
Investments Commission, or ASIC, in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (Cth), or the Corporations Act, and does not
purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to persons, which we refer to in this prospectus as the Exempt Investors, who are
“sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions
contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of
allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is
pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular
needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their
needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Notice to Prospective Investors in Hong Kong
The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to
“professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a
“prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the shares has been or
may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if
permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and
Futures Ordinance and any rules made under that Ordinance.
212
Notice to Prospective Investors in Japan
The shares have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as
amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in
compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, “Japanese Person” shall
mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.
Notice to Prospective Investors in
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this
prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an
invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA,
(ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance
with the conditions of, any other applicable provision of the SFA.
Where the shares are subscribed or purchased under Section 275 of
the SFA by a relevant person which is:
|
|
(a)
|
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals,
each of whom is an accredited investor; or
|
|
|
(b)
|
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
|
securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that
trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
|
|
(a)
|
to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
|
|
|
(b)
|
where no consideration is or will be given for the transfer;
|
|
|
(c)
|
where the transfer is by operation of law;
|
|
|
(d)
|
as specified in Section 276(7) of the SFA; or
|
|
|
(e)
|
as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.
|
213
VALIDITY OF COMMON STOCK
The validity of the shares of our common stock offered hereby will be passed upon for us by Sullivan & Cromwell LLP, New York, New
York. Sidley Austin
LLP
, New York, New York, will act as counsel to the underwriters.
EXPERTS
The consolidated financial statements of Great Western Bancorporation, Inc. at September 30, 2013 and 2012 and for each of the two years
in the period ended September 30, 2013 appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus, which constitutes a part of a registration statement on Form S-1 filed with the SEC, does not contain all of the information
set forth in the registration statement and the related exhibits and schedules. Some items are omitted in accordance with the rules and regulations of the SEC. Accordingly, we refer you to the complete registration statement, including its exhibits
and schedules, for further information about us and the shares of common stock to be sold in this offering. Statements or summaries in this prospectus as to the contents of any contract or other document referred to in this prospectus are not
necessarily complete and, where that contract or document is filed as an exhibit to the registration statement, each statement or summary is qualified in all respects by reference to the exhibit to which the reference relates. You may read and copy
the registration statement, including the exhibits and schedules to the registration statement, at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Information about the operation of the Public Reference
Room may be obtained by calling the SEC at 1-800-SEC-0330. Our filings with the SEC, including the registration statement, are also available to you for free on the SEC’s Internet website at www.sec.gov.
Upon completion of the offering, we will become subject to the informational and reporting requirements of the Exchange Act and, in accordance
with those requirements, will file reports and proxy and information statements with the SEC. You will be able to inspect and copy these reports and proxy and information statements and other information at the addresses set forth above. We intend
to furnish to our stockholders our annual reports containing our audited consolidated financial statements certified by an independent public accounting firm.
214
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Great Western Bancorporation, Inc.
|
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
F-2
|
|
|
|
|
|
Consolidated Financial Statements
|
|
|
|
|
|
Consolidated Balance Sheets as of September 30, 2013 and 2012
|
|
|
F-3
|
|
|
Consolidated Statements of Comprehensive Income for the fiscal years ended September
30, 2013 and 2012
|
|
|
F-4
|
|
|
Consolidated Statements of Stockholder’s Equity for the fiscal years ended September
30, 2013 and 2012
|
|
|
F-6
|
|
|
Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2013 and
2012
|
|
|
F-7
|
|
|
Notes to Consolidated Financial Statements as of and for the fiscal years ended September
30, 2013 and 2012
|
|
|
F-8
|
|
|
|
|
|
Unaudited Interim Consolidated Financial Statements
|
|
|
|
|
|
Consolidated Balance Sheets as of June 30, 2014 and September 30, 2013
|
|
|
F-57
|
|
|
Consolidated Statements of Comprehensive Income for the nine months ended June 30, 2014 and
2013
|
|
|
F-58
|
|
|
Consolidated Statements of Stockholder’s Equity for the nine months ended June 30, 2014 and
2013
|
|
|
F-59
|
|
|
Consolidated Statements of Cash Flows for the nine months ended June 30, 2014 and 2013
|
|
|
F-60
|
|
|
Notes to Consolidated Financial Statements as of and for the nine months ended June 30, 2014 and
2013
|
|
|
F-61
|
|
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholder of
Great
Western Bancorporation, Inc.
We have audited the accompanying consolidated balance sheets of Great Western Bancorporation, Inc. as of September 30,
2013 and 2012, and the related consolidated statements of comprehensive income, stockholder’s equity and cash flows for each of the two years in the period ended September 30, 2013. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Great Western Bancorporation, Inc. at September 30, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the two years in the period ended
September 30, 2013, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
July 18, 2014
F-2
GREAT WESTERN BANCORPORATION, INC.
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
282,157
|
|
|
$
|
255,985
|
|
|
Securities
|
|
|
1,480,449
|
|
|
|
1,581,875
|
|
|
Investment in affiliates
|
|
|
1,683
|
|
|
|
1,683
|
|
|
Loans, net of allowance for loan losses of $55,864 and $71,878 in 2013 and 2012, respectively (includes $347,408 and $548,780 of loans
covered by FDIC loss share agreements in 2013 and 2012, respectively, $841,862 and $688,799 of loans and written loan commitments at fair value under the fair value option in 2013 and 2012, respectively, and $8,271 and $29,268 of loans held for sale
in 2013 and 2012, respectively)
|
|
|
6,306,809
|
|
|
|
6,066,696
|
|
|
Premises and equipment
|
|
|
114,380
|
|
|
|
127,556
|
|
|
Accrued interest receivable
|
|
|
41,065
|
|
|
|
40,736
|
|
|
Other repossessed property (includes $24,412 and $44,332 of property covered under FDIC loss share agreements in 2013 and 2012,
respectively)
|
|
|
57,422
|
|
|
|
68,526
|
|
|
FDIC indemnification asset
|
|
|
45,690
|
|
|
|
68,662
|
|
|
Goodwill
|
|
|
697,807
|
|
|
|
697,807
|
|
|
Core deposits and other intangibles
|
|
|
30,444
|
|
|
|
49,745
|
|
|
Net deferred tax assets
|
|
|
32,626
|
|
|
|
4,998
|
|
|
Other assets
|
|
|
43,726
|
|
|
|
43,983
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
9,134,258
|
|
|
$
|
9,008,252
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholder’s equity
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
$
|
1,199,427
|
|
|
$
|
1,076,437
|
|
|
Interest-bearing
|
|
|
5,748,781
|
|
|
|
5,808,078
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
6,948,208
|
|
|
|
6,884,515
|
|
|
Securities sold under agreements to repurchase
|
|
|
217,562
|
|
|
|
235,572
|
|
|
FHLB advances and other borrowings
|
|
|
390,607
|
|
|
|
305,621
|
|
|
Related party notes payable
|
|
|
41,295
|
|
|
|
41,295
|
|
|
Subordinated debentures
|
|
|
56,083
|
|
|
|
56,083
|
|
|
Fair value of derivatives
|
|
|
1,526
|
|
|
|
43,117
|
|
|
Accrued interest payable
|
|
|
6,790
|
|
|
|
11,460
|
|
|
Income tax payable
|
|
|
12,390
|
|
|
|
5,629
|
|
|
Accrued expenses and other liabilities
|
|
|
42,583
|
|
|
|
36,397
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
7,717,044
|
|
|
|
7,619,689
|
|
|
|
|
|
|
Stockholder’s equity
|
|
|
|
|
|
|
|
|
|
Common stock, $1 par value, authorized 250,000 shares; issued and outstanding 2013 and 2012—198,731 shares
|
|
|
199
|
|
|
|
199
|
|
|
Additional paid-in capital
|
|
|
1,260,504
|
|
|
|
1,260,504
|
|
|
Retained earnings
|
|
|
163,592
|
|
|
|
108,749
|
|
|
Accumulated other comprehensive income (loss)
|
|
|
(7,081
|
)
|
|
|
19,111
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholder’s equity
|
|
|
1,417,214
|
|
|
|
1,388,563
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholder’s equity
|
|
$
|
9,134,258
|
|
|
$
|
9,008,252
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-3
GREAT WESTERN BANCORPORATION, INC.
Consolidated Statements of Comprehensive Income
(In Thousands, Except Share and Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Interest and dividend income
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
264,333
|
|
|
$
|
310,182
|
|
|
Taxable securities
|
|
|
28,552
|
|
|
|
32,581
|
|
|
Nontaxable securities
|
|
|
127
|
|
|
|
180
|
|
|
Dividends on securities
|
|
|
909
|
|
|
|
1,030
|
|
|
Federal funds sold and other
|
|
|
336
|
|
|
|
331
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and dividend income
|
|
|
294,257
|
|
|
|
344,304
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
33,117
|
|
|
|
44,416
|
|
|
Securities sold under agreements to repurchase
|
|
|
644
|
|
|
|
1,014
|
|
|
FHLB advances and other borrowings
|
|
|
3,103
|
|
|
|
3,098
|
|
|
Related party notes payable
|
|
|
950
|
|
|
|
1,007
|
|
|
Subordinated debentures and other
|
|
|
1,347
|
|
|
|
1,436
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
39,161
|
|
|
|
50,971
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
255,096
|
|
|
|
293,333
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
11,574
|
|
|
|
30,145
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
243,522
|
|
|
|
263,188
|
|
|
|
|
|
|
Noninterest income
|
|
|
|
|
|
|
|
|
|
Service charges and other fees
|
|
|
41,692
|
|
|
|
38,937
|
|
|
Net gain on sale of loans
|
|
|
13,724
|
|
|
|
11,794
|
|
|
Casualty insurance commissions
|
|
|
1,426
|
|
|
|
1,383
|
|
|
Investment center income
|
|
|
3,137
|
|
|
|
1,847
|
|
|
Net gain on sale of securities
|
|
|
917
|
|
|
|
7,305
|
|
|
Trust department income
|
|
|
3,545
|
|
|
|
3,241
|
|
|
Net gain from sale of repossessed property and other assets
|
|
|
2,788
|
|
|
|
6,822
|
|
|
Gain on acquisition of business
|
|
|
—
|
|
|
|
3,950
|
|
|
Other
|
|
|
10,463
|
|
|
|
13,696
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
77,692
|
|
|
|
88,975
|
|
|
|
|
|
|
|
|
|
|
|
F-4
GREAT WESTERN BANCORPORATION, INC.
Consolidated Statements of Comprehensive Income
(In Thousands, Except Share and Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
$
|
100,660
|
|
|
$
|
97,689
|
|
|
Occupancy expenses, net
|
|
|
18,532
|
|
|
|
17,366
|
|
|
Data processing
|
|
|
18,980
|
|
|
|
15,270
|
|
|
Equipment expenses
|
|
|
4,518
|
|
|
|
5,438
|
|
|
Advertising
|
|
|
6,267
|
|
|
|
8,169
|
|
|
Communication expenses
|
|
|
4,609
|
|
|
|
4,826
|
|
|
Professional fees
|
|
|
12,547
|
|
|
|
13,049
|
|
|
Derivatives, net (gain) loss
|
|
|
(40,305
|
)
|
|
|
19,369
|
|
|
Amortization of core deposits and other intangibles
|
|
|
19,290
|
|
|
|
19,646
|
|
|
Other
|
|
|
25,975
|
|
|
|
34,188
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
171,073
|
|
|
|
235,010
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
150,141
|
|
|
|
117,153
|
|
|
Provision for income taxes
|
|
|
53,898
|
|
|
|
44,158
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
96,243
|
|
|
$
|
72,995
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)—change in net unrealized gain (loss) on securities available-for-sale (net of deferred income
tax (expense) benefit of $15,376 and $(1,502) in 2013 and 2012, respectively)
|
|
|
(26,192
|
)
|
|
|
2,569
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
70,051
|
|
|
$
|
75,564
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
198,731
|
|
|
|
198,731
|
|
|
Earnings per share
|
|
$
|
484.29
|
|
|
$
|
367.31
|
|
|
|
|
|
|
Dividends per share
|
|
|
|
|
|
|
|
|
|
Dividends issued
|
|
$
|
41,400
|
|
|
$
|
41,800
|
|
|
Dividends per share
|
|
$
|
208.32
|
|
|
$
|
210.34
|
|
See accompanying notes.
F-5
GREAT WESTERN BANCORPORATION, INC.
Consolidated Statements of Stockholder’s Equity
(In Thousands, Except Share and Per Share Data)
Years Ended September 30, 2013 and 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Income
|
|
|
Common
Stock
Par Value
|
|
|
Additional
Paid-in
Capital
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Total
|
|
|
Balance, September 30, 2011
|
|
|
|
|
|
$
|
199
|
|
|
$
|
1,260,504
|
|
|
$
|
77,554
|
|
|
$
|
16,542
|
|
|
$
|
1,354,799
|
|
|
Net income
|
|
$
|
72,995
|
|
|
|
—
|
|
|
|
—
|
|
|
|
72,995
|
|
|
|
—
|
|
|
|
72,995
|
|
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net unrealized gain (loss) on securities available for sale
|
|
|
2,569
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,569
|
|
|
|
2,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
75,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $100.64 per share
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(20,000
|
)
|
|
|
—
|
|
|
|
(20,000
|
)
|
|
Common stock, $109.70 per share
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(21,800
|
)
|
|
|
—
|
|
|
|
(21,800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2012
|
|
|
|
|
|
|
199
|
|
|
|
1,260,504
|
|
|
|
108,749
|
|
|
|
19,111
|
|
|
|
1,388,563
|
|
|
Net income
|
|
$
|
96,243
|
|
|
|
—
|
|
|
|
—
|
|
|
|
96,243
|
|
|
|
—
|
|
|
|
96,243
|
|
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net unrealized gain (loss) on securities available for sale
|
|
|
(26,192
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(26,192
|
)
|
|
|
(26,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
70,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $97.62 per share
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(19,400
|
)
|
|
|
—
|
|
|
|
(19,400
|
)
|
|
Common stock, $110.71 per share
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(22,000
|
)
|
|
|
—
|
|
|
|
(22,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2013
|
|
|
|
|
|
$
|
199
|
|
|
$
|
1,260,504
|
|
|
$
|
163,592
|
|
|
$
|
(7,081
|
)
|
|
$
|
1,417,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-6
GREAT WESTERN BANCORPORATION, INC.
Consolidated Statements of Cash Flows
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
96,243
|
|
|
$
|
72,995
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
43,764
|
|
|
|
47,333
|
|
|
Net gain on sale of securities
|
|
|
(917
|
)
|
|
|
(7,305
|
)
|
|
Net gain on sale of loans
|
|
|
(13,724
|
)
|
|
|
(11,794
|
)
|
|
Net loss on sale of premises and equipment
|
|
|
632
|
|
|
|
—
|
|
|
Net gain from sale of repossessed assets and other assets
|
|
|
(2,788
|
)
|
|
|
(6,822
|
)
|
|
Gain on acquisition of business
|
|
|
—
|
|
|
|
(3,950
|
)
|
|
Provision for loan losses
|
|
|
11,574
|
|
|
|
30,145
|
|
|
Provision for repossessed assets
|
|
|
4,028
|
|
|
|
13,820
|
|
|
Proceeds from FDIC indemnification claims
|
|
|
5,284
|
|
|
|
57,090
|
|
|
Originations of residential real estate loans held-for-sale
|
|
|
(429,009
|
)
|
|
|
(420,491
|
)
|
|
Proceeds from sales of residential real estate loans held-for-sale
|
|
|
463,730
|
|
|
|
428,797
|
|
|
Net deferred income taxes
|
|
|
(6,088
|
)
|
|
|
(14,719
|
)
|
|
Changes in:
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
(329
|
)
|
|
|
(3,326
|
)
|
|
Other assets
|
|
|
(2,931
|
)
|
|
|
15,005
|
|
|
FDIC indemnification asset
|
|
|
17,689
|
|
|
|
573
|
|
|
FDIC clawback liability
|
|
|
1,202
|
|
|
|
(1,284
|
)
|
|
Accrued interest payable and other liabilities
|
|
|
(35,519
|
)
|
|
|
21,653
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
152,841
|
|
|
|
217,720
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Purchase of securities available for sale
|
|
|
(520,929
|
)
|
|
|
(874,857
|
)
|
|
Proceeds from sales and maturities of securities available for sale
|
|
|
567,931
|
|
|
|
858,709
|
|
|
Proceeds from sale of mortgage servicing rights
|
|
|
—
|
|
|
|
510
|
|
|
Net increase in loans
|
|
|
(308,696
|
)
|
|
|
(753,714
|
)
|
|
Purchase of premises and equipment
|
|
|
(3,318
|
)
|
|
|
(12,451
|
)
|
|
Proceeds from sale of premises and equipment
|
|
|
5,163
|
|
|
|
2,567
|
|
|
Proceeds from sale of other assets
|
|
|
45,877
|
|
|
|
118,834
|
|
|
Purchase of FHLB stock
|
|
|
(1,967
|
)
|
|
|
(6,716
|
)
|
|
Business acquisitions, net of cash acquired
|
|
|
—
|
|
|
|
(23,014
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(215,939
|
)
|
|
|
(690,132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Net increase in deposits
|
|
|
63,693
|
|
|
|
254,100
|
|
|
Net increase (decrease) in securities sold under agreements to repurchase
|
|
|
(18,009
|
)
|
|
|
20,923
|
|
|
Proceeds from FHLB advances and other borrowings
|
|
|
84,986
|
|
|
|
132,078
|
|
|
Net change in note payable to NAB
|
|
|
—
|
|
|
|
(7,000
|
)
|
|
Dividends paid
|
|
|
(41,400
|
)
|
|
|
(41,800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
89,270
|
|
|
|
358,301
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and due from banks
|
|
|
26,172
|
|
|
|
(114,111
|
)
|
|
Cash and due from banks, beginning of year
|
|
|
255,985
|
|
|
|
370,096
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks, end of year
|
|
$
|
282,157
|
|
|
$
|
255,985
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flows information
|
|
|
|
|
|
|
|
|
|
Cash payments for interest
|
|
$
|
43,832
|
|
|
$
|
51,502
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments for income taxes
|
|
$
|
58,599
|
|
|
$
|
51,249
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedules of noncash investing and financing activities
|
|
|
|
|
|
|
|
|
|
Loans transferred to repossessed assets and other assets
|
|
$
|
(28,980
|
)
|
|
$
|
(62,158
|
)
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-7
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Great Western Bancorporation, Inc.
(the “Company”) is a bank holding company organized under the laws of Iowa. The primary business of the Company is ownership of its wholly owned subsidiary, Great Western Bank (the “Bank”). The Bank is a full-service regional
bank focused on relationship-based business and agri-business banking in Arizona, Colorado, Iowa, Kansas, Missouri, Nebraska, and South Dakota. The Company and the Bank are subject to the regulation of certain federal and/or state agencies and
undergo periodic examinations by those regulatory authorities. Substantially all of the Company’s income is generated from banking operations. The Company is a wholly owned indirect subsidiary of National Australia Bank Limited
(“NAB”).
Segment Reporting
The
“Segment Reporting” topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) requires that public companies report certain information about operating segments. It also
requires that public companies report certain information about their products and services, the geographic areas in which they operate, and their major customers. The Company is a holding company for a regional bank, which offers a wide array of
products and services to its customers. Pursuant to its banking strategy, emphasis is placed on building relationships with its customers, as opposed to building specific lines of business. As a result, the Company is not organized and does not
allocate resources around discernible lines of business or geographies and prefers to work as an integrated unit to customize solutions for its customers, with business line and geographic emphasis and product offerings changing over time as needs
and demands change. Therefore, the Company only reports one segment, which is consistent with the Company’s preparation of financial information that is evaluated regularly by management in deciding how to allocate resources and assess
performance.
Principles of Consolidation
The
accompanying consolidated financial statements include the accounts and results of the Company and its subsidiaries after elimination of all significant intercompany accounts and transactions.
Basis of Presentation and Use of Estimates
The
accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). U.S. GAAP requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Certain items in
prior periods have been reclassified to conform to the current presentation.
Subsequent Events
The Company evaluated subsequent events through the date its consolidated financial statements were issued. There were no material events that would require
recognition in the 2013 or 2012 consolidated financial statements or disclosure in the notes to the consolidated financial statements.
F-8
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Business Combinations
The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations”
(“ASC 805”). The Company recognizes the fair value of the assets acquired and liabilities assumed, immediately expenses transaction costs and accounts for restructuring plans separately from the business combination. There is no separate
recognition of the acquired allowance for loan losses on the acquirer’s balance sheet as credit related factors are incorporated directly into the fair value of the loans recorded at the acquisition date. The excess of the cost of the
acquisition over the fair value of the net tangible and intangible assets acquired is recorded as goodwill. Alternatively, a bargain purchase gain is recorded equal to the amount by which the fair value of assets purchased exceeds the fair value of
liabilities assumed and consideration paid.
Results of operations of the acquired business are included in the consolidated statements of comprehensive
income from the effective date of acquisition.
Cash and Due From Banks
For purposes of the consolidated statements of cash flows, management has defined cash and cash equivalents to include cash on hand, amounts due from banks
(including cash items in process of clearing), and amounts held at other financial institutions with an initial maturity of 90 days or less.
Securities
The Company classifies securities upon
purchase in one of three categories: trading, held-to-maturity, or available-for-sale. Debt and equity securities held for resale are classified as trading. Debt securities for which the Company has the ability and positive intent to hold until
maturity are classified as held-to-maturity. All other securities are classified as available-for-sale as they may be sold prior to maturity in response to changes in the Company’s interest rate risk profile, funding needs, demand for
collateralized deposits by public entities or other reasons.
Held-to-maturity securities are stated at amortized cost, which represents actual cost
adjusted for premium amortization and discount accretion. Available-for-sale securities are stated at fair value, with unrealized gains and losses, net of related taxes, included in stockholder’s equity as a component of accumulated other
comprehensive income (loss).
Trading securities are stated at fair value. Realized and unrealized gains and losses from sales and fair value adjustments
of trading securities are included in other noninterest income in the consolidated statements of comprehensive income.
Declines in the fair value of
investment securities available for sale (with certain exceptions for debt securities noted below) that are deemed to be other-than-temporary are recognized in earnings as a realized loss, and a new cost basis for the securities is established. In
evaluating other-than-temporary impairment, management considers the length of time and extent to which the fair value has been less than amortized cost, the financial condition and near-term prospects of the issuer, and the intent and ability of
the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value in the near term. Declines in the fair value of debt securities below amortized cost are deemed to be
other-than-temporary in circumstances where: (1) the Company has the intent to sell a security; (2) it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis; or
(3) the Company does not expect to recover the entire amortized cost basis of the security. If the Company intends to sell a security or if it is more likely than not
F-9
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
that the Company will be required to sell the security before recovery, an other-than-temporary impairment loss is recognized in earnings equal to the difference between the security’s
amortized cost basis and its fair value. If the Company does not intend to sell the security or it is not more likely than not that it will be required to sell the security before recovery, the other-than-temporary impairment write-down is separated
into an amount representing credit loss, which is recognized in earnings, and an amount related to all other factors, which is recognized in other comprehensive income.
Interest and dividends, including amortization of premiums and accretion of discounts, are recognized as interest income when earned. Realized gains and
losses on sales (using the specific identification method) and declines in value judged to be other-than-temporary are included in noninterest income in the consolidated statements of comprehensive income.
Federal Home Loan Bank Stock
Investments in the Federal
Home Loan Bank (“FHLB”) stock are restricted as to redemption and are carried at cost. Investments in FHLB stock are reviewed regularly for possible other-than-temporary impairment, and the cost basis of this investment is reduced by any
declines in value determined to be other-than-temporary.
Loans
The Company’s accounting method for loans differs depending on whether the loans were originated or purchased and, for purchased loans, whether the loans
were acquired at a discount related to evidence of credit deterioration since date of origination.
Originated Loans
Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or pay-off, generally are reported at their outstanding
principal balance, adjusted for charge-offs, the allowance for loan losses, and any unamortized deferred fees or costs.
Interest income on loans is
accrued daily on the outstanding balances. Accrual of interest is discontinued when management believes, after considering collection efforts and other factors, the borrower’s financial condition is such that collection of interest is doubtful.
Generally, when loans are placed on nonaccrual status, interest receivable is reversed against interest income in the current period. Interest payments received thereafter are applied as a reduction to the remaining principal balance as long as
concern exists as to the ultimate collection of the principal. Loans are removed from nonaccrual status when they become current as to both principal and interest and concern no longer exists as to the collectability of principal and interest.
The Company has elected to measure certain long-term loans and written loan commitments at fair value to assist in managing interest rate risk for longer-term
loans. Fair value loans are fixed-rate loans having original maturities of 5 years or greater (typically between 5 and 15 years) to our business and agribusiness banking customers to assist them in facilitating their risk management strategies. The
fair value option was elected upon the origination or acquisition of these loans and written loan commitments. Interest income is recognized in the same manner on loans reported at fair value as on non-fair value loans, except in regard to
origination fees and costs which are recognized immediately upon closing. The changes in fair value of long-term loans and written loan commitments at fair value are reported in loan interest income.
F-10
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
For loans held for sale, loan fees charged or received on origination, net of certain direct loan origination
costs, are recognized in income when the related loan is sold. For loans held for investment, loan fees, net of certain direct loan origination costs, are deferred, and the net amount is amortized as an adjustment of the related loan’s yield.
The Company is generally amortizing these amounts over the contractual lives of the loans. Commitment fees are recognized as income when received.
The
Company grants commercial, agricultural, consumer, residential real estate, and other loans to customers primarily in Arizona, Colorado, Iowa, Kansas, Missouri, Nebraska, and South Dakota. The amount of collateral obtained, if deemed necessary, is
based on management’s credit evaluation of the borrower. Collateral held varies but includes accounts receivable, inventory, property and equipment, residential real estate, and income-producing commercial and agricultural properties.
Government guarantees are also obtained for some loans, which reduces the Company’s risk of loss.
Loans originated and intended for sale in the
secondary market are carried at the lower of cost or fair value. Loans held for sale include fixed rate single-family residential mortgage loans under contract to be sold in the secondary market. In most cases, loans in this category are sold within
45 days. These loans are sold with the mortgage servicing rights released. Under limited circumstances, buyers may have recourse to return a purchased loan to the Company. Recourse conditions may include early payment default, breach of
representation or warranties, or documentation deficiencies.
Fair value of loans held for sale is determined based on prevailing market prices for loans
with similar characteristics, sale contract prices, or, for certain portfolios, discounted cash flow analyses. Declines in fair value below cost (and subsequent recoveries) are recognized in net gain on sale of loans. Deferred fees and costs related
to these loans are not amortized but are recognized as part of the cost basis of the loan at the time it is sold. Gains or losses on sales are recognized upon delivery and included in net gain on sale of loans.
Purchased Loans
Loans acquired (non-impaired and
impaired) in a business acquisition are recorded at their fair value at the acquisition date. Credit discounts are included in the determination of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date.
In determining the acquisition date fair value of purchased loans with evidence of credit deterioration (“purchased impaired loans”), and in
subsequent accounting, the Company generally aggregates impaired purchased consumer and certain smaller balance impaired commercial loans into pools of loans with common risk characteristics, while accounting for larger-balance impaired commercial
loans individually. Expected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level-yield method.
Management estimates the cash flows expected to be collected at acquisition and at subsequent measurement dates using internal risk models, which incorporate
the estimate of key assumptions, such as default rates, loss severity, and prepayment speeds. Subsequent to the acquisition date, decreases in cash flows over those expected at the acquisition date are recognized by recording an allowance for loan
losses. Subsequent increases in cash flow over those expected at the acquisition date are recognized as reductions to allowance for loan losses to the extent impairment was previously recognized and thereafter as interest income prospectively.
For purchased loans not deemed impaired at the acquisition date, the difference between the fair value of the loans and the expected cash flows of the loans
at acquisition date is recognized in interest income on a level-yield
F-11
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
method over the life of the loans. Credit discounts representing the principal losses expected over the life of the loan are a component of the initial fair value. Subsequent to the purchase
date, the methods utilized to estimate the required allowance for loan losses for these loans is similar to originated loans; however, the Company records a provision for loan losses only when the required allowance exceeds any remaining credit
discounts.
Credit Risk Management
The
Company’s strategy for credit risk management includes well-defined, centralized credit policies, uniform underwriting criteria and ongoing risk monitoring and review processes for all credit exposures. The strategy also emphasizes
diversification on a geographic, industry, and customer level; regular credit examinations; and management reviews of loans exhibiting deterioration of credit quality. The credit risk management strategy also includes a credit risk assessment
process that performs assessments of compliance with commercial and consumer credit policies, risk ratings, and other critical credit information. Loan decisions are documented with respect to the borrower’s business, purpose of the loan,
evaluation of the repayment source, and the associated risks, evaluation of collateral, covenants and monitoring requirements, and risk rating rationale.
The Company categorizes its loan portfolio into six classes, which is the level at which it develops and documents a systematic methodology to determine the
allowance for loan losses.
The Company’s six loan portfolio classes are residential real estate, commercial real estate, commercial non real estate,
agriculture, consumer and other lending.
The residential real estate lending class includes loans made to consumer customers including residential
mortgages, residential construction loans and home equity loans and lines. These loans are typically fixed rate loans secured by residential real estate. Home equity lines are revolving accounts giving the borrower the ability to draw and repay
balances repeatedly, up to a maximum commitment, and are secured by residential real estate. Home equity lines typically have variable rate terms which are benchmarked to a prime rate. Historical loss history is the primary factor in determining the
allowance for loan losses for the residential real estate lending class. Key risk characteristics relevant to residential real estate lending class loans primarily relate to the borrower’s capacity and willingness to repay and include
unemployment rates and other economic factors, and customer payment history. These risk characteristics, among others, are reflected in the environmental factors considered in determining the allowance for loan losses.
The commercial real estate lending class includes loans made to small and middle market businesses, including multifamily properties. Loans in this class are
secured by commercial real estate. Historical loss history and updated loan-to-value information on collateral-dependent loans are the primary factors in determining the allowance for loan losses for the commercial real estate lending class. Key
risk characteristics relevant to the commercial real estate lending class include the industry and geography of the borrower’s business, purpose of the loan, repayment source, borrower’s debt capacity and financial performance, loan
covenants, and nature of pledged collateral. We consider these risk characteristics in assigning risk ratings and estimating environmental factors considered in determining the allowance for loan losses.
The commercial non real estate lending class includes loans made to small and middle market businesses, and loans made to public sector customers. Loans in
this class are secured by the operations and cash flows of the borrowers, and any guarantors. Historical loss history and updated loan-to-value information on collateral-dependent loans are the primary factors in determining the allowance for loan
losses for the commercial non real estate lending class. Key risk characteristics relevant to the commercial non real estate lending class include the industry and geography of the borrower’s business, purpose of the loan, repayment source,
borrower’s debt
F-12
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
capacity and financial performance, loan covenants, and nature of pledged collateral. We consider these risk characteristics in assigning risk ratings and estimating environmental factors
considered in determining the allowance for loan losses.
The agriculture lending class includes loans made to small and mid-size agricultural individuals
and businesses. Loans in this class are secured by agricultural real estate, production, and cash flows, and any guarantors. Historical loss history and updated loan-to-value information on collateral-dependent loans are the primary factors in
determining the allowance for loan losses for the agriculture lending class. Key risk characteristics relevant to the agriculture lending class include the geography of the borrower’s operations, commodity prices and weather patterns, purpose
of the loan, repayment source, borrower’s debt capacity and financial performance, loan covenants, and nature of pledged collateral. We consider these risk characteristics in assigning risk ratings and estimating environmental factors
considered in determining the allowance for loan losses.
The consumer lending class includes loans made to consumer customers including loans secured by
automobiles and other installment loans, and the other lending class includes credit card loans and unsecured revolving credit lines. Historical loss history is the primary factor in determining the allowance for loan losses for the consumer and
other lending classes. Key risk characteristics relevant to loans in the consumer and other lending classes primarily relate to the borrower’s capacity and willingness to repay and include unemployment rates and other economic factors, and
customer payment history. These risk characteristics, among others, are reflected in the environmental factors considered in determining the allowance for loan losses.
The Company classifies all non-consumer loans by credit quality ratings. These ratings are Pass, Watch, Substandard, Doubtful, and Loss. Loans with a Pass and
Watch rating represent those loans not classified on the Company’s rating scale for problem credits, with loans with a Watch rating being monitored and updated at least quarterly by management. Substandard loans are those where a well-defined
weakness has been identified that may put full collection of contractual cash flows at risk. Doubtful loans are those where a well-defined weakness has been identified and a loss of contractual cash flows is known. Substandard and doubtful loans are
monitored and updated monthly. All loan risk ratings are updated and monitored on a continuous basis. The Company generally does not risk rate consumer loans unless a default event such as bankruptcy or extended nonperformance takes place.
Alternatively, standard credit scoring systems are used to assess credit risks of consumer loans.
Allowance for Loan Losses (“ALL”) and
Unfunded Commitments
The Company maintains an allowance for loan losses at a level management believes is appropriate to reserve for credit losses
inherent in our loan portfolio. The allowance for loan losses is determined based on an ongoing evaluation, driven primarily by monitoring changes in loan risk grades, delinquencies, and other credit risk indicators, which is inherently subjective.
The Company considers the uncertainty related to certain industry sectors and the extent of credit exposure to specific borrowers within the portfolio.
In addition, consideration is given to concentration risks associated with the various loan portfolios and current economic conditions that might impact the portfolio. The Company also considers changes, if any, in underwriting activities, the loan
portfolio composition (including product mix and geographic, industry, or customer-specific concentrations), trends in loan performance, the level of allowance coverage relative to similar banking institutions and macroeconomic factors, such as
changes in unemployment rates, gross domestic product, and consumer bankruptcy filings.
All of these estimates are susceptible to significant change.
Changes to the allowance for loan losses are made by charges to the provision for loan losses, which is reflected in the consolidated statements of comprehensive
F-13
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
income. Loans deemed to be uncollectible are charged off against the allowance for loan losses. Recoveries of amounts previously charged-off are credited to the allowance for loan losses.
The allowance for loan losses consist of reserves for probable losses that have been identified related to specific borrowing relationships that are
individually evaluated for impairment (“specific reserve”), as well as probable losses inherent in our loan portfolio that are not specifically identified (“collective reserve”).
The specific reserve relates to impaired loans. A loan is impaired when, based on current information and events, it is probable the Company will be unable to
collect all amounts due (interest as well as principal) according to the contractual terms of the loan agreement. Specific reserves are determined on a loan-by-loan basis based on management’s best estimate of the Company’s exposure, given
the current payment status of the loan, the present value of expected payments, and the value of any underlying collateral. Impaired loans also include loans modified in troubled debt restructurings where concessions have been granted to borrowers
experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection. Generally, the impairment
related to troubled debt restructurings is measured based on the fair value of the collateral, less cost to sell, or the present value of expected payments relative to the unpaid principal balance. If the impaired loan is identified as collateral
dependent, then the fair value of the collateral method of measuring the amount of the impairment is utilized. This method requires obtaining an independent appraisal of the collateral and applying a discount factor to the appraised value, if
necessary, and including costs to sell.
Management’s estimate for collective reserves reflects losses incurred in the loan portfolio as of the
consolidated balance sheet reporting date. Incurred loss estimates primarily are based on historical loss experience and portfolio mix. Incurred loss estimates may be adjusted to reflect current economic conditions and current portfolio trends
including credit quality, concentrations, aging of the portfolio, and/or significant policy and underwriting changes.
While management uses the best
information available to establish the allowance for loan losses, future adjustments may be necessary if economic conditions differ substantially from the assumptions used in performing the estimates.
Unfunded residential mortgage loan commitments entered into in connection with mortgage loans to be held for sale are considered derivatives and recorded at
fair value on the consolidated balance sheets with changes in fair value recorded in other interest income. All other unfunded loan commitments are generally related to providing credit facilities to customers and are not considered derivatives. For
purchased loans, the fair value of the unfunded credit commitments is considered in determination of the fair value of the loans recorded at the date of acquisition. Reserves for credit exposure on all other unfunded credit commitments are recorded
in other liabilities on the consolidated balance sheets.
FDIC Indemnification Asset and Clawback Liability
In conjunction with a Federal Deposit Insurance Corporation (“FDIC”)-assisted transaction of TierOne Bank in 2010, the Company entered into two loss
share agreements with the FDIC, one covering certain single family residential mortgage loans and one covering commercial loans and other assets, with claim periods ending June 2020 and June 2015, respectively. The agreements cover a portion of
realized losses on loans, foreclosed real estate and certain other assets. The Company has recorded assets on the consolidated balance sheets (i.e., indemnification assets) representing estimated future amounts recoverable from the FDIC.
F-14
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Fair values of loans covered by the loss sharing agreements at the acquisition date were estimated based on
projected cash flows available based on the expected probability of default, default timing and loss given default, the expected reimbursement rates (generally 80%) from the FDIC and other relevant terms of the loss sharing agreements. The initial
fair value was established by discounting these expected cash flows with a market discount rate for instruments with like maturity and risk characteristics.
The loss share assets are measured separately from the related loans and foreclosed real estate and recorded as an FDIC indemnification asset on the
consolidated balance sheets because they are not contractually embedded in the loans and are not transferrable with the loans should the Company choose to dispose of them. Subsequent to the acquisition date, reimbursements received from the FDIC for
actual incurred losses reduce the carrying amount of the loss share assets. Reductions to expected losses on covered assets, to the extent such reductions to expected losses are the result of an improvement to the actual or expected cash flows from
the covered assets, also reduce the carrying amount of the loss share assets. The rate of accretion of the indemnification asset discount included in interest income slows to mirror the accelerated accretion of the loan discount. Additional expected
losses on covered assets, to the extent such expected losses result in the recognition of an allowance for loan losses, increase the carrying amount of the loss share assets. A related increase in the value of the indemnification asset up to the
amount covered by the FDIC is calculated based on the reimbursement rates from the FDIC and is included in other noninterest income. The corresponding loan accretion or amortization is recorded as a component of interest income on the consolidated
statements of comprehensive income. Although these assets are contractual receivables from the FDIC, there are no contractual interest rates.
As part of
the loss sharing agreements, the Company also assumed a liability (“FDIC Clawback Liability”) to be paid within 45 days subsequent to the maturity or termination of the loss sharing agreements that is contingent upon actual losses incurred
over the life of the agreements relative to expected losses considered in the consideration paid at acquisition date and the amount of losses reimbursed to the Company under the loss sharing agreements. The liability was recorded at fair value as of
the acquisition date. The fair value was based on a discounted cash flow calculation that considered the formula defined in the loss sharing agreements and projected losses. The difference between the fair value at acquisition date and the projected
losses is amortized through other noninterest expense. As projected losses and reimbursements are updated, as described above, the FDIC Clawback Liability is adjusted and a gain or loss is recorded in other noninterest expense.
Premises and Equipment
Premises and equipment are stated
at cost less accumulated depreciation. Depreciation is computed principally by the straight-line method over the estimated useful lives of the assets. Costs incurred for maintenance and repairs are expensed as incurred. The range of estimated useful
lives for buildings and building improvements are 10 to 40 years and 3 to 10 years for furniture and equipment.
Long-lived Asset Impairment
The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be
recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset is less than the carrying amount of the asset, the asset’s
carrying value is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of the long-lived asset exceeds its fair value.
No long-lived asset impairments were recognized during the years ended September 30, 2013 or 2012.
F-15
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Bank Owned Life Insurance (“BOLI”)
The carrying amount of bank owned life insurance consists of the initial premium paid plus increases in cash value less the carrying amount associated with any
death benefits received, and is recorded in other assets. Death benefits paid in excess of the applicable carrying amount are recognized as income, which is exempt from income taxes.
Other Repossessed Property
Assets acquired through, or
in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management, and
the assets are carried at the lower of carrying amount or fair value less cost to sell. Income and expenses from operations of repossessed property are included in other noninterest expense. Valuation adjustments made to repossessed properties for
the years ended September 30, 2013 and 2012, totaled $4.03 million and $9.43 million, respectively, and are included in other noninterest expense.
Goodwill
Goodwill represents the cost in excess of the
fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as business acquisitions. Goodwill is evaluated annually for impairment. The Company performs its impairment evaluation in the fourth quarter of
each fiscal year. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill are not recognized in the
consolidated financial statements. No goodwill impairment was recognized during the years ended September 30, 2013 or 2012.
Core Deposits and
Other Intangibles
Intangible assets consist of core deposits, brand intangible, customer relationships, and other intangibles. Core deposits represent
the identifiable intangible value assigned to core deposit bases arising from purchase acquisitions. Brand intangible represents the value associated with the Bank charter. Customer relationships intangible represents the identifiable intangible
value assigned to customer relationships arising from a purchase acquisition. Other intangibles represent contractual franchise arrangements under which the franchiser grants the franchisee the right to perform certain functions within a designated
geographical area.
The methods and lives used to amortize intangible assets are as follows:
|
|
|
|
|
|
|
|
|
Intangible
|
|
Method
|
|
Years
|
|
|
Core deposit
|
|
Straight-line or effective yield
|
|
|
4.75 – 6.2
|
|
|
Brand intangible
|
|
Straight-line
|
|
|
15
|
|
|
Customer relationships
|
|
Straight-line
|
|
|
8.5
|
|
|
Other intangibles
|
|
Straight-line
|
|
|
5
|
|
Intangible assets are evaluated for impairment if indicators of impairment are identified. No intangible asset impairments
were recognized during the years ended September 30, 2013 or 2012.
Derivatives
The Company maintains an overall interest rate risk management strategy that permits the use of derivative instruments to modify exposure to interest rate
risk. The Company enters into interest rate swap contracts to
F-16
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
offset the interest rate risk associated with borrowers who lock in long-term fixed rates (greater than or equal to five years to maturity) through a fixed rate loan. These contracts do not
qualify for hedge accounting. Generally, under these swaps, the Company agrees with NAB to exchange the difference between fixed-rate and floating-rate interest amounts based upon notional principal amounts. These interest rate derivative
instruments are recognized as assets and liabilities on the consolidated balance sheets and measured at fair value, with changes in fair value reported in derivatives net gain or loss. Since each fixed rate loan is paired with an offsetting
derivative contract, the impact to net income is minimized.
The Company enters into forward interest rate lock commitments on mortgage loans to be held
for sale, which are commitments to originate loans whereby the interest rate on the loan is determined prior to funding. The Company also has corresponding forward sales contracts related to these interest rate lock commitments. Both the mortgage
loan commitments and the related sales contracts are considered derivatives and are recorded at fair value with changes in fair value recorded in other interest income.
Income Taxes
The Company files a consolidated income tax
return with National Americas Holdings, LLC (a wholly owned subsidiary of NAB). Income taxes are allocated pursuant to a tax-sharing arrangement, whereby the Company will pay federal and state income taxes as if it were filing on a stand-alone
basis. Income tax expense includes two components: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of
deductions over income. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax
basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods.
Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of
a deferred tax asset will not be realized.
Liabilities related to uncertain tax positions are recognized if it is more likely than not, based on the
technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals
or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized
upon settlement with a taxing authority that has full knowledge of all relevant information.
The determination of whether or not a tax position has met
the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment.
The Company recognizes interest and/or penalties related to income tax matters in other interest and noninterest expense.
Transfers of Financial Assets
Transfers of financial
assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company—put presumptively beyond reach of the
Company and its creditors, even in bankruptcy or other receivership,
F-17
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
(2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does
not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.
Securities sold under agreements to repurchase are accounted for as collateralized financing transactions and are recorded at amounts at which the securities
were financed, plus accrued interest.
Revenue Recognition
The Company recognizes revenue as it is earned based on contractual terms, as transactions occur, or as services are provided and collectability is reasonably
assured. Certain specific policies related to service charges and other fees include the following:
Deposit Service Charges
Service charges on deposit accounts are primarily fees related to customer overdraft events and not sufficient funds fees, net of any refunded fees, and are
recognized as transactions occur and services are provided. Service charges on deposit accounts also relate to monthly fees based on minimum balances, and are earned as transactions occur and services are provided.
Interchange Fees
Interchange fees include interchange
income from consumer debit card transactions processed through card association networks. Interchange income is a fee paid by a merchant bank to the card-issuing bank through the interchange network. Interchange fees are set by the card association
networks and are based on cardholder purchase volumes.
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income, net of applicable income taxes. Other comprehensive income consists entirely of
unrealized appreciation (depreciation) on available-for-sale securities.
New Accounting Pronouncements
In December 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-11,
Disclosures about Offsetting Assets and Liabilities
. Under the
ASU, an entity is required to disclose both gross and net information about instruments and transactions eligible for offset in the balance sheet, as well as instruments and transactions subject to an agreement similar to a master netting agreement.
In January 2013, the FASB released ASU 2013-01,
Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities
, which amended ASU 2011-11 to specifically include only derivatives accounted for under Topic 815, repurchase and
reverse repurchase agreements, and securities borrowing and lending transactions that are either offset or subject to an enforceable master netting arrangement. The disclosure requirements are effective for annual reporting periods beginning on or
after January 1, 2013, and interim periods therein, with retrospective application required. The adoption of these accounting pronouncements is not expected to have a material impact on the Company’s consolidated financial statements.
F-18
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
In October 2012, the FASB released ASU 2012-06,
Subsequent Accounting for an Indemnification Asset
Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution
. The new guidance clarifies that when a reporting entity recognizes an indemnification asset as a result of a government-assisted
acquisition of a financial institution and subsequently a change in the cash flows expected to be collected on the indemnification asset occurs, the reporting entity should account for the change in the measurement of the indemnification asset on
the same basis as the change in the assets subject to indemnification. Any amortization of changes in value should be limited to the lesser of the contractual term of the indemnification agreement or the remaining life of the indemnified assets.
This guidance is effective for annual reporting periods beginning on or after December 15, 2012, and interim periods therein. The Company has previously accounted for its indemnification asset in accordance with this guidance; accordingly, the
adoption of this guidance is not expected to have a material impact on the consolidated financial position, results of operations or cash flows.
In
February 2013, the FASB issued ASU 2013-02,
Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income
. The update amends existing literature to require an entity to provide information
about the amounts reclassified out of other comprehensive income by component, and it also requires enhanced disclosure and cross reference on items reclassified out of accumulated other comprehensive income during the reporting period. The update
is effective for reporting periods beginning after December 15, 2012. The adoption of the update is not expected to have a significant impact to the Company’s consolidated financial statements.
In January 2014, the FASB issued ASU 2014-04,
Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential
Real Estate Collateralized Consumer Mortgage Loans upon
Foreclosure
. The update amends existing literature to eliminate diversity in practice by clarifying and defining when an in substance repossession or foreclosure occurs. The terms
“in substance a repossession or foreclosure” and “physical possession” are not currently defined in the accounting literature, resulting in diversity in practice when a creditor derecognizes a loan receivable and recognizes the
real estate property collateralizing the loan receivable as an asset. Additionally, the update requires interim and annual disclosures of both the amount of foreclosed residential real estate property and the recorded investment in consumer mortgage
loans collateralized by residential real estate property that are in the process of foreclosure. The update is effective for annual periods and the interim periods within those annual periods beginning after December 15, 2014. The adoption of
the update to existing standards is not expected to have a material impact to the Company’s consolidated financial statements.
2. Business
Combinations
North Central Bancshares, Inc
.
On June 22, 2012, the Company acquired North Central Bancshares, Inc. (“NCB”), an Iowa bank headquartered in Fort Dodge, Iowa, in a non-FDIC
assisted transaction.
NCB operated 11 locations in Iowa. Excluding the effects of purchase accounting adjustments, the Company assumed approximately
$356.60 million of deposits of NCB. In addition, the Company purchased approximately $311.64 million in loans, $63.60 million in investment securities, $18.49 million of cash and cash equivalents, $12.05 million in property
and equipment, and assumed $14.75 million of FHLB advances and other borrowings.
The Company determined that the NCB transaction constituted a
business acquisition. Accordingly, the assets acquired and liabilities assumed as of June 22, 2012, are presented at their fair values in the table below. In many cases, the determination of these fair values required management to make
estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change.
F-19
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
The operating results of the Company for the year ended September 30, 2012, include the operating
results produced by the acquired assets and assumed liabilities for the period from June 22, 2012 to September 30, 2012.
Approximately
$2.20 million of core deposit intangible assets were recorded in connection with this transaction. A bargain purchase gain of $3.95 million was recorded in noninterest income as the fair value of the net assets acquired exceeded the
$41.50 million purchase price.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands)
|
|
As Recorded
NCB
|
|
|
Fair Value
Adjustments
|
|
|
As Recorded
by Great
Western
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
18,485
|
|
|
$
|
—
|
|
|
$
|
18,485
|
|
|
Investment securities
|
|
|
63,602
|
|
|
|
(385
|
)
|
|
|
63,217
|
|
|
FHLB stock
|
|
|
1,290
|
|
|
|
—
|
|
|
|
1,290
|
|
|
Loans
|
|
|
311,640
|
|
|
|
(978
|
)
|
|
|
310,662
|
|
|
Allowance
|
|
|
(6,049
|
)
|
|
|
6,049
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
305,591
|
|
|
|
5,071
|
|
|
|
310,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangible
|
|
|
—
|
|
|
|
2,200
|
|
|
|
2,200
|
|
|
Other real estate owned
|
|
|
1,835
|
|
|
|
—
|
|
|
|
1,835
|
|
|
Bank owned life insurance
|
|
|
6,134
|
|
|
|
—
|
|
|
|
6,134
|
|
|
Premises and equipment
|
|
|
12,049
|
|
|
|
843
|
|
|
|
12,892
|
|
|
Other assets
|
|
|
6,214
|
|
|
|
(904
|
)
|
|
|
5,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
|
415,200
|
|
|
|
6,825
|
|
|
|
422,025
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
356,601
|
|
|
|
2,065
|
|
|
|
358,666
|
|
|
FHLB advances and other borrowings
|
|
|
14,750
|
|
|
|
409
|
|
|
|
15,159
|
|
|
Accrued interest and other liabilities
|
|
|
1,972
|
|
|
|
779
|
|
|
|
2,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
373,323
|
|
|
|
3,253
|
|
|
|
376,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
41,877
|
|
|
$
|
3,572
|
|
|
|
45,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid to NCB for net assets acquired
|
|
|
|
|
|
|
|
|
|
|
41,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bargain purchase gain
|
|
|
|
|
|
|
|
|
|
$
|
3,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a description of the methods used to determine the fair values of significant assets and liabilities
presented previously.
Cash and Due From Banks
The
carrying amount of these assets was a reasonable estimate of fair value based on the short-term nature of these assets.
Investment Securities
Fair values for securities were based on quoted market prices, where available. If quoted market prices were not available, fair value estimates were based on
observable inputs, including quoted market prices for similar instruments, quoted market prices that were not in an active market, or other inputs that were observable in the market.
F-20
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
FHLB Stock
The carrying amount of FHLB stock was a reasonable estimate of fair value as shares are repurchased at par value.
Loans
The fair value of loans was based on three
valuation methodologies: (1) large balance (150 largest relationships, all watch loans, all 30+ days past due) single-family residential, home equity line of credit, 2nd lien home loans, and consumer assets were valued individually using a
consumer valuation calculation taking into account a broad range of variables such as FICO scores, current market rates, market spreads, and collateral values; (2) large balance (40 largest relationships, all watch and loans, and all
participations) commercial and commercial real estate loans were evaluated on a credit-by-credit basis by both the former NCB officers most familiar with the credits and the Company’s credit officers, taking into account variables such as
current market rates, market spreads, collateral values, payment histories, and working knowledge of the respective customers; and (3) other smaller balance and low-risk loans were valued collectively based on past credit history, collateral
geography, current market interest rates, and risk grading of the loans. Loans with evidence of credit deterioration at acquisition were not material.
Core Deposit Intangible (“CDI”)
This
intangible asset represents the value of the relationships NCB had with its deposit customers. The CDI was valued using an after-tax cost savings methodology, based on the estimated favorable cost of the funding provided by the depositors over their
estimated remaining life, as compared with the estimated cost of the Company’s alternative cost of funding (“ACOF”) for that period. It is the present value of this after-tax cost savings generated by the depositors, if any, which is
the basis for the value of the depositor relationships.
Other Real Estate Owned (“OREO”)
OREO is presented at the estimated fair value that management expects to receive when the property is sold, net of related costs of disposal. The fair values
were determined by third party appraisals.
Bank Owned Life Insurance
Bank owned life insurance is presented at the cash surrender value of the insurance policies. The cash surrender value was considered to be an appropriate
proxy for the fair value of the policies on the acquisition date.
Premises and Equipment
The fair value of premises was determined by third party appraisals. Other equipment and fixtures were assessed for usability and the carrying values were
adjusted if applicable.
Other Assets
Other assets
include subsidiary assets, prepaid expenses, deferred tax assets, and accrued interest. Adjustments were made to reduce multiple subsidiary accruals, write off deferred tax assets not associated with the Company’s acquired property and write
off assets held at a subsidiary level due to obsolescence.
F-21
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Deposits
The fair value of the assumed deposits was determined using a model that incorporated original interest rate and current interest rate information as well as
duration/maturity information.
Advances from the Federal Home Loan Bank
On the acquisition date, the Company assumed approximately $14.75 million of advances from the Federal Home Loan Bank, the majority of which paid a coupon
of approximately 1.9% and matured in 2015 through 2017. The Company decided to pay down the advances prior to stated maturity, which included a prepayment penalty. The prepayment penalty of $0.41 million was considered as an appropriate proxy
for the fair value adjustment on the acquisition date.
TierOne Bank
On June 4, 2010, the Company entered into a purchase and assumption agreement with the FDIC to acquire certain assets and assume substantially all the
deposits and certain liabilities of TierOne Bank (“TOB”), a Nebraska state-chartered bank headquartered in Lincoln, Nebraska.
The Company
assumed approximately $1,892.20 million of deposits and purchased approximately $1,880.38 million in loans, $101.23 million in OREO, $40.84 million in investment securities and $19.15 million in servicing assets. In
connection with the acquisition, the Company entered into two loss sharing agreements with the FDIC. The expected reimbursement under the loss sharing agreements was recorded as a loss share indemnification asset at its estimated fair value on the
acquisition date.
Pursuant to the terms of the loss sharing agreements, the FDIC is obligated to reimburse the Company for losses with respect to certain
loans, OREO, certain investments securities and other assets (collectively “covered assets”). The loss sharing agreement applicable to single family residential mortgage loans provides for FDIC loss sharing and Bank reimbursements to the
FDIC for gains and recoveries for ten years. The loss sharing agreement applicable to commercial loans and other covered assets provides for FDIC loss sharing for five years and Bank reimbursements to the FDIC for gains and recoveries for a total of
eight years. Agricultural real estate and operating lines and certain consumer loans were excluded from loss sharing and the losses from these loan types were not included in the calculation of the fair value of the indemnification asset.
Approximately $63.00 million of goodwill and $33.00 million of core deposit intangible assets were recorded in connection with this transaction. The amount of
goodwill recorded reflected the difference between the purchase price and the fair value of the net assets acquired. All of the goodwill and core deposit intangible assets recognized are deductible for income tax purposes.
3. Restrictions on Cash and Due from Banks
The Company
is required to maintain reserve balances in cash and on deposit with the Federal Reserve based on a percentage of deposits. The total requirement was approximately $52.66 million and $46.03 million at September 30, 2013 and 2012, respectively.
F-22
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
4. Securities
The amortized cost and approximate fair value of investments in securities, all of which are classified as available for sale according to management’s
intent, are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
|
As of September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Association
|
|
|
1,470,822
|
|
|
|
9,634
|
|
|
|
(21,013
|
)
|
|
|
1,459,443
|
|
|
Federal National Mortgage Association
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
States and political subdivision securities
|
|
|
3,513
|
|
|
|
19
|
|
|
|
—
|
|
|
|
3,532
|
|
|
Corporate debt securities
|
|
|
11,889
|
|
|
|
133
|
|
|
|
(9
|
)
|
|
|
12,013
|
|
|
Other
|
|
|
5,449
|
|
|
|
17
|
|
|
|
(6
|
)
|
|
|
5,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,491,674
|
|
|
$
|
9,803
|
|
|
$
|
(21,028
|
)
|
|
$
|
1,480,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
|
As of September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
5,005
|
|
|
$
|
102
|
|
|
$
|
—
|
|
|
$
|
5,107
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Association
|
|
|
1,502,442
|
|
|
|
28,897
|
|
|
|
(146
|
)
|
|
|
1,531,193
|
|
|
Federal National Mortgage Association
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
States and political subdivision securities
|
|
|
5,757
|
|
|
|
57
|
|
|
|
—
|
|
|
|
5,814
|
|
|
Corporate debt securities
|
|
|
32,878
|
|
|
|
1,478
|
|
|
|
(45
|
)
|
|
|
34,311
|
|
|
Other
|
|
|
5,449
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,551,532
|
|
|
$
|
30,534
|
|
|
$
|
(191
|
)
|
|
$
|
1,581,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amortized cost and approximate fair value of debt securities available for sale as of September 30, 2013 and 2012, by
contractual maturity, are shown below. Maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be called or repaid without any penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|
September 30, 2012
|
|
|
(In Thousands)
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
Due in one year or less
|
|
$
|
1,497
|
|
|
$
|
1,514
|
|
|
$
|
5,710
|
|
|
$
|
5,914
|
|
|
Due after one year through five years
|
|
|
6,988
|
|
|
|
7,123
|
|
|
|
29,733
|
|
|
|
31,166
|
|
|
Due after five years through ten years
|
|
|
6,917
|
|
|
|
6,908
|
|
|
|
8,197
|
|
|
|
8,152
|
|
|
Due after ten years
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,402
|
|
|
|
15,545
|
|
|
|
43,640
|
|
|
|
45,232
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
1,470,823
|
|
|
|
1,459,444
|
|
|
|
1,502,443
|
|
|
|
1,531,194
|
|
|
Securities without contractual maturities
|
|
|
5,449
|
|
|
|
5,460
|
|
|
|
5,449
|
|
|
|
5,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,491,674
|
|
|
$
|
1,480,449
|
|
|
$
|
1,551,532
|
|
|
$
|
1,581,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Proceeds from sales of securities available for sale were $72.44 million and $542.80 million for the years
ended September 30, 2013 and 2012, respectively. Gross gains of $1.70 million and $7.67 million and gross losses of $0.78 million and $0.36 million were realized on the sales for the years ended September 30, 2013 and 2012, respectively,
using the specific identification method.
Securities with a carrying value of approximately $1,090.37 million and $833.76 million at September 30,
2013 and 2012, respectively, were pledged as collateral on public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law. The counterparties do not have the right to sell or pledge the
securities the Company has pledged as collateral.
As detailed in the following tables, certain investments in debt securities, which are approximately
62% and 6% of the Company’s investment portfolio at September 30, 2013 and 2012, respectively, are reported in the consolidated financial statements at an amount less than their amortized cost. Based on evaluation of available evidence,
including recent changes in market interest rates, credit rating information, implicit or explicit government guarantees, and information obtained from regulatory filings, management believes the declines in fair value for these securities are
temporary. As the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell the securities before the recovery of their amortized cost basis, which may be maturity, the Company does
not consider the securities to be other than temporarily impaired at September 30, 2013 or 2012. For the years ended September 30, 2013 and 2012, the Company did not recognize any other-than-temporary impairment.
The following table presents the Company’s gross unrealized losses and approximate fair value in investments, aggregated by investment category and
length of time that individual securities have been in a continuous unrealized loss position (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
|
September 30, 2013
12 months or more
|
|
|
Total
|
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Mortgage-backed securities
|
|
$
|
852,344
|
|
|
$
|
(19,469
|
)
|
|
$
|
56,781
|
|
|
$
|
(1,544
|
)
|
|
$
|
909,125
|
|
|
$
|
(21,013
|
)
|
|
Corporate debt securities
|
|
|
4,436
|
|
|
|
(9
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
4,436
|
|
|
|
(9
|
)
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
4,986
|
|
|
|
(6
|
)
|
|
|
4,986
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
856,780
|
|
|
$
|
(19,478
|
)
|
|
$
|
61,767
|
|
|
$
|
(1,550
|
)
|
|
$
|
918,547
|
|
|
$
|
(21,028
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
|
September 30, 2012
12 months or more
|
|
|
Total
|
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Mortgage-backed securities
|
|
$
|
93,313
|
|
|
$
|
(146
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
93,313
|
|
|
$
|
(146
|
)
|
|
Corporate debt securities
|
|
|
4,949
|
|
|
|
(45
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
4,949
|
|
|
|
(45
|
)
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
98,262
|
|
|
$
|
(191
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
98,262
|
|
|
$
|
(191
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company’s investments in nonmarketable equity securities are all stock of the Federal Home Loan Bank. The carrying
value of Federal Home Loan Bank stock was $28.77 million and $26.80 million as of September 30, 2013 and 2012, respectively, and is reported in other assets on the consolidated balance sheets. No indicators of impairment related to FHLB stock
were identified during fiscal year 2013 or 2012.
F-24
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
The components of other comprehensive income from net unrealized gains (losses) on securities available for
sale for the years ended September 30, 2013 and 2012 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Beginning balance accumulated other comprehensive income
|
|
$
|
19,111
|
|
|
$
|
16,542
|
|
|
Net unrealized holding gain (loss) arising during the period
|
|
|
(40,651
|
)
|
|
|
11,376
|
|
|
Reclassification adjustment for net gain realized in net income
|
|
|
(917
|
)
|
|
|
(7,305
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized gain (loss) before income taxes
|
|
|
(41,568
|
)
|
|
|
4,071
|
|
|
Income tax benefit (expense)
|
|
|
15,376
|
|
|
|
(1,502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized gain (loss) on securities after taxes
|
|
|
(26,192
|
)
|
|
|
2,569
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance accumulated other comprehensive income (loss)
|
|
$
|
(7,081
|
)
|
|
$
|
19,111
|
|
|
|
|
|
|
|
|
|
|
|
5. Loans
The composition
of net loans as of September 30, 2013 and 2012, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Residential real estate
|
|
$
|
906,469
|
|
|
$
|
940,225
|
|
|
Commercial real estate
|
|
|
2,311,974
|
|
|
|
2,364,099
|
|
|
Commercial non real estate
|
|
|
1,481,756
|
|
|
|
1,353,802
|
|
|
Agriculture
|
|
|
1,587,248
|
|
|
|
1,396,472
|
|
|
Consumer
|
|
|
101,477
|
|
|
|
127,236
|
|
|
Other
|
|
|
24,711
|
|
|
|
15,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,413,635
|
|
|
|
6,197,248
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(55,864
|
)
|
|
|
(71,878
|
)
|
|
Unamortized discount on acquired loans
|
|
|
(34,717
|
)
|
|
|
(55,836
|
)
|
|
Unearned net deferred fees and costs and loans in process
|
|
|
(16,245
|
)
|
|
|
(2,838
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,306,809
|
|
|
$
|
6,066,696
|
|
|
|
|
|
|
|
|
|
|
|
The loan breakouts above include loans covered by FDIC loss sharing agreements totaling $347.41 million and
$548.78 million as of September 30, 2013 and 2012, respectively, residential real estate loans held for sale totaling $8.27 million and $29.27 million at September 30, 2013 and 2012, respectively, and $841.86 million and
$688.80 million of loans and written loan commitments accounted for at fair value as of September 30, 2013 and 2012, respectively.
Unamortized
net deferred fees and costs totaled $5.19 million and $2.84 million as of September 30, 2013 and 2012, respectively.
Loans in process represent
loans that have been funded as of the balance sheet dates but not classified into a loan category and loan payments received as of the balance sheet dates that have not been applied to individual loan accounts.
Loans guaranteed by agencies of the U.S. government totaled $104.04 million and $90.21 million at September 30, 2013 and 2012, respectively.
F-25
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Principal balances of residential real estate loans sold totaled $450.01 million and $417.00 million for the
years end September 30, 2013 and 2012, respectively.
Principal balances of loans pledged to the Federal Home Loan Bank to collateralize notes
payable totaled $1,984.67 million and $1,939.95 million at September 30, 2013 and 2012, respectively.
The following table presents the
Company’s nonaccrual loans at September 30, 2013 and 2012 (in thousands), excluding loans covered under the FDIC loss-sharing agreements. Loans greater than 90 days past due and still accruing interest as of September 30, 2013 and
2012, were not significant.
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
2013
|
|
|
2012
|
|
|
Residential real estate
|
|
$
|
8,746
|
|
|
$
|
10,798
|
|
|
Commercial real estate
|
|
|
57,652
|
|
|
|
71,455
|
|
|
Commercial non real estate
|
|
|
6,641
|
|
|
|
7,394
|
|
|
Agriculture
|
|
|
8,236
|
|
|
|
3,757
|
|
|
Consumer
|
|
|
226
|
|
|
|
401
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
81,501
|
|
|
$
|
93,805
|
|
|
|
|
|
|
|
|
|
|
|
The following table (in thousands) presents the Company’s past due loans at September 30, 2013 and 2012. This table
is presented net of unamortized discount on acquired loans and excludes loans measured at fair value with changes in fair value reported in earnings of $841.86 million for 2013 and $688.80 million for 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2013
|
|
30-59 Days
Past Due
|
|
|
60-89 Days
Past Due
|
|
|
Greater Than
90 Days
|
|
|
Total
Past Due
|
|
|
Current
|
|
|
Total
Financing
Receivables
|
|
|
Residential real estate
|
|
$
|
625
|
|
|
$
|
955
|
|
|
$
|
4,942
|
|
|
$
|
6,522
|
|
|
$
|
721,333
|
|
|
$
|
727,855
|
|
|
Commercial real estate
|
|
|
431
|
|
|
|
158
|
|
|
|
9,639
|
|
|
|
10,228
|
|
|
|
1,797,884
|
|
|
|
1,808,112
|
|
|
Commercial non real estate
|
|
|
1,342
|
|
|
|
198
|
|
|
|
2,821
|
|
|
|
4,361
|
|
|
|
1,219,731
|
|
|
|
1,224,092
|
|
|
Agriculture
|
|
|
102
|
|
|
|
4,040
|
|
|
|
2,867
|
|
|
|
7,009
|
|
|
|
1,297,208
|
|
|
|
1,304,217
|
|
|
Consumer
|
|
|
340
|
|
|
|
65
|
|
|
|
44
|
|
|
|
449
|
|
|
|
100,214
|
|
|
|
100,663
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,711
|
|
|
|
24,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,840
|
|
|
|
5,416
|
|
|
|
20,313
|
|
|
|
28,569
|
|
|
|
5,161,081
|
|
|
|
5,189,650
|
|
|
Loans covered by FDIC loss sharing agreements
|
|
|
1,307
|
|
|
|
3,861
|
|
|
|
6,632
|
|
|
|
11,800
|
|
|
|
335,608
|
|
|
|
347,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,147
|
|
|
$
|
9,277
|
|
|
$
|
26,945
|
|
|
$
|
40,369
|
|
|
$
|
5,496,689
|
|
|
$
|
5,537,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2012
|
|
30-59 Days
Past Due
|
|
|
60-89 Days
Past Due
|
|
|
Greater Than
90 Days
|
|
|
Total
Past Due
|
|
|
Current
|
|
|
Total
Financing
Receivables
|
|
|
Residential real estate
|
|
$
|
1,895
|
|
|
$
|
1,232
|
|
|
$
|
3,898
|
|
|
$
|
7,025
|
|
|
$
|
690,195
|
|
|
$
|
697,220
|
|
|
Commercial real estate
|
|
|
6,729
|
|
|
|
1,051
|
|
|
|
19,623
|
|
|
|
27,403
|
|
|
|
1,817,920
|
|
|
|
1,845,323
|
|
|
Commercial non real estate
|
|
|
255
|
|
|
|
—
|
|
|
|
787
|
|
|
|
1,042
|
|
|
|
1,082,061
|
|
|
|
1,083,103
|
|
|
Agriculture
|
|
|
86
|
|
|
|
—
|
|
|
|
435
|
|
|
|
521
|
|
|
|
1,137,004
|
|
|
|
1,137,525
|
|
|
Consumer
|
|
|
282
|
|
|
|
91
|
|
|
|
97
|
|
|
|
470
|
|
|
|
124,777
|
|
|
|
125,247
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,414
|
|
|
|
15,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,247
|
|
|
|
2,374
|
|
|
|
24,840
|
|
|
|
36,461
|
|
|
|
4,867,371
|
|
|
|
4,903,832
|
|
|
Loans covered by FDIC loss sharing agreements
|
|
|
3,650
|
|
|
|
1,514
|
|
|
|
15,082
|
|
|
|
20,246
|
|
|
|
528,534
|
|
|
|
548,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,897
|
|
|
$
|
3,888
|
|
|
$
|
39,922
|
|
|
$
|
56,707
|
|
|
$
|
5,395,905
|
|
|
$
|
5,452,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-26
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
The composition of the loan portfolio by internal risk rating is as follows as of September 30, 2013 and
2012. This table (in thousands) is presented net of unamortized discount on acquired loans and excludes loans measured at fair value with changes in fair value reported in earnings of $841.86 million for 2013 and $688.80 million for 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2013
|
|
Residential
Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Commercial
Non Real
Estate
|
|
|
Agricultural
|
|
|
Consumer
|
|
|
Other
|
|
|
Total
|
|
|
Credit Risk Profile by Internally Assigned Grade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
707,859
|
|
|
$
|
1,652,694
|
|
|
$
|
1,144,131
|
|
|
$
|
1,192,357
|
|
|
$
|
100,087
|
|
|
$
|
24,711
|
|
|
$
|
4,821,839
|
|
|
Watchlist
|
|
|
5,779
|
|
|
|
72,924
|
|
|
|
52,576
|
|
|
|
87,596
|
|
|
|
164
|
|
|
|
—
|
|
|
|
219,039
|
|
|
Substandard
|
|
|
13,039
|
|
|
|
78,244
|
|
|
|
23,538
|
|
|
|
23,963
|
|
|
|
398
|
|
|
|
—
|
|
|
|
139,182
|
|
|
Doubtful
|
|
|
1,178
|
|
|
|
4,250
|
|
|
|
3,847
|
|
|
|
301
|
|
|
|
14
|
|
|
|
—
|
|
|
|
9,590
|
|
|
Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
727,855
|
|
|
|
1,808,112
|
|
|
|
1,224,092
|
|
|
|
1,304,217
|
|
|
|
100,663
|
|
|
|
24,711
|
|
|
|
5,189,650
|
|
|
Loans covered by FDIC loss sharing agreements
|
|
|
167,835
|
|
|
|
150,745
|
|
|
|
28,163
|
|
|
|
525
|
|
|
|
140
|
|
|
|
—
|
|
|
|
347,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
895,690
|
|
|
$
|
1,958,857
|
|
|
$
|
1,252,255
|
|
|
$
|
1,304,742
|
|
|
$
|
100,803
|
|
|
$
|
24,711
|
|
|
$
|
5,537,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2012
|
|
Residential
Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Commercial
Non Real
Estate
|
|
|
Agricultural
|
|
|
Consumer
|
|
|
Other
|
|
|
Total
|
|
|
Credit Risk Profile by Internally Assigned Grade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
675,593
|
|
|
$
|
1,564,683
|
|
|
$
|
1,023,721
|
|
|
$
|
1,096,640
|
|
|
$
|
124,476
|
|
|
$
|
15,414
|
|
|
$
|
4,500,527
|
|
|
Watchlist
|
|
|
5,232
|
|
|
|
173,904
|
|
|
|
20,880
|
|
|
|
35,404
|
|
|
|
76
|
|
|
|
—
|
|
|
|
235,496
|
|
|
Substandard
|
|
|
13,789
|
|
|
|
87,652
|
|
|
|
33,095
|
|
|
|
2,622
|
|
|
|
652
|
|
|
|
—
|
|
|
|
137,810
|
|
|
Doubtful
|
|
|
2,606
|
|
|
|
19,084
|
|
|
|
5,407
|
|
|
|
2,859
|
|
|
|
43
|
|
|
|
—
|
|
|
|
29,999
|
|
|
Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
697,220
|
|
|
|
1,845,323
|
|
|
|
1,083,103
|
|
|
|
1,137,525
|
|
|
|
125,247
|
|
|
|
15,414
|
|
|
|
4,903,832
|
|
|
Loans covered by FDIC loss sharing agreements
|
|
|
227,691
|
|
|
|
234,307
|
|
|
|
85,609
|
|
|
|
754
|
|
|
|
419
|
|
|
|
—
|
|
|
|
548,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
924,911
|
|
|
$
|
2,079,630
|
|
|
$
|
1,168,712
|
|
|
$
|
1,138,279
|
|
|
$
|
125,666
|
|
|
$
|
15,414
|
|
|
$
|
5,452,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-27
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Impaired Loans
The following table presents the Company’s impaired loans (in thousands). This table excludes loans covered by FDIC loss sharing agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
As of September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
15,037
|
|
|
$
|
16,815
|
|
|
$
|
3,217
|
|
|
$
|
15,716
|
|
|
Commercial real estate
|
|
|
106,824
|
|
|
|
123,523
|
|
|
|
5,341
|
|
|
|
106,780
|
|
|
Commercial non real estate
|
|
|
31,132
|
|
|
|
32,557
|
|
|
|
5,607
|
|
|
|
34,817
|
|
|
Agriculture
|
|
|
25,563
|
|
|
|
29,632
|
|
|
|
3,022
|
|
|
|
15,522
|
|
|
Consumer
|
|
|
412
|
|
|
|
656
|
|
|
|
90
|
|
|
|
554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
178,968
|
|
|
$
|
203,183
|
|
|
$
|
17,277
|
|
|
$
|
173,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
As of September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
17,132
|
|
|
$
|
18,757
|
|
|
$
|
3,842
|
|
|
$
|
14,775
|
|
|
Commercial real estate
|
|
|
131,204
|
|
|
|
147,805
|
|
|
|
11,369
|
|
|
|
133,974
|
|
|
Commercial non real estate
|
|
|
41,075
|
|
|
|
44,715
|
|
|
|
9,712
|
|
|
|
30,548
|
|
|
Agriculture
|
|
|
5,481
|
|
|
|
5,530
|
|
|
|
2,655
|
|
|
|
6,401
|
|
|
Consumer
|
|
|
695
|
|
|
|
1,832
|
|
|
|
137
|
|
|
|
950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
195,587
|
|
|
$
|
218,639
|
|
|
$
|
27,715
|
|
|
$
|
186,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no impaired loans with no valuation allowance as of September 30, 2013 or 2012. Interest income recognized on
impaired loans was $7.87 million and $7.73 million for the years ended September 30, 2013 and 2012, respectively.
Restructured Loans
Included in certain loan categories in the impaired loans are troubled debt restructurings (“TDRs”) that were classified as impaired. These TDRs do
not include purchased impaired loans. When the Company grants concessions to borrowers such as reduced interest rates or extensions of loan periods that would not be considered other than because of borrowers’ financial difficulties, the
modification is considered a TDR. Specific reserves included in the allowance for loan losses for TDRs were $6.43 million and $5.66 million at September 30, 2013 and 2012, respectively. Commitments to lend additional funds to borrowers
whose loans were modified in a TDR were not significant as of September 30, 2013 or 2012.
F-28
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
The following table presents the recorded value of the Company’s TDR balances as of September 30,
2013 and 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|
September 30, 2012
|
|
|
|
|
Accruing
|
|
|
Nonaccrual
|
|
|
Accruing
|
|
|
Nonaccrual
|
|
|
Residential real estate
|
|
$
|
662
|
|
|
$
|
1,100
|
|
|
$
|
41
|
|
|
$
|
2,279
|
|
|
Commercial real estate
|
|
|
29,373
|
|
|
|
49,736
|
|
|
|
25,323
|
|
|
|
41,955
|
|
|
Commercial non real estate
|
|
|
4,769
|
|
|
|
5,007
|
|
|
|
14,235
|
|
|
|
5,719
|
|
|
Agriculture
|
|
|
4,326
|
|
|
|
7,268
|
|
|
|
410
|
|
|
|
352
|
|
|
Consumer
|
|
|
—
|
|
|
|
29
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
39,130
|
|
|
$
|
63,140
|
|
|
$
|
40,009
|
|
|
$
|
50,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-29
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
The following table presents a summary of all accruing loans restructured in TDRs during the years ended
September 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2013
|
|
|
Year Ended September 30, 2012
|
|
|
($ in thousands)
|
|
Number
|
|
|
Recorded Investment
|
|
|
Number
|
|
|
Recorded Investment
|
|
|
|
|
Pre-
Modification
|
|
|
Post-
Modification
|
|
|
|
Pre-
Modification
|
|
|
Post-
Modification
|
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Term extension
|
|
|
7
|
|
|
|
663
|
|
|
|
663
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Payment modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Bankruptcy
|
|
|
1
|
|
|
|
5
|
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential real estate
|
|
|
8
|
|
|
|
668
|
|
|
|
668
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
2
|
|
|
|
990
|
|
|
|
990
|
|
|
|
2
|
|
|
|
12,648
|
|
|
|
12,648
|
|
|
Term extension
|
|
|
7
|
|
|
|
4,158
|
|
|
|
4,158
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Payment modification
|
|
|
3
|
|
|
|
13,497
|
|
|
|
13,497
|
|
|
|
1
|
|
|
|
696
|
|
|
|
696
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
793
|
|
|
|
793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
12
|
|
|
|
18,645
|
|
|
|
18,645
|
|
|
|
4
|
|
|
|
14,137
|
|
|
|
14,137
|
|
|
|
|
|
|
|
|
|
|
Commercial non real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
1
|
|
|
|
529
|
|
|
|
529
|
|
|
|
2
|
|
|
|
1,260
|
|
|
|
1,260
|
|
|
Term extension
|
|
|
10
|
|
|
|
14,851
|
|
|
|
14,851
|
|
|
|
1
|
|
|
|
2,663
|
|
|
|
2,663
|
|
|
Payment modification
|
|
|
9
|
|
|
|
2,759
|
|
|
|
2,759
|
|
|
|
6
|
|
|
|
9,006
|
|
|
|
9,006
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial non real estate
|
|
|
20
|
|
|
|
18,139
|
|
|
|
18,139
|
|
|
|
9
|
|
|
|
12,929
|
|
|
|
12,929
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Term extension
|
|
|
6
|
|
|
|
2,008
|
|
|
|
2,008
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Payment modification
|
|
|
2
|
|
|
|
1,949
|
|
|
|
1,949
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total agriculture
|
|
|
8
|
|
|
|
3,957
|
|
|
|
3,957
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Term extension
|
|
|
1
|
|
|
|
3
|
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Payment modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
1
|
|
|
|
3
|
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accruing
|
|
|
49
|
|
|
$
|
41,412
|
|
|
$
|
41,412
|
|
|
|
13
|
|
|
$
|
27,066
|
|
|
$
|
27,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in recorded investment due to principal paydown at time of modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Change in recorded investment due to chargeoffs at time of modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
F-30
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
The following table presents a summary of all non-accruing loans restructured in TDRs during the years ended
September 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2013
|
|
|
Year Ended September 30, 2012
|
|
|
($ in thousands)
|
|
Number
|
|
|
Recorded Investment
|
|
|
Number
|
|
|
Recorded Investment
|
|
|
|
|
Pre-
Modification
|
|
|
Post-
Modification
|
|
|
|
Pre-
Modification
|
|
|
Post-
Modification
|
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
2
|
|
|
$
|
1,944
|
|
|
$
|
1,944
|
|
|
Term extension
|
|
|
15
|
|
|
|
638
|
|
|
|
638
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Payment modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Bankruptcy
|
|
|
2
|
|
|
|
336
|
|
|
|
336
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
2
|
|
|
|
147
|
|
|
|
147
|
|
|
|
3
|
|
|
|
113
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential real estate
|
|
|
19
|
|
|
|
1,121
|
|
|
|
1,121
|
|
|
|
5
|
|
|
|
2,057
|
|
|
|
2,057
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
2
|
|
|
|
310
|
|
|
|
310
|
|
|
|
2
|
|
|
|
15,788
|
|
|
|
15,788
|
|
|
Term extension
|
|
|
7
|
|
|
|
2,448
|
|
|
|
2,448
|
|
|
|
6
|
|
|
|
5,268
|
|
|
|
5,268
|
|
|
Payment modification
|
|
|
7
|
|
|
|
17,578
|
|
|
|
17,578
|
|
|
|
4
|
|
|
|
15,090
|
|
|
|
15,090
|
|
|
Bankruptcy
|
|
|
3
|
|
|
|
3,162
|
|
|
|
3,162
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
19
|
|
|
|
23,498
|
|
|
|
23,498
|
|
|
|
12
|
|
|
|
36,146
|
|
|
|
36,146
|
|
|
|
|
|
|
|
|
|
|
Commercial Non Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
1
|
|
|
|
1,067
|
|
|
|
1,067
|
|
|
|
2
|
|
|
|
1,642
|
|
|
|
1,642
|
|
|
Term extension
|
|
|
8
|
|
|
|
1,127
|
|
|
|
1,127
|
|
|
|
3
|
|
|
|
98
|
|
|
|
98
|
|
|
Payment modification
|
|
|
3
|
|
|
|
2,051
|
|
|
|
1,416
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial non real estate
|
|
|
12
|
|
|
|
4,245
|
|
|
|
3,610
|
|
|
|
5
|
|
|
|
1,740
|
|
|
|
1,740
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Term extension
|
|
|
3
|
|
|
|
768
|
|
|
|
768
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Payment modification
|
|
|
4
|
|
|
|
6,196
|
|
|
|
6,196
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total agriculture
|
|
|
7
|
|
|
|
6,964
|
|
|
|
6,964
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
2
|
|
|
|
11
|
|
|
|
11
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Term extension
|
|
|
5
|
|
|
|
30
|
|
|
|
30
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Payment modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
7
|
|
|
|
41
|
|
|
|
41
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-accruing
|
|
|
64
|
|
|
$
|
35,869
|
|
|
$
|
35,234
|
|
|
|
22
|
|
|
$
|
39,943
|
|
|
$
|
39,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in recorded investment due to principal paydown at time of modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Change in recorded investment due to chargeoffs at time of modification
|
|
|
1
|
|
|
$
|
635
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
F-31
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
For the years ended September 30, 2013 and 2012, the table below represents defaults on loans that were
first modified during the respective fiscal year, that became 90 days or more delinquent or were charged-off during the respective fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
Year Ended September 30, 2013
|
|
|
Year Ended September 30, 2012
|
|
|
|
Number of
Loans
|
|
|
Recorded
Investment
|
|
|
Number of
Loans
|
|
|
Recorded
Investment
|
|
|
Residential real estate
|
|
|
5
|
|
|
$
|
647
|
|
|
|
1
|
|
|
$
|
332
|
|
|
Commercial real estate
|
|
|
7
|
|
|
|
4,401
|
|
|
|
5
|
|
|
|
15,146
|
|
|
Commercial non real estate
|
|
|
1
|
|
|
|
1,067
|
|
|
|
2
|
|
|
|
79
|
|
|
Agriculture
|
|
|
6
|
|
|
|
5,739
|
|
|
|
—
|
|
|
|
—
|
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
$
|
11,854
|
|
|
|
8
|
|
|
$
|
15,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The majority of loans that were modified and subsequently became 90 days or more delinquent have remained on nonaccrual status
since the time of modification.
F-32
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
6. Allowance for Loan Losses
The following table presents the Company’s allowance for loan losses roll forward and respective loan balances for 2013 and 2012. This table (in
thousands) is presented net of unamortized discount on acquired loans and excludes loans measured at fair value with changes in fair value reported in earnings of $841.86 million, loans held for sale of $8.27 million, and guaranteed loans of $104.04
million for 2013 and loans measured at fair value with changes in fair value reported in earnings of $688.80 million, loans held for sale of $29.27 million, and guaranteed loans of $90.21 million for 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2013
|
|
Residential
Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Commercial
Non Real
Estate
|
|
|
Agricultural
|
|
|
Consumer
|
|
|
Other
|
|
|
Total
|
|
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance October 1, 2012
|
|
$
|
14,761
|
|
|
$
|
30,234
|
|
|
$
|
18,979
|
|
|
$
|
6,906
|
|
|
$
|
542
|
|
|
$
|
456
|
|
|
$
|
71,878
|
|
|
Charge-offs
|
|
|
(1,766
|
)
|
|
|
(19,648
|
)
|
|
|
(3,636
|
)
|
|
|
(4,069
|
)
|
|
|
(244
|
)
|
|
|
(1,851
|
)
|
|
|
(31,214
|
)
|
|
Recoveries
|
|
|
279
|
|
|
|
689
|
|
|
|
1,206
|
|
|
|
22
|
|
|
|
396
|
|
|
|
1,034
|
|
|
|
3,626
|
|
|
Provision
|
|
|
1,043
|
|
|
|
10,925
|
|
|
|
(5,427
|
)
|
|
|
6,437
|
|
|
|
(382
|
)
|
|
|
1,054
|
|
|
|
13,650
|
|
|
Impairment of loans acquired with deteriorated credit quality
|
|
|
(2,538
|
)
|
|
|
362
|
|
|
|
100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,076
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance September 30, 2013
|
|
$
|
11,779
|
|
|
$
|
22,562
|
|
|
$
|
11,222
|
|
|
$
|
9,296
|
|
|
$
|
312
|
|
|
$
|
693
|
|
|
$
|
55,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
3,212
|
|
|
$
|
5,095
|
|
|
$
|
5,594
|
|
|
$
|
3,016
|
|
|
$
|
90
|
|
|
$
|
—
|
|
|
$
|
17,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
3,533
|
|
|
$
|
16,986
|
|
|
$
|
3,897
|
|
|
$
|
6,280
|
|
|
$
|
222
|
|
|
$
|
693
|
|
|
$
|
31,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired with deteriorated credit quality
|
|
$
|
5,034
|
|
|
$
|
481
|
|
|
$
|
1,731
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired without deteriorated credit quality
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
885,245
|
|
|
$
|
1,926,828
|
|
|
$
|
1,191,500
|
|
|
$
|
1,295,661
|
|
|
$
|
100,803
|
|
|
$
|
24,711
|
|
|
$
|
5,424,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
8,917
|
|
|
$
|
77,620
|
|
|
$
|
27,527
|
|
|
$
|
23,719
|
|
|
$
|
292
|
|
|
$
|
—
|
|
|
$
|
138,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
589,104
|
|
|
$
|
1,623,274
|
|
|
$
|
1,136,611
|
|
|
$
|
1,240,281
|
|
|
$
|
91,178
|
|
|
$
|
24,711
|
|
|
$
|
4,705,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired with deteriorated credit quality
|
|
$
|
129,905
|
|
|
$
|
85,022
|
|
|
$
|
8,179
|
|
|
$
|
—
|
|
|
$
|
3,202
|
|
|
$
|
—
|
|
|
$
|
226,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired without deteriorated credit quality
|
|
$
|
157,319
|
|
|
$
|
140,912
|
|
|
$
|
19,183
|
|
|
$
|
31,661
|
|
|
$
|
6,131
|
|
|
$
|
—
|
|
|
$
|
355,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-33
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2012
|
|
Residential
Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Commercial
Non Real
Estate
|
|
|
Agricultural
|
|
|
Consumer
|
|
|
Other
|
|
|
Total
|
|
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance October 1, 2011
|
|
$
|
10,758
|
|
|
$
|
40,733
|
|
|
$
|
16,450
|
|
|
$
|
2,509
|
|
|
$
|
832
|
|
|
$
|
261
|
|
|
$
|
71,543
|
|
|
Charge-offs
|
|
|
(1,625
|
)
|
|
|
(24,854
|
)
|
|
|
(7,304
|
)
|
|
|
(49
|
)
|
|
|
(1,137
|
)
|
|
|
(1,764
|
)
|
|
|
(36,733
|
)
|
|
Recoveries
|
|
|
630
|
|
|
|
3,268
|
|
|
|
1,386
|
|
|
|
160
|
|
|
|
226
|
|
|
|
1,253
|
|
|
|
6,923
|
|
|
Provision
|
|
|
1,821
|
|
|
|
3,976
|
|
|
|
4,890
|
|
|
|
4,286
|
|
|
|
621
|
|
|
|
706
|
|
|
|
16,300
|
|
|
Impairment of loans acquired with deteriorated credit quality
|
|
|
3,177
|
|
|
|
7,111
|
|
|
|
3,557
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance September 30, 2012
|
|
$
|
14,761
|
|
|
$
|
30,234
|
|
|
$
|
18,979
|
|
|
$
|
6,906
|
|
|
$
|
542
|
|
|
$
|
456
|
|
|
$
|
71,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
3,837
|
|
|
$
|
11,132
|
|
|
$
|
9,698
|
|
|
$
|
2,655
|
|
|
$
|
137
|
|
|
$
|
—
|
|
|
$
|
27,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
3,364
|
|
|
$
|
16,034
|
|
|
$
|
5,438
|
|
|
$
|
4,251
|
|
|
$
|
405
|
|
|
$
|
456
|
|
|
$
|
29,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired with deteriorated credit quality
|
|
$
|
7,560
|
|
|
$
|
3,068
|
|
|
$
|
3,843
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired without deteriorated credit quality
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
895,393
|
|
|
$
|
2,046,836
|
|
|
$
|
1,125,283
|
|
|
$
|
1,126,504
|
|
|
$
|
123,698
|
|
|
$
|
15,414
|
|
|
$
|
5,333,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
11,283
|
|
|
$
|
119,791
|
|
|
$
|
38,731
|
|
|
$
|
4,650
|
|
|
$
|
448
|
|
|
$
|
—
|
|
|
$
|
174,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
493,200
|
|
|
$
|
1,592,325
|
|
|
$
|
1,030,922
|
|
|
$
|
1,080,535
|
|
|
$
|
104,091
|
|
|
$
|
15,414
|
|
|
$
|
4,316,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired with deteriorated credit quality
|
|
$
|
170,042
|
|
|
$
|
136,817
|
|
|
$
|
13,256
|
|
|
$
|
—
|
|
|
$
|
6,026
|
|
|
$
|
—
|
|
|
$
|
326,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired without deteriorated credit quality
|
|
$
|
220,868
|
|
|
$
|
197,903
|
|
|
$
|
42,374
|
|
|
$
|
41,319
|
|
|
$
|
13,133
|
|
|
$
|
—
|
|
|
$
|
515,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reserve for unfunded loan commitments was $.40 million at both September 30, 2013 and 2012.
7. Accounting for Certain Loans Acquired with Deteriorated Credit Quality
As a result of the Company’s acquisition of TierOne Bank, the Company acquired certain loans that had deteriorated credit quality. Loan accounting
specific to these purchased impaired loans addresses differences
F-34
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
between contractual cash flows expected to be collected from the initial investment in loans if those differences are attributable, at least in part, to credit quality. Several factors were
considered when evaluating whether a loan was considered a purchased impaired loan, including the delinquency status of the loan, updated borrower credit status, geographic information, and updated loan-to-values (“LTV”). U.S. GAAP allows
purchasers to aggregate purchased impaired loans acquired in the same fiscal quarter in one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate
and an aggregate expectation of cash flows.
Loan pools are periodically reassessed to determine expected cash flows. In determining the expected cash
flows, the timing of cash flows and prepayment assumptions for smaller, homogenous loans are based on statistical models that take into account factors such as the loan interest rate, credit profile of the borrowers, the years in which the loans
were originated, and whether the loans are fixed or variable rate loans. Prepayments may be assumed on large individual loans that consider similar prepayment factors listed above for smaller homogenous loans. The re-assessment of purchased impaired
loans resulted in the following changes in the accretable yield during 2013 and 2012 (in thousands):
|
|
|
|
|
|
|
Balance at September 30, 2011
|
|
$
|
124,926
|
|
|
Accretion
|
|
|
(35,786
|
)
|
|
Reclassification from nonaccretable difference
|
|
|
11,829
|
|
|
Disposals
|
|
|
(7,110
|
)
|
|
|
|
|
|
|
|
Balance at September 30, 2012
|
|
|
93,859
|
|
|
Accretion
|
|
|
(29,674
|
)
|
|
Reclassification from nonaccretable difference
|
|
|
6,815
|
|
|
Disposals
|
|
|
(3,340
|
)
|
|
|
|
|
|
|
|
Balance at September 30, 2013
|
|
$
|
67,660
|
|
|
|
|
|
|
|
The reclassifications from nonaccretable difference noted in the table above represent instances where specific pools of loans
are expected to perform better over the remaining lives of the loans than expected at the prior re-assessment date.
The following table provides
purchased impaired loans at September 30, 2013 and September 30, 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|
September 30, 2012
|
|
|
|
|
Outstanding
Balance
1
|
|
|
Recorded
Investment
2
|
|
|
Carrying
Value
3
|
|
|
Outstanding
Balance
1
|
|
|
Recorded
Investment
2
|
|
|
Carrying
Value
3
|
|
|
Residential real estate
|
|
$
|
143,998
|
|
|
$
|
129,905
|
|
|
$
|
124,871
|
|
|
$
|
185,076
|
|
|
$
|
170,042
|
|
|
$
|
162,482
|
|
|
Commercial real estate
|
|
|
172,706
|
|
|
|
85,022
|
|
|
|
84,541
|
|
|
|
229,463
|
|
|
|
136,817
|
|
|
|
133,749
|
|
|
Commercial non real estate
|
|
|
19,539
|
|
|
|
8,179
|
|
|
|
6,448
|
|
|
|
27,127
|
|
|
|
13,256
|
|
|
|
9,413
|
|
|
Consumer
|
|
|
3,721
|
|
|
|
3,202
|
|
|
|
3,202
|
|
|
|
7,624
|
|
|
|
6,026
|
|
|
|
6,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lending
|
|
$
|
339,964
|
|
|
$
|
226,308
|
|
|
$
|
219,062
|
|
|
$
|
449,290
|
|
|
$
|
326,141
|
|
|
$
|
311,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Represents the legal balance of loans acquired with deteriorated credit quality.
|
|
2
|
Represents the book balance of loans acquired with deteriorated credit quality net of the unamortized discount on acquired loans of $33.09 million in 2013 and $51.21 million in 2012.
|
|
3
|
Represents the book balance of loans acquired with deteriorated credit quality net of the fair value mark and related allowance for loan losses.
|
F-35
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Due to improved cash flows of the purchased impaired loans, the reductions to allowance recognized on
previous impairments were $4,585 and $6,387 for the years ended September 30, 2013 and 2012, respectively.
8. FDIC Indemnification Asset
Under the terms of the purchase and assumption agreement with the FDIC with regard to the TierOne Bank acquisition, the Company is reimbursed for a portion of
the losses incurred on covered assets. As covered assets are resolved, whether it be through repayment, short sale of the underlying collateral, the foreclosure on or sale of collateral, or the sale or charge-off of loans or OREO, any differences
between the carrying value of the covered assets versus the payments received during the resolution process, that are reimbursable by the FDIC, are recognized as reductions in the FDIC indemnification asset. Any gains or losses realized from the
resolution of covered assets reduce or increase, respectively, the amount recoverable from the FDIC. The following table represents a summary of the activity related to the FDIC indemnification asset for the years ended September 2013 and 2012 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Balance at beginning of year
|
|
$
|
68,662
|
|
|
$
|
126,325
|
|
|
Amortization
|
|
|
(12,129
|
)
|
|
|
(11,327
|
)
|
|
FDIC portion of charge-offs exceeding fair value marks
|
|
|
(2,106
|
)
|
|
|
4,385
|
|
|
Reduction for claims filed
|
|
|
(8,737
|
)
|
|
|
(50,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
45,690
|
|
|
$
|
68,662
|
|
|
|
|
|
|
|
|
|
|
|
The loss claims filed are subject to review, approval, and annual audits by the FDIC or its assigned agents for compliance
with the terms in the loss sharing agreements.
9. Premises and Equipment
The major classes of premises and equipment and the total amount of accumulated depreciation as of September 30, 2013 and 2012, are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Land
|
|
$
|
23,238
|
|
|
$
|
24,533
|
|
|
Buildings and building improvements
|
|
|
88,171
|
|
|
|
92,714
|
|
|
Furniture and equipment
|
|
|
42,721
|
|
|
|
40,573
|
|
|
Construction in progress
|
|
|
55
|
|
|
|
330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154,185
|
|
|
|
158,150
|
|
|
Accumulated depreciation
|
|
|
(39,805
|
)
|
|
|
(30,594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
114,380
|
|
|
$
|
127,556
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense was $10.70 million and $9.58 million for the years ended September 30, 2013 and 2012,
respectively.
F-36
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
10. Derivative Financial Instruments
In the normal course of business, the Company uses interest rate swaps to manage its interest rate risk and market risk in accommodating the needs of its
customers. Also, the Company enters into interest rate lock commitments on mortgage loans to be held for sale, with corresponding forward sales contracts related to these interest rate lock commitments.
Derivative instruments are recognized as either assets or liabilities in the accompanying consolidated financial statements and are measured at fair value.
The following table summarizes the notional amounts and estimated fair values of the Company’s derivative instruments at September 30, 2013 and
2012 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
Notional
Amount
|
|
|
Balance Sheet
Location
|
|
|
Positive Fair
Value
|
|
|
Negative Fair
Value
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
864,040
|
|
|
|
Liabilities
|
|
|
$
|
12,404
|
|
|
$
|
(13,555
|
)
|
|
Mortgage loan commitments
|
|
|
16,040
|
|
|
|
Assets
|
|
|
|
375
|
|
|
|
—
|
|
|
Mortgage loan forward sale contracts
|
|
|
21,881
|
|
|
|
Liabilities
|
|
|
|
—
|
|
|
|
(375
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
Notional
Amount
|
|
|
Balance Sheet
Location
|
|
|
Positive Fair
Value
|
|
|
Negative Fair
Value
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
655,208
|
|
|
|
Liabilities
|
|
|
$
|
—
|
|
|
$
|
(41,456
|
)
|
|
Mortgage loan commitments
|
|
|
87,952
|
|
|
|
Liabilities
|
|
|
|
11
|
|
|
|
(1,672
|
)
|
|
Mortgage loan forward sale contracts
|
|
|
104,716
|
|
|
|
Assets
|
|
|
|
1,672
|
|
|
|
(11
|
)
|
As with any financial instrument, derivative financial instruments have inherent risk including adverse changes in interest
rates. The Company’s exposure to derivative credit risk is defined as the possibility of sustaining a loss due to the failure of the counterparty to perform in accordance with the terms of the contract. Credit risk associated with interest rate
swaps is similar to those relating to traditional on-balance sheet financial instruments. The Company manages interest rate swap credit risk with the same standards and procedures applied to its commercial lending activities. Amounts due from NAB to
reclaim cash collateral under the interest rate swap master netting arrangements have not been offset against the derivative balances. These receivables are classified on the consolidated balance sheets as cash and were $0 and $37.37 million as
of September 30, 2013 and 2012, respectively.
The effect of derivatives on the consolidated statements of comprehensive income for the years ended
September 30, 2013 and 2012 (in thousands) was as follows:
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
Location of
Gain (Loss) Recognized in
Income
|
|
Amount of
Gain (Loss)
Recognized in
Income
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Noninterest expense
|
|
$
|
40,305
|
|
|
Mortgage loan commitments
|
|
Interest income (expense)
|
|
|
375
|
|
|
Mortgage loan forward sale contracts
|
|
Interest income (expense)
|
|
|
(375
|
)
|
F-37
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
Location of
Gain (Loss) Recognized in
Income
|
|
Amount of
Gain (Loss)
Recognized in
Income
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Noninterest expense
|
|
$
|
(19,369
|
)
|
|
Mortgage loan commitments
|
|
Interest income (expense)
|
|
|
(1,661
|
)
|
|
Mortgage loan forward sale contracts
|
|
Interest income (expense)
|
|
|
1,661
|
|
11. The Fair Value Option
The Company has elected to measure certain long-term loans and written loan commitments at fair value to assist in managing the interest rate risk for
longer-term loans. This fair value option was elected upon the origination of these loans. Interest income is recognized in the same manner as interest on non-fair value loans.
See Note 23 for additional disclosures regarding the fair value of the fair value option loans and written loan commitments.
Long-term loans and written loan commitments for which the fair value option has been elected had a net unfavorable difference between the aggregate fair
value and the aggregate unpaid loan principal balance and written loan commitment amount of approximately $4.83 million and a net favorable amount of approximately $36.33 million at September 30, 2013 and 2012, respectively. The total
unpaid principal balance of these long-term loans was approximately $846.69 million and $652.47 million at September 30, 2013 and 2012, respectively. The fair value of these loans and written loan commitments is included in total
loans in the consolidated balance sheets and are grouped with commercial non real estate, commercial real estate, and agricultural loans in Note 5. The fair value of these written loan commitments was not material at September 30, 2013 and
2012, respectively. None of the noted loans were greater than 90 days past due or in nonaccrual status as of September 30, 2013 or 2012.
Changes in
fair value for items for which the fair value option has been elected and the line items in which these changes are reported are as follows for the years ended September 30, 2013 and 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
Interest
Income
|
|
|
Total Changes
in Fair Value
|
|
|
Long-term loans and written loan commitments
|
|
$
|
(41,160
|
)
|
|
$
|
(41,160
|
)
|
|
|
|
|
|
|
2012
|
|
|
|
|
Interest
Income
|
|
|
Total Changes
in Fair Value
|
|
|
Long-term loans and written loan commitments
|
|
$
|
15,093
|
|
|
$
|
15,093
|
|
For long-term loans and written loan commitments at September 30, 2013 and 2012, approximately $(0.85) million and
$(4.27) million, respectively, of the total change in fair value is attributable to changes in specific credit risk. The gains or losses attributable to changes in instrument-specific credit risk were determined based on an assessment of
existing market conditions and credit quality of the underlying loan for the specific portfolio of loans.
F-38
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
12. Goodwill
Changes in the carrying amount of goodwill for the years ended September 30, 2013 and 2012, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Balance, beginning of year
|
|
$
|
697,807
|
|
|
$
|
697,807
|
|
|
Arising from prior period purchases
|
|
|
—
|
|
|
|
—
|
|
|
Arising from business acquisitions
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
697,807
|
|
|
$
|
697,807
|
|
|
|
|
|
|
|
|
|
|
|
Annually, the Company performs an impairment analysis to determine whether an adjustment to the carrying value of goodwill is
required. The analysis is performed by comparing the fair value of the Bank to the carrying amount of its net assets. Fair value is based on the best information available, such as present value or multiple of earnings techniques. For the years
ended September 30, 2013 and 2012, the Company did not recognize any impairment related to goodwill.
13. Core Deposits and Other Intangibles
A summary of intangible assets subject to amortization is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Deposit
Intangible
|
|
|
Brand
Intangible
|
|
|
Customer
Relationships
Intangible
|
|
|
Other
|
|
|
Total
|
|
|
As of September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount
|
|
$
|
92,679
|
|
|
$
|
8,464
|
|
|
$
|
16,089
|
|
|
$
|
—
|
|
|
$
|
117,232
|
|
|
Accumulated amortization
|
|
|
(73,668
|
)
|
|
|
(3,008
|
)
|
|
|
(10,112
|
)
|
|
|
—
|
|
|
|
(86,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,011
|
|
|
$
|
5,456
|
|
|
$
|
5,977
|
|
|
$
|
—
|
|
|
$
|
30,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount
|
|
$
|
92,679
|
|
|
$
|
8,464
|
|
|
$
|
16,089
|
|
|
$
|
60
|
|
|
$
|
117,292
|
|
|
Accumulated amortization
|
|
|
(56,843
|
)
|
|
|
(2,444
|
)
|
|
|
(8,216
|
)
|
|
|
(44
|
)
|
|
|
(67,547
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
35,836
|
|
|
$
|
6,020
|
|
|
$
|
7,873
|
|
|
$
|
16
|
|
|
$
|
49,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of intangible assets was $19.29 million and $19.65 million for the years ended September 30,
2013 and 2012, respectively. The other intangible assets of $0.01 million were written off during 2013 to other expenses.
The estimated amortization
expense of intangible assets assumes no activities, such as acquisitions, which would result in additional amortizable intangible assets. Estimated amortization expense of intangible assets in subsequent fiscal years is as follows (in thousands):
|
|
|
|
|
|
|
2014
|
|
$
|
16,215
|
|
|
2015
|
|
|
7,110
|
|
|
2016
|
|
|
2,822
|
|
|
2017
|
|
|
1,097
|
|
|
2018
|
|
|
564
|
|
|
2019 and thereafter
|
|
|
2,636
|
|
|
|
|
|
|
|
|
|
|
$
|
30,444
|
|
|
|
|
|
|
|
F-39
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
14. Deposits
The composition of deposits as of September 30, 2013 and 2012, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Noninterest-bearing demand
|
|
$
|
1,199,427
|
|
|
$
|
1,076,437
|
|
|
NOW accounts, money market and savings
|
|
|
3,601,796
|
|
|
|
3,037,382
|
|
|
Time certificates, $100,000 or more
|
|
|
850,817
|
|
|
|
1,178,095
|
|
|
Other time certificates
|
|
|
1,296,168
|
|
|
|
1,592,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,948,208
|
|
|
$
|
6,884,515
|
|
|
|
|
|
|
|
|
|
|
|
At June 22, 2012, in conjunction with the purchase of assets and assumption of liabilities of NCB, the estimated fair
value adjustment of the certificates of deposit (CD) was approximately $2.06 million. Monthly amortization is applied according to the estimated lives of the balances affected and is included in deposit interest expense. The unamortized amount
was $0.78 million and $1.83 million as of September 30, 2013 and 2012, respectively.
Total amortization of CD fair value adjustments related to
the NCB and other acquisitions was $1.54 million and $1.01 million for the years ended September 30, 2013 and 2012, respectively.
At
September 30, 2013, the scheduled maturities of time certificates in subsequent fiscal years are as follows (in thousands):
|
|
|
|
|
|
|
2014
|
|
$
|
1,369,276
|
|
|
2015
|
|
|
448,934
|
|
|
2016
|
|
|
139,508
|
|
|
2017
|
|
|
151,687
|
|
|
2018
|
|
|
16,362
|
|
|
2019 and thereafter
|
|
|
21,218
|
|
|
|
|
|
|
|
|
|
|
$
|
2,146,985
|
|
|
|
|
|
|
|
15. Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase generally mature within one to four days from the transaction date. Securities underlying the agreements had an
amortized cost of approximately $226.16 million and $262.67 million and fair value of approximately $224.16 million and $268.23 million at September 30, 2013 and 2012, respectively. The Company holds the securities under third-party
safekeeping agreements.
F-40
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
16. FHLB Advances, Related Party Notes Payable and Other Borrowings
FHLB advances, related party notes payable, and other borrowings consist of the following at September 30, 2013 and 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Subordinated capital note to NAB New York (a branch of NAB), due June 2018 (callable June 2014), interest paid quarterly
based on LIBOR plus 205 basis points, unsecured
|
|
$
|
35,795
|
|
|
$
|
35,795
|
|
|
$10,000 revolving line of credit to NAB due on demand, interest paid monthly based on LIBOR plus 125 basis points, unsecured
|
|
|
5,500
|
|
|
|
5,500
|
|
|
Notes payable to Federal Home Loan Bank (FHLB), interest rates from 0.31% to 5.81% and maturity dates from October 2013 to July
2023, collateralized by real estate loans and FHLB stock, with various call dates at the option of the FHLB
|
|
|
390,500
|
|
|
|
305,500
|
|
|
Other
|
|
|
107
|
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
431,902
|
|
|
$
|
346,916
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2013, based on its Federal Home Loan Bank stock holdings, the combined aggregate additional borrowing
capacity of the Company with the Federal Home Loan Bank was $770.31 million.
As of September 30, 2013, FHLB advances, related party notes
payable and other borrowings are due or callable (whichever is earlier) in subsequent fiscal years as follows (in thousands):
|
|
|
|
|
|
|
2014
|
|
$
|
166,107
|
|
|
2015
|
|
|
65,000
|
|
|
2016
|
|
|
90,000
|
|
|
2017
|
|
|
25,000
|
|
|
2018
|
|
|
60,795
|
|
|
2019 and thereafter
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
$
|
431,902
|
|
|
|
|
|
|
|
17. Subordinated Debentures
The Company has caused three trusts to be created that have issued Company Obligated Mandatorily Redeemable Preferred Securities (Preferred Securities). These
trusts are described herein.
The sole assets of the trusts are junior subordinated deferrable interest debentures (the Debentures) issued by the Company
(or assumed as part of the Sunstate Bank acquisition) with interest, maturity, and distribution provisions similar in term to the respective Preferred Securities. Additionally, to the extent interest payments are deferred on the Debentures, payment
on the Preferred Securities will be deferred for the same period.
The trusts’ ability to pay amounts due on the Preferred Securities is solely
dependent upon the Company making payment on the related Debentures. The Company’s obligation under the Debentures and relevant trust agreements constitute a full, irrevocable, and unconditional guarantee on a subordinated basis by it of the
obligations of the trusts under the Preferred Securities.
For regulatory purposes the Debentures qualify as elements of capital. As of September 30,
2013, $56.08 million of Debentures were eligible for treatment as Tier 1 capital.
F-41
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
The Company caused to be issued 22,400 shares, $1,000 par value, of Company Obligated Mandatorily Redeemable
Preferred Securities (Preferred Securities) of Great Western Statutory Trust IV on December 17, 2003, through a private placement. The distribution rate is set quarterly at three-month LIBOR plus 285 basis points. Interest Payment Dates are
March 17, June 17, September 17 and December 17 of each year, beginning March 17, 2004 and are payable in arrears. The Company may, at one or more times, defer interest payments on the related Debentures for up to 20
consecutive quarters following suspension of dividends on all capital stock. At the end of any deferral period, all accumulated and unpaid distributions must be paid. The Debentures will be redeemed 30 years from the issuance date; however, subject
to the Company receiving prior approval of the Federal Reserve, if required, the Company has the right to redeem the Debentures in whole, but not in part, at the Special Redemption Date, at a premium as defined by the Indenture if a “Special
Event” occurs prior to December 17, 2008. A “Special Event” means any Capital Treatment Event, an Investment Company Event, or a Tax Event. On or after December 17, 2008, subject to the Company receiving prior approval of
the Federal Reserve, if required, the Company has the right to redeem the Debentures at the Redemption Price, in whole or in part, on an Interest Payment Date. The Redemption Price is $1,000 per Preferred Security plus any accrued and unpaid
distributions to the date of redemption. Holders of the Preferred Securities have no voting rights. The Preferred Securities are unsecured and rank junior in priority of payment to all of the Company’s senior indebtedness and senior to the
Company’s common and preferred stock. Proceeds from the issue were used for general corporate purposes.
The Company caused to be issued 30,000
shares, $1,000 par value, of Company Obligated Mandatorily Redeemable Preferred Securities (Preferred Securities) of GWB Capital Trust VI on March 10, 2006, through a private placement. The distribution rate is set quarterly at three-month
LIBOR plus 148 basis points. Interest Payment dates are December 15, March 15, June 15, and September 15 of each year, beginning June 15, 2006, and are payable in arrears. T may, at one or more times, defer interest payments
on the related Debentures for up to 20 consecutive quarters following suspension of dividends on all capital stock. At the end of any deferral period, all accumulated and unpaid interest must be paid. The Debentures will be redeemed March 15,
2036; however, subject to the Company receiving prior approval of the Federal Reserve, if required, the Company has the right to redeem the Debentures in whole, but not in part, at any Interest Payment Date, at a premium as defined by the Indenture
if a “Special Event” occurs prior to March 15, 2007. A “Special Event” means any Capital Treatment Event, an Investment Company Event, or a Tax Event. On or after March 15, 2011, subject to the Company receiving
approval of the Federal Reserve, if required, the Company has the right to redeem the Debentures at the Redemption Price, whole or in part, on an Interest Payment Date.
The Redemption Price is $1,000 per Preferred Security plus any accrued and unpaid interest to the date of redemption. Holders of the Preferred Securities have
no voting rights. The Preferred Securities are unsecured and rank junior in priority of payment to all of the Company’s senior indebtedness and senior to the Company’s common and preferred stock. Proceeds from the issue were used for
general corporate purposes including redemption of the 9.75% Preferred Securities of GWB Capital Trust II.
The Company acquired the Sunstate Bancshares
Trust II in the acquisition of Sunstate Bank. Sunstate Bancshares caused to be issued 2,000 shares, $1,000 par value, of Company Obligated Mandatorily Redeemable Preferred Securities (Preferred Securities) of Sunstate Bancshares Trust II on
June 1, 2005, through a private placement. The distribution rate is set quarterly at three-month LIBOR plus 185 basis points. Interest Payment dates are March 15, June 15, September 15, and December 15 of each year,
beginning September 15, 2005, and are payable in arrears. The Company may, at one or more times, defer interest payments on the related Debentures for up to 20 consecutive quarters following suspension of dividends on all capital stock. At the
end of any deferral period, all accumulated and unpaid interest must be paid. The Debentures will be redeemed June 15, 2035; however, subject to the Company receiving prior approval of the Federal Reserve, if required, the Company has the right
to redeem the Debentures in whole or in part, at any time, within 90 days following the
F-42
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
occurrence of a Special Event, at a premium as defined by the Indenture if a “Special Event” occurs prior to June 15, 2010. A “Special Event” means any Capital Treatment
Event, an Investment Company Event, or a Tax Event. On or after June 15, 2010, subject to the Company receiving prior approval of the Federal Reserve, if required, the Company has the right to redeem the Debentures at the Redemption Price, in
whole or in part, on an Interest Payment Date. The Redemption Price is $1,000 per Preferred Security plus any accrued and unpaid interest to the date of redemption. Holders of the Preferred Securities have no voting rights. The Preferred Securities
are unsecured and rank junior in priority of payment to all of the Company’s senior indebtedness and senior to the Company’s common and preferred stock. Relating to the trusts, the Company held as assets $1.68 million in common shares
at September 30, 2013 and 2012.
18. Income Taxes
The provision for income taxes charged to operations consists of the following for the years ended September 30, 2013 and 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Currently paid or payable
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
51,828
|
|
|
$
|
51,677
|
|
|
State
|
|
|
8,158
|
|
|
|
7,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,986
|
|
|
|
58,877
|
|
|
Deferred tax (benefit) expense
|
|
|
(6,088
|
)
|
|
|
(14,719
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
53,898
|
|
|
$
|
44,158
|
|
|
|
|
|
|
|
|
|
|
|
The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to
pretax income due to the following for the years ended September 30, 2013 and 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Computed “expected” tax expense (35%)
|
|
$
|
52,550
|
|
|
$
|
41,004
|
|
|
Increase (decrease) in income taxes resulting from:
|
|
|
|
|
|
|
|
|
|
Tax exempt interest income
|
|
|
(3,856
|
)
|
|
|
(2,348
|
)
|
|
State income taxes, net of federal benefit
|
|
|
5,303
|
|
|
|
4,680
|
|
|
Other
|
|
|
(99
|
)
|
|
|
822
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual tax expense
|
|
$
|
53,898
|
|
|
$
|
44,158
|
|
|
|
|
|
|
|
|
|
|
|
F-43
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Net deferred tax assets (liabilities) consist of the following components at September 30, 2013 and 2012
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
19,932
|
|
|
$
|
22,187
|
|
|
Compensation
|
|
|
320
|
|
|
|
420
|
|
|
Net operating loss carryforward
|
|
|
170
|
|
|
|
216
|
|
|
Securities available for sale
|
|
|
4,144
|
|
|
|
—
|
|
|
Other real estate owned
|
|
|
7,072
|
|
|
|
18,889
|
|
|
Core deposit intangible and other fair value adjustments
|
|
|
6,617
|
|
|
|
1,455
|
|
|
Other
|
|
|
4,834
|
|
|
|
2,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,089
|
|
|
|
45,935
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Goodwill and other intangibles
|
|
|
(2,619
|
)
|
|
|
(20,214
|
)
|
|
Securities available for sale
|
|
|
—
|
|
|
|
(11,232
|
)
|
|
Premises and equipment
|
|
|
(6,132
|
)
|
|
|
(8,235
|
)
|
|
Other
|
|
|
(1,712
|
)
|
|
|
(1,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,463
|
)
|
|
|
(40,937
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$
|
32,626
|
|
|
$
|
4,998
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2013 and 2012, the Company had an income tax payable to National Americas Investment, Inc. (a wholly
owned subsidiary of National Americas Holdings, LLC) for $12.39 million and $5.63 million (included in income tax payable).
Management has
determined a valuation reserve is not required for the deferred tax assets because it is more likely than not these assets could be realized through carry back to taxable income in prior years, future reversals of existing taxable temporary
differences, and future taxable income.
Uncertain tax positions were not significant at September 30, 2013 or 2012.
The Company is no longer subject to U.S. federal, state, and local or non-U.S. income tax examinations by tax authorities for years before 2008.
19. Profit-Sharing Plan
The Company participates in a
multiple employer 401(k) profit sharing plan (the Plan). All employees are eligible to participate, beginning with the first day of the month coincident with or immediately following the completion of one year of service and having reached the age
of 21. In addition to employee contributions, the Company may contribute discretionary amounts for eligible participants. Contribution rates for participating employers must be equal. The Company contributed $4.48 million and $4.13 million
to the Plan for the years ended September 30, 2013 and 2012, respectively.
As part of the NCB business combination, the Company acquired a multiple
employer noncontributory tax-qualified defined benefit plan (the Retirement Plan). Effective July 1, 2008, the Retirement Plan was frozen, eliminating all future benefit accruals.
F-44
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
20. Regulatory Matters
The Company and the Bank are subject to certain restrictions on the amount of dividends that may be declared without prior regulatory approval and 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 consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. 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 amounts and ratios (set forth in the table following) of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets (all defined in the regulations). The Company met all capital adequacy and net worth
requirements to which they are subject as of September 30, 2013 and 2012.
The most recent notifications from the regulatory agencies categorize 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 1 risk-based, and Tier 1 leverage ratios as set forth in the following
table. There are no conditions or events since those notifications that management believes have changed the categories.
As an approved mortgage seller,
the Bank is required to maintain a minimum level of capital specified by the United States Department of Housing and Urban Development. At September 30, 2013 and 2012, the Bank met these requirements.
F-45
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Capital amounts and ratios are presented in the following table (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
For Capital Adequacy
Purposes
|
|
|
To Be Well Capitalized Under
Prompt Corrective Action
Provisions
|
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
As of September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk based capital (to risk-weighted assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
846,689
|
|
|
|
13.80
|
%
|
|
$
|
490,865
|
|
|
|
8.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Bank
|
|
|
848,534
|
|
|
|
13.83
|
%
|
|
|
490,793
|
|
|
|
8.00
|
%
|
|
$
|
613,492
|
|
|
|
10.00
|
%
|
|
|
|
|
|
|
|
|
|
Tier 1 risk based capital (to risk-weighted assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
762,189
|
|
|
|
12.42
|
%
|
|
|
245,433
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Bank
|
|
|
792,670
|
|
|
|
12.92
|
%
|
|
|
245,397
|
|
|
|
4.00
|
%
|
|
|
368,095
|
|
|
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital (to average assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
762,189
|
|
|
|
9.20
|
%
|
|
|
331,374
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Bank
|
|
|
792,670
|
|
|
|
9.45
|
%
|
|
|
335,348
|
|
|
|
4.00
|
%
|
|
|
419,185
|
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
As of September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk based capital (to risk-weighted assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
794,517
|
|
|
|
13.70
|
%
|
|
$
|
463,879
|
|
|
|
8.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Bank
|
|
|
794,074
|
|
|
|
13.69
|
%
|
|
|
464,000
|
|
|
|
8.00
|
%
|
|
$
|
579,999
|
|
|
|
10.00
|
%
|
|
|
|
|
|
|
|
|
|
Tier 1 risk based capital (to risk-weighted assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
686,844
|
|
|
|
11.85
|
%
|
|
|
231,939
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Bank
|
|
|
722,196
|
|
|
|
12.45
|
%
|
|
|
232,000
|
|
|
|
4.00
|
%
|
|
|
348,000
|
|
|
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital (to average assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
686,844
|
|
|
|
8.32
|
%
|
|
|
330,137
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Bank
|
|
|
722,196
|
|
|
|
8.75
|
%
|
|
|
330,137
|
|
|
|
4.00
|
%
|
|
|
412,671
|
|
|
|
5.00
|
%
|
21. Commitments and Contingencies
Financial Instruments with Off-Balance-Sheet Risk
The
Company is 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 and letters of credit. They
involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for
commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. A summary of the Company’s commitments as of September 30, 2013 and 2012, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Commitments to extend credit
|
|
$
|
1,713,869
|
|
|
$
|
1,451,680
|
|
|
Letters of credit
|
|
|
51,893
|
|
|
|
61,111
|
|
F-46
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Commitments to extend credit are agreements to lend to a customer provided there is no violation of any
condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Letters of credit are conditional commitments
issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loans to customers. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The credit and collateral policy for commitments and letters of credit is comparable to that for granting
loans.
Asset Sales
The Bank has provided guarantees
in connection with the sale of loans and has assumed a similar obligation in its acquisitions of TierOne Bank in June 2010 and NCB in June 2012. The guarantees are generally in the form of asset buy back or make whole provisions that are
triggered upon a credit event and remain in effect until the loans are collected. The maximum potential future payment related to these guarantees is not readily determinable because the Company’s obligation under these agreements depends on
the occurrence of future events. There were $0.16 million loans repurchased for the year ended September 30, 2013, which have subsequently been charged off. Incurred losses related to these repurchased loans and guaranteed loans as of
September 30, 2013 and 2012, are not significant.
Financial Instruments with Concentration of Credit Risk by Geographic Location
A substantial portion of the Company’s customers’ ability to honor their contracts is dependent on the economy in eastern and northern Nebraska,
northern Missouri, northeastern Kansas, Iowa, southeastern Arizona, central Colorado, and South Dakota. Although the Company’s loan portfolio is diversified, there is a relationship in these regions between the agricultural economy and the
economic performance of loans made to nonagricultural customers. The concentration of credit in the regional agricultural economy is taken into consideration by management in determining the allowance for loan losses.
Lease Commitments
The Company leases several branch
locations under terms of operating lease agreements expiring through December 31, 2021. The Company has the option to renew these leases for periods that range from 1 to 5 years. Total rent expense for these leases for the years ended
September 30, 2013 and 2012, was $5.62 million and $5.32 million, respectively.
Approximate future minimum rental payments for operating
leases in excess of one year in subsequent fiscal years are as follows (in thousands):
|
|
|
|
|
|
|
2014
|
|
$
|
4,324
|
|
|
2015
|
|
|
3,644
|
|
|
2016
|
|
|
3,080
|
|
|
2017
|
|
|
2,464
|
|
|
2018
|
|
|
1,721
|
|
|
2019 and thereafter
|
|
|
2,327
|
|
|
|
|
|
|
|
|
|
|
$
|
17,560
|
|
|
|
|
|
|
|
F-47
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Contingencies
In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the Company’s consolidated financial statements.
The Company was a defendant in a case that
challenged the Company’s ordering of transactions posted to customer checking accounts. The Company entered into and satisfied the settlement during 2012. The settlement was not material to the Company’s consolidated financial statements.
22. Transactions With Related Parties
The Company
has had, and may be expected to have in the future, banking transactions in the ordinary course of business with directors, executive officers, their immediate families, and affiliated companies in which they have 10% or more beneficial ownership
(commonly referred to as related parties). Total loans committed to related parties were not significant at September 30, 2013 and 2012.
In
conjunction with the purchase of the Company on June 3, 2008, the subordinated capital notes with Capital Investors, LLC were redeemed and a new subordinated capital note was issued to NAB New York (a branch of NAB) in the amount of
$35.80 million. The subordinated capital note bears interest at a floating rate of LIBOR plus 205 basis points and is due June 3, 2018, with interest payable quarterly. The interest rate at September 30, 2013, was 2.51685%, and resets
quarterly on each September 3, December 3, March 3, and June 3. The Company has the right, subject to regulatory approval, to prepay the subordinated capital note without penalty. The Company’s obligations under its
Preferred Securities guarantee and the junior subordinated debentures are unsecured and rank junior to the Company’s obligations under its subordinated capital note.
In addition, the Company obtained a $10.00 million revolving line of credit with NAB, which is due on demand. The line of credit has an interest rate of
LIBOR plus 125 basis points, with interest payable quarterly. The interest rate was 1.43206% at September 30, 2013, and will reset on December 5. There were outstanding advances of $5.50 million on this line of credit at September 30,
2013 and 2012.
NAB acts as the counterparty for all of the Company’s interest rate swaps. These swaps are discussed in Note 10.
NAB acts as a dealer on certain security purchases. Securities purchased from NAB totaled $56.12 million for the year ended September 30, 2013. No
commissions were paid to NAB in connection with these purchases.
Interest paid to related parties for notes payable as discussed above and in
Note 16 was $0.91 million and $1.00 million for the years ended September 30, 2013 and 2012, respectively.
NAB provides the Company’s
employees with restricted shares of NAB stock subsequent to meeting short- and long-term incentive goals. A payable is recorded between the Company and NAB based on the value and vesting schedule of issued shares. The liability included in accrued
expenses on the consolidated balance sheets was $2.36 million and $1.92 million at September 30, 2013 and 2012, respectively. The expense related to the restricted shares was $1.94 million and $2.14 million for the years ended
September 30, 2013 and 2012, respectively, and is included within salaries and employee benefits on the consolidated statements of comprehensive income.
F-48
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
23. Fair Value of Financial Instruments and Interest Rate Risk
The Company measures, monitors and discloses certain of its assets and liabilities on a fair value basis. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value guidance also establishes a fair value hierarchy that requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value are as follows:
|
|
|
|
|
Level 1
|
|
Quoted prices in active markets for identical assets or liabilities
|
|
|
|
|
Level 2
|
|
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities
|
|
|
|
|
Level 3
|
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
|
Level 1 inputs are considered to be the most transparent and reliable and Level 3 inputs are considered to be the least
transparent and reliable. The Company assumes the use of the principal market to conduct a transaction of each particular asset or liability being measured and then considers the assumptions that market participants would use when pricing the asset
or liability. Whenever possible, the Company first looks for quoted prices for identical assets or liabilities in active markets (Level 1 inputs) to value each asset or liability. However, when inputs from identical assets or liabilities on active
markets are not available, the Company utilizes market observable data for similar assets and liabilities. The Company maximizes the use of observable inputs and limits the use of unobservable inputs to occasions when observable inputs are not
available. The need to use unobservable inputs generally results from the lack of market liquidity of the actual financial instrument or of the underlying collateral. Although in some instances, third party price indications may be available,
limited trading activity can challenge the observability of these quotations.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Following is a description of the valuation methodologies and inputs used for assets and liabilities measured at fair value on a recurring basis and
recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.
Securities Available for Sale
Where quoted market prices
are available in an active market, securities are classified within Level 1 of the valuation hierarchy. These securities are based on valuations using quoted prices. If quoted market prices are not available, then fair values are estimated by using
pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Level 2 securities include U.S. Treasury, U.S. government agency, agency mortgage-backed, states and political subdivisions, corporate debt, and
other securities. Where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.
Interest Rate Swaps
and Loans
Interest rate swaps are valued using the system used to value all of NAB’s traded securities and derivatives using LIBOR rates. The
fair value of loans accounted for under the fair value option represents the net carrying value of the loan, plus the equal and opposite amount of the value of the swap needed to hedge the interest rate risk and
F-49
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
an adjustment for credit risk based on our assessment of existing market conditions for the specific portfolio of loans. This is used due to the strict prepayment penalties put in the loan terms
to cover the cost of exiting the hedge of the loans in the case of early prepayment or termination. The adjustment for credit risk on loans accounted for under the fair value option is not significant to the overall fair value of the loans. The fair
values estimated by NAB use interest rates that are observable or that can be corroborated by observable market data and, therefore, are classified within Level 2 of the valuation hierarchy. The Company is required to post cash collateral to NAB for
interest rate derivative contracts that are in a liability position, thus a credit risk adjustment on interest rate swaps is not warranted.
The following
table presents the fair value measurements of assets and liabilities recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value
measurements fall at September 30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
As of September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Mortgage-backed securities
|
|
|
1,459,444
|
|
|
|
—
|
|
|
|
1,459,444
|
|
|
|
—
|
|
|
States and political subdivision securities
|
|
|
3,532
|
|
|
|
—
|
|
|
|
3,532
|
|
|
|
—
|
|
|
Corporate debt securities
|
|
|
12,013
|
|
|
|
—
|
|
|
|
12,013
|
|
|
|
—
|
|
|
Other
|
|
|
5,460
|
|
|
|
—
|
|
|
|
5,460
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
$
|
1,480,449
|
|
|
$
|
—
|
|
|
$
|
1,480,449
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives—assets
|
|
$
|
375
|
|
|
$
|
—
|
|
|
$
|
375
|
|
|
$
|
—
|
|
|
Derivatives—liabilities
|
|
|
1,526
|
|
|
|
—
|
|
|
|
1,526
|
|
|
|
—
|
|
|
Fair value loans and written loan commitments
|
|
|
841,862
|
|
|
|
—
|
|
|
|
841,862
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
As of September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
5,107
|
|
|
$
|
—
|
|
|
$
|
5,107
|
|
|
$
|
—
|
|
|
Mortgage-backed securities
|
|
|
1,531,194
|
|
|
|
—
|
|
|
|
1,531,194
|
|
|
|
—
|
|
|
States and political subdivision securities
|
|
|
5,814
|
|
|
|
—
|
|
|
|
5,814
|
|
|
|
—
|
|
|
Corporate debt securities
|
|
|
34,311
|
|
|
|
—
|
|
|
|
34,311
|
|
|
|
—
|
|
|
Other
|
|
|
5,449
|
|
|
|
—
|
|
|
|
5,449
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
$
|
1,581,875
|
|
|
$
|
—
|
|
|
$
|
1,581,875
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives—assets
|
|
$
|
1,661
|
|
|
$
|
—
|
|
|
$
|
1,661
|
|
|
$
|
—
|
|
|
Derivatives—liabilities
|
|
|
43,117
|
|
|
|
—
|
|
|
|
43,117
|
|
|
|
—
|
|
|
Fair value loans and written loan commitments
|
|
|
688,799
|
|
|
|
—
|
|
|
|
688,799
|
|
|
|
—
|
|
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Following is a description of the valuation methodologies used for assets and liabilities measured at fair value on a nonrecurring basis and recognized in the
accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.
Impaired Loans (Collateral Dependent)
Loans for which it
is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for estimating fair value include using the fair value of the collateral for collateral
dependent loans or, where a loan is determined not to be collateral dependent, using the discounted cash flow method.
F-50
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
If the impaired loan is identified as collateral dependent, then the fair value method of measuring the
amount of the impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor, if necessary, to the appraised value and including costs to sell. Because many of these inputs are
not observable, the measurements are classified as Level 3.
Other Real Estate Owned (OREO)
Other real estate owned consists of loan collateral that has been repossessed through foreclosure. This collateral is comprised of commercial and residential
real estate. OREO is recorded initially at fair value of the collateral less estimated selling costs. Subsequent to foreclosure, valuations are updated periodically, and the assets may be marked down further to fair value less selling costs,
reflecting a valuation allowance. Fair value measurements may be based upon appraisals, third-party price opinions, or internally developed pricing methods. These measurements are classified as Level 3.
Mortgage Loans Held for Sale
Fair value of mortgage
loans held for sale is based on either quoted prices for the same or similar loans, or values obtained from third parties, or are estimated for portfolios of loans with similar financial characteristics and are therefore considered a Level 2
valuation.
The following tables present the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level
within the fair value hierarchy in which the fair value measurements fall at September 30, 2013 and 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
As of September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
$
|
40,723
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
40,723
|
|
|
Impaired loans
|
|
|
154,512
|
|
|
|
—
|
|
|
|
—
|
|
|
|
154,512
|
|
|
Loans held for sale, at lower of cost or fair value
|
|
|
8,271
|
|
|
|
—
|
|
|
|
8,271
|
|
|
|
—
|
|
|
|
|
|
|
|
|
As of September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
$
|
24,145
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
24,145
|
|
|
Impaired loans
|
|
|
148,497
|
|
|
|
—
|
|
|
|
—
|
|
|
|
148,497
|
|
|
Loans held for sale, at lower of cost or fair value
|
|
|
29,268
|
|
|
|
—
|
|
|
|
29,268
|
|
|
|
—
|
|
The valuation techniques and significant unobservable inputs used to measure Level 3 fair value measurements at
September 30, 2013 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Instrument
|
|
Fair Value of
Assets / (Liabilities)
at September 30,
2013
|
|
|
Valuation
Technique(s)
|
|
Unobservable
Input
|
|
Range
|
|
Weighted
Average
|
|
Other real estate owned
|
|
$
|
40,723
|
|
|
Appraisal value
|
|
Property specific adjustment
|
|
N/A
|
|
N/A
|
|
Impaired loans
|
|
$
|
154,512
|
|
|
Appraisal value
|
|
Property
specific adjustment
|
|
N/A
|
|
N/A
|
F-51
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Fair Value of Financial Instruments
For financial instruments that have quoted market prices, those quotes are used to determine fair value. Financial instruments that have no defined maturity,
have a remaining maturity of 180 days or less, or reprice frequently to a market rate are assumed to have a fair value that approximates carrying value, after taking into consideration any applicable credit risk. If no market quotes are available,
financial instruments are valued by discounting the expected cash flows using an estimated current market interest rate for the financial instrument.
The
short maturity of the Company’s assets and liabilities results in having a significant number of financial instruments whose fair value equals or closely approximates carrying value. Such financial instruments are reported in the following
consolidated balance sheet categories: cash and due from banks, securities sold under agreements to repurchase, and accrued interest.
Fair value
estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant
assets and liabilities that are not considered financial instruments include premises and equipment, deferred income taxes, goodwill, and core deposit and other intangibles. In addition, the tax ramifications related to the realization of unrealized
gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
Off-balance sheet instruments
(commitments to extend credit and standby letters of credit) are generally short-term and at variable rates. Therefore, both the carrying amount and the estimated fair value associated with these instruments are immaterial. Fair values for balance
sheet instruments as of September 30, 2013 and 2012, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
Level in
Fair Value
Hierarchy
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
|
Level 1
|
|
|
$
|
282,157
|
|
|
$
|
282,157
|
|
|
$
|
255,985
|
|
|
$
|
255,985
|
|
|
Loans, net excluding fair valued loans and loans held for sale
|
|
|
Level 3
|
|
|
|
5,456,676
|
|
|
|
5,420,963
|
|
|
|
5,348,629
|
|
|
|
5,344,167
|
|
|
Accrued interest receivable
|
|
|
Level 2
|
|
|
|
41,065
|
|
|
|
41,065
|
|
|
|
40,736
|
|
|
|
40,736
|
|
|
Federal Home Loan Bank stock
|
|
|
Level 2
|
|
|
|
28,765
|
|
|
|
28,765
|
|
|
|
26,798
|
|
|
|
26,798
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
Level 3
|
|
|
$
|
(6,948,208
|
)
|
|
$
|
(6,959,936
|
)
|
|
$
|
(6,884,515
|
)
|
|
$
|
(6,904,210
|
)
|
|
FHLB advances, related party notes payable, and other borrowings
|
|
|
Level 2
|
|
|
|
(431,902
|
)
|
|
|
(421,593
|
)
|
|
|
(346,916
|
)
|
|
|
(345,901
|
)
|
|
Securities sold under repurchase agreements
|
|
|
Level 2
|
|
|
|
(217,562
|
)
|
|
|
(217,562
|
)
|
|
|
(235,572
|
)
|
|
|
(235,572
|
)
|
|
Accrued interest payable
|
|
|
Level 2
|
|
|
|
(6,790
|
)
|
|
|
(6,790
|
|
|
|
(11,460
|
)
|
|
|
(11,460
|
)
|
|
Subordinated debentures
|
|
|
Level 2
|
|
|
|
(56,083
|
)
|
|
|
(56,084
|
)
|
|
|
(56,083
|
)
|
|
|
(56,086
|
)
|
The following methods and assumptions were used in estimating the fair value of financial instruments that were not previously
disclosed:
Cash and cash due from banks:
Due to the short term nature of cash and cash equivalents, the estimated fair value is equal to the
carrying value and they are categorized as a Level 1 fair value measurement.
F-52
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Loans, net excluding fair valued loans and loans held for sale:
The fair value of the loan portfolio
is estimated using observable inputs including estimated cash flows, and discount rates based on interest rates currently being offered for loans with similar terms, to borrowers of similar credit quality. Loans held for investment are categorized
as a Level 3 fair value measurement.
Accrued interest receivable:
Due to the nature of accrued interest receivable, the estimated fair value is
equal to the carrying value and they are categorized as a Level 2 fair value measurement.
Federal Home Loan Bank stock:
The carrying amount of
FHLB stock approximates its fair value as it can only be redeemed with the FHLB at par value. Federal Home Loan Bank stock has been categorized as a Level 2 fair value measurement.
Deposits:
The estimated fair value of deposits with no stated maturity, such as non-interest bearing demand deposits, savings, NOW, and money market
accounts, is equal to the amount payable on demand. The fair value of interest-bearing time deposits is based on the discounted value of contractual cash flows of such deposits, taking into account the option for early withdrawal. The discount rate
is estimated using the rates offered by the Company, at the respective measurement dates, for deposits of similar maturities. Deposits have been categorized as a Level 3 fair value measurement.
FHLB advances, related party notes payable, and other borrowings:
The fair value of FHLB advances, related party notes payable, and other borrowings is
estimated using discounted cash flow analysis, based on current incremental borrowing rates for similar types of borrowing arrangements. In the absence of a reasonably precise methodology to determine the fair value of the credit agreement, carrying
value has been used to represent fair value. FHLB advances, related party notes payable, and other borrowings have been categorized as a Level 2 fair value measurement.
Securities sold under repurchase agreements:
The Company’s repurchase agreements are overnight transactions that mature the day after the
transaction, and as a result of this short-term nature, the estimated fair value equals the carrying value. Securities sold under repurchase agreements have been categorized as a Level 2 fair value measurement.
Accrued interest payable:
Due to the nature of accrued interest payable, the estimated fair value is equal to the carrying value and they are
categorized as a Level 2 fair value measurement.
Subordinated Debentures:
The fair value of subordinated debentures is estimated using discounted
cash flow analysis, based on current incremental debt rates. In the absence of a reasonably precise methodology to determine the fair value of the credit agreement, carrying value has been used to represent fair value. Subordinated debentures have
been categorized as a Level 2 fair value measurement.
24. Earnings per Share
Basic earnings per share computations for the years ended September 30, 2013 and 2012 were determined by dividing net income by the weighted-average
number of common shares outstanding during the years then ended. The Company had no potentially dilutive securities outstanding during the periods presented.
F-53
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
The following information was used in the computation of basic earnings per share (EPS) for the years ended
September 30, 2013 and 2012 (in thousands except share data).
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Basic earnings per share computation:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
96,243
|
|
|
$
|
72,995
|
|
|
Weighted average common shares outstanding
|
|
|
198,731
|
|
|
|
198,731
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
$
|
484.29
|
|
|
$
|
367.31
|
|
|
|
|
|
|
|
|
|
|
|
25. Parent Company Only Financial Statements
Parent company only financial information for Great Western Bancorporation, Inc. is summarized as follows:
Condensed Balance Sheets
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
6,710
|
|
|
$
|
2,512
|
|
|
Investment in subsidiaries
|
|
|
1,503,778
|
|
|
|
1,480,008
|
|
|
Investment in affiliates
|
|
|
1,683
|
|
|
|
1,683
|
|
|
Accrued interest receivable
|
|
|
2
|
|
|
|
2
|
|
|
Net deferred tax assets
|
|
|
413
|
|
|
|
566
|
|
|
Other assets
|
|
|
14,521
|
|
|
|
7,482
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,527,107
|
|
|
$
|
1,492,253
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholder’s equity
|
|
|
|
|
|
|
|
|
|
Related party notes payable
|
|
$
|
41,295
|
|
|
$
|
41,295
|
|
|
Subordinated debentures
|
|
|
56,083
|
|
|
|
56,083
|
|
|
Accrued interest payable
|
|
|
113
|
|
|
|
121
|
|
|
Income taxes payable
|
|
|
12,390
|
|
|
|
5,629
|
|
|
Accrued expenses and other liabilities
|
|
|
12
|
|
|
|
562
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
109,893
|
|
|
|
103,690
|
|
|
|
|
|
|
Stockholder’s equity
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
199
|
|
|
|
199
|
|
|
Additional paid-in capital
|
|
|
1,260,504
|
|
|
|
1,260,504
|
|
|
Retained earnings
|
|
|
163,592
|
|
|
|
108,749
|
|
|
Accumulated other comprehensive income (loss)
|
|
|
(7,081
|
)
|
|
|
19,111
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholder’s equity
|
|
|
1,417,214
|
|
|
|
1,388,563
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholder’s equity
|
|
$
|
1,527,107
|
|
|
$
|
1,492,253
|
|
|
|
|
|
|
|
|
|
|
|
F-54
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Condensed Statements of Comprehensive Income
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Interest and dividend income
|
|
|
|
|
|
|
|
|
|
Dividends on securities
|
|
$
|
112
|
|
|
$
|
264
|
|
|
Federal funds sold and other
|
|
|
40
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and dividend income
|
|
|
152
|
|
|
|
307
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
Related party notes payable
|
|
|
950
|
|
|
|
1,007
|
|
|
Subordinated debentures
|
|
|
1,347
|
|
|
|
1,436
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
2,297
|
|
|
|
2,443
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (loss)
|
|
|
(2,145
|
)
|
|
|
(2,136
|
)
|
|
|
|
|
|
Noninterest income
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on sale of investments
|
|
|
(73
|
)
|
|
|
(363
|
)
|
|
Other
|
|
|
—
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
(73
|
)
|
|
|
(340
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
906
|
|
|
|
1,655
|
|
|
Data processing
|
|
|
203
|
|
|
|
1
|
|
|
Equipment expenses
|
|
|
—
|
|
|
|
1
|
|
|
Advertising
|
|
|
—
|
|
|
|
1
|
|
|
Communication expenses
|
|
|
—
|
|
|
|
1
|
|
|
Professional fees
|
|
|
135
|
|
|
|
120
|
|
|
Other
|
|
|
2,112
|
|
|
|
1,405
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
3,356
|
|
|
|
3,184
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in net income of subsidiaries and income taxes
|
|
|
(5,574
|
)
|
|
|
(5,660
|
)
|
|
Equity in net income of subsidiaries
|
|
|
99,862
|
|
|
|
76,598
|
|
|
Provision for income taxes
|
|
|
(1,955
|
)
|
|
|
(2,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
96,243
|
|
|
$
|
72,995
|
|
|
|
|
|
|
|
|
|
|
|
F-55
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements
Condensed Statements of Cash Flows
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
96,243
|
|
|
$
|
72,995
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
1
|
|
|
Deferred income taxes
|
|
|
750
|
|
|
|
(1,817
|
)
|
|
Changes in:
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
|
(875
|
)
|
|
|
9,213
|
|
|
Accrued interest and other liabilities
|
|
|
(558
|
)
|
|
|
369
|
|
|
Equity in undistributed net income of subsidiaries
|
|
|
(49,962
|
)
|
|
|
(30,796
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
45,598
|
|
|
|
49,965
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
Net change in note payable to NAB
|
|
|
—
|
|
|
|
(7,000
|
)
|
|
Dividends paid
|
|
|
(41,400
|
)
|
|
|
(41,800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(41,400
|
)
|
|
|
(48,800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and due from banks
|
|
|
4,198
|
|
|
|
1,165
|
|
|
Cash and due from banks, beginning of year
|
|
|
2,512
|
|
|
|
1,347
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks, end of year
|
|
$
|
6,710
|
|
|
$
|
2,512
|
|
|
|
|
|
|
|
|
|
|
|
F-56
GREAT WESTERN BANCORPORATION, INC.
Consolidated Balance Sheets
(In Thousands, Except Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
(Unaudited)
|
|
|
September 30, 2013
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
235,077
|
|
|
$
|
282,157
|
|
|
Securities
|
|
|
1,395,768
|
|
|
|
1,480,449
|
|
|
Investment in affiliates
|
|
|
1,683
|
|
|
|
1,683
|
|
|
Loans, net of allowance for loan losses of $47,038 and $55,864 at June 30, 2014 and September 30, 2013, respectively
(includes $259,677 and $347,408 of loans covered by FDIC loss share agreements at June 30, 2014 and September 30, 2013, respectively, $931,541 and $841,862 of loans and written loan commitments at fair value under the fair value option at
June 30, 2014 and September 30, 2013, respectively, and $10,994 and $8,271 of loans held for sale at June 30, 2014 and September 30, 2013, respectively)
|
|
|
6,631,463
|
|
|
|
6,306,809
|
|
|
Premises and equipment
|
|
|
107,129
|
|
|
|
114,380
|
|
|
Accrued interest receivable
|
|
|
37,055
|
|
|
|
41,065
|
|
|
Other repossessed property (includes $13,967 and $24,412 of property covered under FDIC loss share agreements at June 30, 2014 and
September 30, 2013, respectively)
|
|
|
54,190
|
|
|
|
57,422
|
|
|
FDIC indemnification asset
|
|
|
32,232
|
|
|
|
45,690
|
|
|
Goodwill
|
|
|
697,807
|
|
|
|
697,807
|
|
|
Core deposits and other intangibles
|
|
|
16,996
|
|
|
|
30,444
|
|
|
Net deferred tax assets
|
|
|
38,685
|
|
|
|
32,626
|
|
|
Other assets
|
|
|
44,198
|
|
|
|
43,726
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
9,292,283
|
|
|
$
|
9,134,258
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholder’s equity
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
$
|
1,294,131
|
|
|
$
|
1,199,427
|
|
|
Interest-bearing
|
|
|
5,772,981
|
|
|
|
5,748,781
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
7,067,112
|
|
|
|
6,948,208
|
|
|
Securities sold under agreements to repurchase
|
|
|
185,620
|
|
|
|
217,562
|
|
|
FHLB advances and other borrowings
|
|
|
435,097
|
|
|
|
390,607
|
|
|
Related party notes payable
|
|
|
41,295
|
|
|
|
41,295
|
|
|
Subordinated debentures
|
|
|
56,083
|
|
|
|
56,083
|
|
|
Fair value of derivatives
|
|
|
13,310
|
|
|
|
1,526
|
|
|
Accrued interest payable
|
|
|
5,643
|
|
|
|
6,790
|
|
|
Income tax payable
|
|
|
16,798
|
|
|
|
12,390
|
|
|
Accrued expenses and other liabilities
|
|
|
40,361
|
|
|
|
42,583
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
7,861,319
|
|
|
|
7,717,044
|
|
|
|
|
|
|
Stockholder’s equity
|
|
|
|
|
|
|
|
|
|
Common stock, $1 par value, authorized 250,000 shares; issued and outstanding at June 30, 2014 and September 30, 2013 -
198,731 shares
|
|
|
199
|
|
|
|
199
|
|
|
Additional paid-in capital
|
|
|
1,260,504
|
|
|
|
1,260,504
|
|
|
Retained earnings
|
|
|
172,669
|
|
|
|
163,592
|
|
|
Accumulated other comprehensive loss
|
|
|
(2,408
|
)
|
|
|
(7,081
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholder’s equity
|
|
|
1,430,964
|
|
|
|
1,417,214
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholder’s equity
|
|
$
|
9,292,283
|
|
|
$
|
9,134,258
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-57
GREAT WESTERN BANCORPORATION, INC.
Consolidated Statements of Comprehensive Income (Unaudited)
(In Thousands, Except Share and Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
Interest and dividend income
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
240,362
|
|
|
$
|
188,666
|
|
|
Taxable securities
|
|
|
20,190
|
|
|
|
20,817
|
|
|
Nontaxable securities
|
|
|
61
|
|
|
|
113
|
|
|
Dividends on securities
|
|
|
751
|
|
|
|
701
|
|
|
Federal funds sold and other
|
|
|
400
|
|
|
|
262
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and dividend income
|
|
|
261,764
|
|
|
|
210,559
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
19,629
|
|
|
|
25,975
|
|
|
Securities sold under agreements to repurchase
|
|
|
442
|
|
|
|
489
|
|
|
FHLB advances and other borrowings
|
|
|
2,591
|
|
|
|
2,158
|
|
|
Related party notes payable
|
|
|
690
|
|
|
|
714
|
|
|
Subordinated debentures and other
|
|
|
985
|
|
|
|
1,013
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
24,337
|
|
|
|
30,349
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
237,427
|
|
|
|
180,210
|
|
|
|
|
|
|
Provision (recovery) for loan losses
|
|
|
(2,065
|
)
|
|
|
14,034
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision (recovery) for loan losses
|
|
|
239,492
|
|
|
|
166,176
|
|
|
|
|
|
|
Noninterest income
|
|
|
|
|
|
|
|
|
|
Service charges and other fees
|
|
|
29,728
|
|
|
|
30,927
|
|
|
Net gain on sale of loans
|
|
|
3,885
|
|
|
|
11,108
|
|
|
Casualty insurance commissions
|
|
|
877
|
|
|
|
955
|
|
|
Investment center income
|
|
|
1,757
|
|
|
|
2,050
|
|
|
Net gain on sale of securities
|
|
|
6
|
|
|
|
1,741
|
|
|
Trust department income
|
|
|
2,847
|
|
|
|
2,601
|
|
|
Net gain from sale of repossessed property and other assets
|
|
|
2,413
|
|
|
|
2,235
|
|
|
Other
|
|
|
4,070
|
|
|
|
7,997
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
45,583
|
|
|
|
59,614
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
$
|
71,176
|
|
|
$
|
76,123
|
|
|
Occupancy expenses, net
|
|
|
13,613
|
|
|
|
13,919
|
|
|
Data processing
|
|
|
14,105
|
|
|
|
13,749
|
|
|
Equipment expenses
|
|
|
3,099
|
|
|
|
3,361
|
|
|
Advertising
|
|
|
3,385
|
|
|
|
4,684
|
|
|
Communication expenses
|
|
|
3,402
|
|
|
|
3,585
|
|
|
Professional fees
|
|
|
9,623
|
|
|
|
8,855
|
|
|
Derivatives, net (gain) loss
|
|
|
12,119
|
|
|
|
(41,635
|
)
|
|
Amortization of core deposits and other intangibles
|
|
|
13,448
|
|
|
|
14,600
|
|
|
Other
|
|
|
22,466
|
|
|
|
18,947
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
166,436
|
|
|
|
116,188
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
118,639
|
|
|
|
109,602
|
|
|
Provision for income taxes
|
|
|
41,562
|
|
|
|
39,682
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
77,077
|
|
|
$
|
69,920
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) - change in net unrealized gain (loss) on securities available-for-sale (net of deferred income tax
(expense) benefit of $(2,684) and $10,887 for the nine months ended June 30, 2014 and 2013, respectively)
|
|
|
4,673
|
|
|
|
(18,549
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
81,750
|
|
|
$
|
51,371
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
198,731
|
|
|
|
198,731
|
|
|
Earnings per share
|
|
$
|
387.85
|
|
|
$
|
351.83
|
|
|
|
|
|
|
Dividends per share
|
|
|
|
|
|
|
|
|
|
Dividends issued
|
|
$
|
68,000
|
|
|
$
|
41,400
|
|
|
Dividends per share
|
|
$
|
342.17
|
|
|
$
|
208.32
|
|
See accompanying notes.
F-58
GREAT WESTERN BANCORPORATION, INC.
Consolidated Statements of Stockholder’s Equity (Unaudited)
(In Thousands, Except Share and Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Income
|
|
|
Common
Stock
Par Value
|
|
|
Additional
Paid-in
Capital
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Total
|
|
|
Balance, September 30, 2012
|
|
|
|
|
|
$
|
199
|
|
|
$
|
1,260,504
|
|
|
$
|
108,749
|
|
|
$
|
19,111
|
|
|
$
|
1,388,563
|
|
|
Net income
|
|
$
|
69,920
|
|
|
|
—
|
|
|
|
—
|
|
|
|
69,920
|
|
|
|
—
|
|
|
|
69,920
|
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net unrealized gain (loss) on securities available for sale
|
|
|
(18,549
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(18,549
|
)
|
|
|
(18,549
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
51,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $97.62 per share
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(19,400
|
)
|
|
|
—
|
|
|
|
(19,400
|
)
|
|
Common stock, $110.70 per share
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(22,000
|
)
|
|
|
—
|
|
|
|
(22,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2013
|
|
|
|
|
|
$
|
199
|
|
|
$
|
1,260,504
|
|
|
$
|
137,269
|
|
|
$
|
562
|
|
|
$
|
1,398,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2013
|
|
|
|
|
|
$
|
199
|
|
|
$
|
1,260,504
|
|
|
$
|
163,592
|
|
|
$
|
(7,081
|
)
|
|
$
|
1,417,214
|
|
|
Net income
|
|
$
|
77,077
|
|
|
|
—
|
|
|
|
—
|
|
|
|
77,077
|
|
|
|
—
|
|
|
|
77,077
|
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net unrealized gain (loss) on securities available for sale
|
|
|
4,673
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,673
|
|
|
|
4,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
81,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $171.09 per share
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(34,000
|
)
|
|
|
—
|
|
|
|
(34,000
|
)
|
|
Common stock, $171.09 per share
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(34,000
|
)
|
|
|
—
|
|
|
|
(34,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2014
|
|
|
|
|
|
$
|
199
|
|
|
$
|
1,260,504
|
|
|
$
|
172,669
|
|
|
$
|
(2,408
|
)
|
|
$
|
1,430,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-59
GREAT WESTERN BANCORPORATION, INC.
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
77,077
|
|
|
$
|
69,920
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
27,790
|
|
|
|
33,758
|
|
|
Net gain on sale of securities
|
|
|
(6
|
)
|
|
|
(1,741
|
)
|
|
Net gain on sale of loans
|
|
|
(3,885
|
)
|
|
|
(11,108
|
)
|
|
Net loss on sale of premises and equipment
|
|
|
1,417
|
|
|
|
551
|
|
|
Net gain from sale of repossessed assets and other assets
|
|
|
(2,413
|
)
|
|
|
(2,235
|
)
|
|
Provision (recovery) for loan losses
|
|
|
(2,065
|
)
|
|
|
14,034
|
|
|
Provision for repossessed assets
|
|
|
8,997
|
|
|
|
241
|
|
|
Proceeds from FDIC indemnification claims
|
|
|
5,330
|
|
|
|
6,422
|
|
|
Originations of residential real estate loans held-for-sale
|
|
|
(149,001
|
)
|
|
|
(347,062
|
)
|
|
Proceeds from sales of residential real estate loans held-for-sale
|
|
|
150,163
|
|
|
|
366,460
|
|
|
Net deferred income taxes
|
|
|
(8,743
|
)
|
|
|
(11,509
|
)
|
|
Changes in:
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
4,010
|
|
|
|
2,857
|
|
|
Other assets
|
|
|
1,175
|
|
|
|
3,069
|
|
|
FDIC indemnification asset
|
|
|
8,128
|
|
|
|
10,016
|
|
|
FDIC clawback liability
|
|
|
682
|
|
|
|
250
|
|
|
Accrued interest payable and other liabilities
|
|
|
12,145
|
|
|
|
(34,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
130,801
|
|
|
|
99,164
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Purchase of securities available for sale
|
|
|
(148,670
|
)
|
|
|
(486,701
|
)
|
|
Proceeds from sales and maturities of securities available for sale
|
|
|
233,725
|
|
|
|
426,342
|
|
|
Net increase in loans
|
|
|
(351,360
|
)
|
|
|
(187,324
|
)
|
|
Purchase of premises and equipment
|
|
|
(2,263
|
)
|
|
|
(2,420
|
)
|
|
Proceeds from sale of premises and equipment
|
|
|
743
|
|
|
|
2,036
|
|
|
Proceeds from sale of other assets
|
|
|
28,141
|
|
|
|
32,758
|
|
|
Purchase of FHLB stock
|
|
|
(1,649
|
)
|
|
|
(5,690
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(241,333
|
)
|
|
|
(220,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Net increase in deposits
|
|
$
|
118,904
|
|
|
$
|
24,323
|
|
|
Net decrease in securities sold under agreements to repurchase
|
|
|
(31,942
|
)
|
|
|
(7,457
|
)
|
|
Proceeds from FHLB advances and other borrowings
|
|
|
44,490
|
|
|
|
119,990
|
|
|
Dividends paid
|
|
|
(68,000
|
)
|
|
|
(41,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
63,452
|
|
|
|
95,456
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and due from banks
|
|
|
(47,080
|
)
|
|
|
(26,379
|
)
|
|
Cash and due from banks, beginning of period
|
|
|
282,157
|
|
|
|
255,985
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks, end of period
|
|
$
|
235,077
|
|
|
$
|
229,606
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flows information
|
|
|
|
|
|
|
|
|
|
Cash payments for interest
|
|
$
|
25,484
|
|
|
$
|
30,154
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments for income taxes
|
|
$
|
45,520
|
|
|
$
|
42,112
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedules of noncash investing and financing activities
|
|
|
|
|
|
|
|
|
|
Loans transferred to repossessed assets and other assets
|
|
$
|
(31,493
|
)
|
|
$
|
(20,460
|
)
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-60
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
Great Western Bancorporation,
Inc. (the “Company”) is a bank holding company organized under the laws of Iowa. The primary business of the Company is ownership of its wholly owned subsidiary, Great Western Bank (the “Bank”). The Bank is a full-service
regional bank focused on relationship-based business and agri-business banking in Arizona, Colorado, Iowa, Kansas, Missouri, Nebraska, and South Dakota. The Company and the Bank are subject to the regulation of certain federal and/or state agencies
and undergo periodic examinations by those regulatory authorities. Substantially all of the Company’s income is generated from banking operations. The Company is a wholly owned indirect subsidiary of National Australia Bank Limited
(“NAB”).
The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles
generally accepted in the United States (“U.S. GAAP”) and reflect all adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position and results of operations for the periods presented.
All such adjustments are of a normal recurring nature. The unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ending September 30, 2013. The
results of operations for interim periods are not necessarily indicative of the results that may be expected for the year or any other period.
The
accompanying unaudited consolidated financial statements include the accounts and results of operations of the Company and its subsidiaries after elimination of all significant intercompany accounts and transactions. The preparation of unaudited
consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could
differ from these estimates.
The Company has evaluated all events or transactions that occurred through the date the Company issued these financial
statements. During this period, the Company did not have any material recognizable or non-recognizable subsequent events other than outlined below.
In
July 2014, NAB formed Great Western Bancorp, Inc. (“Bancorp”), a Delaware corporation. Bancorp will succeed to the business of the Company whose consolidated financial statements and related notes are included in this document. Bancorp
holds no assets other than the nominal amount of cash contributed as equity to it in connection with its formation. Bancorp has also not engaged in any business or other activities other than in connection with its formation and as the registrant
for this offering.
2. New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 “
Revenue
from Contracts with Customers (Topic 606)
”, which does not apply to financial instruments. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods
within that reporting period. The amendments can be applied retrospectively to each prior reporting period or retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial application. Early application
is not permitted. The Company is assessing the impact of ASU 2014-09 on its accounting and disclosures.
In January 2014, the FASB issued ASU 2014-04,
Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure
. The update amends existing literature to eliminate diversity in
practice by clarifying and defining
F-61
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
when an in substance repossession or foreclosure occurs. The terms “in substance repossession or foreclosure” and “physical possession” are not currently defined in the
accounting literature, resulting in diversity in practice when a creditor derecognizes a loan receivable and recognizes the real estate property collateralizing the loan receivable as an asset. Additionally, the update requires interim and annual
disclosures of both the amount of foreclosed residential real estate property and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure. The update is effective
for annual periods and the interim periods within those annual periods beginning after December 15, 2014. The adoption of the update to existing standards is not expected to have a material impact to the Company’s consolidated financial
statements.
3. Restrictions on Cash and Due from Banks
The Company is required to maintain reserve balances in cash and on deposit with the Federal Reserve based on a percentage of deposits. The total requirement
was approximately $43.27 million and $52.66 million at June 30, 2014 and September 30, 2013, respectively.
4. Securities
The amortized cost and approximate fair value of investments in securities, all of which are classified as available for sale according to management’s
intent, are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
|
As of June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
148,733
|
|
|
$
|
605
|
|
|
$
|
—
|
|
|
$
|
149,338
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Association
|
|
|
1,235,906
|
|
|
|
8,105
|
|
|
|
(12,806
|
)
|
|
|
1,231,205
|
|
|
Federal National Mortgage Association
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
States and political subdivision securities
|
|
|
2,218
|
|
|
|
2
|
|
|
|
—
|
|
|
|
2,220
|
|
|
Corporate debt securities
|
|
|
11,771
|
|
|
|
196
|
|
|
|
—
|
|
|
|
11,967
|
|
|
Other
|
|
|
1,007
|
|
|
|
30
|
|
|
|
—
|
|
|
|
1,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,399,636
|
|
|
$
|
8,938
|
|
|
$
|
(12,806
|
)
|
|
$
|
1,395,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
|
As of September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Association
|
|
|
1,470,822
|
|
|
|
9,634
|
|
|
|
(21,013
|
)
|
|
|
1,459,443
|
|
|
Federal National Mortgage Association
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
States and political subdivision securities
|
|
|
3,513
|
|
|
|
19
|
|
|
|
—
|
|
|
|
3,532
|
|
|
Corporate debt securities
|
|
|
11,889
|
|
|
|
133
|
|
|
|
(9
|
)
|
|
|
12,013
|
|
|
Other
|
|
|
5,449
|
|
|
|
17
|
|
|
|
(6
|
)
|
|
|
5,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,491,674
|
|
|
$
|
9,803
|
|
|
$
|
(21,028
|
)
|
|
$
|
1,480,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-62
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
The amortized cost and approximate fair value of debt securities available for sale as of June 30, 2014 and
September 30, 2013, by contractual maturity, are shown below. Maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be called or repaid without any penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
September 30, 2013
|
|
|
(In thousands)
|
|
Amortized
Cost
|
|
|
Fair Value
|
|
|
Amortized
Cost
|
|
|
Fair Value
|
|
|
Due in one year or less
|
|
$
|
7,246
|
|
|
$
|
7,296
|
|
|
$
|
1,497
|
|
|
$
|
1,514
|
|
|
Due after one year through five years
|
|
|
149,177
|
|
|
|
149,784
|
|
|
|
6,988
|
|
|
|
7,123
|
|
|
Due after five years through ten years
|
|
|
6,299
|
|
|
|
6,445
|
|
|
|
6,917
|
|
|
|
6,908
|
|
|
Due after ten years
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162,722
|
|
|
|
163,525
|
|
|
|
15,402
|
|
|
|
15,545
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
1,235,907
|
|
|
|
1,231,206
|
|
|
|
1,470,823
|
|
|
|
1,459,444
|
|
|
Securities without contractual maturities
|
|
|
1,007
|
|
|
|
1,037
|
|
|
|
5,449
|
|
|
|
5,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,399,636
|
|
|
$
|
1,395,768
|
|
|
$
|
1,491,674
|
|
|
$
|
1,480,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of securities available for sale were $4.45 million and $49.44 million for the nine months ended June 30,
2014 and 2013, respectively. Gross gains of $0.01 million and $1.74 million for the nine months ended June 30, 2014 and 2013, respectively and gross losses of $0 for both the nine months ended June 30, 2014 and 2013 were realized on the sales, using
the specific identification method.
Securities with a carrying value of approximately $1,174.02 million and $1,090.37 million at June 30, 2014 and
September 30, 2013, respectively, were pledged as collateral on public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law. The counterparties do not have the right to sell or pledge the
securities the Company has pledged as collateral.
As detailed in the following tables, certain investments in debt securities, which are approximately
53% and 62% of the Company’s investment portfolio at June 30, 2014 and September 30, 2013, respectively, are reported in the consolidated financial statements at an amount less than their amortized cost. Based on evaluation of available
evidence, including recent changes in market interest rates, credit rating information, implicit or explicit government guarantees, and information obtained from regulatory filings, management believes the declines in fair value for these securities
are temporary. As the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell the securities before the recovery of their amortized cost basis, which may be maturity, the Company
does not consider the securities to be other than temporarily impaired at June 30, 2014 or September 30, 2013. For the nine months ended June 30, 2014 and 2013, the Company did not recognize any other-than-temporary impairment.
F-63
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
The following table presents the Company’s gross unrealized losses and approximate fair value in
investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
|
June 30, 2014
12 Months or More
|
|
|
Total
|
|
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
U.S. Treasury securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Mortgage-backed securities
|
|
|
136,531
|
|
|
|
(867
|
)
|
|
|
602,818
|
|
|
|
(11,939
|
)
|
|
|
739,349
|
|
|
|
(12,806
|
)
|
|
Corporate debt securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
136,531
|
|
|
$
|
(867
|
)
|
|
$
|
602,818
|
|
|
$
|
(11,939
|
)
|
|
$
|
739,349
|
|
|
$
|
(12,806
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
|
September 30, 2013
12 Months or More
|
|
|
Total
|
|
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Mortgage-backed securities
|
|
$
|
852,344
|
|
|
$
|
(19,469
|
)
|
|
$
|
56,781
|
|
|
$
|
(1,544
|
)
|
|
$
|
909,125
|
|
|
$
|
(21,013
|
)
|
|
Corporate debt securities
|
|
|
4,436
|
|
|
|
(9
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
4,436
|
|
|
|
(9
|
)
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
4,986
|
|
|
|
(6
|
)
|
|
|
4,986
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
856,780
|
|
|
$
|
(19,478
|
)
|
|
$
|
61,767
|
|
|
$
|
(1,550
|
)
|
|
$
|
918,547
|
|
|
$
|
(21,028
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company’s investments in nonmarketable equity securities are all stock of the Federal Home Loan Bank. The carrying
value of Federal Home Loan Bank stock was $30.41 million and $28.77 million as of June 30, 2014 and September 30, 2013, respectively, and is reported in other assets in the consolidated balance sheets.
The components of other comprehensive income from net unrealized gains (losses) on securities available for sale for the nine months ended June 30, 2014 and
2013, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance accumulated other comprehensive income (loss)
|
|
$
|
(7,081
|
)
|
|
$
|
19,111
|
|
|
Net unrealized holding gain (loss) arising during the period
|
|
|
7,363
|
|
|
|
(27,695
|
)
|
|
Reclassification adjustment for net gain realized in net income
|
|
|
(6
|
)
|
|
|
(1,741
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized gain (loss) before income taxes
|
|
|
7,357
|
|
|
|
(29,436
|
)
|
|
Income tax (expense) benefit
|
|
|
(2,684
|
)
|
|
|
10,887
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized gain (loss) on securities
|
|
|
4,673
|
|
|
|
(18,549
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance accumulated other comprehensive income (loss)
|
|
$
|
(2,408
|
)
|
|
$
|
562
|
|
|
|
|
|
|
|
|
|
|
|
F-64
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
5. Loans
The composition of net loans as of June 30, 2014 and September 30, 2013, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
September 30,
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
911,313
|
|
|
$
|
906,469
|
|
|
Commercial real estate
|
|
|
2,406,925
|
|
|
|
2,311,974
|
|
|
Commercial non real estate
|
|
|
1,621,949
|
|
|
|
1,481,756
|
|
|
Agriculture
|
|
|
1,648,856
|
|
|
|
1,587,248
|
|
|
Consumer
|
|
|
90,919
|
|
|
|
101,477
|
|
|
Other
|
|
|
30,363
|
|
|
|
24,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,710,325
|
|
|
|
6,413,635
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(47,038
|
)
|
|
|
(55,864
|
)
|
|
Unamortized discount on acquired loans
|
|
|
(27,732
|
)
|
|
|
(34,717
|
)
|
|
Unearned net deferred fees and costs and loans in process
|
|
|
(4,092
|
)
|
|
|
(16,245
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,631,463
|
|
|
$
|
6,306,809
|
|
|
|
|
|
|
|
|
|
|
|
The loan breakouts above include loans covered by FDIC loss sharing agreements totaling $259.68 million and
$347.41 million as of June 30, 2014 and September 30, 2013, respectively, real estate loans held for sale totaling $10.99 million and $8.27 million as of June 30, 2014 and September 30, 2013, respectively, and $931.54 million and
$841.86 million of loans and written loan commitments accounted for at fair value as of June 30, 2014 and September 30, 2013, respectively.
Unamortized net deferred fees and costs totaled $5.84 million and $5.19 million as of June 30, 2014 and September 30, 2013, respectively.
Loans in process totaled $(1.75) million and $11.06 million as of June 30, 2014 and September 30, 2013, respectively. Loans in process represent
loans that have been funded as of the balance sheet dates but not classified into a loan category and loan payments received as of the balance sheet dates that have not been applied to individual loan accounts.
Loans guaranteed by agencies of the U.S. government totaled $100.67 million and $104.04 million at June 30, 2014 and September 30, 2013, respectively.
Principal balances of residential real estate loans sold totaled $146.28 million and $355.35 million for the nine months ended June 30, 2014 and 2013,
respectively.
Principal balances of loans pledged to the Federal Home Loan Bank to collateralize notes payable totaled $2,099.48 million and $1,984.67
million at June 30, 2014 and September 30, 2013, respectively.
F-65
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
The following table presents the Company’s nonaccrual loans at June 30, 2014 and September 30, 2013
(in thousands), excluding loans covered under the FDIC loss-sharing agreements. Loans greater than 90 days past due and still accruing interest as of June 30, 2014 and September 30, 2013 were not significant.
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
June 30,
2014
|
|
|
September 30,
2013
|
|
|
Residential real estate
|
|
$
|
6,615
|
|
|
$
|
8,746
|
|
|
Commercial real estate
|
|
|
19,978
|
|
|
|
57,652
|
|
|
Commercial non real estate
|
|
|
4,380
|
|
|
|
6,641
|
|
|
Agriculture
|
|
|
11,381
|
|
|
|
8,236
|
|
|
Consumer
|
|
|
139
|
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
42,493
|
|
|
$
|
81,501
|
|
|
|
|
|
|
|
|
|
|
|
The following table (in thousands) presents the Company’s past due loans at June 30, 2014 and September 30, 2013. This
table is presented net of unamortized discount on acquired loans and excludes loans measured at fair value with changes in fair value reported in earnings of $931.54 million as of June 30, 2014 and $841.86 million as of September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2014
|
|
30-59 Days
Past Due
|
|
|
60-89 Days
Past Due
|
|
|
Greater Than
90 Days
|
|
|
Total Past
Due
|
|
|
Current
|
|
|
Total
Financing
Receivables
|
|
|
Residential real estate
|
|
$
|
1,304
|
|
|
$
|
1,149
|
|
|
$
|
2,491
|
|
|
$
|
4,944
|
|
|
$
|
761,859
|
|
|
$
|
766,803
|
|
|
Commercial real estate
|
|
|
1,551
|
|
|
|
1,031
|
|
|
|
4,727
|
|
|
|
7,309
|
|
|
|
1,903,683
|
|
|
|
1,910,992
|
|
|
Commercial non real estate
|
|
|
13,046
|
|
|
|
1,251
|
|
|
|
1,069
|
|
|
|
15,366
|
|
|
|
1,338,922
|
|
|
|
1,354,288
|
|
|
Agriculture
|
|
|
489
|
|
|
|
1,525
|
|
|
|
6,955
|
|
|
|
8,969
|
|
|
|
1,329,406
|
|
|
|
1,338,375
|
|
|
Consumer
|
|
|
269
|
|
|
|
217
|
|
|
|
40
|
|
|
|
526
|
|
|
|
90,040
|
|
|
|
90,566
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,363
|
|
|
|
30,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,659
|
|
|
|
5,173
|
|
|
|
15,282
|
|
|
|
37,114
|
|
|
|
5,454,273
|
|
|
|
5,491,387
|
|
|
Loans covered by FDIC loss sharing agreements
|
|
|
1,627
|
|
|
|
1,667
|
|
|
|
5,671
|
|
|
|
8,965
|
|
|
|
250,712
|
|
|
|
259,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,286
|
|
|
$
|
6,840
|
|
|
$
|
20,953
|
|
|
$
|
46,079
|
|
|
$
|
5,704,985
|
|
|
$
|
5,751,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2013
|
|
30-59 Days
Past Due
|
|
|
60-89 Days
Past Due
|
|
|
Greater Than
90 Days
|
|
|
Total Past
Due
|
|
|
Current
|
|
|
Total
Financing
Receivables
|
|
|
Residential real estate
|
|
$
|
625
|
|
|
$
|
955
|
|
|
$
|
4,942
|
|
|
$
|
6,522
|
|
|
$
|
721,333
|
|
|
$
|
727,855
|
|
|
Commercial real estate
|
|
|
431
|
|
|
|
158
|
|
|
|
9,639
|
|
|
|
10,228
|
|
|
|
1,797,884
|
|
|
|
1,808,112
|
|
|
Commercial non real estate
|
|
|
1,342
|
|
|
|
198
|
|
|
|
2,821
|
|
|
|
4,361
|
|
|
|
1,219,731
|
|
|
|
1,224,092
|
|
|
Agriculture
|
|
|
102
|
|
|
|
4,040
|
|
|
|
2,867
|
|
|
|
7,009
|
|
|
|
1,297,208
|
|
|
|
1,304,217
|
|
|
Consumer
|
|
|
340
|
|
|
|
65
|
|
|
|
44
|
|
|
|
449
|
|
|
|
100,214
|
|
|
|
100,663
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,711
|
|
|
|
24,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,840
|
|
|
|
5,416
|
|
|
|
20,313
|
|
|
|
28,569
|
|
|
|
5,161,081
|
|
|
|
5,189,650
|
|
|
Loans covered by FDIC loss sharing agreements
|
|
|
1,307
|
|
|
|
3,861
|
|
|
|
6,632
|
|
|
|
11,800
|
|
|
|
335,608
|
|
|
|
347,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,147
|
|
|
$
|
9,277
|
|
|
$
|
26,945
|
|
|
$
|
40,369
|
|
|
$
|
5,496,689
|
|
|
$
|
5,537,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-66
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
The composition of the loan portfolio by internal risk rating is as follows as of June 30, 2014 and September
30, 2013. This table (in thousands) is presented net of unamortized discount on acquired loans and excludes loans measured at fair value with changes in fair value reported in earnings of $931.54 million as of June 30, 2014 and $841.86 million as of
September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2014
|
|
Residential
Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Commercial
Non Real
Estate
|
|
|
Agricultural
|
|
|
Consumer
|
|
|
Other
|
|
|
Total
|
|
|
Credit Risk Profile by Internally Assigned Grade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
748,654
|
|
|
$
|
1,778,189
|
|
|
$
|
1,274,953
|
|
|
$
|
1,159,928
|
|
|
$
|
89,883
|
|
|
$
|
30,363
|
|
|
$
|
5,081,970
|
|
|
Watchlist
|
|
|
4,869
|
|
|
|
77,224
|
|
|
|
46,156
|
|
|
|
138,032
|
|
|
|
135
|
|
|
|
—
|
|
|
|
266,416
|
|
|
Substandard
|
|
|
12,657
|
|
|
|
52,329
|
|
|
|
31,909
|
|
|
|
40,371
|
|
|
|
521
|
|
|
|
—
|
|
|
|
137,787
|
|
|
Doubtful
|
|
|
623
|
|
|
|
3,250
|
|
|
|
1,270
|
|
|
|
44
|
|
|
|
27
|
|
|
|
—
|
|
|
|
5,214
|
|
|
Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
766,803
|
|
|
|
1,910,992
|
|
|
|
1,354,288
|
|
|
|
1,338,375
|
|
|
|
90,566
|
|
|
|
30,363
|
|
|
|
5,491,387
|
|
|
Loans covered by FDIC loss sharing agreements
|
|
|
134,620
|
|
|
|
110,664
|
|
|
|
12,292
|
|
|
|
2,035
|
|
|
|
66
|
|
|
|
—
|
|
|
|
259,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
901,423
|
|
|
$
|
2,021,656
|
|
|
$
|
1,366,580
|
|
|
$
|
1,340,410
|
|
|
$
|
90,632
|
|
|
$
|
30,363
|
|
|
$
|
5,751,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2013
|
|
Residential
Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Commercial
Non Real
Estate
|
|
|
Agricultural
|
|
|
Consumer
|
|
|
Other
|
|
|
Total
|
|
|
Credit Risk Profile by Internally Assigned Grade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
707,859
|
|
|
$
|
1,652,694
|
|
|
$
|
1,144,131
|
|
|
$
|
1,192,357
|
|
|
$
|
100,087
|
|
|
$
|
24,711
|
|
|
$
|
4,821,839
|
|
|
Watchlist
|
|
|
5,779
|
|
|
|
72,924
|
|
|
|
52,576
|
|
|
|
87,596
|
|
|
|
164
|
|
|
|
—
|
|
|
|
219,039
|
|
|
Substandard
|
|
|
13,039
|
|
|
|
78,244
|
|
|
|
23,538
|
|
|
|
23,963
|
|
|
|
398
|
|
|
|
—
|
|
|
|
139,182
|
|
|
Doubtful
|
|
|
1,178
|
|
|
|
4,250
|
|
|
|
3,847
|
|
|
|
301
|
|
|
|
14
|
|
|
|
—
|
|
|
|
9,590
|
|
|
Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
727,855
|
|
|
|
1,808,112
|
|
|
|
1,224,092
|
|
|
|
1,304,217
|
|
|
|
100,663
|
|
|
|
24,711
|
|
|
|
5,189,650
|
|
|
Loans covered by FDIC loss sharing agreements
|
|
|
167,835
|
|
|
|
150,745
|
|
|
|
28,163
|
|
|
|
525
|
|
|
|
140
|
|
|
|
—
|
|
|
|
347,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
895,690
|
|
|
$
|
1,958,857
|
|
|
$
|
1,252,255
|
|
|
$
|
1,304,742
|
|
|
$
|
100,803
|
|
|
$
|
24,711
|
|
|
$
|
5,537,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-67
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
Impaired Loans
The following table presents the Company’s impaired loans (in thousands). This table excludes loans covered by FDIC loss sharing agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
As of June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
13,555
|
|
|
$
|
13,892
|
|
|
$
|
3,184
|
|
|
$
|
14,296
|
|
|
Commercial real estate
|
|
|
73,000
|
|
|
|
76,041
|
|
|
|
4,949
|
|
|
|
89,912
|
|
|
Commercial non real estate
|
|
|
34,148
|
|
|
|
37,102
|
|
|
|
5,081
|
|
|
|
32,640
|
|
|
Agriculture
|
|
|
40,808
|
|
|
|
43,525
|
|
|
|
627
|
|
|
|
33,186
|
|
|
Consumer
|
|
|
574
|
|
|
|
770
|
|
|
|
116
|
|
|
|
493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
162,085
|
|
|
$
|
171,330
|
|
|
$
|
13,957
|
|
|
$
|
170,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
As of September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
15,037
|
|
|
$
|
16,815
|
|
|
$
|
3,217
|
|
|
$
|
15,716
|
|
|
Commercial real estate
|
|
|
106,824
|
|
|
|
123,523
|
|
|
|
5,341
|
|
|
|
106,780
|
|
|
Commercial non real estate
|
|
|
31,132
|
|
|
|
32,557
|
|
|
|
5,607
|
|
|
|
34,817
|
|
|
Agriculture
|
|
|
25,563
|
|
|
|
29,632
|
|
|
|
3,022
|
|
|
|
15,522
|
|
|
Consumer
|
|
|
412
|
|
|
|
656
|
|
|
|
90
|
|
|
|
554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
178,968
|
|
|
$
|
203,183
|
|
|
$
|
17,277
|
|
|
$
|
173,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no impaired loans with no valuation allowance as of June 30, 2014 or September 30, 2013. Interest income
recognized on impaired loans was $4.55 million and $5.71 million for the nine months ended June 30, 2014 and 2013, respectively.
Restructured Loans
Included in certain loan categories in the impaired loans are troubled debt restructurings (“TDRs”) that were classified as impaired. The
TDRs do not include purchased impaired loans. When the Company grants concessions to borrowers such as reduced interest rates or extensions of loan periods that would not be considered other than because of borrowers’ financial difficulties,
the modification is considered a TDR. Specific reserves included in the allowance for loan losses for TDRs were $2.96 million and $6.43 million at June 30, 2014 and September 30, 2013, respectively. Commitments to lend additional funds to
borrowers whose loans were modified in a TDR were not significant as of June 30, 2014 or September 30, 2013.
F-68
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
The following table presents the recorded value of the Company’s TDR balances as of June 30, 2014 and
September 30, 2013 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
September 30, 2013
|
|
|
|
|
Accruing
|
|
|
Nonaccrual
|
|
|
Accruing
|
|
|
Nonaccrual
|
|
|
Residential real estate
|
|
$
|
884
|
|
|
$
|
773
|
|
|
$
|
662
|
|
|
$
|
1,100
|
|
|
Commercial real estate
|
|
|
29,165
|
|
|
|
18,728
|
|
|
|
29,373
|
|
|
|
49,736
|
|
|
Commercial non real estate
|
|
|
6,312
|
|
|
|
1,606
|
|
|
|
4,769
|
|
|
|
5,007
|
|
|
Agriculture
|
|
|
1,032
|
|
|
|
8,723
|
|
|
|
4,326
|
|
|
|
7,268
|
|
|
Consumer
|
|
|
41
|
|
|
|
14
|
|
|
|
—
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
37,434
|
|
|
$
|
29,844
|
|
|
$
|
39,130
|
|
|
|
63,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-69
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
The following table presents a summary of all accruing loans restructured in TDRs during the periods ended
June 30, 2014 and June 30, 2013 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30, 2014
|
|
|
Nine months ended June 30, 2013
|
|
|
|
|
|
|
|
Recorded Investment
|
|
|
|
|
|
Recorded Investment
|
|
|
|
|
Number
|
|
|
Pre-
Modification
|
|
|
Post-
Modification
|
|
|
Number
|
|
|
Pre-
Modification
|
|
|
Post-
Modification
|
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Term extension
|
|
|
2
|
|
|
|
74
|
|
|
|
74
|
|
|
|
2
|
|
|
|
77
|
|
|
|
77
|
|
|
Payment modification
|
|
|
2
|
|
|
|
50
|
|
|
|
50
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Bankruptcy
|
|
|
1
|
|
|
|
130
|
|
|
|
130
|
|
|
|
1
|
|
|
|
5
|
|
|
|
5
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Residential real estate
|
|
|
5
|
|
|
|
254
|
|
|
|
254
|
|
|
|
3
|
|
|
|
82
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Term extension
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
|
3,995
|
|
|
|
3,995
|
|
|
Payment Modification
|
|
|
2
|
|
|
|
2,911
|
|
|
|
2,911
|
|
|
|
2
|
|
|
|
13,343
|
|
|
|
13,343
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial real estate
|
|
|
2
|
|
|
|
2,911
|
|
|
|
2,911
|
|
|
|
8
|
|
|
|
17,338
|
|
|
|
17,338
|
|
|
|
|
|
|
|
|
|
|
Commercial non real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Term extension
|
|
|
5
|
|
|
|
1,813
|
|
|
|
1,813
|
|
|
|
5
|
|
|
|
14,407
|
|
|
|
14,407
|
|
|
Payment Modification
|
|
|
5
|
|
|
|
2,917
|
|
|
|
2,917
|
|
|
|
4
|
|
|
|
2,454
|
|
|
|
2,454
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
2
|
|
|
|
329
|
|
|
|
329
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial non real estate
|
|
|
12
|
|
|
|
5,059
|
|
|
|
5,059
|
|
|
|
9
|
|
|
|
16,861
|
|
|
|
16,861
|
|
|
|
|
|
|
|
|
|
|
Agriculture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Term extension
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
932
|
|
|
|
932
|
|
|
Payment Modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Agriculture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
932
|
|
|
|
932
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Term extension
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
3
|
|
|
|
3
|
|
|
Payment Modification
|
|
|
3
|
|
|
|
15
|
|
|
|
15
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
2
|
|
|
|
28
|
|
|
|
28
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer
|
|
|
5
|
|
|
|
43
|
|
|
|
43
|
|
|
|
1
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Accruing
|
|
|
24
|
|
|
$
|
8,267
|
|
|
$
|
8,267
|
|
|
|
23
|
|
|
$
|
35,216
|
|
|
$
|
35,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in recorded investment due to principal paydown at time of modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Change in recorded investment due to chargeoffs at time of modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
F-70
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
The following table presents a summary of all non-accruing loans restructured in TDRs during the periods
ended June 30, 2014 and June 30, 2013 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30, 2014
|
|
|
Nine months ended June 30, 2013
|
|
|
|
|
|
|
|
Recorded Investment
|
|
|
|
|
|
Recorded Investment
|
|
|
|
|
Number
|
|
|
Pre-
Modification
|
|
|
Post-
Modification
|
|
|
Number
|
|
|
Pre-
Modification
|
|
|
Post-
Modification
|
|
|
Residential real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
4
|
|
|
$
|
98
|
|
|
$
|
98
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Term extension
|
|
|
3
|
|
|
|
26
|
|
|
|
26
|
|
|
|
9
|
|
|
|
475
|
|
|
|
475
|
|
|
Payment Modification
|
|
|
1
|
|
|
|
11
|
|
|
|
11
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Bankruptcy
|
|
|
1
|
|
|
|
4
|
|
|
|
4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
1
|
|
|
|
38
|
|
|
|
38
|
|
|
|
2
|
|
|
|
147
|
|
|
|
147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Residential real estate
|
|
|
10
|
|
|
|
177
|
|
|
|
177
|
|
|
|
11
|
|
|
|
622
|
|
|
|
622
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
2
|
|
|
|
500
|
|
|
|
500
|
|
|
|
1
|
|
|
|
232
|
|
|
|
232
|
|
|
Term extension
|
|
|
2
|
|
|
|
4,031
|
|
|
|
4,031
|
|
|
|
45
|
|
|
|
1,878
|
|
|
|
1,878
|
|
|
Payment Modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
|
11,413
|
|
|
|
11,413
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
3,162
|
|
|
|
3,162
|
|
|
Other
|
|
|
1
|
|
|
|
87
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial real estate
|
|
|
5
|
|
|
|
4,618
|
|
|
|
4,618
|
|
|
|
15
|
|
|
|
16,685
|
|
|
|
16,685
|
|
|
|
|
|
|
|
|
|
Commercial non real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
1,067
|
|
|
|
1,067
|
|
|
Term extension
|
|
|
8
|
|
|
|
125
|
|
|
|
125
|
|
|
|
5
|
|
|
|
994
|
|
|
|
994
|
|
|
Payment Modification
|
|
|
1
|
|
|
|
36
|
|
|
|
36
|
|
|
|
2
|
|
|
|
1,352
|
|
|
|
1,352
|
|
|
Bankruptcy
|
|
|
1
|
|
|
|
10
|
|
|
|
10
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial non real estate
|
|
|
10
|
|
|
|
171
|
|
|
|
171
|
|
|
|
8
|
|
|
|
3,413
|
|
|
|
3,413
|
|
|
|
|
|
|
|
|
|
Agriculture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Term extension
|
|
|
2
|
|
|
|
260
|
|
|
|
260
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Payment Modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Agriculture
|
|
|
2
|
|
|
|
260
|
|
|
|
260
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Term extension
|
|
|
1
|
|
|
|
11
|
|
|
|
11
|
|
|
|
3
|
|
|
|
14
|
|
|
|
14
|
|
|
Payment Modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Bankruptcy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer
|
|
|
2
|
|
|
|
12
|
|
|
|
12
|
|
|
|
3
|
|
|
|
14
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-accruing
|
|
|
29
|
|
|
$
|
5,238
|
|
|
$
|
5,238
|
|
|
|
37
|
|
|
$
|
20,734
|
|
|
$
|
20,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in recorded investment due to principal paydown at time of modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Change in recorded investment due to chargeoffs at time of modification
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
F-71
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
For the nine months ended June 30, 2014 and 2013, the table below represents defaults on loans that were
first modified during the previous 12 months, that became 90 days or more delinquent or were charged-off during the nine months ended June 30, 2014 and 2013, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
(in thousands)
|
|
Number of
Loans
|
|
|
Recorded
Investment
|
|
|
Number of
Loans
|
|
|
Recorded
Investment
|
|
|
Residential Real Estate
|
|
|
2
|
|
|
$
|
337
|
|
|
|
—
|
|
|
$
|
—
|
|
|
Commercial Real Estate
|
|
|
2
|
|
|
|
7,053
|
|
|
|
1
|
|
|
|
3,716
|
|
|
Commercial Non Real Estate
|
|
|
4
|
|
|
|
537
|
|
|
|
1
|
|
|
|
1,067
|
|
|
Agriculture
|
|
|
7
|
|
|
|
7,361
|
|
|
|
—
|
|
|
|
—
|
|
|
Consumer
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total TDRs
|
|
|
15
|
|
|
$
|
15,288
|
|
|
|
2
|
|
|
$
|
4,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The majority of loans that were modified and subsequently became 90 days or more delinquent have remained on nonaccrual status
since the time of modification.
F-72
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
6. Allowance for Loan Losses
The following table presents the Company’s allowance for loan losses roll forward and respective loan balances for the nine months ended June 30, 2014 and
2013. This table (in thousands) is presented net of unamortized discount on acquired loans and excludes loans measured at fair value with changes in fair value reported in earnings of $931.54 million, loans held for sale of $10.99 million, and
guaranteed loans of $100.67 million for June 30, 2014 and loans measured at fair value with changes in fair value reported in earnings of $768.88 million, loans held for sale of $20.98 million, and guaranteed loans of $103.43 million for June 30,
2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2014
|
|
Residential
Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Commercial Non
Real Estate
|
|
|
Agricultural
|
|
|
Consumer
|
|
|
Other
|
|
|
Total
|
|
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance October 1, 2013
|
|
$
|
11,779
|
|
|
$
|
22,562
|
|
|
$
|
11,222
|
|
|
$
|
9,296
|
|
|
$
|
312
|
|
|
$
|
693
|
|
|
$
|
55,864
|
|
|
Charge-offs
|
|
|
(581
|
)
|
|
|
(3,733
|
)
|
|
|
(2,883
|
)
|
|
|
(2,652
|
)
|
|
|
(191
|
)
|
|
|
(1,154
|
)
|
|
|
(11,194
|
)
|
|
Recoveries
|
|
|
190
|
|
|
|
1,521
|
|
|
|
1,228
|
|
|
|
29
|
|
|
|
136
|
|
|
|
1,329
|
|
|
|
4,433
|
|
|
Provision
|
|
|
201
|
|
|
|
(2,903
|
)
|
|
|
1,461
|
|
|
|
1,067
|
|
|
|
67
|
|
|
|
(18
|
)
|
|
|
(125
|
)
|
|
Impairment of loans acquired with deteriorated credit quality
|
|
|
(1,175
|
)
|
|
|
608
|
|
|
|
(1,441
|
)
|
|
|
—
|
|
|
|
68
|
|
|
|
—
|
|
|
|
(1,940
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance June 30, 2014
|
|
$
|
10,414
|
|
|
$
|
18,055
|
|
|
$
|
9,587
|
|
|
$
|
7,740
|
|
|
$
|
392
|
|
|
$
|
850
|
|
|
$
|
47,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
3,183
|
|
|
$
|
4,843
|
|
|
$
|
5,078
|
|
|
$
|
625
|
|
|
$
|
116
|
|
|
$
|
—
|
|
|
$
|
13,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
3,371
|
|
|
$
|
12,881
|
|
|
$
|
4,239
|
|
|
$
|
7,115
|
|
|
$
|
208
|
|
|
$
|
850
|
|
|
$
|
28,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired with deteriorated credit quality
|
|
$
|
3,860
|
|
|
$
|
331
|
|
|
$
|
270
|
|
|
$
|
—
|
|
|
$
|
68
|
|
|
$
|
—
|
|
|
$
|
4,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired without deteriorated credit quality
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
888,457
|
|
|
$
|
1,986,214
|
|
|
$
|
1,309,224
|
|
|
$
|
1,334,512
|
|
|
$
|
90,632
|
|
|
$
|
30,363
|
|
|
$
|
5,639,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
10,613
|
|
|
$
|
52,845
|
|
|
$
|
32,325
|
|
|
$
|
30,907
|
|
|
$
|
433
|
|
|
$
|
—
|
|
|
$
|
127,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
643,220
|
|
|
$
|
1,770,075
|
|
|
$
|
1,260,827
|
|
|
$
|
1,277,405
|
|
|
$
|
84,551
|
|
|
$
|
30,363
|
|
|
$
|
5,066,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired with deteriorated credit quality
|
|
$
|
107,931
|
|
|
$
|
57,986
|
|
|
$
|
6,807
|
|
|
$
|
1,773
|
|
|
$
|
2,112
|
|
|
$
|
—
|
|
|
$
|
176,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired without deteriorated credit quality
|
|
$
|
126,693
|
|
|
$
|
105,308
|
|
|
$
|
9,265
|
|
|
$
|
24,427
|
|
|
$
|
3,536
|
|
|
$
|
—
|
|
|
$
|
269,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-73
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2013
|
|
Residential
Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Commercial Non
Real Estate
|
|
|
Agricultural
|
|
|
Consumer
|
|
|
Other
|
|
|
Total
|
|
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance October 1, 2012
|
|
$
|
14,761
|
|
|
$
|
30,234
|
|
|
$
|
18,979
|
|
|
$
|
6,906
|
|
|
$
|
542
|
|
|
$
|
456
|
|
|
$
|
71,878
|
|
|
Charge-offs
|
|
|
(1,429
|
)
|
|
|
(18,313
|
)
|
|
|
(2,927
|
)
|
|
|
(3,644
|
)
|
|
|
(149
|
)
|
|
|
(1,388
|
)
|
|
|
(27,850
|
)
|
|
Recoveries
|
|
|
209
|
|
|
|
196
|
|
|
|
826
|
|
|
|
19
|
|
|
|
314
|
|
|
|
680
|
|
|
|
2,244
|
|
|
Provision
|
|
|
1,461
|
|
|
|
12,349
|
|
|
|
(6,541
|
)
|
|
|
5,662
|
|
|
|
(334
|
)
|
|
|
803
|
|
|
|
13,400
|
|
|
Impairment of loans acquired with deteriorated credit quality
|
|
|
(1,205
|
)
|
|
|
1,188
|
|
|
|
651
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance June 30, 2013
|
|
$
|
13,797
|
|
|
$
|
25,654
|
|
|
$
|
10,988
|
|
|
$
|
8,943
|
|
|
$
|
373
|
|
|
$
|
551
|
|
|
$
|
60,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
4,352
|
|
|
$
|
6,279
|
|
|
$
|
4,878
|
|
|
$
|
2,907
|
|
|
$
|
117
|
|
|
$
|
—
|
|
|
$
|
18,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
3,090
|
|
|
$
|
17,038
|
|
|
$
|
3,450
|
|
|
$
|
6,036
|
|
|
$
|
256
|
|
|
$
|
551
|
|
|
$
|
30,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired with deteriorated credit quality
|
|
$
|
6,355
|
|
|
$
|
2,337
|
|
|
$
|
2,660
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired without deteriorated credit quality
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
855,510
|
|
|
$
|
1,967,874
|
|
|
$
|
1,257,530
|
|
|
$
|
1,327,148
|
|
|
$
|
94,812
|
|
|
$
|
23,476
|
|
|
$
|
5,526,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
11,632
|
|
|
$
|
78,652
|
|
|
$
|
25,486
|
|
|
$
|
16,139
|
|
|
$
|
390
|
|
|
$
|
—
|
|
|
$
|
132,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
533,223
|
|
|
$
|
1,641,237
|
|
|
$
|
1,199,440
|
|
|
$
|
1,278,412
|
|
|
$
|
83,208
|
|
|
$
|
23,476
|
|
|
$
|
4,758,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired with deteriorated credit quality
|
|
$
|
138,762
|
|
|
$
|
102,889
|
|
|
$
|
8,297
|
|
|
$
|
—
|
|
|
$
|
3,727
|
|
|
$
|
—
|
|
|
$
|
253,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: loans acquired without deteriorated credit quality
|
|
$
|
171,893
|
|
|
$
|
145,096
|
|
|
$
|
24,307
|
|
|
$
|
32,597
|
|
|
$
|
7,487
|
|
|
$
|
—
|
|
|
$
|
381,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A credit risk adjustment of $4.60 million at June 30, 2014 and $5.27 million at June 30, 2013 is included in the
carrying value of fair valued loans to recognize potential impairment present in the portfolio.
The reserve for unfunded loan commitments was $0.40
million at both June 30, 2014 and September 30, 2013.
F-74
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
7. Accounting for Certain Loans Acquired with Deteriorated Credit Quality
As a result of the Company’s acquisition of TierOne Bank, the Company acquired certain loans that had deteriorated credit quality. Loan accounting
specific to these purchased impaired loans addresses differences between contractual cash flows expected to be collected from the initial investment in loans if those differences are attributable, at least in part, to credit quality. Several factors
were considered when evaluating whether a loan was considered a purchased impaired loan, including the delinquency status of the loan, updated borrower credit status, geographic information, and updated loan-to-values (“LTV”). U.S. GAAP
allows purchasers to aggregate purchased impaired loans acquired in the same fiscal quarter in one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite
interest rate and an aggregate expectation of cash flows.
Loan pools are periodically reassessed to determine expected cash flows. In determining the
expected cash flows, the timing of cash flows and prepayment assumptions for smaller, homogenous loans are based on statistical models that take into account factors such as the loan interest rate, credit profile of the borrowers, the years in which
the loans were originated, and whether the loans are fixed or variable rate loans. Prepayments may be assumed on large individual loans that consider similar prepayment factors listed above for smaller homogenous loans. The re-assessment of
purchased impaired loans resulted in the following changes in the accretable yield during the nine months ended June 30, 2014 and 2013 (in thousands):
|
|
|
|
|
|
|
Balance at September 30, 2013
|
|
$
|
67,660
|
|
|
Accretion
|
|
|
(14,016
|
)
|
|
Reclassification from nonaccretable difference
|
|
|
3,175
|
|
|
Disposals
|
|
|
(5,004
|
)
|
|
|
|
|
|
|
|
Balance at June 30, 2014
|
|
$
|
51,815
|
|
|
|
|
|
|
|
|
Balance at September 30, 2012
|
|
$
|
93,859
|
|
|
Accretion
|
|
|
(22,615
|
)
|
|
Reclassification from nonaccretable difference
|
|
|
3,156
|
|
|
Disposals
|
|
|
(3,199
|
)
|
|
|
|
|
|
|
|
Balance at June 30, 2013
|
|
$
|
71,201
|
|
|
|
|
|
|
|
The reclassifications from nonaccretable difference noted in the table above represent instances where specific pools of loans
are expected to perform better over the remaining lives of the loans than expected at the prior re-assessment date.
The following table presents
purchased impaired loans at June 30, 2014 and September 30, 2013 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
September 30, 2013
|
|
|
|
|
Outstanding
Balance
1
|
|
|
Recorded
Investment
2
|
|
|
Carrying Value
3
|
|
|
Outstanding
Balance
1
|
|
|
Recorded
Investment
2
|
|
|
Carrying Value
3
|
|
|
Residential real estate
|
|
$
|
121,049
|
|
|
$
|
107,931
|
|
|
$
|
104,071
|
|
|
$
|
143,998
|
|
|
$
|
129,905
|
|
|
$
|
124,871
|
|
|
Commercial real estate
|
|
|
140,837
|
|
|
|
57,986
|
|
|
|
57,655
|
|
|
|
172,706
|
|
|
|
85,022
|
|
|
|
84,541
|
|
|
Commercial non real estate
|
|
|
17,360
|
|
|
|
6,807
|
|
|
|
6,537
|
|
|
|
19,539
|
|
|
|
8,179
|
|
|
|
6,448
|
|
|
Agriculture
|
|
|
1,773
|
|
|
|
1,773
|
|
|
|
1,773
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Consumer
|
|
|
2,369
|
|
|
|
2,112
|
|
|
|
2,044
|
|
|
|
3,721
|
|
|
|
3,202
|
|
|
|
3,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lending
|
|
$
|
283,388
|
|
|
$
|
176,609
|
|
|
$
|
172,080
|
|
|
$
|
339,964
|
|
|
$
|
226,308
|
|
|
$
|
219,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-75
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
|
1
|
Represents the legal balance of loans acquired with deteriorated credit quality.
|
|
2
|
Represents the book balance of loans acquired with deteriorated credit quality net of the unamortized discount on acquired loans of $27.73 million at June 30, 2014 and $33.09 million at September 30, 2013.
|
|
3
|
Represents the book balance of loans acquired with deteriorated credit quality net of the unamortized discount on acquired loans and related allowance for loan losses.
|
Due to improved cash flows of the purchased impaired loans, the reduction to allowance recognized on previous impairments were $3.08 million and $2.39 million
for the nine months ended June 30, 2014 and 2013, respectively.
8. FDIC Indemnification Asset
Under the terms of the purchase and assumption agreement with the FDIC with regard to the TierOne Bank acquisition, the Company is reimbursed for a portion of
the losses incurred on covered assets. As covered assets are resolved, whether it be through repayment, short sale of the underlying collateral, the foreclosure on or sale of collateral, or the sale or charge-off of loans or OREO, any differences
between the carrying value of the covered assets versus the payments received during the resolution process, that are reimbursable by the FDIC, are recognized as reductions in the FDIC indemnification asset. Any gains or losses realized from the
resolution of covered assets reduce or increase, respectively, the amount recoverable from the FDIC. The following table represents a summary of the activity related to the FDIC indemnification asset for the nine months ended June 30, 2014 and
2013 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
Balance at beginning of period
|
|
$
|
45,690
|
|
|
$
|
68,662
|
|
|
Amortization
|
|
|
(11,203
|
)
|
|
|
(10,092
|
)
|
|
FDIC portion of charge-offs exceeding fair value marks and expenses
|
|
|
3,834
|
|
|
|
2,777
|
|
|
Payments (reductions) for claims filed
|
|
|
(6,089
|
)
|
|
|
(9,122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
32,232
|
|
|
$
|
52,225
|
|
|
|
|
|
|
|
|
|
|
|
The loss claims filed are subject to review, approval, and annual audits by the FDIC or its assigned agents for compliance
with the terms in the loss sharing agreement.
9. Derivative Financial Instruments
In the normal course of business, the Company uses interest rate swaps to manage its interest rate risk and market risk in accommodating the needs of its
customers. Also, the Company enters into interest rate lock commitments on mortgage loans to be held for sale, with corresponding forward sales contracts related to these interest rate lock commitments.
Derivative instruments are recognized as either assets or liabilities in the accompanying consolidated financial statements and are measured at fair value.
F-76
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
The following table summarizes the notional amounts and estimated fair values of the Company’s
derivative instruments at June 30, 2014 and September 30, 2013 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
Notional
Amount
|
|
|
Balance
Sheet
Location
|
|
Positive
Fair
Value
|
|
|
Negative
Fair
Value
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
946,818
|
|
|
Liabilities
|
|
$
|
6,330
|
|
|
$
|
(19,600
|
)
|
|
Mortgage loan commitments
|
|
|
28,182
|
|
|
Assets
|
|
|
40
|
|
|
|
—
|
|
|
Mortgage loan forward sale contracts
|
|
|
28,852
|
|
|
Liabilities
|
|
|
—
|
|
|
|
(40
|
)
|
|
|
|
|
|
|
September 30, 2013
|
|
|
|
|
Notional
Amount
|
|
|
Balance
Sheet
Location
|
|
Positive
Fair
Value
|
|
|
Negative
Fair
Value
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
864,040
|
|
|
Liabilities
|
|
$
|
12,404
|
|
|
$
|
(13,555
|
)
|
|
Mortgage loan commitments
|
|
|
16,040
|
|
|
Assets
|
|
|
375
|
|
|
|
—
|
|
|
Mortgage loan forward sale contracts
|
|
|
21,881
|
|
|
Liabilities
|
|
|
—
|
|
|
|
(375
|
)
|
As with any financial instrument, derivative financial instruments have inherent risk including adverse changes in interest
rates. The Company’s exposure to derivative credit risk is defined as the possibility of sustaining a loss due to the failure of the counterparty to perform in accordance with the terms of the contract. Credit risk associated with interest rate
swaps is similar to those relating to traditional on-balance sheet financial instruments. The Company manages interest rate swap credit risk with the same standards and procedures applied to its commercial lending activities. Amounts due from NAB to
reclaim cash collateral under the interest rate swap master netting arrangements have not been offset against the derivative balances. These cash deposits classified on the consolidated balance sheets as cash were $0 as of June 30, 2014 and
September 30, 2013.
The effect of derivatives on the consolidated statements of comprehensive income for the nine months ended June 30, 2014 and 2013 (in
thousands) was as follows:
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
Location of
Gain (Loss)
Recognized in Income
|
|
Amount of
Gain (Loss)
Recognized in Income
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Noninterest expense
|
|
$
|
(12,119
|
)
|
|
Mortgage loan commitments
|
|
Interest income (expense)
|
|
|
40
|
|
|
Mortgage loan forward sale contracts
|
|
Interest income (expense)
|
|
|
(40
|
)
|
|
|
|
|
|
|
2013
|
|
|
|
|
Location of
Gain (Loss)
Recognized in Income
|
|
Amount of
Gain (Loss)
Recognized in Income
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Noninterest expense
|
|
$
|
41,635
|
|
|
Mortgage loan commitments
|
|
Interest income (expense)
|
|
|
39
|
|
|
Mortgage loan forward sale contracts
|
|
Interest income (expense)
|
|
|
(39
|
)
|
F-77
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
Netting of Derivatives
The Company has various financial assets and financial liabilities that are subject to enforceable master netting agreements or similar agreements. The Company
has entered into an International Swaps and Derivatives Association, Inc. (“ISDA”) master netting arrangement with NAB. Under the terms of the master netting arrangements, all transactions between the Company and the counterparty
constitute a single business relationship such that in the event of default, the non-defaulting party is entitled to set off claims and apply property held by that party in respect of any transaction against obligations owed. Any payments,
deliveries, or other transfers may be applied against each other and netted.
The table below shows total gross derivative assets and liabilities which
are adjusted on an aggregate basis, where applicable to take into consideration the effects of legally enforceable master netting agreements for the net reported amount in the consolidated balance sheets. These amounts are offset on the consolidated
balance sheets.
The following tables (in thousands) present the Company’s gross derivative financial assets and liabilities at June 30, 2014
and September 30, 2013, and the related impact of enforceable master netting arrangements and cash collateral, where applicable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Amount
|
|
|
Amount
Offset
|
|
|
Net Amount
Presented in
Consolidated
Balance
Sheets
|
|
|
Held/
Pledged
Financial
Instruments
|
|
|
Net
Amount
|
|
|
June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives subject to master netting arrangement or similar arrangement
|
|
$
|
6,330
|
|
|
$
|
(6,330
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Derivative financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives subject to master netting arrangement or similar arrangement
|
|
$
|
(19,600
|
)
|
|
|
6,330
|
|
|
|
(13,270
|
)
|
|
|
20,545
|
|
|
|
7,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative financial liabilities
|
|
$
|
(13,270
|
)
|
|
$
|
—
|
|
|
$
|
(13,270
|
)
|
|
$
|
20,545
|
|
|
$
|
7,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Amount
|
|
|
Amount
Offset
|
|
|
Net Amount
Presented in
Consolidated
Balance
Sheets
|
|
|
Held /
Pledged
Financial
Instruments
|
|
|
Net
Amount
|
|
|
September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives subject to master netting arrangement or similar arrangement
|
|
$
|
12,404
|
|
|
$
|
(12,404
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Derivative financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives subject to master netting arrangement or similar arrangement
|
|
|
(13,555
|
)
|
|
|
12,404
|
|
|
|
(1,151
|
)
|
|
|
—
|
|
|
|
(1,151
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative financial liabilities
|
|
$
|
(1,151
|
)
|
|
$
|
—
|
|
|
$
|
(1,151
|
)
|
|
$
|
—
|
|
|
$
|
(1,151
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. The Fair Value Option
The Company has elected to measure certain long-term loans and written loan commitments at fair value to assist in managing the interest rate risk for
longer-term loans. This fair value option was elected upon the origination of these loans. Interest income is recognized in the same manner as interest on non-fair value loans.
F-78
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
See Note 16 for additional disclosures regarding the fair value of the fair value option loans and
written loan commitments.
Long-term loans and written loan commitments for which the fair value option has been elected had a net favorable difference
between the aggregate fair value and the aggregate unpaid loan principal balance and written loan commitment amount of approximately $8.67 million at June 30, 2014 and net unfavorable difference between the aggregate fair value and the
aggregate unpaid loan principal balance and written loan commitment amount of approximately $4.83 million at September 30, 2013. The total unpaid principal balance of these long-term loans was approximately $922.87 million and $846.69 million at
June 30, 2014 and September 30, 2013, respectively. The fair value of these loans and written loan commitments is included in total loans in the consolidated balance sheets and are grouped with commercial non real estate, commercial real
estate, and agricultural loans in Note 5. The fair value of these written loan commitments was not material at June 30, 2014 and September 30, 2013, respectively. None of the noted loans were greater than 90 days past due or in nonaccrual
status as of June 30, 2014 and September 30, 2013.
Changes in fair value for items for which the fair value option has been elected and the line items in
which these changes are reported are as follows for the nine months ended June 30, 2014 and 2013 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
Interest
Income
|
|
|
Total Changes
in Fair Value
|
|
|
Long-term loans and written loan commitments
|
|
$
|
13,506
|
|
|
$
|
13,506
|
|
|
|
|
|
|
|
June 30, 2013
|
|
|
|
|
Interest
Income
|
|
|
Total Changes
in Fair Value
|
|
|
Long-term loans and written loan commitments
|
|
$
|
(41,776
|
)
|
|
$
|
(41,776
|
)
|
For long-term loans and written loan commitments at June 30, 2014 and 2013, approximately $1.39 million and
$(0.14) million, respectively, of the total change in fair value is attributable to changes in specific credit risk. The gains or losses attributable to changes in instrument-specific credit risk were determined based on an assessment of
existing market conditions and credit quality of the underlying loan for the specific portfolio of loans.
11. Core Deposits and Other Intangibles
A summary of intangible assets subject to amortization is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
Deposit
Intangible
|
|
|
Brand
Intangible
|
|
|
Customer
Relationships
Intangible
|
|
|
Total
|
|
|
As of June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount
|
|
$
|
92,679
|
|
|
$
|
8,464
|
|
|
$
|
16,089
|
|
|
$
|
117,232
|
|
|
Accumulated amortization
|
|
|
(85,271
|
)
|
|
|
(3,431
|
)
|
|
|
(11,534
|
)
|
|
|
(100,236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,408
|
|
|
$
|
5,033
|
|
|
$
|
4,555
|
|
|
$
|
16,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount
|
|
$
|
92,679
|
|
|
$
|
8,464
|
|
|
$
|
16,089
|
|
|
$
|
117,232
|
|
|
Accumulated amortization
|
|
|
(73,668
|
)
|
|
|
(3,008
|
)
|
|
|
(10,112
|
)
|
|
|
(86,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,011
|
|
|
$
|
5,456
|
|
|
$
|
5,977
|
|
|
$
|
30,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-79
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
Amortization expense of intangible assets was $13.45 million and $14.60 million for the nine months ended
June 30, 2014 and 2013, respectively.
The estimated amortization expense of intangible assets assumes no activities, such as acquisitions, which
would result in additional amortizable intangible assets. Estimated amortization expense of intangible assets in subsequent fiscal years is as follows (in thousands):
|
|
|
|
|
|
|
Remaining in 2014
|
|
$
|
2,767
|
|
|
2015
|
|
|
7,110
|
|
|
2016
|
|
|
2,822
|
|
|
2017
|
|
|
1,097
|
|
|
2018
|
|
|
564
|
|
|
2019 and thereafter
|
|
|
2,636
|
|
|
|
|
|
|
|
|
|
|
$
|
16,996
|
|
|
|
|
|
|
|
12. Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase generally mature the following business day from the transaction date. Securities underlying the agreements had
an amortized cost of approximately $208.51 million and $226.16 million and fair value of approximately $208.24 million and $224.16 million at June 30, 2014 and September 30, 2013, respectively. The Company holds the securities under third-party
safekeeping agreements.
13. FHLB Advances, Related Party Notes Payable and Other Borrowings
FHLB advances, related party notes payable, and other borrowings consist of the following at June 30, 2014 and September 30, 2013 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
September 30,
2013
|
|
|
Subordinated capital note to NAB New York (a branch of NAB), due June 2018 (callable June 2015), interest paid quarterly
based on LIBOR plus 205 basis points, unsecured
|
|
$
|
35,795
|
|
|
$
|
35,795
|
|
|
$10,000 revolving line of credit to NAB due on demand, interest paid monthly based on LIBOR plus 125 basis points, unsecured
|
|
|
5,500
|
|
|
|
5,500
|
|
|
Notes payable to Federal Home Loan Bank (FHLB), interest rates from 0.24% to 3.66% and maturity dates from July 2014 to July 2023 as of
June 30, 2014, collateralized by real estate loans and FHLB stock, with various call dates at the option of the FHLB
|
|
|
435,000
|
|
|
|
390,500
|
|
|
Other
|
|
|
97
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
476,392
|
|
|
$
|
431,902
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2014, based on its Federal Home Loan Bank stock holdings, the combined aggregate additional borrowing capacity
of the Company with the Federal Home Loan Bank was $806.16 million.
F-80
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
As of June 30, 2014, FHLB advances, related party notes payable and other borrowings are due or callable
(whichever is earlier) in subsequent fiscal years as follows (in thousands):
|
|
|
|
|
|
|
Remaining in 2014
|
|
$
|
60,597
|
|
|
2015
|
|
|
65,000
|
|
|
2016
|
|
|
90,000
|
|
|
2017
|
|
|
25,000
|
|
|
2018
|
|
|
60,795
|
|
|
2019 and thereafter
|
|
|
175,000
|
|
|
|
|
|
|
|
|
|
|
$
|
476,392
|
|
|
|
|
|
|
|
14. Income Taxes
The
provision for income taxes charged to operations consists of the following for the nine months ended June 30, 2014 and 2013 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
Currently paid or payable
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
43,760
|
|
|
$
|
45,602
|
|
|
State
|
|
|
6,545
|
|
|
|
5,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,305
|
|
|
|
51,191
|
|
|
Deferred tax benefit
|
|
|
(8,743
|
)
|
|
|
(11,509
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
41,562
|
|
|
$
|
39,682
|
|
|
|
|
|
|
|
|
|
|
|
The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to
pretax income due to the following for the nine months ended June 30, 2014 and 2013 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Computed “expected” tax expense (35%)
|
|
$
|
41,523
|
|
|
$
|
38,360
|
|
|
Increase (decrease) in income taxes resulting from:
|
|
|
|
|
|
|
|
|
|
Tax exempt interest income
|
|
|
(3,539
|
)
|
|
|
(2,679
|
)
|
|
State income taxes, net of federal benefit
|
|
|
4,254
|
|
|
|
3,633
|
|
|
Other
|
|
|
(676
|
)
|
|
|
368
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual tax expense
|
|
$
|
41,562
|
|
|
$
|
39,682
|
|
|
|
|
|
|
|
|
|
|
|
F-81
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
Net deferred tax assets (liabilities) consist of the following components at June 30, 2014 and
September 30, 2013 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
September 30, 2013
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
17,205
|
|
|
$
|
19,932
|
|
|
Compensation
|
|
|
327
|
|
|
|
320
|
|
|
Net operating loss carryforward
|
|
|
132
|
|
|
|
170
|
|
|
Securities available for sale
|
|
|
1,460
|
|
|
|
4,144
|
|
|
Other real estate owned
|
|
|
13,937
|
|
|
|
7,072
|
|
|
Core deposit intangible and other fair value adjustments
|
|
|
10,072
|
|
|
|
6,617
|
|
|
Other
|
|
|
3,605
|
|
|
|
4,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,738
|
|
|
|
43,089
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Goodwill and other intangibles
|
|
|
(1,870
|
)
|
|
|
(2,619
|
)
|
|
Premises and equipment
|
|
|
(4,723
|
)
|
|
|
(6,132
|
)
|
|
Other
|
|
|
(1,460
|
)
|
|
|
(1,712
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,053
|
)
|
|
|
(10,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
38,685
|
|
|
$
|
32,626
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2014 and September 30, 2013, the Company had an income tax payable to National Americas Investment, Inc. for
$16.80 million and $12.39 million (included in income tax payable).
Management has determined a valuation reserve is not required for the
deferred tax assets because it is more likely than not these assets could be realized through carry back to taxable income in prior years, future reversals of existing taxable temporary differences, and future taxable income.
Uncertain tax positions were not significant at June 30, 2014 or September 30, 2013.
The Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2009. In July 2014,
the IRS issued the final report on their examination of federal income tax returns for the periods ended September 30, 2010 and 2011.
15.
Profit-Sharing Plan
The Company participates in a multiple employer 401(k) profit sharing plan (the Plan). All employees are eligible to participate,
beginning with the first day of the month coincident with or immediately following the completion of one year of service and having reached the age of 21. In addition to employee contributions, the Company may contribute discretionary amounts for
eligible participants. Contribution rates for participating employers must be equal. The Company contributed $2.53 million and $3.46 million to the Plan for the nine months ended June 30, 2014 and June 30, 2013, respectively.
16. Fair Value of Financial Instruments and Interest Rate Risk
The Company measures, monitors and discloses certain of its assets and liabilities on a fair value basis. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
F-82
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
transaction between market participants at the measurement date. The fair value guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value are as follows:
|
|
Level 1
|
Quoted prices in active markets for identical assets or liabilities
|
|
|
Level 2
|
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities
|
|
|
Level 3
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
|
Level 1 inputs are considered to be the most transparent and reliable and Level 3 inputs are considered to be the least transparent and reliable. The Company
assumes the use of the principal market to conduct a transaction of each particular asset or liability being measured and then considers the assumptions that market participants would use when pricing the asset or liability. Whenever possible, the
Company first looks for quoted prices for identical assets or liabilities in active markets (Level 1 inputs) to value each asset or liability. However, when inputs from identical assets or liabilities on active markets are not available, the Company
utilizes market observable data for similar assets and liabilities. The Company maximizes the use of observable inputs and limits the use of unobservable inputs to occasions when observable inputs are not available. The need to use unobservable
inputs generally results from the lack of market liquidity of the actual financial instrument or of the underlying collateral. Although in some instances, third party price indications may be available, limited trading activity can challenge the
observability of these quotations.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Following is a description of the valuation methodologies and inputs used for assets and liabilities measured at fair value on a recurring basis and recognized
in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.
Securities Available for Sale
Where quoted market prices
are available in an active market, securities are classified within Level 1 of the valuation hierarchy. These securities are based on valuations using quoted prices. Level 1 securities include U.S. Treasury. If quoted market prices are not
available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Level 2 securities include U.S. government agency, agency mortgage-backed, states and political
subdivisions, corporate debt, and other securities. Where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.
Interest Rate Swaps and Loans
Interest rate swaps are
valued using the system used to value all of NAB’s traded securities and derivatives using LIBOR rates. The fair value of loans accounted for under the fair value option represents the net carrying value of the loan, plus the equal and opposite
amount of the value of the swap needed to hedge the interest rate risk and an adjustment for credit risk based on our assessment of existing market conditions for the specific portfolio of loans. This is used due to the strict prepayment penalties
put in the loan terms to cover the cost of exiting the hedge of the loans in the case of early prepayment or termination. The adjustment for credit risk on loans
F-83
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
accounted for under the fair value option is not significant to the overall fair value of the loans. The fair values estimated by NAB use interest rates that are observable or that can be
corroborated by observable market data and, therefore, are classified within Level 2 of the valuation hierarchy. The Company is required to post cash collateral to NAB for interest rate derivative contracts that are in a liability position, thus a
credit risk adjustment on interest rate swaps is not warranted.
The following table presents the fair value measurements of assets and liabilities
recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2014 and September 30, 2013 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
As of June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
149,338
|
|
|
$
|
—
|
|
|
$
|
149,338
|
|
|
$
|
—
|
|
|
Mortgage-backed securities
|
|
|
1,231,206
|
|
|
|
—
|
|
|
|
1,231,206
|
|
|
|
—
|
|
|
States and political subdivision securities
|
|
|
2,220
|
|
|
|
—
|
|
|
|
2,220
|
|
|
|
—
|
|
|
Corporate debt securities
|
|
|
11,967
|
|
|
|
—
|
|
|
|
11,967
|
|
|
|
—
|
|
|
Other
|
|
|
1,037
|
|
|
|
—
|
|
|
|
1,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
$
|
1,395,768
|
|
|
$
|
—
|
|
|
$
|
1,395,768
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives - assets
|
|
$
|
40
|
|
|
$
|
—
|
|
|
$
|
40
|
|
|
$
|
—
|
|
|
Derivatives - liabilities
|
|
|
13,310
|
|
|
|
—
|
|
|
|
13,310
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Fair value loans and written loan commitments
|
|
|
931,541
|
|
|
|
—
|
|
|
|
931,541
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
As of September, 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
$
|
1,459,444
|
|
|
$
|
—
|
|
|
$
|
1,459,444
|
|
|
$
|
—
|
|
|
States and political subdivision securities
|
|
|
3,532
|
|
|
|
—
|
|
|
|
3,532
|
|
|
|
—
|
|
|
Corporate debt securities
|
|
|
12,013
|
|
|
|
—
|
|
|
|
12,013
|
|
|
|
—
|
|
|
Other
|
|
|
5,460
|
|
|
|
—
|
|
|
|
5,460
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
$
|
1,480,449
|
|
|
$
|
—
|
|
|
$
|
1,480,449
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives - assets
|
|
$
|
375
|
|
|
$
|
—
|
|
|
$
|
375
|
|
|
$
|
—
|
|
|
Derivatives - liabilities
|
|
|
1,526
|
|
|
|
—
|
|
|
|
1,526
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Fair value loans and written loan commitments
|
|
|
841,862
|
|
|
|
—
|
|
|
|
841,862
|
|
|
|
—
|
|
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Following is a description of the valuation methodologies used for assets and liabilities measured at fair value on a nonrecurring basis and recognized in the
accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.
Impaired Loans (Collateral Dependent)
Loans for which it
is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for estimating fair value include using the fair value of the collateral for collateral
dependent loans or, where a loan is determined not to be collateral dependent, using the discounted cash flow method.
F-84
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
If the impaired loan is identified as collateral dependent, then the fair value method of measuring the
amount of the impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor, if necessary, to the appraised value and including costs to sell. Because many of these inputs are
not observable, the measurements are classified as Level 3.
Other Real Estate Owned (OREO)
Other real estate owned consists of loan collateral that has been repossessed through foreclosure. This collateral is comprised of commercial and residential
real estate. OREO is recorded initially at fair value of the collateral less estimated selling costs. Subsequent to foreclosure, valuations are updated periodically, and the assets may be marked down further to fair value less selling costs,
reflecting a valuation allowance. Fair value measurements may be based upon appraisals, third-party price opinions, or internally developed pricing methods. These measurements are classified as Level 3.
Mortgage Loans Held for Sale
Fair value of mortgage
loans held for sale is based on either quoted prices for the same or similar loans, or values obtained from third parties, or are estimated for portfolios of loans with similar financial characteristics and are therefore considered a Level 2
valuation.
The following tables present the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level
within the fair value hierarchy in which the fair value measurements fall at June 30, 2014 and September 30, 2013 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
As of June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
$
|
33,677
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
33,677
|
|
|
Impaired loans
|
|
|
138,723
|
|
|
|
—
|
|
|
|
—
|
|
|
|
138,723
|
|
|
Loans held for sale, at lower of cost or market
|
|
|
10,994
|
|
|
|
—
|
|
|
|
10,994
|
|
|
|
—
|
|
|
|
|
|
|
|
|
As of September 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
$
|
40,723
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
40,723
|
|
|
Impaired loans
|
|
|
154,512
|
|
|
|
—
|
|
|
|
—
|
|
|
|
154,512
|
|
|
Loans held for sale, at lower of cost or market
|
|
|
8,271
|
|
|
|
—
|
|
|
|
8,271
|
|
|
|
—
|
|
The valuation techniques and significant unobservable inputs used to measure Level 3 fair value measurements at June 30, 2014
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instrument
|
|
Fair Value of
Assets /
(Liabilities) at
June 30, 2014
|
|
|
Valuation
Technique(s)
|
|
|
Unobservable Input
|
|
Range
|
|
Weighted
Average
|
|
Other real estate owned
|
|
$
|
33,677
|
|
|
|
Appraisal value
|
|
|
Property specific adjustment
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
138,723
|
|
|
|
Appraisal value
|
|
|
Property specific adjustment
|
|
N/A
|
|
N/A
|
Fair Value of Financial Instruments
For financial instruments that have quoted market prices, those quotes are used to determine fair value. Financial instruments that have no defined maturity,
have a remaining maturity of 180 days or less, or reprice frequently to
F-85
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
a market rate are assumed to have a fair value that approximates carrying value, after taking into consideration any applicable credit risk. If no market quotes are available, financial
instruments are valued by discounting the expected cash flows using an estimated current market interest rate for the financial instrument.
The short
maturity of the Company’s assets and liabilities results in having a significant number of financial instruments whose fair value equals or closely approximates carrying value. Such financial instruments are reported in the following
consolidated balance sheet categories: cash and due from banks, securities sold under agreements to repurchase, and accrued interest.
Fair value
estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant
assets and liabilities that are not considered financial instruments include premises and equipment, deferred income taxes, goodwill, and core deposit and other intangibles. In addition, the tax ramifications related to the realization of unrealized
gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
Off-balance sheet instruments
(commitments to extend credit and standby letters of credit) are generally short-term and at variable rates. Therefore, both the carrying amount and the estimated fair value associated with these financial instruments are immaterial. Fair values for
balance sheet instruments as of June 30, 2014 and September 30, 2013, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level in Fair
Value
Hierarchy
|
|
|
June 30, 2014
|
|
|
September 30, 2013
|
|
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
|
Level 1
|
|
|
$
|
235,077
|
|
|
$
|
235,077
|
|
|
$
|
282,157
|
|
|
$
|
282,157
|
|
|
Loans, net excluding fair valued loans and loans held for sale
|
|
|
Level 3
|
|
|
|
5,688,928
|
|
|
|
5,680,154
|
|
|
|
5,456,676
|
|
|
|
5,420,963
|
|
|
Accrued interest receivable
|
|
|
Level 2
|
|
|
|
37,055
|
|
|
|
37,055
|
|
|
|
41,065
|
|
|
|
41,065
|
|
|
Federal Home Loan Bank stock
|
|
|
Level 2
|
|
|
|
30,414
|
|
|
|
30,414
|
|
|
|
28,765
|
|
|
|
28,765
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
Level 3
|
|
|
$
|
(7,067,112
|
)
|
|
$
|
(7,072,929
|
)
|
|
$
|
(6,948,208
|
)
|
|
$
|
(6,959,936
|
)
|
|
FHLB advances, related party notes payable, and other borrowings
|
|
|
Level 2
|
|
|
|
(476,392
|
)
|
|
|
(461,674
|
)
|
|
|
(431,902
|
)
|
|
|
(421,593
|
)
|
|
Securities sold under repurchase agreements
|
|
|
Level 2
|
|
|
|
(185,620
|
)
|
|
|
(185,620
|
)
|
|
|
(217,562
|
)
|
|
|
(217,562
|
)
|
|
Accrued interest payable
|
|
|
Level 2
|
|
|
|
(5,643
|
)
|
|
|
(5,643
|
)
|
|
|
(6,790
|
)
|
|
|
(6,790
|
)
|
|
Subordinated debentures
|
|
|
Level 2
|
|
|
|
(56,083
|
)
|
|
|
(56,083
|
)
|
|
|
(56,083
|
)
|
|
|
(56,084
|
)
|
The following methods and assumptions were used in estimating the fair value of financial instruments that were not previously
disclosed:
Cash and cash due from banks:
Due to the short term nature of cash and cash equivalents, the estimated fair value is equal to the
carrying value and they are categorized as a Level 1 fair value measurement.
Loans, net excluding fair value loans and loans held for sale:
The fair value of the loan portfolio is estimated using observable inputs including estimated cash flows, and discount rates based on interest rates currently being offered for loans with similar terms, to borrowers of similar credit quality. Loans
held for investment are categorized as a Level 3 fair value measurement.
F-86
GREAT WESTERN BANCORPORATION, INC.
Notes to Consolidated Financial Statements (Unaudited)
Accrued interest receivable:
Due to the nature of accrued interest receivable, the estimated fair
value is equal to the carrying value and they are categorized as a Level 2 fair value measurement.
Federal Home Loan Bank stock:
The carrying
amount of FHLB stock approximates its fair value as it can only be redeemed with the FHLB at par value. Federal Home Loan Bank stock has been categorized as a Level 2 fair value measurement.
Deposits:
The estimated fair value of deposits with no stated maturity, such as non-interest bearing demand deposits, savings, NOW, and money market
accounts, is equal to the amount payable on demand. The fair value of interest-bearing time deposits is based on the discounted value of contractual cash flows of such deposits, taking into account the option for early withdrawal. The discount rate
is estimated using the rates offered by the Company, at the respective measurement dates, for deposits of similar maturities. Deposits have been categorized as a Level 3 fair value measurement.
FHLB advances, related party notes payable, and other borrowings:
The fair value of FHLB advances, related party notes payable, and other borrowings
are estimated using discounted cash flow analysis, based on current incremental borrowing rates for similar types of borrowing arrangements. In the absence of a reasonably precise methodology to determine the fair value of the credit agreement,
carrying value has been used to represent fair value. FHLB advances, related party notes payable, and other borrowings have been categorized as a Level 2 fair value measurement.
Securities sold under repurchase agreements:
The Company’s repurchase agreements are overnight transactions that mature the day after the
transaction, and as a result of this short-term nature, the estimated fair value equals the carrying value. Securities sold under repurchase agreements have been categorized as a Level 2 fair value measurement.
Accrued interest payable:
Due to the nature of accrued interest payable, the estimated fair value is equal to the carrying value and they are
categorized as a Level 2 fair value measurement.
Subordinated Debentures:
The fair value of subordinated debentures is estimated using discounted
cash flow analysis, based on current incremental debt rates. In the absence of a reasonably precise methodology to determine the fair value of the credit agreement, carrying value has been used to represent fair value. Subordinated debentures have
been categorized as a Level 2 fair value measurement.
17. Earnings per Share
Basic earnings per share computations for the nine months ended June 30, 2014 and 2013 were determined by dividing net income by the weighted-average number of
common shares outstanding during the periods then ended. The Company had no potentially dilutive securities outstanding during the periods presented.
The
following information was used in the computation of basic earnings per share (EPS) for the nine months ended June 30, 2014 and 2013 (in thousands except share data).
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
June 30, 2013
|
|
|
Basic earnings per share computation:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
77,077
|
|
|
$
|
69,920
|
|
|
Weighted average common shares outstanding
|
|
|
198,731
|
|
|
|
198,731
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
$
|
387.85
|
|
|
$
|
351.83
|
|
|
|
|
|
|
|
|
|
|
|
F-87
Through and including
, 2014 (the 25th day after the date of this prospectus), all dealers effecting transactions in our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or
subscription.
Shares
Great Western Bancorp, Inc.
Common Stock
PROSPECTUS
Joint Book-Running Managers
|
|
|
|
|
|
|
|
Deutsche Bank Securities
|
|
BofA Merrill Lynch
|
, 2014
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Estimated expenses, other than underwriting discounts and commissions, in connection with the sale of the registrant’s common stock, par
value $0.01, are as follows:
|
|
|
|
|
|
|
|
|
Amount
to be Paid
|
|
|
SEC registration fee
|
|
|
*
|
|
|
Financial Industry Regulatory Authority, Inc. filing fee
|
|
|
*
|
|
|
New York Stock Exchange listing fee
|
|
|
*
|
|
|
Blue sky fees and expenses
|
|
|
*
|
|
|
Printing fees and expenses
|
|
|
*
|
|
|
Legal fees and expenses
|
|
|
*
|
|
|
Accounting fees and expenses
|
|
|
*
|
|
|
Transfer agent’s fees
|
|
|
*
|
|
|
Miscellaneous
|
|
|
*
|
|
|
|
|
|
|
|
|
Total
|
|
|
*
|
|
|
|
|
|
|
|
|
*
|
To be included by amendment.
|
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law, or DGCL, grants each corporation organized thereunder the power to indemnify any
person who is or was a director, officer, employee or agent of a corporation or enterprise against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in
connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of being or having been in any such capacity, if such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding had no reasonable cause to believe such person’s conduct was unlawful, except that with
respect to an action or suit brought by or in the right of the corporation such indemnification is limited to expenses (including attorneys’ fees) in connection with the defense or settlement of such action or suit. The DGCL provides that
Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. The registrant’s amended and restated bylaws will
provide for indemnification by the registrant of its directors, officers, employees and agents to the fullest extent permitted by the DGCL, subject to limited exceptions. In addition, the registrant intends to enter into the employment agreements to
be filed as Exhibits 10.7 through 10.9 hereto with certain officers of the registrant that will provide for indemnification by the registrant of those officers to the fullest extent permitted by the DGCL, subject to the registrant’s amended and
restated certificate of incorporation and amended and restated bylaws. Furthermore, the registrant intends to enter into the stockholder agreement to be filed as Exhibit 10.1, under which it will be required to provide for the indemnification of
NAB-employed or NAB-designated directors, officers and employees to the fullest extent permitted by the DGCL.
Section 102(b)(7) of
the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law,
(iii) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions or (iv) for any transaction from which the director derived an improper personal benefit. The registrant’s amended and restated
certificate of incorporation will provide for such limitation of liability.
II-1
The registrant maintains insurance policies under which coverage is provided (a) to its
directors and officers, in their respective capacities as such, against loss arising from a claim made for any actual or alleged wrongful act, and (b) to itself with respect to payments which the registrant may make to such officers and
directors pursuant to the above indemnification provision or otherwise as a matter of law. We will also be obligated under the Stockholder Agreement to provide certain insurance coverage to our directors, officers and employees and to NAB-affiliated
individuals and entities, including insurance against certain liabilities under the Securities Act of 1933, as amended, or the Securities Act.
Reference is made to the form of underwriting agreement to be filed as Exhibit 1.1 hereto for provisions providing that the underwriters are
obligated, under certain circumstances, to indemnify the registrant’s directors, officers and controlling persons against certain liabilities under the Securities Act.
Item 15. Recent Sales of Unregistered Securities.
In the three years preceding the filing of this Registration Statement, the registrant has not issued any securities that were not registered
under the Securities Act, except for the issuance of 100 shares of the registrant’s common stock to National Americas Holdings LLC for aggregate consideration of $100 upon the registrant’s formation in a transaction exempt from
registration pursuant to Section 4(a)(2) of the Securities Act. Prior to the completion of this offering, the registrant will effect a -to-1 stock split of its common stock.
Item 16. Exhibits and Financial Statement Schedules.
(a)
Exhibits:
The following exhibits are filed as part of this Registration Statement:
|
|
|
|
|
Number
|
|
Description
|
|
|
|
|
1.1
|
|
Form of Underwriting Agreement*
|
|
|
|
|
2.1
|
|
Purchase and Assumption Agreement (Whole Bank, All Deposits), dated as of June 4, 2010, among Federal Deposit Insurance Corporation, as Receiver of TierOne Bank, Lincoln, Nebraska, Federal Deposit Insurance Corporation and Great
Western Bank
|
|
|
|
|
2.2
|
|
Form of Agreement and Plan of Merger of Great Western Bancorp, Inc. and Great Western Bancorporation, Inc.*
|
|
|
|
|
3.1
|
|
Form of Amended and Restated Certificate of Incorporation
|
|
|
|
|
3.2
|
|
Form of Amended and Restated Bylaws
|
|
|
|
|
4.1
|
|
Form of Common Stock Certificate
|
|
|
|
|
4.2
|
|
Indenture, dated as of December 17, 2003, between Great Western Bancorporation, Inc. and U.S. Bank National Association
|
|
|
|
|
4.3
|
|
Supplemental Indenture, dated , between Great Western Bancorporation, Inc., Great Western Bancorp, Inc. and U.S.
Bank National Association*
|
|
|
|
|
4.4
|
|
Amended and Restated Declaration of Trust of Great Western Statutory Trust IV, dated December 17, 2003
|
|
|
|
|
4.5
|
|
Indenture, dated as of March 10, 2006, between Great Western Bancorporation, Inc. and LaSalle Bank National Association
|
|
|
|
|
4.6
|
|
Supplemental Indenture, dated , between Great Western Bancorporation, Inc., Great Western Bancorp, Inc. and
LaSalle Bank National Association*
|
|
|
|
|
4.7
|
|
Amended and Restated Declaration of Trust of GWB Capital Trust VI, dated as of March 10, 2006
|
|
|
|
|
4.8
|
|
Indenture, dated as of June 1, 2005, between Sunstate Bancshares, Inc. and JPMorgan Chase Bank, National Association
|
II-2
|
|
|
|
|
Number
|
|
Description
|
|
|
|
|
4.9
|
|
First Supplemental Indenture, dated as of May 10, 2007, between Great Western Bancorporation, Inc. and The Bank of New York Trust Company
|
|
|
|
|
4.10
|
|
Second Supplemental Indenture, dated , between Great Western Bancorporation, Inc., Great Western Bancorp, Inc.
and The Bank of New York Trust Company, National Association*
|
|
|
|
|
4.11
|
|
Amended and Restated Declaration of Trust of Sunstate Bancshares Trust II, dated as of June 1, 2005
|
|
|
|
|
4.12
|
|
Amended and Restated Credit Agreement, dated as of
, between Great Western Bancorporation, Inc. and National Australia Bank Limited*
|
|
|
|
|
4.13
|
|
Subordinated Note of Great Western Bancorporation, Inc., dated as of June 3, 2008
|
|
|
|
|
5.1
|
|
Opinion of Sullivan & Cromwell LLP*
|
|
|
|
|
10.1
|
|
Form of Stockholder Agreement
|
|
|
|
|
10.2
|
|
Form of Transitional Services Agreement
|
|
|
|
|
10.3
|
|
Form of Registration Rights Agreement
|
|
|
|
|
10.4
|
|
Employment Agreement, dated January 16, 2014, between Great Western Bank and Kenneth Karels
|
|
|
|
|
10.5
|
|
Secondment Letter, dated November 8, 2012, between National Australia Bank Limited and Peter Chapman
|
|
|
|
|
10.6
|
|
Secondment Letter, dated August 5, 2010, between National Australia Bank Limited and Stephen Ulenberg, as amended by the letter dated December 23, 2013
|
|
|
|
|
10.7
|
|
Employment Agreement, dated , between Great Western Bancorp, Inc. and Kenneth Karels*
|
|
|
|
|
10.8
|
|
Employment Agreement, dated , between Great Western Bancorp, Inc. and Peter Chapman*
|
|
|
|
|
10.9
|
|
Employment Agreement, dated , between Great Western Bancorp, Inc. and Stephen Ulenberg*
|
|
|
|
|
10.10
|
|
Form of Great Western Bancorp, Inc. 2014 Omnibus Incentive Compensation Plan
|
|
|
|
|
10.11
|
|
Form of Great Western Bancorp, Inc. 2014 Non-Employee Director Plan
|
|
|
|
|
10.12
|
|
Form of Great Western Bancorp, Inc. Executive Incentive Compensation Plan
|
|
|
|
|
21.1
|
|
Subsidiaries of Great Western Bancorp, Inc.
|
|
|
|
|
23.1
|
|
Consent of Ernst & Young LLP
|
|
|
|
|
23.2
|
|
Consent of Sullivan & Cromwell LLP (contained in Exhibit 5.1)*
|
|
|
|
|
24.1
|
|
Powers of Attorney (included on signature page to the Registration Statement)
|
|
*
|
To be filed by amendment.
|
(b)
Consolidated Financial Statement Schedules:
All
schedules are omitted because the required information is inapplicable or the information is presented in the consolidated financial statements and the related notes.
II-3
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(a) to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered
in such names as required by the underwriter to permit prompt delivery to each purchaser;
(b) that insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final adjudication of such issue;
(c) that for purposes of determining
any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and
(d) that for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in Sioux Falls, South Dakota, on August 27, 2014.
|
|
|
|
|
Great Western Bancorp, Inc.
|
|
|
|
|
By:
|
|
/s/ Ken Karels
|
|
|
|
|
|
Name:
|
|
Ken Karels
|
|
Title:
|
|
President and Chief Executive Officer
|
The undersigned directors and officers do hereby constitute and appoint Ken Karels and Peter Chapman and
either of them, our true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers, and to execute any and all
instruments for us and in our names in the capacities indicated below, that such person may deem necessary or advisable to enable the Registrant to comply with the Securities Act of 1933, or the Act, and any rules, regulations and requirements of
the Securities and Exchange Commission in connection with this registration statement, including specifically, but not limited to, power and authority to sign for us, or any of us, in the capacities indicated below, any and all amendments hereto
(including pre-effective and post-effective amendments or any other registration statement filed pursuant to the provisions of Rule 462(b) under the Act); and we do hereby ratify and confirm all that such person or persons shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Act, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Ken Karels
Ken Karels
|
|
President, Chief Executive Officer and
Director
(Principal Executive
Officer)
|
|
August 27, 2014
|
|
|
|
|
|
/s/ Nathan Butler
Nathan Butler
|
|
Director
|
|
August 27, 2014
|
|
|
|
|
|
/s/ Swati Dave
Swati Dave
|
|
Director
|
|
August 28, 2014
|
|
|
|
|
|
/s/ Frances Grieb
Frances Grieb
|
|
Director
|
|
August 27, 2014
|
|
|
|
|
|
/s/ Andrew Hove
Andrew Hove
|
|
Director
|
|
August 27, 2014
|
|
|
|
|
|
/s/ Rolfe Lakin
Rolfe Lakin
|
|
Director
|
|
August 27, 2014
|
|
|
|
|
|
/s/ Richard Rauchenberger
Richard Rauchenberger
|
|
Director
|
|
August 27, 2014
|
II-5
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Daniel Rykhus
Daniel Rykhus
|
|
Director
|
|
August 27, 2014
|
|
|
|
|
|
/s/ Richard Sawers
Richard Sawers
|
|
Director
|
|
August 28, 2014
|
|
|
|
|
|
/s/ Peter Chapman
|
|
|
|
|
|
Peter Chapman
|
|
Chief Financial Officer and Executive Vice President
(Principal Financial Officer and Principal Accounting Officer)
|
|
August 27, 2014
|
II-6
INDEX TO EXHIBITS
|
|
|
|
|
Number
|
|
Description
|
|
|
|
|
1.1
|
|
Form of Underwriting Agreement*
|
|
|
|
|
2.1
|
|
Purchase and Assumption Agreement (Whole Bank, All Deposits), dated as of June 4, 2010, among Federal Deposit Insurance Corporation, as Receiver of TierOne Bank, Lincoln, Nebraska, Federal Deposit Insurance Corporation and Great
Western Bank
|
|
|
|
|
2.2
|
|
Form of Agreement and Plan of Merger of Great Western Bancorp, Inc. and Great Western Bancorporation, Inc.*
|
|
|
|
|
3.1
|
|
Form of Amended and Restated Certificate of Incorporation
|
|
|
|
|
3.2
|
|
Form of Amended and Restated Bylaws
|
|
|
|
|
4.1
|
|
Form of Common Stock Certificate
|
|
|
|
|
4.2
|
|
Indenture, dated as of December 17, 2003, between Great Western Bancorporation, Inc. and U.S. Bank National Association
|
|
|
|
|
4.3
|
|
Supplemental Indenture, dated , between Great Western Bancorporation, Inc., Great Western Bancorp, Inc. and U.S.
Bank National Association*
|
|
|
|
|
4.4
|
|
Amended and Restated Declaration of Trust of Great Western Statutory Trust IV, dated December 17, 2003
|
|
|
|
|
4.5
|
|
Indenture, dated as of March 10, 2006, between Great Western Bancorporation, Inc. and LaSalle Bank National Association
|
|
|
|
|
4.6
|
|
Supplemental Indenture, dated , between Great Western Bancorporation, Inc., Great Western Bancorp, Inc. and
LaSalle Bank National Association*
|
|
|
|
|
4.7
|
|
Amended and Restated Declaration of Trust of GWB Capital Trust VI, dated as of March 10, 2006
|
|
|
|
|
4.8
|
|
Indenture, dated as of June 1, 2005, between Sunstate Bancshares, Inc. and JPMorgan Chase Bank, National Association
|
|
|
|
|
4.9
|
|
First Supplemental Indenture, dated as of May 10, 2007, between Great Western Bancorporation, Inc. and The Bank of New York Trust Company
|
|
|
|
|
4.10
|
|
Second Supplemental Indenture, dated , between Great Western Bancorporation, Inc., Great Western Bancorp, Inc.
and The Bank of New York Trust Company, National Association*
|
|
|
|
|
4.11
|
|
Amended and Restated Declaration of Trust of Sunstate Bancshares Trust II, dated as of June 1, 2005
|
|
|
|
|
4.12
|
|
Amended and Restated Credit Agreement, dated
, between Great Western Bancorporation, Inc. and National Australia Bank Limited*
|
|
|
|
|
4.13
|
|
Subordinated Note of Great Western Bancorporation, Inc., dated as of June 3, 2008
|
|
|
|
|
5.1
|
|
Opinion of Sullivan & Cromwell LLP*
|
|
|
|
|
10.1
|
|
Form of Stockholder Agreement
|
|
|
|
|
10.2
|
|
Form of Transitional Services Agreement
|
|
|
|
|
10.3
|
|
Form of Registration Rights Agreement
|
|
|
|
|
10.4
|
|
Employment Agreement, dated January 16, 2014, between Great Western Bank and Kenneth Karels
|
|
|
|
|
10.5
|
|
Secondment Letter, dated November 8, 2012, between National Australia Bank Limited and Peter Chapman
|
|
|
|
|
10.6
|
|
Secondment Letter, dated August 5, 2010, between National Australia Bank Limited and Stephen Ulenberg, as amended by the letter dated December 23, 2013
|
|
|
|
|
10.7
|
|
Employment Agreement, dated , between Great Western Bancorp, Inc. and Kenneth
Karels*
|
|
|
|
|
|
Number
|
|
Description
|
|
|
|
|
10.8
|
|
Employment Agreement, dated , between Great Western Bancorp, Inc. and Peter Chapman*
|
|
|
|
|
10.9
|
|
Employment Agreement, dated , between Great Western Bancorp, Inc. and Stephen Ulenberg*
|
|
|
|
|
10.10
|
|
Form of Great Western Bancorp, Inc. 2014 Omnibus Incentive Compensation Plan
|
|
|
|
|
10.11
|
|
Form of Great Western Bancorp, Inc. 2014 Non-Employee Director Plan
|
|
|
|
|
10.12
|
|
Form of Great Western Bancorp, Inc. Executive Incentive Compensation Plan
|
|
|
|
|
21.1
|
|
Subsidiaries of Great Western Bancorp, Inc.
|
|
|
|
|
23.1
|
|
Consent of Ernst & Young LLP
|
|
|
|
|
23.2
|
|
Consent of Sullivan & Cromwell LLP (contained in Exhibit 5.1)*
|
|
|
|
|
24.1
|
|
Powers of Attorney (included on signature page to the Registration Statement)
|
|
*
|
To be filed by amendment.
|
Exhibit 2.1
PURCHASE AND ASSUMPTION AGREEMENT
WHOLE BANK
ALL DEPOSITS
AMONG
FEDERAL DEPOSIT
INSURANCE CORPORATION,
RECEIVER OF TIERONE BANK,
LINCOLN, NEBRASKA
FEDERAL DEPOSIT INSURANCE CORPORATION
and
GREAT WESTERN
BANK
DATED AS OF
June 4, 2010
i
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
ARTICLE I
|
|
DEFINITIONS
|
|
|
2
|
|
|
|
|
|
|
ARTICLE II
|
|
ASSUMPTION OF LIABILITIES
|
|
|
9
|
|
|
|
|
|
|
2.1
|
|
Liabilities Assumed by Assuming Institution
|
|
|
9
|
|
|
2.2
|
|
Interest on Deposit Liabilities
|
|
|
10
|
|
|
2.3
|
|
Unclaimed Deposits
|
|
|
11
|
|
|
2.4
|
|
Employee Plans
|
|
|
11
|
|
|
|
|
|
|
ARTICLE III
|
|
PURCHASE OF ASSETS
|
|
|
11
|
|
|
|
|
|
|
3.1
|
|
Assets Purchased by Assuming Institution
|
|
|
11
|
|
|
3.2
|
|
Asset Purchase Price
|
|
|
12
|
|
|
3.3
|
|
Manner of Conveyance; Limited Warranty; Nonrecourse; Etc
|
|
|
12
|
|
|
3.4
|
|
Puts of Assets to the Receiver.
|
|
|
13
|
|
|
3.5
|
|
Assets Not Purchased by Assuming Institution
|
|
|
15
|
|
|
3.6
|
|
Assets Essential to Receiver
|
|
|
16
|
|
|
|
|
|
|
ARTICLE IV
|
|
ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS
|
|
|
17
|
|
|
|
|
|
|
4.1
|
|
Continuation of Banking Business
|
|
|
17
|
|
|
4.2
|
|
Agreement with Respect to Credit Card Business
|
|
|
18
|
|
|
4.3
|
|
Agreement with Respect to Safe Deposit Business
|
|
|
18
|
|
|
4.4
|
|
Agreement with Respect to Safekeeping Business
|
|
|
18
|
|
|
4.5
|
|
Agreement with Respect to Trust Business
|
|
|
18
|
|
|
4.6
|
|
Agreement with Respect to Bank Premises
|
|
|
19
|
|
|
4.7
|
|
Agreement with Respect to Leased Data Processing Equipment
|
|
|
22
|
|
|
4.8
|
|
Agreement with Respect to Certain Existing Agreements
|
|
|
23
|
|
|
4.9
|
|
Informational Tax Reporting
|
|
|
24
|
|
|
4.10
|
|
Insurance
|
|
|
24
|
|
|
4.11
|
|
Office Space for Receiver and Corporation
|
|
|
24
|
|
|
4.12
|
|
Agreement with Respect to Continuation of Group Health Plan Coverage for Former Employees
|
|
|
25
|
|
|
4.13
|
|
Agreement with Respect to Interim Asset Servicing
|
|
|
26
|
|
|
4.14
|
|
Reserved
|
|
|
26
|
|
|
4.15
|
|
Agreement with Respect to Loss Sharing
|
|
|
26
|
|
ii
|
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE V
|
|
DUTIES WITH RESPECT TO DEPOSITORS OF THE FAILED BANK
|
|
|
26
|
|
|
|
|
|
|
5.1
|
|
Payment of Checks, Drafts and Orders
|
|
|
26
|
|
|
5.2
|
|
Certain Agreements Related to Deposits
|
|
|
26
|
|
|
5.3
|
|
Notice to Depositors
|
|
|
27
|
|
|
|
|
|
|
ARTICLE VI
|
|
RECORDS
|
|
|
27
|
|
|
|
|
|
|
6.1
|
|
Transfer of Records
|
|
|
27
|
|
|
6.2
|
|
Delivery of Assigned Records
|
|
|
28
|
|
|
6.3
|
|
Preservation of Records
|
|
|
28
|
|
|
6.4
|
|
Access to Records; Copies
|
|
|
28
|
|
|
|
|
|
|
ARTICLE VII
|
|
BID; INITIAL PAYMENT
|
|
|
29
|
|
|
|
|
|
|
ARTICLE VIII
|
|
ADJUSTMENTS
|
|
|
29
|
|
|
|
|
|
|
8.1
|
|
Pro Forma Statement
|
|
|
29
|
|
|
8.2
|
|
Correction of Errors and Omissions; Other Liabilities
|
|
|
30
|
|
|
8.3
|
|
Payments
|
|
|
30
|
|
|
8.4
|
|
Interest
|
|
|
30
|
|
|
8.5
|
|
Subsequent Adjustments
|
|
|
30
|
|
|
|
|
|
|
ARTICLE IX
|
|
CONTINUING COOPERATION
|
|
|
30
|
|
|
|
|
|
|
9.1
|
|
General Matters
|
|
|
31
|
|
|
9.2
|
|
Additional Title Documents
|
|
|
31
|
|
|
9.3
|
|
Claims and Suits
|
|
|
31
|
|
|
9.4
|
|
Payment of Deposits
|
|
|
31
|
|
|
9.5
|
|
Withheld Payments
|
|
|
31
|
|
|
9.6
|
|
Proceedings with Respect to Certain Assets and Liabilities
|
|
|
32
|
|
|
9.7
|
|
Information
|
|
|
33
|
|
|
|
|
|
|
ARTICLE X
|
|
CONDITION PRECEDENT
|
|
|
33
|
|
|
|
|
|
|
ARTICLE XI
|
|
REPRESENTATIONS AND WARRANTIES OF THE ASSUMING INSTITUTION
|
|
|
33
|
|
|
|
|
|
|
ARTICLE XII
|
|
INDEMNIFICATION
|
|
|
34
|
|
|
|
|
|
|
12.1
|
|
Indemnification of Indemnitees
|
|
|
34
|
|
|
12.2
|
|
Conditions Precedent to Indemnification
|
|
|
37
|
|
|
12.3
|
|
No Additional Warranty
|
|
|
38
|
|
|
12.4
|
|
Indemnification of Corporation and Receiver
|
|
|
38
|
|
|
12.5
|
|
Obligations Supplemental
|
|
|
38
|
|
|
12.6
|
|
Criminal Claims
|
|
|
39
|
|
|
12.7
|
|
Limited Guaranty of the Corporation
|
|
|
39
|
|
|
12.8
|
|
Subrogation
|
|
|
39
|
|
iii
|
|
|
|
|
|
|
|
|
ARTICLE XIII
|
|
MISCELLANEOUS
|
|
|
39
|
|
|
|
|
|
|
13.1
|
|
Entire Agreement
|
|
|
39
|
|
|
13.2
|
|
Headings
|
|
|
40
|
|
|
13.3
|
|
Counterparts
|
|
|
40
|
|
|
13.4
|
|
Governing Law
|
|
|
40
|
|
|
13.5
|
|
Successors
|
|
|
40
|
|
|
13.6
|
|
Modification; Assignment
|
|
|
40
|
|
|
13.7
|
|
Notice
|
|
|
40
|
|
|
13.8
|
|
Manner of Payment
|
|
|
41
|
|
|
13.9
|
|
Costs, Fees and Expenses
|
|
|
41
|
|
|
13.10
|
|
Waiver
|
|
|
42
|
|
|
13.11
|
|
Severability
|
|
|
42
|
|
|
13.12
|
|
Term of Agreement
|
|
|
42
|
|
|
13.13
|
|
Survival of Covenants, Etc.
|
|
|
42
|
|
|
|
|
|
|
SCHEDULES
|
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
Certain Liabilities Assumed
|
|
|
44
|
|
|
2.1(a)
|
|
Excluded Deposit Liability Accounts
|
|
|
45
|
|
|
3.1
|
|
Certain Assets Purchased
|
|
|
46
|
|
|
3.2
|
|
Purchase Price of Assets or Assets
|
|
|
47
|
|
|
3.5(l)
|
|
Excluded Securities
|
|
|
49
|
|
|
3.5(o)
|
|
Excluded Assets
|
|
|
50
|
|
|
4.15A
|
|
Single Family Shared-Loss Agreement
|
|
|
51
|
|
|
4.15B
|
|
Commercial Shared-Loss Share Loans
|
|
|
52
|
|
|
4.15C
|
|
Shared-Loss Securities
|
|
|
53
|
|
|
4.15D
|
|
Loans Excluded From Loss-Sharing Agreement
|
|
|
54
|
|
|
7
|
|
Calculation of Deposit Premium
|
|
|
55
|
|
|
|
|
|
|
EXHIBITS
|
|
|
|
|
|
|
|
|
|
|
|
2.3A
|
|
Final Notice Letter
|
|
|
57
|
|
|
2.3B
|
|
Affidavit of Mailing
|
|
|
59
|
|
|
4.13
|
|
Interim Asset Servicing Arrangement
|
|
|
62
|
|
|
4.15A
|
|
Single Family Shared-Loss Agreement
|
|
|
64
|
|
|
4.15B
|
|
Commercial Shared-Loss Agreement
|
|
|
109
|
|
iv
PURCHASE AND ASSUMPTION AGREEMENT
WHOLE BANK
ALL DEPOSITS
THIS AGREEMENT
, made and entered into as of the 4th day of June, 2010, by and among the
FEDERAL DEPOSIT INSURANCE CORPORATION,
RECEIVER of TIERONE BANK, LINCOLN, NEBRASKA
(the “Receiver”),
GREAT WESTERN BANK
, organized under the laws of the State of South Dakota, and having its principal place of business in Sioux Falls, South Dakota (the “Assuming
Institution”), and the
FEDERAL DEPOSIT INSURANCE CORPORATION
, organized under the laws of the United States of America and having its principal office in Washington, D.C., acting in its corporate capacity (the
“Corporation”).
WITNESSETH:
WHEREAS
, on Bank Closing, the Chartering Authority closed
TIERONE BANK
(the “Failed Bank”) pursuant to applicable law
and the Corporation was appointed Receiver thereof; and
WHEREAS
, the Assuming Institution desires to purchase certain
assets and assume certain deposit and other liabilities of the Failed Bank on the terms and conditions set forth in this Agreement; and
WHEREAS
, pursuant to 12 U.S.C. Section 1823(c)(2)(A), the Corporation may provide assistance to the Assuming Institution to
facilitate the transactions contemplated by this Agreement, which assistance may include indemnification pursuant to Article XII; and
WHEREAS
, the Board of Directors of the Corporation (the “Board”) has determined to provide assistance to the Assuming
Institution on the terms and subject to the conditions set forth in this Agreement; and
WHEREAS
, the Board has determined
pursuant to 12 U.S.C. Section 1823(c)(4)(A) that such assistance is necessary to meet the obligation of the Corporation to provide insurance coverage for the insured deposits in the Failed Bank.
1
NOW THEREFORE
, in consideration of the mutual promises herein set forth and other valuable
consideration, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Capitalized
terms used in this Agreement shall have the meanings set forth in this Article I, or elsewhere in this Agreement. As used herein, words imparting the singular include the plural and vice versa.
“
Accounting Records
”
means the general ledger and subsidiary ledgers and supporting schedules which support the
general ledger balances.
“
Acquired Subsidiaries
”
means Subsidiaries of the Failed Bank acquired pursuant
to Section 3.1.
“
Affiliate
”
of any Person means any director, officer, or employee of that Person and
any other Person (i) who is directly or indirectly controlling, or controlled by, or under direct or indirect common control with, such Person, or (ii) who is an affiliate of such Person as the term “affiliate” is defined in
Section 2 of the Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841.
“
Agreement
”
means this Purchase and Assumption Agreement by and among the Assuming Institution, the Corporation and
the Receiver, as amended or otherwise modified from time to time.
“
Assets
”
means all assets of the Failed
Bank purchased pursuant to Section 3.1. Assets owned by Subsidiaries of the Failed Bank are not “Assets” within the meaning of this definition.
“
Assumed Deposits
”
means Deposits.
“
Bank Closing
”
means the close of business of the Failed Bank on the date on which the Chartering Authority closed
such institution.
“
Bank Premises
”
means the banking houses, drive-in banking facilities, and teller
facilities (staffed or automated) together with adjacent parking, storage and service facilities and structures connecting remote facilities to banking houses, and land on which the foregoing are located, and unimproved land that are owned or leased
by the Failed Bank and that have formerly been utilized, are currently utilized, or are intended to be utilized in the future by the Failed Bank as shown on the Accounting Record of the Failed Bank as of Bank Closing.
“
Bid Amount
”
has the meaning provided in Article VII.
“
Bid Valuation Date
”
means
April 7. 2010
.
“
Book Value
”
means, with respect to any Asset and any Liability Assumed, the dollar amount thereof stated on the
Accounting Records of the Failed Bank. The Book Value of any item shall be determined as of Bank Closing after adjustments made by the Receiver for differences in accounts, suspense items, unposted debits and credits, and other similar adjustments
or corrections and for setoffs, whether voluntary or involuntary. The Book Value of
2
a Subsidiary of the Failed Bank acquired by the Assuming Institution shall be determined from the investment in subsidiary and related accounts on the “bank only” (unconsolidated)
balance sheet of the Failed Bank based on the equity method of accounting. Without limiting the generality of the foregoing, (i) the Book Value of a Liability Assumed shall include all accrued and unpaid interest thereon as of Bank Closing, and
(ii) the Book Value of a Loan shall reflect adjustments for earned interest, or unearned interest (as it relates to the “rule of 78s” or add-on-interest loans, as applicable), if any, as of Bank Closing, adjustments for the portion of
earned or unearned loan-related credit life and/or disability insurance premiums, if any, attributable to the Failed Bank as of Bank Closing, and adjustments for Failed Bank Advances, if any, in each case as determined for financial reporting
purposes. The Book Value of an Asset shall not include any adjustment for loan premiums, discounts or any related deferred income, fees or expenses, or general or specific reserves on the Accounting Records of the Failed Bank.
Notwithstanding the
previous sentence, the following GL Accounts will be included to adjust the Book Value of their related Assets: 102030; 102040; 102010; 102020; 102050; 102070; 102060; 102090; 104050; 106020; 106050; 102080; 106030; 106040; 132040; 132060; 132150
and 185010
. For Shared-Loss Securities, Book Value means the value of the security provided in the Information Package.
“
Business Day
”
means a day other than a Saturday, Sunday, Federal legal holiday or legal holiday under the laws of the
State where the Failed Bank is located, or a day on which the principal office of the Corporation is closed.
“
Chartering Authority
”
means (i) with respect to a national bank, the Office of the Comptroller of the Currency,
(ii) with respect to a Federal savings association or savings bank, the Office of Thrift Supervision, (iii) with respect to a bank or savings institution chartered by a State, the agency of such State charged with primary responsibility
for regulating and/or closing banks or savings institutions, as the case may be, (iv) the Corporation in accordance with 12 U.S.C. Section 1821(c), with regard to self appointment, or (v) the appropriate Federal banking agency in
accordance with 12 U.S.C. 1821(c)(9).
“
Commitment
”
means the unfunded portion of a line of credit or other
commitment reflected on the books and records of the Failed Bank to make an extension of credit (or additional advances with respect to a Loan) that was legally binding on the Failed Bank as of Bank Closing, other than extensions of credit pursuant
to the credit card business and overdraft protection plans of the Failed Bank, if any.
“
Credit Documents
”
mean the agreements, instruments, certificates or other documents at any time evidencing or otherwise relating to, governing or executed in connection with or as security for, a Loan, including without limitation notes, bonds, loan agreements,
letter of credit applications, lease financing contracts, banker’s acceptances, drafts, interest protection agreements, currency exchange agreements, repurchase agreements, reverse repurchase agreements, guarantees, deeds of trust, mortgages,
assignments, security agreements, pledges, subordination or priority agreements, lien priority agreements, undertakings, security instruments, certificates, documents, legal opinions, participation agreements and intercreditor agreements, and all
amendments, modifications, renewals, extensions, rearrangements, and substitutions with respect to any of the foregoing.
3
“
Credit File
”
means all Credit Documents and all other credit,
collateral, or insurance documents in the possession or custody of the Assuming Institution, or any of its Subsidiaries or Affiliates, relating to an Asset or a Loan included in a Put Notice, or copies of any thereof.
“
Data Processing Lease
”
means any lease or licensing agreement, binding on the Failed Bank as of Bank Closing, the
subject of which is data processing equipment or computer hardware or software used in connection with data processing activities. A lease or licensing agreement for computer software used in connection with data processing activities shall
constitute a Data Processing Lease regardless of whether such lease or licensing agreement also covers data processing equipment.
“
Deposit
”
means a deposit as defined in 12 U.S.C. Section 1813(l), including without limitation, outstanding
cashier’s checks and other official checks and all uncollected items included in the depositors’ balances and credited on the books and records of the Failed Bank;
provided
,
that
the term “Deposit” shall not include
all or any portion of those deposit balances which, in the discretion of the Receiver or the Corporation, (i) may be required to satisfy it for any liquidated or contingent liability of any depositor arising from an unauthorized or unlawful
transaction, or (ii) may be needed to provide payment of any liability of any depositor to the Failed Bank or the Receiver, including the liability of any depositor as a director or officer of the Failed Bank, whether or not the amount of the
liability is or can be determined as of Bank Closing.
“
Deposit Secured Loan
”
means a loan in which the only
collateral securing the loan is Assumed Deposits or deposits at other insured depository institutions
“
Failed Bank Advances
”
means the total sums paid by the Failed Bank to (i) protect its lien position, (ii) pay ad
valorem taxes and hazard insurance, and (iii) pay credit life insurance, accident and health insurance, and vendor’s single interest insurance.
“
Fair Market Value
”
means (i)(a) “Market Value” as defined in the regulation prescribing the standards for
real estate appraisals used in federally related transactions, 12 C.F.R. § 323.2(g), and accordingly shall mean the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair
sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to
buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and acting in what they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
4
(5) The price represents the normal consideration for the property sold unaffected by special or
creative financing or sales concessions granted by anyone associated with the sale;
as determined as of Bank Closing by an appraiser chosen by the
Assuming Institution from a list of acceptable appraisers provided by the Receiver; any costs and fees associated with such determination shall be shared equally by the Receiver and the Assuming Institution, and (b) which, with respect to Bank
Premises (to the extent, if any, that Bank Premises are purchased utilizing this valuation method), shall be determined not later than sixty (60) days after Bank Closing by an appraiser selected by the Receiver and the Assuming Institution
within seven (7) days after Bank Closing; or (ii) with respect to property other than Bank Premises purchased utilizing this valuation method, the price therefore as established by the Receiver and agreed to by the Assuming Institution, or
in the absence of such agreement, as determined in accordance with clause (i)(a) above.
“
First Loss
Tranche
” means the amount of loss the Assuming Institution shall absorb prior to the commencement of loss sharing and it must be stated as zero or a positive number. The First Loss Tranche bid is expressed as a percentage of the Book
Value of Assets covered by loss sharing. The First Loss Tranche must be a positive number.
“
Fixtures
” means those leasehold improvements, additions, alterations and installations constituting all or a
part of Bank Premises and which were acquired, added, built, installed or purchased at the expense of the Failed Bank, regardless of the holder of legal title thereto as of Bank Closing.
“
Furniture and Equipment
”
means the furniture and equipment, other than motor vehicles, leased or owned by the Failed
Bank and reflected on the books of the Failed Bank as of Bank Closing and located on or at Bank Premises, including without limitation automated teller machines, carpeting, furniture, office machinery (including personal computers), shelving, office
supplies, telephone, surveillance, security systems and artwork. Motor vehicles shall be considered other assets and pass at Book Value. Furniture and equipment located at a storage facility not adjacent to a Bank Premises are excluded from this
definition.
“
Indemnitees
”
means, except as provided in paragraph (11) of Section 12.1(b),
(i) the Assuming Institution, (ii) the Subsidiaries and Affiliates of the Assuming Institution
other
than
any Subsidiaries or Affiliates of the Failed Bank that are or become Subsidiaries or Affiliates of the Assuming
Institution, and (iii) the directors, officers, employees and agents of the Assuming Institution and its Subsidiaries and Affiliates who are
not
also present or former directors, officers, employees or agents of the Failed Bank or of any
Subsidiary or Affiliate of the Failed Bank.
“
Information Package
”
means the most recent compilation of
financial and other data with respect to the Failed Bank, including any amendments or supplements thereto, provided to the Assuming Institution by the Corporation on the web site used by the Corporation to market the Failed Bank to potential
acquirers.
5
“
Initial Payment
”
means the payment made pursuant to Article VII
(based on the best information available as of the Bank Closing Date), the amount of which shall be either (i) if the Bid Amount is positive, the aggregate Book Value of the Liabilities Assumed
minus
the sum of the aggregate purchase
price of the Assets and assets purchased and the positive Bid Amount, or (ii) if the Bid Amount is negative, the sum of the aggregate Book Value of the Liabilities Assumed and the negative Bid Amount
minus
the aggregate purchase price of
the Assets and assets purchased. The Initial Payment shall be payable by the Corporation to the Assuming Bank if (i) the Liabilities Assumed are greater than the sum of the positive Bid Amount and the Assets and assets purchased, or if
(ii) the sum of the Liabilities Assumed and the negative Bid Amount are greater than the Assets and assets purchased. The Initial Payment shall be payable by the Assuming Bank to the Corporation if (i) the Liabilities Assumed are less than
the sum of the positive Bid Amount and the Assets and assets purchased, or if (ii) the sum of the Liabilities Assumed and the negative Bid Amount is less than the Assets and assets purchased. Such Initial Payment shall be subject to adjustment
as provided in Article VIII.
“
Legal Balance
”
means the amount of indebtedness legally owed by an
Obligor with respect to a Loan, including principal and accrued and unpaid interest, late fees, attorneys’ fees and expenses, taxes, insurance premiums, and similar charges, if any.
“
Liabilities Assumed
”
has the meaning provided in Section 2.1.
“
Lien
”
means any mortgage, lien, pledge, charge, assignment for security purposes, security interest, or encumbrance
of any kind with respect to an Asset, including any conditional sale agreement or capital lease or other title retention agreement relating to such Asset.
“
Loans
”
means all of the following owed to or held by the Failed Bank as of Bank Closing:
(i) loans (including loans which have been charged off the Accounting Records of the Failed Bank in whole or in part prior to and including
the Bid Valuation Date), participation agreements, interests in participations, overdrafts of customers (including but not limited to overdrafts made pursuant to an overdraft protection plan or similar extensions of credit in connection with a
deposit account), revolving commercial lines of credit, home equity lines of credit, Commitments, United States and/or State-guaranteed student loans, and lease financing contracts;
(ii) all Liens, rights (including rights of set-off), remedies, powers, privileges, demands, claims, priorities, equities and benefits owned
or held by, or accruing or to accrue to or for the benefit of, the holder of the obligations or instruments referred to in clause (i) above, including but not limited to those arising under or based upon Credit Documents, casualty insurance
policies and binders, standby letters of credit, mortgagee title insurance policies and binders, payment bonds and performance bonds at any time and from time to time existing with respect to any of the obligations or instruments referred to in
clause (i) above; and
(iii) all amendments, modifications, renewals, extensions, refinancings, and refundings of or for any of the
foregoing.
6
“
Obligor
”
means each Person liable for the full or partial payment or
performance of any Loan, whether such Person is obligated directly, indirectly, primarily, secondarily, jointly, or severally.
“
Other Real Estate
”
means all interests in real estate (other than Bank Premises and Fixtures), including but not
limited to mineral rights, leasehold rights, condominium and cooperative interests, air rights and development rights that are owned by the Failed Bank.
“
Payment Date
”
means the first Business Day after the Bank Closing Date.
“
Person
”
means any individual, corporation, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, or government or any agency or political subdivision thereof, excluding the Corporation.
“
Primary Indemnitor
”
means any Person (other than the Assuming Institution or any of its Affiliates) who is obligated
to indemnify or insure, or otherwise make payments (including payments on account of claims made against) to or on behalf of any Person in connection with the claims covered under Article XII, including without limitation any insurer issuing
any directors and officers liability policy or any Person issuing a financial institution bond or banker’s blanket bond.
“
Pro forma
”
means producing a balance sheet that reflects a reasonably accurate financial statement of the Failed bank
through the date of closing. The pro forma financial statements serve as a basis for the opening entries of both the Assuming Institution and the Receiver.
“
Put Date
”
has the meaning provided in Section 3.4.
“
Put Notice
”
has the meaning provided in Section 3.4.
“
Qualified Financial Contract
”
means a qualified financial contract as defined in 12 U.S.C.
Section 1821(e)(8)(D).
“
Record
”
means any document, microfiche, microfilm and computer records
(including but not limited to magnetic tape, disc storage, card forms and printed copy) of the Failed Bank generated or maintained by the Failed Bank that is owned by or in the possession of the Receiver at Bank Closing.
“
Related Liability
”
with respect to any Asset means any liability existing and reflected on the Accounting Records of
the Failed Bank as of Bank Closing for (i) indebtedness secured by mortgages, deeds of trust, chattel mortgages, security interests or other liens on or affecting such Asset, (ii) ad valorem taxes applicable to such Asset, and
(iii) any other obligation determined by the Receiver to be directly related to such Asset.
“
Related Liability
Amount
”
with respect to any Related Liability on the books of the Assuming Institution, means the amount of such Related Liability as stated on the Accounting Records of the Assuming Institution (as maintained in accordance with
generally
7
accepted accounting principles) as of the date as of which the Related Liability Amount is being determined. With respect to a liability that relates to more than one asset, the amount of such
Related Liability shall be allocated among such assets for the purpose of determining the Related Liability Amount with respect to any one of such assets. Such allocation shall be made by specific allocation, where determinable, and otherwise shall
be pro rata based upon the dollar amount of such assets stated on the Accounting Records of the entity that owns such asset.
“
Repurchase Price
”
means, with respect to any Loan the Book Value, adjusted to reflect changes to Book Value after
Bank Closing, plus (i) any advances and interest on such Loan after Bank Closing, minus (ii) the total of amounts received by the Assuming Institution for such Loan, regardless of how applied, after Bank Closing, plus (iii) advances
made by Assuming Institution, plus (iv) total disbursements of principal made by Receiver that are not included in the Book Value.
“
Safe Deposit Boxes
”
means the safe deposit boxes of the Failed Bank, if any, including the removable safe deposit
boxes and safe deposit stacks in the Failed Bank’s vault(s), all rights and benefits under rental agreements with respect to such safe deposit boxes, and all keys and combinations thereto.
“
Settlement Date
”
means the first Business Day immediately prior to the day which is three hundred sixty-five
(365) days after Bank Closing, or such other date prior thereto as may be agreed upon by the Receiver and the Assuming Institution. The Receiver, in its discretion, may extend the Settlement Date.
“
Settlement Interest Rate
”
means, for the first calendar quarter or portion thereof during which interest accrues, the
rate determined by the Receiver to be equal to the equivalent coupon issue yield on twenty-six (26)-week United States Treasury Bills in effect as of Bank Closing as published in
The Wall Street Journal
;
provided
,
that
if no
such equivalent coupon issue yield is available as of Bank Closing, the equivalent coupon issue yield for such Treasury Bills most recently published in
The Wall Street Journal
prior to Bank Closing shall be used. Thereafter, the rate shall
be adjusted to the rate determined by the Receiver to be equal to the equivalent coupon issue yield on such Treasury Bills in effect as of the first day of each succeeding calendar quarter during which interest accrues as published in
The Wall
Street Journal
.
“
Shared-Loss Securities
”
means those securities and other assets listed on Schedule
4.15C.
8
“
Subsidiary
”
has the meaning set forth in
Section 3(w)(4) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1813(w)(4), as amended.
ARTICLE II
ASSUMPTION OF LIABILITIES
2.1
Liabilities Assumed by Assuming Institution
. The Assuming Institution expressly assumes at Book Value (subject to
adjustment pursuant to Article VIII) and agrees to pay, perform, and discharge all of the following liabilities of the Failed Bank as of Bank Closing, except as otherwise provided in this Agreement (such liabilities referred to as
“Liabilities Assumed”):
(a) Assumed Deposits, except those Deposits specifically listed on Schedule 2.1(a);
provided
,
that
as to any Deposits of public money which are Assumed Deposits, the Assuming Institution agrees to properly secure such Deposits with such Assets as appropriate which, prior to Bank Closing, were pledged as security by the Failed Bank, or
with assets of the Assuming Institution, if such securing Assets, if any, are insufficient to properly secure such Deposits;
(b)
liabilities for indebtedness secured by mortgages, deeds of trust, chattel mortgages, security interests or other liens on or affecting any Assets, if any;
provided
,
that
the assumption of any liability pursuant to this paragraph shall
be limited to the market value of the Assets securing such liability as determined by the Receiver;
(c) borrowings from Federal Reserve
Banks and Federal Home Loan Banks, if any,
provided
,
that
the assumption of any liability pursuant to this paragraph shall be limited to the market value of the assets securing such liability as determined by the Receiver; and
overdrafts, debit balances, service charges, reclamations, and adjustments to accounts with the Federal Reserve Banks as reflected on the books and records of any such Federal Reserve Bank within ninety (90) days after Bank Closing, if any;
(d) ad valorem taxes applicable to any Asset, if any;
provided
, that the assumption of any ad valorem taxes pursuant to this
paragraph shall be limited to an amount equal to the market value of the Asset to which such taxes apply as determined by the Receiver;
(e) liabilities, if any, for federal funds purchased, repurchase agreements and overdrafts in accounts maintained with other depository
institutions (including any accrued and unpaid interest thereon computed to and including Bank Closing);
provided
,
that
the assumption of any liability pursuant to this paragraph shall be limited to the market value of the Assets
securing such liability as determined by the Receiver;
(f) United States Treasury tax and loan note option accounts, if any;
(g) liabilities for any acceptance or commercial letter of credit (including any “standby letters of credit” as defined in 12 C.F.R.
Section 337.2(a) issued on the behalf of any Obligor of a Loan acquired hereunder by the Assuming Institution, but excluding any other standby letters of credit);
provided
,
that
the assumption of any liability pursuant to this
paragraph shall be limited to the market value of the Assets securing such liability as determined by the Receiver;
(h) duties and
obligations assumed pursuant to this Agreement including without limitation those relating to the Failed Bank’s Records, credit card business, overdraft protection plans, safe deposit business, safekeeping business or trust business, if any;
(i) liabilities, if any, for Commitments;
9
(j) liabilities, if any, for amounts owed to any Subsidiary of the Failed Bank acquired under
Section 3.1;
(k) liabilities, if any, with respect to Qualified Financial Contracts;
(l) duties and obligations under any contract pursuant to which the Failed Bank provides mortgage servicing for others, or mortgage servicing
is provided to the Failed Bank by others, including (i) any seller obligations, including seller origination; and repurchase obligations, and (ii) any government sponsored enterprise (“GSE”) seller or servicer obligations,
provided
that
, if the Assuming Institution is not an approved GSE servicer, or does not intend or is unable to become an approved GSE servicer, the Assuming Institution will cooperate with Receiver and the GSE to effect the transfer of
any such servicing obligations to a GSE approved servicer; and
(m) all asset-related offensive litigation liabilities and all
asset-related defensive litigation liabilities, but only to the extent such liabilities relate to assets subject to a shared-loss agreement, and provided that all other defensive litigation and any class actions with respect to credit card business
are retained by the Receiver.
Schedule 2.1 attached hereto and incorporated herein sets forth certain categories of Liabilities Assumed
and the aggregate Book Value of the Liabilities Assumed in such categories. Such schedule is based upon the best information available to the Receiver and may be adjusted as provided in Article VIII.
2.2
Interest on Deposit Liabilities
.
The Assuming Institution agrees that, from and after Bank Closing, it will
accrue and pay interest on Deposit liabilities assumed pursuant to Section 2.1 at a rate(s) it shall determine;
provided
,
that
for non-transaction Deposit liabilities such rate(s) shall not be less than the lowest rate offered by
the Assuming Institution to its depositors for non-transaction deposit accounts. The Assuming Institution shall permit each depositor to withdraw, without penalty for early withdrawal, all or any portion of such depositor’s Deposit, whether or
not the Assuming Institution elects to pay interest in accordance with any deposit agreement formerly existing between the Failed Bank and such depositor;
and
further
provided
, that if such Deposit has been pledged to secure an
obligation of the depositor or other party, any withdrawal thereof shall be subject to the terms of the agreement governing such pledge. The Assuming Institution shall give notice to such depositors as provided in Section 5.3 of the rate(s) of
interest which it has determined to pay and of such withdrawal rights.
10
2.3
Unclaimed Deposits.
Fifteen (15) months following the Bank Closing
Date, the Assuming Institution will provide the Receiver a listing of all deposit accounts, including the type of account, not claimed by the depositor. The Receiver will review the list and authorize the Assuming Institution to act on behalf of the
Receiver to send a “Final Legal Notice” in a form substantially similar to Exhibit 2.3A to the owner(s) of the unclaimed deposits reminding them of the need to claim or arrange to continue their account(s) with the Assuming
Institution. The Assuming Institution will send the “Final Legal Notice” to the depositors within thirty (30) days following notification of the Receiver’s authorization. The Assuming Institution will prepare an Affidavit of
Mailing and will forward the Affidavit of Mailing to the Receiver after mailing out the “Final Legal Notice” in a form substantially similar to Exhibit 2.3B to the owner(s) of unclaimed deposit accounts.
If, within eighteen (18) months after Bank Closing, any depositor of the Failed Bank does not claim or arrange to continue such
depositor’s Deposit assumed pursuant to Section 2.1 at the Assuming Institution, the Assuming Institution shall, within fifteen (15) Business Days after the end of such eighteen (18) month period, (i) refund to the Receiver
the full amount of each such deposit (without reduction for service charges), (ii) provide to the Receiver a schedule of all such refunded Deposits in such form as may be prescribed by the Receiver, and (iii) assign, transfer, convey, and
deliver to the Receiver, all right, title, and interest of the Assuming Institution in and to the Records previously transferred to the Assuming Institution and other records generated or maintained by the Assuming Institution pertaining to such
Deposits. During such eighteen (18) month period, at the request of the Receiver, the Assuming Institution promptly shall provide to the Receiver schedules of unclaimed deposits in such form as may be prescribed by the Receiver.
2.4
Employee Plans
.
Except as provided in Section 4.12, the Assuming Institution shall have no liabilities, obligations or
responsibilities under the Failed Bank’s health care, bonus, vacation, pension, profit sharing, deferred compensation, 401K or stock purchase plans or similar plans, if any, unless the Receiver and the Assuming Institution agree otherwise
subsequent to the date of this Agreement.
ARTICLE III
PURCHASE OF ASSETS
3.1
Assets Purchased by Assuming Institution
.
With the exception of certain assets expressly excluded in Sections 3.5 and 3.6, the Assuming Institution hereby purchases from the Receiver, and the Receiver hereby sells, assigns,
transfers, conveys, and delivers to the Assuming Institution, all right, title, and interest of the Receiver in and to all of the assets (real, personal and mixed, wherever located and however acquired) including all subsidiaries, joint ventures,
partnerships, and any and all other business combinations or arrangements, whether active, inactive, dissolved or terminated, of the Failed Bank whether or not reflected on the books of the Failed Bank as of Bank Closing. Schedule 3.1 attached
hereto and incorporated herein sets forth certain categories of Assets purchased hereunder. Such schedule is based upon the best information available to the Receiver and may be adjusted as provided in Article VIII. Assets are purchased
hereunder by the Assuming Institution subject to all liabilities for indebtedness collateralized by Liens affecting such Assets to the extent provided in Section 2.1. Notwithstanding Section 4.8, the Assuming Institution specifically
purchases all mortgage servicing rights and obligations of the Failed Bank.
11
3.2
Asset Purchase Price
.
(a) All Assets and assets of the Failed Bank subject to an option to purchase by the Assuming Institution shall be purchased for the amount, or
the amount resulting from the method specified for determining the amount, as specified on Schedule 3.2, except as otherwise may be provided herein. Any Asset, asset of the Failed Bank subject to an option to purchase or other asset purchased for
which no purchase price is specified on Schedule 3.2 or otherwise herein shall be purchased at its Book Value. Loans or other assets charged off the Accounting Records of the Failed Bank before the Bid Valuation Date shall be purchased at a price of
zero.
(b) The purchase price for securities (other than the capital stock of any Acquired Subsidiary, Shared-Loss Securities, FRB and
FHLB stock) purchased under Section 3.1 by the Assuming Institution shall be the market value thereof as of Bank Closing, which market value shall be (i) the market price for each such security quoted at the close of the trading day
effective on Bank Closing as published electronically by Bloomberg, L.P., or alternatively, at the discretion of the Receiver, IDC/Financial Times (FT) Interactive Data; (ii)
provided
,
that
if such market price is not available
for any such security, the Assuming Institution will submit a bid for each such security within three days of notification/bid request by the Receiver (unless a different time period is agreed to by the Assuming Institution and the Receiver) and the
Receiver, in its sole discretion will accept or reject each such bid; and (iii)
further provided
in the absence of an acceptable bid from the Assuming Institution, each such security shall not pass to the Assuming Institution and shall
be deemed to be an excluded asset hereunder.
(c)
Qualified Financial Contracts shall be purchased at market value determined in
accordance with the terms of Exhibit 3.2(c). Any costs associated with such valuation shall be shared equally by the Receiver and the Assuming Institution.
3.3
Manner of Conveyance; Limited Warranty; Nonrecourse; Etc
. THE CONVEYANCE OF ALL ASSETS, INCLUDING REAL AND PERSONAL PROPERTY
INTERESTS, PURCHASED BY THE ASSUMING INSTITUTION UNDER THIS AGREEMENT SHALL BE MADE, AS NECESSARY, BY RECEIVER’S DEED OR RECEIVER’S BILL OF SALE, “AS IS”, “WHERE IS”, WITHOUT RECOURSE AND, EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED IN THIS AGREEMENT, WITHOUT ANY WARRANTIES WHATSOEVER WITH RESPECT TO SUCH ASSETS, EXPRESS OR IMPLIED, WITH RESPECT TO TITLE, ENFORCEABILITY, COLLECTIBILITY, DOCUMENTATION OR FREEDOM FROM LIENS OR ENCUMBRANCES (IN WHOLE OR IN
PART), OR ANY OTHER MATTERS.
12
3.4
Puts of Assets to the Receiver
.
(a)
Puts Within 30 Days After Bank Closing
.
During the thirty (30)-day period following Bank Closing and only during such
period (which thirty (30)-day period may be extended
in writing
in the sole absolute discretion of the Receiver for any Loan), in accordance with this Section 3.4, the Assuming Institution shall be entitled to require the Receiver to
purchase any Deposit Secured Loan transferred to the Assuming Institution pursuant to Section 3.1 which is not fully secured by Assumed Deposits or deposits at other insured depository institutions due to either insufficient Assumed Deposit or
deposit collateral or deficient documentation regarding such collateral; provided with regard to any Deposit Secured Loan secured by an Assumed Deposit, no such purchase may be required until any Deposit setoff determination, whether voluntary or
involuntary, has been made; and,
at the end of the thirty (30)-day period following Bank Closing and at that time only, in accordance with this
Section 3.4, the Assuming Institution shall be entitled to require the Receiver to purchase any remaining overdraft transferred to the Assuming Institution pursuant to 3.1 which both was made after the Bid Valuation Date and was not made
pursuant to an overdraft protection plan or similar extension of credit.
Notwithstanding the foregoing, the Assuming Institution shall
not
have
the right to require the Receiver to purchase any Loan if (i) the Obligor with respect to such Loan is an Acquired Subsidiary, or (ii) the Assuming Institution has:
|
|
(A)
|
made any advance in accordance with the terms of a Commitment or otherwise with respect to such Loan;
|
|
|
(B)
|
taken any action that increased the amount of a Related Liability with respect to such Loan over the amount of such liability immediately prior to the time of such action;
|
|
|
(C)
|
created or permitted to be created any Lien on such Loan which secures indebtedness for money borrowed or which constitutes a conditional sales agreement, capital lease or other title retention agreement;
|
|
|
(D)
|
entered into, agreed to make, grant or permit, or made, granted or permitted any modification or amendment to, any waiver or extension with respect to, or any renewal, refinancing or refunding of, such Loan or related
Credit Documents or collateral, including, without limitation, any act or omission which diminished such collateral; or
|
|
|
(E)
|
sold, assigned or transferred all or a portion of such Loan to a third party (whether with or without recourse).
|
The Assuming Institution shall transfer all such Assets to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any
Person claiming by, through or under the Assuming Institution with respect to any such Asset, as provided in Section 12.4.
(b)
Puts Prior to the Settlement Date
.
During the period from the Bank Closing Date to and including the Business Day
immediately preceding the Settlement Date, the Assuming Bank shall be entitled to require the Receiver to purchase any Asset which the Assuming Bank can establish is evidenced by forged or stolen instruments as of the Bank Closing Date;
provided
,
that
, the Assuming Bank shall
not
have the right to require the Receiver to purchase any such Asset with respect to which the Assuming Bank has taken any action referred to in Section 3.4(a)(ii) with respect to
such Asset. The Assuming Bank shall transfer all such Assets to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Bank with respect to any such Asset,
as provided in Section 12.4.
13
(c)
Notices to the Receiver
.
In the event that the Assuming
Institution elects to require the Receiver to purchase one or more Assets, the Assuming Institution shall deliver to the Receiver a notice (a “Put Notice”) which shall include:
|
|
(i)
|
a list of all Assets that the Assuming Institution requires the Receiver to purchase;
|
|
|
(ii)
|
a list of all Related Liabilities with respect to the Assets identified pursuant to (i) above; and
|
|
|
(iii)
|
a statement of the estimated Repurchase Price of each Asset identified pursuant to (i) above as of the applicable Put Date.
|
Such notice shall be in the form prescribed by the Receiver or such other form to which the Receiver shall consent. As provided in Section 9.6, the
Assuming Institution shall deliver to the Receiver such documents, Credit Files and such additional information relating to the subject matter of the Put Notice as the Receiver may request and shall provide to the Receiver full access to all other
relevant books and records.
(d)
Purchase by Receiver
.
The Receiver shall purchase Assets that are
specified in the Put Notice and shall assume Related Liabilities with respect to such Assets, and the transfer of such Assets and Related Liabilities shall be effective as of a date determined by the Receiver which date shall not be later than
thirty (30) days after receipt by the Receiver of the Put Notice (the “Put Date”).
(e)
Purchase Price
and Payment Date
.
Each Asset purchased by the Receiver pursuant to this Section 3.4 shall be purchased at a price equal to the Repurchase Price of such Asset less the Related Liability Amount applicable to such Asset, in
each case determined as of the applicable Put Date. If the difference between such Repurchase Price and such Related Liability Amount is positive, then the Receiver shall pay to the Assuming Institution the amount of such difference; if the
difference between such amounts is negative, then the Assuming Institution shall pay to the Receiver the amount of such difference. The Assuming Institution or the Receiver, as the case may be, shall pay the purchase price determined pursuant to
this Section 3.4(d) not later than the twentieth (20th) Business Day following the applicable Put Date, together with interest on such amount at the Settlement Interest Rate for the period from and including such Put Date to and including
the day preceding the date upon which payment is made.
(f)
Servicing
.
The Assuming Institution shall
administer and manage any Asset subject to purchase by the Receiver in accordance with usual and prudent banking standards and business practices until such time as such Asset is purchased by the Receiver.
(g)
Reversals
.
In the event that the Receiver purchases an Asset (and assumes the Related Liability) that
it is not required to purchase pursuant to this Section 3.4, the Assuming Institution shall repurchase such Asset (and assume such Related Liability) from the Receiver at a price computed so as to achieve the same economic result as would apply
if the Receiver had never purchased such Asset pursuant to this Section 3.4.
14
3.5
Assets Not Purchased by Assuming Institution
.
The Assuming Institution
does not purchase, acquire or assume, or (except as otherwise expressly provided in this Agreement) obtain an option to purchase, acquire or assume under this Agreement:
(a) any financial institution bonds, banker’s blanket bonds, or public liability, fire, extended coverage insurance policy, bank owned
life insurance or any other insurance policy of the Failed Bank, or premium refund, unearned premium derived from cancellation, or any proceeds payable with respect to any of the foregoing;
(b) any interest, right, action, claim, or judgment against (i) any officer, director, employee, accountant, attorney, or any other
Person employed or retained by the Failed Bank or any Subsidiary of the Failed Bank on or prior to Bank Closing arising out of any act or omission of such Person in such capacity, (ii) any underwriter of financial institution bonds,
banker’s blanket bonds or any other insurance policy of the Failed Bank, (iii) any shareholder or holding company of the Failed Bank, or (iv) any other Person whose action or inaction may be related to any loss (exclusive of any loss
resulting from such Person’s failure to pay on a Loan made by the Failed Bank) incurred by the Failed Bank;
provided
,
that
for the purposes hereof, the acts, omissions or other events giving rise to any such claim shall have
occurred on or before Bank Closing, regardless of when any such claim is discovered and regardless of whether any such claim is made with respect to a financial institution bond, banker’s blanket bond, or any other insurance policy of the
Failed Bank in force as of Bank Closing;
(c) prepaid regulatory assessments of the Failed Bank, if any;
(d) legal or equitable interests in tax receivables of the Failed Bank, if any, including any claims arising as a result of the Failed Bank
having entered into any agreement or otherwise being joined with another Person with respect to the filing of tax returns or the payment of taxes;
(e) amounts reflected on the Accounting Records of the Failed Bank as of Bank Closing as a general or specific loss reserve or contingency
account, if any;
(f) leased or owned Bank Premises and leased or owned Furniture and Equipment and Fixtures and data processing equipment
(including hardware and software) located on leased or owned Bank Premises, if any;
provided
,
that
the Assuming Institution does obtain an option under Section 4.6, Section 4.7 or Section 4.8, as the case may be, with
respect thereto;
(g) owned Bank Premises which the Receiver, in its discretion, determines may contain environmentally hazardous
substances;
(h) any “goodwill,” as such term is defined in the instructions to the report of condition prepared by banks
examined by the Corporation in accordance with 12 C.F.R. Section 304.3, and other intangibles;
(i) any criminal restitution or
forfeiture orders issued in favor of the Failed Bank;
15
(j) reserved;
(k) assets essential to the Receiver in accordance with Section 3.6;
(l) the securities listed on the attached Schedule 3.5(l);
(m) prepaid accounts associated with any contract or agreement that the Assuming Institution either does not directly assume pursuant to the
terms of this Agreement nor has an option to assume under Section 4.8; and,
(o) assets listed on Schedule 3.5(o).
3.6
Retention or Repurchase of Assets Essential to Receiver
.
(a) The Receiver may refuse to sell to the Assuming Institution, or the Assuming Institution agrees, at the request of the Receiver set forth
in a written notice to the Assuming Institution, to assign, transfer, convey, and deliver to the Receiver all of the Assuming Institution’s right, title and interest in and to, any Asset or asset essential to the Receiver as determined by the
Receiver in its discretion (together with all Credit Documents evidencing or pertaining thereto), which may include any Asset or asset that the Receiver determines to be:
|
|
(i)
|
made to an officer, director, or other Person engaging in the affairs of the Failed Bank, its Subsidiaries or Affiliates or any related entities of any of the foregoing;
|
|
|
(ii)
|
the subject of any investigation relating to any claim with respect to any item described in Section 3.5(a) or (b), or the subject of, or potentially the subject of, any legal proceedings;
|
|
|
(iii)
|
made to a Person who is an Obligor on a loan owned by the Receiver or the Corporation in its corporate capacity or its capacity as receiver of any institution;
|
|
|
(iv)
|
secured by collateral which also secures any asset owned by the Receiver; or
|
|
|
(v)
|
related to any asset of the Failed Bank not purchased by the Assuming Institution under this Article III or any liability of the Failed Bank not assumed by the Assuming Institution under Article II.
|
(b) Each such Asset or asset purchased by the Receiver shall be purchased at a price equal to the Repurchase Price thereof
less the Related Liability Amount with respect to any Related Liabilities related to such Asset or asset, in each case determined as of the date of the notice provided by the Receiver pursuant to Section 3.6(a). The Receiver shall pay the
Assuming Institution not later than the twentieth (20th) Business Day following receipt of related Credit Documents and Credit Files together with interest on such amount at the Settlement Interest Rate for the period from and including the
date of receipt of such documents to and including the day
16
preceding the day on which payment is made. The Assuming Institution agrees to administer and manage each such Asset or asset in accordance with usual and prudent banking standards and business
practices until each such Asset or asset is purchased by the Receiver. All transfers with respect to Asset or assets under this Section 3.6 shall be made as provided in Section 9.6. The Assuming Institution shall transfer all such Asset or
assets and Related Liabilities to the Receiver without recourse, and shall indemnify the Receiver against any and all claims of any Person claiming by, through or under the Assuming Institution with respect to any such Asset or asset, as provided in
Section 12.4.
ARTICLE IV
ASSUMPTION OF CERTAIN DUTIES AND OBLIGATIONS
The Assuming Institution agrees with the Receiver and the Corporation as follows:
4.1
Continuation of Banking Business
.
For the period commencing the first banking Business Day after Bank Closing and
ending no earlier than the first anniversary of Bank Closing, the Assuming Institution will provide full service banking in the trade area of the Failed Bank. Thereafter, the Assuming Institution may cease providing such banking services in the
trade area of the Failed Bank, provided the Assuming Institution has received all necessary regulatory approvals. At the option of the Assuming Institution, such banking services may be provided at any or all of the Bank Premises, or at other
premises within such trade area. The trade area shall be determined by the Receiver. For the avoidance of doubt, the foregoing shall not restrict the Assuming Institution from opening, closing or selling branches upon receipt of the necessary
regulatory approvals, if the Assuming Institution or its successors continue to provide banking services in the trade area. Assuming Institution will pay to the Receiver, upon the sale of a branch or branches within the year following the date of
this agreement, fifty percent (50%) of any franchise premium in excess of the franchise premium paid by the Assuming Institution with respect to such branch or branches.
17
4.2
Agreement with Respect to Credit Card Business
.
The Assuming Institution
agrees to honor and perform, from and after Bank Closing, all duties and obligations with respect to the Failed Bank’s credit card business, and/or processing related to credit cards, if any, and assumes all outstanding extensions of credit
with respect thereto.
4.3
Agreement with Respect to Safe Deposit Business
.
The Assuming Institution assumes and
agrees to discharge, from and after Bank Closing, in the usual course of conducting a banking business, the duties and obligations of the Failed Bank with respect to all Safe Deposit Boxes, if any, of the Failed Bank and to maintain all of the
necessary facilities for the use of such boxes by the renters thereof during the period for which such boxes have been rented and the rent therefore paid to the Failed Bank, subject to the provisions of the rental agreements between the Failed Bank
and the respective renters of such boxes;
provided
,
that
the Assuming Institution may relocate the Safe Deposit Boxes of the Failed Bank to any office of the Assuming Institution located in the trade area of the Failed Bank. The Safe
Deposit Boxes shall be located and maintained in the trade area of the Failed Bank for a minimum of one year from Bank Closing. The trade area shall be determined by the Receiver. Fees related to the safe deposit business earned prior to the Bank
Closing Date shall be for the benefit of the Receiver and fees earned after the Bank Closing Date shall be for the benefit of the Assuming Institution.
4.4
Agreement with Respect to Safekeeping Business
.
The Receiver transfers, conveys and delivers to the Assuming
Institution and the Assuming Institution accepts all securities and other items, if any, held by the Failed Bank in safekeeping for its customers as of Bank Closing. The Assuming Institution assumes and agrees to honor and discharge, from and after
Bank Closing, the duties and obligations of the Failed Bank with respect to such securities and items held in safekeeping. The Assuming Institution shall be entitled to all rights and benefits heretofore accrued or hereafter accruing with respect
thereto. The Assuming Institution shall provide to the Receiver written verification of all assets held by the Failed Bank for safekeeping within sixty (60) days after Bank Closing. The assets held for safekeeping by the Failed Bank shall be
held and maintained by the Assuming Institution in the trade area of the Failed Bank for a minimum of one year from Bank Closing. At the option of the Assuming Institution, the safekeeping business may be provided at any or all of the Bank Premises,
or at other premises within such trade area. The trade area shall be determined by the Receiver. Fees related to the safekeeping business earned prior to the Bank Closing Date shall be for the benefit of the Receiver and fees earned after the Bank
Closing Date shall be for the benefit of the Assuming Institution.
4.5
Agreement with Respect to Trust Business
.
(a) The Assuming Institution shall, without further transfer, substitution, act or deed, to the full extent permitted by law, succeed to
the rights, obligations, properties, assets, investments, deposits, agreements, and trusts of the Failed Bank under trusts, executorships, administrations, guardianships, and agencies, and other fiduciary or representative capacities, all to the
same extent as though the Assuming Institution had assumed the same from the Failed Bank prior to Bank Closing;
provided
,
that
any liability based on the misfeasance, malfeasance or nonfeasance of the Failed Bank, its directors,
officers, employees or agents with respect to the trust business is not assumed hereunder.
(b) The Assuming Institution shall, to the
full extent permitted by law, succeed to, and be entitled to take and execute, the appointment to all executorships, trusteeships, guardianships and other fiduciary or representative capacities to which the Failed Bank is or may be named in wills,
whenever probated, or to which the Failed Bank is or may be named or appointed by any other instrument.
(c) In the event additional
proceedings of any kind are necessary to accomplish the transfer of such trust business, the Assuming Institution agrees that, at its own expense, it will take whatever action is necessary to accomplish such transfer. The Receiver agrees to use
reasonable efforts to assist the Assuming Institution in accomplishing such transfer.
(d) The Assuming Institution shall provide to the
Receiver written verification of the assets held in connection with the Failed Bank’s trust business within sixty (60) days after Bank Closing.
18
4.6
Agreement with Respect to Bank Premises
.
(a)
Option to Purchase
.
Subject to Section 3.5, the Receiver hereby grants to the Assuming Institution an
exclusive option for the period of ninety (90) days commencing the day after Bank Closing to purchase any or all owned Bank Premises, including all Furniture, Fixtures and Equipment located on the Bank Premises. The Assuming Institution shall
give written notice to the Receiver within the option period of its election to purchase or not to purchase any of the owned Bank Premises. Any purchase of such premises shall be effective as of the date of Bank Closing and such purchase shall be
consummated as soon as practicable thereafter, and in no event later than the Settlement Date. If the Assuming Institution gives notice of its election not to purchase one or more of the owned Bank Premises within seven (7) days of Bank
Closing, then, not withstanding any other provision of this Agreement to the contrary, the Assuming Institution shall not be liable for any of the costs or fees associated with appraisals for such Bank Premises and associated Fixtures, Furniture and
Equipment.
(b)
Option to Lease
.
The Receiver hereby grants to the Assuming Institution an exclusive option for the
period of ninety (90) days commencing the day after Bank Closing to cause the Receiver to assign to the Assuming Institution any or all leases for leased Bank Premises, if any, which have been continuously occupied by the Assuming Institution
from Bank Closing to the date it elects to accept an assignment of the leases with respect thereto to the extent such leases can be assigned;
provided
,
that
the exercise of this option with respect to any lease must be as to all
premises or other property subject to the lease. If an assignment cannot be made of any such leases, the Receiver may, in its discretion, enter into subleases with the Assuming Institution containing the same terms and conditions provided under such
existing leases for such leased Bank Premises or other property. The Assuming Institution shall give notice to the Receiver within the option period of its election to accept or not to accept an assignment of any or all leases (or enter into
subleases or new leases in lieu thereof). The Assuming Institution agrees to assume all leases assigned (or enter into subleases or new leases in lieu thereof) pursuant to this Section 4.6. If the Assuming Institution gives notice of its
election not to accept an assignment of a lease for one or more of the leased Bank Premises within seven (7) days of Bank Closing, then, not withstanding any other provision of this Agreement to the contrary, the Assuming Institution shall not
be liable for any of the costs or fees associated with appraisals for the Fixtures, Furniture and Equipment located on such leased Bank Premises.
(c)
Facilitation
.
The Receiver agrees to facilitate the assumption, assignment or sublease of leases or the negotiation
of new leases by the Assuming Institution;
provided
,
that
neither the Receiver nor the Corporation shall be obligated to engage in litigation, make payments to the Assuming Institution or to any third party in connection with
facilitating any such assumption, assignment, sublease or negotiation or commit to any other obligations to third parties.
(d)
Occupancy
.
The Assuming Institution shall give the Receiver fifteen (15) days’ prior written notice of its intention to vacate prior to vacating any leased Bank Premises with respect to which the Assuming Institution
has not exercised the option provided in Section 4.6(b). Any such notice shall be deemed to terminate the Assuming Institution’s option with respect to such leased Bank Premises.
19
(e)
Occupancy Costs
.
(i) The Assuming Institution agrees to pay to the Receiver, or to appropriate third parties at the direction of the Receiver, during and for
the period of any occupancy by it of (x) owned Bank Premises the market rental value, as determined by the appraiser selected in accordance with the definition of Fair Market Value, and all operating costs, and (y) leased Bank Premises,
all operating costs with respect thereto and to comply with all relevant terms of applicable leases entered into by the Failed Bank, including without limitation the timely payment of all rent. Operating costs include, without limitation all taxes,
fees, charges, utilities, insurance and assessments, to the extent not included in the rental value or rent. If the Assuming Institution elects to purchase any owned Bank Premises in accordance with Section 4.6(a), the amount of any rent paid
(and taxes paid to the Receiver which have not been paid to the taxing authority and for which the Assuming Institution assumes liability) by the Assuming Institution with respect thereto shall be applied as an offset against the purchase price
thereof.
(ii) The Assuming Institution agrees during the period of occupancy by it of owned or leased Bank Premises, to pay to the
Receiver rent for the use of all owned or leased Furniture and Equipment and all owned or leased Fixtures located on such Bank Premises for the period of such occupancy. Rent for such property owned by the Failed Bank shall be the market rental
value thereof, as determined by the Receiver within sixty (60) days after Bank Closing. Rent for such leased property shall be an amount equal to any and all rent and other amounts which the Receiver incurs or accrues as an obligation or is
obligated to pay for such period of occupancy pursuant to all leases and contracts with respect to such property. If the Assuming Institution purchases any owned Furniture and Equipment or owned Fixtures in accordance with Section 4.6(f) or
4.6(h), the amount of any rents paid by the Assuming Institution with respect thereto shall be applied as an offset against the purchase price thereof.
(f)
Certain Requirements as to Furniture, Equipment and Fixtures
.
If the Assuming Institution purchases owned Bank
Premises or accepts an assignment of the lease (or enters into a sublease or a new lease in lieu thereof) for leased Bank Premises as provided in Section 4.6(a) or 4.6(b), or if the Assuming Institution does not exercise such option but within
twelve (12) months following Bank Closing obtains the right to occupy such premises (whether by assignment, lease, sublease, purchase or otherwise), other than in accordance with Section 4.6(a) or (b), the Assuming Institution shall
(i) effective as of the date of Bank Closing, purchase from the Receiver all Furniture and Equipment and Fixtures owned by the Failed Bank at Fair Market Value and located thereon as of Bank Closing, (ii) accept an assignment or a sublease
of the leases or negotiate new leases for all Furniture and Equipment and Fixtures leased by the Failed Bank and located thereon, and (iii) if applicable, accept an assignment or a sublease of any ground lease or negotiate a new ground lease
with respect to any land on which such Bank Premises are located;
provided
,
that
the Receiver shall not have disposed of such Furniture and Equipment and Fixtures or repudiated the leases specified in clause (ii) or (iii).
20
(g)
Vacating Premises
.
(i) If the Assuming Institution elects not to purchase any owned Bank Premises, the notice of such election in accordance with
Section 4.6(a) shall specify the date upon which the Assuming Institution’s occupancy of such premises shall terminate, which date shall not be later than ninety (90) days after the date of the Assuming Institution’s notice not
to exercise such option. The Assuming Institution promptly shall relinquish and release to the Receiver such premises and the Furniture and Equipment and Fixtures located thereon in the same condition as at Bank Closing, normal wear and tear
excepted. By occupying any such premises after the expiration of such ninety (90)-day period, the Assuming Institution shall, at the Receiver’s option, (x) be deemed to have agreed to purchase such Bank Premises, and to assume all leases,
obligations and liabilities with respect to leased Furniture and Equipment and leased Fixtures located thereon and any ground lease with respect to the land on which such premises are located, and (y) be required to purchase all Furniture and
Equipment and Fixtures owned by the Failed Bank and located on such premises as of Bank Closing.
(ii) If the Assuming Institution elects
not to accept an assignment of the lease or sublease any leased Bank Premises, the notice of such election in accordance with Section 4.6(b) shall specify the date upon which the Assuming Institution’s occupancy of such leased Bank
Premises shall terminate, which date shall not be later than ninety (90) days after the date of the Assuming Institution’s notice not to exercise such option. Upon vacating such premises, the Assuming Institution shall relinquish and
release to the Receiver such premises and the Fixtures and the Furniture and Equipment located thereon in the same condition as at Bank Closing, normal wear and tear excepted. By failing to provide notice of its intention to vacate such premises
prior to the expiration of the option period specified in Section 4.6(b), or by occupying such premises after the one hundred eighty (180)-day period specified above in this paragraph (ii), the Assuming Institution shall, at the Receiver’s
option, (x) be deemed to have assumed all leases, obligations and liabilities with respect to such premises (including any ground lease with respect to the land on which premises are located), and leased Furniture and Equipment and leased
Fixtures located thereon in accordance with this Section 4.6 (unless the Receiver previously repudiated any such lease), and (y) be required to purchase all Furniture and Equipment and Fixtures owned by the Failed Bank at Fair Market Value
and located on such premises as of Bank Closing.
(h)
Furniture and Equipment and Certain Other Equipment
.
The
Receiver hereby grants to the Assuming Institution an option to purchase
all
Furniture and Equipment and/or all telecommunications, data processing equipment (including hardware and software) and check processing and similar operating
equipment owned by the Failed Bank at Fair Market Value and located at any leased Bank Premises that the Assuming Institution elects to vacate or which it could have, but did not occupy, pursuant to this Section 4.6;
provided
,
that
, the Assuming Institution shall give the Receiver notice of its election to purchase such property at the time it gives notice of its intention to vacate such Bank Premises or within ten (10) days after Bank Closing for Bank
Premises it could have, but did not, occupy.
21
(i)
Option to Put Bank Premises and Related Fixtures, Furniture and
Equipment
.
(i) For a period of ninety (90) days following Bank Closing, the Assuming Institution shall be entitled to
require the Receiver to purchase any Bank Premises that is owned, directly or indirectly, by an Acquired Subsidiary and the purchase price paid by the Receiver shall be the Fair Market Value of the Bank Premises.
(ii) If the Assuming Institution elects to require the Receiver to purchase any Bank Premises that is owned, directly or indirectly, by an
Acquired Subsidiary, the Assuming Institution shall also have the option, exercisable within the same ninety (90) day time period, to require the Receiver to purchase any Fixtures, Furniture and Equipment that is owned, directly or indirectly,
by an Acquired Subsidiary and which is located on such Bank Premises. The purchase price paid by the Receiver shall be the Fair Market Value of the Fixtures, Furniture and Equipment.
(iii) In the event the Assuming Institution elects to exercise its option under this subparagraph, the Assuming Institution shall pay to the
Receiver occupancy costs in accordance with Section 4.6(e) and shall vacate the Bank Premises in accordance with Section 4.6(g)(i).
(iv) Regardless of whether the Assuming Institution exercises any of its option under this subparagraph, the purchase price for the Acquired
Subsidiary shall be adjusted by the difference between the Fair Market Value of the Bank Premises and Fixtures, Furniture and Equipment and their respective Book Value as reflected of the books and records of the Acquired Subsidiary. Such adjustment
shall be made in accordance with Article VIII of this Agreement.
4.7
Agreement with Respect to Leased Data Processing
Equipment
.
(a) The Receiver hereby grants to the Assuming Institution an exclusive option for the period of ninety
(90) days commencing the day after Bank Closing to accept an assignment from the Receiver of any or all Data Processing Leases to the extent that such Data Processing Leases can be assigned.
(b) The Assuming Institution shall (i) give written notice to the Receiver within the option period specified in
Section 4.7(a) of its intent to accept or decline an assignment or sublease of any or all Data Processing Leases and promptly accept an assignment or sublease of such Data Processing Leases, and (ii) give written notice to the appropriate
lessor(s) that it has accepted an assignment or sublease of any such Data Processing Leases.
(c) The Receiver agrees to facilitate the
assignment or sublease of Data Processing Leases or the negotiation of new leases or license agreements by the Assuming Institution;
provided
,
that
neither the Receiver nor the Corporation shall be obligated to engage in litigation or
make payments to the Assuming Institution or to any third party in connection with facilitating any such assumption, assignment, sublease or negotiation.
22
(d) The Assuming Institution agrees, during its period of use of any property subject to a Data
Processing Lease, to pay to the Receiver or to appropriate third parties at the direction of the Receiver all operating costs with respect thereto and to comply with all relevant terms of the applicable Data Processing Leases entered into by the
Failed Bank, including without limitation the timely payment of all rent, taxes, fees, charges, utilities, insurance and assessments.
(e)
The Assuming Institution shall, not later than fifty (50) days after giving the notice provided in Section 4.7(b), (i) relinquish and release to the Receiver all property subject to the relevant Data Processing Lease, in the same
condition as at Bank Closing, normal wear and tear excepted, or (ii) accept an assignment or a sublease thereof or negotiate a new lease or license agreement under this Section 4.7.
4.8
Agreement with Respect to Certain Existing Agreements
.
(a) Subject to the provisions of Section 4.8(b), with respect to agreements existing as of Bank Closing which provide for the rendering of
services by or to the Failed Bank, within thirty (30) days after Bank Closing, the Assuming Institution shall give the Receiver written notice specifying whether it elects to assume or not to assume each such agreement. Except as may be
otherwise provided in this Article IV, the Assuming Institution agrees to comply with the terms of each such agreement for a period commencing on the day after Bank Closing and ending on: (i) in the case of an agreement that provides for
the rendering of services by the Failed Bank, the date which is ninety (90) days after Bank Closing, and (ii) in the case of an agreement that provides for the rendering of services to the Failed Bank, the date which is thirty
(30) days after the Assuming Institution has given notice to the Receiver of its election not to assume such agreement;
provided
,
that
the Receiver can reasonably make such service agreements available to the Assuming Institution.
The Assuming Institution shall be deemed by the Receiver to have assumed agreements for which no notification is timely given. The Receiver agrees to assign, transfer, convey, and deliver to the Assuming Institution all right, title and interest of
the Receiver, if any, in and to agreements the Assuming Institution assumes hereunder. In the event the Assuming Institution elects not to accept an assignment of any lease (or sublease) or negotiate a new lease for leased Bank Premises under
Section 4.6 and does not otherwise occupy such premises, the provisions of this Section 4.8(a) shall not apply to service agreements related to such premises. The Assuming Institution agrees, during the period it has the use or benefit of
any such agreement, promptly to pay to the Receiver or to appropriate third parties at the direction of the Receiver all operating costs with respect thereto and to comply with all relevant terms of such agreement.
(b) The provisions of Section 4.8(a) regarding the Assuming Institution’s election to assume or not assume certain agreements shall
not apply to (i) agreements pursuant to which the Failed Bank provides mortgage servicing for others or mortgage servicing is provided to the Failed Bank by others, (ii) agreements that are subject to Sections 4.1 through 4.7 and any
insurance policy or bond referred to in Section 3.5(a) or other agreement specified in Section 3.5, and (iii) consulting, management or employment agreements, if any, between the Failed Bank and its employees or other Persons. Except
as otherwise expressly set forth elsewhere in this Agreement, the Assuming Institution does not assume any liabilities or acquire any rights under any of the agreements described in this Section 4.8(b).
23
4.9
Informational Tax Reporting
.
The Assuming Institution agrees to perform
all obligations of the Failed Bank with respect to Federal and State income tax informational reporting related to (i) the Assets and the Liabilities Assumed, (ii) deposit accounts that were closed and loans that were paid off or
collateral obtained with respect thereto prior to Bank Closing, (iii) miscellaneous payments made to vendors of the Failed Bank, and (iv) any other asset or liability of the Failed Bank, including, without limitation, loans not purchased
and Deposits not assumed by the Assuming Institution, as may be required by the Receiver.
4.10
Insurance
.
The
Assuming Institution agrees to obtain insurance coverage effective from and after Bank Closing, including public liability, fire and extended coverage insurance acceptable to the Receiver with respect to owned or leased Bank Premises that it
occupies, and all owned or leased Furniture and Equipment and Fixtures and leased data processing equipment (including hardware and software) located thereon, in the event such insurance coverage is not already in force and effect with respect to
the Assuming Institution as the insured as of Bank Closing. All such insurance shall, where appropriate (as determined by the Receiver), name the Receiver as an additional insured.
4.11
Office Space for Receiver and Corporation
.
For the period commencing on the day following Bank Closing and ending on
the one hundred eightieth (180th) day thereafter, the Assuming Institution agrees to provide to the Receiver and the Corporation, without charge, adequate and suitable office space (including parking facilities and vault space), furniture,
equipment (including photocopying and telecopying machines), email accounts, network access and technology resources (such as shared drive) and utilities (including local telephone service and fax machines) at the Bank Premises occupied by the
Assuming Institution for their use in the discharge of their respective functions with respect to the Failed Bank. In the event the Receiver and the Corporation determine that the space provided is inadequate or unsuitable, the Receiver and the
Corporation may relocate to other quarters having adequate and suitable space and the costs of relocation and any rental and utility costs for the balance of the period of occupancy by the Receiver and the Corporation shall be borne by the Assuming
Institution. Additionally, the Assuming Institution agrees to pay such bills and invoices on behalf of the Receiver and Corporation as the Receiver or Corporation may direct for the period beginning on the date of Bank Closing and ending on
Settlement Date. Assuming Institution shall submit it requests for reimbursement of such expenditures pursuant to Article VIII of this Agreement.
24
4.12
Agreement with Respect to Continuation of Group Health Plan Coverage for Former
Employees of the Failed Bank
.
(a) The Assuming Institution agrees to assist the Receiver, as provided in this Section 4.12,
in offering individuals who were employees or former employees of the Failed Bank, or any of its Subsidiaries, and who, immediately prior to Bank Closing, were receiving, or were eligible to receive, health insurance coverage or health insurance
continuation coverage from the Failed Bank (“Eligible Individuals”), the opportunity to obtain health insurance coverage in the Corporation’s FIA Continuation Coverage Plan which provides for health insurance continuation coverage to
such Eligible Individuals who are qualified beneficiaries of the Failed Bank as defined in Section 607 of the Employee Retirement Income Security Act of 1974, as amended (respectively, “qualified beneficiaries” and “ERISA”).
The Assuming Institution shall consult with the Receiver and not later than five (5) Business Days after Bank Closing shall provide written notice to the Receiver of the number (if available), identity (if available) and addresses (if
available) of the Eligible Individuals who are qualified beneficiaries of the Failed Bank and for whom a “qualifying event” (as defined in Section 603 of ERISA) has occurred and with respect to whom the Failed Bank’s obligations
under Part 6 of Subtitle B of Title I of ERISA have not been satisfied in full, and such other information as the Receiver may reasonably require. The Receiver shall cooperate with the Assuming Institution in order to permit it to prepare such
notice and shall provide to the Assuming Institution such data in its possession as may be reasonably required for purposes of preparing such notice.
(b) The Assuming Institution shall take such further action to assist the Receiver in offering the Eligible Individuals who are qualified
beneficiaries of the Failed Bank the opportunity to obtain health insurance coverage in the Corporation’s FIA Continuation Coverage Plan as the Receiver may direct. All expenses incurred and paid by the Assuming Institution (i) in
connection with the obligations of the Assuming Institution under this Section 4.12, and (ii) in providing health insurance continuation coverage to any Eligible Individuals who are hired by the Assuming Institution and such
employees’ qualified beneficiaries shall be borne by the Assuming Institution.
(c) No later than five (5) Business Days after
Bank Closing, the Assuming Institution shall provide the Receiver with a list of all Failed Bank employees the Assuming Institution will not hire. Unless otherwise agreed, the Assuming Institution pays all salaries and payroll costs for all Failed
Bank Employees until the list is provided to the Receiver. The Assuming Institution shall be responsible for all costs and expenses (i.e. salary, benefits, etc.) associated with all other employees not on that list from and after the date of
delivery of the list to the Receiver. The Assuming Institution shall offer to the Failed Bank employees it retains employment benefits comparable to those the Assuming Institution offers its current employees.
(d) This Section 4.12 is for the sole and exclusive benefit of the parties to this Agreement, and for the benefit of no other Person
(including any former employee of the Failed Bank or any Subsidiary thereof or qualified beneficiary of such former employee). Nothing in this Section 4.12 is intended by the parties, or shall be construed, to give any Person (including any
former employee of the Failed Bank or any Subsidiary thereof or qualified beneficiary of such former employee) other than the Corporation, the Receiver and the Assuming Institution any legal or equitable right, remedy or claim under or with respect
to the provisions of this Section.
25
4.13
Agreement with Respect to Interim Asset Servicing
.
At any time after Bank
Closing, the Receiver may establish on its books an asset pool(s) and may transfer to such asset pool(s) (by means of accounting entries on the books of the Receiver) all or any assets and liabilities of the Failed Bank which are not acquired by the
Assuming Institution, including, without limitation, wholly unfunded Commitments and assets and liabilities which may be acquired, funded or originated by the Receiver subsequent to Bank Closing. The Receiver may remove assets (and liabilities) from
or add assets (and liabilities) to such pool(s) at any time in its discretion. At the option of the Receiver, the Assuming Institution agrees to service, administer, and collect such pool assets in accordance with and for the term set forth in
Exhibit 4.13 “Interim Asset Servicing Arrangement”.
4.14
Reserved
.
4.15
Agreement with Respect to Loss Sharing
.
The Assuming Institution shall be entitled to require reimbursement from the
Receiver for loss sharing on certain loans in accordance with the Single Family Shared-Loss Agreement attached hereto as Exhibit 4.15A and the Commercial Shared-Loss Agreement attached hereto as Exhibit 4.15B, collectively, the
“Shared-Loss Agreements.” The Loans that shall be subject to the Shared-Loss Agreements are identified on the Schedules 4.15A and 4.15B, and Schedule 4.15C, Shared-Loss Securities, attached hereto.
ARTICLE V
DUTIES WITH
RESPECT TO DEPOSITORS OF THE FAILED BANK
5.1
Payment of Checks, Drafts and Orders
.
Subject to Section 9.5, the
Assuming Institution agrees to pay all properly drawn checks, drafts and withdrawal orders of depositors of the Failed Bank presented for payment, whether drawn on the check or draft forms provided by the Failed Bank or by the Assuming Institution,
to the extent that the Deposit balances to the credit of the respective makers or drawers assumed by the Assuming Institution under this Agreement are sufficient to permit the payment thereof, and in all other respects to discharge, in the usual
course of conducting a banking business, the duties and obligations of the Failed Bank with respect to the Deposit balances due and owing to the depositors of the Failed Bank assumed by the Assuming Institution under this Agreement.
5.2
Certain Agreements Related to Deposits
.
Subject to Section 2.2, the Assuming Institution agrees to honor the terms and
conditions of any written escrow or mortgage servicing agreement or other similar agreement relating to a Deposit liability assumed by the Assuming Institution pursuant to this Agreement.
26
5.3
Notice to Depositors
.
(a) Within seven (7) days after Bank Closing, the Assuming Institution shall give (i) notice to depositors of the Failed Bank of its
assumption of the Deposit liabilities of the Failed Bank, and (ii) any notice required under Section 2.2, by mailing to each such depositor a notice with respect to such assumption and by advertising in a newspaper of general circulation
in the county or counties in which the Failed Bank was located. The Assuming Institution agrees that it will obtain prior approval of all such notices and advertisements from counsel for the Receiver and that such notices and advertisements shall
not be mailed or published until such approval is received.
(b) The Assuming Institution shall give notice by mail to depositors of the
Failed Bank concerning the procedures to claim their deposits, which notice shall be provided to the Assuming Institution by the Receiver or the Corporation. Such notice shall be included with the notice to depositors to be mailed by the Assuming
Institution pursuant to Section 5.3(a).
(c) If the Assuming Institution proposes to charge fees different from those charged by the
Failed Bank before it establishes new deposit account relationships with the depositors of the Failed Bank, the Assuming Institution shall give notice by mail of such changed fees to such depositors.
ARTICLE VI
RECORDS
6.1
Transfer of Records
.
(a) In accordance with Sections 2.1 and 3.1, the Receiver assigns, transfers, conveys and delivers to the Assuming Institution, whether
located on Bank Premises occupied or not occupied by the Assuming Institution or at any other location, the following:
(i) all Records
pertaining to the Deposit liabilities of the Failed Bank assumed by the Assuming Institution under this Agreement, including, but not limited to, the following:
(A) signature cards, orders, contracts between the Failed Bank and its depositors and Records of similar character;
(B) passbooks of depositors held by the Failed Bank, deposit slips, cancelled checks and withdrawal orders representing charges to accounts
of depositors; and
(ii) all Records pertaining to the Assets, including, but not limited to, the following:
(A) records of deposit balances carried with other banks, bankers or trust companies;
(B) Loan and collateral records and Credit Files and other documents;
(C) deeds, mortgages, abstracts, surveys, and other instruments or records of title pertaining to real estate or real estate mortgages;
(D) signature cards, agreements and records pertaining to Safe Deposit Boxes, if any; and
(E) records pertaining to the credit card business, trust business or safekeeping business of the Failed Bank, if any.
(b) The Receiver, at its option, may assign and transfer to the Assuming Institution by a single blanket assignment or otherwise, as soon as
practicable after Bank Closing, any other Records not assigned and transferred to the Assuming Institution as provided in this Agreement, whether located on Bank Premises occupied or not occupied by the Assuming Institution or at any other location,
including but not limited to loan disbursement checks, general ledger tickets, official bank checks, proof transactions (including proof tapes) and paid out loan files.
27
6.2
Delivery of Assigned Records
.
The Receiver shall deliver to the Assuming
Institution all Records described in (i) Section 6.1(a) as soon as practicable on or after the date of this Agreement, and (ii) Section 6.1(b) as soon as practicable after making any assignment described therein.
6.3
Preservation of Records
.
The Assuming Institution agrees that it will preserve and maintain for the joint benefit of
the Receiver, the Corporation and the Assuming Institution, all Records of which it has custody for such period as either the Receiver or the Corporation in its discretion may require, until directed otherwise,
in writing
, by the Receiver or
Corporation. The Assuming Institution shall have the primary responsibility to respond to subpoenas, discovery requests, and other similar official inquiries and customer requests for lien releases with respect to the Records of which it has
custody.
6.4
Access to Records; Copies
.
The Assuming Institution agrees to permit the Receiver and the Corporation
access to all Records of which the Assuming Institution has custody, and to use, inspect, make extracts from or request copies of any such Records in the manner and to the extent requested, and to duplicate, in the discretion of the Receiver or the
Corporation, any Record in the form of microfilm or microfiche pertaining to Deposit account relationships;
provided
,
that
in the event that the Failed Bank maintained one or more duplicate copies of such microfilm or microfiche
Records, the Assuming Institution hereby assigns, transfers, and conveys to the Corporation one such duplicate copy of each such Record without cost to the Corporation, and agrees to deliver to the Corporation all Records assigned and transferred to
the Corporation under this Article VI as soon as practicable on or after the date of this Agreement. The party requesting a copy of any Record shall bear the cost (based on standard accepted industry charges to the extent applicable, as
determined by the Receiver) for providing such duplicate Records. A copy of each Record requested shall be provided as soon as practicable by the party having custody thereof.
28
ARTICLE VII
BID; INITIAL PAYMENT
The
Assuming Institution has submitted to the Receiver a Deposit premium bid of 1.5% and an Asset premium (discount) bid of (2.2%) (the “Bid Amount”). The Deposit premium bid will be applied to the total of all Assumed Deposits except for
brokered, CDARS, and any market place or similar subscription services Deposits. The Asset premium (discount) bid will be applied to the purchase price of all Assets acquired. On the Payment Date, the Assuming Bank will pay to the Corporation, or
the Corporation will pay to the Assuming Bank, as the case may be, the Initial Payment, together with interest on such amount (if the Payment Date is not the day following the day of the Bank Closing Date) from and including the day following the
Bank Closing Date to and including the day preceding the Payment Date at the Settlement Interest Rate.
ARTICLE VIII
ADJUSTMENTS
8.1
Pro
Forma Statement
.
The Receiver, as soon as practicable after Bank Closing, in accordance with the best information then available, shall provide to the Assuming Institution a pro forma statement reflecting any adjustments of such
liabilities and assets as may be necessary. Such pro forma statement shall take into account, to the extent possible, (i) liabilities and assets of a nature similar to those contemplated by Section 2.1 or Section 3.1, respectively,
which at Bank Closing were carried in the Failed Bank’s suspense accounts, (ii) accruals as of Bank Closing for all income related to the assets and business of the Failed Bank acquired by the Assuming Institution hereunder, whether or not
such accruals were reflected on the Accounting Records of the Failed Bank in the normal course of its operations, and (iii) adjustments to determine the Book Value of any investment in an Acquired Subsidiary and related accounts on the
“bank only” (unconsolidated) balance sheet of the Failed Bank based on the equity method of accounting, whether or not the Failed Bank used the equity method of accounting for investments in subsidiaries, except that the resulting amount
cannot be less than the Acquired Subsidiary’s recorded equity as of Bank Closing as reflected on the Accounting Records of the Acquired Subsidiary. Any Loan purchased by the Assuming Institution pursuant to Section 3.1 which the Failed
Bank charged off during the period beginning the day after the Bid Valuation Date to the date of Bank Closing shall be deemed not to be charged off for the purposes of the pro forma statement, and the purchase price shall be determined pursuant to
Section 3.2.
29
8.2
Correction of Errors and Omissions; Other Liabilities
.
(a) In the event any bookkeeping omissions or errors are discovered in preparing any pro forma statement or in completing the transfers and
assumptions contemplated hereby, the parties hereto agree to correct such errors and omissions, it being understood that, as far as practicable, all adjustments will be made consistent with the judgments, methods, policies or accounting principles
utilized by the Failed Bank in preparing and maintaining Accounting Records, except that adjustments made pursuant to this Section 8.2(a) are not intended to bring the Accounting Records of the Failed Bank into accordance with generally
accepted accounting principles.
(b) If the Receiver discovers at any time subsequent to the date of this Agreement that any claim exists
against the Failed Bank which is of such a nature that it would have been included in the liabilities assumed under Article II had the existence of such claim or the facts giving rise thereto been known as of Bank Closing, the Receiver may, in
its discretion, at any time, require that such claim be assumed by the Assuming Institution in a manner consistent with the intent of this Agreement. The Receiver will make appropriate adjustments to the pro forma statement provided by the Receiver
to the Assuming Institution pursuant to Section 8.1 as may be necessary.
8.3
Payments
.
The Receiver agrees to
cause to be paid to the Assuming Institution, or the Assuming Institution agrees to pay to the Receiver, as the case may be, on the Settlement Date, a payment in an amount which reflects net adjustments (including any costs, expenses and fees
associated with determinations of value as provided in this Agreement) made pursuant to Section 8.1 or Section 8.2, plus interest as provided in Section 8.4. The Receiver and the Assuming Institution agree to effect on the Settlement
Date any further transfer of assets to or assumption of liabilities or claims by the Assuming Institution as may be necessary in accordance with Section 8.1 or Section 8.2.
8.4
Interest
.
Any amounts paid under Section 8.3 or Section 8.5, shall bear interest for the period from and
including the day following Bank Closing to and including the day preceding the payment at the Settlement Interest Rate.
8.5
Subsequent Adjustments
.
In the event that the Assuming Institution or the Receiver discovers any errors or omissions as contemplated by Section 8.2 or any error with respect to the payment made under Section 8.3 after the
Settlement Date, the Assuming Institution and the Receiver agree to promptly correct any such errors or omissions, make any payments and effect any transfers or assumptions as may be necessary to reflect any such correction plus interest as provided
in Section 8.4.
ARTICLE IX
CONTINUING COOPERATION
30
9.1
General Matters
.
The parties hereto agree that they will, in good faith
and with their best efforts, cooperate with each other to carry out the transactions contemplated by this Agreement and to effect the purposes hereof.
9.2
Additional Title Documents
. The Receiver, the Corporation and the Assuming Institution each agree, at any time, and from
time to time, upon the request of any party hereto, to execute and deliver such additional instruments and documents of conveyance as shall be reasonably necessary to vest in the appropriate party its full legal or equitable title in and to the
property transferred pursuant to this Agreement or to be transferred in accordance herewith. The Assuming Institution shall prepare such instruments and documents of conveyance (in form and substance satisfactory to the Receiver) as shall be
necessary to vest title to the Assets in the Assuming Institution. The Assuming Institution shall be responsible for recording such instruments and documents of conveyance at its own expense.
9.3
Claims and Suits
.
(a) The Receiver shall have the right, in its discretion, to (i) defend or settle any claim or suit against the Assuming Institution with
respect to which the Receiver has indemnified the Assuming Institution in the same manner and to the same extent as provided in Article XII, and (ii) defend or settle any claim or suit against the Assuming Institution with respect to any
Liability Assumed, which claim or suit may result in a loss to the Receiver arising out of or related to this Agreement, or which existed against the Failed Bank on or before Bank Closing. The exercise by the Receiver of any rights under this
Section 9.3(a) shall not release the Assuming Institution with respect to any of its obligations under this Agreement.
(b) In the
event any action at law or in equity shall be instituted by any Person against the Receiver and the Corporation as codefendants with respect to any asset of the Failed Bank retained or acquired pursuant to this Agreement by the Receiver, the
Receiver agrees, at the request of the Corporation, to join with the Corporation in a petition to remove the action to the United States District Court for the proper district. The Receiver agrees to institute, with or without joinder of the
Corporation as coplaintiff, any action with respect to any such retained or acquired asset or any matter connected therewith whenever notice requiring such action shall be given by the Corporation to the Receiver.
9.4
Payment of Deposits
.
In the event any depositor does not accept the obligation of the Assuming Institution to pay any
Deposit liability of the Failed Bank assumed by the Assuming Institution pursuant to this Agreement and asserts a claim against the Receiver for all or any portion of any such Deposit liability, the Assuming Institution agrees on demand to provide
to the Receiver funds sufficient to pay such claim in an amount not in excess of the Deposit liability reflected on the books of the Assuming Institution at the time such claim is made. Upon payment by the Assuming Institution to the Receiver of
such amount, the Assuming Institution shall be discharged from any further obligation under this Agreement to pay to any such depositor the amount of such Deposit liability paid to the Receiver.
9.5
Withheld Payments
.
At any time, the Receiver or the Corporation may, in its discretion, determine that all or any
portion of any deposit balance assumed by the Assuming Institution pursuant to this Agreement does not constitute a “Deposit” (or otherwise, in its discretion, determine that it is the best interest of the Receiver or Corporation to
withhold all or any portion of any deposit), and may direct the Assuming Institution to withhold payment of all or any portion of any such deposit balance. Upon such direction, the Assuming Institution agrees to hold such deposit and not to make any
payment of such deposit balance to or on behalf of the depositor, or to itself, whether by way of transfer, set-off, or otherwise. The Assuming Institution agrees to maintain the “withheld payment” status of any such deposit balance until
directed in writing by the Receiver or the Corporation as to its disposition. At the direction of the Receiver or the Corporation, the Assuming Institution shall return all or any portion of such deposit balance to the Receiver or the Corporation,
as appropriate, and thereupon the Assuming Institution shall be discharged from any further liability to such depositor with respect to such returned deposit balance. If such deposit balance has been paid to the depositor prior to a demand for
return by the Corporation or the Receiver, and payment of such deposit balance had not been previously withheld pursuant to this Section, the Assuming Institution shall not be obligated to return such deposit balance to the Receiver or the
Corporation. The Assuming Institution shall be obligated to reimburse the Corporation or the Receiver, as the case may be, for the amount of any deposit balance or portion thereof paid by the Assuming Institution in contravention of any previous
direction to withhold payment of such deposit balance or return such deposit balance the payment of which was withheld pursuant to this Section.
31
9.6
Proceedings with Respect to Certain Assets and Liabilities
.
(a) In connection with any investigation, proceeding or other matter with respect to any asset or liability of the Failed Bank retained by the
Receiver, or any asset of the Failed Bank acquired by the Receiver pursuant to this Agreement, the Assuming Institution shall cooperate to the extent reasonably required by the Receiver.
(b) In addition to its obligations under Section 6.4, the Assuming Institution shall provide representatives of the Receiver access at
reasonable times and locations without other limitation or qualification to (i) its directors, officers, employees and agents and those of the Subsidiaries acquired by the Assuming Institution, and (ii) its books and records, the books and
records of such Subsidiaries and all Credit Files, and copies thereof. Copies of books, records and Credit Files shall be provided by the Assuming Institution as requested by the Receiver and the costs of duplication thereof shall be borne by the
Receiver.
(c) Not later than ten (10) days after the Put Notice pursuant to Section 3.4 or the date of the notice of transfer
of any Loan by the Assuming Institution to the Receiver pursuant to Section 3.6, the Assuming Institution shall deliver to the Receiver such documents with respect to such Loan as the Receiver may request, including without limitation the
following: (i) all related Credit Documents (other than certificates, notices and other ancillary documents), (ii) a certificate setting forth the principal amount on the date of the transfer and the amount of interest, fees and other
charges then accrued and unpaid thereon, and any restrictions on transfer to which any such Loan is subject, and (iii) all Credit Files, and all documents, microfiche, microfilm and computer records (including but not limited to magnetic tape,
disc storage, card forms and printed copy) maintained by, owned by, or in the possession of the Assuming Institution or any Affiliate of the Assuming Institution relating to the transferred Loan.
32
9.7
Information
. The Assuming Institution promptly shall provide to the Corporation
such other information, including financial statements and computations, relating to the performance of the provisions of this Agreement as the Corporation or the Receiver may request from time to time, and, at the request of the Receiver, make
available employees of the Failed Bank employed or retained by the Assuming Institution to assist in preparation of the pro forma statement pursuant to Section 8.1.
ARTICLE X
CONDITION
PRECEDENT
The obligations of the parties to this Agreement are subject to the Receiver and the Corporation having received at or
before Bank Closing evidence reasonably satisfactory to each of any necessary approval, waiver, or other action by any governmental authority, the board of directors of the Assuming Institution, or other third party, with respect to this Agreement
and the transactions contemplated hereby, the closing of the Failed Bank and the appointment of the Receiver, the chartering of the Assuming Institution, and any agreements, documents, matters or proceedings contemplated hereby or thereby.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES OF THE ASSUMING INSTITUTION
The Assuming Institution represents and warrants to the Corporation and the Receiver as follows:
(a)
Corporate Existence and Authority
. The Assuming Institution (i) is duly organized, validly existing and in good
standing under the laws of its Chartering Authority and has full power and authority to own and operate its properties and to conduct its business as now conducted by it, and (ii) has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The Assuming Institution has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the performance of the transactions contemplated hereby.
(b)
Third Party Consents
. No governmental authority or other third party consents (including but not limited to
approvals, licenses, registrations or declarations) are required in connection with the execution, delivery or performance by the Assuming Institution of this Agreement, other than such consents as have been duly obtained and are in full force and
effect.
(c)
Execution and Enforceability
. This Agreement has been duly executed and delivered by the Assuming
Institution and when this Agreement has been duly authorized, executed and delivered by the Corporation and the Receiver, this Agreement will constitute the legal, valid and binding obligation of the Assuming Institution, enforceable in accordance
with its terms.
(d)
Compliance with Law
.
33
(i) Neither the Assuming Institution nor any of its Subsidiaries is in violation of any statute,
regulation, order, decision, judgment or decree of, or any restriction imposed by, the United States of America, any State, municipality or other political subdivision or any agency of any of the foregoing, or any court or other tribunal having
jurisdiction over the Assuming Institution or any of its Subsidiaries or any assets of any such Person, or any foreign government or agency thereof having such jurisdiction, with respect to the conduct of the business of the Assuming Institution or
of any of its Subsidiaries, or the ownership of the properties of the Assuming Institution or any of its Subsidiaries, which, either individually or in the aggregate with all other such violations, would materially and adversely affect the business,
operations or condition (financial or otherwise) of the Assuming Institution or the ability of the Assuming Institution to perform, satisfy or observe any obligation or condition under this Agreement.
(ii) Neither the execution and delivery nor the performance by the Assuming Institution of this Agreement will result in any violation by the
Assuming Institution of, or be in conflict with, any provision of any applicable law or regulation, or any order, writ or decree of any court or governmental authority.
e)
Representations Remain True
. The Assuming Institution represents and warrants that it has executed and delivered to
the Corporation a Purchaser Eligibility Certification and Confidentiality Agreement and that all information provided and representations made by or on behalf of the Assuming Institution in connection with this Agreement and the transactions
contemplated hereby, including, but not limited to, the Purchaser Eligibility Certification and Confidentiality Agreement (which are affirmed and ratified hereby) are and remain true and correct in all material respects and do not fail to state any
fact required to make the information contained therein not misleading.
ARTICLE XII
INDEMNIFICATION
12.1
Indemnification of Indemnitees
. From and after Bank Closing and subject to the limitations set forth in this Section and Section 12.6 and compliance by the Indemnitees with Section 12.2, the Receiver agrees to indemnify and hold
harmless the Indemnitees against any and all costs, losses, liabilities, expenses (including attorneys’ fees) incurred prior to the assumption of defense by the Receiver pursuant to paragraph (d) of Section 12.2, judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with claims against any Indemnitee based on liabilities of the Failed Bank that are not assumed by the Assuming Institution pursuant to this Agreement or subsequent to the
execution hereof by the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution for which indemnification is provided hereunder in (a) of this Section 12.1, subject to certain exclusions as provided in (b) of
this Section 12.1:
(a)
(1) claims based on the rights of any shareholder or former shareholder as such of (x) the Failed Bank, or (y) any Subsidiary or
Affiliate of the Failed Bank;
34
(2) claims based on the rights of any creditor as such of the Failed Bank, or any creditor as
such of any director, officer, employee or agent of the Failed Bank, with respect to any indebtedness or other obligation of the Failed Bank arising prior to Bank Closing;
(3) claims based on the rights of any present or former director, officer, employee or agent as such of the Failed Bank or of any Subsidiary
or Affiliate of the Failed Bank;
(4) claims based on any action or inaction prior to Bank Closing of the Failed Bank, its directors,
officers, employees or agents as such, or any Subsidiary or Affiliate of the Failed Bank, or the directors, officers, employees or agents as such of such Subsidiary or Affiliate;
(5) claims based on any malfeasance, misfeasance or nonfeasance of the Failed Bank, its directors, officers, employees or agents with respect
to the trust business of the Failed Bank, if any;
(6) claims based on any failure or alleged failure (not in violation of law) by the
Assuming Institution to continue to perform any service or activity previously performed by the Failed Bank which the Assuming Institution is not required to perform pursuant to this Agreement or which arise under any contract to which the Failed
Bank was a party which the Assuming Institution elected not to assume in accordance with this Agreement and which neither the Assuming Institution nor any Subsidiary or Affiliate of the Assuming Institution has assumed subsequent to the execution
hereof;
(7) claims arising from any action or inaction of any Indemnitee, including for purposes of this Section 12.1(a)(7) the
former officers or employees of the Failed Bank or of any Subsidiary or Affiliate of the Failed Bank that is taken upon the specific written direction of the Corporation or the Receiver,
other
than
any action or inaction taken in a
manner constituting bad faith, gross negligence or willful misconduct; and
(8) claims based on the rights of any depositor of the Failed
Bank whose deposit has been accorded “withheld payment” status and/or returned to the Receiver or Corporation in accordance with Section 9.5 and/or has become an “unclaimed deposit” or has been returned to the Corporation or
the Receiver in accordance with Section 2.3;
(b)
provided
,
that
, with respect to this Agreement, except for paragraphs
(7) and (8) of Section 12.1(a), no indemnification will be provided under this Agreement for any:
(1) judgment or fine
against, or any amount paid in settlement (without the written approval of the Receiver) by, any Indemnitee in connection with any action that seeks damages against any Indemnitee (a “counterclaim”) arising with respect to any Asset and
based on any action or inaction of either the Failed Bank, its directors, officers, employees or agents as such prior to Bank Closing, unless any such judgment, fine or amount paid in settlement exceeds the greater of (i) the Repurchase Price
of such Asset, or (ii) the monetary recovery sought on such Asset by the Assuming Institution in the cause of action from which the counterclaim arises; and in such event the Receiver will provide indemnification only in the amount of such
excess; and no indemnification will be provided for any costs or expenses other than any costs or expenses (including attorneys’ fees) which, in the determination of the Receiver, have been actually and reasonably incurred by such Indemnitee in
connection with the defense of any such counterclaim; and it is expressly agreed that the Receiver reserves the right to intervene, in its discretion, on its behalf and/or on behalf of the Receiver, in the defense of any such counterclaim;
35
(2) claims with respect to any liability or obligation of the Failed Bank that is expressly
assumed by the Assuming Institution pursuant to this Agreement or subsequent to the execution hereof by the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution;
(3) claims with respect to any liability of the Failed Bank to any present or former employee as such of the Failed Bank or of any Subsidiary
or Affiliate of the Failed Bank, which liability is expressly assumed by the Assuming Institution pursuant to this Agreement or subsequent to the execution hereof by the Assuming Institution or any Subsidiary or Affiliate of the Assuming
Institution;
(4) claims based on the failure of any Indemnitee to seek recovery of damages from the Receiver for any claims based upon
any action or inaction of the Failed Bank, its directors, officers, employees or agents as fiduciary, agent or custodian prior to Bank Closing;
(5) claims based on any violation or alleged violation by any Indemnitee of the antitrust, branching, banking or bank holding company or
securities laws of the United States of America or any State thereof;
(6) claims based on the rights of any present or former creditor,
customer, or supplier as such of the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution;
(7) claims based on
the rights of any present or former shareholder as such of the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution regardless of whether any such present or former shareholder is also a present or former shareholder of
the Failed Bank;
(8) claims, if the Receiver determines that the effect of providing such indemnification would be to (i) expand or
alter the provisions of any warranty or disclaimer thereof provided in Section 3.3 or any other provision of this Agreement, or (ii) create any warranty not expressly provided under this Agreement;
(9) claims which could have been enforced against any Indemnitee had the Assuming Institution not entered into this Agreement;
(10) claims based on any liability for taxes or fees assessed with respect to the consummation of the transactions contemplated by this
Agreement, including without limitation any subsequent transfer of any Assets or Liabilities Assumed to any Subsidiary or Affiliate of the Assuming Institution;
(11) except as expressly provided in this Article XII, claims based on any action or inaction of any Indemnitee, and nothing in this
Agreement shall be construed to provide indemnification for (i) the Failed Bank, (ii) any Subsidiary or Affiliate of the Failed Bank, or (iii) any present or former director, officer, employee or agent of the Failed Bank or its
Subsidiaries or Affiliates;
provided
,
that
the Receiver, in its discretion, may provide indemnification hereunder for any present or former director, officer, employee or agent of the Failed Bank or its Subsidiaries or Affiliates who
is also or becomes a director, officer, employee or agent of the Assuming Institution or its Subsidiaries or Affiliates;
(12) claims or
actions which constitute a breach by the Assuming Institution of the representations and warranties contained in Article XI;
(13)
claims arising out of or relating to the condition of or generated by an Asset arising from or relating to the presence, storage or release of any hazardous or toxic substance, or any pollutant or contaminant, or condition of such Asset which
violate any applicable Federal, State or local law or regulation concerning environmental protection; and
(14) claims based on, related
to or arising from any asset, including a loan, acquired or liability assumed by the Assuming Institution, other than pursuant to this Agreement.
36
12.2
Conditions Precedent to Indemnification
. It shall be a condition precedent to
the obligation of the Receiver to indemnify any Person pursuant to this Article XII that such Person shall, with respect to any claim made or threatened against such Person for which such Person is or may be entitled to indemnification
hereunder:
(a) give written notice to the Regional Counsel (Litigation Branch) of the Corporation in the manner and at the address
provided in Section 13.7 of such claim as soon as practicable after such claim is made or threatened;
provided
,
that
notice must be given on or before the date which is six (6) years from the date of this Agreement;
(b) provide to the Receiver such information and cooperation with respect to such claim as the Receiver may reasonably require;
(c) cooperate and take all steps, as the Receiver may reasonably require, to preserve and protect any defense to such claim;
(d) in the event suit is brought with respect to such claim, upon reasonable prior notice, afford to the Receiver the right, which the
Receiver may exercise in its sole discretion, to conduct the investigation, control the defense and effect settlement of such claim, including without limitation the right to designate counsel and to control all negotiations, litigation,
arbitration, settlements, compromises and appeals of any such claim, all of which shall be at the expense of the Receiver;
provided
,
that
the Receiver shall have notified the Person claiming indemnification in writing that such claim
is a claim with respect to which the Person claiming indemnification is entitled to indemnification under this Article XII;
37
(e) not incur any costs or expenses in connection with any response or suit with respect to such
claim, unless such costs or expenses were incurred upon the written direction of the Receiver;
provided
,
that
the Receiver shall not be obligated to reimburse the amount of any such costs or expenses unless such costs or expenses were
incurred upon the written direction of the Receiver;
(f) not release or settle such claim or make any payment or admission with respect
thereto, unless the Receiver consents in writing thereto, which consent shall not be unreasonably withheld;
provided
,
that
the Receiver shall not be obligated to reimburse the amount of any such settlement or payment unless such
settlement or payment was effected upon the written direction of the Receiver; and
(g) take reasonable action as the Receiver may request
in writing as necessary to preserve, protect or enforce the rights of the indemnified Person against any Primary Indemnitor.
12.3
No Additional Warranty
. Nothing in this Article XII shall be construed or deemed to (i) expand or otherwise alter any warranty or disclaimer thereof provided under Section 3.3 or any other provision of this Agreement with
respect to, among other matters, the title, value, collectibility, genuineness, enforceability or condition of any (x) Asset, or (y) asset of the Failed Bank purchased by the Assuming Institution subsequent to the execution of this
Agreement by the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution, or (ii) create any warranty not expressly provided under this Agreement with respect thereto.
12.4
Indemnification of Receiver and Corporation
.
From and after Bank Closing, the Assuming Institution agrees to
indemnify and hold harmless the Corporation and the Receiver and their respective directors, officers, employees and agents from and against any and all costs, losses, liabilities, expenses (including attorneys’ fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with any of the following:
(a) claims based on any and all
liabilities or obligations of the Failed Bank assumed by the Assuming Institution pursuant to this Agreement or subsequent to the execution hereof by the Assuming Institution or any Subsidiary or Affiliate of the Assuming Institution, whether or not
any such liabilities subsequently are sold and/or transferred, other than any claim based upon any action or inaction of any Indemnitee as provided in paragraph (7) or (8) of Section 12.1(a); and
(b) claims based on any act or omission of any Indemnitee (including but not limited to claims of any Person claiming any right or title by or
through the Assuming Institution with respect to Assets transferred to the Receiver pursuant to Section 3.4 or 3.6), other than any action or inaction of any Indemnitee as provided in paragraph (7) or (8) of Section 12.1(a).
12.5
Obligations Supplemental
. The obligations of the Receiver, and the Corporation as guarantor in accordance with
Section 12.7, to provide indemnification under this Article XII are to supplement any amount payable by any Primary Indemnitor to the Person indemnified under this Article XII. Consistent with that intent, the Receiver agrees only to
make payments pursuant to such indemnification to the extent not payable by a Primary Indemnitor. If the aggregate amount of payments by the Receiver, or the Corporation as guarantor in accordance with Section 12.7, and all Primary Indemnitors
with respect to any item of indemnification under this Article XII exceeds the amount payable with respect to such item, such Person being indemnified shall notify the Receiver thereof and, upon the request of the Receiver, shall promptly pay
to the Receiver, or the Corporation as appropriate, the amount of the Receiver’s (or Corporation’s) payments to the extent of such excess.
38
12.6
Criminal Claims
. Notwithstanding any provision of this Article XII to the
contrary, in the event that any Person being indemnified under this Article XII shall become involved in any criminal action, suit or proceeding, whether judicial, administrative or investigative, the Receiver shall have no obligation hereunder
to indemnify such Person for liability with respect to any criminal act or to the extent any costs or expenses are attributable to the defense against the allegation of any criminal act, unless (i) the Person is successful on the merits or
otherwise in the defense against any such action, suit or proceeding, or (ii) such action, suit or proceeding is terminated without the imposition of liability on such Person.
12.7
Limited Guaranty of the Corporation
.
The Corporation hereby guarantees performance of the Receiver’s obligation to
indemnify the Assuming Institution as set forth in this Article XII. It is a condition to the Corporation’s obligation hereunder that the Assuming Institution shall comply in all respects with the applicable provisions of this
Article XII. The Corporation shall be liable hereunder only for such amounts, if any, as the Receiver is obligated to pay under the terms of this Article XII but shall fail to pay. Except as otherwise provided above in this
Section 12.7, nothing in this Article XII is intended or shall be construed to create any liability or obligation on the part of the Corporation, the United States of America or any department or agency thereof under or with respect to
this Article XII, or any provision hereof, it being the intention of the parties hereto that the obligations undertaken by the Receiver under this Article XII are the sole and exclusive responsibility of the Receiver and no other Person or
entity.
12.8
Subrogation
.
Upon payment by the Receiver, or the Corporation as guarantor in accordance with
Section 12.7, to any Indemnitee for any claims indemnified by the Receiver under this Article XII, the Receiver, or the Corporation as appropriate, shall become subrogated to all rights of the Indemnitee against any other Person to the
extent of such payment.
ARTICLE XIII
MISCELLANEOUS
13.1
Entire Agreement
. This Agreement, the Single Family Shared-Loss Agreement, and the Commercial Shared-Loss Agreement, including the Schedules and Exhibits thereto, embodies the entire agreement of the parties hereto in relation to the
subject matter herein and supersedes all prior understandings or agreements, oral or written, between the parties.
39
13.2
Headings
. The headings and subheadings of the Table of Contents, Articles and
Sections contained in this Agreement, except the terms identified for definition in Article I and elsewhere in this Agreement, are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any
provision hereof.
13.3
Counterparts
. This Agreement may be executed in any number of counterparts and by the duly
authorized representative of a different party hereto on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement.
13.4
GOVERNING LAW
. THIS AGREEMENT, THE SINGLE FAMILY SHARED-LOSS AGREEMENT, AND THE COMMERCIAL SHARED-LOSS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE FEDERAL LAW OF THE UNITED STATES OF AMERICA, AND IN THE ABSENCE OF CONTROLLING FEDERAL LAW, IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH
THE MAIN OFFICE OF THE FAILED BANK IS LOCATED.
13.5
Successors
. All terms and conditions of this Agreement shall be binding
on the successors and assigns of the Receiver, the Corporation and the Assuming Institution. Except as otherwise specifically provided in this Agreement, nothing expressed or referred to in this Agreement is intended or shall be construed to give
any Person other than the Receiver, the Corporation and the Assuming Institution any legal or equitable right, remedy or claim under or with respect to this Agreement or any provisions contained herein, it being the intention of the parties hereto
that this Agreement, the obligations and statements of responsibilities hereunder, and all other conditions and provisions hereof are for the sole and exclusive benefit of the Receiver, the Corporation and the Assuming Institution and for the
benefit of no other Person.
13.6
Modification; Assignment
. No amendment or other modification, rescission, release, or
assignment of any part of this Agreement, the Single Family Shared-Loss Agreement, and the Commercial Shared-Loss Agreement shall be effective except pursuant to a written agreement subscribed by the duly authorized representatives of the parties
hereto.
13.7
Notice
. Any notice, request, demand, consent, approval or other communication to any party hereto shall be
effective when received and shall be given
in writing
, and delivered in person against receipt therefore, or sent by certified mail, postage prepaid, courier service, telex, facsimile transmission or email to such party (with copies as
indicated below) at its address set forth below or at such other address as it shall hereafter furnish in writing to the other parties. All such notices and other communications shall be deemed given on the date received by the addressee.
[Continued Next Page]
40
Assuming Institution
Great Western Bank
Level 4, 100 North Phillips Avenue
Sioux Falls, SD 57104
|
|
|
|
|
Telephone:
|
|
[redacted]
|
|
|
|
[redacted]
|
|
Facsimile:
|
|
[redacted]
|
|
|
|
|
Attention:
|
|
Tim Kaiser
|
|
|
|
|
with a copy to:
|
|
Kevin Roadnight
|
Receiver and Corporation
Federal Deposit Insurance Corporation,
Receiver of
TIERONE
BANK
1601 Bryan Street, Suite 1700
Dallas, Texas 75201
|
|
|
|
|
Attention:
|
|
Settlement Manager
|
and with respect to notice under Article XII:
Federal Deposit Insurance Corporation
Receiver of
TIERONE BANK
1601 Bryan
Street, Suite 1700
Dallas, Texas 75201
|
|
|
|
|
Attention:
|
|
Regional Counsel (Litigation Branch)
|
13.8
Manner of Payment
. All payments due under this Agreement shall be in lawful money of the
United States of America in immediately available funds as each party hereto may specify to the other parties;
provided
,
that
in the event the Receiver or the Corporation is obligated to make any payment hereunder in the amount of
$25,000.00 or less, such payment may be made by check.
13.9
Costs, Fees and Expenses
. Except as otherwise specifically
provided herein, each party hereto agrees to pay all costs, fees and expenses which it has incurred in connection with or incidental to the matters contained in this Agreement, including without limitation any fees and disbursements to its
accountants and counsel;
provided
,
that
the Assuming Institution shall pay all fees, costs and expenses (other than attorneys’ fees incurred by the Receiver) incurred in connection with the transfer to it of any Assets or
Liabilities Assumed hereunder or in accordance herewith.
41
13.10
Waiver
. Each of the Receiver, the Corporation and the Assuming Institution
may waive its respective rights, powers or privileges under this Agreement;
provided
,
that
such waiver shall be in writing;
and
further
provided
, that no failure or delay on the part of the Receiver, the
Corporation or the Assuming Institution to exercise any right, power or privilege under this Agreement shall operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right, power or privilege by the Receiver, the Corporation, or the Assuming Institution under this Agreement, nor will any such waiver operate or be construed as a future waiver of such
right, power or privilege under this Agreement.
13.11
Severability
. If any provision of this Agreement is declared invalid
or unenforceable, then, to the extent possible, all of the remaining provisions of this Agreement shall remain in full force and effect and shall be binding upon the parties hereto.
13.12
Term of Agreement
. This Agreement shall continue in full force and effect until the tenth (10th) anniversary of Bank
Closing;
provided
,
that
the provisions of Section 6.3 and 6.4 shall survive the expiration of the term of this Agreement; and
provided
further
, that the receivership of the Failed Bank may be terminated prior to the
expiration of the term of this Agreement, and in such event, the guaranty of the Corporation, as provided in and in accordance with the provisions of Section 12.7 shall be in effect for the remainder of the term of this Agreement. Expiration of
the term of this Agreement shall not affect any claim or liability of any party with respect to any (i) amount which is owing at the time of such expiration, regardless of when such amount becomes payable, and (ii) breach of this Agreement
occurring prior to such expiration, regardless of when such breach is discovered.
13.13
Survival of Covenants,
Etc
.
The covenants, representations, and warranties in this Agreement shall survive the execution of this Agreement and the consummation of the transactions contemplated hereunder.
[Signature Page Follows]
42
IN WITNESS WHEREOF
, the parties hereto have caused this Agreement to be executed by their
duly authorized representatives as of the date first above written.
|
|
|
|
|
FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER OF TIERONE BANK
LINCOLN, NEBRASKA
|
|
|
|
|
BY:
|
|
/s/ Daniel M. Bell
|
|
NAME:
|
|
Daniel M. Bell
|
|
TITLE:
|
|
Receiver In Charge
|
|
|
|
|
|
FEDERAL DEPOSIT INSURANCE CORPORATION
|
|
|
|
|
BY:
|
|
/s/ Daniel M. Bell
|
|
NAME:
|
|
Daniel M. Bell
|
|
TITLE:
|
|
Attorney In Fact
|
|
|
|
|
|
GREAT WESTERN BANK
|
|
|
|
|
BY:
|
|
/s/ Jeff Erickson
|
|
NAME:
|
|
Jeff Erickson
|
|
TITLE:
|
|
President & CEO
|
43
SCHEDULE 2.1 - Certain Liabilities Assumed by the Assuming Institution
[To be provided]
44
SCHEDULE 2.1(a) – Excluded Deposit Liability Accounts
Accounts Excluded from P&A Transaction
TierOne Bank
Lincoln,
NE
TierOne Bank did not report any deposits associated with the Depository Organization (DO) Cede & Co as Nominee for DTC as of
April 7, 2010. If such funds exist at bank closing, they will not pass to the Assuming Institution and will be excluded from the transaction as described in section 2.1 of the P&A Agreement. A schedule will be updated post-closing with data
as of the actual bank closing date if such DO accounts are determined to exist at that time.
45
SCHEDULE 3.1 - Certain Assets Purchased
SEE ATTACHED LIST
THE LIST(S)
ATTACHED TO THIS SCHEDULE (OR SUBSCHEDULE(S)) AND THE INFORMATION THEREIN, IS AS OF THE DATE OF THE MOST RECENT PERTINENT DATA MADE AVAILABLE TO THE ASSUMING INSTITUTION AS PART OF THE INFORMATION PACKAGE. IT WILL BE ADJUSTED TO REFLECT THE
COMPOSITION AND BOOK VALUE OF THE LOANS AND ASSETS AS OF THE DATE OF BANK CLOSING. THE LIST(S) MAY NOT INCLUDE ALL LOANS AND ASSETS (E.G., CHARGED OFF LOANS). THE LIST(S) MAY BE REPLACED WITH A MORE ACCURATE LIST POST CLOSING.
[To be provided]
46
SCHEDULE 3.2 - Purchase Price of Assets or assets
|
|
|
|
|
|
|
(a)
|
|
cash and receivables from depository institutions, including cash items in the process of collection, plus interest thereon:
|
|
Book Value
|
|
|
|
|
|
(b)
|
|
securities (exclusive of the capital stock of Acquired Subsidiaries, Shared-Loss Securities, FRB and FHLB stock), plus interest thereon:
|
|
As provided in Section 3.2(b)
|
|
|
|
|
|
(c)
|
|
federal funds sold and repurchase agreements, if any, including interest thereon:
|
|
Book Value
|
|
|
|
|
|
(d)
|
|
Loans:
|
|
Book Value
|
|
|
|
|
|
(e)
|
|
credit card business, if any, including all outstanding extensions of credit and offensive litigation, but excluding any class action lawsuits related to the credit card business:
|
|
Book Value
|
|
|
|
|
|
(f)
|
|
Safe Deposit Boxes and related business, safekeeping business and trust business, if any:
|
|
Book Value
|
|
|
|
|
|
(g)
|
|
Records and other documents:
|
|
Book Value
|
|
|
|
|
|
(h)
|
|
Other Real Estate
|
|
Book Value
|
|
|
|
|
|
(i)
|
|
boats, motor vehicles, aircraft, trailers, fire arms, repossessed collateral
|
|
Book Value
|
|
|
|
|
|
(j)
|
|
capital stock of any Acquired Subsidiaries and FRB and FHLB stock:
|
|
Book Value
|
|
|
|
|
|
(k)
|
|
amounts owed to the Failed Bank by any Acquired Subsidiary:
|
|
Book Value
|
|
|
|
|
|
(l)
|
|
assets securing Deposits of public money, to the extent not otherwise purchased hereunder:
|
|
Book Value
|
|
|
|
|
|
(m)
|
|
Overdrafts of customers:
|
|
Book Value
|
|
|
|
|
|
(n)
|
|
rights, if any, with respect to Qualified Financial Contracts.
|
|
As provided in Section 3.2(c)
|
47
|
|
|
|
|
|
|
|
|
|
|
(o)
|
|
rights of the Failed Bank to provide mortgage servicing for others and to have mortgage servicing provided to the Failed Bank by others and related contracts.
|
|
Book Value
|
|
|
|
|
|
(p)
|
|
Shared-Loss Securities
|
|
Book Value
|
|
|
|
|
assets subject to an option to purchase:
|
|
|
|
|
|
|
|
(a)
|
|
Bank Premises:
|
|
Fair Market Value
|
|
|
|
|
|
(b)
|
|
Furniture and Equipment:
|
|
Fair Market Value
|
|
|
|
|
|
(c)
|
|
Fixtures:
|
|
Fair Market Value
|
|
|
|
|
|
(d)
|
|
Other Equipment:
|
|
Fair Market Value
|
48
SCHEDULE 3.5(l) – Excluded Securities
TIERONE BANK, LINCOLN, NE (9138)
|
|
|
|
|
|
|
|
|
PASS/
NOT
OFFERED
|
|
CUSIP
|
|
DESCRIPTION
|
|
|
|
|
|
|
|
[redacted]
|
|
[redacted]
|
|
[redacted]
|
49
SCHEDULE 3.5(o) – Excluded Assets
GL ACCOUNTS
[redacted]
50
SCHEDULE 4.15A
LOANS SUBJECT TO LOSS SHARING UNDER THE
SINGLE FAMILY SHARED-LOSS AGREEMENT
[To be provided]
51
SCHEDULE 4.15B
LOANS SUBJECT TO LOSS SHARING UNDER THE
COMMERCIAL SHARED-LOSS AGREEMENT
[To be provided]
52
SCHEDULE 4.15C
SHARED-LOSS SECURITIES
[NONE]
53
SCHEDULE 4.15D
LOANS EXCLUDED FROM LOSS SHARING UNDER THE
COMMERCIAL FAMILY SHARED-LOSS AGREEMENT
Consumer Loans Sold to Assuming Institution Without Loss Share - as of 4-7-10
This group of 8,220 loans with Current Balance totaling $44.677MM was provided to Bidders pre-bid date. A full and complete electronic list of these loans
will be made available to the AI at P&A execution.
AND
A group of 1,400 performing and non-performing agricultural loans with Current Balance totaling $127.5 MM was provided to bidders pre-bid date. A full and
complete electronic list of these loans will be made available to the AI at P&A execution – “Agricultural Loans – No LS Coverage –
4-7-10.xls(10MB)”
54
SCHEDULE 7 -Accounts Excluded from Calculation of Deposit Franchise Bid Premium
TierOne Bank
Lincoln,
NE
The accounts identified below will pass to the Assuming Institution (unless otherwise noted in subsequent amendments to the P&A agreement).
When calculating the premium to be paid on Assumed Deposits in a P&A transaction, the FDIC will exclude the following categories of deposit accounts:
|
|
|
|
|
|
|
|
|
Category
|
|
Description
|
|
Amount
|
|
|
I
|
|
Non- DO Brokered Deposits
|
|
$
|
9,118,770.97
|
|
|
II
|
|
CDARS
|
|
$
|
0
|
|
|
III
|
|
Market Place Deposits (e.g. QuickRate/Bank Internet CD’s)
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits excluded from Calculation of premium
|
|
$
|
9,118,770.97
|
|
|
|
|
|
|
|
|
|
Category Description
I Brokered Deposits
Brokered deposit accounts are
accounts for which the “depositor of record” is an agent, nominee, or custodian who deposits funds for a principal or principals to whom “pass-through” deposit insurance coverage may be extended. The FDIC separates brokered
deposit accounts into 2 categories: 1) Depository Organization (DO) Brokered Deposits and 2) Non-Depository Organization (Non-DO) Brokered Deposits. This distinction is made by the FDIC to facilitate our role as Receiver and Insurer. These terms
will not appear on other “brokered deposit” reports generated by the institution.
Non-DO Brokered Deposits pass to the Assuming Bank, but are
excluded from Assumed Deposits when the deposit premium is calculated. Please see the attached report for a detailed list of these accounts. This list will be updated post-closing with balances as of the bank closing date.
DO Brokered Deposits (Cede & Co as Nominee for DTC), are typically excluded from Assumed Deposits in the P&A transaction
II CDARS
CDARS deposits pass to the Assuming Bank, but
are excluded from Assumed Deposits when the deposit premium is calculated.
TierOne Bank reportedly did not participate in the CDARS program as of the
date of the deposit download and did not report CDARS deposits.
III Market Place Deposits
“Market Place Deposits” is a description given to deposits that may have been solicited via a money desk, internet subscription service (for example,
QwickRate), or similar programs.
55
TierOne Bank did not report QwickRate or similar deposits as identified above. A list will be updated
post-closing with balances, if any exist, as of the bank closing date.
The accounts identified below will pass to the Assuming Institution (unless
otherwise noted). When calculating the premium to be paid on Assumed Deposits in a P&A transaction, the FDIC will exclude the following categories of deposit accounts:
SUMMARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
File Tab Name
|
|
Number of Rows
|
|
|
Sum of Current Balance
|
|
|
Sum of Accrued Interest
|
|
|
NON-DO BROKERED CDS
|
|
|
6
|
|
|
$
|
9,118,770.970
|
|
|
$
|
1,349.008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6
|
|
|
$
|
9,118,770.970
|
|
|
$
|
1,349.008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
EXHIBIT 2.3A
FINAL NOTICE LETTER
FINAL LEGAL NOTICE
Claiming Requirements for Deposits
Under 12 U.S.C. 1822(e)
[Date]
[Name of Unclaimed Depositor]
[Address of
Unclaimed Depositor]
[Anytown, USA]
Subject:
[XXXXX – Name of Bank
City,
State]
– In Receivership
Dear
[Sir/Madam]
:
As you may know, on
[Date: Closing Date]
, the
[Name of Bank (“The Bank”)]
was closed and the Federal Deposit
Insurance Corporation (“FDIC”) transferred
[The Bank’s]
accounts to
[Name of Acquiring Institution].
According to federal law under 12 U.S.C., 1822(e), on
[Date: eighteen months from the Closing Date]
,
[Name of Acquiring
Institution]
must transfer the funds in your account(s) back to the FDIC if you have not claimed your account(s) with
[Name of Acquiring Institution].
Based on the records recently supplied to us by
[Name of Acquiring Institution]
,
your account(s) currently fall into this category.
This letter is your formal Legal Notice that you have until
[Date:
eighteen months from the Closing Date]
, to claim or arrange to continue your account(s) with
[Name of Acquiring Institution].
There are several ways that you can claim your account(s) at
[Name of Acquiring Institution]
. It is only
necessary for you to take any one of the following actions in order for your account(s) at
[Name of Acquiring Institution]
to be deemed claimed. In addition, if you have more than one account, your claim to one account will automatically
claim all accounts:
|
1.
|
Write to
[Name of Acquiring Institution]
and notify them that you wish to keep your account(s) active with them. Please be sure to include the name of the account(s), the account number(s), the signature of an
authorized signer on the account(s), name, and address.
[Name of Acquiring Institution]
address is:
|
[123 Main
Street
Anytown, USA]
57
|
2.
|
Execute a new signature card on your account(s), enter into a new deposit agreement with
[Name of Acquiring Institution],
change the ownership on your account(s), or renegotiate the terms of your certificate of
deposit account(s) (if any).
|
|
3.
|
Provide
[Name of Acquiring Institution]
with a change of address form.
|
|
4.
|
Make a deposit to or withdrawal from your account(s). This includes writing a check on any account or having an automatic direct deposit credited to or an automatic withdrawal debited from an account.
|
If you do not want to continue your account(s) with
[Name of Acquiring Institution]
for any reason, you can withdraw your funds
and close your account(s). Withdrawing funds from one or more of your account(s) satisfies the federal law claiming requirement. If you have time deposits, such as certificates of deposit,
[Name of Acquiring Institution]
can advise you how to
withdraw them without being charged an interest penalty for early withdrawal.
If you do not claim ownership of your
account(s) at
[Name of Acquiring Institution by Date: eighteen months from the Closing Date]
federal law requires
[Name of Acquiring Institution]
to return your deposits to the FDIC, which will deliver them as unclaimed property to the
State indicated in your address in the Failed Institution’s records. If your address is outside of the United States, the FDIC will deliver the deposits to the State in which the Failed Institution had its main office. 12 U.S.C.
§ 1822(e). If the State accepts custody of your deposits, you will have 10 years from the date of delivery to claim your deposits from the State. After 10 years you will be permanently barred from claiming your deposits. However, if the
State refuses to take custody of your deposits, you will be able to claim them from the FDIC until the receivership is terminated. If you have not claimed your insured deposits before the receivership is terminated, and a receivership may be
terminated at any time, all of your rights in those deposits will be barred.
If you have any questions or concerns about
these items, please contact
[Bank Employee]
at
[Name of Acquiring Institution]
by phone at
[(XXX) XXX-XXXX]
.
|
|
|
Sincerely,
|
|
|
|
[Name of Claims Specialist]
|
|
[Title]
|
58
EXHIBIT 2.3B
AFFIDAVIT OF MAILING
AFFIDAVIT OF
MAILING
State of
COUNTY OF
I am employed as a
[Title of Office]
by the
[Name of Acquiring Institution]
.
This will attest that on
[Date of mailing]
, I caused a true and correct copy of the Final Legal Notice, attached hereto, to owners of unclaimed
deposits of
[Name of Failed Bank]
, City, State, to be prepared for deposit in the mail of the United States of America on behalf of the Federal Deposit Insurance Corporation. A list of depositors to whom the notice was mailed is attached.
This notice was mailed to the depositor’s last address as reflected on the books and records of the
[Name of Failed Bank]
as of the date of failure.
|
|
|
|
|
[Name]
|
|
[Title of Office]
|
|
[Name of Acquiring Institution]
|
Subscribed and sworn to before me this day of [Month, Year].
My commission expires:
59
EXHIBIT 3.2(c) — VALUATION OF CERTAIN
QUALIFIED FINANCIAL CONTRACTS
Interest Rate Contracts - All interest rate swaps, forward rate agreements,
interest rate futures, caps, collars and floors, whether purchased or written.
Option Contracts - All put and call option contracts,
whether purchased or written, on marketable securities, financial futures, foreign currencies, foreign exchange or foreign exchange futures contracts.
Foreign Exchange Contracts - All contracts for future purchase or sale of foreign currencies, foreign currency or cross currency swap
contracts, or foreign exchange futures contracts.
All financial contracts used to hedge assets and liabilities that are
acquired by the Assuming Institution but are not subject to adjustment from Book Value.
The difference between the Book Value and market value as of Bank Closing.
|
|
1.
|
The price at which the Assuming Institution sells or disposes of Qualified Financial Contracts will be deemed to be the fair market value of such contracts, if such sale or disposition occurs at prevailing market rates
within a predefined timetable as agreed upon by the Assuming Institution and the Receiver.
|
|
|
2.
|
In valuing all other Qualified Financial Contracts, the following principles will apply:
|
|
|
(i)
|
All known cash flows under swaps or forward exchange contracts shall be present valued to the swap zero coupon interest rate curve.
|
|
|
(ii)
|
All valuations shall employ prices and interest rates based on the actual frequency of rate reset or payment.
|
|
|
(iii)
|
Each tranche of amortizing contracts shall be separately valued. The total value of such amortizing contract shall be the sum of the values of its component tranches.
|
|
|
(iv)
|
For regularly traded contracts, valuations shall be at the midpoint of the bid and ask prices quoted by customary sources (e.g.,
The Wall Street Journal
, Telerate, Reuters or other similar source) or regularly
traded exchanges.
|
60
|
|
(v)
|
For all other Qualified Financial Contracts where published market quotes are unavailable, the adjusted price shall be the average of the bid and ask price quotes from three (3) securities dealers acceptable to the
Receiver and Assuming Institution as of Bank Closing. If quotes from securities dealers cannot be obtained, an appraiser acceptable to the Receiver and the Assuming Institution will perform a valuation based on modeling, correlation analysis,
interpolation or other techniques, as appropriate.]
|
61
EXHIBIT 4.13
INTERIM ASSET SERVICING ARRANGEMENT
(a) With respect to each asset (or liability) designated from time to time by the Receiver to be serviced by the Assuming Institution pursuant
to this Arrangement, including any Assets sold by the Receiver but with respect to which the Receiver has an obligation to service or provide servicing support. (such being designated as “Pool Assets”), during the term of this Arrangement,
the Assuming Institution shall:
(i) Promptly apply payments received with respect to any Pool Assets;
(ii) Reverse and return insufficient funds checks;
(iii) Pay (A) participation payments to participants in Loans, as and when received; and (B) tax and insurance bills on Pool Assets
as they come due, out of escrow funds maintained for purposes;
(iv) Maintain accurate records reflecting (A) the payment history of
Pool Assets, with updated information received concerning changes in the address or identity of the obligors and (B) usage of data processing equipment and employee services with respect to servicing duties;
(v) Send billing statements to obligors on Pool Assets to the extent that such statements were sent by the Failed Bank;
(vi) Send notices to obligors who are in default on Loans (in the same manner as the Failed Bank);
(vii) Send to the Receiver, Attn: Managing Liquidator, at the address provided in Section 13.7 of the Agreement, or to such other person
at such address as the Receiver may designate,
via
overnight
delivery
: (A) on a weekly basis, weekly reports for the Pool Assets, including, without limitation, reports reflecting collections and the trial balances,
transaction journals and loan histories for Pool Assets having activity, together with copies of (1) checks received, (2) insufficient funds checks returned, (3) checks for payment to participants or for taxes and insurance,
(4) pay-off requests, (5) notices to defaulted obligors, and (6) data processing and employee logs and (B) any other reports, copies or information as may be periodically or from time to time requested;
(viii) Remit on a weekly basis to the Receiver, Attn: Division of Finance, Cashier Unit, Operations, at the address in (vii),
via
wire
transfer
to the account designated by the Receiver, or to such other person at such address and/or account as the Receiver may designate, all payments received on Pool Assets managed by the Assuming Institution or at such time and
place and in such manner as may be directed by the Receiver;
(ix) prepare and timely file all information reports with appropriate tax
authorities, and, if required by the Receiver, prepare and file tax returns and pay taxes due on or before the due date, relating to the Pool Assets; and
62
(x) provide and furnish such other services, operations or functions as may be required with
regard to Pool Assets, including, without limitation, as may be required with regard to any business, enterprise or agreement which is a Pool Asset, all as may be required by the Receiver.
Notwithstanding anything to the contrary in this Section, the Assuming Institution shall not be required to initiate litigation or other collection
proceedings against any obligor or any collateral with respect to any defaulted Loan. The Assuming Institution shall promptly notify the Receiver, at the address provided above in subparagraph (a)(vii), of any claims or legal actions regarding any
Pool Asset.
(b) The Receiver agrees to reimburse the Assuming Institution for actual, reasonable and necessary expenses incurred in
connection with the performance of duties pursuant to this Arrangement, including expenses of photocopying, postage and express mail, and data processing and employee services (based upon the number of hours spent performing servicing duties).
(c) The Assuming Bank shall provide the services described herein for a period of up to three hundred sixty-five (365) days after Bank
Closing.
(d) At any time during the term of this Arrangement, the Receiver may, upon written notice to the Assuming Institution, remove
one or more Pool Assets from the Pool, at which time the Assuming Institution’s responsibility with respect thereto shall terminate.
(e) At the expiration of this Agreement or upon the termination of the Assuming Institution’s responsibility with respect to any Pool
Asset pursuant to paragraph (d) hereof, the Assuming Institution shall:
(i) deliver to the Receiver (or its designee) all of the
Credit Documents and Pool Records relating to the Pool Assets; and
(ii) cooperate with the Receiver to facilitate the orderly transition
of managing the Pool Assets to the Receiver (or its designee).
(f) At the request of the Receiver, the Assuming Institution shall perform
such transitional services with regard to the Pool Assets as the Receiver may request. Transitional services may include, without limitation, assisting in any due diligence process deemed necessary by the Receiver and providing to the Receiver or
its designee(s) (x) information and data regarding the Pool Assets, including, without limitation, system reports and data downloads sufficient to transfer the Pool Assets to another system or systems, and (y) access to employees of the
Assuming Institution involved in the management of, or otherwise familiar with, the Pool Assets.
63
EXHIBIT 4.15A
SINGLE FAMILY SHARED-LOSS AGREEMENT
This agreement for the reimbursement of loss sharing on certain single family residential mortgage loans (the “Single Family Shared-Loss
Agreement”) shall apply when the Assuming Institution purchases Single Family Shared-Loss Loans as that term is defined herein. The terms hereof shall modify and supplement, as necessary, the terms of the Purchase and Assumption Agreement to
which this Single Family Shared-Loss Agreement is attached as Exhibit 4.15A and incorporated therein. To the extent any inconsistencies may arise between the terms of the Purchase and Assumption Agreement and this Single Family Shared-Loss
Agreement with respect to the subject matter of this Single Family Shared-Loss Agreement, the terms of this Single Family Shared-Loss Agreement shall control. References in this Single Family Shared-Loss Agreement to a particular Section shall be
deemed to refer to a Section in this Single Family Shared-Loss Agreement, unless the context indicates that it is intended to be a reference to a Section of the Purchase and Assumption Agreement.
ARTICLE I — DEFINITIONS
The
capitalized terms used in this Single Family Shared-Loss Agreement that are not defined in this Single Family Shared-Loss Agreement are defined in the Purchase and Assumption Agreement. In addition to the terms defined above, defined below are
certain additional terms relating to loss-sharing, as used in this Single Family Shared-Loss Agreement.
“
Accounting
Records
” means the subsidiary system of record on which the loan history and balance of each Single Family Shared-Loss Loan is maintained; individual loan files containing either an original or copies of documents that are customary and
reasonable with respect to loan servicing, including management and disposition of Other Real Estate; the records documenting alternatives considered with respect to loans in default or for which a default is reasonably foreseeable; records of loss
calculations and supporting documentation with respect to line items on the loss calculations; and, monthly delinquency reports and other performance reports customarily utilized by the Assuming Institution in management of loan portfolios.
“
Accrued Interest
” means, with respect to Single Family Shared-Loss Loans, the amount of earned and
unpaid interest at the note rate specified in the applicable loan documents, limited to 90 days.
“
Affiliate
” shall have the meaning set forth in the Purchase and Assumption Agreement;
provided
, that,
for purposes of this Single Family Shared-Loss Agreement, no Third Party Servicer shall be deemed to be an Affiliate of the Assuming Institution.
“
Commencement Date
” means the first calendar day following the Bank Closing.
“
Commercial Shared-Loss Agreement
” means the Commercial Shared-Loss Agreement attached to the Purchase and
Assumption Agreement as Exhibit 4.15B.
64
“
Cumulative Loss Amount
” means the sum of the Monthly Loss Amounts
less the sum of all Recovery Amounts.
“
Cumulative Servicing Amount
” means the sum of the Period
Servicing Amounts for every consecutive twelve-month period prior to and ending on the True-Up Measurement Date in respect of each of the Shared-Loss Agreements during which the loss-sharing provisions of the applicable Shared-Loss Agreement is in
effect.
“
Cumulative Shared-Loss Amount
” means the excess, if any, of the Cumulative Loss Amount
over the First Loss Tranche.
“
Cumulative Shared-Loss Payments
” means (i) the aggregate of all
of the payments made or payable to the Assuming Institution under the Shared-Loss Agreements minus (ii) the aggregate of all of the payments made or payable to the Receiver under the Shared-Loss Agreements.
“
Customary Servicing Procedures
” means procedures (including collection procedures) that the Assuming
Institution (or, to the extent a Third Party Servicer is engaged, the Third Party Servicer) customarily employs and exercises in servicing and administering mortgage loans for its own accounts and the servicing procedures established by FNMA or
FHLMC (as in effect from time to time), which are in accordance with accepted mortgage servicing practices of prudent lending institutions.
“
Deficient Loss
” means the determination by a court in a bankruptcy proceeding that the value of the collateral
is less than the amount of the loan in which case the loss will be the difference between the then unpaid principal balance (or the NPV of a modified loan that defaults) and the value of the collateral so established.
“
Examination Criteria
” means the loan classification criteria employed by, or any applicable regulations of,
the Assuming Institution’s Chartering Authority at the time such action is taken, as such criteria may be amended from time to time.
“
Final Shared-Loss Month
” means the calendar month in which the tenth anniversary of the Commencement Date
occurs.
“
Foreclosure Loss
” means the loss realized when the Assuming Institution has completed the
foreclosure on a Single Family Shared-Loss Loan and realized final recovery on the collateral through liquidation and recovery of all insurance proceeds. Each Foreclosure Loss shall be calculated in accordance with the form and methodology specified
in Exhibits 2c(1)-(3).
“
Holding Company
” means any company owning Shares of the Assuming
Institution that is a holding company pursuant to the Bank Holding Company Act of 1956, 12 U.S.C. 1841
et seq.
or the Home Owner’s Loan Act, 12 U.S.C. 1461
et seq.
“
Home Equity Loan
” means a loan or funded or unfunded portions of a line of credit secured by a mortgage on a
one-to four-family residences or stock of cooperative housing association, where the Failed Bank did not have a first lien on the same property as collateral.
65
“
Intrinsic Loss Estimate
” means total losses under the shared loss
agreements in the amount of Five hundred sixty-six million dollars ($ 566,000,000.00).
“
Investor-Owned
Residential Loan
” means a Loan, excluding advances made pursuant to a Home Equity Loan, that is secured by a mortgage on a one- to four family residences or stock of cooperative housing associations that is not owner-occupied or the
borrower’s primary residence.
“
Loss
” means a Foreclosure Loss, Restructuring Loss, Short Sale
Loss, Portfolio Loss, Modification Default Loss or Deficient Loss.
“
Loss Amount
” means the dollar
amount of loss incurred and reported on the Monthly Certificate for a Shared-Loss Loan.
“
Modification Default
Loss
” means the loss calculated in Exhibits 2a(1)-(3) for single family loans previously modified pursuant to this Single Family Shared-Loss Agreement that subsequently default and result in a foreclosure, short sale or
Deficient Loss.
“
Modification Guidelines
” has the meaning provided in Section 2.1(a) of this
Single Family Shared-Loss Agreement.
“
Monthly Certificate
” has the meaning provided in
Section 2.1(b) of this Single Family Shared-Loss Agreement.
“
Monthly Loss Amount
” means the
sum of all Foreclosure Losses, Restructuring Losses, Short Sale Losses, Portfolio Losses, Modification Default Losses and Deficient Losses realized by the Assuming Institution for any Shared Loss Month.
“
Monthly Shared-Loss Amount
” means the change in the Cumulative Shared-Loss Amount from the beginning of each
month to the end of each month.
“
Neutral Member
” has the meaning provided in Section 2.
1(f)(ii) of this Single Family Shared-Loss Agreement.
“
Period Servicing Amount
” means, for any
twelve month period with respect to each of the Shared-Loss Agreements during which the loss-sharing provisions of the applicable Shared-Loss Agreement are in effect, the product of (i) the simple average of the principal amount of Shared-Loss
Loans and Shared-Loss Assets (other than the Shared-Loss Securities) (in each case as defined in the Shared-Loss Agreements), as the case may be, at the beginning of such period and at the end of such period times (ii) one percent (1%).
“
Portfolio Loss
” means the loss realized on either (i) a portfolio sale of Single Family
Shared-Loss Loans in accordance with the terms of Article IV or (ii) the sale of a loan with the consent of the Receiver as provided in Section 2.7.
“
Recovery Amount
” means, with respect to any period prior to the Termination Date, the amount of collected
funds received by the Assuming Institution that (i) are applicable against a Foreclosure Loss calculated in accordance with
Exhibits 2c(1)-(3),
or (iii) gains
66
realized from a Section 4.1 sale of Single Family Shared-Loss Loans for which the Assuming Institution has previously received a Restructuring Loss payment from the Receiver (iv) or any
incentive payments from national programs paid to an investor or borrower on loans that have been modified or otherwise treated (short sale or foreclosure) in accordance with Exhibit 5.
“
Related Loans
” has the meaning set forth in Section 3.1.
“
Restructuring Loss
” means the loss on a modified or restructured loan measured by the difference between
(a) the principal, Accrued Interest, tax and insurance advances, third party or other fees due on a loan prior to the modification or restructuring, and (b) the net present value of estimated cash flows on the modified or restructured
loan, discounted at the Then-Current Interest Rate. Each Restructuring Loss shall be calculated in accordance with the form and methodology attached as Exhibits 2a(1)-(3), as applicable.
“
Restructured Loan
” means a Single Family Shared-Loss Loan for which the Assuming Institution has received a
Restructuring Loss payment from the Receiver. This applies to owner occupied and investor owned residences.
“
Servicing Officer
” has the meaning provided in Section 2.1(b) of this Single Family Shared-Loss
Agreement.
“
Shared Loss Loan
” means a Single Family Shared-Loss Loan, Investor-Owned Residential
Loan, Restructured Loan or Home Equity Loan.
“
Shared-Loss Month
” means each calendar month between
the Commencement Date and the last day of the month in which the tenth anniversary of the Commencement Date occurs, provided that, the first Shared-Loss Month shall begin on the Commencement Date and end on the last day of that month.
“
Shared-Loss Payment Trigger
” means when the sum of the Cumulative Loss Amount under this Single Family
Shared-Loss Agreement and the cumulative Shared-Loss Amounts under the Commercial Shared-Loss Agreement, exceeds the First Loss Tranche. If the First Loss Tranche is zero or a negative number, the Shared Loss Payment Trigger shall be deemed to have
been reached upon Bank Closing.
“
Shares
” means common stock and any instrument which by its terms
is currently convertible into common stock, or which may become convertible into common stock.
“
Short-Sale
Loss
” means the loss resulting from the Assuming Institution’s agreement with the mortgagor to accept a payoff in an amount less than the balance due on the loan (including the costs of any cash incentives to borrower to agree to
such sale or to maintain the property pending such sale), further
provided
,
that
each Short-Sale Loss shall be calculated in accordance with the form and methodology specified in Exhibits 2b(1)-(3).
“
Single Family Shared-Loss Loan
” means a single family one-to-four owner-occupied residential mortgage loans,
excluding advances made pursuant to Home Equity Loans, that is secured by a mortgage on a one-to four family residences or stock of cooperative housing associations (whether owned by the Assuming Institution or any Subsidiary).
67
“
Termination Date
” means the last day of the Final Shared-Loss
Month.
“
Then-Current Interest Rate
” means the most recently published Freddie Mac survey rate for
30-year fixed-rate loans for Investor-Owned Loans or such other interest rate approved by the Receiver.
“
Third
Party Servicer
” means any servicer appointed from time to time by the Assuming Institution or any Affiliate of the Assuming Institution to service the Shared-Loss Loans on behalf of the Assuming Institution, the identity of which shall
be given to the Receiver prior to or concurrent with the appointment thereof.
ARTICLE II — SHARED-LOSS ARRANGEMENT
2.1
Shared-Loss Arrangement
.
(a)
Loss Mitigation and Consideration of Alternatives
.
(i) For each Single Family Shared-Loss Loan in default or for which a default is reasonably foreseeable, the Assuming Institution shall
undertake reasonable and customary loss mitigation efforts, in accordance with any of the following programs selected by Assuming Institution in its sole discretion, Exhibit 5 (FDIC Mortgage Loan Modification Program), the United States
Treasury’s Home Affordable Modification Program Guidelines or any other modification program approved by the United States Treasury Department, the Corporation, the Board of Governors of the Federal Reserve System or any other governmental
agency (it being understood that the Assuming Institution can select different programs for the various Single Family Shared-Loss Loans) (such program chosen, the “Modification Guidelines”). After selecting the applicable Modification
Guideline for each such Single Family Shared-Loss Loan, the Assuming Institution shall document its consideration of foreclosure, loan restructuring under the applicable Modification Guideline chosen, and short-sale (if short-sale is a viable
option) alternatives and shall select the alternative the Assuming Institution believes, based on its estimated calculations, will result in the least Loss. If unemployment or underemployment is the primary cause for default or for which a default
is reasonably foreseeable, the Assuming Institution may consider the borrower for a temporary forbearance plan which reduces the loan payment to an affordable level for at least six (6) months.
(ii) Losses on Home Equity Loans shall be shared under the charge-off policies of the Assuming Institution’s Examination Criteria as if
they were Single Family Shared-Loss Loans.
(iii) Losses on Investor-Owned Residential Loans shall be treated as Restructured Loans, and
with the consent of the Receiver can be restructured under terms separate from the Exhibit 5 standards. Please refer to Exhibits 2(a)(1)-(2) for guidance in Calculation of Loss for Restructured Loans. Losses on Investor-Owned
Residential Loans will be treated as if they were Single Family Shared-Loss Loans.
68
(iv) The Assuming Institution shall retain its loss calculations for the Shared Loss Loans and
such calculations shall be provided to the Receiver upon request. For the avoidance of doubt and notwithstanding anything herein to the contrary, (x) the Assuming Institution is not required to modify or restructure any Shared-Loss Loan on more
than one occasion and (y) the Assuming Institution is not required to consider any alternatives with respect to any Shared-Loss Loan in the process of foreclosure as of the Bank Closing if the Assuming Institution can document that a loan
modification is not cost effective and shall be entitled to continue such foreclosure measures and recover the Foreclosure Loss as provided herein, and (z) the Assuming Institution shall have a transition period of up to 90 days after Bank
Closing to implement the Modification Guidelines, during which time, the Assuming Institution may submit claims under such guidelines as may be in place at the Failed Bank.
(b)
Monthly Certificates
.
Not later than fifteen (15) days after the end of each Shared-Loss Month, beginning with the month in which the Commencement Date occurs
and ending in the Final Shared-Loss Month, the Assuming Institution shall deliver to the Receiver a certificate, signed by an officer of the Assuming Institution involved in, or responsible for, the administration and servicing of the Shared-Loss
Loans whose name appears on a list of servicing officers furnished by the Assuming Institution to the Receiver, (a “Servicing Officer”) setting forth in such form and detail as the Receiver may reasonably specify (a “Monthly
Certificate”):
|
|
(i)
|
(A) a schedule substantially in the form of Exhibit 1 listing:
|
(i) each Shared-Loss Loan
for which a Loss Amount (calculated in accordance with the applicable Exhibit) is being claimed, the related Loss Amount for each Shared-Loss Loan, and the total Monthly Loss Amount for all Shared-Loss Loans;
(ii) each Shared-Loss Loan for which a Recovery Amount was received, the Recovery Amount for each Shared-Loss Loan, and the total Recovery
Amount for all Shared-Loss Loans;
(iii) the total Monthly Loss Amount for all Shared-Loss Loans minus the total monthly Recovery Amount
for all Shared-Loss Loans;
(iv) the Cumulative Shared-Loss Amount as of the beginning and end of the month;
(v) the Monthly Shared Loss Amount;
(vi) the result obtained in (v) times 80%, which is the amount to be paid under Section 2.1(d) of this Single Family Shared-Loss
Agreement by the Receiver to the Assuming Institution if the amount is a positive number, or by the Assuming Institution to the Receiver if the amount is a negative number;
69
|
|
(ii)
|
for each of the Shared-Loss Loans for which a Loss is claimed for that Shared-Loss Month, a schedule showing the calculation of the Loss Amount using the form and methodology shown in Exhibits 2a(1)-(3),
Exhibit 2b, or Exhibits 2c(1)-(2), as applicable.
|
|
|
(iii)
|
For each of the Restructured Loans where a gain or loss is realized in a sale under Section 4.1 or 4.2, a schedule showing the calculation using the form and methodology shown in Exhibits 2d(1)-(2).
|
|
|
(iv)
|
a portfolio performance and summary schedule substantially in the form shown in Exhibit 3.
|
(c)
Monthly Data Download
. Not later than fifteen (15) days after the end of each month, beginning with the month in which
the Commencement Date occurs and ending with the Final Shared-Loss Month, Assuming Institution shall provide Receiver:
(i) the servicing
file in machine-readable format including but not limited to the fields shown on Exhibit 2.1(c) for each outstanding Single Family Shared-Loss Loan, as applicable; and
(ii) an Excel file for ORE held as a result of foreclosure on a Single Family Shared-Loss Loan listing:
(A) Foreclosure date
(B)
Unpaid loan principal balance
(C) Appraised value or BPO value, as applicable
(D) Projected liquidation date
Notwithstanding the foregoing, the Assuming Institution shall not be required to provide any of the foregoing information to the extent it is
unable to do so as a result of the Failed Bank’s or Receiver’s failure to provide information required to produce the information set forth in this Section 2.1(c);
provided
, that the Assuming Institution shall, consistent with
Customary Servicing Procedures seek to produce any such missing information or improve any inaccurate information previously provided to it.
(d)
Payments With Respect to Shared-Loss Assets
. After the Shared Loss Payment Trigger is reached, not later than fifteen
(15) days after the date on which the Receiver receives the Monthly Certificate, the Receiver shall pay to the Assuming Institution, in immediately available funds, an amount equal to eighty percent (80%) of the Monthly Shared-Loss Amount
reported on the Monthly Certificate. If the total Monthly Shared-Loss Amount reported on the Monthly Certificate is a negative number, the Assuming Institution shall pay to the Receiver in immediately available funds eighty percent (80%) of
that amount.
(e)
Limitations on Shared-Loss Payment
. The Receiver shall not be required to make any payments
pursuant to Section 2.1(d) with respect to any Foreclosure Loss, Restructuring Loss, Short Sale Loss, Deficient Loss, or Portfolio Loss that the Receiver
70
determines, based upon the criteria set forth in this Single Family Shared-Loss Agreement (including the analysis and documentation requirements of Section 2.1(a)) or Customary Servicing
Procedures, should not have been effected by the Assuming Institution; provided, however, (x) the Receiver must provide notice to the Assuming Institution detailing the grounds for not making such payment, (y) the Receiver must provide the
Assuming Institution with a reasonable opportunity to cure any such deficiency and (z) (1) to the extent curable, if cured, the Receiver shall make payment with respect to the properly effected Loss, and (2) to the extent not curable,
shall not constitute grounds for the Receiver to withhold payment as to all other Losses (or portion of Losses) that are properly payable pursuant to the terms of this Single Family Shared-Loss Agreement. In the event that the Receiver does not make
any payment with respect to Losses claimed pursuant to Section 2.1(d), the Receiver and Assuming Institution shall, upon final resolution, make the necessary adjustments to the Monthly Shared-Loss Amount for that Monthly Certificate and the
payment pursuant to Section 2.1(d) above shall be adjusted accordingly.
(f)
Payments by Wire-Transfer
. All
payments under this Single Family Shared-Loss Agreement shall be made by wire-transfer in accordance with the wire-transfer instructions on Exhibit 4.
(g)
Payment in the Event Losses Fail to Reach Expected Level
. On the date that is 45 days following the last day (such
day, the “True-Up Measurement Date”) of the Final Shared Loss Month, or upon the final disposition of all Shared Loss Assets under this Single Family Shared-Loss Agreement at any time after the termination of the Commercial Shared-Loss
Agreement, the Assuming Institution shall pay to the Receiver fifty percent (50%) of the excess, if any, of (i) twenty percent (20%) of the Intrinsic Loss Estimate less (ii) the sum of (A) twenty-five percent (25%) of
the asset premium (discount) plus (B) twenty-five percent (25%) of the Cumulative Shared-Loss Payments plus (C) the Cumulative Servicing Amount. The Assuming Institution shall deliver to the Receiver not later than 30 days following
the True-Up Measurement Date, a schedule, signed by an officer of the Assuming Institution, setting forth in reasonable detail the calculation of the Cumulative Shared-Loss Payments and the Cumulative Servicing Amount.
(h)
Payments as Administrative Expenses
.
Payments from the Receiver with respect to this Single Family Shared-Loss
Agreement are administrative expenses of the Receiver. To the extent the Receiver needs funds for shared-loss payments respect to this Single Family Shared-Loss Agreement, the Receiver shall request funds under the Master Loan and Security
Agreement, as amended (“MLSA”), from FDIC in its corporate capacity. The Receiver will not agree to any amendment of the MLSA that would prevent the Receiver from drawing on the MLSA to fund shared-loss payments.
2.2
Auditor Report; Right to Audit
.
(a) Within the time period permitted for the examination audit pursuant to 12 CFR Section 363 after the end of each fiscal year during
which the Receiver makes any payment to the Assuming Institution under this Single Family Shared-Loss Agreement, the Assuming Institution shall deliver to the Receiver a report signed by its independent public accountants stating that they have
reviewed the terms of this Single Family Shared-Loss Agreement and that,
71
in the course of their annual audit of the Assuming Institution’s books and records, nothing has come to their attention suggesting that any computations required to be made by the Assuming
Institution during such fiscal year pursuant to this Article II were not made by the Assuming Institution in accordance herewith. In the event that the Assuming Institution cannot comply with the preceding sentence, it shall promptly submit to
the Receiver corrected computations together with a report signed by its independent public accountants stating that, after giving effect to such corrected computations, nothing has come to their attention suggesting that any computations required
to be made by the Assuming Institution during such year pursuant to this Article II were not made by the Assuming Institution in accordance herewith. In such event, the Assuming Institution and the Receiver shall make all such accounting
adjustments and payments as may be necessary to give effect to each correction reflected in such corrected computations, retroactive to the date on which the corresponding incorrect computation was made.
(b) The Assuming Institution shall perform on an annual basis an internal audit of its compliance with the provisions of this Article II
and shall provide the Receiver and the Corporation with copies of the internal audit reports and access to internal audit workpapers related to such internal audit.
(c) The Receiver or the FDIC in its corporate capacity (“Corporation”), its contractors and their employees, and its agents may
perform an audit or audits to determine the Assuming Institution’s compliance with the provisions of this Single Family Shared-Loss Agreement, including this Article II, by providing not less than ten (10) Business Days’ prior
written notice. Assuming Institution shall provide access to pertinent records and proximate working space in Assuming Institution’s facilities. The scope and duration of any such audit shall be within the reasonable discretion of the Receiver
or the Corporation, but shall in no event be administered in a manner that unreasonably interferes with the operation of the Assuming Institution’s business. The Receiver or the Corporation, as the case may be, shall bear the expense of any
such audit. In the event that any corrections are necessary as a result of such an audit or audits, the Assuming Institution and the Receiver shall make such accounting adjustments and payments as may be necessary to give retroactive effect to such
corrections.
2.3
Withholdings
. Notwithstanding any other provision in this Article II, the Receiver, upon the
direction of the Director (or designee) of the Federal Deposit Insurance Corporation’s Division of Resolutions and Receiverships, may withhold payment for any amounts included in a Monthly Certificate delivered pursuant to Section 2.1, if
in its good faith and reasonable judgment there is a reasonable basis under the requirements of this Single Family Shared-Loss Agreement for denying the eligibility of an item for which reimbursement or payment is sought under such Section. In such
event, the Receiver shall provide a written notice to the Assuming Institution detailing the grounds for withholding such payment. At such time as the Assuming Institution demonstrates to the satisfaction of the Receiver, in its reasonable judgment,
that the grounds for such withholding of payment, or portion of payment, no longer exist or have been cured, then the Receiver shall pay the Assuming Institution the amount withheld which the Receiver determines is eligible for payment, within
fifteen (15) Business Days.
2.4
Books and Records
. The Assuming Institution shall at all times during the term
of this Single Family Shared-Loss Agreement keep books and records sufficient to ensure and document compliance with the terms of this Single Family Shared-Loss Agreement, including but not limited to (a) documentation of alternatives
considered with respect to defaulted loans or
72
loans for which default is reasonably foreseeable, (b) documentation showing the calculation of loss for claims submitted to the Receiver, (c) retention of documents that support each
line item on the loss claim forms, and (d) documentation with respect to the Recovery Amount on loans for which the Receiver has made a loss-share payment
2.5
Information
. The Assuming Institution shall promptly provide to the Receiver such other information, including but not
limited to, financial statements, computations, and bank policies and procedures, relating to the performance of the provisions of this Single Family Shared-Loss Agreement, as the Receiver may reasonably request from time to time.
2.6
Tax Ruling
. The Assuming Institution shall not at any time, without the Receiver’s prior written consent, seek a
private letter ruling or other determination from the Internal Revenue Service or otherwise seek to qualify for any special tax treatment or benefits associated with any payments made by the Receiver pursuant to this Single Family Shared-Loss
Agreement.
2.7
Loss of Shared-Loss Coverage on Shared-Loss Loans
. The Receiver shall be relieved of its obligations with
respect to a Shared-Loss Loan upon payment of a Foreclosure Loss amount, or a Short Sale Loss amount with respect to such Single Family Shared-Loss Loan, or upon the sale without FDIC consent of a Single Family Shared-Loss Loan by Assuming
Institution to a person or entity that is not an Affiliate. The Assuming Institution shall provide the Receiver with timely notice of any such sale. Failure to administer any Shared-Loss Loan or Loans in accordance with Article III shall at the
discretion of the Receiver constitute grounds for the loss of shared loss coverage with respect to such Shared-Loss Loan or Loans. Notwithstanding the foregoing, a sale of the Single Family Shared-Loss Loan, for purposes of this Section 2.7,
shall not be deemed to have occurred as the result of (i) any change in the ownership or control of Assuming Institution or the transfer of any or all of the Single Family Shared-Loss Loan(s) to any Affiliate of Assuming Institution,
(ii) a merger by Assuming Institution with or into any other entity, or (iii) a sale by Assuming Institution of all or substantially all of its assets.
ARTICLE III — RULES REGARDING THE ADMINISTRATION OF
SHARED-LOSS LOANS
3.1
Agreement with Respect to Administration
. The Assuming Institution shall (and shall cause any of its Affiliates to which the
Assuming Institution transfers any Shared-Loss Loans to) manage, administer, and collect the Shared-Loss Loans while owned by the Assuming Institution or any Affiliate thereof during the term of this Single Family Shared-Loss Agreement in accordance
with the rules set forth in this Article III. The Assuming Institution shall be responsible to the Receiver in the performance of its duties hereunder and shall provide to the Receiver such reports as the Receiver reasonably deems advisable,
including but not limited to the reports required by Sections 2.1, 2.2 and 3.3 hereof, and shall permit the Receiver to monitor the Assuming Institution’s performance of its duties hereunder.
73
3.2
Duties of the Assuming Institution
.
(a) In the performance of its duties under this Article III, the Assuming Institution shall:
(i) manage and administer each Shared-Loss Loan in accordance with Assuming Institution’s usual and prudent business and banking practices
and Customary Servicing Procedures;
(ii) exercise its best business judgment in managing, administering and collecting amounts owed on the
Shared-Loss Loans;
(iii) use commercially reasonable efforts to maximize Recoveries with respect to Losses on Shared-Loss Loans without
regard to the effect of maximizing collections on assets held by the Assuming Institution or any of its Affiliates that are not Shared-Loss Loans;
(iv) retain sufficient staff (in Assuming Institution’s discretion) to perform its duties hereunder; and
(v) other than as provided in Section 2.1(a), comply with the terms of the Modification Guidelines for any Single Family Shared-Loss Loans
meeting the requirements set forth therein. For the avoidance of doubt, the Assuming Institution may propose exceptions to Exhibit 5 (the FDIC Loan Modification Program) for a group of Loans with similar characteristics, with the objectives of
(1) minimizing the loss to the Assuming Institution and the FDIC and (2) maximizing the opportunity for qualified homeowners to remain in their homes with affordable mortgage payments.
(b) Any transaction with or between any Affiliate of the Assuming Institution with respect to any Shared-Loss Loan including, without
limitation, the execution of any contract pursuant to which any Affiliate of the Assuming Institution will manage, administer or collect any of the Shared-Loss Loans will be provided to FDIC for informational purposes and if such transaction is not
entered into on an arm’s length basis on commercially reasonable terms such transaction shall be subject to the prior written approval of the Receiver.
3.3
Shared-Loss Asset Records and Reports
.
The Assuming Institution shall establish and maintain such records as may be
appropriate to account for the Single Family Shared-Loss Loans in such form and detail as the Receiver may reasonably require, and to enable the Assuming Institution to prepare and deliver to the Receiver such reports as the Receiver may from time
to time request regarding the Single Family Shared-Loss Loans and the Monthly Certificates required by Section 2.1 of this Single Family Shared-Loss Agreement.
3.4
Related Loans
.
(a) Assuming Institution shall use its best efforts to determine which loans are “Related Loans,” as hereinafter defined. The
Assuming Institution shall not manage, administer or collect any “Related Loan” in any manner that would have the effect of increasing the amount of any collections with respect to the Related Loan to the detriment of the Shared-Loss Loan
to
74
which such loan is related. A “Related Loan” means any loan or extension of credit to an Obligor of a Shared-Loss Loan held by the Assuming Institution at any time on or prior to the
end of the Final Shared-Loss Month.
(b) The Assuming Institution shall prepare and deliver to the Receiver with the Monthly Certificates
for the calendar months ending June 30 and December 31, a schedule of all Related Loans on the Accounting Records of the Assuming Institution as of the end of each such semi-annual period.
3.5
Legal Action; Utilization of Special Receivership Powers
.
The Assuming Institution shall notify the Receiver in
writing (such notice to be given in accordance with Article V below and to include all relevant details) prior to utilizing in any legal action any special legal power or right which the Assuming Institution derives as a result of having
acquired an asset from the Receiver, and the Assuming Institution shall not utilize any such power unless the Receiver shall have consented in writing to the proposed usage. The Receiver shall have the right to direct such proposed usage by the
Assuming Institution and the Assuming Institution shall comply in all respects with such direction. Upon request of the Receiver, the Assuming Institution will advise the Receiver as to the status of any such legal action. The Assuming Institution
shall immediately notify the Receiver of any judgment in litigation involving any of the aforesaid special powers or rights.
3.6
Third Party Servicer
.
The Assuming Institution may perform any of its obligations and/or exercise any of its rights under this Single Family Shared-Loss Agreement through or by one or more Third Party Servicers, who may take
actions and make expenditures as if any such Third Party Servicer was the Assuming Institution hereunder (and, for the avoidance of doubt, such expenses incurred by any such Third Party Servicer on behalf of the Assuming Institution shall be
included in calculating Losses to the extent such expenses would be included in such calculation if the expenses were incurred by Assuming Institution); provided, however, that the use thereof by the Assuming Institution shall not release the
Assuming Institution of any obligation or liability hereunder.
ARTICLE IV — PORTFOLIO SALE
4.1
Assuming Institution Portfolio Sales of Remaining Shared-Loss Loans
.
The Assuming Institution shall have the right,
with the consent of the Receiver, to liquidate for cash consideration, from time to time in one or more transactions, all or a portion of Shared-Loss Loans held by the Assuming Institution at any time prior to the Termination Date (“Portfolio
Sales”). If the Assuming Institution exercises its option under this Section 4.1, it must give sixty (60) days notice in writing to the Receiver setting forth the details and schedule for the Portfolio Sale, which shall be conducted
by means of sealed bid sales to third parties, not including any of the Assuming Institution’s affiliates, contractors, or any affiliates of the Assuming Institution’s contractors. Sales of Restructured Loans shall be sold in a separate
pool from Shared-Loss Loans that have not been restructured. Other proposals for the sale of a Shared-Loss Loan or Shared- Loss Loans submitted by the Assuming Institution will be considered by the Receiver on a case-by-case basis.
75
4.2
Assuming Institution’s Liquidation of Remaining Shared-Loss Loans
.
In the event that the Assuming Institution does not conduct a Portfolio Sale pursuant to Section 4.1, the Receiver shall have the right, exercisable in its sole and absolute discretion, to require the Assuming Institution to liquidate for cash
consideration, any Shared-Loss Loans held by the Assuming Institution at any time after the date that is six months prior to the Termination Date. If the Receiver exercises its option under this Section 4.2, it must give notice in writing to
the Assuming Institution, setting forth the time period within which the Assuming Institution shall be required to liquidate the Shared-Loss Loans. The Assuming Institution will comply with the Receiver’s notice and must liquidate the
Shared-Loss Loans as soon as reasonably practicable by means of sealed bid sales to third parties, not including any of the Assuming Institution’s affiliates, contractors, or any affiliates of the Assuming Institution’s contractors. The
selection of any financial advisor or other third party broker or sales agent retained for the liquidation of the remaining Shared-Loss Loans pursuant to this Section shall be subject to the prior approval of the Receiver, such approval not to be
unreasonably withheld, delayed or conditioned.
4.3
Calculation of Sale Gain or Loss
.
For Shared-Loss Loans that are
not Restructured Loans, gain or loss on the sales under Section 4.1 or Section 4.2 will be calculated as the sale price received by the Assuming Institution less the unpaid principal balance of the remaining Shared-Loss Loans. For any
Restructured Loan included in the sale gain or loss on sale will be calculated as (a) the sale price received by the Assuming Institution less (b) the net present value of estimated cash flows on the Restructured Loan that was used in the
calculation of the related Restructuring Loss plus (c) Loan principal payments collected by the Assuming Institution from the date the Loan was restructured to the date of sale. (See Exhibits 2d(1)-(2) for example calculations).
ARTICLE V — LOSS-SHARING NOTICES GIVEN TO RECEIVER AND PURCHASER
All notices, demands and other communications hereunder shall be in writing and shall be delivered by hand, or overnight courier, receipt
requested, addressed to the parties as follows:
|
|
|
|
|
If to Receiver, to:
|
|
Federal Deposit Insurance Corporation as Receiver for TierOne Bank
Division of Resolutions and Receiverships
550 17th Street,
N.W.
Washington, D.C. 20429
Attention: Ralph Malami, Manager,
Capital Markets
|
|
|
|
|
with a copy to:
|
|
Federal Deposit Insurance Corporation as Receiver for TierOne Bank
Room E7056
3501 Fairfax Drive, Arlington, VA 2226
Attn: Special Issues Unit
|
76
With respect to a notice under Section 3.5 of this Single Family Shared-Loss Agreement,
copies of such notice shall be sent to:
|
|
|
|
|
|
|
|
|
Federal Deposit Insurance Corporation
|
|
|
|
Legal Division 1601 Bryan St.
|
|
|
|
Dallas, Texas 75201
|
|
|
|
Attention: Regional Counsel
|
If to Assuming
Institution, to:
|
|
|
|
|
|
|
|
|
Great Western Bank
|
|
|
|
Level 4, 100 North Phillips Avenue
|
|
|
|
Sioux Falls, SD 57104
|
|
|
|
|
|
|
|
Telephone:
|
|
[redacted]
|
|
|
|
|
|
[redacted]
|
|
|
|
Facsimile:
|
|
[redacted]
|
|
|
|
|
|
|
|
Attention:
|
|
Tim Kaiser
|
|
|
|
|
|
|
with a copy to: Kevin Roadnight
|
Such Persons and addresses may be changed from time to time by notice given pursuant to the provisions of this
Article V. Any notice, demand or other communication delivered pursuant to the provisions of this Article V shall be deemed to have been given on the date actually received.
ARTICLE VI — MISCELLANEOUS
6.1
Expenses
.
Except as otherwise expressly provided herein, all costs and expenses incurred by or on behalf of a party
hereto in connection with this Single Family Shared-Loss Agreement shall be borne by such party whether or not the transactions contemplated herein shall be consummated.
6.2
Successors and Assigns; Specific Performance
.
This Single Family Shared- Loss Agreement, and all of the terms and
provisions hereof shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted successors and assigns only. The Receiver may assign or otherwise transfer this Single Family Shared-Loss Agreement and the
rights and obligations of the Receiver hereunder (in whole or in part) to the Federal Deposit Insurance Corporation in its corporate capacity without the consent of Assuming Institution. Notwithstanding anything to the contrary contained in this
Single Family Shared-Loss Agreement, except as is expressly permitted in this Section 6.2, the Assuming Institution may not assign or otherwise transfer this Single Family Shared-Loss Agreement or any of the Assuming Institution’s rights
or obligations hereunder (in whole or in part), or sell or transfer of any subsidiary of the Assuming Institution holding title to Shared-Loss Assets or Shared-Loss Securities, without the prior written consent of the Receiver, which consent may be
granted or withheld by the Receiver in its sole and absolute discretion. An assignment or transfer of this Single Family Shared-Loss Agreement includes:
(i) a merger or consolidation of the Assuming Institution with or into another company, if the shareholders of the Assuming Institution will
own less than sixty-six and two/thirds percent (66.66 %) of the equity of the consolidated entity;
77
(ii) a merger or consolidation of the Assuming Institution’s Holding Company with or into
another company, if the shareholders of the Holding Company will own less than sixty-six and two/thirds percent (66.66 %) of the equity of the consolidated entity;
(iii) the sale of all or substantially all of the assets of the Assuming Institution to another company or person; or
(iv) a sale of shares by any one or more shareholders that will effect a change in control of the Assuming Institution, as determined by the
Receiver with reference to the standards set forth in the Change in Bank Control Act, 12 U.S.C. 1817(j).
For the avoidance of doubt, any
transaction under this Section 6.2 that requires the Receiver’s consent that is made without consent of the Receiver hereunder will relieve the Receiver of any of its obligations under this Single Family Shared-Loss Agreement.
No Loss shall be recognized under this Single Family Shared-Loss Agreement as a result of any accounting adjustments that are made due to or as a result of
any assignment or transfer of this Single Family Shared-Loss Agreement or any merger, consolidation, sale or other transaction to which the Assuming Institution, its Holding Company or any Affiliate is a party, regardless of whether the Receiver
consents to such assignment or transfer in connection with such transaction pursuant to this Section 6.2.
6.3
WAIVER OF JURY
TRIAL
.
EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, ARISING OUT OF OR RELATING TO OR IN CONNECTION WITH THIS SINGLE FAMILY SHARED-LOSS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
6.4
No Third Party Beneficiary
.
This Single Family Shared-Loss Agreement and the Exhibits hereto are for the sole
and exclusive benefit of the parties hereto and their respective permitted successors and permitted assigns and there shall be no other third party beneficiaries, and nothing in this Single Family Shared-Loss Agreement or the Exhibits shall be
construed to grant to any other Person any right, remedy or Claim under or in respect of this Single Family Shared-Loss Agreement or any provision hereof.
6.5
Consent
.
Except as otherwise provided herein, when the consent of a party is required herein, such consent shall not
be unreasonably withheld or delayed.
78
6.6
Rights Cumulative
.
Except as otherwise expressly provided herein, the
rights of each of the parties under this Single Family Shared-Loss Agreement are cumulative, may be exercised as often as any party considers appropriate and are in addition to each such party’s rights under the Purchase and Sale Agreement and
any of the related agreements or under law. Except as otherwise expressly provided herein, any failure to exercise or any delay in exercising any of such rights, or any partial or defective exercise of such rights, shall not operate as a waiver or
variation of that or any other such right.
ARTICLE VII
DISPUTE RESOLUTION
7.1
Dispute Resolution Procedures
.
(a) In the event a dispute arises about the interpretation, application, calculation of Loss, or
calculation of payments or otherwise with respect to this Single Family Shared-Loss Agreement (“SF Shared-Loss Dispute Item”), then the Receiver and the Assuming Institution shall make every attempt in good faith to resolve such items
within sixty (60) days following the receipt of a written description of the SF Shared-Loss Dispute Item, with notification of the possibility of taking the matter to arbitration (the date on which such 60-day period expires, or any extension
of such period as the parties hereto may mutually agree to in writing, herein called the “Resolution Deadline Date”). If the Receiver and the Assuming Institution resolve all such items to their mutual satisfaction by the Resolution
Deadline Date, then within thirty (30) days following such resolution, any payment due as a result of such resolution shall be made arising from the settlement of the SF Shared-Loss Dispute.
(b) If the Receiver and the Assuming Institution fail to resolve any outstanding SF Shared-Loss Dispute Items by the Resolution Deadline Date,
then either party may notify the other of its intent to submit the SF Shared-Loss Dispute Item to arbitration pursuant to the provisions of this Article VII. Failure of either party to submit pursuant to paragraph (c) hereof any unresolved
SF Shared-Loss Dispute Item to arbitration within thirty (30) days following the Resolution Deadline Date (the date on which such thirty (30) day period expires is herein called the “Arbitration Deadline Date”) shall extinguish
that party’s right to submit the non-submitted SF Shared-Loss Dispute Item to arbitration, and constitute a waiver of the submitting party’s right to dispute such non-submitted SF Shared-Loss Dispute Item (but not a waiver of any similar
claim which may arise in the future).
(c) If a SF Shared-Loss Dispute Item is submitted to arbitration, it shall be governed by the rules
of the American Arbitration Association (the “AAA”), except as otherwise provided herein. Either party may submit a matter for arbitration by delivering a notice, prior to the Arbitration Deadline Date, to the other party in writing
setting forth:
(i) A brief description of each SF Shared-Loss Dispute Item submitted for arbitration;
(ii) A statement of the moving party’s position with respect to each SF Shared-Loss Dispute Item submitted for arbitration;
79
(iii) The value sought by the moving party, or other relief requested regarding each SF
Shared-Loss Dispute Item submitted for arbitration, to the extent reasonably calculable; and
(iv) The name and address of the arbiter
selected by the moving party (the “Moving Arbiter”), who shall be a neutral, as determined by the AAA.
Failure to adequately
include any information above shall not be deemed to be a waiver of the parties right to arbitrate so long as after notification of such failure the moving party cures such failure as promptly as reasonably practicable.
(d) The non-moving party shall, within thirty (30) days following receipt of a notice of arbitration pursuant to this Section 7.1,
deliver a notice to the moving party setting forth:
(i) The name and address of the arbiter selected by the non-moving party (the
“Respondent Arbiter”), who shall be a neutral, as determined by the AAA;
(ii) A statement of the position of the respondent with
respect to each Dispute Item; and
(iii) The ultimate resolution sought by the respondent or other relief, if any, the respondent deems is
due the moving party with respect to each SF Shared-Loss Dispute Item.
Failure to adequately include any information above shall not be
deemed to be a waiver of the non-moving party’s right to defend such arbitration so long as after notification of such failure the non-moving party cures such failure as promptly as reasonably practicable
(e) The Moving Arbiter and Respondent Arbiter shall select a third arbiter from a list furnished by the AAA. In accordance with the rules of
the AAA, the three (3) arbiters shall constitute the arbitration panel for resolution of each SF Loss-Share Dispute Item. The concurrence of any two (2) arbiters shall be deemed to be the decision of the arbiters for all purposes
hereunder. The arbitration shall proceed on such time schedule and in accordance with the Rules of Commercial Arbitration of the AAA then in effect, as modified by this Section 7.1. The arbitration proceedings shall take place at such location
as the parties thereto may mutually agree, but if they cannot agree, then they will take place at the offices of the Corporation in Washington, DC, or Arlington, Virginia.
(f) The Receiver and Assuming Institution shall facilitate the resolution of each outstanding SF Shared-Loss Dispute Item by making available
in a prompt and timely manner to one another and to the arbiters for examination and copying, as appropriate, all documents, books, and records under their respective control and that would be discoverable under the Federal Rules of Civil Procedure.
80
(g) The arbiters designated pursuant to subsections (c), (d) and (e) hereof shall
select, with respect to each Dispute Item submitted to arbitration pursuant to this Section 7.1, either (i) the position and relief submitted by the Assuming Institution with respect to each SF Shared-Loss Dispute Item, or (ii) the
position and relief submitted by the Receiver with respect to each SF Shared-Loss Dispute Item, in either case as set forth in its respective notice of arbitration. The arbiters shall have no authority to select a value for each Dispute Item other
than the determination set forth in Section 7.1(c) and Section 7.1(d). The arbitration shall be final, binding and conclusive on the parties.
(h) Any amounts ultimately determined to be payable pursuant to such award shall bear interest at the Settlement Interest Rate from and
including the date specified for the arbiters decisions specified in this Section 7.1, without regard to any extension of the finality of such award, to but not including the date paid. All payments required to be made under this
Section 7.1 shall be made by wire transfer.
(i) For the avoidance of doubt, to the extent any notice of a SF Shared-Loss Dispute
Item(s) is provided prior to the Termination Date, the terms of this Single Family Shared-Loss Agreement shall remain in effect with respect to the Single Family Shared-Loss Loans that are the subject of such SF Shared-Loss Dispute Item(s) until
such time as any such dispute is finally resolved.
7.2
Fees and Expenses of Arbiters
.
The aggregate fees and expenses of
the arbiters shall be borne equally by the parties. The parties shall pay the aggregate fees and expenses within thirty (30) days after receipt of the written decision of the arbiters (unless the arbiters agree in writing on some other payment
schedule).
81
Exhibit 1
Monthly Certificate
SEE FOLLOWING PAGE
82
CERTIFICATE
MONTHLY SUMMARY
FOR
SINGLE FAMILY ASSETS
FDIC RECEIVER FOR XXXXXXX BANK
PURCHASE AND ASSUMPTION AGREEMENT DATED: Jan 1, 2009
Shared-Loss Period Ended:
(Dollars)
Calculation of Amount Due from (to) FDIC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FDIC % Share
|
|
0%
|
|
|
80%
|
|
|
Total
|
|
|
Carry forward from other types of assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. Cumulative losses from single family pool
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
2. Cumulative losses from securities
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
3. Cumulative loss from commercial and other pool
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
4. Total cumulative losses at beg of period
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
5. Covered single family losses (gains) during period
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
6. Cumulative loss at end of period
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FDIC % Share
|
|
|
x 0
|
%
|
|
|
x 80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Amount Due from (to) FDIC
|
|
|
0 +
|
|
|
|
0 +
|
|
|
|
= -
|
|
|
Memo: threshold for recovery percentage
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preparer name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preparer signature
|
|
Preparer title:
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer signature
|
|
Officer title:
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
|
|
|
|
|
|
Page 1 of 3
83
XXXXXXXXX
Bank
FIN No.
Non-Single Family Shared-Loss Agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proforma Net Balance*
|
|
|
Unfunded
|
|
|
|
|
Schedule 4.15B as provided
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Loan
Number
|
|
Name
|
|
Net Balance
|
|
|
Unfunded
|
|
|
Explanation
(Loan Description)
|
|
Add the following loans currently included in Schedule 4.15A Non-Single Family Shared-Loss Agreement:
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Subtract the following loans currently included in Schedule 4.15B Single Family Shared-Loss Agreement:
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Add the following loan not included in either Schedule 4.15A or 4.15B Asset Detail (Must provide documentation)
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Add the following Unfunded Commitments (Must provide documentation)
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Total Adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 4.15B Revised Totals
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Total adjustments should also be reflected in the Certificate filing for the quarter this form is submitted.
|
*
|
Net Balance agrees with amount noted on Schedule 4.15A Single Family Shared-Loss Agreement, or Revised Totals if this form has already been submitted previously.
|
84
XXXXXXXXX
Bank
FIN No.
Single Family Shared-Loss Agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proforma Net Balance*
|
|
|
Unfunded
|
|
|
|
|
Schedule 4.15A as provided
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Loan
Number
|
|
Name
|
|
Net Balance
|
|
|
Unfunded
|
|
|
Explanation
(Loan Description)
|
|
Add the following loans currently included in Schedule 4.15B Non-Single Family Shared-Loss Agreement:
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Subtract the following loans currently included in Schedule 4.15A Single Family Shared-Loss
Agreement:
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Add the following loan not included in either Schedule 4.15A or 4.15B Asset Detail (Must provide
documentation)
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Add the following Unfunded Commitments (Must provide documentation)
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Subtotal
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Total Adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 4.15A Revised Totals
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
Exhibit 2.1(c)
|
|
|
|
|
1
|
|
Shared-Loss Month
|
|
|
|
|
2
|
|
Loan ID
|
|
|
|
|
3
|
|
First payment date
|
|
|
|
|
4
|
|
Property type
|
|
|
|
|
5
|
|
Lien
|
|
|
|
|
6
|
|
Original loan amount
|
|
|
|
|
7
|
|
Documentation
|
|
|
|
|
8
|
|
Original FICO
|
|
|
|
|
9
|
|
Original LTV
|
|
|
|
|
10
|
|
Original combined LTV
|
|
|
|
|
11
|
|
Original front-end DTI
|
|
|
|
|
12
|
|
Original back-end DTI
|
|
|
|
|
13
|
|
Negative Amortization cap
|
|
|
|
|
14
|
|
Property city
|
|
|
|
|
15
|
|
Property state
|
|
|
|
|
16
|
|
Property street address
|
|
|
|
|
17
|
|
Property zip
|
|
|
|
|
18
|
|
Maturity date
|
|
|
|
|
19
|
|
MI Coverage
|
|
|
|
|
20
|
|
Occupancy
|
|
|
|
|
21
|
|
Interest rate type
|
|
|
|
|
22
|
|
Product Type
|
|
|
|
|
23
|
|
Loan amortization type
|
|
|
|
|
24
|
|
Lookback
|
|
|
|
|
25
|
|
Margin
|
|
|
|
|
26
|
|
Interest rate index
|
|
|
|
|
27
|
|
Interest rate cap
|
|
|
|
|
28
|
|
Interest rate floor
|
|
|
|
|
29
|
|
First interest cap
|
|
|
|
|
30
|
|
Periodic interest cap
|
|
|
|
|
31
|
|
Periodic interest floor
|
|
|
|
|
32
|
|
Pay Cap
|
|
|
|
|
33
|
|
UPB
|
|
|
|
|
34
|
|
Interest rate
|
86
|
|
|
|
|
35
|
|
Paid-to date
|
|
|
|
|
36
|
|
Next payment due date
|
|
|
|
|
37
|
|
Scheduled payment
|
|
|
|
|
38
|
|
Escrow payment
|
|
|
|
|
39
|
|
Escrow balance
|
|
|
|
|
40
|
|
Next interest rate reset date
|
|
|
|
|
41
|
|
Next payment reset date
|
|
|
|
|
42
|
|
Rate reset period
|
|
|
|
|
43
|
|
Payment reset period
|
|
|
|
|
44
|
|
Payment History
|
|
|
|
|
45
|
|
Exceptional Loan Status
|
|
|
|
|
46
|
|
Valuation date
|
|
|
|
|
47
|
|
Valuation amount
|
|
|
|
|
48
|
|
Valuation type
|
|
|
|
|
49
|
|
Household income
|
|
|
|
|
50
|
|
Current FICO
|
|
|
|
|
51
|
|
Maximum Draw Amount
|
|
|
|
|
52
|
|
Draw period
|
|
|
|
|
53
|
|
Superior Lien Balance
|
87
Exhibit 2a (1)
CALCULATION OF RESTRUCTURING LOSS - HAMP or FDIC LOAN MODIFICATION
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Shared-Loss Month
|
|
|
20090531
|
|
|
|
|
2
|
|
Loan no:
|
|
|
123456
|
|
|
|
|
3
|
|
Modification Program:
|
|
|
HAMP
|
|
|
|
|
|
|
|
|
|
|
|
Loan before Restructuring
|
|
|
|
|
|
|
|
4
|
|
Unpaid principal balance
|
|
|
450000
|
|
|
|
|
5
|
|
Remaining term
|
|
|
298
|
|
|
|
|
6
|
|
Interest rate 0.06500
|
|
|
|
|
|
|
|
7
|
|
Next ARM reset rate (if within next 4 months)
|
|
|
0.00000
|
|
|
|
|
8
|
|
Interest Paid-To-Date
|
|
|
20081230
|
|
|
|
|
9
|
|
Delinquency Status
|
|
|
FC
|
|
|
|
|
10
|
|
Monthly payment - P&I
|
|
|
3047
|
|
|
|
|
11
|
|
Monthly payment - T&I
|
|
|
1000
|
|
|
|
|
|
|
Total monthly payment
|
|
|
4047
|
|
|
|
|
12
|
|
Household current annual income
|
|
|
95000
|
|
|
|
|
13
|
|
Valuation Date
|
|
|
20090121
|
|
|
|
|
14
|
|
Valuation Amount
|
|
|
425000
|
|
|
|
|
15
|
|
Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)
|
|
|
AVM
|
|
|
|
|
|
|
|
|
|
|
|
Terms of Modified/Restructured Loan
|
|
|
|
|
|
|
|
16
|
|
1st Trial Payment Due Date
|
|
|
20090119
|
|
|
|
|
17
|
|
Modification Effective Date
|
|
|
20090419
|
|
|
|
|
18
|
|
Net Unpaid Principal Balance (net of forbearance & principal reduction)
|
|
|
467188
|
|
|
|
|
19
|
|
Principal forbearance
|
|
|
0
|
|
|
|
|
20
|
|
Principal reduction
|
|
|
0
|
|
|
|
|
21
|
|
Product (fixed or step)
|
|
|
step
|
|
|
|
|
22
|
|
Remaining amortization term
|
|
|
480
|
|
|
|
|
23
|
|
Maturity date
|
|
|
20490119
|
|
|
|
|
24
|
|
Interest rate
|
|
|
0.02159
|
|
|
|
|
25
|
|
Next Payment due date
|
|
|
20090601
|
|
|
|
|
26
|
|
Monthly payment - P&I
|
|
|
1454
|
|
|
|
|
27
|
|
Monthly payment - T&I
|
|
|
1000
|
|
|
|
|
|
|
Total monthly payment
|
|
|
2454
|
|
|
|
|
28
|
|
Next reset date
|
|
|
20140501
|
|
|
|
|
29
|
|
Interest rate change per adjustment
|
|
|
0.01000
|
|
|
|
|
30
|
|
Lifetime interest rate cap
|
|
|
0.05530
|
|
|
|
|
31
|
|
Back end DTI
|
|
|
0.45000
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring Loss Calculation
|
|
|
|
|
|
|
|
|
same as Unpaid Principal Balance before 4 above restructuring/modification
|
|
|
450000
|
|
|
|
|
|
|
|
|
|
34
|
|
Accrued interest, limited to 90 days
|
|
|
7313
|
|
|
|
|
35
|
|
Attorney’s fees
|
|
|
0
|
|
|
|
|
36
|
|
Foreclosure costs, including title search, filing fees, advertising, etc.
|
|
|
500
|
|
|
|
|
37
|
|
Property protection costs, maint. and repairs
|
|
|
0
|
|
|
|
|
38
|
|
Tax and insurance advances
|
|
|
2500
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Advances
|
|
|
|
|
|
|
|
39
|
|
Appraisal/Broker’s Price Opinion fees
|
|
|
100
|
|
|
|
|
40
|
|
Inspections
|
|
|
0
|
|
|
|
|
41
|
|
Other
|
|
|
0
|
|
|
|
|
|
|
Total loan balance due before restructuring
|
|
|
460413
|
|
|
|
|
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
|
|
|
|
|
42
|
|
MI contribution
|
|
|
0
|
|
|
|
|
43
|
|
Other credits
|
|
|
0
|
|
|
|
|
44
|
|
T & I escrow account balances, if positive
|
|
|
|
|
|
|
|
|
|
Total Cash Recovery
|
|
|
0
|
|
|
|
|
|
|
|
|
Assumptions for Calculating Loss Share Amount, Restructured Loan:
|
|
|
|
|
|
|
|
45
|
|
Discount rate for projected cash flows
|
|
|
0.05530
|
|
|
|
|
46
|
|
Loan prepayment in full
|
|
|
120
|
|
|
|
|
47
|
|
NPV of projected cash flows (see amort schd1)
|
|
|
386927
|
|
|
|
|
|
|
|
|
|
48
|
|
Gain/Loss Amount
|
|
|
73485
|
|
Line item definitions can be found in SFR Data Submission Handbook.
89
Exhibit 2a(2)
CALCULATION OF RESTRUCTURING LOSS - 2nd FDIC MODIFICATION
|
|
|
|
|
|
|
|
|
1
|
|
Shared-Loss Month
|
|
|
20090531
|
|
|
2
|
|
Loan no:
|
|
|
123456
|
|
|
3
|
|
Modification Program:
|
|
|
FDIC
|
|
|
|
|
|
|
|
|
Loan before Restructuring
|
|
|
|
|
|
4
|
|
Unpaid principal balance
|
|
|
450000
|
|
|
5
|
|
Remaining term
|
|
|
298
|
|
|
6
|
|
Interest rate
|
|
|
0.06500
|
|
|
7
|
|
Next ARM reset rate (if within next 4 months)
|
|
|
0.00000
|
|
|
8
|
|
Interest Paid-To-Date
|
|
|
20081230
|
|
|
9
|
|
Delinquency Status
|
|
|
FC
|
|
|
10
|
|
Monthly payment - P&I
|
|
|
3047
|
|
|
11
|
|
Monthly payment - T&I
|
|
|
1000
|
|
|
|
|
Total monthly payment
|
|
|
4047
|
|
|
12
|
|
Household current annual income
|
|
|
95000
|
|
|
13
|
|
Valuation Date
|
|
|
20090121
|
|
|
14
|
|
Valuation Amount
|
|
|
425000
|
|
|
15
|
|
Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)
|
|
|
AVM
|
|
|
|
|
|
|
|
|
Terms of Modified/Restructured Loan
|
|
|
|
|
|
16
|
|
1st Trial Payment Due Date
|
|
|
20090201
|
|
|
17
|
|
Modification Effective Date
|
|
|
20090501
|
|
|
18
|
|
Net Principal balance (net of forbearance & principal reduction)
|
|
|
467188
|
|
|
19
|
|
Principal forbearance
|
|
|
0
|
|
|
20
|
|
Principal reduction
|
|
|
0
|
|
|
21
|
|
Product (fixed or step)
|
|
|
step
|
|
|
22
|
|
Remaining amortization term
|
|
|
480
|
|
|
23
|
|
Maturity date
|
|
|
20490501
|
|
|
24
|
|
Interest rate
|
|
|
0.02159
|
|
|
25
|
|
Next Payment due date
|
|
|
20090601
|
|
|
26
|
|
Monthly payment - P&I
|
|
|
1454
|
|
|
27
|
|
Monthly payment - T&I
|
|
|
1000
|
|
|
|
|
Total monthly payment
|
|
|
2454
|
|
|
28
|
|
Next reset date
|
|
|
20140501
|
|
|
29
|
|
Interest rate change per adjustment
|
|
|
0.01000
|
|
|
30
|
|
Lifetime interest rate cap
|
|
|
0.05530
|
|
|
31
|
|
Back end DTI
|
|
|
0.45000
|
|
|
|
|
Restructuring Loss Calculation
|
|
|
|
|
|
32
|
|
Previous NPV of loan modification
|
|
|
458740
|
|
|
33
|
|
Less: Post modification principal payments
|
|
|
2500
|
|
|
|
|
Plus:
|
|
|
|
|
|
35
|
|
Attorney’s fees
|
|
|
0
|
|
|
36
|
|
Foreclosure costs, including title search, filing fees, advertising, etc.
|
|
|
500
|
|
|
37
|
|
Property protection costs, maint. and repairs
|
|
|
0
|
|
|
38
|
|
Tax and insurance advances
|
|
|
2500
|
|
|
|
|
Other Advances
|
|
|
|
|
|
39
|
|
Appraisal/Broker’s Price Opinion fees
|
|
|
100
|
|
90
|
|
|
|
|
|
|
|
|
40
|
|
Inspections
|
|
|
0
|
|
|
41
|
|
Other
|
|
|
0
|
|
|
|
|
Total loan balance due before restructuring
|
|
|
459340
|
|
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
|
|
|
42
|
|
MI contribution
|
|
|
0
|
|
|
43
|
|
Other credits
|
|
|
0
|
|
|
44
|
|
T & I escrow account balances, if positive
|
|
|
|
|
|
|
|
Total Cash Recovery
|
|
|
0
|
|
|
|
|
|
Assumptions for Calculating Loss Share Amount, Restructured Loan:
|
|
|
|
|
|
45
|
|
Discount rate for projected cash flows
|
|
|
0.05530
|
|
|
46
|
|
Loan prepayment in full
|
|
|
120
|
|
|
47
|
|
NPV of projected cash flows (see amort schd1)
|
|
|
386927
|
|
|
48
|
|
Gain/Loss Amount
|
|
|
72413
|
|
Line item definitions can be found in SFR Data Submission Handbook.
91
Notes to Exhibits 2a (restructuring)
|
1.
|
The data shown are for illustrative purpose. The figures will vary for actual restructurings.
|
|
2.
|
For purposes of loss sharing, losses on restructured loans are calculated as the difference between:
|
|
|
a.
|
The principal, accrued interest, advances due on the loan, and allowable 3
rd
party fees prior to restructuring (2a(1) lines 34-41, 2a(2) lines 33-41), and
|
|
|
b.
|
The Net Present Value (NPV) of the estimated cash flows (line 47). The cash flows should assume no default or prepayment for 10 years, followed by prepayment in full at the end of 10 years (120 months).
|
|
3.
|
For owner-occupied residential loans, the NPV is calculated using the most recently published Freddie Mac survey rate on 30-year fixed rate loans as of the restructure date.
|
|
4.
|
For investor owned or non-owner occupied residential loans, the NPV is calculated using commercially reasonable rate on 30-year fixed rate loans as of the restructure date.
|
|
5.
|
If the new loan is an adjustable-rate loan, interest rate resets and related cash flows should be projected based on the index rate in effect at the date of the loan restructuring. If the restructured loan otherwise
provides for specific charges in monthly P&I payments over the term of the loan, those changes should be reflected in the projected cash flows. Assuming Institution must retain supporting schedule of projected cash flows as required by
Section 2.1 of the Single Family Shared-Loss Agreement and provide it to the FDIC if requested for a sample audit.
|
|
6.
|
Do not include late fees, prepayment penalties, or any similar lender fees or charges by the Failed Bank or Assuming Institution to the loan account, any allocation of Assuming Institution’s servicing costs, or any
allocations of Assuming Institution’s general and administrative (G&A) or other operating costs.
|
|
7.
|
The amount of accrued interest that may be added to the balance of the loan is limited to the minimum of:
|
|
|
b.
|
The number of days that the loan is delinquent at the time of restructuring
|
|
|
c.
|
The number of days between the resolution date and the restructuring
|
To calculate accrued
interest, apply the note interest rate that would have been in effect if the loan were performing to the principal balance after application of the last payment made by the borrower.
92
Exhibit 2b(1)
CALCULATION OF LOSS FOR SHORT SALE LOANS
Loan written down to book value prior to Loss Share
|
|
|
|
|
|
|
|
|
1
|
|
Shared-Loss Month:
|
|
|
20090531
|
|
|
2
|
|
Loan #
|
|
|
62201
|
|
|
|
|
|
|
3
|
|
Interest Paid-to-Date
|
|
|
20071130
|
|
|
4
|
|
Short Payoff Date
|
|
|
20090522
|
|
|
5
|
|
Note Interest rate
|
|
|
0.08500
|
|
|
6
|
|
Occupancy
|
|
|
|
|
|
|
|
If owner occupied:
|
|
|
Owner
|
|
|
7
|
|
Household current annual income
|
|
|
45000
|
|
|
8
|
|
Estimated NPV of loan mod
|
|
|
220000
|
|
|
9
|
|
Valuation Date
|
|
|
20090121
|
|
|
10
|
|
Valuation Amount
|
|
|
300000
|
|
|
11
|
|
Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)
|
|
|
Ext
Appraisal
|
|
|
|
|
|
|
|
|
Short-Sale Loss calculation
|
|
|
|
|
|
13
|
|
Book Value
|
|
|
300000
|
|
|
14
|
|
Less: Post closing principal payments
|
|
|
0
|
|
|
17
|
|
Accrued interest, limited to 90 days
|
|
|
6375
|
|
|
18
|
|
Attorney’s fees
|
|
|
75
|
|
|
19
|
|
Foreclosure costs, including title search, filing fees, advertising, etc.
|
|
|
0
|
|
|
20
|
|
Property protection costs, maint., repairs and any costs or expenses relating to environmental conditions
|
|
|
0
|
|
|
21
|
|
Tax and insurance advances
|
|
|
0
|
|
|
|
|
Other Advances
|
|
|
|
|
|
22
|
|
Appraisal/Broker’s Price Opinion fees
|
|
|
250
|
|
|
23
|
|
Inspections
|
|
|
600
|
|
|
24
|
|
Other
|
|
|
0
|
|
|
25
|
|
Incentive to borrower
|
|
|
5000
|
|
|
|
|
|
|
|
|
Gross balance recoverable by Purchaser
|
|
|
312300
|
|
|
|
|
|
|
26
|
|
Amount accepted in Short-Sale (net proceeds)
|
|
|
275000
|
|
|
27
|
|
Hazard Insurance
|
|
|
0
|
|
|
28
|
|
Mortgage Insurance
|
|
|
0
|
|
|
29
|
|
T & I escrow account balance, if positive
|
|
|
0
|
|
|
30
|
|
Other credits, if any (itemize)
|
|
|
0
|
|
|
|
|
|
|
|
|
Total Cash Recovery
|
|
|
275000
|
|
|
|
|
|
|
31
|
|
Gain/Loss Amount
|
|
|
37300
|
|
|
1
|
Costs with respect to environmental remediation activities are limited to $200,000 unless prior consent of the FDIC
|
Line item definitions located in SF Data Submission Handbook
93
Exhibit 2b(2)
CALCULATION OF LOSS FOR SHORT SALE LOANS
No Preceeding Loan Mod under Loss Share
|
|
|
|
|
|
|
|
|
1
|
|
Shared-Loss Month:
|
|
|
20090531
|
|
|
2
|
|
Loan #
|
|
|
58776
|
|
|
|
|
|
|
3
|
|
Interest Paid-to-Date
|
|
|
20080731
|
|
|
4
|
|
Short Payoff Date
|
|
|
20090417
|
|
|
5
|
|
Note Interest rate
|
|
|
0.07750
|
|
|
6
|
|
Occupancy
|
|
|
Owner
|
|
|
|
|
If owner occupied:
|
|
|
|
|
|
7
|
|
Household current annual income
|
|
|
38500
|
|
|
8
|
|
Estimated NPV of loan mod
|
|
|
200000
|
|
|
9
|
|
Valuation Date
|
|
|
20090121
|
|
|
10
|
|
Valuation Amount
|
|
|
300000
|
|
|
11
|
|
Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)
|
|
|
Ext
Appraisal
|
|
|
|
|
Short-Sale Loss calculation
|
|
|
|
|
|
12
|
|
Loan UPB
|
|
|
375000
|
|
|
17
|
|
Accrued interest, limited to 90 days
|
|
|
7266
|
|
|
18
|
|
Attorney’s fees
|
|
|
0
|
|
|
19
|
|
Foreclosure costs, including title search, filing fees, advertising, etc.
|
|
|
400
|
|
|
20
|
|
Property protection costs, maint., repairs and any costs or expenses relating to environmental conditions
|
|
|
1450
|
|
|
21
|
|
Tax and insurance advances
|
|
|
0
|
|
|
|
|
Other Advances
|
|
|
|
|
|
22
|
|
Appraisal/Broker’s Price Opinion fees
|
|
|
350
|
|
|
23
|
|
Inspections
|
|
|
600
|
|
|
24
|
|
Other
|
|
|
0
|
|
|
25
|
|
Incentive to borrower
|
|
|
2000
|
|
|
|
|
|
|
|
|
Gross balance recoverable by Purchaser
|
|
|
387066
|
|
|
|
|
|
|
26
|
|
Amount accepted in Short-Sale (net proceeds)
|
|
|
255000
|
|
|
27
|
|
Hazard Insurance
|
|
|
0
|
|
|
28
|
|
Mortgage Insurance
|
|
|
0
|
|
|
29
|
|
T & I escrow account balance, if positive
|
|
|
0
|
|
|
30
|
|
Other credits, if any (itemize)
|
|
|
0
|
|
|
|
|
Total Cash Recovery
|
|
|
255000
|
|
|
|
|
|
|
31
|
|
Gain/Loss Amount
|
|
|
132066
|
|
|
1
|
Costs with respect to environmental remediation activities are limited to $200,000 unless prior consent of the FDIC
|
Line item definitions located in SF Data Submission Handbook
94
Notes to Exhibits 2b (short sale)
|
1.
|
The data shown are for illustrative purpose. The figures will vary for actual short sales.
|
|
2.
|
The covered loss is the difference between the gross balance recoverable by Purchaser and the total cash recovery. There are two methods of calculation for covered losses from short sales, depending upon the
circumstances. They are shown below:
|
|
|
a.
|
If the loan was restructured when the Loss Share agreement was in place, and then the short sale occurred, use Exhibit 2b(3). This version uses the Net Present Value (NPV) of the modified loan as the starting point
for the covered loss.
|
|
|
b.
|
Otherwise, use Exhibit 2b(2). This version uses the unpaid balance of the loan as of the last payment as the starting point for the covered loss.
|
|
|
c.
|
Use Exhibit 2b(1) for loans written down to book value prior to the shared-loss agreement.
|
|
3.
|
For Exhibit 2b(2), the gross balance recoverable by the purchaser is calculated as the sum of lines 12 – 25; it is shown after line 25. For Exhibit 2b(3), the gross balance recoverable by the purchaser is
calculated as line 15 minus line 16 plus lines 18 – 25; it is shown after line 25.
|
|
4.
|
For Exhibit 2b(2), the total cash recovery is calculated as the sum of lines 26 – 30; it is shown in line 31. For Exhibit 2b(3), the total cash recovery is calculated as the sum of lines 26 – 30; it
is shown after line 30.
|
|
5.
|
Reasonable and customary third party attorney’s fees and expenses incurred by or on behalf of Assuming Institution in connection with any enforcement procedures, or otherwise with respect to such loan, are reported
under Attorney’s fees.
|
|
6.
|
Do not include late fees, prepayment penalties, or any similar lender fees or charges by the Failed Bank or Assuming Institution to the loan account, any allocation of Assuming Institution’s servicing costs, or any
allocations of Assuming Institution’s general and administrative (G&A) or other operating costs.
|
|
7.
|
If Exhibit 2b(3) is used, then no accrued interest may be included as a covered loss. Otherwise, the amount of accrued interest that may be included as a covered loss is limited to the minimum of:
|
|
|
b.
|
The number of days that the loan is delinquent when the property was sold
|
|
|
c.
|
The number of days between the resolution date and the date when the property was sold
|
To
calculate accrued interest, apply the note interest rate that would have been in effect if the loan were performing to the principal balance after application of the last payment made by the borrower.
95
Exhibit 2c(1)
CALCULATION OF FORECLOSURE LOSS
ORE or Foreclosure Occurred Prior to Loss Share Agreement
|
|
|
|
|
|
|
|
|
1
|
|
Shared-Loss Month
|
|
|
20090630
|
|
|
2
|
|
Loan no:
|
|
|
364574
|
|
|
|
|
|
|
3
|
|
Interest Paid-To-Date
|
|
|
20071001
|
|
|
4
|
|
Foreclosure sale date
|
|
|
20080202
|
|
|
5
|
|
Liquidation date
|
|
|
20090412
|
|
|
6
|
|
Note Interest rate
|
|
|
0.08100
|
|
|
10
|
|
Valuation Date
|
|
|
20090121
|
|
|
11
|
|
Valuation Amount
|
|
|
228000
|
|
|
12
|
|
Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)
|
|
|
Int Appr
|
|
|
|
|
|
|
|
|
Foreclosure Loss calculation
|
|
|
|
|
|
13
|
|
Book value at date of Loss Share agreement
|
|
|
244900
|
|
|
14
|
|
Less: Post closing principal payments
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
3306
|
|
|
|
|
|
|
|
|
Costs incurred after Loss Share agreement in place:
|
|
|
|
|
|
19
|
|
Attorney’s fees
|
|
|
0
|
|
|
20
|
|
Foreclosure costs, including title search, filing fees, advertising, etc.
|
|
|
0
|
|
|
21
|
|
Property protection costs, maint. and repairs
|
|
|
6500
|
|
|
22
|
|
Tax and insurance advances
|
|
|
0
|
|
|
|
|
Other Advances
|
|
|
|
|
|
23
|
|
Appraisal/Broker’s Price Opinion fees
|
|
|
0
|
|
|
24
|
|
Inspections
|
|
|
0
|
|
|
25
|
|
Other
|
|
|
0
|
|
|
|
|
Gross balance recoverable by Purchaser
|
|
|
254706
|
|
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
|
|
|
26
|
|
Net liquidation proceeds (from HUD-1 settl stmt)
|
|
|
219400
|
|
|
27
|
|
Hazard Insurance proceeds
|
|
|
0
|
|
|
28
|
|
Mortgage Insurance proceeds
|
|
|
0
|
|
|
29
|
|
T & I escrow account balances, if positive
|
|
|
0
|
|
|
30
|
|
Other credits, if any (itemize)
|
|
|
0
|
|
|
|
|
Total Cash Recovery
|
|
|
219400
|
|
|
|
|
|
|
31
|
|
Gain/Loss Amount
|
|
|
35306
|
|
Line item definitions located in SF Data Submission Handbook
96
Exhibit 2c(2)
CALCULATION OF FORECLOSURE LOSS
During Term of the Agreement
No Preceeding Loan Mod under Loss
Share
|
|
|
|
|
|
|
|
|
1
|
|
Shared-Loss Month
|
|
|
20090531
|
|
|
2
|
|
Loan no:
|
|
|
292334
|
|
|
|
|
|
|
3
|
|
Interest Paid-to-Date
|
|
|
20080430
|
|
|
4
|
|
Foreclosure sale date
|
|
|
20090115
|
|
|
5
|
|
Liquidation date
|
|
|
20090412
|
|
|
6
|
|
Note Interest rate
|
|
|
0.08000
|
|
|
7
|
|
Occupancy
|
|
|
Owner
|
|
|
|
|
If owner occupied:
|
|
|
|
|
|
8
|
|
Household current annual income
|
|
|
42000
|
|
|
9
|
|
Estimated NPV of loan mod
|
|
|
195000
|
|
|
10
|
|
Valuation Date
|
|
|
20090121
|
|
|
11
|
|
Valuation Amount
|
|
|
235000
|
|
|
12
|
|
Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)
|
|
|
Ext BPO
|
|
|
|
|
|
|
|
|
Foreclosure Loss calculation
|
|
|
|
|
|
14
|
|
Loan Principal balance at property reversion Plus:
|
|
|
300000
|
|
|
18
|
|
Accrued interest, limited to 90 days
|
|
|
6000
|
|
|
19
|
|
Attorney’s fees
|
|
|
0
|
|
|
20
|
|
Foreclosure costs, including title search, filing fees, advertising, etc.
|
|
|
4000
|
|
|
21
|
|
Property protection costs, maint. and repairs
|
|
|
5500
|
|
|
22
|
|
Tax and insurance advances
|
|
|
1500
|
|
|
|
|
Other Advances
|
|
|
|
|
|
23
|
|
Appraisal/Broker’s Price Opinion fees
|
|
|
0
|
|
|
24
|
|
Inspections
|
|
|
50
|
|
|
25
|
|
Other
|
|
|
0
|
|
|
|
|
|
|
|
|
Gross balance recoverable by Purchaser
|
|
|
317050
|
|
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
|
|
|
26
|
|
Net liquidation proceeds (from HUD-1 settl stmt)
|
|
|
205000
|
|
|
27
|
|
Hazard Insurance proceeds
|
|
|
0
|
|
|
28
|
|
Mortgage Insurance proceeds
|
|
|
0
|
|
|
29
|
|
T & I escrow account balances, if positive
|
|
|
0
|
|
|
30
|
|
Other credits, if any (itemize)
|
|
|
0
|
|
|
|
|
Total Cash Recovery
|
|
|
205000
|
|
|
|
|
|
|
31
|
|
Gain/Loss Amount
|
|
|
112050
|
|
Line item definitions located in SF Data Submission Handbook
97
Exhibit 2c(3)
CALCULATION OF FORECLOSURE LOSS
Foreclosure after a Covered Loan Mod
|
|
|
|
|
|
|
|
|
1
|
|
Shared-Loss Month
|
|
|
20090531
|
|
|
2
|
|
Loan no:
|
|
|
138554
|
|
|
|
|
|
|
3
|
|
Interest Paid-to-Date
|
|
|
20080430
|
|
|
4
|
|
Foreclosure sale date
|
|
|
20090115
|
|
|
5
|
|
Liquidation date
|
|
|
20090412
|
|
|
6
|
|
Note Interest rate
|
|
|
0.04000
|
|
|
10
|
|
Valuation Date
|
|
|
20081215
|
|
|
11
|
|
Valuation Amount
|
|
|
210000
|
|
|
|
|
|
|
12
|
|
Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)
|
|
|
Ext Appr
|
|
|
|
|
|
|
|
|
Foreclosure Loss calculation
|
|
|
|
|
|
16
|
|
NPV of projected cash flows at loan mod
|
|
|
285000
|
|
|
17
|
|
Less: Post modification principal payments
|
|
|
2500
|
|
|
|
|
Plus:
|
|
|
|
|
|
19
|
|
Attorney’s fees
|
|
|
0
|
|
|
20
|
|
Foreclosure costs, including title search, filing fees, advertising, etc.
|
|
|
4000
|
|
|
21
|
|
Property protection costs, maint. and repairs
|
|
|
7000
|
|
|
22
|
|
Tax and insurance advances
|
|
|
2000
|
|
|
|
|
Other Advances
|
|
|
|
|
|
23
|
|
Appraisal/Broker’s Price Opinion fees
|
|
|
0
|
|
|
24
|
|
Inspections
|
|
|
0
|
|
|
25
|
|
Other
|
|
|
0
|
|
|
|
|
|
|
|
|
Gross balance recoverable by Purchaser
|
|
|
295500
|
|
|
|
|
|
|
|
|
Cash Recoveries:
|
|
|
|
|
|
26
|
|
Net liquidation proceeds (from HUD-1 settl stmt)
|
|
|
201000
|
|
|
27
|
|
Hazard Insurance proceeds
|
|
|
0
|
|
|
28
|
|
Mortgage Insurance proceeds
|
|
|
0
|
|
|
29
|
|
T & I escrow account balances, if positive
|
|
|
0
|
|
|
30
|
|
Other credits, if any (itemize)
|
|
|
0
|
|
|
|
|
Total Cash Recovery
|
|
|
201000
|
|
|
|
|
|
|
31
|
|
Gain/Loss Amount
|
|
|
94500
|
|
Line item definitions located in SF Data Submission Handbook
98
Notes to Exhibits 2c (foreclosure)
|
2.
|
The data shown are for illustrative purpose. The figures will vary for actual restructurings.
|
|
3.
|
The covered loss is the difference between the gross balance recoverable by Purchaser and the total cash recovery. There are three methods of calculation for covered losses from foreclosures, depending upon the
circumstances. They are shown below:
|
|
|
a.
|
If foreclosure occurred prior to the beginning of the Loss Share agreement, use Exhibit 2c(1). This version uses the book value of the REO as the starting point for the covered loss.
|
|
|
b.
|
If foreclosure occurred after the Loss Share agreement was in place, and if the loan was not restructured when the Loss Share agreement was in place, use Exhibit 2c(2). This version uses the unpaid balance of the
loan as of the last payment as the starting point for the covered loss.
|
|
|
c.
|
If the loan was restructured when the Loss Share agreement was in place, and then foreclosure occurred, use Exhibit 2c(3). This version uses the Net Present Value (NPV) of the modified loan as the starting point
for the covered loss.
|
|
4.
|
For Exhibit 2c(1), the gross balance recoverable by the purchaser is calculated as the sum of lines 13 – 25; it is shown after line 25. For Exhibit 2c(2), the gross balance recoverable by the purchaser is
calculated as the sum of lines 14 – 25; it is shown after line 25. For Exhibit 2c(3), the gross balance recoverable by the purchaser is calculated as line 16 minus line 17 plus lines 17 – 25; it is shown after line 25.
|
|
5.
|
For Exhibit 2c(1), the total cash recovery is calculated as the sum of lines 26 – 30; it is shown in line 31. For Exhibit 2c(2), the total cash recovery is calculated as the sum of lines 26 – 30; it
is shown in line 31. For Exhibit 2c(3), the total cash recovery is calculated as the sum of lines 26 – 30; it is shown in line 31.
|
|
6.
|
Reasonable and customary third party attorney’s fees and expenses incurred by or on behalf of Assuming Institution in connection with any enforcement procedures, or otherwise with respect to such loan, are reported
under Attorney’s fees.
|
|
7.
|
Assuming Institution’s (or Third Party Servicer’s) reasonable and customary out-ofpocket costs paid to either a third party or an affiliate (if affiliate is pre-approved by the FDIC) for foreclosure, property
protection and maintenance costs, repairs, assessments, taxes, insurance and similar items are treated as part of the gross recoverable balance, to the extent they are not paid from funds in the borrower’s escrow account. Allowable costs are
limited to amounts per Freddie Mac and Fannie Mae guidelines (as in effect from time to time), where applicable, provided that this limitation shall not apply to costs or expenses relating to environmental conditions.
|
|
8.
|
Do not include late fees, prepayment penalties, or any similar lender fees or charges by the Failed Bank or Assuming Institution to the loan account, any allocation of Assuming Institution’s servicing costs, or any
allocations of Assuming Institution’s general and administrative (G&A) or other operating costs.
|
|
9.
|
If Exhibit 2c(3) is used, then no accrued interest may be included as a covered loss. The amount of accrued interest that may be included as a covered loss on Exhibit 2c(2) is limited to the minimum of:
|
|
|
b.
|
The number of days that the loan is delinquent when the property was sold
|
99
|
|
c.
|
The number of days between the resolution date and the date when the property was sold
|
To
calculate accrued interest, apply the note interest rate that would have been in effect if the loan were performing to the principal balance after application of the last payment made by the borrower.
100
Exhibit 2d(1)
CALCULATION OF LOSS FOR UNRELATED 2ND LIEN
CHARGE-OFF
|
|
|
|
|
|
|
|
|
1
|
|
Shared-Loss Month:
|
|
|
20090531
|
|
|
2
|
|
Loan #
|
|
|
58776
|
|
|
|
|
|
|
3
|
|
Interest paid-to-date
|
|
|
20081201
|
|
|
4
|
|
Charge-Off Date
|
|
|
20090531
|
|
|
5
|
|
Note Interest rate
|
|
|
0.03500
|
|
|
6
|
|
Occupancy
|
|
|
Owner
|
|
|
|
|
If owner occupied:
|
|
|
|
|
|
7
|
|
Household current annual income
|
|
|
0
|
|
|
8
|
|
Valuation Date
|
|
|
20090402
|
|
|
9
|
|
Valuation Amount
|
|
|
230000
|
|
|
10
|
|
Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)
|
|
|
BPO
|
|
|
11
|
|
Balance of superior liens
|
|
|
210000
|
|
|
|
|
|
|
|
|
Charge-Off Loss calculation
|
|
|
|
|
|
12
|
|
Loan Principal balance
|
|
|
55000
|
|
|
13
|
|
Charge-off amount (principal only) Plus:
|
|
|
55000
|
|
|
14
|
|
Accrued interest, limited to 90 days
|
|
|
481
|
|
|
15
|
|
Attorney’s fees
|
|
|
0
|
|
|
16
|
|
Foreclosure costs, including title search, filing fees, advertising, etc.
|
|
|
250
|
|
|
17
|
|
Property protection costs, maint., repairs and any costs or expenses relating to environmental conditions
|
|
|
0
|
|
|
18
|
|
Tax and insurance advances
|
|
|
0
|
|
|
|
|
Other Advances
|
|
|
|
|
|
19
|
|
Appraisal/Broker’s Price Opinion fees
|
|
|
75
|
|
|
20
|
|
Inspections
|
|
|
0
|
|
|
21
|
|
Other
|
|
|
0
|
|
|
|
|
|
|
|
|
Gross balance recoverable by Purchaser
|
|
|
55806
|
|
|
|
|
|
|
22
|
|
Foreclosure sale proceeds
|
|
|
0
|
|
|
23
|
|
Hazard Insurance proceeds
|
|
|
0
|
|
|
24
|
|
Mortgage Insurance proceeds
|
|
|
0
|
|
|
25
|
|
Tax overage
|
|
|
0
|
|
|
26
|
|
Short sale payoff
|
|
|
1500
|
|
|
27
|
|
Other credits, if any (itemize)
|
|
|
0
|
|
|
|
|
|
|
|
|
Total Cash Recovery
|
|
|
1500
|
|
|
|
|
|
|
28
|
|
Loss Amount
|
|
|
54306
|
|
|
1
|
Costs with respect to environmental remediation activities are limited to $200,000 unless prior consent of the FDIC
|
Line item definitions located in SF Data Submission Handbook
101
Exhibit 2d(2)
|
|
|
|
|
|
|
Shared-Loss Month:
|
|
|
|
[input month]
|
|
Loan no.:
|
|
|
|
[input loan no.)
|
NOTE
The
calculation of recovery on a loan for which a Restructuring Loss has been paid will only apply if the loan is sold.
EXAMPLE CALCULATION
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring Loss Information
|
|
|
|
|
|
|
|
|
|
|
|
Loan principal balance before restructuring
|
|
|
|
|
|
$
|
200,000
|
|
|
A
|
|
NPV, restructured loan
|
|
|
|
|
|
|
165,000
|
|
|
B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on restructured loan
|
|
|
|
|
|
$
|
35,000
|
|
|
A – B
|
|
Times FDIC applicable loss share % (80%)
|
|
|
|
|
|
|
80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss share payment to purchaser
|
|
|
|
|
|
$
|
28,000
|
|
|
C
|
|
|
|
|
|
|
Calculation – Recovery amount due to Receiver
|
|
|
|
|
|
|
|
|
|
|
|
Loan sales price
|
|
|
|
|
|
$
|
190,000
|
|
|
|
|
NPV of restructured loan at mod date
|
|
|
|
|
|
|
165,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain - step 1
|
|
|
|
|
|
|
25,000
|
|
|
D
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLUS
|
|
|
|
|
|
|
|
|
|
|
|
Loan UPB after restructuring
|
|
|
(1
|
)
|
|
|
200,000
|
|
|
|
|
Loan UPB at liquidation date
|
|
|
|
|
|
|
192,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain - step 2 (principal collections after restructuring)
|
|
|
|
|
|
|
8,000
|
|
|
E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery amount
|
|
|
|
|
|
|
33,000
|
|
|
D + E
|
|
Times FDIC loss share %
|
|
|
|
|
|
|
80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery due to FDIC
|
|
|
|
|
|
$
|
26,400
|
|
|
F
|
|
|
|
|
|
|
Net loss share paid to purchaser (C – F)
|
|
|
|
|
|
$
|
1,600
|
|
|
|
|
|
|
|
|
|
Proof Calculation
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
Loan principal balance
|
|
|
|
|
|
$
|
200,000
|
|
|
G
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal collections on loan
|
|
|
|
|
|
|
8,000
|
|
|
|
|
Sales price for loan
|
|
|
|
|
|
|
190,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total collections on loan
|
|
|
|
|
|
|
198,000
|
|
|
H
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss on loan
|
|
|
|
|
|
$
|
2,000
|
|
|
G – H
|
|
Times FDIC applicable loss share % (80%)
|
|
|
|
|
|
|
80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss share payment to purchaser
|
|
|
|
|
|
$
|
1,600
|
|
|
|
|
(1)
|
This example assumes that the FDIC loan modification program as shown in Exhibit 5 is applied and the loan restructuring does not result in a reduction in the loan principal balance due from the borrower.
|
|
(2)
|
This proof calculation is provided to illustrate the concept and the Assuming Institution is not required to provide this with its Recovery calculations.
|
102
Exhibit 3
Portfolio Performance and Summary Schedule
SHARED-LOSS LOANS
PORTFOLIO PERFORMANCE AND SUMMARY
SCHEDULE
|
|
|
|
|
|
|
|
|
MONTH ENDED:
|
|
|
|
[input report month]
|
|
|
|
|
|
|
|
|
|
|
|
POOL SUMMARY
|
|
#
|
|
|
$
|
|
|
Loans at Sale Date
|
|
|
xx
|
|
|
|
xx
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans as of this month-end
|
|
|
xx
|
|
|
|
xx
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Total
|
|
PORTFOLIO PERFORMANCE STATUS
|
|
#
|
|
$
|
|
#
|
|
Current
|
|
|
|
|
|
|
|
30 – 59 days past due
|
|
|
|
|
|
|
|
60 – 89 days past due
|
|
|
|
|
|
|
|
90 – 119 days past due
|
|
|
|
|
|
|
|
120 and over days past due
|
|
|
|
|
|
|
|
In foreclosure
|
|
|
|
|
|
|
|
ORE
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo Item:
|
|
|
|
|
|
|
|
Loans in process of restructuring – total
|
|
|
|
|
|
|
|
Loans in bankruptcy
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans in process of restructuring by delinquency status
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
30 - 59 days past due
|
|
|
|
|
|
|
|
60 - 89 days past due
|
|
|
|
|
|
|
|
90 - 119 days past due
|
|
|
|
|
|
|
|
120 and over days past due in foreclosure
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
103
List of Loans Paid Off During Month
List of Loans Sold During Month
104
Exhibit 4
Wire Transfer Instructions
PURCHASER WIRING INSTRUCTIONS
|
|
|
|
|
BANK RECEIVING WIRE
|
|
|
|
|
|
|
9 DIGIT ABA ROUTING NUMBER
|
|
|
|
|
|
|
ACCOUNT NUMBER
|
|
|
|
|
|
|
NAME OF ACCOUNT
|
|
|
|
|
|
|
ATTENTION TO WHOM
|
|
|
|
|
|
|
PURPOSE OF WIRE
|
|
|
FDIC RECEIVER WIRING INSTRUCTIONS
|
|
|
|
|
BANK RECEIVING WIRE
|
|
|
|
|
|
|
SHORT NAME
|
|
|
|
|
|
|
ADDRESS OF BANK RECEIVING WIRE
|
|
|
|
|
|
|
9 DIGIT ABA ROUTING NUMBER
|
|
|
|
|
|
|
ACCOUNT NUMBER
|
|
|
|
|
|
|
NAME OF ACCOUNT
|
|
|
|
|
|
|
ATTENTION TO WHOM
|
|
|
|
|
|
|
PURPOSE OF WIRE
|
|
|
105
EXHIBIT 5
FDIC MORTGAGE LOAN MODIFICATION PROGRAM
Objective
The objective of this FDIC Mortgage Loan
Modification Program (“Program”) is to modify the terms of certain residential mortgage loans so as to improve affordability, increase the probability of performance, allow borrowers to remain in their homes and increase the value of the
loans to the FDIC and assignees. The Program provides for the modification of Qualifying Loans (as defined below) by reducing the borrower’s monthly housing debt to income ratio (“DTI Ratio”) to no more than 31% at the time of the
modification and eliminating adjustable interest rate and negative amortization features.
Qualifying Mortgage Loans
In order for a mortgage loan to be a Qualifying Loan it must meet all of the following criteria, which must be confirmed by the lender:
|
|
•
|
|
The collateral securing the mortgage loan is owner-occupied and the owner’s primary residence; and
|
|
|
•
|
|
The mortgagee has a first priority lien on the collateral; and
|
|
|
•
|
|
Either the borrower is at least 60 days delinquent or a default is reasonably foreseeable.
|
Modification
Process
The lender shall undertake a review of its mortgage loan portfolio to identify Qualifying Loans. For each Qualifying Loan, the lender shall
determine the net present value of the modified loan and, if it will exceed the net present value of the foreclosed collateral upon disposition, then the Qualifying Loan shall be modified so as to reduce the borrower’s monthly DTI Ratio to no
more than 31% at the time of the modification. To achieve this, the lender shall use a combination of interest rate reduction, term extension and principal forbearance, as necessary.
The borrower’s monthly DTI Ratio shall be a percentage calculated by dividing the borrower’s monthly income by the borrower’s monthly housing
payment (including principal, interest, taxes and insurance). For these purpose of the foregoing calculation:
(1) the borrower’s
monthly income shall be defined as the borrower’s (along with any co-borrowers’) income amount before any payroll deductions and includes wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing allowances, other
compensation for personal services, Social Security payments, including Social Security received by adults on behalf of minors or by minors intended for their own support, and monthly income from annuities, insurance policies, retirement funds,
pensions, disability or death benefits, unemployment benefits, rental income and other income. All income information must be documented and verified. If the borrower receives public assistance or collects unemployment, the Assuming Institution must
determine whether the public assistance or unemployment income will continue for at least nine (9) months.
106
(2) the borrower’s monthly housing payment shall be the amount required to pay monthly
principal and interest plus one-twelfth of the then current annual amount required to pay real property taxes and homeowner’s insurance with respect to the collateral.
In order to calculate the monthly principal payment, the lender shall capitalize to the outstanding principal balance of the Qualifying Loan the amount of all
delinquent interest, delinquent taxes, past due insurance premiums, third party fees and (without duplication) escrow advances (such amount, the “Capitalized Balance”).
In order to achieve the goal of reducing the DTI Ratio to 31%, the lender shall take the following steps in the following order of priority with respect to
each Qualifying Loan:
|
|
1.
|
Reduce the interest rate to the then current Freddie Mac Survey Rate for 30-year fixed rate mortgage loans, and adjust the term to 30 years.
|
|
|
2.
|
If the DTI Ratio is still in excess of 31%, reduce the interest rate further, but no lower than 3%, until the DTI ratio of 31% is achieved.
|
|
|
3.
|
If the DTI Ratio is still in excess of 31% after adjusting the interest rate to 3%, extend the remaining term of the loan by 10 years.
|
|
|
4.
|
If the DTI Ratio is still in excess of 31%, calculate a new monthly payment (the “Adjusted Payment Amount”) that will result in the borrower’s monthly DTI Ratio not exceeding 31%. After calculating the
Adjusted Payment Amount, the lender shall bifurcate the Capitalized Balance into two portions – the amortizing portion and the non-amortizing portion. The amortizing portion of the Capitalized Balance shall be the mortgage amount that will
fully amortize over a 40-year term at an annual interest rate of 3% and monthly payments equal to the Adjusted Payment Amount. The non-amortizing portion of the Capitalized Balance shall be the difference between the Capitalized Balance and the
amortizing portion of the Capitalized Balance. If the amortizing portion of the Capitalized Balance is less than 75% of the current estimated value of the collateral, then the lender may choose not to restructure the loan. If the lender chooses to
restructure the loan, then the lender shall forbear on collecting the non-amortizing portion of the Capitalized Balance, and such amount shall be due and payable only upon the earlier of (i) maturity of the modified loan, (ii) a sale of
the property or (iii) a pay-off or refinancing of the loan. No interest shall be charged on the non-amortizing portion of the Capitalized Balance, but repayment shall be secured by a first lien on the collateral.
|
Special Note:
The net present value calculation used to
determine whether a loan should be modified based on the modification process above is distinct and different from the net present value calculation used to determine the covered loss if the loan is modified. Please refer only to the net present
value calculation described in this exhibit for the modification process, with its separate assumptions, when determining whether to provide a modification to a borrower. Separate
107
assumptions may include, without limitation, Assuming Institution’s determination of a probability of default without modification, a probability of default with modification, home price
forecasts, prepayment speeds, and event timing. These assumptions are applied to different projected cash flows over the term of the loan, such as the projected cash flow of the loan performing or defaulting without modification and the projected
cash flow of the loan performing or defaulting with modification.
By contrast, the net present value for determining the covered loss is based on a 10
year period. While the assumptions in the net present value calculation used in the modification process may change, the net present value calculation for determining the covered loss remains constant.
Related Junior Lien Mortgage Loans
In cases where the lender holds a junior lien mortgage loan that is collateralized by the same property that collateralizes a Qualifying Loan
that is modified as described above, the junior lien mortgage loan shall also be modified to enhance overall affordability to the borrower. At a minimum, the lender shall reduce the interest rate on the junior lien mortgage loan to no more than
2% per annum. Further modifications may be made at the lender’s discretion as needed to support affordability and performance of the modified first lien Qualifying Loan.
108
EXHIBIT 4.15B
COMMERCIAL SHARED-LOSS AGREEMENT
This agreement for reimbursement of loss sharing expenses on certain loans and other assets (the “Commercial Shared-Loss Agreement”)
shall apply when the Assuming Institution purchases Shared-Loss Assets as that term is defined herein. The terms hereof shall modify and supplement, as necessary, the terms of the Purchase and Assumption Agreement to which this Commercial
Shared-Loss Agreement is attached as Exhibit 4.15B and incorporated therein. To the extent any inconsistencies may arise between the terms of the Purchase and Assumption Agreement and this Commercial Shared-Loss Agreement with respect to the
subject matter of this Commercial Shared-Loss Agreement, the terms of this Commercial Shared-Loss Agreement shall control. References in this Commercial Shared-Loss Agreement to a particular Section shall be deemed to refer to a Section in this
Commercial Shared-Loss Agreement unless the context indicates that a Section of the Purchase and Assumption Agreement is intended.
ARTICLE I — DEFINITIONS
Capitalized terms used in this Commercial Shared-Loss Agreement that are not defined in this Commercial Shared-Loss Agreement are defined in
the Purchase and Assumption Agreement In addition to the terms defined above, defined below are certain additional terms relating to loss-sharing, as used in this Commercial Shared-Loss Agreement.
“
AAA
” means the American Arbitration Association as provided in Section 2.1(f)(iii) of this Commercial
Shared-Loss Agreement.
“
Accrued Interest
” means, with respect to any Shared-Loss Loan, Permitted
Advance or Shared-Loss Loan Commitment Advance at any time, the amount of earned and unpaid interest, taxes, credit life and/or disability insurance premiums (if any) payable by the Obligor accrued on or with respect to such Shared-Loss Loan,
Permitted Advance or Shared-Loss Loan Commitment Advance, all as reflected on the Accounting Records of the Failed Bank or the Assuming Institution (as applicable);
provided
,
that
Accrued Interest shall not include any amount that
accrues on or with respect to any Shared-Loss Loan, Permitted Advance or Shared-Loss Loan Commitment Advance after that Asset has been placed on non-accrual or nonperforming status by either the Failed Bank or the Assuming Institution (as
applicable).
“
Additional ORE
” means Shared-Loss Loans that become Other Real Estate after Bank
Closing Date.
“
Affiliate
” shall have the meaning set forth in the Purchase and Assumption
Agreement;
provided
,
that
, for purposes of this Commercial Shared-Loss Agreement, no Third Party Servicer shall be deemed to be an Affiliate of the Assuming Institution.
“
Applicable Anniversary of the Commencement Date
” means the fifth (5th) anniversary of the Commencement
Date.
109
“
Calendar Quarter
” means a quarterly period (a) for the first
such period, beginning on the Commencement Date and ending on the last calendar day of either March, June, September or December, whichever is the first to occur after the Commencement Date, and (b) for quarterly periods thereafter, beginning
on the first calendar day of the calendar month immediately after the month that ended the prior period and ending on the last calendar day of each successive three-calendar-month period thereafter (i.e., each March, June, September and December,
starting in the applicable order depending on the ending date of first such period) of any year.
“
Capitalized
Expenditures
” means those expenditures that (i) would be capitalized under generally accepted accounting principles, and (ii) are incurred with respect to Shared-Loss Loans, Other Real Estate, Additional ORE or Subsidiary ORE.
Capitalized Expenditures shall not include expenses related to environmental conditions including, but not limited to, remediation, storage or disposal of any hazardous or toxic substances or any pollutant or contaminant.
“
Charge-Offs
” means, with respect to any Shared-Loss Assets for any period, an amount equal to the aggregate
amount of loans or portions of loans classified as “Loss” under the Examination Criteria, including
(a) charge-offs of
(i) the principal amount of such assets net of unearned interest (including write-downs associated with Other Real Estate, Additional
ORE, Subsidiary ORE or loan modification(s)); and
(ii) Accrued Interest; and
(iii) Capitalized Expenditures; plus
(b) Pre-Charge-Off Expenses incurred on the respective Shared-Loss Loans, all as effected by the Assuming Institution during such period and
reflected on the Accounting Records of the Assuming Institution;
provided
,
that
:
(i) the aggregate amount of Accrued
Interest (including any reversals thereof) for the period after Bank Closing that shall be included in determining the amount of Charge-Offs for any Shared-Loss Loan shall not exceed ninety (90) days’ Accrued Interest; and
(ii) no Charge-Off shall be taken with respect to any anticipated expenditure by the Assuming Institution until such expenditure is actually
incurred; and
(iii) any financial statement adjustments made in connection with the purchase of any Assets pursuant to this Purchase and
Assumption Agreement or any future purchase, merger, consolidation or other acquisition of the Assuming Institution shall not constitute “Charge-Offs”; and
110
(iv) except for Portfolio Sales, the sale or other disposition of Other Real Estate, Additional
ORE or Subsidiary ORE to a Person other than an Affiliate of the Assuming Institution conducted in a commercially reasonable and prudent manner, or any other sales or dispositions consented to by the Receiver, losses incurred on the sale or other
disposition of Shared-Loss Assets or Shared-Loss Securities to any Person shall not constitute Charge-Offs.
“
Commencement Date
” means the first calendar day following Bank Closing.
“
Consumer Loans
” means loans to individuals for household, family and other personal expenditures (including
United States and/or State-guaranteed student loans) but specifically excludes extensions of credit pursuant to a credit card plan or debit card plan.
“
Cumulative Servicing Amount
” means the sum of the Period Servicing Amounts for every consecutive twelve-month
period prior to and ending on the True-Up Measurement Date in respect of each of the Shared-Loss Agreements during which the loss-sharing provisions of the applicable Shared-Loss Agreement is in effect.
“
Cumulative Shared-Loss Payments
” means (i) the aggregate of all of the payments made or payable to the
Assuming Institution under the Shared-Loss Agreements minus (ii) the aggregate of all of the payments made or payable to the Receiver under the Shared-Loss Agreements.
“
Environmental Assessment
” means an assessment of the presence, storage or release of any hazardous or toxic
substance, pollutant or contaminant with respect to the collateral securing a Shared-Loss Loan that has been fully or partially charged off.
“
Examination Criteria
” means the loan classification criteria employed by, or any applicable regulations of,
the Assuming Institution’s Chartering Authority at the time such action is taken, as such criteria may be amended from time to time.
“
Failed Bank Charge-Offs/Write-Downs
” means, with respect to any Asset, an amount equal to the aggregate amount
of reversals or charge-offs of Accrued Interest and charge-offs and writedowns of principal effected by the Failed Bank with respect to that Asset as reflected on the Accounting Records of the Failed Bank.
“
FDIC Party
” has the meaning provided in Section 2.1(f)(ii) of this Commercial Shared-Loss Agreement.
“
Holding Company
” means any company owning Shares of the Assuming Institution that is a holding
company pursuant to the Bank Holding Company Act of 1956, 12 U.S.C. 1841
et seq.
or the Home Owner’s Loan Act, 12 U.S.C. 1461
et seq.
“
Intrinsic Loss Estimate
” means total losses under the shared loss agreements in the amount of Five hundred
sixty-six million dollars ($ 566,000,000.00).
“
Net Charge-Offs
” means, with respect to any period,
an amount equal to the aggregate amount of Charge-Offs for such period less the amount of Recoveries for such period.
111
“
Neutral Member
” has the meaning provided in
Section 2.1(f)(ii) of this Commercial Shared-Loss Agreement.
“
New Shared-Loss Loans
” means
loans that would otherwise be subject to loss sharing under this Commercial Shared-Loss Agreement that were originated after April 7, 2010 and before Bank Closing.
“
Notice of Dispute
” has the meaning provided in Section 2.1(f)(iii) of this Commercial Shared-Loss
Agreement.
“
ORE Subsidiary
” means any Subsidiary of the Assuming Institution that engages solely in
holding, servicing, managing or liquidating interests of a type described in clause (A) of the definition of “Other Real Estate,” which interests have arisen from the collection or settlement of a Shared-Loss Loan.
“
Other Real Estate
” means all of the following (including any of the following fully or partially charged off
the books and records of the Failed Bank or the Assuming Institution) that (i) are owned by the Failed Bank as of Bank Closing and are purchased pursuant to the Purchase and Assumption Agreement or (ii) have arisen subsequent to Bank
Closing from the collection or settlement by the Assuming Institution of a Shared-Loss Loan:
(A) all interests in
real estate (other than Bank Premises and Fixtures), including but not limited to mineral rights, leasehold rights, condominium and cooperative interests, air rights and development rights; and
(B) all other assets (whether real or personal property) acquired by foreclosure or in full or partial satisfaction of
judgments or indebtedness.
“
OTTI Adjustment
” means any other than temporary impairment of the Shared-Loss
Securities, determined pursuant to FAS 115, expressed as a positive number, or reversals of other than temporary impairment, expressed as a negative number (for the avoidance of doubt, normal and customary unrealized mark-to-market changes by reason
of the application of fair value accounting do not qualify for loss sharing payments).
“
OTTI Loss
”
means any other than temporary impairment of the Shared-Loss Securities, determined pursuant to FAS 115, expressed as a positive number (for the avoidance of doubt, normal and customary unrealized mark-to-market changes by reason of the application
of fair value accounting do not qualify for loss sharing payments).
“
Period Servicing Amount
”
means, for any twelve month period with respect to each of the Shared-Loss Agreements during which the loss-sharing provisions of the applicable Shared-Loss Agreement are in effect, the product of (i) the simple average of the principal amount
of Shared-Loss Loans and Shared-Loss Assets (other than the Shared-Loss Securities) (in each case as defined in the Shared-Loss Agreements), as the case may be, at the beginning of such period and at the end of such period times (ii) one
percent (1%).
112
“
Permitted Advance
” means an advance of funds by the Assuming
Institution with respect to a Shared-Loss Loan, or the making of a legally binding commitment by the Assuming Institution to advance funds with respect to a Shared-Loss Loan, that
(i) in the case of such an advance, is actually made, and, in the case of such a commitment, is made and all of the proceeds thereof actually
advanced, within one (1) year after the Commencement Date; and
(ii) does not cause the sum of
(A) the book value of such Shared-Loss Loan as reflected on the Accounting Records of the Assuming Institution after any such advance has
been made by the Assuming Institution;
plus
(B) the unfunded amount of any such commitment made by the Assuming Institution
related thereto, to exceed 110% of the Book Value of such Shared-Loss Loan; and
(iii) is not made with respect to a Shared-Loss Loan with
respect to which
(A) there exists a related Shared-Loss Loan Commitment; or
(B) the Assuming Institution has taken a Charge-Off; and
(iv) is made in good faith, is supported at the time it is made by documentation in the Credit Files and conforms to and is in accordance with
the applicable requirements set forth in Article III of this Commercial Shared-Loss Agreement and with the then effective written internal credit policy guidelines of the Assuming Institution;
provided
,
that
the limitations in
subparagraphs (i), (ii) and (iii) of this definition shall not apply to any such action (other than to an advance or commitment related to the remediation, storage or final disposal of any hazardous or toxic substance, pollutant or
contaminant) that is taken by Assuming Institution in its reasonable discretion to preserve or secure the value of the collateral for such Shared-Loss Loan.
“
Permitted Amendment
” means, with respect to any Shared-Loss Loan Commitment or Shared-Loss Loan, any
amendment, modification, renewal or extension thereof, or any waiver of any term, right, or remedy thereunder, made by the Assuming Institution in good faith and otherwise in accordance with the applicable requirements set forth in Article III
of this Commercial Shared-Loss Agreement and the then effective written internal credit policy guidelines of the Assuming Institution;
provided
,
that
:
(i) with respect to a Shared-Loss Loan Commitment or a Shared-Loss Loan that is not a revolving line of credit, no such amendment,
modification, renewal, extension, or waiver, except as allowed under the definition of Permitted Advance, shall operate to increase the amount of principal (A) then remaining available to be advanced by the Assuming Institution under the
Shared-Loss Loan Commitment or (B) then outstanding under the Shared-Loss Loan;
113
(ii) with respect to a Shared-Loss Loan Commitment or a Shared-Loss Loan that is a revolving line
of credit, no such amendment, modification, renewal, extension, or waiver, except as allowed under the definition of Permitted Advance, shall operate to increase the maximum amount of principal authorized as of Bank Closing to be outstanding at any
one time under the underlying revolving line of credit relationship with the debtor (regardless of the extent to which such revolving line of credit may have been funded as of Bank Closing or may subsequently have been funded and/or repaid); and
(iii) no such amendment, modification, renewal, extension or waiver shall extend the term of such Shared-Loss Loan Commitment or
Shared-Loss Loan beyond the end of the final Shared-Loss Quarter unless the term of such Shared-Loss Loan Commitment or Shared-Loss Loan as existed on Bank Closing was beyond the end of the final Shared-Loss Quarter, in which event no such
amendment, modification, renewal, extension or waiver shall extend such term beyond the term as existed as of Bank Closing.
“
Pre-Charge-Off Expenses
” means those expenses incurred in the usual and prudent management of a Shared-Loss
Loan that would qualify as a Reimbursable Expense or Recovery Expense if incurred after a Charge-Off of the related Shared-Loss Asset had occurred.
“
Quarterly Certificate
” has the meaning provided in Section 2.1(a)(i) of this Commercial Shared-Loss
Agreement.
“
Recoveries
” shall mean the following:
(i)
Generally
.
(A) In addition to any sums to be applied as Recoveries pursuant to subparagraph (ii) below, “Recoveries” means, with respect to
any period, the sum of (without duplication):
(1) the amount of collections during such period by the Assuming Institution on Charge-Offs
of Shared-Loss Assets effected by the Assuming Institution prior to the end of the final Shared-Loss Quarter;
plus
(2) the amount
of collections during such period by the Assuming Institution on Failed Bank Charge-Offs/Write-Downs;
plus
(3) the amount of gain
on any sale or other disposition during such period by the Assuming Institution of Shared Loss Loans, Other Real Estate, Additional ORE or Subsidiary ORE (
provided
,
that
the amount of any such gain included in Recoveries shall not
exceed the aggregate amount of the related Failed Bank Charge-Offs/Write-Downs and Charge-Offs taken and any related Reimbursable Expenses and Recovery Expenses);
plus
(4) the amount of collections during such period by the Assuming Institution of any Reimbursable Expenses or Recovery Expenses;
plus
(5) the amount of any fee or other consideration received by the Assuming Institution during or prior to such period in connection with
any amendment, modification, renewal, extension, refinance, restructure, commitment or other similar action taken by the Assuming Institution with respect to a Shared-Loss Asset with respect to which there exists a
114
Failed Bank Charge-Off/Write-Down or a Shared-Loss Loan as to which a Charge-Off has been effected by the Assuming Institution during or prior to such period (
provided
,
that
the
amount of any such fee or other consideration included in Recoveries shall not exceed the aggregate amount of the related Failed Bank Charge-Offs/Write-Downs and Charge-Offs taken and any related Reimbursable Expenses and Recovery Expenses).
(B)
Order of Application
.
For the purpose of determining the amounts to be applied as Recoveries pursuant to subparagraph
(A) above, the Assuming Institution shall apply amounts received on the Assets that are not otherwise applied to reduce the book value of principal of a Shared-Loss Loan (or, in the case of Other Real Estate, Additional ORE, Subsidiary ORE and
Capitalized Expenditures, that are not otherwise applied to reduce the book value thereof) in the following order: first to Charge-Offs and Failed Bank Charge-Offs/Write Downs; then to Reimbursable Expenses and Recovery Expenses; then to interest
income; and then to other expenses incurred by the Assuming Institution.
(ii)
Interest Income as Recoveries
.
If
there occurs an amendment, modification, renewal, extension, refinance, restructure, commitment, sale or other similar action with respect to a Shared-Loss Loan as to which there exists a Failed Bank Charge-Off/Write Down or as to
which a Charge-Off has been effected by the Assuming Institution during or prior to such period,
and
if
, as a result of such occurrence, the Assuming Institution recognizes any interest income for financial accounting purposes on that
Shared-Loss Loan,
then
“Recoveries” shall also include the portion of the total amount of any such interest income recognized by the Assuming Institution which is derived by
multiplying
:
(A) the total amount of any such interest income recognized by the Assuming Institution during such period with respect to that Shared-Loss
Loan as described above,
by
(B) a fraction, the
numerator
of which is the aggregate principal amount (excluding reversals or
charge-offs of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and Charge-Offs effected by the Assuming Institution with respect to that Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has not yet been
charged-off but has been placed on nonaccrual status, all of which occurred at any time prior to or during the period in which the interest income referred to in subparagraph (II)(A) immediately above was recognized, and the
denominator
of
which is the total amount of principal indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs and Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan as of the end of such period;
provided
,
however
, that the amount of any interest income included as Recoveries for a particular Shared-Loss Loan shall not exceed the
aggregate amount of (x) Failed Bank Charge-Offs/Write-Downs, (y) Charge-Offs effected by the Assuming Institution during or prior to the period in which the amount of Recoveries is being determined, plus (z) any Reimbursable Expenses
and Recovery Expenses paid to the Assuming Institution pursuant to this Commercial Shared-Loss Agreement during or prior to the period in which the amount of Recoveries is being determined, all with respect to that particular Shared-Loss Loan; and,
provided
,
further
,
that
any collections on any such Shared-Loss Loan that are
not
applied to reduce book value of principal or recognized as interest income shall be applied pursuant to subparagraph (i) above.
115
(iii)
Exceptions to Recoveries
.
Notwithstanding subparagraphs (i) and
(ii) above, the term “Recoveries” shall not include:
(A) any amounts paid to the Assuming Institution by the Receiver
pursuant to Section 2.1 of this Commercial Shared-Loss Agreement;
(B) amounts received with respect to Charge-Offs effected by the
Assuming Institution after the final Shared-Loss Quarter;
(C) after the final Shared-Loss Quarter, income received by the Assuming
Institution from the operation of, and any gains recognized by the Assuming Institution on the disposition of, Other Real Estate, Additional ORE or Subsidiary ORE (such income and gains being hereinafter together referred to as “ORE
Income”),
except
to the extent that aggregate ORE Income exceeds the aggregate expenses paid to third parties by or on behalf of the Assuming Institution after the final Shared-Loss Quarter to manage, operate and maintain Other Real
Estate, Additional ORE or Subsidiary ORE (such expenses being hereinafter referred to as “ORE Expenses”). In determining the extent aggregate ORE Income exceeds aggregate ORE Expenses for any Recovery Quarter, the Assuming Institution will
subtract
(1) ORE Expenses paid to third parties during such Recovery Quarter (provided, that, in the case of the final Recovery Quarter
only, the Assuming Institution will subtract ORE Expenses paid to third parties from the beginning of the final Recovery Quarter up to the date the Assuming Institution is required to deliver the final Quarterly Certificate pursuant to this
Commercial Shared-Loss Agreement),
from
(2) ORE Income received during such Recovery Quarter, to calculate net ORE income
(“Net ORE Income”) for that Recovery Quarter. If the amount of Net ORE Income so calculated for a Recovery Quarter is positive, such amount shall be reported as Recoveries on the Quarterly Certificate for such Recovery Quarter.
If the amount of Net ORE Income so calculated for a Recovery Quarter is negative (“Net ORE Loss Carryforward”), such amount shall be
added to any ORE Expenses paid to third parties in the next succeeding Recovery Quarter, which sum shall then be subtracted from ORE Income for that next succeeding Recovery Quarter, for the purpose of determining the amount of Net ORE Income (or,
if applicable, Net ORE Loss Carryforward) for that next succeeding Recovery Quarter. If, as of the end of the final Recovery Quarter, a Net ORE Loss Carryforward exists, then the amount of the Net ORE Loss Carryforward that does
not
exceed
the aggregate amount of Net ORE Income reported as Recoveries on Quarterly Certificates for
all
Recovery Quarters may be included as a Recovery Expense on the Quarterly Certificate for the final Recovery Quarter.
“
Recovery Amount
” has the meaning provided in Section 2.1(b)(ii) of this Commercial Shared-Loss Agreement.
116
“
Recovery Expenses
” means, for any Recovery Quarter, the amount of
actual, reasonable and necessary out-of-pocket expenses (other than Capitalized Expenditures) paid to third parties (other than Affiliates of the Assuming Institution) by or on behalf of the Assuming Institution, as limited by Sections 3.2(c)
and (d) of Article III to this Commercial Shared-Loss Agreement, to recover amounts owed with respect to:
(i) any Shared-Loss
Asset as to which a Charge-Off was effected prior to the end of the final Shared-Loss Quarter (provided that such amounts were incurred no earlier than the date the first Charge-Off on such Shared-Loss Asset could have been reflected on the
Accounting Records of the Assuming Institution); and
(ii) Failed Bank Charge-Offs/Write-Downs (including, in each case, all costs and
expenses related to an Environmental Assessment and any other costs or expenses related to any environmental conditions with respect to the Shared-Loss Assets (it being understood that any remediation expenses for any such pollutant or contaminant
are not recoverable if in excess of $200,000 per Shared-Loss Asset, without the Assuming Institution having obtained the prior consent of the Receiver for such expenses).
Provided
,
that
, so long as income with respect to a Shared-Loss Loan is being prorated pursuant to the arithmetical formula in
subsection (ii) of the definition of “Recoveries”, the term “Recovery Expenses” shall not include that portion of any such expenses paid during such Recovery Quarter to recover any amounts owed on that Shared-Loss Loan that
is derived by:
subtracting
(1) the product derived by
multiplying
:
(A) the total amount of any such expenses paid by or on behalf of the Assuming Institution during such Recovery Quarter with respect to that
Shared-Loss Loan,
by
(B) a fraction, the
numerator
of which is the aggregate principal amount (excluding reversals or
charge-offs of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and Charge-Offs effected by the Assuming Institution with respect to that Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has not yet been
charged-off but has been placed on nonaccrual status, all of which occurred at any time prior to or during the period in which the interest income referred to in subparagraph (ii)(A) of the definition of “Recoveries” was recognized, and
the
denominator
of which is the total amount of principal indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs and Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan as of the end of such
period;
from
(2) the total amount of any such expenses paid during that Recovery Quarter with respect to that Shared-Loss
Loan.
“
Recovery Quarter
” has the meaning provided in Section 2.1(a)(ii) of this Commercial Shared-Loss
Agreement.
117
“
Reimbursable Expenses
” means, for any Shared-Loss Quarter, the amount of
actual, reasonable and necessary out-of-pocket expenses (other than Capitalized Expenditures), paid to third parties (other than Affiliates of the Assuming Institution) by or on behalf of the Assuming Institution, as limited by Sections 3.2(c)
and (d) of Article III of this Commercial Shared-Loss Agreement, to:
(i) recover amounts owed with respect to any Shared-Loss
Asset as to which a Charge-Off has been effected prior to the end of the final Shared-Loss Quarter (provided that such amounts were incurred no earlier than the date the first Charge-Off on such Shared-Loss Asset could have been reflected on the
Accounting Records of the Assuming Institution) and recover amounts owed with respect to Failed Bank Charge-Offs/Write-Downs (including, in each case, all costs and expenses related to an Environmental Assessment and any other costs or expenses
related to any environmental conditions with respect to the Shared-Loss Assets (it being understood that any such remediation expenses for any such pollutant or contaminant are not recoverable if in excess of $200,000 per Shared-Loss Asset, without
the Assuming Institution having obtained the prior consent of the Receiver for such expenses);
provided
,
that
, so long as income with respect to a Shared-Loss Loan is being pro-rated pursuant to the arithmetical formula in subsection
(II) of the definition of “Recoveries”, the term “Reimbursable Expenses” shall
not
include that portion of any such expenses paid during such Shared-Loss Quarter to recover any amounts owed on that Shared-Loss Loan that is
derived by:
subtracting
(1) the product derived by
multiplying
:
(A) the total amount of any such expenses paid by or on behalf of the Assuming Institution during such Shared-Loss Quarter with respect to that
Shared-Loss Loan,
by
(B) a fraction, the
numerator
of which is the aggregate principal amount (excluding reversals or
charge-offs of Accrued Interest) of all such Failed Bank Charge-Offs/Write-Downs and Charge-Offs effected by the Assuming Institution with respect to that Shared-Loss Loan plus the principal amount of that Shared-Loss Loan that has not yet been
charged-off but has been placed on nonaccrual status, all of which occurred at any time prior to or during the period in which the interest income referred to in subparagraph (II)(A) of the definition of “Recoveries” was recognized, and
the
denominator
of which is the total amount of principal indebtedness (including all such prior Failed Bank Charge-Offs/Write-Downs and Charge-Offs as described above) due from the Obligor on that Shared-Loss Loan as of the end of such
period;
from
(2) the total amount of any such expenses paid during that Shared-Loss Quarter with respect to that Shared-Loss
Loan;
(ii) manage, operate or maintain Other Real Estate, Additional ORE or Subsidiary ORE
less
the amount of any income received
by the Assuming Institution during such Shared-Loss Quarter with respect to such Other Real Estate, Additional ORE or Subsidiary ORE (which resulting amount under this clause (ii) may be negative);
(iii) litigation expenses with respect to Shared-Loss Assets.
118
“
Review Board
” has the meaning provided in Section 2.1(f)(i) of this
Commercial Shared-Loss Agreement.
“
Shared-Loss Amount
” has the meaning provided in Section 2.1(b)(i) of this
Commercial Shared-Loss Agreement.
“
Shared-Loss Asset Repurchase Price
” means, with respect to any Shared-Loss
Asset, the principal amount thereof plus any other fees or penalties due from an Obligor (including, subject to the limitations discussed below, the amount of any Accrued Interest) stated on the Accounting Records of the Assuming Institution, as of
the date as of which the Shared-Loss Asset Repurchase Price is being determined (regardless, in the case of a Shared-Loss Loan, of the Legal Balance thereof) plus all Reimbursable Expenses and Recovery Expenses incurred up to and through the date of
consummation of purchase of such Shared- Loss Asset;
provided
,
that
(i) in the case of a Shared-Loss Loan there shall be excluded from such amount the amount of any Accrued Interest accrued on or with respect to such Shared-Loss
Loan prior to the ninety (90)-day period ending on the day prior to the purchase date determined pursuant to Sections 2.1(e)(i) or 2.1(e)(iii) of this Commercial Shared-Loss Agreement, except to the extent such Accrued Interest was included in
the Book Value of such Shared-Loss Loan, and (ii) any collections on a Shared-Loss Loan received by the Assuming Institution after the purchase date applicable to such Shared-Loss Loan shall be applied (without duplication) to reduce the
Shared-Loss Asset Repurchase Price of such Shared-Loss Loan on a dollar-for-dollar basis. For purposes of determining the amount of unpaid interest which accrued during a given period with respect to a variable-rate Shared-Loss Loan, all collections
of interest shall be deemed to be applied to unpaid interest in the chronological order in which such interest accrued.
“
Shared-Loss Assets
” means Shared-Loss Loans, Other Real Estate purchased by the Assuming Institution, Additional ORE,
Subsidiary ORE and Capitalized Expenditures, but does not include Shared-Loss Securities.
“
Shared-Loss Loan
Commitment
” means:
(i) any Commitment to make a further extension of credit or to make a further advance with respect to an
existing Shared-Loss Loan; and
(ii) any Shared-Loss Loan Commitment (described in subparagraph (i) immediately preceding) with
respect to which the Assuming Institution has made a Permitted Amendment.
“
Shared-Loss Loan Commitment Advance
”
means an advance pursuant to a Shared-Loss Loan Commitment with respect to which the Assuming Institution has
not
made a Permitted Advance.
“
Shared-Loss Loans
” means:
(i) (A) Loans purchased by the Assuming Institution pursuant to the Purchase and Assumption Agreement set forth on Schedule 4.15(b) to the
Purchase and Assumption Agreement;
119
(B) New Shared-Loss Loans purchased by the Assuming Institution pursuant to the Purchase and
Assumption Agreement;
(C) Permitted Advances;
(D) Shared-Loss Loan Commitment Advances, if any;
provided
,
that
Shared-Loss Loans shall not include Loans, New Shared-Loss
Loans, Permitted Advances and Shared-Loss Loan Commitment Advances with respect to which an Acquired Subsidiary, or a constituent Subsidiary thereof, is an Obligor;
(E) Loans owned by any Acquired Subsidiary which are not Shared-Loss Loans under the Single Family Shared-Loss Agreement;
(F) Consumer Loans, but does not include the Consumer Loans specified on Schedule 4.15D and in the related Excel spreadsheet supplied
electronically; and,
(G) Notwithstanding the above, not Loans of whatever nature specified on Schedule 4.15D.
(ii) any Shared-Loss Loans (described in subparagraph (i) immediately preceding) with respect to which the Assuming Institution has made
a Permitted Amendment.
“
Shared-Loss Securities
” means those securities and other assets listed on
Exhibit 4.15(C).
“
Shared-Loss Payment Trigger
” means when the sum of the Cumulative Loss Amount under this
Single Family Shared-Loss Agreement and the cumulative Shared-Loss Amounts under the Commercial Shared-Loss Agreement, exceeds the First Loss Tranche. If the First Loss Tranche is zero or a negative number, the Shared Loss Payment Trigger shall be
deemed to have been reached upon Bank Closing.
“
Shared-Loss Quarter
” has the meaning provided in
Section 2.1(a)(i) of this Commercial Shared-Loss Agreement.
“
Shares
” means common stock and any instrument
which by its terms is currently convertible into common stock, or which may become convertible into common stock.
“
SLS Net
Realized Gain
” means the net realized gain on the sale of a Shared Loss Security determined pursuant to FAS 115, expressed as a negative number on the Quarterly Certificate.
“
SLS Net Realized Loss
” means the net realized loss on the sale of a Shared Loss Security determined pursuant to FAS
115, expressed as a positive number on the Quarterly Certificate.
“
Subsidiary ORE
” means all assets owned by ORE
Subsidiaries that would constitute ORE or Additional ORE if such assets were on the books of the Assuming Institution.
“
Termination Date
” means the eighth (8th) anniversary of the Commencement Date.
120
“
Third Party Servicer
” means any servicer appointed from time to time by
the Assuming Institution or any Affiliate of the Assuming Institution to service the Shared-Loss Assets on behalf of the Assuming Institution, the identity of which shall be given to the Receiver prior to or concurrent with the appointment thereof.
ARTICLE II — SHARED-LOSS ARRANGEMENT
2.1
Shared-Loss Arrangement.
(a)
Quarterly Certificates
. (i) Not later than thirty (30) days after the end of each Calendar Quarter from and
including the initial Calendar Quarter to and including the Calendar Quarter in which the Applicable Anniversary of the Commencement Date falls (each of such Calendar Quarters being referred to herein as a “Shared-Loss Quarter”), the
Assuming Institution shall deliver to the Receiver a certificate, signed by the Assuming Institution’s chief executive officer and its chief financial officer, setting forth in such form and detail as the Receiver may specify (a “Quarterly
Certificate”)(an example of a Quarterly Certificate is attached as Exhibit 1):
(A) the amount of Charge-Offs,
the amount of Recoveries and the amount of Net Charge-Offs (which amount may be negative) during such Shared-Loss Quarter with respect to the Shared-Loss Assets (and for Recoveries, with respect to the Assets for which a chargeoff was effected by
the Failed Bank prior to Bank Closing); and
(B) the aggregate amount of Reimbursable Expenses (which amount may be
negative) during such Shared-Loss Quarter; and
(C) SLS Net Realized Loss and SLS Net Realized Gain, if any; and
(D) any OTTI Adjustment.
(ii) Not later than thirty (30) days after the end of each Calendar Quarter from and including the first Calendar Quarter following the
final Shared-Loss Quarter to and including the Calendar Quarter in which the Termination Date falls (each of such Calendar Quarters being referred to herein as a “Recovery Quarter”), the Assuming Institution shall deliver to the Receiver a
Quarterly Certificate setting forth, in such form and detail as the Receiver may specify
(A) the amount of Recoveries and
Recovery Expenses during such Recovery Quarter. On the Quarterly Certificate for the
first Recovery Quarter only
, the Assuming Institution may report as a separate item, in such form and detail as the Receiver may specify, the aggregate
amount of any Reimbursable Expenses that: (a) were incurred prior to or during the final Shared-Loss Quarter,
and
(b) had not been included in any Quarterly Certificate for any Shared-Loss Quarter because they had not been actually
paid by or on behalf of the Assuming Institution (in accordance with the terms of this Commercial Shared-Loss Agreement) during any Shared-Loss Quarter
and
(c) were actually paid by or on behalf of the Assuming Institution (in accordance
with the terms of this Commercial Shared-Loss Agreement) during the first Recovery Quarter; and
121
(B) SLS Net Realized Gain, and any reversals of OTTI Loss.
(b)
Payments With Respect to Shared-Loss Assets
.
(i) For purposes of this Section 2.1(b), the Assuming Institution shall initially record the Shared-Loss Assets on its Accounting Records
at Book Value, and initially record the Shared-Loss Securities on its Accounting Records at Book Value, and adjust such amounts as such values may change after the Bank Closing. If the amount of all Net Charge-Offs during any Shared-Loss Quarter
plus
Reimbursable Expenses,
plus
SLS Net Realized Gain and SLS Net Realized Loss,
plus
the OTTI Adjustment during such Shared-Loss Quarter (the “Shared-Loss Amount”) is positive, then, except as provided in
Sections 2.1(c) and (e) below, and subject to the provisions of Section 2.1(b)(vi) below, not later than fifteen (15) days after the date on which the Receiver receives the Quarterly Certificate with respect to such Shared-Loss
Quarter, the Receiver shall pay to the Assuming Institution an amount equal to eighty percent (80%) of the Shared-Loss Amount for such Shared-Loss Quarter. If the Shared-Loss Amount during any Shared-Loss Quarter is negative, the Assuming
Institution shall pay to the Receiver an amount equal to eighty percent (80%) of the Shared-Loss Amount for such Shared-Loss Quarter, which payment shall be delivered to the Receiver together with the Quarterly Certificate for such Shared-Loss
Quarter.
(ii) (A) If the amount of gross Recoveries during any Recovery Quarter
less
Recovery Expenses during such Recovery
Quarter plus SLS Net Realized Gains and reversals of OTTI Loss on Shared-Loss Securities (the “Recovery Amount”) is positive, then, simultaneously with its delivery of the Quarterly Certificate with respect to such Recovery Quarter, the
Assuming Institution shall pay to the Receiver an amount equal to eighty percent (80%) of the Recovery Amount for such Recovery Quarter.
(B) If the Recovery Amount is negative, then such negative amount shall be subtracted from the amount of gross Recoveries during the next
succeeding Recovery Quarter in determining the Recovery Amount in such next succeeding Recovery Quarter;
provided
,
that
this Section 2.1(b)(ii) shall operate successively in the event that the Recovery Amount (after giving effect
to this Section 2.1(b)(ii)) in such next succeeding Recovery Quarter is negative.
(C) The Assuming Institution shall specify, in
the Quarterly Certificate for the final Recovery Quarter, the aggregate amount for all Recovery Quarters only, as of the end of, and including, the final Recovery Quarter of (A) Recoveries plus SLS Net Realized Gains and reversals of OTTI Loss
on Shared-Loss Securities (“Aggregate Recovery Period Recoveries”), (B) Recovery Expenses (“Aggregate Recovery Expenses”), and (C)
only
those Recovery Expenses that have been actually “offset” against
Aggregate Recovery Period Recoveries (including those so “offset” in that final Recovery Quarter) (“Aggregate Offset Recovery Expenses”); as used in this sentence, the term “offset” means the amount that has been
applied to reduce gross Recoveries in any Recovery Quarter pursuant to the methodology set forth in this Section 2.1(b)(ii). If, at the end of the final Recovery Quarter the amount of Aggregate Recovery Expenses exceeds the amount of Aggregate
Recovery Period Recoveries, the Receiver shall have no obligation to pay to the Assuming Institution all or any portion of such excess.
122
(D) Subsequent to the Assuming Institution’s calculation of the Recovery Amount (if any)
for the final Recovery Quarter, the Assuming Institution shall also show on the Quarterly Certificate for the final Recovery Quarter the results of the following three mathematical calculations: (i) Aggregate Recovery Period Recoveries
minus
Aggregate Offset Recovery Expenses; (ii) Aggregate Recovery Expenses
minus
Aggregate Offset Recovery Expenses; and (iii) the
lesser
of the two amounts calculated in (i) and (ii) immediately above
(“Additional Recovery Expenses”)
multiplied by
80% (the amount so calculated in (iii) being defined as the “Additional Recovery Expense Amount”). If the Additional Recovery Expense Amount is greater than zero, then
the Assuming Institution may request in the Quarterly Certificate for the final Recovery Quarter that the Receiver reimburse the Assuming Institution the amount of the Additional Recovery Expense Amount and the Receiver shall pay to the Assuming
Institution the Additional Recovery Expense Amount within fifteen (15) days after the date on which the Receiver receives that Quarterly Certificate.
(E) On the Quarterly Certificate for the final Recovery Quarter only, the Assuming Institution may include, in addition to any Recovery
Expenses for that Recovery Quarter that were paid by or on behalf of the Assuming Institution in that Recovery Quarter, those Recovery Expenses that: (a) were incurred prior to or during the final Recovery Quarter,
and
(b) had
not
been included in any Quarterly Certificate for any Recovery Quarter because they had not been actually paid by or on behalf of the Assuming Institution (in accordance with the terms of this Commercial Shared-Loss Agreement) during any
Recovery Quarter,
and
(c) were actually paid by or on behalf of the Assuming Institution (in accordance with the terms of this Commercial Shared-Loss Agreement) prior to the date the Assuming Institution is required to deliver that final
Quarterly Certificate to the Receiver under the terms of Section 2.1(a)(ii).
(iii) With respect to each Shared-Loss Quarter and
Recovery Quarter, collections by or on behalf of the Assuming Institution on any charge-off effected by the Failed Bank prior to Bank Closing on an Asset other than a Shared-Loss Asset or Shared-Loss Securities shall be reported as Recoveries under
this Section 2.1 only to the extent such collections exceed the Book Value of such Asset, if any. For any Shared-Loss Quarter or Recovery Quarter in which collections by or on behalf of the Assuming Institution on such Asset are applied to both
Book Value and to a charge-off effected by the Failed Bank prior to Bank Closing, the amount of expenditures incurred by or on behalf of the Assuming Institution attributable to the collection of any such Asset, that shall be considered a
Reimbursable Expense or a Recovery Expense under this Section 2.1 will be limited to a proportion of such expenditures which is equal to the proportion derived by dividing (A) the amount of collections on such Asset applied to a charge-off
effected by the Failed Bank prior to Bank Closing, by (B) the total collections on such Assets. With respect to Assets that were completely charged off by the Failed Bank and had a zero Book Value at Bank Closing, for the purpose of calculating
the payments under this Section 2.1(b) for Recoveries on those Assets for each such quarter, the Assuming Institution shall pay an amount equal to fifty percent (50%) of the Recoveries on Failed Bank Charge-Offs/Write-Downs with respect to
such Assets, and shall separately account for the other computations on those Recoveries under this Section 2.1(b) using fifty percent (50%) (and not eighty percent (80%)).
123
(iv) If the Assuming Institution has duly specified an amount of Reimbursable Expenses on the
Quarterly Certificate for the first Recovery Quarter as described above in Section 2.1(a)(ii)(E), then, not later than fifteen (15) days after the date on which the Receiver receives that Quarterly Certificate, the Receiver shall pay to
the Assuming Institution an amount equal to eighty percent (80%) of the amount of such Reimbursable Expenses.
(v) If the First Loss
Tranche as determined under the Purchase and Assumption Agreement is a positive number, Receiver has no obligation to make payment for any Shared Loss Quarters until the Shared-Loss Payment Trigger is satisfied.
(vi) Payments from the Receiver with respect to this Commercial Shared-Loss Agreement are administrative expenses of the Receiver. To the
extent the Receiver needs funds for shared-loss payments respect to this Commercial Shared-Loss Agreement, the Receiver shall request funds under the Master Loan and Security Agreement, as amended (“MLSA”), from FDIC in its corporate
capacity. The Receiver will not agree to any amendment of the MLSA that would prevent the Receiver from drawing on the MLSA to fund shared-loss payments.
(c)
Limitation on Shared-Loss Payment
.
The Receiver shall not be required to make any payments pursuant to this Section 2.1
with respect to any Charge-Off of a Shared-Loss Asset that the Receiver or the Corporation determines, based upon the Examination Criteria, should not have been effected by the Assuming Institution;
provided
, (x) the Receiver must
provide notice to the Assuming Institution detailing the grounds for not making such payment, (y) the Receiver must provide the Assuming Institution with a reasonable opportunity to cure any such deficiency and (z) (1) to the extent
curable, if cured, the Receiver shall make payment with respect to any properly effected Charge-Off and (2) to the extent not curable, the Receiver shall make a payment as to all Charge-Offs (or portion of Charge-Offs) that were effected which
would have been payable as a Charge-Off if the Assuming Institution had properly effected such Charge-Off. In the event that the Receiver does not make any payments with respect to any Charge-Off of a Shared-Loss Asset pursuant to this
Section 2.1 or determines that a payment was improperly made, the Assuming Institution and the Receiver shall, upon final resolution, make such accounting adjustments and payments as may be necessary to give retroactive effect to such
corrections. Failure to administer any Shared-Loss Asset or Assets, or Shared-Loss Securities, in accordance with Article III shall at the discretion of the Receiver constitute grounds for the loss of shared loss coverage with respect to such
Shared-Loss Loan or Loans.
(d)
Sale of, or Additional Advances or Amendments with Respect to, Shared-Loss Loans and Administration
of Related Loans
.
No Shared-Loss Loan shall be treated as a Shared-Loss Asset pursuant to this Section 2.1 (i) if the Assuming Institution sells or otherwise transfers such Shared-Loss Loan or any interest therein (whether with or
without recourse) to any Person, (ii) after the Assuming Institution makes any additional advance, commitment or increase in the amount of a commitment with respect to such Shared-Loss Loan that does not constitute a Permitted Advance or a
Shared-Loss Loan Commitment Advance, (iii) after the Assuming Institution makes any amendment, modification, renewal or extension to such
124
Shared-Loss Loan that does not constitute a Permitted Amendment, or (iv) after the Assuming Institution has managed, administered or collected any “Related Loan” (as such term is
defined in Section 3.4 of Article III of this Commercial Shared-Loss Agreement) in any manner which would have the effect of increasing the amount of any collections with respect to the Related Loan to the detriment of such Shared-Loss
Asset to which such loan is related;
provided
,
that
any such Shared-Loss Loan that has been the subject of Charge-Offs prior to the taking of any action described in clause (i), (ii), (iii) or (iv) of this Section 2.1(d)
by the Assuming Institution shall be treated as a Shared-Loss Asset pursuant to this Section 2.1 solely for the purpose of treatment of Recoveries on such Charge-Offs until such time as the amount of Recoveries with respect to such Shared-Loss
Asset equals such Charge-Offs.
(e)
Option to Purchase
.
(i) In the event that the Assuming Institution determines that there is a substantial likelihood that continued efforts to collect a
Shared-Loss Asset or an Asset for which a charge-off was effected by the Failed Bank with, in either case, a Legal Balance of $5,000,000 or more on the Accounting Records of the Assuming Institution will result in an expenditure, after Bank Closing,
of funds by on behalf of the Assuming Institution to a third party for a specified purpose (the expenditure of which, in its best judgment, will maximize collections), which do not constitute Reimbursable Expenses or Recovery Expenses, and such
expenses will exceed ten percent (10%) of the then book value thereof as reflected on the Accounting Records of the Assuming Institution, the Assuming Institution shall (i) promptly so notify the Receiver and (ii) request that such
expenditure be treated as a Reimbursable Expense or Recovery Expense for purposes of this Section 2.1. (Where the Assuming Institution determines that there is a substantial likelihood that the previously mentioned situation exists with respect
to continued efforts to collect a Shared-Loss Asset or an Asset for which a charge-off was effected by the Failed Bank with, in either case, a Legal Balance of less than $1,000,000 on the Accounting Records of the Assuming Institution, the Assuming
Institution may so notify the Receiver and request that such expenditure be treated as a Reimbursable Expense or Recovery Expense.) Within thirty (30) days after its receipt of such a notice, the Receiver will advise the Assuming Institution of
its consent or denial, that such expenditures shall be treated as a Reimbursable Expense or Recovery Expense, as the case may be. Notwithstanding the failure of the Receiver to give its consent with respect to such expenditures, the Assuming
Institution shall continue to administer such Shared-Loss Asset in accordance with Section 2.2, except that the Assuming Institution shall not be required to make such expenditures. At any time after its receipt of such a notice and on or prior
to the Termination Date the Receiver shall have the right to purchase such Shared-Loss Asset or Asset as provided in Section 2.1(e)(iii), notwithstanding any consent by the Receiver with respect to such expenditure.
(ii) During the period prior to the Termination Date, the Assuming Institution shall notify the Receiver within fifteen (15) days after
any of the following becomes fully or partially charged-off:
(A) a Shared-Loss Loan having a Legal Balance (or, in the
case of more than one (1) Shared-Loss Loan made to the same Obligor, a combined Legal Balance) of $5,000,000 or more in circumstances in which the legal claim against the relevant Obligor survives; or
125
(B) a Shared-Loss Loan to a director, an “executive officer” as defined
in 12 C.F.R. 215.2(d), a “principal shareholder” as defined in 12 C.F.R. 215.2(l), or an Affiliate of the Assuming Institution.
During the period prior to the Termination Date, the Assuming Institution shall notify the Receiver within fifteen (15) days after any
complete or partial charge-off of a Shared-Loss Loan to a director, an “executive officer” as defined in 12 C.F.R. ‘ 215.2(d), a “principal shareholder” as defined in 12 C.F.R. ‘ 215.2(l), or an Affiliate of the
Assuming Institution.
(iii) If the Receiver determines in its discretion that the Assuming Institution is not diligently pursuing
collection efforts with respect to any Shared-Loss Asset which has been fully or partially charged-off or written-down (including any Shared-Loss Asset which is identified or required to be identified in a notice pursuant to Section 2.1(e)(ii))
or any Asset for which there exists a Failed Bank Charge-Off/Write-Down, the Receiver may at its option, exercisable at any time on or prior to the Termination Date, require the Assuming Institution to assign, transfer and convey such Shared-Loss
Asset or Asset to and for the sole benefit of the Receiver for a price equal to the Shared-Loss Asset Repurchase Price thereof less the Related Liability Amount with respect to any Related Liabilities related to such Shared-Loss Asset or Asset.
(iv) Not later than ten (10) days after the date upon which the Assuming Institution receives notice of the Receiver’s intention to
purchase or require the assignment of any Shared-Loss Asset or Asset pursuant to Section 2.1(e)(i) or (iii), the Assuming Institution shall transfer to the Receiver such Shared-Loss Asset or Asset and any Credit Files relating thereto and shall
take all such other actions as may be necessary and appropriate to adequately effect the transfer of such Shared-Loss Asset or Asset from the Assuming Institution to the Receiver. Not later than fifteen (15) days after the date upon which the
Receiver receives such Shared-Loss Asset or Asset and any Credit Files relating thereto, the Receiver shall pay to the Assuming Institution an amount equal to the Shared-Loss Asset Repurchase Price of such Shared-Loss Asset or Asset less the Related
Liability Amount.
(v) The Receiver shall assume all Related Liabilities with respect to any Shared-Loss Asset or Asset set forth in the
notice described in Section 2.1(e)(iv).
(f)
Dispute Resolution
.
(i) (A) Any dispute as to whether a Charge-Off of a Shared-Loss Asset was made in accordance with Examination Criteria shall be resolved by the
Assuming Institution’s Chartering Authority. (B) With respect to any other dispute arising under the terms of this Commercial Shared-Loss Agreement which the parties hereto cannot resolve after having negotiated such matter, in good faith,
for a thirty (30) day period, other than a dispute the Corporation is not permitted to submit to arbitration under the Administrative Dispute Resolution Act of 1996 (“ADRA”), as amended, such other dispute shall be resolved by
determination of a review board (a “Review Board”) established pursuant to Section 2.1(f). Any Review Board
126
under this Section 2.1(f) shall follow the provisions of the Federal Arbitration Act and shall follow the provisions of the ADRA. (C) Any determination by the Assuming
Institution’s Chartering Authority or by a Review Board shall be conclusive and binding on the parties hereto and not subject to further dispute, and judgment may be entered on said determination in accordance with applicable arbitration law in
any court having jurisdiction thereof.
(ii) A Review Board shall consist of three (3) members, each of whom shall have such
expertise as the Corporation and the Assuming Institution agree is relevant. As appropriate, the Receiver or the Corporation (the “FDIC Party”) will select one member, one member will be selected by the Assuming Institution and the third
member (the “Neutral Member”) will be selected by the other two members. The member of the Review Board selected by a party may be removed at any time by such party upon two (2) days’ written notice to the other party of the
selection of a replacement member. The Neutral Member may be removed by unanimous action of the members appointed by the FDIC Party and the Assuming Institution after two (2) days’ prior written notice to the FDIC Party and the Assuming
Institution of the selection of a replacement Neutral Member. In addition, if a Neutral Member fails for any reason to serve or continue to serve on the Review Board, the other remaining members shall so notify the parties to the dispute and the
Neutral Member in writing that such Neutral Member will be replaced, and the Neutral Member shall thereafter be replaced by the unanimous action of the other remaining members within twenty (20) business days of that notification.
(iii) No dispute may be submitted to a Review Board by any of the parties to this Commercial Shared-Loss Agreement unless
such party has provided to the other party a written notice of dispute (“Notice of Dispute”). During the forty-five (45)-day period following the providing of a Notice of Dispute, the parties to the dispute will make every effort in good
faith to resolve the dispute by mutual agreement. As part of these good faith efforts, the parties should consider the use of less formal dispute resolution techniques, as judged appropriate by each party in its sole discretion. Such techniques may
include, but are not limited to, mediation, settlement conference, and early neutral evaluation. If the parties have not agreed to a resolution of the dispute by the end of such forty-five (45)-day period, then, subject to the discretion of the
Corporation and the written consent of the Assuming Institution as set forth in Section 2.1(f)(i)(B) above, on the first day following the end of such period, the FDIC Party and the Assuming Institution shall notify each other of its selection
of its member of the Review Board and such members shall be instructed to promptly select the Neutral Member of the Review Board. If the members appointed by the FDIC Party and the Assuming Institution are unable to promptly agree upon the initial
selection of the Neutral Member, or a timely replacement Neutral Member as set forth in Section 2.1(f)(ii) above, the two appointed members shall apply to the American Arbitration Association (“AAA”), and such Neutral Member shall be
appointed in accordance with the Commercial Arbitration Rules of the AAA.
(iv) The resolution of a dispute pursuant to this
Section 2.1(f) shall be governed by the Commercial Arbitration Rules of the AAA to the extent that such rules are not inconsistent with this Section 2.1(f). The Review Board may modify the procedures set forth in such rules from time to
time with the prior approval of the FDIC Party and the Assuming Institution.
127
(v) Within fifteen (15) days after the last to occur of the final written submissions of
both parties, the presentation of witnesses, if any, and oral presentations, if any, the Review Board shall adopt the position of one of the parties and shall present to the parties a written award regarding the dispute. The determination of any two
(2) members of a Review Board will constitute the determination of such Review Board.
(vi) The FDIC Party and the Assuming
Institution will each pay the fees and expenses of the member of the Review Board selected by it. The FDIC Party and Assuming Institution will share equally the fees and expenses of the Neutral Member. No such fees or expenses incurred by or on
behalf of the Assuming Institution shall be subject to reimbursement by the FDIC Party under this Commercial Shared-Loss Agreement or otherwise.
(vii) Each party will bear all costs and expenses incurred by it in connection with the submission of any dispute to a Review Board. No such
costs or expenses incurred by or on behalf of the Assuming Institution shall be subject to reimbursement by the FDIC Party under this Commercial Shared-Loss Agreement or otherwise. The Review Board shall have no authority to award costs or expenses
incurred by either party to these proceedings.
(viii) Any dispute resolution proceeding held pursuant to this Section 2.1(f) shall
not be public. In addition, each party and each member of any Review Board shall strictly maintain the confidentiality of all issues, disputes, arguments, positions and interpretations of any such proceeding, as well as all information, attachments,
enclosures, exhibits, summaries, compilations, studies, analyses, notes, documents, statements, schedules and other similar items associated therewith, except as the parties agree in writing or such disclosure is required pursuant to law, rule or
regulation. Pursuant to ADRA, dispute resolution communications may not be disclosed either by the parties or by any member of the Review board unless:
(1) all parties to the dispute resolution proceeding agree in writing;
(2) the communication has already been made public;
(3) the communication is required by statute, rule or regulation to be made public; or
(4) a court determines that such testimony or disclosure is necessary to prevent a manifest injustice, help establish a violation of the law or
prevent harm to the public health or safety, or of sufficient magnitude in the particular case to outweigh the integrity of dispute resolution proceedings in general by reducing the confidence of parties in future cases that their communications
will remain confidential.
(ix) Any dispute resolution proceeding pursuant to this Section 2.1(f) (whether as a matter of good faith
negotiations, by resort to a Review Board, or otherwise) is a compromise negotiation for purposes of the Federal Rules of Evidence and state rules of evidence. The parties agree that all proceedings, including any statement made or document prepared
by any party, attorney or other participants are privileged and shall not be disclosed in any subsequent proceeding or document or construed for any purpose as an admission against interest. Any document submitted and any statements made during any
dispute resolution proceeding are for settlement purposes only. The parties further agree not to subpoena any of the members of the Review Board or any documents submitted to the Review Board. In no event will the Neutral Member voluntarily testify
on behalf of any party.
128
(x) No decision, interpretation, determination, analysis, statement, award or other pronouncement
of any Review Board shall constitute precedent as regards any subsequent proceeding (whether or not such proceeding involves dispute resolution under this Commercial Shared-Loss Agreement) nor shall any Review Board be bound to follow any decision,
interpretation, determination, analysis, statement, award or other pronouncement rendered by any previous Review Board or any other previous dispute resolution panel which may have convened in connection with a transaction involving other failed
financial institutions or Federal assistance transactions.
(xi) The parties may extend any period of time in this Section 2.1(f) by
mutual agreement. Notwithstanding anything above to the contrary, no dispute shall be submitted to a Review Board until each member of the Review Board, and any substitute member, if applicable, agrees to be bound by the provisions of this
Section 2.1(f) as applicable to members of a Review Board. Prior to the commencement of the Review Board proceedings, or, in the case of a substitute Neutral Member, prior to the re-commencement of such proceedings subsequent to that
substitution, the Neutral Member shall provide a written oath of impartiality.
(xii) For the avoidance of doubt, and notwithstanding
anything herein to the contrary, in the event any notice of dispute is provided to a party under this Section 2.1(g) prior to the Termination Date, the terms of this Commercial Shared-Loss Agreement shall remain in effect with respect to any
such items set forth in such notice until such time as any such dispute with respect to such item is finally resolved.
(g)
Payment in the Event Losses Fail to Reach Expected Level
. On the date that is 45 days following the last day (such day, the “True-Up Measurement Date”) of the calendar month in which the tenth anniversary of the calendar day
following the Bank Closing occurs, or upon the final disposition of all Shared Loss Assets under the Single Family Shared-Loss Agreement at any time after the termination of this Commercial Shared-Loss Agreement, the Assuming Institution shall pay
to the Receiver fifty percent (50%) of the excess, if any, of (i) twenty percent (20%) of the Intrinsic Loss Estimate less (ii) the sum of (A) twenty-five percent (25%) of the asset premium (discount) plus
(B) twenty-five percent (25%) of the Cumulative Shared-Loss Payments plus (C) the Cumulative Servicing Amount. The Assuming Institution shall deliver to the Receiver not later than 30 days following the True-Up Measurement Date, a
schedule, signed by an officer of the Assuming Institution, setting forth in reasonable detail the calculation of the Cumulative Shared-Loss Payments and the Cumulative Servicing Amount.
2.2
Administration of Shared-Loss Assets
.
The Assuming Institution shall at all times prior to the Termination Date comply with
the Rules Regarding the Administration of Shared-Loss Assets as set forth in Article III of this
Commercial Shared-Loss Agreement
.
129
2.3
Auditor Report; Right to Audit
.
(a) Within the time period permitted for the examination audit pursuant to 12 CFR Section 363 after the end of each fiscal year from and
including the fiscal year during which Bank Closing falls to and including the calendar year during which the Termination Date falls, the Assuming Institution shall deliver to the Corporation and to the Receiver a report signed by its independent
public accountants stating that they have reviewed the terms of this Commercial Shared-Loss Agreement and that, in the course of their annual audit of the Assuming Institution’s books and records, nothing has come to their attention suggesting
that any computations required to be made by the Assuming Institution during such year by this Article II were not made by the Assuming Institution in accordance herewith. In the event that the Assuming Institution cannot comply with the
preceding sentence, it shall promptly submit to the Receiver corrected computations together with a report signed by its independent public accountants stating that, after giving effect to such corrected computations, nothing has come to their
attention suggesting that any computations required to be made by the Assuming Institution during such year by this Article II were not made by the Assuming Institution in accordance herewith. In such event, the Assuming Institution and the
Receiver shall make all such accounting adjustments and payments as may be necessary to give effect to each correction reflected in such corrected computations, retroactive to the date on which the corresponding incorrect computation was made. It is
the intention of this provision to align the timing of the audit required under this Commercial Shared-Loss Agreement with the examination audit required pursuant to 12 CFR Section 363.
(b) The Assuming Institution shall perform on an annual basis an internal audit of its compliance with the provisions of this Article II
and shall provide the Receiver and the Corporation with copies of the internal audit reports and access to internal audit workpapers related to such internal audit.
(c) The Receiver or the Corporation, their agents, contractors and their employees, may perform an audit to determine the Assuming
Institution’s compliance with the provisions of this Commercial Shared-Loss Agreement, including this Article II, at any time by providing not less than ten (10) Business Days prior written notice. The scope and duration of any such
audit shall be within the discretion of the Receiver or the Corporation, as the case may be, but shall in no event be administered in a manner that unreasonably interferes with the operation of the Assuming Institution’s business. The Receiver
or the Corporation, as the case may be, shall bear the expense of any such audit. In the event that any corrections are necessary as a result of such an audit, the Assuming Institution and the Receiver shall make such accounting adjustments and
payments as may be necessary to give retroactive effect to such corrections.
2.4
Withholdings
.
Notwithstanding any other
provision in this Article II, the Receiver, upon the direction of the Director (or designee) of the Corporation’s Division of Resolutions and Receiverships, may withhold payment for any amounts included in a Quarterly Certificate delivered
pursuant to Section 2.1, if, in its judgment, there is a reasonable basis under the terms of this Commercial Shared-Loss Agreement for denying the eligibility of an item for which reimbursement or payment is sought under such Section. In such event,
the Receiver shall provide a written notice to the Assuming Institution detailing the grounds for withholding such payment. At such time as the Assuming Institution demonstrates to the satisfaction of the Receiver that the grounds for such
withholding of payment, or portion of payment, no longer exist or have been cured, then the Receiver shall pay the Assuming Institution the amount
130
withheld which the Receiver determines is eligible for payment, within fifteen (15) Business Days. In the event the Receiver or the Assuming Institution elects to submit the issue of the
eligibility of the item for reimbursement or payment for determination under the dispute resolution procedures of Section 2.1(f), then (i) if the dispute is settled by the mutual agreement of the parties in accordance with
Section 2.1(f)(iii), the Receiver shall pay the amount withheld (to the extent so agreed) within fifteen (15) Business Days from the date upon which the dispute is determined by the parties to be resolved by mutual agreement, and
(ii) if the dispute is resolved by the determination of a Review Board, the Receiver shall pay the amount withheld (to the extent so determined) within fifteen (15) Business Days from the date upon which the Receiver is notified of the
determination by the Review Board of its obligation to make such payment. Any payment by the Receiver pursuant to this Section 2.4 shall be made together with interest on the amount thereof from the date the payment was agreed or determined
otherwise to be due, at the interest rate per annum determined by the Receiver to be equal to the coupon equivalent of the three (3)-month U.S. Treasury Bill Rate in effect as of the first Business Day of each Calendar Quarter during which such
interest accrues as reported in the Federal Reserve Board’s Statistical Release for Selected Interest Rates H.15 opposite the caption “Auction Average - 3-Month” or, if not so reported for such day, for the next preceding Business Day
for which such rate was so reported.
2.5
Books and Records
. The Assuming Institution shall at all times during the term of
this Commercial Shared-Loss Agreement keep books and records which fairly present all dealings and transactions carried out in connection with its business and affairs. Except as otherwise provided for in the Purchase and Assumption Agreement or
this Commercial Shared-Loss Agreement, all financial books and records shall be kept in accordance with generally accepted accounting principles, consistently applied for the periods involved and in a manner such that information necessary to
determine compliance with any requirement of the Purchase and Assumption Agreement or this Commercial Shared-Loss Agreement will be readily obtainable, and in a manner such that the purposes of the Purchase and Assumption Agreement or this
Commercial Shared-Loss Agreement may be effectively accomplished. Without the prior written approval of the Corporation, the Assuming Institution shall not make any change in its accounting principles adversely affecting the value of the Shared-Loss
Assets except as required by a change in generally accepted accounting principles. The Assuming Institution shall notify the Corporation of any change in its accounting principles affecting the Shared-Loss Assets which it believes are required by a
change in generally accepted accounting principles.
2.6
Information
. The Assuming Institution shall promptly provide
to the Corporation such other information, including financial statements and computations, relating to the performance of the provisions of the Purchase and Assumption Agreement or otherwise relating to its business and affairs or this
Commercial Shared-Loss Agreement
, as the Corporation or the Receiver may request from time to time.
2.7
Tax Ruling
.
The Assuming Institution shall not at any time, without the Corporation’s prior written consent, seek a private letter ruling or other determination from the Internal Revenue Service or otherwise seek to qualify for any special tax treatment or
benefits associated with any payments made by the Corporation pursuant to the Purchase and Assumption Agreement or this
Commercial Shared-Loss Agreement
.
131
ARTICLE III — RULES REGARDING THE ADMINISTRATION OF SHARED-LOSS ASSETS AND SHARED-LOSS
SECURITIES
3.1
Agreement with Respect to Administration
.
The Assuming Institution shall (and shall cause any of its
Affiliates to which the Assuming Institution transfers any Shared-Loss Assets or Shared-Loss Securities), or shall cause a Third Party Servicer to, manage, administer, and collect the Shared-Loss Assets and Shared-Loss Securities while owned by the
Assuming Institution or any Affiliate thereof during the term of this Commercial Shared-Loss Agreement in accordance with the rules set forth in this Article III (“Rules”). The Assuming Institution shall be responsible to the Receiver
and the Corporation in the performance of its duties hereunder and shall provide to the Receiver and the Corporation such reports as the Receiver or the Corporation reasonably deems advisable, including but not limited to the reports required by
Section 3.3 hereof, and shall permit the Receiver and the Corporation at all times to monitor the Assuming Institution’s performance of its duties hereunder.
3.2
Duties of the Assuming Institution with Respect to Shared-Loss Assets
.
(a) In the performance of its duties under these Rules, the Assuming Institution shall:
(i) manage, administer, collect and effect Charge-Offs and Recoveries with respect to each Shared-Loss Asset in a manner consistent with
(A) usual and prudent business and banking practices; (B) the Assuming Institution’s (or, in the case a Third Party Servicer is engaged, the Third Party Servicer’s) practices and procedures including, without limitation, the
then-effective written internal credit policy guidelines of the Assuming Institution, with respect to the management, administration and collection of and taking of charge-offs and write-downs with respect to loans, other real estate and repossessed
collateral that do not constitute Shared Loss Assets;
(ii) exercise its best business judgment in managing, administering, collecting
and effecting Charge-Offs with respect to Shared-Loss Assets;
(iii) use its best efforts to maximize collections with respect to
Shared-Loss Assets and, if applicable for a particular Shared-Loss Asset, without regard to the effect of maximizing collections on assets held by the Assuming Institution or any of its Affiliates that are not Shared-Loss Assets;
(iv) adopt and implement accounting, reporting, record-keeping and similar systems with respect to the Shared-Loss Assets, as provided in
Section 3.4 hereof;
(v) retain sufficient staff to perform its duties hereunder; and
(vi) provide written notification in accordance with Article IV of this Commercial Shared-Loss Agreement immediately after the execution
of any contract pursuant to which any third party (other than an Affiliate of the Assuming Institution) will manage, administer or collect any of the Shared-Loss Assets, together with a copy of that contract.
132
(b) Any transaction with or between any Affiliate of the Assuming Institution with respect to any
Shared-Loss Asset including, without limitation, the execution of any contract pursuant to which any Affiliate of the Assuming Institution will manage, administer or collect any of the Shared-Loss Assets, or any other action involving self-dealing,
shall be subject to the prior written approval of the Receiver or the Corporation.
(c) The following categories of expenses shall not be
deemed to be Reimbursable Expenses or Recovery Expenses:
(i) Federal, State, or local income taxes and expenses related thereto;
(ii) salaries or other compensation and related benefits of Assuming Institution employees and the employees of its Affiliates including,
without limitation, any bonus, commission or severance arrangements, training, payroll taxes, dues, or travel- or relocation-related expenses,;
(iii) the cost of space occupied by the Assuming Institution, any Affiliate thereof and their staff, the rental of and maintenance of
furniture and equipment, and expenses for data processing including the purchase or enhancement of data processing systems;
(iv) except
as otherwise provided herein, fees for accounting and other independent professional consultants (other than consultants retained to assess the presence, storage or release of any hazardous or toxic substance, or any pollutant or contaminant with
respect to the collateral securing a Shared-Loss Asset that has been fully or partially charged-off);
provided
,
that
for purposes of this Section 3.2(c)(iv), fees of attorneys and appraisers engaged as necessary to assist in
collections with respect to Shared-Loss Assets shall not be deemed to be fees of other independent consultants;
(v) allocated portions
of any other overhead or general and administrative expense other than any fees relating to specific assets, such as appraisal fees or environmental audit fees, for services of a type the Assuming Institution does not normally perform internally;
(vi) any expense not incurred in good faith and with the same degree of care that the Assuming Institution normally would exercise in
the collection of troubled assets in which it alone had an interest; and
(vii) any expense incurred for a product, service or activity
that is of an extravagant nature or design.
(d) Subject to Section 3.7, the Assuming Institution shall not contract with third
parties to provide services the cost of which would be a Reimbursable Expense or Recovery Expense if the Assuming Institution would have provided such services itself if the relevant Shared-Loss Assets were not subject to the loss-sharing provisions
of Section 2.1 of this Commercial Shared-Loss Agreement.
133
3.3
Duties of the Assuming Institution with Respect to Shared-Loss Securities
.
(a) In the performance of its duties under these Rules, the Assuming Institution shall:
(i) manage, administer, collect and each Shared-Loss Security in a manner consistent with (A) usual and prudent business and banking
practices; (B) the Assuming Institution’s practices and procedures including, without limitation, the then-effective written internal credit policy guidelines of the Assuming Institution, with respect to the management, administration and
collection of similar assets that are not Shared-Loss Securities;
(ii) exercise its best business judgment in managing, administering,
collecting and effecting Charge-Offs with respect to Shared-Loss Securities;
(iii) use its best efforts to maximize collections with
respect to Shared-Loss Securities and, if applicable for a particular Shared-Loss Security, without regard to the effect of maximizing collections on assets held by the Assuming Institution or any of its Affiliates that are not Shared-Loss
Securities, provided that, any sale of a Shared-Loss Security shall only be made with the prior approval of the Receiver or the Corporation;
(iv) adopt and implement accounting, reporting, record-keeping and similar systems with respect to the Shared-Loss Securities, as provided in
Section 3.4 hereof;
(v) retain sufficient staff to perform its duties hereunder; and
(vi) provide written notification in accordance with Article IV of this Commercial Shared-Loss Agreement immediately after the execution
of any contract pursuant to which any third party (other than an Affiliate of the Assuming Institution) will manage, administer or collect any of the Shared-Loss Securities, together with a copy of that contract.
(b) Any transaction with or between any Affiliate of the Assuming Institution with respect to any Shared-Loss Security including, without
limitation, the execution of any contract pursuant to which any Affiliate of the Assuming Institution will manage, administer or collect any of the Shared-Loss Assets, or any other action involving self-dealing, shall be subject to the prior written
approval of the Receiver or the Corporation.
(c) The Assuming Institution shall not contract with third parties to provide services the
cost of which would be a Reimbursable Expense or Recovery Expense if the Assuming Institution would have provided such services itself if the relevant Shared-Loss Assets were not subject to the loss-sharing provisions of Section 2.1 of this
Commercial Shared-Loss Agreement.
3.4
Records and Reports
. The Assuming Institution shall establish and maintain records on
a separate general ledger, and on such subsidiary ledgers as may be appropriate to account for the Shared-Loss Assets and the Shared-Loss Securities, in such form and detail as the Receiver or the Corporation may require, to enable the Assuming
Institution to prepare and deliver to the Receiver or the Corporation such reports as the Receiver or the Corporation may from time to time request regarding the Shared-Loss Assets, the Shared-Loss Securities and the Quarterly Certificates required
by Section 2.1 of this Commercial Shared-Loss Agreement.
134
3.5
Related Loans
.
(a) The Assuming Institution shall not manage, administer or collect any “Related Loan” in any manner which would have the effect of
increasing the amount of any collections with respect to the Related Loan to the detriment of the Shared-Loss Asset to which such loan is related. A “Related Loan” means any loan or extension of credit held by the Assuming Institution at
any time on or prior to the end of the final Recovery Quarter that is: (i) made to the same Obligor with respect to a Loan that is a Shared-Loss Asset or with respect to a Loan from which Other Real Estate, Additional ORE or Subsidiary ORE
derived, or (ii) attributable to the same primary Obligor with respect to any Loan described in clause (i) under the rules of the Assuming Institution’s Chartering Authority concerning the legal lending limits of financial
institutions organized under its jurisdiction as in effect on the Commencement Date, as applied to the Assuming Institution.
(b) The
Assuming Institution shall prepare and deliver to the Receiver with the Quarterly Certificates for the Calendar Quarters ending June 30 and December 31 for all Shared-Loss Quarters and Recovery Quarters, a schedule of all Related Loans
which are commercial loans or commercial real estate loans with Legal Balances of $5,000,000 or more on the Accounting Records of the Assuming Institution as of the end of each such semi-annual period, and all other commercial loans or commercial
real estate loans attributable to the same Obligor on such loans of $5,000,000 or more.
3.6
Legal Action; Utilization of Special
Receivership Powers
. The Assuming Institution shall notify the Receiver in writing (such notice to be given in accordance with Article IV below and to include all relevant details) prior to utilizing in any legal action any special
legal power or right which the Assuming Institution derives as a result of having acquired a Shared-Loss Asset from the Receiver, and the Assuming Institution shall not utilize any such power unless the Receiver shall have consented in writing to
the proposed usage. The Receiver shall have the right to direct such proposed usage by the Assuming Institution and the Assuming Institution shall comply in all respects with such direction. Upon request of the Receiver, the Assuming Institution
will advise the Receiver as to the status of any such legal action. The Assuming Institution shall immediately notify the Receiver of any judgment in litigation involving any of the aforesaid special powers or rights.
3.7
Third Party Servicer
. The Assuming Institution may perform any of its obligations and/or exercise any of its rights under
this Commercial Shared-Loss Agreement through or by one or more Third Party Servicers, who may take actions and make expenditures as if any such Third Party Servicer was the Assuming Institution hereunder (and, for the avoidance of doubt, such
expenses incurred by any such Third Party Servicer on behalf of the Assuming Institution shall be Reimbursable Expenses or Recovery Expenses, as the case may be, to the same extent such expenses would so qualify if incurred by the Assuming
Institution); provided, however, that the use thereof by the Assuming Institution shall not release the Assuming Institution of any obligation or liability hereunder.
135
ARTICLE IV — PORTFOLIO SALE
4.1
Assuming Institution Portfolio Sales of Remaining Shared-Loss Assets
. The Assuming Institution shall have the right with the
concurrence of the Receiver, commencing as of the first day of the third to last Shared-Loss Quarter, to liquidate for cash consideration, in one or more transactions, all or a portion of Shared-Loss Assets held by the Assuming Institution
(“Portfolio Sales”). If the Assuming Institution exercises its option under this Section 4.1, it must give thirty (30) days notice in writing to the Receiver setting forth the details and schedule for the Portfolio Sale which
shall be conducted by means of sealed bid sales to third parties, not including any of the Assuming Institution’s affiliates, contractors, or any affiliates of the Assuming Institution’s contractors.
4.2
Calculation of Sale Gain or Loss
.
For Shared-Loss Assets gain or loss on the sales under Section 4.1 will be
calculated as the aggregate sales price received by the Assuming Institution less the aggregate book value of the remaining Shared-Loss Assets.
ARTICLE V — LOSS-SHARING NOTICES GIVEN TO CORPORATION AND/OR RECEIVER
As a supplement to the notice provisions contained in Section 13.7 of the Purchase and Assumption Agreement, any notice, request, demand,
consent, approval, or other communication (a “Notice”) given to the Corporation and/or the Receiver in the loss-sharing context shall be given as follows:
5.1
With respect to a Notice under Section 2 and Sections 3.1-3.5 of this Commercial Shared-Loss Agreement:
Federal Deposit Insurance Corporation
Division of Resolutions and Receiverships
550 17th Street, N.W.
Washington, D.C. 20429
Attention: Assistant Director, Franchise and Asset Marketing
5.2
With respect to a Notice under Section 3.6 of this Commercial Shared-Loss Agreement:
Federal Deposit Insurance Corporation Legal Division
1601 Bryan Street
Dallas, Texas
75201
Attention: Regional Counsel
136
with a copy to:
Federal Deposit Insurance Corporation Legal Division
550 17th Street, N.W.
Washington, D.C. 20429
Attention: Senior Counsel (Special Issues Group)
ARTICLE VI — MISCELLANEOUS
6.1
Expenses
. Except as otherwise expressly provided herein, all costs and expenses incurred by a party hereto in connection
with this Commercial Shared-Loss Agreement shall be borne by such party whether or not the transactions contemplated herein shall be consummated.
6.2
Successors and Assigns; Specific Performance
.
This Commercial Shared-Loss Agreement, and all of the terms and provisions
hereof shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted successors and assigns only. The Receiver may assign or otherwise transfer this Commercial Shared-Loss Agreement and the rights and
obligations of the Receiver hereunder (in whole or in part) to the Federal Deposit Insurance Corporation in its corporate capacity without the consent of Assuming Institution. Notwithstanding anything to the contrary contained in this Commercial
Shared-Loss Agreement, except as is expressly permitted in this Section 6.2, the Assuming Institution may not assign or otherwise transfer this Commercial Shared-Loss Agreement or any of the Assuming Institution’s rights or obligations
hereunder (in whole or in part), or sell or transfer of any subsidiary of the Assuming Institution holding title to Shared-Loss Assets or Shared-Loss Securities, without the prior written consent of the Receiver, which consent may be granted or
withheld by the Receiver in its sole and absolute discretion. An assignment or transfer of this Commercial Shared-Loss Agreement includes:
(i) a merger or consolidation of the Assuming Institution with or into another company, if the shareholders of the Assuming Institution will
own less than sixty-six and two/thirds percent (66.66 %) of the equity of the consolidated entity;
(ii) a merger or consolidation of the
Assuming Institution’s Holding Company with or into another company, if the shareholders of the Holding Company will own less than sixty-six and two/thirds percent (66.66 %) of the equity of the consolidated entity;
(iii) the sale of all or substantially all of the assets of the Assuming Institution to another company or person; or
(iv) a sale of shares by any one or more shareholders that will effect a change in control of the Assuming Institution, as determined by the
Receiver with reference to the standards set forth in the Change in Bank Control Act, 12 U.S.C. 1817(j).
For the avoidance of doubt, any transaction
under this Section 6.2 that requires the Receiver’s consent that is made without consent of the Receiver hereunder will relieve the Receiver of any of its obligations under this Commercial Shared-Loss Agreement.
137
No Loss shall be recognized under this Commercial Shared-Loss Agreement as a result of any accounting adjustments
that are made due to or as a result of any assignment or transfer of this Commercial Shared-Loss Agreement or any merger, consolidation, sale or other transaction to which the Assuming Institution, its Holding Company or any Affiliate is a party,
regardless of whether the Receiver consents to such assignment or transfer in connection with such transaction pursuant to this Section 6.2.
6.3
WAIVER OF JURY TRIAL
. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN OR TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR RELATING TO OR IN CONNECTION WITH THIS COMMERCIAL SHARED-LOSS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
6.4
No Third Party Beneficiary
.
This Commercial Shared-Loss Agreement and the Exhibits
hereto are for the sole and exclusive benefit of the parties hereto and their respective permitted successors and permitted assigns and there shall be no other third party beneficiaries, and nothing in Commercial Shared-Loss Agreement or the
Exhibits shall be construed to grant to any other Person any right, remedy or claim under or in respect of this Commercial Shared-Loss Agreement or any provision hereof.
6.5
Consent
.
Except as otherwise provided herein, when the consent of a party is required herein, such consent shall not be
unreasonably withheld or delayed.
6.6
Rights Cumulative
. Except as otherwise expressly provided herein, the rights of each
of the parties under this Commercial Shared-Loss Agreement are cumulative, may be exercised as often as any party considers appropriate and are in addition to each such party’s rights under the Purchase and Sale Agreement and any of the related
agreements or under law. Except as otherwise expressly provided herein, any failure to exercise or any delay in exercising any of such rights, or any partial or defective exercise of such rights, shall not operate as a waiver or variation of that or
any other such right.
138
Exhibit 1
For the commercial and other pool, the FDIC reporting requirement includes the following:
|
|
•
|
|
A quarterly loan level download for all loans in the asset pool
|
|
|
•
|
|
A quarterly asset level download of commercial ORE
|
|
|
•
|
|
A quarterly certificate report that includes 3 sections:
|
|
|
•
|
|
1: A summary report of total covered losses for the quarter and the derivation of the FDIC portion of the covered loss
|
|
|
•
|
|
2: A summary report on the commercial and other portfolio and covered losses and recoveries
|
|
|
•
|
|
3: A performance report on the outstanding commercial and other pool assets under loss share
|
|
|
•
|
|
A quarterly listing of assets with covered losses
|
A blank version of the quarterly certificate report is
shown below.
139
CERTIFICATE
QUARTERLY SUMMARY
FOR COMM
AND OTHER SHARED-LOSS AGREEMENT
FDIC - RECEIVER OF
PURCHASE AND
ASSUMPTION AGREEMENT DATED:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shared-Loss Quarter Ended:
(Dollars)
|
|
|
Calculation of Amount Due from (to) FDIC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FDIC % Share
|
|
0%
|
|
|
|
|
|
|
|
80%
|
|
|
|
|
|
|
|
95%
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
Carry forward from other types of assets:
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
1.
|
|
Cumulative losses from single family loans
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
2.
|
|
Cumulative losses from securities
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
3.
|
|
Cumulative loss from non-single family
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
4.
|
|
Total cumulative losses at beg of quarter
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
5.
|
|
Covered losses (gains) during quarter
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
6.
|
|
Cumulative loss at end of quarter
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
FDIC % Share
|
|
|
|
|
x 0
|
%
|
|
|
|
|
|
|
|
|
x 80
|
%
|
|
|
|
|
|
|
|
|
x 95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
|
Amount Due from (to) FDIC
|
|
|
|
|
0
|
|
|
|
+
|
|
|
|
|
|
0
|
|
|
|
+
|
|
|
|
|
|
0
|
|
|
|
+
|
|
|
|
|
|
+
|
|
|
Memo: threshold for recovery percentage
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preparer name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preparer signature
|
|
|
|
Preparer title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer signature
|
|
|
|
Officer title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
|
|
|
|
|
|
|
|
140
CERTIFICATE
QUARTERLY SUMMARY
FOR COMM AND
OTHER SHARED-LOSS AGREEMENT
FDIC - RECEIVER OF
BANK
BANK
PURCHASE AND ASSUMPTION AGREEMENT
DATED:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shared-Loss Quarter Ended:
(Dollars)
|
|
|
|
|
|
|
PART A. Opening/Closing Net Shared-Loss Asset
Balances
|
|
Cumulative
at beg of
Quarter
|
|
|
This Quarter
|
|
|
Cumulative
at end of
Quarter
|
|
|
|
|
Commercial Real Estate Loans
|
|
|
C & I Loans
|
|
|
ORE & oth
repo assets
|
|
|
Consumer
Loans
|
|
|
Other
Loans
|
|
|
Total
|
|
|
FDIC
Adjustments
|
|
|
|
|
|
Constr & Dev
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
1.
|
|
Opening Balance
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
2.
|
|
Adjustments
|
|
a) Transfers
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
b) Reclassification
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
c) Other
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
3.
|
|
Adjusted Opening Balance
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
4.
|
|
Add
|
|
a) Assumed Commitment Advances
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
b) Permitted Advances
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
c) Capital Expenditures
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
d) Recoveries
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
5.
|
|
Loss
|
|
a) Pre Collectors (payoffs and amount)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
b) Sales
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
c) Charge-offs (excluding ?)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
d) Qualifying loss on sales
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
6.
|
|
Net (Reduction) Increase Amount
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
7.
|
|
Closing Balance
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Part B. Charge-Offs, Recoveries & Reimbursable Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
|
Charge-offs
|
|
a) Principal (from 5c and 5d)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
b) Account (up to 90 days)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
9.
|
|
Total Charge-Offs
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
10.
|
|
Less Recoveries
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
11.
|
|
Net Charge-Offs (Recoveries)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
12.
|
|
Add Reimbursable Expenses
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
13.
|
|
Loss Offsetting Income
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
14.
|
|
Shared-Loss Debit (Credit) Amount
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
141
Failed Bank Name
Performance Status: Commercial and Other Loans
Quarter ending
(Dollars)
Number of Loans / Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
|
|
Delinquent
|
|
|
In
Foreclosure
|
|
|
Repossessed
Assets*
|
|
|
Total
|
|
|
|
|
|
30-59 days
|
|
|
60-89 days
|
|
|
90+ days
|
|
|
|
|
|
Construction & Development
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Comm Real Estate
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Total Comm Real Estate
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
C&I
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Consumer Loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Total
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
$ Balance (000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
|
|
Delinquent
|
|
|
In
Foreclosure
|
|
|
Repossessed
Assets*
|
|
|
Total
|
|
|
|
|
|
30-59 days
|
|
|
60-89 days
|
|
|
90+ days
|
|
|
|
|
|
Construction & Development
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Comm Real Estate
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Total Comm Real Estate
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
C&I
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Consumer Loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Total
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
*
|
ORE for CRE loans; other types of repossessed assets for other types of loans.
|
142
Exhibit 3.1
FORM OF
AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
OF
GREAT WESTERN BANCORP, INC.
Great Western Bancorp, Inc. (the “
Corporation
”), a corporation organized and existing under the General Corporation Law of
the State of Delaware, as amended (the “
DGCL
”), hereby certifies as follows:
1. The name of the Corporation is Great
Western Bancorp, Inc.
2. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State
of Delaware on July 2, 2014 (the “
Original Certificate of Incorporation
”).
3. This Amended and Restated Certificate
of Incorporation (this “
Amended and Restated Certificate of Incorporation
”) amends and restates the provisions of the Original Certificate of Incorporation of the Corporation and has been duly adopted in accordance with the
provisions of Sections 242 and 245 of the DGCL and by written consent of the holder of all of the outstanding stock entitled to vote thereon in accordance with the provisions of Section 228 of the DGCL.
4. The text of the Original Certificate of Incorporation is hereby amended and restated to read herein as set forth in full:
ARTICLE I
The name of
the Corporation is Great Western Bancorp, Inc.
ARTICLE II
The address of the Corporation’s registered office in the State of Delaware is Corporation Service Company, 2711 Centerville Road, Suite
400 in the City of Wilmington, County of New Castle, 19808. The name of its registered agent at such address is The Corporation Service Company.
ARTICLE III
The purpose
of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
ARTICLE IV
Section 4.1
Capitalization
. The total number of shares of all classes of capital stock which the Corporation shall have
authority to issue is [
—
], consisting of [
—
] shares of Common Stock, par value $0.01 per share (“
Common Stock
”), [
—
] shares of
Non-Voting
Common Stock, par value $0.01 per share (“
Non-Voting Common Stock
”), and
[
—
] shares of Preferred Stock, par value $0.01 per share (“
Preferred Stock
”).
Section 4.2
Stock Split
. Upon the filing and effectiveness
(the “
Effective Time
”) pursuant to the DGCL of this Amended and Restated Certificate of Incorporation, each share of Common Stock issued and outstanding immediately prior to the Effective Time shall, automatically and
without any action on the part of the respective holders thereof, be split and converted into [
—
] shares of Common Stock. The foregoing shall have no effect on the par value per share of the Common
Stock, and each share of Common Stock will continue to have a par value of $0.01 per share. Each certificate that immediately before the Effective Time represented shares of Common Stock (“
Old Certificates
”) shall thereafter
represent that number of shares of Common Stock into which shares of the Common Stock represented by the Old Certificate shall have been split.
Section 4.3
Common Stock and Non-Voting Common Stock
.
(a)
Voting Rights
.
(i)
Common Stock
. Each holder of Common Stock, as such, shall be entitled to one vote for each share of Common Stock
held of record by such holder on all matters on which stockholders generally are entitled to vote. In addition to any other vote required by law, the affirmative vote of a majority of the outstanding shares of Common Stock, voting separately as a
class, shall be required to amend, alter or repeal (including by merger, consolidation or otherwise) any provision of this Amended and Restated Certificate of Incorporation that adversely affects the privileges, preferences or rights of the Common
Stock contained in this Amended and Restated Certificate of Incorporation in a manner that is materially adverse from the effect of such amendment, alteration or repeal on the Non-Voting Common Stock.
(ii)
Non-Voting Common Stock
. Holders of Non-Voting Common Stock, as such, shall have no voting power and shall not be
entitled to vote on any matter except (1) as otherwise required by law and (2) the affirmative vote of a majority of the outstanding shares of Non-Voting Common Stock, voting separately as a class, shall be required to amend, alter or
repeal (including by merger, consolidation or otherwise) any provision of this Amended and Restated Certificate of Incorporation that adversely affects the privileges, preferences or rights of the Non-Voting Common Stock contained in this Amended
and Restated Certificate of Incorporation in a manner that is materially adverse from the effect of such amendment, alteration or repeal on the Common Stock. Each holder of Non-Voting Common Stock, as such, shall be entitled to one vote for each
share of Non-Voting Common Stock held of record by such holder on all matters on which holders of Non-Voting Common Stock are entitled to vote pursuant to this Amended and Restated Certificate of Incorporation.
(b)
Dividends, Other Distributions and Liquidation.
Except as otherwise provided in this Amended and Restated
Certificate of Incorporation, Non-Voting Common Stock shall in all other respects carry the same rights and privileges as Common Stock (including in respect of dividends or other distributions declared on the Common Stock and in respect of
distributions to the Common Stock upon any dissolution, liquidation or winding up of the Corporation) and shall be treated the
-2-
same as Common Stock (including in any merger, consolidation, share exchange or other similar transaction);
provided
that, if the Corporation shall in any manner split, subdivide or
combine (including by way of a dividend payable in shares of Common Stock or Non-Voting Common Stock) the outstanding shares of Common Stock or Non-Voting Common Stock, the outstanding shares of such other class of stock shall likewise be split,
subdivided or combined in the same manner proportionately and on the same basis per share;
provided
,
further
, that no dividend payable in Common Stock shall be declared on the Non-Voting Common Stock and no dividend payable in
Non-Voting Common Stock shall be declared on the Common Stock, but instead, in the case of a stock dividend, each class of stock shall receive such stock dividend in shares of like stock. Subject to the rights of the holders of any series of
Preferred Stock and as otherwise provided this Section 4.3(b), holders of shares of Common Stock and Non-Voting shall be entitled to receive such dividends and other distributions in cash, stock or property of the Corporation when, as and if
declared thereon by the board of directors of the Corporation (the “
Board
”) from time to time out of assets or funds of the Corporation legally available therefor.
(c)
Conversion of Non-Voting Common Stock
.
(i) Each holder of shares of Non-Voting Common Stock shall have the right, at such holder’s option, to convert any and all
of such holder’s shares of Non-Voting Common Stock into an equal number of fully paid and non-assessable shares of Common Stock in accordance with the procedures set forth in this Section 4.3(c) in connection with a transfer (1) that
is part of a widely distributed public offering of Common Stock, (2) to an underwriter for the purpose of conducting a widely distributed public offering of Common Stock, (3) not requiring registration under the Securities Act of 1933, as
amended, in which no one transferee (or group of associated transferees) acquires in excess of 2% of the Common Stock then outstanding (including pursuant to a related series of transfers), or (4) that is part of a transaction approved by the
Board of Governors of the Federal Reserve System.
(ii) Each conversion of shares of Non-Voting Common Stock pursuant to
this Section 4.3(c) shall be effected by the delivery by the holder during ordinary business hours of a written notice to the Corporation stating the name of such holder and the number of shares of Non-Voting Common Stock that such holder
desires to convert. Subject to the limitations in Section 4.3(d)(i), such conversion shall be deemed to have been effected as of the close of business on the date such notice is delivered to the Corporation, or on such later date specified in
such notice. Until presented and surrendered for cancellation following such conversion, each certificate representing shares of Non-Voting Common Stock in respect of which a conversion election has been made in accordance with this Section 4.3
shall be deemed to represent the number of shares of Common Stock into which such shares of
-3-
Non-Voting Common Stock have been converted, and upon presentation and surrender of such certificate the holder thereof shall be entitled to receive a certificate for the appropriate number of
shares of Common Stock. Upon a conversion pursuant to this Section 4.3(d), each converted share of Non-Voting Common Stock shall be retired and shall again represent an authorized by unissued share of Non-Voting Common Stock under this Amended
and Restated Certificate of Incorporation. All shares of Common Stock issued upon conversion of shares of Non-Voting Common Stock shall, upon issuance, be fully paid and non-assessable.
(iii) The conversion of shares of Non-Voting Common Stock pursuant to this Section 4.3(c) shall be made without charge to
the holder or holders of such shares for any issuance tax (except stock transfer tax) in respect thereof or other costs incurred by the Corporation in connection with such conversion.
(iv) The Corporation shall from time to time reserve for issuance out of its authorized but unissued shares of Common Stock, or
shall keep available (solely for the purposes of issuance upon conversion of shares of Non-Voting Common Stock) shares of Common Stock held by the Corporation as treasury stock, the number of shares of Common Stock into which all outstanding shares
of Non-Voting Common Stock may be converted.
Section 4.4
Preferred Stock
.
(a) Shares of Preferred Stock may be issued in one or more series from time to time by the Board, and the Board is expressly
authorized to fix by resolution or resolutions the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions thereof, of the shares of each series of Preferred Stock, including without limitation the
following:
(i) the distinctive serial designation of such series which shall distinguish it from other series;
(ii) the number of shares included in such series;
(iii) the dividend rate (or method of determining such rate) payable to the holders of the shares of such series, any
conditions upon which such dividends shall be paid and the date or dates upon which such dividends shall be payable;
(iv)
whether dividends on the shares of such series shall be cumulative and, in the case of shares of any series having cumulative dividend rights, the date or dates or method of determining the date or dates from which dividends on the shares of such
series shall be cumulative;
(v) the amount or amounts which shall be payable out of the assets of the Corporation to the
holders of the shares of such series upon voluntary or involuntary liquidation, dissolution or winding up the Corporation, and the relative rights of priority, if any, of payment of the shares of such series;
-4-
(vi) the price or prices at which, the period or periods within which, and the
terms and conditions upon which the shares of such series may be redeemed, in whole or in part, at the option of the Corporation or at the option of the holder or holders thereof or upon the happening of a specified event or events;
(vii) the obligation, if any, of the Corporation to purchase or redeem shares of such series pursuant to a sinking fund or
otherwise and the price or prices at which, the period or periods within which and the terms and conditions upon which the shares of such series shall be redeemed or purchased, in whole or in part, pursuant to such obligation;
(viii) whether or not the shares of such series shall be convertible or exchangeable, at any time or times at the option of the
holder or holders thereof or at the option of the Corporation or upon the happening of a specified event or events, into shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation,
and the price or prices or rate or rates of exchange or conversion and any adjustments applicable thereto;
(ix) whether or
not the holders of the shares of such series shall have voting rights, in addition to the voting rights provided by law, and if so the terms of such voting rights; and
(x) any other powers, preferences and rights and qualifications, limitations and restrictions not inconsistent with the DGCL.
(b) Unless otherwise provided in the resolution or resolutions of the Board or a duly authorized committee thereof
establishing the terms of a series of Preferred Stock, no holder of any share of Preferred Stock shall be entitled to vote on any amendment or alteration of this Amended and Restated Certificate of Incorporation to authorize or create, or increase
the authorized amount of, any other class or series of Preferred Stock or any alteration, amendment or repeal of any provision of any other series of Preferred Stock.
(c) Except as otherwise required by the DGCL or provided in the resolution or resolutions of the Board or a duly authorized
committee thereof establishing the terms of a series of Preferred Stock, no holder of Common Stock or Non-Voting Common Stock, as such, shall be entitled to vote on any amendment or alteration of this Amended and Restated Certificate of
Incorporation that alters, amends or changes the powers, preferences, rights or other terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of
one or more other series of Preferred Stock, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation or the DGCL.
(d) Subject to the rights of the holders of any series of Preferred Stock, the number of authorized shares of any class or
series of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the outstanding shares of such class or series, voting together as a single
class, irrespective of the provisions of Section 242(b)(2) of the DGCL or any corresponding provision hereafter enacted.
-5-
(e) Unless otherwise provided in the resolution or resolutions of the Board or a
duly authorized committee thereof establishing the terms of a series of Preferred Stock, no holder of any share of Preferred Stock shall, in such capacity, be entitled to bring a derivative action, suit or proceeding on behalf of the Corporation.
ARTICLE V
No holder
of any capital stock of the Corporation shall have any preemptive rights nor be entitled, as of right, to purchase or subscribe for any part of the unissued capital stock of the Corporation or of any additional capital stock issued by reason of any
increase of authorized capital stock of the Corporation or other securities whether or not convertible into capital stock of the Corporation.
ARTICLE VI
In
furtherance and not in limitation of the powers conferred by the DGCL, the Board is expressly authorized to adopt, amend or repeal bylaws of the Corporation, subject to the power of the stockholders of the Corporation to alter or repeal any bylaws
whether adopted by them or otherwise;
provided
that the affirmative vote of holders of not less than seventy-five percent (75%) of the votes of all outstanding shares of capital stock of the Corporation entitled to vote generally in the
election of directors, considered for purposes hereof as a single class, shall be required for the stockholders to adopt new bylaws or to alter, amend, or repeal bylaws.
ARTICLE VII
Elections of
directors need not be by written ballot except and to the extent provided in the Corporation’s bylaws.
ARTICLE VIII
The number of directors of the Corporation shall be fixed from time to time pursuant to the Corporation’s bylaws. Commencing as of the
date of this Amended and Restated Certificate of Incorporation, the directors of the Corporation shall be divided into three classes, as nearly equal in number as reasonably possible, as determined by the Board, with the initial term of office of
the first class of such directors to expire at the 2015 annual meeting of stockholders of the Corporation, the initial term of office of the second class of such directors to expire at the 2016 annual meeting of stockholders of the Corporation and
the initial term of office of the third class of such directors to expire at the 2017 annual meeting of stockholders of the Corporation, with each class of directors to hold office until their successors have been duly elected and qualified. At each
annual meeting of stockholders following such initial classification and election, directors elected to succeed the directors whose terms expire at such annual meeting shall be elected to hold office for a term of three years following their
election and until their successors have been duly elected and qualified. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain or attain a number of directors in each class as
nearly equal as reasonably possible, but no decrease in the number of directors may shorten the term of any incumbent director.
-6-
ARTICLE IX
No action required or permitted to be taken by the holders of any class or series of stock of the Corporation, including but not limited to
the election of directors, may be taken by one or more written consents.
ARTICLE X
Notwithstanding anything else in this Amended and Restated Certificate of Incorporation to the contrary, an affirmative vote of the holders of
not less than seventy-five percent (75%) of the votes of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors shall be required to amend, alter, repeal or adopt any provision of this
Amended and Restated Certificate of Incorporation (whether by merger, consolidation or otherwise) contained in
Article VI
,
Article VIII
,
Article IX
or
Article XII
.
ARTICLE XI
Section 11.1 To the fullest extent authorized by the DGCL, a director of the Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that such exemption from liability or limitation thereof is not permitted under the DGCL as currently in effect or as the same may hereafter be
amended. No amendment, modification or repeal of this
Section 11.1
shall adversely affect any right or protection of a director that exists at the time of such amendment, modification or repeal.
Section 11.2 To the fullest extent permitted by the DGCL, the Corporation is authorized to provide indemnification of (and advancement of
expenses to) the Corporation’s directors, officers and agents (and any other persons to which the DGCL permits the Corporation to provide indemnification) through the Corporation’s bylaws, agreements with such persons, vote of stockholders
or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the DGCL, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to
actions for breach of duty to the Corporation, its stockholders and others, and by any applicable federal or state bank regulatory laws or regulations. The rights to indemnification and to the advancement of expenses conferred in this
Section 11.2
shall not be exclusive of any other right which any such person may have or may hereafter acquire under this Amended and Restated Certificate of Incorporation, the Corporation’s bylaws, any statute, agreement, vote of
stockholders or disinterested directors or otherwise. No amendment, modification or repeal of this
Section 11.2
shall adversely affect any right or protection of a director, officer, agent or other person existing at the time of, or
increase the liability of any person with respect to any acts or omissions of such person occurring prior to, such amendment, repeal or modification.
-7-
ARTICLE XII
Section 12.1
Interested Stockholders
. The Corporation expressly elects to be governed by Section 203 of the DGCL.
Notwithstanding the terms of Section 203 of the DGCL, neither NAB nor any of its affiliates, nor any transferee receiving shares of Common Stock, Non-Voting Common Stock or Preferred Stock from NAB or its affiliates, or any affiliate of any
such transferee, shall be deemed at any time, and without regard to the percentage of voting stock of the Corporation owned by NAB or any of its affiliates, to be an “interested stockholder” as such term is defined in
Section 203(c)(5) of the DGCL.
Section 12.2
Business Opportunities
. NAB may (either directly or through its affiliates)
engage in or possess interests in other business ventures of every kind and description for its own account, including, without limitation, directly engaging in or investing in other entities that engage in retail, commercial, industrial, and
agribusiness lending and wealth management in the United States or elsewhere (provided that nothing in this
Section 12.2
shall be interpreted to prevent NAB from contractually limiting its right to engage in any of the foregoing
activities, either directly or through its affiliates). To the fullest extent permitted by law, the Corporation, on behalf of itself and its subsidiaries, hereby renounces any interest or expectancy of the Corporation and its subsidiaries in, or in
being offered an opportunity to participate in, business opportunities that are from time to time presented to NAB or any of its (or its affiliates’) officers, directors, agents, members, affiliates, partners or subsidiaries (other than the
Corporation or its subsidiaries), even if the opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so. The Corporation
renounces and waives and agrees not to assert any claim for breach of any fiduciary or other duty relating to such opportunity, against NAB or any of its (or its affiliates’) officers, directors, agents, members, affiliates, partners or
subsidiaries (other than the Corporation or its subsidiaries), by reason of the fact that such person pursues or acquires such business opportunity, directs such business opportunity to another person, or fails to present such business opportunity,
or information regarding such business opportunity, to the Corporation or its subsidiaries unless, in the case of any such person who is a director or officer of the Corporation, such business opportunity is expressly offered to such director or
officer in writing solely in his or her capacity as a director or officer of the Corporation. Any person or entity purchasing or otherwise acquiring any interest in shares of the Corporation’s capital stock shall be deemed to have notice of,
and to have consented to, the provisions of this
Section 12.2
.
Section 12.3
Forum Selection
. Unless the Corporation
consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on
behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action
asserting a claim arising pursuant to any provision of the DGCL this Amended and Restated Certificate of Incorporation or the Corporation’s bylaws, or (d) any action asserting a claim that is governed by the internal affairs doctrine, in
each such case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein and the claim not being one which is vested in the exclusive jurisdiction of a court or forum other
-8-
than the Court of Chancery or for which the Court of Chancery does not have subject matter jurisdiction. Any person purchasing or otherwise acquiring any interest in any shares of the
Corporation’s capital stock shall be deemed to have notice of, and to have consented to the provisions of this
Section 12.3
.
Section 12.4
Severability
. If any provision of this Amended and Restated Certificate of Incorporation shall be held to be invalid,
illegal or unenforceable as applied to any circumstance for any reason whatsoever: (a) the validity, legality and enforceability of such provision in any other circumstance and of the remaining provisions of this Amended and Restated
Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal, or unenforceable that is not itself held
to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) to the fullest extent possible, the provisions of this Amended and Restated Certificate of Incorporation (including, without limitation, each
such portion of any paragraph of this Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal, or unenforceable) shall be construed so as to permit the Corporation to protect its directors,
officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent permitted by law.
[
Signature Page Follows
]
-9-
IN WITNESS WHEREOF, Great Western Bancorp, Inc. has caused this Amended and Restated Certificate
of Incorporation to be signed by [
—
], its [
—
], on the [
—
] day of [
—
], 2014.
|
|
|
|
|
Great Western Bancorp, Inc.
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
[Amended and Restated Certificate of Incorporation]
Exhibit 3.2
FORM OF
AMENDED AND
RESTATED BYLAWS
OF
GREAT WESTERN BANCORP, INC.
ARTICLE I
Stockholders
Section 1.1.
Annual Meetings
. An annual meeting of stockholders shall be held for the election of directors at such
date, time and place either within or without the State of Delaware, or may instead be held solely by means of remote communication, as may be designated by the Board of Directors of the Corporation (the “
Board
”) from time to time.
Any other proper business may be transacted at the annual meeting.
Section 1.2.
Special Meetings
. Special meetings of
stockholders may be called at any time only by the Chairperson of the Board, the Chief Executive Officer, the Board or, prior to the time at which National Australia Bank Limited (“
NAB
”) ceases to control the Corporation for
purposes of the Bank Holding Company Act of 1956, as amended, as provided for in a written determination from the Board of Governors of the Federal Reserve System to NAB or as provided for in a written notice by NAB to the Corporation to such effect
(the “
Non-Control Date
”), NAB, to be held at such date, time and place either within or without the State of Delaware, or may instead be held by means of remote communication, as may be stated in the notice of such meeting.
Section 1.3.
Notice of Meetings
. Whenever stockholders are required or permitted to take any action at a meeting, a written
notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such
meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at
such meeting as of the record date for determining the stockholders entitled to notice of the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such
stockholder’s address as it appears on the records of the Corporation. In addition, if stockholders have consented to receive notices by a form of electronic transmission, then such notice, by facsimile telecommunication, or by electronic mail,
shall be deemed to be given when directed to a number or an electronic mail address, respectively, at which the stockholder has consented to receive notice. If such notice is transmitted by a posting on an electronic network together with separate
notice to the stockholder of such specific
posting, such notice shall be deemed to be given upon the later of (a) such posting, and (b) the giving of such separate notice. If such notice is transmitted by any other form of
electronic transmission, such notice shall be deemed to be given when directed to the stockholder. Notice shall be deemed to have been given to all stockholders of record who share an address if notice is given in accordance with the
“householding” rules set forth in the rules of the Securities and Exchange Commission (the “
SEC
”) under the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”), and Section 233 of the
Delaware General Corporation Law (the “
DGCL
”). For purposes of these Bylaws, “
electronic transmission
” means any form of communication, not directly involving the physical transmission of paper, that creates a
record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form through an automated process.
Section 1.4.
Adjournments
. Any meeting of stockholders may be adjourned from time to time, to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, thereof are announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled to vote at such meeting.
Section 1.5.
Quorum
. At each meeting of stockholders, except where otherwise provided by law, the Amended and Restated
Certificate of Incorporation of the Corporation (the “
Certificate of Incorporation
”) or these Bylaws, the holders of a majority of the outstanding shares of stock entitled to vote on a matter at the meeting, present in person or
represented by proxy, shall constitute a quorum. For purposes of the foregoing, where a separate vote by class or classes is required for any matter, the holders of a majority of the outstanding shares of such class or classes, present in person or
represented by proxy, shall constitute a quorum to take action with respect to that vote on that matter. Two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class
at the meeting. In the absence of a quorum of the holders of any class of stock entitled to vote on a matter, either (a) the holders of such class so present or represented may, by majority vote, adjourn the meeting of such class from time to
time in the manner provided by Section 1.4 until a quorum of such class shall be so present or represented or (b) the chairperson of the meeting may, on his or her own motion and without the approval of the stockholders who are present in
person or represented by proxy and entitled to vote at such meeting, adjourn the meeting from time to time in the manner provided by Section 1.4 until a quorum of such class shall be so present and represented, without notice other than
announcement at the meeting.
Section 1.6.
Organization
.
(a) Meetings of stockholders shall be presided over by the Chairperson of the Board, or in the absence of the Chairperson of
the Board by the Vice
-2-
Chairperson of the Board, or in the absence of the Vice Chairperson of the Board by the Chief Executive Officer, or in the absence of the Chief Executive Officer by the President, in the absence
of the President by a Vice President, or in the absence of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary, or in the absence of the
Secretary an Assistant Secretary, or in the absence of an Assistant Secretary, any person appointed by the chairperson of the meeting, shall act as secretary of the meeting.
(b) The order of business at each such meeting shall be as determined by the chairperson of the meeting. The chairperson of the
meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment
of procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof, and the
opening and closing of the voting polls for each item on which a vote is to be taken.
Section 1.7.
Inspectors
.
(a) Prior to any meeting of stockholders, the Board or the Chief Executive Officer shall appoint one or more inspectors to act
at such meeting and make a written report thereof and may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at the meeting of stockholders, the chairperson of
the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to faithfully execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors shall (i) ascertain the number of shares outstanding and the voting power of each, (ii) determine the number of shares represented at the meeting and the validity of proxies and
ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors and (v) certify their determination of the number
of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons to assist them in the performance of their duties.
(b) The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at a
meeting shall be announced at the meeting. No ballot, proxy or vote, nor any revocation thereof or change thereto, shall be accepted by the inspectors after the closing of the polls.
(c) In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the
proxies, any envelopes submitted therewith, any information provided by a stockholder who submits a proxy by telegram, cablegram, or other electronic transmission from which it can
-3-
be determined that the proxy was authorized by the stockholder, any written ballot or, if authorized by the Board, a ballot submitted by electronic transmission together with any information from
which it can be determined that the electronic transmission was authorized by the stockholder, any information provided in a record of a vote if such vote was taken at the meeting by means of remote communication along with any information used to
verify that any person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder, ballots and the regular books and records of the Corporation, and they may also consider other reliable information for the
limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the
stockholder holds of record. If the inspectors consider other reliable information for such purpose, they shall, at the time they make their certification, specify the precise information considered by them, including the person or persons from whom
they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.
Section 1.8.
Voting
.
(a) Unless otherwise provided in the Certificate of Incorporation, each stockholder entitled to vote at any meeting of
stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question.
(b) Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the
meeting and entitled to vote on the election of directors. In all other matters, unless otherwise provided by law or by the Certificate of Incorporation or these Bylaws, the affirmative vote of the holders of a majority of the shares present in
person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Where a separate vote by class or classes is required, the affirmative vote of the holders of a majority of the shares of
such class or classes present in person or represented by proxy at the meeting shall be the act of such class or classes, except as otherwise provided by law or by the Certificate of Incorporation or these Bylaws. For purposes of this
Section 1.8, votes cast “for” or “against” and “abstentions” with respect to such matter shall be counted as shares of stock of the Corporation entitled to vote on such matter, while “broker non-votes”
(or other shares of stock of the Corporation similarly not entitled to vote) shall not be counted as shares entitled to vote on such matter.
(c) Voting at meetings of stockholders need not be by written ballot unless the holders of a majority of the outstanding shares
of all classes of stock entitled to vote thereon present in person or represented by proxy at such meeting shall so determine.
-4-
(d) Shares of capital stock of the Corporation (i) belonging to the
Corporation or (ii) held by another corporation if the Corporation owns, directly or indirectly, a sufficient number of shares entitled to elect a majority of the directors of such other corporation, shall not be voted directly or indirectly at
any meeting and shall not be counted in determining the total number of outstanding shares at any given time. Notwithstanding the foregoing, shares held by the Corporation in a fiduciary capacity may be voted and shall be counted in determining the
total number of outstanding shares at any given time.
Section 1.9.
Proxies
. Each stockholder entitled to vote at a
meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power, regardless of whether the interest with which it is coupled is an interest
in the stock itself or an interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly
executed proxy bearing a later date with the Secretary.
Section 1.10.
Fixing Date for Determination of Stockholders of
Record
.
(a) In order that the Corporation may determine the stockholders entitled to notice of any meeting of
stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than sixty nor
less than ten days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record
date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of and to vote at a meeting of
stockholders shall be at the close of business on the day immediately preceding the day on which notice is given, or, if notice is waived, at the close of business on the day immediately preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided
,
however
, that the Board may fix a new record date for determination of
stockholders entitled to vote at the adjourned meeting, and in such case shall also fix the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders
entitled to vote in accordance with this Section 1.10(a) at the adjourned meeting.
(b) In order that the Corporation
may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any
-5-
change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the
day on which the Board adopts the resolution relating thereto.
Section 1.11.
List of Stockholders Entitled to Vote
. The
Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting;
provided
,
however
, if the record date for determining the stockholders
entitled to vote is less than ten days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date, arranged in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Nothing in this Section 1.11 shall require the Corporation to include electronic mail addresses or other electronic content information on such list. Such list shall be open to the
examination of any stockholder for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network,
provided
that the information required to gain access to
such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic
network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be
produced and kept at the time and place of the meeting during the whole time thereof and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then such list shall also be open to
the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.
Section 1.12.
Advance Notice of Stockholder Nominees for Director and Other Stockholder Proposals
.
(a) The matters to be considered and brought before any meeting of stockholders shall be limited to only such matters,
including the nomination and election of directors, as shall be brought properly before such meeting in compliance with the procedures set forth in this Section 1.12.
(b) For any matter to be brought properly before the annual meeting of stockholders, the matter must be (i) specified in
the notice of the annual meeting given by or at the direction of the Board, (ii) otherwise brought before the annual meeting by or at the direction of the Board or (iii) brought before the annual meeting by a stockholder who (1) is a
stockholder of record of the Corporation on the date the Stockholder Notice (as defined below) is delivered to the Secretary, (2) is entitled to vote at the annual meeting and (3) complies with the procedures set forth in this
Section 1.12.
-6-
(c) In addition to any other requirements under applicable law and the
Certificate of Incorporation and these Bylaws, written notice (the “
Stockholder Notice
”) of any nomination or other proposal must be timely and any proposal, other than a nomination, must constitute a proper matter for stockholder
action. To be timely, the Stockholder Notice must be delivered to the Secretary at the principal executive office of the Corporation not less than 90 nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding
year (for these purposes, the annual meeting for the year 2014 shall be deemed to have occurred on February 15, 2014);
provided
,
however
, that if (and only if) the annual meeting is not scheduled to be held within a period that
commences 30 days before such anniversary date and ends within 60 days after such anniversary date (an annual meeting date outside such period being referred to herein as an “
Other Meeting Date
”), the Stockholder Notice shall be
given in the manner provided herein by the later of the close of business on (i) the date 90 days prior to such Other Meeting Date or (ii) the tenth day following the date such Other Meeting Date is first publicly announced or disclosed. A
Stockholder Notice must contain the following information: (i) whether the stockholder is providing the notice at the request of a beneficial holder of shares, whether the stockholder, any such beneficial holder or any nominee has any
agreement, arrangement or understanding with, or has received any financial assistance, funding or other consideration from, any other person with respect to the investment by the stockholder or such beneficial holder in the Corporation or the
matter the Stockholder Notice relates to, and the details thereof, including the name of such other person (the stockholder, any beneficial holder on whose behalf the notice is being delivered, any nominees listed in the notice and any persons with
whom such agreement, arrangement or understanding exists or from whom such assistance has been obtained are hereinafter collectively referred to as “
Interested Persons
”), (ii) the name and address of all Interested Persons,
(iii) a complete listing of the record and beneficial ownership positions (including number or amount) of all equity securities and debt instruments, whether held in the form of loans or capital market instruments, of the Corporation or any of
its subsidiaries held by all Interested Persons, (iv) whether and the extent to which any hedging, derivative or other transaction is in place or has been entered into within the prior six months preceding the date of delivery of the
Stockholder Notice by or for the benefit of any Interested Person with respect to the Corporation or its subsidiaries or any of their respective securities, debt instruments or credit ratings, the effect or intent of which transaction is to give
rise to gain or loss as a result of changes in the trading price of such securities or debt instruments or changes in the credit ratings for the Corporation, its subsidiaries or any of their respective securities or debt instruments (or, more
generally, changes in the perceived creditworthiness of the Corporation or its subsidiaries), or to increase or decrease the voting power of such Interested Person, and if so, a summary of the material terms thereof, and (v) a representation
that the stockholder is a holder of record of stock of the Corporation that would be entitled to vote at the meeting and intends to appear in
-7-
person or by proxy at the meeting to propose the matter set forth in the Stockholder Notice. As used herein, “
beneficially owned
” has the meaning provided in Rules 13d-3 and
13d-5 under the Exchange Act. The Stockholder Notice shall be updated not later than 10 days after the record date for the determination of stockholders entitled to vote at the meeting to provide any material changes in the foregoing information as
of the record date. Any Stockholder Notice relating to the nomination of directors must also contain (1) the information regarding each nominee required by paragraphs (a), (e) and (f) of Item 401 of Regulation S-K adopted by
the SEC (or the corresponding provisions of any successor regulation), (2) each nominee’s signed consent to serve as a director of the Corporation if elected, and (3) whether each nominee is eligible for consideration as an
independent director under the relevant standards contemplated by Item 407(a) of Regulation S-K (or the corresponding provisions of any successor regulation). The Corporation may also require any proposed nominee to furnish such other
information, including completion of the Corporation’s director questionnaire, as it may reasonably require to determine whether the nominee would be considered “independent” as a director or as a member of any applicable committee of
the Board under the various rules and standards applicable to the Corporation. Any Stockholder Notice with respect to a matter other than the nomination of directors must contain (x) the text of the proposal to be presented, including the text
of any resolutions to be proposed for consideration by stockholders and (y) a brief written statement of the reasons why such stockholder favors the proposal. Notwithstanding anything in this Section 1.12(c) to the contrary, in the
event that the number of directors to be elected to the Board of the Corporation is increased and either all of the nominees for director or the size of the increased Board is not publicly announced or disclosed by the Corporation at least 100 days
prior to the first anniversary of the preceding year’s annual meeting, a Stockholder Notice shall also be considered timely hereunder, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to
the Secretary at the principal executive office of the Corporation not later than the close of business on the tenth day following the first date all of such nominees or the size of the increased Board shall have been publicly announced or
disclosed.
(d) For any matter to be brought properly before a special meeting of stockholders, the matter must be set
forth in the Corporation’s notice of the meeting given by or at the direction of the Board. In the event that the Corporation calls a special meeting of stockholders for the purpose of electing one or more persons to the Board, any stockholder
may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of the meeting, if the Stockholder Notice required by Section 1.12(c) shall be delivered to the Secretary at
the principal executive office of the Corporation not later than the close of business on the tenth day following the day on which the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting is publicly
announced or disclosed.
-8-
(e) For purposes of this Section 1.12, a matter shall be deemed to have been
“
publicly announced or disclosed
” if such matter is disclosed in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with
the SEC.
(f) Only persons who are nominated in accordance with the procedures set forth in this Section 1.12 shall be
eligible for election as directors of the Corporation. In no event shall the postponement or adjournment of an annual meeting already publicly noticed, or any announcement of such postponement or adjournment, commence a new period (or extend any
time period) for the giving of notice as provided in this Section 1.12. This Section 1.12 shall not apply to (i) stockholders proposals made pursuant to Rule 14a-8 under the Exchange Act or (ii) the election of directors selected
by or pursuant to the provisions of the Certificate of Incorporation relating to the rights of the holders of any class or series of stock of the Corporation having a preference over the Common Stock as to dividends or upon liquidation to elect
directors under specified circumstances.
(g) The chairperson of any meeting of stockholders, in addition to making any
other determinations that may be appropriate to the conduct of the meeting, shall have the power and duty to determine whether notice of nominees and other matters proposed to be brought before a meeting has been duly given in the manner provided in
this Section 1.12 and, if not so given, shall direct and declare at the meeting that such nominees and other matters are not properly before the meeting and shall not be considered. Notwithstanding the foregoing provisions of this
Section 1.12, if the stockholder or a qualified representative of the stockholder does not appear at the annual or special meeting of stockholders of the Corporation to present any such nomination, or make any such proposal, such nomination or
proposal shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation.
ARTICLE II
Board of Directors
Section 2.1.
Powers; Number; Qualifications
. The business and affairs of the Corporation shall be managed by or under the
direction of the Board, except as may be otherwise provided by law or in the Certificate of Incorporation. The Board shall consist of three or more members, each of whom shall be a natural person but need not, except as otherwise determined by the
Board or the Corporation, be a stockholder. There shall initially be nine directors, and the number of directors may be designated from time to time by the Board;
provided
that, prior to the Non-Control Date, the number of Directors shall not
be increased to more than thirteen or decreased to less than five. This Section 2.1 may not be amended, modified or repealed except by the affirmative vote of not less than seventy-five percent (75%) of the directors present at a meeting
at which a quorum is present.
-9-
Section 2.2.
Election; Term of Office; Resignation; Removal; Vacancies
.
(a) Each director shall hold office until the next election of the class for which such director shall have been chosen and
until his or her successor is elected and qualified, unless such director resigns or is removed prior to such time. Any director may resign at any time upon notice given in writing or by electronic transmission to the Board or to the Chief Executive
Officer or the Secretary. Such resignation shall take effect at the time it is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. Unless otherwise specified
therein no acceptance of such resignation shall be necessary to make it effective. Any director or the entire Board may be removed, with cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Unless
otherwise provided in the Certificate of Incorporation or these Bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of directors to be elected by all of the stockholders having the right to vote as
a single class or from any other cause may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Any director elected or appointed to fill a vacancy shall hold office until the next
election of the class of directors of the director which such director replaced and until and his or her successor is elected and qualified, unless such director resigns or is removed prior to such time.
(b) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the
Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by the sole remaining
director so elected.
Section 2.3.
Regular Meetings
. Regular meetings of the Board may be held at such places within or
without the State of Delaware and at such times as the Board may from time to time determine, and if so determined notice thereof need not be given.
Section 2.4.
Special Meetings
. Special meetings of the Board may be held at any time or place within or without the State of
Delaware whenever called by the Chairperson of the Board, by the Vice Chairperson of the Board, by the Chief Executive Officer or by any two directors. Reasonable notice thereof shall be given by the person or persons calling the meeting.
Section 2.5.
Participation in Meetings by Conference Telephone Permitted
. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, members of the Board, or any committee designated by the Board, may
-10-
participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this Section 2.5 shall constitute presence in person at such meeting.
Section 2.6.
Quorum; Vote Required for Action
. At all meetings of the Board a majority of the entire Board shall constitute a
quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board unless the Certificate of Incorporation or these Bylaws shall require a vote of a greater
number. In case at any meeting of the Board a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall be present.
Section 2.7.
Organization
. Meetings of the Board shall be presided over by the Chairperson of the Board, or in the absence of
the Chairperson of the Board by the Vice Chairperson of the Board, or in the absence of the Vice Chairperson of the Board by the Chief Executive Officer, or in their absence by a chairperson chosen at the meeting. The Secretary, or in the absence of
the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 2.8.
Action by Directors Without a Meeting
. Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing or by
electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and
shall be in electronic form if the minutes are maintained in electronic form.
Section 2.9.
Compensation of Directors
. Unless
otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board shall have the authority to fix the compensation of directors.
ARTICLE III
Committees
Section 3.1.
Committees
. The Board may designate one or more committees, each committee to consist of one or more of
the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member
of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of
-11-
the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these Bylaws, shall have
and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall
have the power or authority in reference to the following matters: (a) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by law to be submitted
to stockholders for approval, (b) adopting, amending or repealing these Bylaws or (c) indemnifying directors.
Section 3.2.
Committee Rules
. Unless the Board otherwise provides, each committee designated by the Board may adopt, amend
and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a
quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each committee shall conduct its
business in the same manner as the Board conducts its business pursuant to Article II. In addition, any committee may appoint one or more subcommittees of its members.
ARTICLE IV
Officers
Section 4.1.
Officers; Election
. The principal officers of the Corporation include a Chief Executive Officer, a President, a
Chief Financial Officer, one or more Vice Presidents (which will have such designations as the Board shall deem appropriate, and which may include Executive Vice President or Senior Vice President), a Secretary, one or more Assistant Secretaries,
and such other officers as the Board shall appoint. Each of the principal officers of the Corporation shall be elected or appointed by the Board. The Board may give any officer or assistant officer such further designations or alternate titles as it
considers desirable. Any number of offices may be held by the same person unless the Certificate of Incorporation or these Bylaws otherwise provide.
Section 4.2.
Term of Office; Resignation; Removal; Vacancies
. Unless otherwise provided in the resolution of the Board
electing any officer, each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice or electronic transmission to the
Board, the Chief Executive Officer or the Secretary. Such resignation shall take effect at the time it is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events.
Unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights
of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, may be filled by the
Board at any meeting.
-12-
Section 4.3.
Chairperson of the Board
. The Chairperson of the Board, if one is
selected, shall preside at all meetings of the Board and of the stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board or as may be provided by
law.
Section 4.4.
Vice Chairperson of the Board
. In the absence of the Chairperson of the Board, the Vice Chairperson of
the Board, if one is selected, shall preside at all meetings of the Board and of the stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board or as
may be provided by law.
Section 4.5.
Chief Executive Officer
. The Chief Executive Officer shall have general charge and
supervision of the business of the Corporation and, in general, shall perform all duties incident to the office of chief executive officer of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or as
may be provided by law. The Chief Executive Officer may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall be expressly delegated
by resolution of the Board or by these Bylaws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed. In the absence of the Chairperson of the Board and Vice Chairperson of the
Board, the Chief Executive Officer shall preside at all meetings of the Board and of the stockholders at which he or she shall be present.
Section 4.6.
President
. The President shall, subject to the oversight of the Chief Executive Officer, have general charge and
supervision of the business of the Corporation and, in general, shall perform all duties incident to the office of president of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or as may be
provided by law. In the absence of the Chief Executive Officer or in the event of his death or inability or refusal to act, the President, if one has been elected, shall perform the duties of the Chief Executive Officer, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. The President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases in which the
signing and execution thereof shall be expressly delegated by resolution of the Board or by these Bylaws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed. In the absence of
the Chairperson of the Board, Vice Chairperson of the Board and the Chief Executive Officer, the President shall preside at all meetings of the Board and of the stockholders at which he or she shall be present.
Section 4.7.
Chief Financial Officer
. The Chief Financial Officer shall have charge of and be responsible for all funds,
securities, receipts and disbursements of the Corporation and shall deposit or cause to be deposited, in the name of the
-13-
Corporation, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by or under authority of the Board. If required by
the Board, the Chief Financial Officer shall give a bond for the faithful discharge of his or her duties, with such surety or sureties as the Board may determine. The Chief Financial Officer shall keep or cause to be kept full and accurate records
of all receipts and disbursements in books of the Corporation, shall render to the Chief Executive Officer and to the Board, whenever requested, an account of the financial condition of the Corporation, and, in general, shall perform all the duties
incident to the offices of chief financial officer and treasurer of a corporation (including the authority of the treasurer to execute stock certificates on behalf of the Corporation under the DGCL) and such other duties as may, from time to time,
be assigned to him or her by the Board or the Chief Executive Officer or as may be provided by law. The Chief Financial Officer may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in
cases in which the signing and execution thereof shall be expressly delegated by resolution of the Board or by these Bylaws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed.
Section 4.8.
Vice Presidents
. The Vice President or Vice Presidents, at the request or in the absence of the President
or during the President’s inability to act, shall perform the duties of the President, and when so acting shall have the powers of the President. If there be more than one Vice President, the Board may determine which one or more of the Vice
Presidents shall perform any of such duties; or if such determination is not made by the Board, the President may make such determination; otherwise any of the Vice Presidents may perform any of such duties. The Vice President or Vice Presidents
shall have such other powers and shall perform such other duties as may, from time to time, be assigned to him or her or them by the Board or the President or as may be provided by law. Any Vice President may sign and execute in the name of the
Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by resolution of the Board or by these Bylaws to some other officer or agent of the
Corporation, or shall be required by applicable law otherwise to be signed or executed.
Section 4.9.
Secretary
. The
Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board and any committees in a book to be kept for that purpose, shall see that all notices are duly given in accordance with the provisions of these
Bylaws or as required by law, shall be custodian of the records of the Corporation, may affix the corporate seal, if any, to any document the execution of which, on behalf of the Corporation, is duly authorized, and when so affixed may attest the
same, and, in general, shall perform all duties incident to the office of secretary of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the Chief Executive Officer or as may be provided by law.
The Secretary may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by resolution of the Board or by these
Bylaws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed.
-14-
Section 4.10.
Other Officers
. The other officers, if any, of the Corporation
shall have such powers and duties in the management of the Corporation as shall be stated in a resolution of the Board which is not inconsistent with these by-laws and, to the extent not so stated, as generally pertain to their respective offices,
subject to the control of the Board. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties.
ARTICLE V
Stock
Section 5.1.
Stock Certificates and Uncertificated Shares
.
(a) The shares of stock in the Corporation shall be represented by certificates;
provided
that the Board may provide by
resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate theretofore issued until such
certificate is surrendered to the Corporation. Every holder of stock represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairperson or Vice Chairperson of the Board, or the
President or a Vice President, and by the Chief Financial Officer, the Secretary or an Assistant Secretary, of the Corporation, representing the number of shares of stock registered in certificate form owned by such holder. If such certificate is
manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or
registrar at the date of issue. The Corporation may not issue stock certificates in bearer form.
(b) If the Corporation is
authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock;
provided
that, except as otherwise provided by law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock a statement
that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated shares, the
-15-
Corporation shall send to the registered owner thereof a written notice containing the information required by law to be set forth or stated on certificates or a statement that the Corporation
will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
(c) Except as otherwise expressly provided by law, the rights and
obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.
Section 5.2.
Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates
. The Corporation may issue a new
certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such
owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new
certificate or uncertificated shares.
Section 5.3.
Transfer of Shares
. Transfer of shares of the Corporation shall be
made only on the stock transfer books of the Corporation.
ARTICLE VI
Indemnification
Section 6.1.
Indemnification
.
(a) Except as provided in this Article VI, the Corporation shall indemnify each Indemnified Person (as defined below) against
all liability and Expenses (as defined below) to the full extent permitted by the DGCL, as the same exists or may hereinafter be amended (but, in the case of such amendment, only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than the DGCL permitted the Corporation to provide prior to such amendment). Expenses actually and reasonably incurred by any Indemnified Person in defending any civil, criminal, administrative or investigative action,
suit, or proceeding, as described in this Article VI, shall be paid or reimbursed by the Corporation promptly in advance of final disposition of such action, suit or proceeding upon receipt by it of an undertaking of such Indemnified Person to repay
such Expenses if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation. The Corporation shall not be required to pay or reimburse Expenses in connection with any proceeding initiated by an Indemnified
Person, unless (i) the Corporation has joined in or the Board has consented to the initiation of such proceeding,
-16-
(ii) the Corporation agrees to pay or reimburse Expenses, in its sole discretion, pursuant to powers vested in the Corporation under applicable law, or (iii) such Expenses arise in
connection with a Permitted Counterclaim (as defined below). Each Indemnified Person’s obligation to reimburse the Corporation shall be unsecured and no interest shall be charged thereon. The Corporation shall not indemnify an Indemnified
Person or advance or reimburse such Indemnified Person’s Expenses if the action, suit or proceeding alleges (1) claims under Section 16(b) of the Exchange Act, (2) violations of the Corporation’s code of ethics or insider
trading policy or (3) violations of Federal or state insider trading laws, unless, in each case, such Indemnified Person has been successful on the merits, received the written consent to incurring the Expense or settled the case with the
written consent of the Corporation, in which case the Corporation shall indemnify and reimburse such Indemnified Person. In addition, the Corporation shall not indemnify an Indemnified Person or advance or reimburse such Indemnified Person’s
Expenses if such indemnification or payment would constitute a “prohibited indemnification payment” under the regulations of the Federal Deposit Insurance Corporation (or any successor provisions) or any other applicable laws, rules or
regulations. An Indemnified Person shall be presumed to have met the relevant standard, and, if the determination is not made by the Corporation within thirty days of a demand by such Indemnified Person for indemnification, such Indemnified Person
shall be deemed to have met such standard.
(b) No claim for indemnification shall be paid by the Corporation unless the
Corporation has determined that the Indemnified Person acted in good faith and in a manner such Indemnified Person reasonably believed to be in or not opposed to the best interest of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his or her conduct was unlawful. Unless ordered by a court, such determinations shall be made by (i) a majority vote of the directors who are not parties to the action, suit or proceeding for
which indemnification is sought, even though less than a quorum, or (ii) by a committee of such directors designated by a majority vote of directors, even though less than a quorum, or (iii) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (iv) by the stockholders.
(c) Each
Indemnified Person shall promptly notify the Corporation in writing as soon as practicable upon the earlier of (i) having actual knowledge of an action, suit or proceeding where indemnification or the advance payment or reimbursement of
Expenses may be sought or (ii) being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any matter which may be subject to indemnification or the advance payment or reimbursement of
Expenses covered hereunder. The failure of an Indemnified Person to so notify the Corporation shall not relieve the Corporation of any obligation which it may have to such Indemnified Person pursuant to this Article VI.
-17-
(d) As a condition to indemnification or the advance payment or reimbursement of
Expenses, any demand for payment by an Indemnified Person shall be in writing and shall provide reasonable accounting for the Expenses to be paid by the Corporation.
(e) For the purposes of this Article VI,
(i) the term “
Indemnified Person
” shall mean any person made or threatened to be made a party, or otherwise
involved in any civil, criminal, administrative or investigative action, suit or proceeding by reason of the fact that such person or such person’s testator or intestate is or was a director, officer, employee, or agent of the Corporation or
serves or served at the request of the Corporation any other enterprise as a director, officer, employee or agent;
(ii)
the term “
Corporation
” shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term “other
enterprise” shall include any corporation, limited liability company, public limited company, partnership, joint venture, trust, employee benefit plan, fund or other enterprise;
(iii) service “
at the request of the Corporation
” shall include service as a director, officer, employee or
agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and action by a person with respect to an employee
benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation;
(iv) the term “
Expenses
” shall include all reasonable fees, costs and expenses, including without limitation,
attorney’s fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, ERISA excise taxes or penalties
assessed on an Indemnified Person with respect to an employee benefit plan, Federal, state, local or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Article VI, penalties and all other disbursements or
expenses of the types customarily incurred in connection with defending, preparing to defend, or investigating an actual or threatened civil, criminal, administrative or investigative action, suit or proceeding (including such Indemnified
Person’s counterclaims that directly respond to and negate the affirmative claim made against such Indemnified Person (“
Permitted Counterclaims
”) in such action, suit or proceeding), but shall exclude the costs of (1) any
of such Indemnified Person’s counterclaims, other than Permitted Counterclaims or (2) the fees and costs of enforcing a right to indemnification or advance payment or reimbursement under Article VI.
-18-
(f) Any action, suit or proceeding regarding indemnification or advance payment
or reimbursement of Expenses arising out of these Bylaws or otherwise shall only be brought and heard in Delaware Court of Chancery. In the event of any payment under this Article VI, the Corporation shall be subrogated to the extent of such payment
to all of the rights of recovery of the applicable Indemnified Person (under any insurance policy or otherwise), who shall execute all papers required and shall do everything necessary to secure such rights, including the execution of such documents
necessary to enable the Corporation to effectively bring suit to enforce such rights. Except as required by law or as otherwise becomes public, each Indemnified Person will keep confidential any information that arises in connection with this
Article VI, including but not limited to, claims for indemnification or the advance payment or reimbursement of Expenses, amounts paid or payable under this Article VI and any communications between the parties. No amendment of the Certificate of
Incorporation or this Article VI shall impair the rights of any Indemnified Person arising at any time with respect to events occurring prior to such amendment.
(g) The indemnification and advancement of Expenses provided in this Section 6.4 or in Section 6.5 shall not be
deemed exclusive of any other rights to which any person may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors, statute, provision of the Certificate of Incorporation, or otherwise, both as to action in such
person’s official capacity and as to action in another capacity while holding such official capacity (including, without limitation, rights to indemnification or advancement of Expenses incurred in connection with an action, suit or proceeding
commenced by such person to enforce a right to indemnification or advancement, to the extent such person is successful in such action, suit or proceeding).
Section 6.2.
Permissive Supplementary Benefits
. The Corporation may, but shall not be required to, supplement the right to
indemnification against liability and advancement of Expenses under Section 6.1 by (a) purchasing insurance on behalf of any one or more of such Indemnified Persons, whether or not the Corporation would be obligated to indemnify or advance
Expenses to such Indemnified Person under Section 6.1, and/or (b) entering into individual or group indemnification agreements with any one or more of such Indemnified Persons.
Section 6.3.
Severability
. If any portion of this Article VI shall be invalidated or held to be unenforceable on any ground
by any court of competent jurisdiction, the decision of which shall not have been reversed on appeal, the provisions of this Article VI shall be deemed to be modified to the minimum extent necessary to avoid a violation of law and, as so modified,
shall remain valid and enforceable in accordance with their terms to the fullest extent permitted by law.
-19-
ARTICLE VII
Miscellaneous
Section 7.1.
Fiscal Year
. The fiscal year of the Corporation shall be determined by the Board.
Section 7.2.
Seal
. The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon
and shall be in such form as may be approved from time to time by the Board. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
Section 7.3.
Waiver of Notice of Meetings of Stockholders, Directors and Committees
. Whenever notice is required to be given
by law or under any provision of the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these Bylaws.
Section 7.4.
Interested Directors; Quorum
. No contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or
voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because such director’s or
officer’s votes are counted for such purpose, if: (a) the material facts as to director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and
the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) the material facts as to
director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote
of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.
-20-
Section 7.5.
Form of Records
. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or by means of, or be in the form of, any information storage device, or method, provided that the records so kept can be converted into
clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records in accordance with law.
Section 7.6.
Amendment of Bylaws
. Subject to the terms of the Certificate of Incorporation, these Bylaws may be amended or
repealed, and new Bylaws adopted, by the Board, but the stockholders entitled to vote may adopt additional Bylaws and may amend or repeal any bylaw whether or not adopted by them.
-21-
Exhibit 4.1
No. Shares Common Stock Par Value $.01 Per share Incorporated under the laws of State of Delaware Great Western
Bancorp, Inc. THIS CERTIFIES that is the owner of fully paid and non-assessable Shares of common stock of the par value of one cent per share of the above- named Corporation transferable on the books of the Corporation in person or by duly
authorized Attorney upon surrender of this Certificate properly endorsed. IN WITNESS WHEREOF THE Corporation has caused this certificate to be signed by signed by its duly authorized officers. Dated , 20 . Ken Karels President & Chief Executive
Officer Donald Straka Secretary & General Counsel
PLEASE INSERT SOCIAL SECURTIY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE For Value Received, hereby sell, assign and transfer unto - Shares
represented by the within Certificate, and do hereby irrevocably constitute and appoint attorney to transfer the said Shares on the books of the within named Corporation with full power of substitution in the premises. Dated In presence of NOTICE:
THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
Exhibit 4.2
GREAT WESTERN BANCORPORATION, INC.,
as Issuer
INDENTURE
Dated as of December 17, 2003
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
FLOATING
RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
DUE 2033
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
ARTICLE I
|
|
|
DEFINITIONS
|
|
|
|
|
|
|
Section 1.1.
|
|
Definitions
|
|
|
1
|
|
|
|
|
ARTICLE II
|
|
|
DEBENTURES
|
|
|
|
|
|
|
Section 2.1
|
|
Authentication and Dating
|
|
|
8
|
|
|
Section 2.2.
|
|
Form of Trustee’s Certificate of Authentication
|
|
|
8
|
|
|
Section 2.3.
|
|
Form and Denomination of Debentures
|
|
|
9
|
|
|
Section 2.4.
|
|
Execution of Debentures
|
|
|
9
|
|
|
Section 2.5.
|
|
Exchange and Registration of Transfer of Debentures
|
|
|
9
|
|
|
Section 2.6.
|
|
Mutilated, Destroyed, Lost or Stolen Debentures
|
|
|
11
|
|
|
Section 2.7.
|
|
Temporary Debentures
|
|
|
12
|
|
|
Section 2.8.
|
|
Payment of Interest and Additional Interest
|
|
|
12
|
|
|
Section 2.9.
|
|
Cancellation of Debentures Paid, etc.
|
|
|
13
|
|
|
Section 2.10.
|
|
Computation of Interest
|
|
|
14
|
|
|
Section 2.11.
|
|
Extension of Interest Payment Period
|
|
|
15
|
|
|
Section 2.12.
|
|
CUSIP Numbers
|
|
|
16
|
|
|
|
|
ARTICLE III
|
|
|
PARTICULAR COVENANTS OF THE COMPANY
|
|
|
|
|
|
|
Section 3.1.
|
|
Payment of Principal, Premium and Interest; Agreed Treatment of the Debentures
|
|
|
16
|
|
|
Section 3.2.
|
|
Offices for Notices and Payments, etc.
|
|
|
17
|
|
|
Section 3.3.
|
|
Appointments to Fill Vacancies in Trustee’s Office
|
|
|
17
|
|
|
Section 3.4.
|
|
Provision as to Paying Agent
|
|
|
18
|
|
|
Section 3.5.
|
|
Certificate to Trustee
|
|
|
18
|
|
|
Section 3.6.
|
|
Additional Sums
|
|
|
19
|
|
|
Section 3.7.
|
|
Compliance with Consolidation Provisions
|
|
|
19
|
|
|
Section 3.8.
|
|
Limitation on Dividends
|
|
|
19
|
|
|
Section 3.9.
|
|
Covenants as to the Trust
|
|
|
20
|
|
|
Section 3.10.
|
|
Additional Junior Indebtedness
|
|
|
20
|
|
|
|
|
ARTICLE IV
|
|
|
SECURITYHOLDERS’ LISTS AND REPORTS
|
|
|
BY THE COMPANY AND THE TRUSTEE
|
|
|
|
|
|
|
Section 4.1.
|
|
Securityholders’ Lists
|
|
|
20
|
|
|
Section 4.2.
|
|
Preservation and Disclosure of Lists
|
|
|
20
|
|
|
|
|
ARTICLE V
|
|
|
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
|
|
|
UPON AN EVENT OF DEFAULT
|
|
|
|
|
|
|
Section 5.1.
|
|
Events of Default
|
|
|
21
|
|
i
|
|
|
|
|
|
|
|
|
Section 5.2.
|
|
Payment of Debentures on Default; Suit There for
|
|
|
23
|
|
|
Section 5.3.
|
|
Application of Moneys Collected by Trustee
|
|
|
24
|
|
|
Section 5.4.
|
|
Proceedings by Securityholders
|
|
|
25
|
|
|
Section 5.5.
|
|
Proceedings by Trustee
|
|
|
25
|
|
|
Section 5.6.
|
|
Remedies Cumulative and Continuing; Delay or Omission Not a Waiver
|
|
|
25
|
|
|
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.
|
|
Understanding to Pay Costs
|
|
|
26
|
|
|
|
|
ARTICLE VI
|
|
|
CONCERNING THE TRUSTEE
|
|
|
|
|
|
|
Section 6.1.
|
|
Duties and Responsibilities of Trustee
|
|
|
27
|
|
|
Section 6.2.
|
|
Reliance on Documents, Opinions, etc.
|
|
|
28
|
|
|
Section 6.3.
|
|
No Responsibility for Recitals, etc.
|
|
|
28
|
|
|
Section 6.4.
|
|
Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Debentures
|
|
|
29
|
|
|
Section 6.5.
|
|
Moneys to be Held in Trust
|
|
|
29
|
|
|
Section 6.6.
|
|
Compensation and Expenses of Trustee
|
|
|
29
|
|
|
Section 6.7.
|
|
Officers’ Certificate as Evidence
|
|
|
30
|
|
|
Section 6.8.
|
|
Eligibility of Trustee
|
|
|
30
|
|
|
Section 6.9.
|
|
Resignation or Removal of Trustee
|
|
|
30
|
|
|
Section 6.10.
|
|
Acceptance by Successor Trustee
|
|
|
31
|
|
|
Section 6.11.
|
|
Succession by Merger, etc.
|
|
|
32
|
|
|
Section 6.12.
|
|
Authenticating Agents
|
|
|
32
|
|
|
|
|
ARTICLE VII
|
|
|
CONCERNING THE SECURITYHOLDERS
|
|
|
|
|
|
|
Section 7.1.
|
|
Action by Securityholders
|
|
|
33
|
|
|
Section 7.2.
|
|
Proof of Execution by Securityholders
|
|
|
34
|
|
|
Section 7.3.
|
|
Who Are Deemed Absolute Owners
|
|
|
34
|
|
|
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
|
|
|
|
|
|
|
Section 8.1.
|
|
Purposes of Meetings
|
|
|
35
|
|
|
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
|
|
|
36
|
|
|
Section 8.6.
|
|
Voting
|
|
|
36
|
|
|
Section 8.7.
|
|
Quorum; Actions
|
|
|
36
|
|
|
|
|
ARTICLE IX
|
|
|
SUPPLEMENTAL INDENTURES
|
|
|
|
|
|
|
Section 9.1.
|
|
Supplemental Indentures without Consent of Securityholders
|
|
|
37
|
|
|
Section 9.2.
|
|
Supplemental Indentures with Consent of Securityholders
|
|
|
38
|
|
ii
|
|
|
|
|
|
|
|
|
Section 9.3.
|
|
Effect of Supplemental Indentures
|
|
|
39
|
|
|
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
|
|
|
|
|
|
|
Section 10.1.
|
|
Optional Redemption
|
|
|
40
|
|
|
Section 10.2.
|
|
Special Event Redemption
|
|
|
40
|
|
|
Section 10.3.
|
|
Notice of Redemption; Selection of Debentures
|
|
|
40
|
|
|
Section 10.4.
|
|
Payment of Debentures Called for Redemption
|
|
|
41
|
|
|
|
|
ARTICLE XI
|
|
|
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
|
|
|
|
|
|
|
Section 11.1.
|
|
Company May Consolidate, etc., on Certain Terms
|
|
|
41
|
|
|
Section 11.2.
|
|
Successor Entity to be Substituted
|
|
|
41
|
|
|
Section 11.3.
|
|
Opinion of Counsel to be Given to Trustee
|
|
|
42
|
|
|
|
|
ARTICLE XII
|
|
|
SATISFACTION AND DISCHARGE OF INDENTURE
|
|
|
|
|
|
|
Section 12.1.
|
|
Discharge of Indenture
|
|
|
42
|
|
|
Section 12.2.
|
|
Deposited Moneys to be Held in Trust by Trustee
|
|
|
42
|
|
|
Section 12.3.
|
|
Paying Agent to Repay Moneys Held
|
|
|
43
|
|
|
Section 12.4.
|
|
Return of Unclaimed Moneys
|
|
|
43
|
|
|
|
|
ARTICLE XIII
|
|
|
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
|
|
|
OFFICERS AND DIRECTORS
|
|
|
|
|
|
|
Section 13.1.
|
|
Indenture and Debentures Solely Corporate Obligations
|
|
|
43
|
|
|
|
|
ARTICLE XIV
|
|
|
MISCELLANEOUS PROVISIONS
|
|
|
|
|
|
|
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.
|
|
|
44
|
|
|
Section 14.5.
|
|
Governing Law
|
|
|
44
|
|
|
Section 14.6.
|
|
Evidence of Compliance with Conditions Precedent
|
|
|
44
|
|
|
Section 14.7.
|
|
Table of Contents, Headings, etc.
|
|
|
44
|
|
|
Section 14.8.
|
|
Execution in Counterparts
|
|
|
44
|
|
|
Section 14.9.
|
|
Separability
|
|
|
44
|
|
|
Section 14.10.
|
|
Assignment
|
|
|
45
|
|
|
Section 14.11.
|
|
Acknowledgment of Rights
|
|
|
45
|
|
iii
|
|
|
|
|
|
|
|
|
|
|
ARTICLE XV
|
|
|
SUBORDINATION OF DEBENTURES
|
|
|
|
|
|
|
Section 15.1.
|
|
Agreement to Subordinate
|
|
|
45
|
|
|
Section 15.2.
|
|
Default on Senior Indebtedness
|
|
|
45
|
|
|
Section 15.3.
|
|
Liquidation, Dissolution, Bankruptcy
|
|
|
46
|
|
|
Section 15.4.
|
|
Subrogation
|
|
|
47
|
|
|
Section 15.5.
|
|
Trustee to Effectuate Subordination
|
|
|
47
|
|
|
Section 15.6.
|
|
Notice by the Company
|
|
|
48
|
|
|
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 Floating Rate Junior Subordinated Deferrable Interest Debenture
|
|
|
|
|
iv
THIS INDENTURE, dated as of December 17, 2003, between Great Western Bancorporation, Inc.,
an Iowa corporation (the “
Company
”), and U.S. Bank 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 2033 (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
” has the meaning set forth in Section 2.11.
“
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.
1
“
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 or executive order 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 U.S. Bank 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 Capital Securities
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 Capital Securities as Tier 1 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.
2
“
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 Great Western Bancorporation, Inc., an Iowa 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, or its designated district bank, as
applicable, 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 March 17, June 17, September 17 and December 17 of each year
during the term of this Indenture, or if such day is not a Business Day, then the next succeeding Business Day, commencing with March 17, 2004.
3
“
Interest Rate
” means for the period beginning on (and including) the date of
original issuance and ending on (but excluding) March 17, 2004 the rate per annum of 4.02% 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 December 17, 2033.
“
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.
4
“
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
(including any Additional 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
5
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 previsions 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 the price set forth in the following table for any Special Redemption Date that occurs on
the date indicated below (or if such day is not a Business Day, then the next succeeding Business Day), expressed as the percentage of the principal amount of the Debentures being redeemed:
|
|
|
|
|
|
|
Special Redemption Date
|
|
Special Redemption Price
|
|
|
March 17, 2004
|
|
|
104.625
|
%
|
|
June 17, 2004
|
|
|
104.300
|
%
|
|
September 17, 2004
|
|
|
104.000
|
%
|
|
December 17, 2004
|
|
|
103.650
|
%
|
|
March 17, 2005
|
|
|
103.350
|
%
|
|
June 17, 2005
|
|
|
103.000
|
%
|
|
September 17, 2005
|
|
|
102.700
|
%
|
|
December 17, 2005
|
|
|
102.350
|
%
|
|
March 17, 2006
|
|
|
102.050
|
%
|
|
June 17, 2006
|
|
|
101.700
|
%
|
|
September 17, 2006
|
|
|
101.400
|
%
|
|
December 17, 2006
|
|
|
101.050
|
%
|
|
March 17, 2007
|
|
|
100.750
|
%
|
|
June 17, 2007
|
|
|
100.450
|
%
|
|
September 17, 2007
|
|
|
100.200
|
%
|
|
December 17, 2007 and thereafter
|
|
|
100.000
|
%
|
6
plus, in each case, accrued and unpaid interest (including any Additional Interest) on such Debentures to the
Special 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 Great Western Statutory Trust IV, 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.
7
“
Trustee
” means U.S. Bank 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 $23,093,000.00 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.
|
|
|
|
|
|
|
|
|
U.S. BANK NATIONAL ASSOCIATION, as Trustee
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
Authorized Signer
|
8
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 $100,000.00 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 $100,000.00 shall be deemed to be void 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
9
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 IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES,
INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.
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
10
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 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 AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 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 $100,000.00 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
11
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.
Each Debenture shall bear interest for the period beginning on (and including) the date of original
issuance and ending on (but excluding) March 17, 2004 at a rate per annum of 4.02%, and shall bear interest for each successive period beginning on (and including) March 17, 2004, and each succeeding
12
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 2.85% (the “
Coupon Rate
”), 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 (including Additional Interest) at the Interest Rate in effect for each applicable period 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 March 17, 2004.
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 take 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 (including Additional 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 calendar 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
13
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 each Distribution Period will be calculated by
applying the Interest Rate to the principal amount outstanding at the commencement of the Distribution Period on the basis of the actual number of days in the Distribution Period concerned divided by 360. 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.
14
(b) The Interest 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 (except any Additional Sums that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During an Extension Period, interest will continue to
accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for
the Extension Period, to the extent permitted by law (such interest referred to herein as “
Additional Interest
”). 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
15
(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 an Extension Period at least 5 Business Days prior to the regular record date (as such term is used in Section 2.8) immediately preceding the Interest Payment Date with respect to which interest
on the Debentures would have been payable except for the election to begin or extend such Extension Period. 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 and other payments 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
16
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.
17
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 or other payments, 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,
interest or other payments 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 or other payments, 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, interest or other payments 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.
18
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 (including withholding 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 (including withholding 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).
19
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 Additional Junior Indebtedness (i) that, by its terms, is expressly stated
to be either junior and subordinate or
pari passu
in all respects to the Debentures, and (ii) 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 Security holders 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
20
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
21
(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, (i) 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
22
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, if any,
and (ii) 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,
|
|
|
(ii)
|
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 Trustee (including any claim for reasonable compensation to the Trustee and each predecessor
|
23
|
|
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 Security
holder 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 Security holder 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 (including Additional Interest); and
Fourth: The balance, if any, to the Company.
24
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, remedy or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right, remedy 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 (in accordance with its duties under Section 6.1) or by the Securityholders.
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
25
(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 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 5.8.
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.
Understanding 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.
26
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.
27
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
28
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 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. For purposes of clarification, this Section 6.6 does not contemplate the payment by the Company of acceptance or annual administration fees owing to the Trustee pursuant to the services to be provided by the Trustee under this
Indenture or the fees and expenses of the Trustee’s counsel in connection with the closing of the transactions contemplated by this Indenture. 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.
29
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 §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.
30
(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 as 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.
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.
31
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
32
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 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 Security holders 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
33
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
34
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
35
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,
36
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;
37
(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 md
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
38
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 Security holders 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.
39
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 Interest Payment Date on or after
December 17, 2008 (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.
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.
40
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 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) 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.
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
41
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.
42
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.
43
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, 10834 Old Mill Rd., Suite One, Omaha, Nebraska
68154-2648, Attention: Daniel A. Hamann. 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 Services Division, with a copy to the Trustee, 1 Federal
Street – 3rd Floor, Boston, Massachusetts 02110, Attention: Paul D. Allen, Corporate Trust Services Division. 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.
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 14.8.
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 14.9.
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.
44
Section 14.10.
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 14.11.
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: (1) Fixed Rate Junior Subordinated Debentures due August 8, 2029 issued pursuant to an Indenture
dated August 8, 1999 by and between the Company and Wilmington Trust Company; (2) Fixed Rate Junior Subordinated Debentures due March 19, 2031 issued pursuant to an Indenture dated March 19, 2001 by and between the Company and
Wilmington Trust Company; and (3) Floating Rate Junior Subordinated Debentures due October 29, 2032 issued pursuant to an Indenture dated October 29, 2002 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 and such Senior Indebtedness has not been paid in full, 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.
45
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, to 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
46
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.
47
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
48
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
49
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.
|
|
|
|
|
|
|
GREAT WESTERN BANCORPORATION, INC.
|
|
|
|
|
By:
|
|
/s/ Daniel F. Hamann
|
|
|
|
Name:
|
|
Daniel F. Hamann
|
|
|
|
Title:
|
|
Chairman & CEO
|
|
|
|
U.S. BANK NATIONAL ASSOCIATION, as Trustee
|
|
|
|
|
By:
|
|
/s/ Paul D. Allen
|
|
|
|
Name:
|
|
Paul D. Allen
|
|
|
|
Title:
|
|
Vice President
|
EXHIBIT A
FORM OF FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
[FORM OF FACE OF SECURITY]
THIS
SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.
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, 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, 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 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
A-1-1
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 $100,000.00 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
$100,000.00 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
Great Western Bancorporation, Inc.
December 17, 2003
Great
Western Bancorporation, Inc., an Iowa corporation (the “Company” which term includes any successor Person under the Indenture hereinafter referred to), for value received promises to pay to U.S. Bank National Association, not in its
individual capacity but solely as Institutional Trustee for Great Western Statutory Trust IV (the “Holder”) or registered assigns, the principal sum of twenty-three million ninety-three thousand dollars ($23,093,000.00) on
December 17, 2033, and to pay interest on said principal sum from December 17, 2003, 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 17, June 17, September 17 and December 17 of each year (or if such day is not a Business Day, then the next succeeding Business Day) commencing on
March 17, 2004, at an annual rate equal to 4.02% beginning on (and including) the date of original issuance and ending on (but excluding) March 17, 2004 and at an annual rate for each successive period beginning on (and including)
March 17, 2004, 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 2.85% (the
“Coupon Rate”), 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 and to the extent that payment of such
interest is enforceable under applicable law) on any overdue installment of interest (including Additional Interest) at the Interest
A-1-2
Rate in effect for each applicable period, 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 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 Interest 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)).
A-1-3
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 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 (except any Additional Sums that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During an Extension Period, interest will continue to accrue on the Debentures, and interest on
such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent
permitted by law (such interest referred to herein as “Additional Interest”). 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 engage
in any of the activities or transactions described on the reverse side hereof and in the Indenture. 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 an Extension Period at least 5 Business Days prior to
the regular record date (as such term is used in Section 2.8 of the Indenture) immediately preceding the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend
such Extension Period.
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.
A-1-4
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.
The provisions of this Debenture 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.
A-1-5
IN WITNESS WHEREOF, the Company has duly executed this certificate.
|
|
|
|
|
GREAT WESTERN BANCORPORATION, INC.
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
Title:
|
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures referred to in the within-mentioned Indenture.
|
|
|
|
|
U.S. BANK NATIONAL ASSOCIATION, as Trustee
|
|
|
|
|
By:
|
|
|
|
|
|
Authorized Officer
|
A-1-6
[FORM OF REVERSE OF DEBENTURE]
This Debenture is one of the floating rate junior subordinated deferrable interest debentures of the Company, all issued or to be issued under
and pursuant to the Indenture dated as of December 17, 2003 (the “Indenture”), duly executed and delivered between the Company and the Trustee, to which Indenture reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures. The Debentures are limited in aggregate principal amount as specified in the Indenture.
Upon the occurrence and continuation of a Special Event prior to December 17, 2008, the Company shall have the right 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, at the Special Redemption Price.
In addition, the Company shall have the right 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 Interest Payment Date on or after December 17, 2008, at the Redemption Price.
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.
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.
Notwithstanding the foregoing, any
redemption of Debentures by the Company shall be subject to the receipt of any and all required regulatory approvals.
In case an Event of
Default shall have occurred and be continuing, upon demand of the Trustee, the principal of all of the Debentures 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 Company and the Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, to execute supplemental indentures 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.
A-1-7
The Indenture also contains provisions permitting the holders of a majority in aggregate
principal amount of the Debentures at the time outstanding m behalf of the holders of all of the Debentures to 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 or of the Indenture 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 of the Indenture;
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 the 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 the Indenture, said default or Event of Default shall for all purposes of the Debentures and the
Indenture be deemed to have been cured and to be not continuing.
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest, including Additional Interest, on this Debenture at the time and place and at
the rate and in the money herein prescribed.
The Company has agreed that 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 Extension 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, 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
A-1-8
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).
The Debentures are issuable only in registered, certificated form without coupons and in minimum denominations of $100,000.00 and any multiple
of $1,000.00 in excess thereof As provided in the Indenture and subject to the transfer restrictions and limitations as may be contained herein and therein from time to time, this Debenture is transferable by the holder hereof on the Debenture
Register of the Company. 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 of the
Indenture, 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. 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.
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.
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 the 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 the Indenture and the issue of the Debentures.
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.
THE INDENTURE AND THE DEBENTURES 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.
A-1-9
Exhibit 4.4
AMENDED AND RESTATED DECLARATION
OF TRUST
by and among
U.S. BANK NATIONAL ASSOCIATION,
as Institutional Trustee,
GREAT WESTERN BANCORPORATION, INC.,
as Sponsor,
and
DANIEL A. HAMANN and JAMES R. CLARK,
as Administrators,
Dated as of December 17, 2003
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
|
|
|
23
|
|
|
Section 6.1.
|
|
General Provisions Regarding Securities
|
|
|
23
|
|
|
Section 6.2.
|
|
Paying Agent, Transfer Agent and Registrar
|
|
|
23
|
|
|
Section 6.3.
|
|
Form and Dating
|
|
|
24
|
|
|
Section 6.4.
|
|
Mutilated, Destroyed, Lost or Stolen Certificates
|
|
|
24
|
|
|
Section 6.5.
|
|
Temporary Securities
|
|
|
24
|
|
i
TABLE OF CONTENTS
(
continued
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
Section 6.6.
|
|
Cancellation
|
|
|
25
|
|
|
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
|
|
|
31
|
|
|
Section 9.3.
|
|
Fiduciary Duty
|
|
|
31
|
|
|
Section 9.4.
|
|
Indemnification
|
|
|
31
|
|
|
Section 9.5.
|
|
Outside Businesses
|
|
|
33
|
|
|
Section 9.6.
|
|
Compensation; Fee
|
|
|
34
|
|
|
|
|
|
ARTICLE X ACCOUNTING
|
|
|
34
|
|
|
Section 10.1.
|
|
Fiscal Year
|
|
|
34
|
|
|
Section 10.2.
|
|
Certain Accounting Matters
|
|
|
34
|
|
|
Section 10.3.
|
|
Banking
|
|
|
35
|
|
|
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
|
|
|
37
|
|
|
|
|
|
ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
|
|
|
38
|
|
|
Section 12.1.
|
|
Representations and Warranties of Institutional Trustee
|
|
|
38
|
|
|
|
|
|
ARTICLE XIII MISCELLANEOUS
|
|
|
38
|
|
|
Section 13.1.
|
|
Notices
|
|
|
38
|
|
|
Section 13.2.
|
|
Governing Law
|
|
|
39
|
|
|
Section 13.3.
|
|
Intention of the Parties
|
|
|
40
|
|
|
Section 13.4.
|
|
Headings
|
|
|
40
|
|
|
Section 13.5.
|
|
Successors and Assigns
|
|
|
40
|
|
|
Section 13.6.
|
|
Partial Enforceability
|
|
|
40
|
|
|
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
|
ii
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
GREAT WESTERN
STATUTORY TRUST IV
December 17, 2003
AMENDED AND RESTATED DECLARATION OF TRUST (“
Declaration
”) dated and effective as of December 17, 2003, 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 Great Western Statutory Trust IV
(the “
Trust
”), a statutory trust under the Statutory Trust Act (as defined herein) pursuant to a Declaration of Trust dated as of December 3, 2003 (the “
Original Declaration
”), and a Certificate of Trust filed
with the Secretary of State of the State of Connecticut on December 3, 2003, 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.
1
“
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 Daniel A. Hamann and James R. Clark, 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 or executive order to close.
“
Capital Securities
”
has the meaning set forth in paragraph l(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 l(b) of Annex I.
2
“
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 Great Western Bancorporation, Inc., an Iowa corporation, in its capacity as issuer of the Debentures
under the Indenture.
“
Debenture Trustee
” means U.S. Bank 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 2033 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) March 17, 2004, the rate per annum of 4.02%, and for the period beginning on (and including) March 17, 2004 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
3
(b) default by the Trust in the payment of any Redemption Price or Special 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.
4
“
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.
5
“
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 Great Western Bancorporation, Inc., an Iowa 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
6
“
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 “Great Western Statutory Trust IV,” 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 U.S. Bank 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.
7
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.
8
(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.
9
(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.
10
(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.
11
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.
12
(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
13
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
14
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 (that has not been cured or waived pursuant to Section 6.7), 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
15
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.
16
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 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. and 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;
17
(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 owing to the Debenture Trustee pursuant to Section 6.6 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, the offering, sale and issuance of the Securities
18
(including fees to the placement agents in connection therewith), the costs 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 (for purposes of clarification, this Section 3.3(b) does not contemplate the payment by the Sponsor of acceptance or annual administration fees owing to the Institutional Trustee pursuant
to the services to be provided by the Institutional Trustee under this Declaration or the fees and expenses of the Institutional Trustee’s counsel in connection with the closing of the transactions contemplated by this Declaration); and
(c) 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.
19
(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 U.S. Bank 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 Daniel A. Hamann and James R. Clark. 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
20
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
21
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.
22
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
”
23
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 $100,000.00 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
24
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, subject to the provisions hereof, 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.
25
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 under the Indenture or any Indenture Event of Default, except a default or Indenture Event of Default in the payment of principal or interest on the Debentures (unless such default
or Indenture 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 under the Indenture or an
Indenture 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 December 17, 2038, the expiration of the term of the Trust;
(ii) upon a Bankruptcy Event with respect to the Sponsor, the Trust or the Debenture Issuer;
26
(iii) upon the filing of a certificate of dissolution or its equivalent with
respect to the Sponsor (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) 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, 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;
(v) upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor, the Trust or the
Debenture Issuer;
(vi) 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
(vii) 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.
27
(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
28
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 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.
29
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A
LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 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 $100,000.00 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.
30
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
31
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
32
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 and the Institutional Trustee may engage or be interested 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
33
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 Institutional 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.
34
(c) The Administrators, at the Sponsor’s expense, shall cause to be duly prepared at the
principal office of the Sponsor in the United States, as ‘United States’ is defined in Section 7701(a)(9) of the Code (or at the principal office of the Trust if the Sponsor has no such principal office in the United States), 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
35
(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) Sections 9.1(b) and 9.1(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 (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;
36
provided
,
however
, that no such modification, elimination or addition referred to
in clauses (i), (ii), (iii) or (iv) 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
37
(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):
Great Western Statutory Trust IV
c/o Great Western Bancorporation, Inc.
10834 Old Mill Rd., Suite One
Omaha, Nebraska 68154-2648
Attention: Daniel A. Hamann
Telecopy: 402-333-8339
38
(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):
U.S. Bank
National Association
225 Asylum Street, Goodwin Square
Hartford, Connecticut 06103
Attention: Vice President, Corporate Trust Services Division
Telecopy: 860-241-6889
With a
copy to:
U.S. Bank National Association
1 Federal Street - 3rd Floor
Boston, Massachusetts 02110
Attention: Paul D. Allen, Corporate Trust Services Division
Telecopy: 617-603-6665
(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):
Great Western Bancorporation, Inc.
10834 Old Mill Rd., Suite One
Omaha, Nebraska 68154-2648
Attention: Daniel A. Hamann
Telecopy: 402-333-8339
(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
39
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
40
IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and
year first above written.
|
|
|
|
|
U.S. BANK NATIONAL ASSOCIATION,
|
|
as Institutional Trustee
|
|
|
|
|
By:
|
|
/s/ Paul D. Allen
|
|
|
|
Name: Paul D. Allen
|
|
|
|
Title: Vice President
|
|
|
|
GREAT WESTERN BANCORPORATION, INC.,
as Sponsor
|
|
|
|
|
By:
|
|
/s/ Deryl F. Hamann
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
|
GREAT WESTERN STATUTORY TRUST IV
|
|
|
|
|
By:
|
|
/s/ Daniel A. Hamann
|
|
|
|
Administrator
|
|
|
|
|
By:
|
|
/s/ James R. Clark
|
|
|
|
Administrator
|
41
ANNEX I
TERMS OF SECURITIES
Pursuant to
Section 6.1 of the Amended and Restated Declaration of Trust, dated as of December 17, 2003 (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) 22,400 Floating Rate Capital Securities of Great Western Statutory Trust IV (the “Trust”), with an aggregate stated liquidation
amount with respect to the assets of the Trust of twenty-two million four hundred thousand dollars ($22,400,000.00) 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) 693 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) March 17, 2004 at a rate per annum of 4.02% and shall bear interest for each successive period beginning on (and including) March 17, 2004, 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 2.85% (the “
Coupon Rate
”), 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 will bear interest thereon compounded quarterly at the applicable Distribution Rate (to the
extent permitted by law). Distributions, as used herein, include cash distributions and any such compounded distributions unless otherwise noted. 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. The amount of the Distribution payable for any Distribution Period will be calculated by applying the Distribution Rate to the stated liquidation
amount outstanding at the commencement of the Distribution Period on the basis of 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 17, June 17, September 17 and December 17 of each year, or if such day is not a Business Day, then the next succeeding Business Day, commencing on March 17, 2004 (each a “
Distribution Payment
Date
”) when, as and if available for payment. The Debenture Issuer has the right
I-1
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, during which Extension Period no interest shall be due and payable.
During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Distribution Rate in effect for each such Extension Period, compounded quarterly from
the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “
Additional Interest
”). 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
, that 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. During any Extension Period, Distributions on the Securities shall be deferred for a period equal to the Extension Period. 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.
I-2
(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 aggregate of the stated liquidation amount of $1,000.00 per Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the “
Liquidation
Distribution
”), unless in connection with such Liquidation, the Debentures in an 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, or its designated district bank, as applicable, 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
I-3
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 the 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, (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 December 17, 2033. The Debentures may be redeemed by the Debenture Issuer, in whole or in part, at any
Distribution Payment Date on or after December 17, 2008, 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;
I-4
(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 Distribution 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 Capital Securities 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 Capital Securities as Tier 1 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.
I-5
“
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 December 17, 2033.
“
Redemption Date
” shall mean the date fixed for the redemption of Capital Securities, which shall be any
March 17, June 17, September 17 or December 17 commencing December 17, 2008.
“
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 date on which a Special Event redemption occurs, which shall be any
March 17, June 17, September 17 or December 17.
“
Special Redemption Price
” means the price
set forth in the following table for any Special Redemption Date that occurs on the date indicated below (or if such day is not a Business Day, then the next succeeding Business Day), expressed as the percentage of the principal amount of the
Debentures being redeemed:
|
|
|
|
|
|
|
Special Redemption Date
|
|
Special Redemption Price
|
|
|
March 17, 2004
|
|
|
104.625
|
%
|
|
June 17, 2004
|
|
|
104.300
|
%
|
|
September 17, 2004
|
|
|
104.000
|
%
|
|
December 17, 2004
|
|
|
103.650
|
%
|
|
March 17, 2005
|
|
|
103.350
|
%
|
|
June 17, 2005
|
|
|
103.000
|
%
|
|
September 17, 2005
|
|
|
102.700
|
%
|
|
December 17, 2005
|
|
|
102.350
|
%
|
|
March 17, 2006
|
|
|
102.050
|
%
|
|
June 17, 2006
|
|
|
101.700
|
%
|
|
September 17, 2006
|
|
|
101.400
|
%
|
|
December 17, 2006
|
|
|
101.050
|
%
|
|
March 17, 2007
|
|
|
100.750
|
%
|
|
June 17, 2007
|
|
|
100.450
|
%
|
|
September 17, 2007
|
|
|
100.200
|
%
|
|
December 17, 2007 and thereafter
|
|
|
100.000
|
%
|
I-6
plus, in each case, accrued and unpaid Interest on such Debentures to the Special 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
I-7
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 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.
I-8
(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 or the Special Redemption Date, as applicable),
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.
I-9
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) waiving any past default and its consequences that is waivable under the Indenture, or (iii) exercising 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
I-10
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.
I-11
(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 (or Special 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 (or Special Redemption Price) the full amount of such Redemption Price (or Special 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 (or Special 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.
I-12
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 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 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 $100,000.00 (100 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 $100,000.00 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
|
|
22,400 Capital Securities
|
December 17, 2003
Certificate Evidencing Floating Rate Capital Securities
of
Great Western Statutory Trust
IV
(liquidation amount $1,000.00 per Capital Security)
Great Western Statutory Trust IV, 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 December 17, 2003 among Preferred Term Securities XII, Ltd., Preferred Term Securities XII,
Inc. and The Bank of New York, is the registered owner of capital 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 Capital Securities represented hereby are issued pursuant to, and the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities shall in all respects be subject
to, the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of December 17, 2003, among Daniel A. Hamann and James R. Clark, as Administrators, U.S. Bank National Association, as Institutional Trustee, Great
Western Bancorporation, 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
A-1-2
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.
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.
|
|
|
|
|
|
|
GREAT WESTERN STATUTORY TRUST IV
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
|
|
Title:
|
|
Administrator
|
CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the within-mentioned Declaration.
|
|
|
|
|
U.S. BANK NATIONAL ASSOCIATION,
as
the Institutional Trustee
|
|
|
|
|
By:
|
|
|
|
|
|
Authorized Officer
|
A-1-4
[FORM OF REVERSE OF CAPITAL SECURITY]
Distributions payable on each Capital Security will be payable at an annual rate equal to 4.02% beginning on (and including) the date of
original issuance and ending on (but excluding) March 17, 2004 and at an annual rate for each successive period beginning on (and including) March 17, 2004, 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 2.85% (the “Coupon Rate”), 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 will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by
applicable law). The term “Distributions” as used herein includes cash distributions and any such compounded distributions unless otherwise noted. 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. The amount of the Distribution payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the commencement of the Distribution Period on the basis of 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.
The Distribution 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
A-1-5
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 17, June 17, September 17 and December 17 of each year (or if such day is not a Business Day, then the
next succeeding Business Day), commencing on March 17, 2004. 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
extending the interest payment period for up to 20 consecutive quarterly periods (each an “Extension Period”) at any time and from time to time on the Debentures, subject to the conditions described below, during which Extension Period no
interest shall be due and payable. During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Distribution Rate in effect for each such Extension
Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “Additional Interest”). 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. During any Extension Period, Distributions on the Capital Securities shall be deferred for a period equal to the Extension Period.
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 assignee’s social security or tax identification number)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
1
|
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 Security 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 Security registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
|
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
|
|
693 Common Securities
|
December 17, 2003
Certificate Evidencing Floating Rate Common Securities
of
Great Western Statutory Trust
IV
Great Western Statutory Trust IV
,
a statutory trust created under the laws of the State of Connecticut (the “Trust”),
hereby certifies that Great Western Bancorporation, 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 Common Securities represented hereby are issued pursuant to, and the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities shall in all respects be subject to, the provisions of the
Amended and Restated Declaration of Trust of the Trust dated as of December 17, 2003, among Daniel A. Hamann and James R. Clark, as Administrators, U.S. Bank National Association, as Institutional Trustee, Great Western Bancorporation, 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, when 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.
|
|
|
|
|
|
|
GREAT WESTERN STATUTORY TRUST IV
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
|
|
Title:
|
|
Administrator
|
A-2-2
[FORM OF REVERSE OF COMMON SECURITY]
Distributions payable on each Common Security will be payable at an annual rate equal to 4.02% beginning on (and including) the date of
original issuance and ending on (but excluding) March 17, 2004 and at an annual rate for each successive period beginning on (and including) March 17, 2004, 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 2.85% (the “Coupon Rate”), 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 will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by
applicable law). The term “Distributions” as used herein includes cash distributions and any such compounded distributions unless otherwise noted. 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. The amount of the Distribution payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the commencement of the Distribution Period on the basis of 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.
The Distribution 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
A-2-3
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 17, June 17, September 17 and December 17 of each year (or if such day is not a Business Day, then the next
succeeding Business Day), commencing on March 17, 2004. 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
extending the interest payment period for up to 20 consecutive quarterly periods (each an “Extension Period”) at any time and from time to time on the Debentures, subject to the conditions described below, during which Extension Period no
interest shall be due and payable. During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Distribution Rate in effect for each such Extension
Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “Additional Interest”). 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. During any Extension Period, Distributions on the Common Securities shall be deferred for a period equal to the Extension Period. 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 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 assignee’s social security or tax identification number)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
|
|
|
|
|
|
Date:
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature:
|
|
|
|
|
|
|
|
|
|
(Sign exactly as your name appears on the other side of this Common Security Certificate)
|
|
|
|
|
|
|
Signature:
|
|
|
|
|
|
|
|
|
|
(Sign exactly as your name appears on the other side of this Common Security Certificate)
|
Signature Guarantee
2
|
2
|
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 Security 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 Security registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
|
A-2-5
Exhibit 4.5
GREAT WESTERN BANCORPORATION, INC.
as Company
INDENTURE
Dated as of March 10, 2006
LASALLE BANK NATIONAL ASSOCIATION
As Trustee
JUNIOR SUBORDINATED
DEBT SECURITIES
Due March 15, 2036
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
ARTICLE I
|
|
|
|
|
|
|
|
|
DEFINITIONS
|
|
|
|
|
|
|
|
|
SECTION 1.01. Definitions
|
|
|
1
|
|
|
|
|
|
ARTICLE II
|
|
|
|
|
|
|
|
|
DEBT SECURITIES
|
|
|
|
|
|
|
|
|
SECTION 2.01. Authentication and Dating
|
|
|
8
|
|
|
SECTION 2.02. Form of Trustee’s Certificate of Authentication
|
|
|
9
|
|
|
SECTION 2.03. Form and Denomination of Debt Securities
|
|
|
9
|
|
|
SECTION 2.04. Execution of Debt Securities
|
|
|
10
|
|
|
SECTION 2.05. Exchange and Registration of Transfer of Debt Securities
|
|
|
10
|
|
|
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Debt Securities
|
|
|
13
|
|
|
SECTION 2.07. Temporary Debt Securities
|
|
|
14
|
|
|
SECTION 2.08. Payment of Interest
|
|
|
14
|
|
|
SECTION 2.09. Cancellation of Debt Securities Paid, etc.
|
|
|
16
|
|
|
SECTION 2.10. Computation of Interest
|
|
|
16
|
|
|
SECTION 2.11. Extension of Interest Payment Period
|
|
|
18
|
|
|
SECTION 2.12. CUSIP Numbers
|
|
|
19
|
|
|
SECTION 2.13. Income Tax Certification
|
|
|
19
|
|
|
SECTION 2.14. Global Debentures
|
|
|
19
|
|
|
|
|
|
ARTICLE III
|
|
|
|
|
|
|
|
|
PARTICULAR COVENANTS OF THE COMPANY
|
|
|
|
|
|
|
|
|
SECTION 3.01. Payment of Principal, Premium and Interest; Agreed Treatment of the Debt Securities
|
|
|
21
|
|
|
SECTION 3.02. Offices for Notices and Payments, etc.
|
|
|
22
|
|
|
SECTION 3.03. Appointments to Fill Vacancies in Trustee’s Office
|
|
|
23
|
|
|
SECTION 3.04. Provision as to Paying Agent
|
|
|
23
|
|
|
SECTION 3.05. Certificate to Trustee
|
|
|
24
|
|
- i -
|
|
|
|
|
|
|
SECTION 3.06. Additional Interest
|
|
|
24
|
|
|
SECTION 3.07. Compliance with Consolidation Provisions
|
|
|
24
|
|
|
SECTION 3.08. Limitation on Dividends
|
|
|
25
|
|
|
SECTION 3.09. Covenants as to the Trust
|
|
|
25
|
|
|
|
|
|
ARTICLE IV
|
|
|
|
|
|
|
|
|
LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
|
|
|
|
|
|
|
|
|
SECTION 4.01. Securityholders’ Lists
|
|
|
26
|
|
|
SECTION 4.02. Preservation and Disclosure of Lists
|
|
|
26
|
|
|
SECTION 4.03. Financial and Other Information
|
|
|
27
|
|
|
|
|
|
ARTICLE V
|
|
|
|
|
|
|
|
|
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT
|
|
|
|
|
|
|
|
|
SECTION 5.01. Events of Default
|
|
|
28
|
|
|
SECTION 5.02. Payment of Debt Securities on Default; Suit Therefor
|
|
|
30
|
|
|
SECTION 5.03. Application of Moneys Collected by Trustee
|
|
|
31
|
|
|
SECTION 5.04. Proceedings by Securityholders
|
|
|
32
|
|
|
SECTION 5.05. Proceedings by Trustee
|
|
|
32
|
|
|
SECTION 5.06. Remedies Cumulative and Continuing
|
|
|
32
|
|
|
SECTION 5.07. Direction of Proceedings and Waiver of Defaults by Majority of Securityholders
|
|
|
33
|
|
|
SECTION 5.08. Notice of Defaults
|
|
|
34
|
|
|
SECTION 5.09. Undertaking to Pay Costs
|
|
|
34
|
|
|
|
|
|
ARTICLE VI
|
|
|
|
|
|
|
|
|
CONCERNING THE TRUSTEE
|
|
|
|
|
|
|
|
|
SECTION 6.01. Duties and Responsibilities of Trustee
|
|
|
34
|
|
|
SECTION 6.02. Reliance on Documents, Opinions, etc.
|
|
|
36
|
|
|
SECTION 6.03. No Responsibility for Recitals, etc.
|
|
|
37
|
|
|
SECTION 6.04. Trustee. Authenticating Agent. Paying Agents, Transfer Agents or Registrar May Own Debt Securities
|
|
|
37
|
|
|
SECTION 6.05. Moneys to be Held in Trust
|
|
|
37
|
|
- ii -
|
|
|
|
|
|
|
SECTION 6.06. Compensation and Expenses of Trustee
|
|
|
37
|
|
|
SECTION 6.07. Officers’ Certificate as Evidence
|
|
|
38
|
|
|
SECTION 6.08. Eligibility of Trustee
|
|
|
39
|
|
|
SECTION 6.09. Resignation or Removal of Trustee, Calculation Agent, Paying Agent or Debt Security Registrar
|
|
|
39
|
|
|
SECTION 6.10. Acceptance by Successor
|
|
|
40
|
|
|
SECTION 6.11. Succession by Merger, etc.
|
|
|
41
|
|
|
SECTION 6.12. Authenticating Agents
|
|
|
42
|
|
|
|
|
|
ARTICLE VII
|
|
|
|
|
|
|
|
|
CONCERNING THE SECURITYHOLDERS
|
|
|
|
|
|
|
|
|
SECTION 7.01. Action by Securityholders
|
|
|
43
|
|
|
SECTION 7.02. Proof of Execution by Securityholders
|
|
|
44
|
|
|
SECTION 7.03. Who Are Deemed Absolute Owners
|
|
|
44
|
|
|
SECTION 7.04. Debt Securities Owned by Company Deemed Not Outstanding
|
|
|
44
|
|
|
SECTION 7.05. Revocation of Consents; Future Securityholders Bound
|
|
|
45
|
|
|
|
|
|
ARTICLE VIII
|
|
|
|
|
|
|
|
|
SECURITYHOLDERS’ MEETINGS
|
|
|
|
|
|
|
|
|
SECTION 8.01. Purposes of Meetings
|
|
|
45
|
|
|
SECTION 8.02. Call of Meetings by Trustee
|
|
|
46
|
|
|
SECTION 8.03. Call of Meetings by Company or Securityholders
|
|
|
46
|
|
|
SECTION 8.04. Qualifications for Voting
|
|
|
46
|
|
|
SECTION 8.05. Regulations
|
|
|
46
|
|
|
SECTION 8.06. Voting
|
|
|
47
|
|
|
SECTION 8.07. Quorum; Actions
|
|
|
47
|
|
|
SECTION 8.08. Written Consent Without a Meeting
|
|
|
48
|
|
|
|
|
|
ARTICLE IX
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INDENTURES
|
|
|
|
|
|
|
|
|
SECTION 9.01. Supplemental Indentures without Consent of Securitvholders
|
|
|
48
|
|
|
SECTION 9.02. Supplemental Indentures with Consent of Securityholders
|
|
|
50
|
|
|
SECTION 9.03. Effect of Supplemental Indentures
|
|
|
51
|
|
- iii -
|
|
|
|
|
|
|
SECTION 9.04. Notation on Debt Securities
|
|
|
51
|
|
|
SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be furnished to Trustee
|
|
|
51
|
|
|
|
|
|
ARTICLE X
|
|
|
|
|
|
|
|
|
REDEMPTION OF SECURITIES
|
|
|
|
|
|
|
|
|
SECTION 10.01. Optional Redemption
|
|
|
51
|
|
|
SECTION 10.02. Special Event Redemption
|
|
|
52
|
|
|
SECTION 10.03. Notice of Redemption; Selection of Debt Securities
|
|
|
52
|
|
|
SECTION 10.04. Payment of Debt Securities Called for Redemption
|
|
|
53
|
|
|
|
|
|
ARTICLE XI
|
|
|
|
|
|
|
|
|
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
|
|
|
|
|
|
|
|
|
SECTION 11.01. Company May Consolidate, etc., on Certain Terms
|
|
|
53
|
|
|
SECTION 11.02. Successor Entity to be Substituted
|
|
|
54
|
|
|
SECTION 11.03. Opinion of Counsel to be Given to Trustee
|
|
|
55
|
|
|
|
|
|
ARTICLE XII
|
|
|
|
|
|
|
|
|
SATISFACTION AND DISCHARGE OF INDENTURE
|
|
|
|
|
|
|
|
|
SECTION 12.01. Discharge of Indenture
|
|
|
55
|
|
|
SECTION 12.02. Deposited Moneys to be Held in Trust by Trustee
|
|
|
55
|
|
|
SECTION 12.03. Paying Agent to Repay Moneys Held
|
|
|
56
|
|
|
SECTION 12.04. Return of Unclaimed Moneys
|
|
|
56
|
|
|
|
|
|
ARTICLE XIII
|
|
|
|
|
|
|
|
|
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
|
|
|
|
|
|
|
|
|
SECTION 13.01. Indenture and Debt Securities Solely Corporate Obligations
|
|
|
56
|
|
|
|
|
|
ARTICLE XIV
|
|
|
|
|
|
|
|
|
MISCELLANEOUS PROVISIONS
|
|
|
|
|
|
|
|
|
SECTION 14.01. Successors
|
|
|
57
|
|
|
SECTION 14.02. Official Acts by Successor Entity
|
|
|
57
|
|
|
SECTION 14.03. Surrender of Company Powers
|
|
|
57
|
|
- iv -
|
|
|
|
|
|
|
SECTION 14.04. Addresses for Notices, etc.
|
|
|
57
|
|
|
SECTION 14.05. Governing Law
|
|
|
58
|
|
|
SECTION 14.06. Evidence of Compliance with Conditions Precedent
|
|
|
58
|
|
|
SECTION 14.07. Non-Business Days
|
|
|
58
|
|
|
SECTION 14.08. Table of Contents, Headings, etc.
|
|
|
58
|
|
|
SECTION 14.09. Execution in Counterparts
|
|
|
59
|
|
|
SECTION 14.10. Severability
|
|
|
59
|
|
|
SECTION 14.11. Assignment
|
|
|
59
|
|
|
SECTION 14.12. Acknowledgment of Rights
|
|
|
59
|
|
|
|
|
|
ARTICLE XV
|
|
|
|
|
|
|
|
|
SUBORDINATION OF DEBT SECURITIES
|
|
|
|
|
|
|
|
|
SECTION 15.01. Agreement to Subordinate
|
|
|
60
|
|
|
SECTION 15.02. Default on Senior Indebtedness
|
|
|
60
|
|
|
SECTION 15.03. Liquidation; Dissolution: Bankruptcy
|
|
|
60
|
|
|
SECTION 15.04. Subrogation
|
|
|
62
|
|
|
SECTION 15.05. Trustee to Effectuate Subordination
|
|
|
63
|
|
|
SECTION 15.06. Notice by the Company
|
|
|
63
|
|
|
SECTION 15.07. Rights of the Trustee, Holders of Senior Indebtedness
|
|
|
63
|
|
|
SECTION 15.08. Subordination May Not Be Impaired
|
|
|
64
|
|
- v -
THIS INDENTURE, dated as of March 10, 2006, between Great Western Bancorporation, Inc., a
bank holding company incorporated in Iowa (hereinafter sometimes called the “Company”), and LaSalle Bank National Association as trustee (hereinafter sometimes called the “Trustee”).
W I T N E S S E T H:
WHEREAS,
for its lawful corporate purposes, the Company has duly authorized the issuance of its Junior Subordinated Debt Securities due March 15, 2036 (the “Debt Securities”) under this Indenture and to provide, among other things, for the
execution and authentication, delivery and administration thereof, the Company has duly authorized the execution of this Indenture.
NOW,
THEREFORE, in consideration of the premises, and the purchase of the Debt Securities 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
Debt 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 and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.01. 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” shall have the meaning set forth in Section 3.06.
“Additional Provisions” shall have the meaning set forth in Section 15.01.
“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 Wilmington, Delaware,
New York City or the city of the Principal Office of the Trustee or the Company are permitted or required by any applicable law or executive order to close.
“Calculation Agent” means the Person identified as “Trustee” in the first paragraph hereof with respect to the Debt
Securities and the Institutional Trustee with respect to the Trust Securities.
“Capital Securities” means undivided beneficial
interests in the assets of the Trust which are designated as “TP Securities” and rank
pari passu
with Common Securities issued by the Trust; provided, however, that if an Event of Default (as defined in the Declaration) has occurred
and is continuing, 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 will enter into with LaSalle Bank National Association
or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities of the Trust.
“Capital
Treatment Event” means, if the Company is organized and existing under the laws of the United States or any state thereof or the District of Columbia, 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 (a) any amendment to, or change in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or any rules, guidelines or policies of any applicable regulatory
authority for the Company or (b) 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 Debt Securities, there is more than an insubstantial risk that, within 90 days of the receipt of such opinion, the aggregate Liquidation Amount of the Capital Securities will not be eligible
to be treated by the Company as “Tier 1 Capital” (or the then equivalent thereof) for purposes of the capital adequacy guidelines of the Federal Reserve (or any successor regulatory authority with jurisdiction over bank or financial
holding companies), 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 aggregate Liquidation Amount of the Capital Securities as Tier 1 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 the Debt Securities in connection with the liquidation of
-2-
the Trust by the Company 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 are designated as “Common Securities” and rank
pari passu
with Capital Securities issued by the Trust; provided, however, that if an Event of Default (as defined in the Declaration) has occurred and is continuing, 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 Great Western Bancorporation, Inc., a bank holding company incorporated in Iowa, and, subject to the provisions of
Article XI, shall include its successors and assigns.
“Debt Security” or “Debt Securities” has the meaning stated in
the first recital of this Indenture.
“Debt Security Register” has the meaning specified in Section 2.05.
“Declaration” means the Amended and Restated Declaration of Trust of the Trust dated as of March 10, 2006, 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 2.08.
“Deferred Interest” has the meaning set forth in Section 2.11.
“Depositary” means an organization registered as a clearing agency under the Exchange Act that is designated as Depositary by the
Company or any successor thereto. DTC will be the initial Depositary.
“Depositary Participant” means a broker, dealer, bank,
other financial institution or other Person for whom from time to time the Depositary effects book-entry transfers and pledges of securities deposited with the Depositary.
“DTC” means The Depository Trust Company, a New York corporation.
“Event of Default” means any event specified in Section 5.01, which has 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.
-3-
“Federal Reserve” means the Board of Governors of the Federal Reserve System.
“Global Debenture” means a security that evidences all or part of the Debt Securities, the ownership and transfers of which shall be
made through book entries by a Depositary.
“Indenture” means this instrument as originally executed or, if amended or
supplemented as herein provided, as so amended or supplemented, or both.
“Initial Purchaser” means the initial purchaser of the
Capital Securities.
“Institutional Trustee” has the meaning set forth in the Declaration.
“Interest Payment Date” means March 15, June 15, September 15 and December 15 of each year, commencing
on June 15, 2006, during the term of this Indenture.
“Interest Payment Period” means the period from and including an
Interest Payment Date, or in the case of the first Interest Payment Period, the original date of issuance of the Debt Securities, to, but excluding, the next succeeding Interest Payment Date or, in the case of the last Interest Payment Period, the
Redemption Date, Special Redemption Date or Maturity Date, as the case may be.
“Interest Rate” means, with respect to any
Interest Period, a per annum rate of interest, equal to LIBOR, as determined on the LIBOR Determination Date for such Interest Payment Date, plus 1.48%; provided, however, that the Interest Rate for any Interest Payment Period may not exceed the
highest rate permitted by New York law, as the same may be modified by United States law of general applicability.
“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 a change in law or regulation or written 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 original issuance of the Debt
Securities.
“LIBOR” means the London Interbank Offered Rate for U.S. Dollar deposits in Europe as determined by the
Calculation Agent according to Section 2.10(b).
“LIBOR Banking Day” has the meaning set forth in Section 2.10(b)(l).
“LIBOR Business Day” has the meaning set forth in Section 2.10(b)(1).
“LIBOR Determination Date” has the meaning set forth in Section 2.10(b).
“Liquidation Amount” means the liquidation amount of $1,000 per Trust Security.
-4-
“Maturity Date” means March 15, 2036.
“Notice” has the meaning set forth in Section 2.11.
“Officers’ Certificate” means a certificate signed by the Chairman of the Board, the Vice Chairman, the President or any Vice
President, and by the Chief Financial Officer, 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 14.06 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
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.
“Outstanding”
means, when used with reference to Debt Securities, subject to the provisions of Section 7.04, as of any particular time, all Debt Securities authenticated and delivered by the Trustee or the Authenticating Agent under this Indenture, except
(a) Debt Securities theretofore canceled by the Trustee or the Authenticating Agent or delivered to the Trustee for cancellation;
(b) Debt Securities, 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
, that, if such Debt Securities, or
portions thereof, are to be redeemed prior to maturity thereof, notice of such redemption shall have been given as provided in Articles X and XIV or provision satisfactory to the Trustee shall have been made for giving such notice; and
(c) Debt Securities paid pursuant to Section 2.06 or in lieu of or in substitution for which other Debt Securities shall have been
authenticated and delivered pursuant to the terms of Section 2.06 unless proof satisfactory to the Company and the Trustee is presented that any such Debt Securities are held by bona fide holders in due course.
“Paying Agent” has the meaning set forth in Section 3.04(e).
“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 Debt Security means every previous Debt Security evidencing all or a portion of the same debt as that evidenced by such particular Debt Security; and, for the purposes of this definition, any Debt Security authenticated and delivered
under Section 2.06 in lieu of a lost, destroyed or stolen Debt Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Debt Security.
-5-
“Principal Office of the Trustee” means the office of the Trustee, at which at any
particular time its corporate trust business shall be principally administered, which at all times shall be located within the United States and at the time of the execution of this Indenture shall be 135 S. LaSalle Street, Suite 1511, Chicago,
Illinois 60603, Attn: CDO Trust Services Group – GWB Capital Trust VI.
“Redemption Date” has the meaning set forth in
Section 10.01.
“Redemption Price” means 100% of the principal amount of the Debt Securities being redeemed plus accrued
and unpaid interest on such Debt Securities to the Redemption Date.
“Responsible Officer” means, with respect to the Trustee,
any officer within the CDO Trust Services Group in the Principal Office of the Trustee with direct responsibility for the administration of the Indenture, 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 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.
“Securityholder,” “Holder,” “holder of Debt Securities” or other similar terms, means any Person in whose name
at the time a particular Debt Security is registered on the Debt Security Register.
“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 (but excluding trade accounts payable arising in the ordinary course of business); (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, unless, with the prior approval of the Federal Reserve if not otherwise generally approved, it is provided in the instrument creating or evidencing the same or pursuant to which the same is outstanding, that such obligations are
not superior or are
pari passu
in right of payment to the Debt Securities;
-6-
provided, however, that Senior Indebtedness shall not include (A) any debt securities issued to any trust other than the Trust (or a trustee of such trust) that is a financing vehicle of the
Company (a “financing entity”), in connection with the issuance by such financing entity of equity or other securities in transactions substantially similar in structure to the transactions contemplated hereunder and in the Declaration,
(B) any guarantees of the Company in respect of the equity or other securities of any financing entity referred to in clause (A) above or (C) any other instruments classified as subordinated or
pari passu
to the Debt Securities
by the Federal Reserve.
“Special Event” means any of a Tax Event, an Investment Company Event or a Capital Treatment Event.
“Special Redemption Date” has the meaning set forth in Section 10.02.
“Special Redemption Price” means, with respect to the redemption of any Debt Security following a Tax Event, an amount in cash equal
to 100% of the principal amount of the Debt Securities; and with respect to the redemption pursuant to any other Special Event, an amount in cash equal to 103.525% of the principal amount of Debt Securities to be redeemed prior to March 15,
2007 and thereafter equal to the percentage of the principal amount of the Debt Securities that is specified below for the Special Redemption Date plus, in each case, unpaid interest accrued thereon to the Special Redemption Date:
|
|
|
|
|
|
|
Special Redemption During the 12-Month Period Beginning March 15
|
|
Percentage of
Principal Amount
|
|
|
2007
|
|
|
103.140
|
%
|
|
2008
|
|
|
102.355
|
%
|
|
2009
|
|
|
101.570
|
%
|
|
2010
|
|
|
100.785
|
%
|
|
2011 and thereafter
|
|
|
100.000
|
%
|
“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
-7-
any official administrative pronouncement (including any private letter ruling, technical advice memorandum, regulatory procedure, notice or announcement (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 Debt 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 Debt Securities; (ii) if the Company is
organized and existing under the laws of the United States or any state thereof or the District of Columbia, interest payable by the Company on the Debt Securities is not, or within 90 days of the date of such opinion, will not be, deductible by the
Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to or otherwise required to pay, or required to withhold from distributions to
holders of Trust Securities, more than a de minimis amount of other taxes (including withholding taxes), duties, assessments or other governmental charges.
“Trust” means GWB Capital Trust VI, the Delaware statutory trust, or any other similar trust created for the purpose of issuing
Capital Securities in connection with the issuance of Debt Securities under this Indenture, of which the Company is the sponsor.
“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended from time-to-time, or any successor legislation.
“Trust Securities” means Common Securities and Capital Securities of GWB Capital Trust VI.
“Trustee” means the Person identified as “Trustee” in the first paragraph hereof, and, subject to the provisions of
Article VI hereof, shall also include its successors and assigns as Trustee hereunder.
“United States” means the United States
of America and the District of Columbia.
“U.S. Person” has the meaning given to United States Person as set forth in
Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended.
ARTICLE II
DEBT SECURITIES
SECTION 2.01.
Authentication and Dating
.
Upon the execution and delivery of this Indenture, or from time to time thereafter, Debt Securities in
an aggregate principal amount not in excess of $30,928,000 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 Debt Securities to or upon
the written order of the Company, signed by its Chairman of the Board of Directors, Vice Chairman, President or
-8-
Chief Financial Officer or one of its Vice Presidents, without any further action by the Company hereunder. In authenticating such Debt Securities, and accepting the additional responsibilities
under this Indenture in relation to such Debt Securities, the Trustee shall be entitled to receive, and (subject to Section 6.01) shall be fully protected in relying upon 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 or other officers with appropriate delegated authority of the Company as the case may be.
The Trustee shall have the right to decline to authenticate and deliver any Debt Securities under this Section if the Trustee, being advised
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 Securityholders. The Trustee shall
also be entitled to receive an opinion of counsel to the effect that (1) all conditions precedent to the execution, delivery and authentication of the Securities have been complied with; (2) the Securities are not required to be registered
under the Securities Act; and (3) the Indenture is not required to be qualified under the Trust Indenture Act.
The definitive Debt
Securities 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 Debt Securities, as evidenced by their execution of such Debt Securities.
SECTION 2.02.
Form of Trustee’s Certificate of Authentication
.
The Trustee’s certificate of authentication on all Debt Securities shall be in substantially the following form:
This represents Debt Securities referred to in the within-mentioned Indenture.
LaSalle Bank National Association, not in its individual capacity but solely as Trustee
SECTION 2.03.
Form and Denomination of Debt Securities
.
The Debt Securities shall be substantially in the form of Exhibit A hereto. The Debt Securities shall be in registered, certificated form
without coupons and in minimum denominations of $100,000 and any multiple of $1,000 in excess thereof. The Debt Securities 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.
-9-
SECTION 2.04.
Execution of Debt Securities
.
The Debt Securities shall be signed in the name and on behalf of the Company by the manual or facsimile signature of any of its Chairman of
the Board of Directors, Vice Chairman, President or Chief Financial Officer or one of its Executive Vice Presidents, Senior Vice Presidents or Vice Presidents, under its corporate seal (if legally required), which may be affixed thereto or printed,
engraved or otherwise reproduced thereon, by facsimile or otherwise, and which need not be attested. Only such Debt Securities 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 officer, 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
Debt Security executed by the Company shall be conclusive evidence that the Debt Security 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 Debt Securities shall cease to be such officer before the Debt Securities
so signed shall have been authenticated and delivered by the Trustee or the Authenticating Agent, or disposed of by the Company, such Debt Securities nevertheless may be authenticated and delivered or disposed of as though the Person who signed such
Debt Securities had not ceased to be such officer of the Company; and any Debt Security may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Debt Security, 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 Debt Security shall be
dated the date of its authentication.
SECTION 2.05.
Exchange and Registration of Transfer of Debt Securities
.
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 3.02, a register (the “Debt Security Register”) for the Debt Securities issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration and
transfer of all Debt Securities as provided in this Article II. Such register shall be in written form or in any other form capable of being converted into written form within a reasonable time.
Debt Securities 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 3.02, 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 Debt Security or Debt Securities which the Securityholder making the exchange shall be entitled to receive. Upon due presentment for registration of transfer of any Debt Security at the Principal Office of the Trustee or at any office or agency
of the Company maintained for such purpose as provided in Section 3.02, 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 Debt Security for a like aggregate principal amount. Registration or registration of transfer of any Debt Security by the Trustee or by any agent of the Company appointed pursuant to, and delivery of such
Debt Security, shall be deemed to complete the registration or registration of transfer of such Debt Security.
-10-
All Debt Securities 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 either the Trustee or the Authenticating Agent
duly executed by, the holder or such holder’s attorney duly authorized in writing.
Neither the Trustee nor the Debt Security
Registrar shall be responsible for ascertaining whether any transfer hereunder complies with the registration provisions of or any exemptions from the Securities Act (under and as defined in the Declaration), applicable state securities laws or the
applicable laws of any other jurisdiction, ERISA, the United States Internal Revenue Code of 1986, as amended, or the Investment Company Act (under and as defined in the Declaration).
No service charge shall be made for any exchange or registration of transfer of Debt Securities, 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 Debt Security for a period of 15 days immediately preceding the date of selection of Debt Securities for redemption.
Notwithstanding the foregoing, Debt Securities may not be transferred except in compliance with the restricted securities legend set forth
below, unless otherwise determined by the Company in accordance with applicable law, which legend shall be placed on each Debt 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 LAWS. 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. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE COMPANY,
(B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON THE HOLDER 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, (C) TO A “NON U.S. PERSON” IN AN “OFFSHORE TRANSACTION” PURSUANT TO REGULATION S UNDER THE SECURITIES ACT,
(D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN “ACCREDITED
-11-
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 (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) 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 AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING
TRANSACTIONS INVOLVING THIS SECURITY UNLESS SUCH TRANSACTIONS ARE 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 THIS SECURITY 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 THIS SECURITY 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 CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SECURITY WILL DELIVER TO THE COMPANY AND TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION
AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
-12-
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A PRINCIPAL AMOUNT OF
NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A PRINCIPAL AMOUNT OF LESS THAN $100,000 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 THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS
SECURITY.
THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING
THE FEDERAL DEPOSIT INSURANCE CORPORATION. THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND THE CLAIMS OF GENERAL AND SECURED CREDITORS OF THE COMPANY, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE COMPANY OR ANY OF ITS SUBSIDIARIES
AND IS NOT SECURED.
SECTION 2.06.
Mutilated, Destroyed, Lost or Stolen Debt Securities
.
In case any Debt Security 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 Debt Security bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debt Security, or in lieu of and in substitution for the Debt Security so destroyed, lost
or stolen. In every case the applicant for a substituted Debt Security 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 Debt Security and of the ownership thereof.
The Trustee may authenticate any such substituted Debt Security and deliver the same upon the written request or authorization of any officer
of the Company. Upon the issuance of any substituted Debt Security, 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 Debt Security 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 Debt Security, pay or
authorize the payment of the same (without surrender thereof except in the case of a mutilated Debt Security) 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 Security and of the ownership thereof.
Every substituted Debt Security issued pursuant to the provisions of this Section 2.06 by virtue of the fact that any such Debt Security
is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen
-13-
Debt Security 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 Debt Securities duly issued hereunder. All
Debt Securities 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 Debt
Securities 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 2.07.
Temporary Debt Securities
.
Pending the preparation of definitive Debt Securities, the Company may execute and the Trustee shall authenticate and make available for
delivery temporary Debt Securities that arc typed, printed or lithographed. Temporary Debt Securities shall be issuable in any authorized denomination, and substantially in the form of the definitive Debt Securities but with such omissions,
insertions and variations as may be appropriate for temporary Debt Securities, all as may be determined by the Company. Every such temporary Debt Security 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 Debt Securities. Without unreasonable delay, the Company will execute and deliver to the Trustee or the Authenticating Agent definitive Debt Securities and thereupon
any or all temporary Debt Securities may be surrendered in exchange therefor, at the Principal Office of the Trustee or at any office or agency maintained by the Company for such purpose as provided in Section 3.02, and the Trustee or the
Authenticating Agent shall authenticate and make available for delivery in exchange for such temporary Debt Securities a like aggregate principal amount of such definitive Debt Securities. 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 Debt Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Debt Securities authenticated and delivered hereunder.
SECTION 2.08.
Payment of Interest
.
Each Debt Security will bear interest at the then applicable Interest Rate from and including each Interest Payment Date or, in the case of
the first Interest Payment Period, the original date of issuance of such Debt Security to, but excluding, the next succeeding Interest Payment Date or, in the case of the last Interest Payment Period, the Redemption Date, Special Redemption Date or
Maturity Date, as applicable, on the principal thereof, on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on Deferred Interest and on any overdue installment of interest (including
Defaulted Interest), payable (subject to the provisions of Article XII) on each Interest Payment Date commencing on June 15, 2006. Interest and any Deferred Interest on any Debt Security that is payable, and is punctually paid or duly provided
for by the Company, on any Interest Payment Date shall be paid to the Person in whose name said Debt Security (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 Deferred Interest payable on the Maturity Date shall be paid to the Person to
-14-
whom principal is paid. In the event that any Debt Security 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 either on or prior to such Interest Payment Date, interest on such Debt Security will be paid upon presentation and surrender of such Debt Security.
Any interest on any Debt Security, other than Deferred Interest, that is payable, but is not punctually paid or duly provided for by the
Company, 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 Debt 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 Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Debt Security and the date of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements reasonably 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 fifteen nor less than ten days prior to the date of the proposed payment and not less than ten 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
his or her address as it appears in the Debt Security Register, not less than ten 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 Debt Securities (or their respective Predecessor Securities) are registered on such special record date and thereafter the Company shall have no further payment obligation in
respect of the Defaulted Interest.
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 Debt Securities.
The term “regular record date” as used in this Indenture shall mean the fifteenth day prior to the applicable Interest Payment Date
whether or not such date is a Business Day.
Subject to the foregoing provisions of this Section, each Debt Security delivered under this
Indenture upon registration of transfer of or in exchange for or in lieu of any other Debt Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Debt Security.
-15-
SECTION 2.09.
Cancellation of Debt Securities Paid, etc.
All Debt Securities 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, shall be promptly canceled by it, and no Debt Securities shall be issued in lieu thereof except as expressly permitted by any
of the provisions of this Indenture. The Trustee shall dispose of all canceled Debt Securities in accordance with its customary practices, unless the Company otherwise directs the Trustee in writing, in which case the Trustee shall dispose of such
Debt Securities as directed by the Company. If the Company shall acquire any of the Debt Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debt Securities unless and until
the same are surrendered to the Trustee for cancellation.
SECTION 2.10.
Computation of Interest
.
(a) The amount of interest payable for any Interest Payment Period will be computed on the basis of a 360-day year and the actual number of
days elapsed in the relevant interest period;
provided
,
however
, that upon the occurrence of a Special Event Redemption pursuant to Section 10.02 the amounts payable pursuant to this Indenture shall be calculated as set forth in
the definition of Special Redemption Price.
(b) LIBOR, for any Interest Payment Period, shall be determined by the Calculation Agent in
accordance with the following provisions:
(1) On the second LIBOR Business Day (provided, that on such day commercial
banks are open for business (including dealings in foreign currency deposits) in London (a “LIBOR Banking Day”), and otherwise the next preceding LIBOR Business Day that is also a LIBOR Banking Day) prior to
March 15, June 15, September 15 and December 15 (or, with respect to the first Interest Payment Period, on March 8, 2006) (each such day, a “LIBOR Determination Date” for the following Interest Payment
Period), the Calculation Agent shall obtain the rate for three-month U.S. Dollar deposits in Europe, which appears on Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 2000 Interest Rate and Currency
Exchange Definitions) or such other page as may replace such Telerate Page 3750 on the Moneyline Telerate, Inc. service (or such other service or services as may be nominated by the British Banker’s Association as the information vendor for the
purpose of displaying London Interbank offered rates for U.S. dollar deposits), as of 11:00 a.m. (London time) on such LIBOR Determination Date, and the rate so obtained shall be LIDOR for such Interest Payment Period. “LIBOR Business Day”
means any day that is not a Saturday, Sunday or other day on which commercial banking institutions in The City of New York or Chicago, Illinois are authorized or obligated by law or executive order to be closed. If such rate is superseded on
Telerate Page 3750 by a corrected rate before 12:00 noon (London time) on the same LIBOR Determination Date, the corrected rate as so substituted will be LIBOR for that Interest Payment Period.
-16-
(2) If, on any LIBOR Determination Date, such rate does not appear on Telerate
Page 3750 or such other page as may replace such Telerate Page 3750 on the Moneyline Telerate, Inc. service (or such other service or services as may be nominated by the British Banker’s Association as the information vendor for the purpose of
displaying London Interbank offered rates for U.S. dollar deposits), the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London Interbank market for
three-month U.S. Dollar deposits in Europe (in an amount determined by the Calculation Agent) by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to
the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such quotations, LIBOR shall equal the arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference
Banks provide such a quotation, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that at least two leading banks in the City of New York (as selected by the Calculation Agent) are quoting on the relevant LIBOR Determination
Date for three-month U.S. Dollar deposits in Europe at approximately 11:00 a.m. (London time) (in an amount determined by the Calculation Agent). As used herein, “Reference Banks” means four major banks in the London Interbank market
selected by the Calculation Agent.
(3) If the Calculation Agent is required but is unable to determine a rate in
accordance with at least one of the procedures provided above, LIBOR for the applicable Interest Payment Period shall be LIBOR in effect for the immediately preceding Interest Payment Period.
(c) All percentages resulting from any calculations on the Debt 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).
(d) As soon as practicable following each LIBOR Determination
Date, but in no event later than the 30th day following such LIBOR Determination Date, the Calculation Agent shall notify, in writing, the Company, the Institutional Trustee and the Paying Agent of the applicable Interest Rate in effect for the
related Interest Payment Period. The Calculation Agent shall, upon the request of the holder of any Debt Securities, provide the Interest Rate then in effect. All calculations made by the Calculation Agent in the absence of manifest error shall be
conclusive for all purposes and binding on the Company and the Holders of the Debt Securities. Any error in a calculation of the Interest Rate by the Calculation Agent may be corrected at any time by the delivery of notice of such corrected Interest
Rate as provided above. The Paying Agent shall be entitled to rely on information received from the Calculation Agent or the Company as to the Interest Rate. The Company shall, from time to time, provide any necessary information to the Paying Agent
relating to any original issue discount and interest on the Debt Securities that is included in any payment and reportable for taxable income calculation purposes. Failure to notify the Company, the Institutional Trustee or the Paying Agent of the
applicable Interest Rate shall not affect the obligation of the Company to make payment on Debentures at such Interest Rate.
-17-
SECTION 2.11.
Extension of Interest Payment Period
.
As long as it is acting in good faith, and so long as no Event of Default pursuant to paragraphs (c), (e) or (f) of
Section 5.01 of the Indenture 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 Debt Securities by extending the interest
distribution period on the Debt Securities at any time and from time to time during the term of the Debt Securities, for up to twenty consecutive quarterly periods (each such extended interest distribution period, an “Extension Period”),
during which Extension Period no interest shall be due and payable (except any Additional Interest that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During any Extension Period, interest will
continue to accrue on the Debt Securities, and interest on such accrued interest (such accrued interest and interest thereon referred to herein as “Deferred Interest”) will accrue at an annual rate equal to the Interest Rate applicable
during such Extension Period, compounded quarterly from the date such Deferred Interest would have been payable were it not for the Extension Period, to the extent permitted by law. No interest or Deferred Interest shall be due and payable during an
Extension Period, except at the end thereof. At the end of any such Extension Period the Company shall pay all Deferred Interest then accrued and unpaid on the Debt Securities;
provided
,
however
, that no Extension Period may extend
beyond the Maturity Date; and
provided
further
,
however
, that during any such Extension Period, the Company shall be subject to the restrictions set forth in Section 3.08 of this Indenture. 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 twenty consecutive quarterly periods, or extend beyond the
Maturity Date. Upon the termination of ariy Extension Period and upon the payment of all Deferred Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Deferred Interest shall be due and
payable during an Extension Period, except at the end thereof, but Deferred Interest shall accrue upon each installment of interest that would otherwise have been due and payable during such Extension Period until such installment is paid. The
Company must give the Trustee notice of its election to begin any Extension Period or extend an Extension Period (“Notice”) not later than the related regular record date for the relevant Interest Payment Date. The Notice shall describe
why the Company has elected to begin an Extension Period. The Notice shall acknowledge and affirm the Company’s understanding that it is prohibited from issuing dividends and other distributions during the Extension Period. Upon receipt of the
Notice, an Initial Purchaser shall have the right, at its sole discretion, to disclose the name of the Company, the fact that the Company has elected to begin an Extension Period and other information that such Initial Purchaser, at its sole
discretion, deems relevant to the Company’s election to begin an Extension Period. The Trustee shall give notice of the Company’s election to begin a new Extension Period to the Securityholders.
-18-
SECTION 2.12.
CUSIP Numbers
.
The Company in issuing the Debt Securities may use a “CUSIP” number (if then generally in use), and, if so, the Trustee shall use a
“CUSIP” number in notices of redemption as a convenience to Securityholders;
provided
, that any such notice may state that no representation is made as to the correctness of such number either as printed on the Debt 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 Debt Securities, 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 number.
SECTION 2.13.
Income Tax Certification
.
As a condition to the payment of any principal of or interest on the Debt Securities without the imposition of withholding tax, the Trustee
shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor form) in the case of a person that is a “United
States person” within the meaning of Section 7701(a)(30) of the Code (under and as defined in the Declaration) or an Internal Revenue Service Form W-8 (or applicable successor form) in the case of a person that is not a “United States
person” within the meaning of Section 770l(a)(30) of the Code, and any other certification acceptable to it to enable the Trustee or any Paying Agent to determine their respective duties and liabilities with respect to any taxes or other
charges that they may be required to pay, deduct or withhold in respect of such Debt Securities.
SECTION 2.14.
Global Debentures
.
(a) Upon the election of the holder of Outstanding Debt Securities, which election need not be in writing, the Debt Securities owned by
such holder shall be issued in the form of one or more Global Debentures registered in the name of the Depositary or its nominee. Each Global Debenture issued under this Indenture shall be registered in the name of the Depositary designated by the
Company for such Global Debenture or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Debenture shall constitute a single Debt Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no Global Debenture may be exchanged in whole or in part for Debt Securities
registered, and no transfer of a Global Debenture in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Debenture or a nominee thereof unless (i) such Depositary advises the Trustee and the
Company in writing that such Depositary is no longer willing or able to properly discharge its responsibilities as Depositary with respect to such Global Debenture, and no qualified successor is appointed by the Company within ninety (90) days
of receipt by the Company of such notice, (ii) such Depositary ceases to be a clearing agency registered under the Exchange Act and no successor is appointed by the Company within ninety (90) days after obtaining knowledge of such event,
(iii) the Company executes and delivers to the Trustee a Company Order stating that the Company elects to terminate the book-entry system through the Depositary or (iv) an Event of Default shall have occurred and be continuing. Upon the
occurrence of any event specified in clause (i), (ii), (iii) or (iv) above, the Trustee shall notify the Depositary and instruct the Depositary to notify all owners of beneficial interests in such Global Debenture of the occurrence of such
event and of the availability of Debt Securities to such owners of beneficial interests requesting the same. Upon the issuance of such Debt Securities
-19-
and the registration in the Debt Security Register of such Debt Securities in the names of such owners of the beneficial interests therein, the Trustee shall recognize such owners of beneficial
interests as Holders.
(c) If any Global Debenture is to be exchanged for other Debt Securities or canceled in part, or if another Debt
Security is to be exchanged in whole or in part for a beneficial interest in any Global Debenture, then either (i) such Global Debenture shall be so surrendered for exchange or cancellation as provided in this Article II or (ii) the
principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or canceled, or equal to the principal amount of such other Debt Security to be so exchanged for a beneficial interest therein, as
the case may be, by means of an appropriate adjustment made on the records of the Debt Security registrar, whereupon the Trustee, in accordance with the Applicable Depository Procedures, shall instruct the Depositary or its authorized representative
to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Debenture by the Depositary, accompanied by registration instructions, the Company shall execute and the Trustee shall authenticate and deliver any
Debt Securities issuable in exchange for such Global Debenture (or any portion thereof) in accordance with the instructions of the Depositary. The Trustee shall not be liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be fully protected in relying on, such instructions.
(d) Every Debt Security authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global Debenture or any portion thereof shall be authenticated and delivered in the form of, and shall be, a Global Debenture, unless such Debt Security is registered in the name of a Person other
than the Depositary for such Global Debenture or a nominee thereof.
(e) Debt Securities distributed to holders of Book-Entry Capital
Securities (as defined in the Trust Agreement) upon the dissolution of the Trust shall be distributed in the form of one or more Global Debentures registered in the name of a Depositary or its nominee, and deposited with the Debt Securities
registrar, as custodian for such Depositary, or with such Depositary, for credit by the Depositary to the respective accounts of the beneficial owners of the Debt Securities represented thereby (or such other accounts as they may direct). Debt
Securities distributed to holders of Capital Securities other than Book-Entry Capital Securities upon the dissolution of the Trust shall not be issued in the form of a Global Debenture or any other form intended to facilitate book-entry trading in
beneficial interests in such Debt Securities.
(f) The Depositary or its nominee, as the registered owner of a Global Debenture, shall be
the Holder of such Global Debenture for all purposes under this Indenture and the Debt Securities, and owners of beneficial interests in a Global Debenture shall hold such interests pursuant to the Applicable Depository Procedures. Accordingly, any
such owner’s beneficial interest in a Global Debenture shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Depositary Participants. The Debt
Securities registrar and the Trustee shall be entitled to deal with the Depositary for all purposes of this Indenture relating to a Global Debenture (including the payment of principal and interest thereon and the giving of instructions or
directions by owners of beneficial interests therein and the giving of notices) as the sole Holder of the Debt
-20-
Security and shall have no obligations to the owners of beneficial interests therein. Neither the Trustee nor the Debt Securities registrar shall have any liability in respect of any transfers
affected by the Depositary.
(g) The rights of owners of beneficial interests in a Global Debenture shall be exercised only through the
Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its Depositary Participants.
(h) No holder of any beneficial interest in any Global Debenture held on its behalf by a Depositary shall have any rights under this Indenture
with respect to such Global Debenture, and such Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the owner of such Global Debenture for all purposes whatsoever. None of the Company, the Trustee nor
any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Debenture or maintaining, supervising or reviewing
any records relating to such beneficial ownership interests. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as holder of any
Debt Security.
ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01.
Payment of Principal, Premium and Interest; Agreed Treatment of the Debt Securities
.
(a) The Company covenants and agrees that it will duly and punctually pay or cause to be paid all payments due on the Debt Securities at the
place, at the respective times and in the manner provided in this Indenture and the Debt Securities. At the option of the Company, each installment of interest on the Debt Securities may be paid (i) by mailing checks for such interest payable
to the order of the holders of Debt Securities entitled thereto as they appear on the Debt Security Register or (ii) by wire transfer to any account with a banking institution located in the United States designated by such holders to the
Paying Agent no later than the related record date. Notwithstanding anything to the contrary contained in this Indenture or any Debt Security, if the Trust or the Trustee of the Trust is the holder of any Debt Security, then all payments in respect
of such Debt Security shall be made by the Company in immediately available funds when due.
(b) The Company will treat the Debt
Securities as indebtedness, and the interest payable in respect of such Debt Securities as interest, for all U.S. federal income tax purposes. As a condition to the payment of any principal of or interest on any Debt Security without the imposition
of withholding tax, the Company shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor form) in the case of a
Person that is
-21-
a U.S. Person or an Internal Revenue Service Form W-8 (or applicable successor form) in the case of a Person that is not a U.S. Person and any other certification acceptable to it to enable the
Company and the Trustee to determine their respective duties and liabilities with respect to any taxes or other charges that they may be required to pay or withhold in respect of such Debt Security or the holder of such Debt Security under any
present or future law or regulation of the United States or any political subdivision thereof or taxing authority therein or to comply with any reporting or other requirements under any such law or regulation.
(c) As of the date of this Indenture, the Company represents that it has no intention to exercise its right under Section 2.11 to defer
payments of interest on the Debt Securities by commencing an Extension Period.
(d) As of the date of this Indenture, the Company
represents that the likelihood that it would exercise its right to defer payments of interest on the Debt Securities by commencing an Extension Period at any time during which the Debt Securities 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 premium, if any, 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 Debt Securities.
SECTION 3.02.
Offices for Notices and Payments, etc.
So long as any of the Debt Securities remain outstanding, the Company will maintain an office or agency where the Debt Securities may be
presented for payment, an office or agency where the Debt Securities may be presented for registration of transfer and for exchange as provided in this Indenture and an office or agency where notices and demands to or upon the Company in respect of
the Debt Securities or of this Indenture may be served. The Company hereby appoints the Trustee at LaSalle Bank National Association, CDO Trust Services Group, Attn: Greg Myers, 135 South LaSalle, Suite 1511, Chicago, Illinois 60603 – GWB
Capital Trust VI as such office or agency. In case the Company shall fail to maintain any such office 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 other offices or agencies where the Debt Securities 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 for the purposes above mentioned. The Company
will give to the Trustee prompt written notice of any such designation or rescission thereof.
-22-
SECTION 3.03.
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 6.09, a Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 3.04.
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 3.04:
(1) that it will hold all sums held by it as such agent for the payment of all payments due on the Debt Securities (whether
such sums have been paid to it by the Company or by any other obligor on the Debt Securities) in trust for the benefit of the holders of the Debt Securities;
(2) that it will give the Trustee prompt written notice of any failure by the Company (or by any other obligor on the Debt
Securities) to make any payment on the Debt Securities 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 payments due on the Debt Securities, set
aside, segregate and hold in trust for the benefit of the holders of the Debt Securities a sum sufficient to pay such payments 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 Debt Securities) to make any payment on the Debt Securities when the same shall become due and payable.
Whenever the Company shall have one or more Paying Agents for the Debt Securities, it will, on or prior to each due date of the payments on
the Debt Securities, deposit with a Paying Agent a sum sufficient to pay all payments 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 3.04 to the contrary
notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Debt Securities, 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 same terms and conditions 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 12.03 and 12.04.
(e) The Company hereby initially appoints the Trustee to act as Paying Agent (the “Paying Agent”).
-23-
SECTION 3.05.
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 Debt Securities 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 by the Company in the performance of any covenants of the Company
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 thereof.
SECTION 3.06.
Additional Interest
.
If and for so long as the Trust is the holder of all Debt Securities and is subject to or otherwise required to pay, or is required to
withhold from distributions to holders of Trust Securities, any additional taxes (including withholding taxes), duties, assessments or other governmental charges as a result of a Tax Event, the Company will pay such additional amounts (the
“Additional Interest”) on the Debt Securities as shall be required so that the net amounts received and retained by the Trust for distribution to holders of Trust Securities after paying all taxes (including withholding taxes), duties,
assessments or other governmental charges will be equal to the amounts the Trust would have received and retained for distribution to holders of Trust Securities after paying all taxes (including withholding taxes on distributions to holders of
Trust Securities), duties, assessments or other governmental charges if no such additional taxes, duties, assessments or other governmental charges had been imposed. Whenever in this Indenture or the Debt Securities there is a reference in any
context to the payment of principal of or premium, if any, or interest on the Debt Securities, such mention shall be deemed to include mention of payments of the Additional Interest provided for in this paragraph to the extent that, in such context,
Additional Interest is, was or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Interest (if applicable) in any provisions hereof shall not be construed as excluding
Additional Interest in those provisions hereof where such express mention is not made;
provided
,
however
, that, notwithstanding anything to the contrary contained in this Indenture or any Debt Security, the deferral of the payment of
interest during an Extension Period pursuant to Section 2.11 shall not defer the payment of any Additional Interest that may be due and payable.
SECTION 3.07.
Compliance with Consolidation Provisions
.
The Company will not, while any of the Debt Securities remain outstanding, consolidate with, or merge into any other Person, or merge into
itself, or sell, convey, transfer or otherwise dispose of all or substantially all of its property or capital stock to any other Person unless the provisions of Article XI hereof are complied with.
-24-
SECTION 3.08.
Limitation on Dividends
.
If Debt Securities 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 Debt Securities 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 Debt Securities by extending the interest distribution period as provided herein and such period, or any
extension thereof, shall have commenced and be continuing, then the Company may not (A) 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 (B) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank
pari passu
in all respects with or junior in interest to the Debt
Securities or (C) make any payment under any guarantees of the Company that rank
pari passu
in all respects with or junior in interest to the Capital Securities Guarantee (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company (I) 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, (II) in
connection with a dividend reinvestment or stockholder stock purchase plan or (III) 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 occurrence of (i), (ii) or (iii) above, (b) as a result of any exchange, reclassification, combination 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
stockholder’s rights plan, or the issuance of rights, stock or other property under any stockholder’s rights plan, or the redemption or repurchase of rights pursuant thereto, or 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).
SECTION 3.09.
Covenants as to the Trust
.
For so long as such 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 that is a U.S. Person may succeed to the Company’s ownership of such Common Securities. The Company, as owner of the Common Securities, shall use commercially
reasonable efforts to cause the Trust (a) to remain a statutory trust, except in connection with a distribution of Debt Securities 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, (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 Debt Securities.
-25-
ARTICLE IV
LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
SECTION 4.01.
Securityholders’ Lists
.
The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee:
(a) on each regular record date for an Interest Payment Date, a list, in such form as the Trustee may reasonably require, of the names and
addresses of the Securityholders of the Debt Securities 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 4.01 so long as the Trustee is in possession thereof by reason of its acting as Debt Security registrar.
SECTION 4.02.
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 Debt 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 Debt Securities registrar (if so
acting) hereunder. The 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 Debt Securities (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 Debt 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 Debt Securities with respect to their rights under this Indenture or under such Debt Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall
within five Business Days after the receipt of such application, at the election of the Company, 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 4.02, or
(2) inform such applicants as to the approximate number of holders of Debt Securities 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 4.02, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any,
specified in such application.
-26-
If the Company 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 of Debt Securities 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 4.02 a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the 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 of the Company to the effect that such mailing would be contrary to the best interests of the holders of all Debt Securities, 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 Debt Securities, by receiving and holding the same, agrees
with the 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 Debt 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 Trustee shall not be held accountable by reason of mailing any material pursuant to a
request made under said subsection (b).
SECTION 4.03.
Financial and Other Information
.
The Company shall deliver to each Securityholder (1) each Report on Form 10-K and Form 10-Q prepared by the Company and filed with the
Securities and Exchange Commission in accordance with the Exchange Act within 7 days after the filing thereof, (2) if the Company is not then (y) subject to Section 13 or I5(d) of the Exchange Act or (z) exempt from reporting
pursuant to Rule 12g3-2(b) thereunder, the Company shall be required to provide within 45 days of the end of each calendar quarterly period and 90 days after the end of each calendar year, the information required to be provided by Rule 144A(d)(4)
under the Securities Act and (3) within 30 days after the end of the fiscal year of the Company, Form 1099 or such other annual U.S. federal income tax information statement required by the Code containing such information with regard to the
Debt Securities held by such holder as is required by the Code and the income tax regulations of the U.S. Treasury thereunder.
If and so
long as a Holder of the Debt Securities is an entity that holds a pool of debt securities or trust preferred securities, or a trustee thereof, the Company will cause copies of its reports on Form FR Y-9C to be delivered to the Holder promptly
following their filing with the Federal Reserve.
-27-
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT
SECTION 5.01.
Events of Default
.
The following events shall be “Events of Default” with respect to Debt Securities:
(a) the Company defaults in the payment of any interest upon any Debt Security when it becomes due and payable (unless the Company has elected
and may defer interest payments pursuant to Section 2.11), and continuance of such default for a period of 30 days; for the avoidance of doubt, an extension of any interest distribution period by the Company in accordance with Section 2.11
of this Indenture shall not constitute a default under this clause 5.01(a); or
(b) the Company defaults in the payment of all or any part
of the principal of (or premium, if any, on) any Debt Securities as and when the same shall become due and payable either at maturity, upon redemption, by declaration of acceleration pursuant to Section 5.01 of this Indenture or otherwise; or
(c) the Company defaults in the payment of any interest upon any Debt Security when it becomes due and payable following the nonpayment
of any such interest as a result of Extension Period for 20 or more consecutive quarterly periods; or
(d) the Company defaults in the
performance of, or breaches, any of its covenants or agreements in Sections 3.06, 3.07, 3.08 or 3.09 of 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 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of not less than 25% in aggregate
principal amount of the outstanding Debt Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or
(e) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoints a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its
property, or orders 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
(f) the Company 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 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
-28-
(g) the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its
business or otherwise terminated its existence except in connection with (1) the distribution of the Debt Securities to holders of the Trust Securities in liquidation of their interests in the Trust, (2) the redemption of all of the
outstanding Trust Securities or (3) certain mergers, consolidations or amalgamations, each as permitted by the Declaration.
If an
Event of Default specified under clause (c) of this Section 5.01 occurs and is continuing with respect to the Debt Securities, then, and in each and every such case, unless the principal of the Debt Securities shall have already become due
and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debt Securities 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 Debt Securities and any premium and interest accrued, but unpaid, thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. If an Event of Default
specified under clause (e) or (f) of this Section 5.01 occurs, then, in each and every such case, the entire principal amount of the Debt Securities and any premium and interest accrued, but unpaid, thereon shall
ipso facto
become immediately due and payable without further action. Notwithstanding anything to the contrary in this Section 5.01, if at any time during the period in which this Indenture remains in force and effect, the Company ceases or elects to
cease to be subject to the supervision and regulations of the Federal Reserve, OTS, OCC or similar regulatory authority overseeing bank, thrift, savings and loan or financial holding companies or similar institutions requiring specifications for the
treatment of capital similar in nature to the capital adequacy guidelines under the Federal Reserve rules and regulations, then the first sentence of this paragraph shall be deemed to include clauses (a), (b) and (d) under this
Section 5.01 as an Event of Default resulting in an acceleration of payment of the Debt Securities to the same extent as provided herein for clause (c).
With respect to clause (d) of this Section 5.01, the Company agrees that in the event of a breach by the Company of its covenants or
agreements mentioned therein, any remedy at law or in damages may prove inadequate and therefore the Company agrees that the Trustee shall be entitled to injunctive relief against the Company in the event of any breach or threatened breach by the
Company, in addition to any other relief (including damages) available to the Trustee under this Indenture or under law.
The foregoing
provisions, however, are subject to the condition that if, at any time after the principal of the Debt 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 Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Debt Securities and all payments on the Debt Securities which
shall have become due otherwise than by acceleration (with interest upon all such payments and Deferred Interest, to the extent permitted by law) 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 6.06, if any, and (ii) all Events of Default under this Indenture, other than the non-payment of the payments
on Debt Securities which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein, and in each and every such case the holders of a majority in aggregate principal amount of the Debt
-29-
Securities 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; provided, however, that if the Debt Securities are held by the Trust or a trustee of the Trust, such waiver or rescission
and annulment shall not be effective until the holders of a majority in aggregate liquidation amount of the outstanding Capital Securities of the Trust shall have consented to such waiver or rescission and annulment.
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 Debt Securities 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 Debt Securities shall continue as though no such proceeding had been taken.
SECTION 5.02.
Payment of Debt Securities on Default; Suit Therefor
.
The Company covenants that upon the occurrence of an Event of Default pursuant to clause 5.01(a), 5.01(b) or 5.01(c), and upon demand of the
Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Debt Securities, the whole amount that then shall have become due and payable on all Debt Securities including Deferred Interest accrued on the Debt Securities; 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 6.06. 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 Debt Securities
and collect in the manner provided by law out of the property of the Company or any other obligor on such Debt 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 Company or any other obligor on the Debt
Securities 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 Debt Securities, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Debt Securities 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 5.02, 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 Debt 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 Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys
-30-
and counsel, and for reimbursement of all other amounts due to the Trustee under Section 6.06) and of the Securityholders allowed in such judicial proceedings relative to the Company or any
other obligor on the Debt Securities, 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 Debt 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 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 6.06.
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 Debt Securities 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 Debt Securities, may be enforced by
the Trustee without the possession of any of the Debt Securities, 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 Debt Securities.
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 Debt Securities, and it shall not
be necessary to make any holders of the Debt Securities parties to any such proceedings.
SECTION 5.03.
Application of Moneys Collected
by Trustee
.
Any moneys collected by the Trustee shall be applied in the following order, at the date or dates specified pursuant
hereto for the distribution of such moneys, upon presentation of the several Debt 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 incurred by, and reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all
other amounts due to the Trustee under Section 6.06;
Second: To the payment of all Senior Indebtedness of the Company if and to the
extent required by Article XV;
-31-
Third: To the payment of the amounts then due and unpaid upon Debt Securities, 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 Debt Securities; and
Fourth: The balance, if any, to the Company.
SECTION 5.04.
Proceedings by Securityholders
.
No holder of any Debt Security 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 Debt Securities and unless the holders of not less than 25% in aggregate principal amount of the Debt Securities 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;
provided
, that no holder of Debt Securities shall have any right to prejudice the rights of any other
holder of Debt Securities, obtain priority or preference over any other such holder or enforce any right under this Indenture except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debt Securities.
Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Debt Security to receive payment of the
principal of, premium, if any, and interest on such Debt Security 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. 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 5.05.
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 5.06.
Remedies Cumulative and Continuing
.
Except as otherwise provided in Section 2.06, 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 Debt 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 Debt Securities, and no delay or omission of the Trustee or of any holder of any of the Debt 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
-32-
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 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.
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 Debt Securities affected (voting as one class) at the time outstanding and, if
the Debt Securities are held by the Trust or a trustee of the Trust, the holders of a majority in aggregate liquidation amount of the outstanding Capital Securities of the Trust 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 Debt Securities;
provided
,
however
, that if the Debt Securities are held by the Trust or a trustee
of the Trust, such time, method and place or such exercise, as the case may be, may not be so directed until the holders of a majority in aggregate liquidation amount of the outstanding Capital Securities of the Trust shall have directed such time,
method and place or such exercise, as the case may be;
provided
,
further
, that (subject to the provisions of Section 6.01) the Trustee shall have the right to decline to follow any such direction if the Trustee being advised by
counsel 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. Prior to any declaration of acceleration, or
ipso facto
acceleration, of the maturity
of the Debt Securities, the holders of a majority in aggregate principal amount of the Debt Securities at the time outstanding may on behalf of the holders of all of the Debt Securities 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 Debt Securities, (b) in respect of covenants or provisions hereof which cannot be modified or
amended without the consent of the holder of each Debt Security affected, or (c) in respect of the covenants contained in Section 3.09;
provided
,
however
, that if the Debt Securities are held by the Trust or a trustee of the
Trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of the 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 Debt Security is required, such waiver or modification to such waiver shall not be effective until each holder of the outstanding Capital Securities of the Trust shall have
consented to such waiver or modification to such waiver. Upon any such waiver or modification to such waiver, the Default or Event of 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 Debt Securities shall be restored to their former positions and rights hereunder, respectively; but no such waiver or modification to 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 5.07, said Default or Event of Default shall for all purposes of the Debt Securities and this Indenture be
deemed to have been cured and to be not continuing.
-33-
SECTION 5.08.
Notice of Defaults
.
The Trustee shall, within 90 days after a Responsible Officer of the Trustee shall have actual knowledge or received written notice of the
occurrence of a Default with respect to the Debt Securities, mail to all Securityholders, as the names and addresses of such holders appear upon the Debt Security Register, notice of all Defaults with respect to the Debt Securities actually 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 5.08 being hereby defined to be the events specified in subsections (a), (b), (c), (d),
(e) and (f) of Section 5.01, not including periods of grace, if any, provided for therein);
provided
, that, except in the case of default in the payment of the principal of, premium, if any, or interest on any of the Debt
Securities, 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 5.09.
Undertaking to Pay Costs
.
All parties to this Indenture agree, and each holder of any Debt Security by such holder’s 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; but the provisions of this Section 5.09 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 Debt Securities (or, if such Debt Securities are held by the Trust or a trustee of the Trust, more than 10% in liquidation amount of the outstanding Capital
Securities), 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 Debt Security against the Company on or after the same shall have become due and payable, or to
any suit instituted in accordance with Section 14.12.
ARTICLE VI
CONCERNING THE TRUSTEE
SECTION
6.01.
Duties and Responsibilities of Trustee
.
With respect to the holders of Debt Securities issued hereunder, the Trustee, prior
to the occurrence of an Event of Default with respect to the Debt Securities and after the curing or waiving of all Events of Default which may have occurred, with respect to the Debt Securities, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an Event of Default with respect to the Debt Securities 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 person would exercise or use under the circumstances in the conduct of such person’s own affairs.
-34-
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 the Debt Securities 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 the Debt Securities 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 Debt Securities 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 on their face 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;
(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 5.07, relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;
(d) the Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Debt Securities unless either
(1) a Responsible Officer shall have actual knowledge of such Default or Event of Default or (2) 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 Debt
Securities or by any holder of the Debt Securities, except with respect to an Event of Default pursuant to Sections 5.01(a), 5.01(b) or 5.01(c) hereof (other than an Event of Default resulting from the default in the payment of Additional Interest
or premium, if any, if the Trustee does not have actual knowledge or written notice that such payment is due and payable), of which the Trustee shall be deemed to have knowledge; and
(e) in the absence of bad faith on the part of the Trustee, the Trustee may seek and rely on reasonable instructions from the Company.
-35-
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.
SECTION 6.02.
Reliance on Documents, Opinions, etc.
Except as otherwise provided in Section 6.01:
(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 in good faith 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 reasonably 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 Debt
Securities (that has not been cured or waived) to exercise with respect to the Debt Securities 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 person would
exercise or use under the circumstances in the conduct of such person’s 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 Debt Securities 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; and
-36-
(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.
SECTION 6.03.
No Responsibility for Recitals, etc.
The recitals contained herein and in the Debt Securities (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 Debt Securities. The Trustee and the Authenticating Agent shall not be accountable for the use or application by the Company of any Debt Securities or the proceeds of any Debt Securities authenticated and
delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this Indenture.
SECTION 6.04.
Trustee.
Authenticating Agent. Paying Agents, Transfer Agents or Registrar May Own Debt Securities
.
The Trustee or any Authenticating Agent or
any Paying Agent or any transfer agent or any Debt Security registrar, in its individual or any other capacity, may become the owner or pledgee of Debt Securities with the same rights it would have if it were not Trustee, Authenticating Agent,
Paying Agent, transfer agent or Debt Security registrar.
SECTION 6.05.
Moneys to be Held in Trust
.
Subject to the provisions of Section 12.04, 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, if any, shall be paid from time to time to the Company
upon the written order of the Company, signed by the Chairman of the Board of Directors, the President, the Chief Operating Officer, a Vice President, the Treasurer or an Assistant Treasurer of the Company.
SECTION 6.06.
Compensation and Expenses of Trustee
.
Other than as provided in the Fee Agreement of even date herewith between Cohen Bros. & Company, the Trustee, the Company and
Delaware Trustee (as defined in the Declaration), 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 written request for all documented 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 reasonable expenses and disbursements of its counsel and of all Persons not regularly in its employ)
except any such
-37-
expense, disbursement or advance that arises from its negligence, willful misconduct or bad faith. The Company also covenants to indemnify each of the Trustee (including in its individual
capacity) and 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), except to the extent such loss, damage, claim, liability or expense results from the negligence, willful misconduct or bad faith of such indemnitee, arising out of or in connection with the acceptance or administration of this Trust,
including the costs and expenses of defending itself against any claim or liability in the premises. The obligations of the Company under this Section 6.06 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for
documented expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by (and the Company hereby grants and pledges to the Trustee) a lien prior to that of the Debt
Securities 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 Debt Securities.
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 subsections (e), (f) or (g) of Section 5.01, 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 Debt Security 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 Debt Securities or otherwise advance funds to or on behalf of the Company.
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 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,
willful misconduct or bad faith 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, willful misconduct or bad
faith 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.
-38-
SECTION 6.08.
Eligibility of Trustee
.
The Trustee hereunder shall at all times be a U.S. Person that is a banking corporation or national banking association organized and doing
business under the laws of the United States of America or any state thereof or of the District of Columbia and 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, or District of Columbia authority. If such corporation or national banking association 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 6.08 the combined capital and surplus of such corporation or national banking association 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, notwithstanding that such corporation or national banking association shall be otherwise eligible and qualified under this Article.
In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.08, the Trustee shall
resign immediately in the manner and with the effect specified in Section 6.09.
If the Trustee has or shall acquire any
“conflicting interest” within the meaning of § 310(b) of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to this Indenture.
SECTION 6.09.
Resignation or Removal of Trustee, Calculation Agent, Paying Agent or Debt Security Registrar
.
(a) The Trustee, or any trustee or trustees hereafter appointed, the Calculation Agent, the Paying Agent and any Debt Security Registrar 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 Debt Securities at their addresses as they shall appear on the Debt Security Register.
Upon receiving such notice of resignation, the Company shall promptly appoint a successor or successors by written instrument, in duplicate, executed by order of its Board of Directors, one copy of which instrument shall be delivered to the
resigning party and one copy to the successor. If no successor 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 party may
petition any court of competent jurisdiction for the appointment of a successor, or any Securityholder who has been a bona fide holder of a Debt Security or Debt Securities for at least six months may, subject to the provisions of Section 5.09,
on behalf of himself or herself and all others similarly situated, petition any such court for the appointment of a successor. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of the last paragraph of Section 6.08 after written request
therefor by the Company or by any Securityholder who has been a bona fide holder of a Debt Security or Debt Securities for at least six months,
-39-
(2) the Trustee shall cease to be eligible in accordance with the provisions of
Section 6.08 and shall fail to resign after written request therefor by the Company or by any such Sccurityholder, or
(3) the Trustee shall become incapable of acting, or shall be adjudged 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 5.09, if no successor Trustee shall have been so appointed and have accepted
appointment within 30 days of the occurrence of any of (1), (2) or (3) above, any Securityholder who has been a bona fide holder of a Debt Security or Debt Securities for at least six months may, on behalf of himself or herself 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 a successor Trustee.
(c) Upon prior written notice to the Company and the Trustee, the holders of a majority in
aggregate principal amount of the Debt Securities 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 ten 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 6.09 provided, may petition any court of competent jurisdiction for an appointment of a successor.
(d) Any resignation or
removal of the Trustee, the Calculation Agent, the Paying Agent and any Debt Security Registrar and appointment of a successor pursuant to any of the provisions of this Section 6.09 shall become effective upon acceptance of appointment by the
successor as provided in Section 6.10.
SECTION 6.10.
Acceptance by Successor
.
Any successor Trustee, Calculation Agent, Paying Agent or Debt Security Registrar appointed as provided in Section 6.09 shall execute,
acknowledge and deliver to the Company and to its predecessor an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the retiring party shall become effective and such successor, without any further act, deed
or conveyance, shall become vested with all the rights, powers, duties and obligations with respect to the Debt Securities of its predecessor hereunder, with like effect as if originally named herein; but, nevertheless, on the written request of the
Company or of the successor, the party ceasing to act shall, upon payment of the amounts then due it pursuant to the provisions of Section 6.06, execute and deliver an instrument transferring to such successor all the rights and powers of the
party so ceasing to act and shall duly assign, transfer and deliver to such successor all property and money held by such retiring party
-40-
hereunder. Upon reasonable request of any such successor, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor all
such rights and powers. Any party ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected to secure any amounts then due it pursuant to the provisions of Section 6.06.
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 Debt Securities 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 6.10 unless at the time of such acceptance such successor Trustee shall be eligible and qualified under the provisions of Section 6.08.
In no event shall a retiring Trustee, Calculation Agent, Paying Agent or Debt Security Registrar be liable for the acts or omissions of any
successor hereunder.
Upon acceptance of appointment by a successor Trustee, Calculation Agent, Paying Agent or Debt Security Registrar as
provided in this Section 6.l0, the Company shall mail notice of the succession to the holders of Debt Securities at their addresses as they shall appear on the Debt Security Register. If the Company fails to mail such notice within ten Business
Days after the acceptance of appointment by the successor, the successor shall cause such notice to be mailed at the expense of the Company.
SECTION 6.11.
Succession by Merger, etc.
Any Person into which the 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 Trustee shall be a party, or any Person 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
, that such Person 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 Debt Securities 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 Debt Securities so authenticated; and in case at that time any of the Debt Securities
shall not have been authenticated, any successor to the Trustee may authenticate such Debt Securities either in the name of any predecessor hereunder or in the name of the
-41-
successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debt Securities 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 Debt Securities 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 Debt Securities 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 Debt Securities; provided, 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 Debt 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 $50,000,000 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 6.12 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 or converted or with which it may be consolidated, or any Person resulting from
any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any Person 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 Person 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 Debt Securities 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 Debt Securities as the names and addresses of such holders appear on the Debt Security 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 Debt Securities of its predecessor hereunder, with like effect as if originally
named as Authenticating Agent herein.
-42-
Other than as provided in the Fee Agreement of even date herewith between Cohen Bros. &
Company, the Company, the Trustee and Delaware Trustee (as defined in the Declaration), 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 and shall receive such reasonable indemnity as it may require against the costs, expenses and liabilities incurred in furtherance of its
duties under this Section 6.12.
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 Debt Securities or
aggregate Liquidation Amount of the Capital 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 or any number of instruments of similar tenor executed by such Securityholders or holders of Capital Securities, as the case may be, in
person or by agent or proxy appointed in writing, or (b) by the record of such holders of Debt Securities voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII or
of such holders of Capital Securities duly called and held in accordance with the provisions of the Declaration, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Securityholders or holders
of Capital Securities, as the case may be, 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 Debt Securities 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 Debt Securities 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 Debt 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.
-43-
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 such
Securityholder’s 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 Debt Securities
shall be proved by the Debt Security Register or by a certificate of the Debt Security 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 8.06.
SECTION 7.03.
Who Are Deemed Absolute Owners
.
Prior to due presentment for registration of transfer of any Debt Security, the Company, the Trustee, any Authenticating Agent, any Paying
Agent, any transfer agent and any Debt Security registrar may deem the Person in whose name such Debt Security shall be registered upon the Debt Security Register to be, and may treat such Person as, the absolute owner of such Debt Security (whether
or not such Debt Security shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debt Security 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 Debt Security registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon such holder’s 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 Debt Security.
SECTION 7.04.
Debt Securities Owned by Company Deemed Not Outstanding
.
In determining whether the holders of the requisite aggregate principal amount of Debt Securities have concurred in any direction, consent or
waiver under this Indenture, Debt Securities which are owned by the Company or any other obligor on the Debt Securities or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company
(other than the Trust) or any other obligor on the Debt Securities shall be disregarded and deemed not to be outstanding for the purpose of any such determination;
provided
, that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, consent or waiver, only Debt Securities which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Debt Securities so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to vote such Debt Securities 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.
-44-
SECTION 7.05.
Revocation of Consents; Future Securityholders Bound
.
At any time prior to (but not after) the evidencing to the 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 Debt Securities specified in this Indenture in connection with such action, any holder (in cases where no record date has been set pursuant to Section 7.01) or any holder as of an
applicable record date (in cases where a record date has been set pursuant to Section 7.01) of a Debt Security (or any Debt Security 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 Debt Securities 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 7.02,
revoke such action so far as concerns such Debt Security (or so far as concerns the principal amount represented by any exchanged or substituted Debt Security). Except as aforesaid any such action taken by the holder of any Debt Security shall be
conclusive and binding upon such holder and upon all future holders and owners of such Debt Security, and of any Debt Security 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 Debt Security or any Debt Security issued in exchange or substitution therefor.
ARTICLE VIII
SECURITYHOLDERS’ MEETINGS
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 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 9.02; 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 Debt
Securities under any other provision of this Indenture or under applicable law.
-45-
SECTION 8.02.
Call of Meetings by Trustee
.
The 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 Chicago, Illinois 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 Debt Securities affected at their addresses as they shall appear on the Debt Securities 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 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 Debt
Securities, 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 in 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 Debt Securities 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 Debt 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 Trustee and its counsel and any representatives of the Company and its counsel.
SECTION 8.05.
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 Debt 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 deem appropriate.
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 8.03, 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 at the meeting.
Subject to the provisions of Section 7.04, at any meeting each holder of Debt Securities with respect to which such meeting is being held
or proxy therefor shall be entitled to one vote for each $1,000 principal amount of Debt Securities held or represented by such holder;
provided
,
however
, that no vote shall be cast or counted at any meeting in respect of any Debt
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 Debt Securities held by such chairman or instruments in writing as
aforesaid duly designating
-46-
such chairman 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, whether or not constituting a quorum, 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 Debt Securities 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 Debt 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
Debt 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 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 8.07.
Quorum; Actions
.
The Persons entitled to vote a majority in outstanding principal amount of the Debt Securities 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 outstanding principal amount of the Debt Securities, the Persons holding or representing such specified percentage in outstanding principal amount of the Debt Securities 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 8.02, except that such notice need be given only once not less than
five 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 outstanding principal amount of the Debt Securities
which shall constitute a quorum.
-47-
Except as limited by the proviso in the first paragraph of Section 9.02, 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 not less than a majority in outstanding principal amount of the Debt Securities;
provided
,
however
, that, except as limited by the proviso in the first paragraph of Section 9.02, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action that this
Indenture expressly provides may be given by the holders of not less than a specified percentage in outstanding principal amount of the Debt Securities 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 not less than such specified percentage in outstanding principal amount of the Debt Securities.
Any resolution passed or decision taken at any meeting of holders of Debt Securities duly held in accordance with this Section shall be
binding on all the Securityholders, whether or not present or represented at the meeting.
SECTION 8.08.
Written Consent Without a
Meeting
.
Whenever under this Indenture, Securityholders are required or permitted to take any action by vote, such action may be
taken without a meeting on written consent, setting forth the action so taken, signed by the Securityholders of all outstanding Debt Securities entitled to vote thereon. No consent shall be effective to take the action referred to therein unless,
within sixty days of the earliest dated consent delivered in the manner required by this paragraph to the Trustee, written consents signed by a sufficient number of Securityholders to take action are delivered to the Trustee at its Principal Office.
Delivery made to the Trustee at its Principal Office, shall be by hand or by certificated or registered mail, return receipt requested. Written consent thus given by the Securityholders of such number of Debt Securities as is required hereunder,
shall have the same effect as a valid vote of Securityholders of such number of Debt Securities.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION
9.01.
Supplemental Indentures without Consent of Security holders
.
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 Debt Securities as the Board of Directors shall consider to be for the protection of the holders of such Debt Securities, and to make the occurrence, or the
occurrence and continuance, of a Default in any of such additional
-48-
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 or amend such other provisions in regard to matters or questions arising under this Indenture;
provided
, that any such action shall not
adversely affect the interests of the holders of the Debt Securities;
(d) to add to, delete from, or revise the terms of Debt Securities,
including, without limitation, any terms relating to the issuance, exchange, registration or transfer of Debt Securities, including to provide for transfer procedures and restrictions substantially similar to those applicable to the Capital
Securities, as required by Section 2.05 (for purposes of assuring that no registration of Debt Securities is required under the Securities Act of 1933, as amended); provided, that any such action shall not adversely affect the interests of the
holders of the Debt Securities then outstanding (it being understood, for purposes of this proviso, that transfer restrictions on Debt Securities substantially similar to those applicable to Capital Securities shall not be deemed to adversely affect
the holders of the Debt Securities);
(e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with
respect to the Debt Securities and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of
Section 6.10;
(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 Debt Securities, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or the Debt Securities, or to add to the rights of the holders of Debt Securities.
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 9.01 may be executed by the Company and the Trustee without the consent of the holders of any of the Debt Securities at the time outstanding, notwithstanding any of the provisions of
Section 9.02.
-49-
SECTION 9.02.
Supplemental Indentures with Consent of Securityholders
.
With the consent (evidenced as provided in Section 7.01) of the holders of not less than a majority in aggregate principal amount of the
Debt Securities at the time outstanding affected by such supplemental indenture, 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
(which shall conform to the provisions of the Trust Indenture Act, then in effect, applicable to indentures qualified thereunder) 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 Debt Securities;
provided
,
however
, that no such supplemental indenture shall without such consent of the holders of each Debt
Security then outstanding and affected thereby (i) change the Maturity Date of any Debt Security, or reduce the principal amount thereof or any premium thereon, or reduce the rate (or manner of calculation of the rate) or extend the time of
payment of interest thereon, or reduce (other than as a result of the maturity or earlier redemption of any such Debt Security in accordance with the terms of this Indenture and such Debt Security) or increase the aggregate principal amount of Debt
Securities then outstanding, or change any of the redemption provisions, or make the principal thereof or any interest or premium thereon payable in any coin or currency other than United States Dollars, 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 Debt Securities the holders of which are required to consent to any such
supplemental indenture; and
provided
,
further
, that if the Debt Securities are held by the Trust or a trustee of such trust, such supplemental indenture shall not be effective until the holders of a majority in Liquidation Amount of
the outstanding Capital Securities shall have consented to such supplemental indenture;
provided
,
further
, that if the consent of the Securityholder of each outstanding Debt Security is required, such supplemental indenture shall not
be effective until each holder of the outstanding Capital 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 (and holders of Capital Securities, if
required) 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 Debt Security 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.
-50-
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.
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 Debt 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 Debt Securities
.
Debt Securities 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 Debt Securities 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 Debt Securities then outstanding.
SECTION 9.05.
Evidence of Compliance of Supplemental Indenture to be furnished to Trustee
.
The Trustee, subject to the provisions of Sections 6.01 and 6.02, shall, in addition to the documents required by Section 14.06, 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 10.01.
Optional Redemption
.
At any time the Company shall have the right, subject to the receipt by the Company of prior approval from any regulatory authority with
jurisdiction over the Company if such approval is then required under applicable capital guidelines or policies of such regulatory authority, to redeem the Debt Securities, in whole or (provided that all accrued and unpaid interest has been paid on
all Debt Securities for all Interest Periods terminating on or prior to such date) from time to time in part, on any March 15, June 15, September 15 or December 15 on or after March 15, 2011 (the “Redemption
Date”), at the Redemption Price.
-51-
SECTION 10.02.
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
from any regulatory authority with jurisdiction over the Company if such approval is then required under applicable capital guidelines or policies of such regulatory authority, to redeem the Debt Securities, in whole or in part, at any time within
90 days following the occurrence of such Special Event (the “Special Redemption Date”), at the Special Redemption Price.
SECTION 10.03.
Notice of Redemption; Selection of Debt Securities
.
In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Debt Securities, it shall fix a
date for redemption and shall mail, or cause the Trustee to mail (at the expense of the Company) a notice of such redemption at least 30 and not more than 60 days prior to the date fixed for redemption to the holders of Debt Securities so to be
redeemed as a whole or in part at their last addresses as the same appear on the Debt 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 Debt Security designated for redemption as a whole or in part shall not affect the validity of
the proceedings for the redemption of any other Debt Security.
Each such notice of redemption shall specify the CUSIP number, if any, of
the Debt Securities to be redeemed, the date fixed for redemption, the redemption price (or manner of calculation of the price) at which Debt Securities are to be redeemed, the place or places of payment, that payment will be made upon presentation
and surrender of such Debt Securities, 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 Debt Securities are to be redeemed the notice of redemption shall specify the numbers of the Debt Securities to be redeemed. In case the Debt Securities 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 Debt Security, a new Debt Security or Debt Securities in principal amount equal to the unredeemed portion
thereof will be issued.
On the Business Day prior to the Redemption Date or the Special Redemption Date specified in the notice of
redemption given as provided in this Section, 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 all the Debt Securities so called for redemption at the
appropriate redemption price, together with unpaid interest accrued to such date.
The Company will give the Trustee notice not less than
45 nor more than 60 days prior to the Redemption Date as to the Redemption Price at which the Debt Securities are to be redeemed and the aggregate principal amount of Debt Securities to be redeemed and the Trustee shall select, in such manner as in
its sole discretion it shall deem appropriate and fair, the Debt Securities or portions thereof (in integral multiples of $1,000) to be redeemed.
-52-
SECTION 10.04.
Payment of Debt Securities Called for Redemption
.
If notice of redemption has been given as provided in Section 10.03, the Debt Securities or portions of Debt Securities with respect to
which such notice has been given shall become due and payable on the Redemption Date or the Special Redemption Date (as the case may be) and at the place or places stated in such notice at the applicable redemption price, together with interest
accrued to the date fixed for redemption, and on and after said Redemption Date or the Special Redemption Date (unless the Company shall default in the payment of such Debt Securities at the redemption price, together with unpaid interest accrued
thereon to said date) interest on the Debt Securities or portions of Debt Securities so called for redemption shall cease to accrue. On presentation and surrender of such Debt Securities at a place of payment specified in said notice, such Debt
Securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable redemption price, together with unpaid interest accrued thereon to the Redemption Date or the Special Redemption Date (as the case may be).
Upon presentation of any Debt Security 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 Debt Security or Debt Securities of authorized denominations in principal amount equal to the umedeemed portion of the Debt Security so presented.
ARTICLE XI
CONSOLIDATION,
MERGER, SALE, CONVEYANCE AND LEASE
SECTION 11.01.
Company May Consolidate, etc., on Certain Terms
.
Nothing contained in this Indenture or in the Debt Securities shall prevent any consolidation or merger of the Company with or into any other
corporation or corporations (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 all or substantially all of the property or capital stock of the Company or its successor or successors to any other corporation (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, (i) upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other
disposition, the successor entity shall be a corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia (unless such corporation has (1) agreed to make all payments due in respect of
the Debt Securities or, if outstanding, the Capital Securities and Capital Securities Guarantee without withholding or deduction for, or on account of, any taxes, duties, assessments or other governmental charges under the laws or regulations of the
jurisdiction of organization or residence (for tax purposes) of such corporation or any political subdivision or taxing authority thereof or therein unless required by applicable law, in which case such corporation shall have agreed to pay such
-53-
additional amounts as shall be required so that the net amounts received and retained by the holders of such Debt Securities or Capital Securities, as the case may be, after payment of all taxes
(including withholding taxes), duties, assessments or other governmental charges, will be equal to the amounts that such holders would have received and retained had no such taxes (including withholding taxes), duties, assessments or other
governmental charges been imposed, (2) irrevocably and unconditionally consented and submitted to the jurisdiction of any United States federal court or New York state court, in each case located in The City of New York, Borough of Manhattan,
in respect of any action, suit or proceeding against it arising out of or in connection with this Indenture, the Debt Securities, the Capital Securities Guarantee or the Declaration and irrevocably and unconditionally waived, to the fullest extent
permitted by law, any objection to the laying of venue in any such court or that any such action, suit or proceeding has been brought in an inconvenient forum and (3) irrevocably appointed an agent in The City of New York for service of process
in any action, suit or proceeding referred to in clause (2) above) and such corporation expressly assumes all of the obligations of the Company under the Debt Securities, this Indenture, the Capital Securities Guarantee and the Declaration and
(ii) after giving effect to any such consolidation, merger, sale, conveyance, transfer or other disposition, no Default or Event of Default shall have occurred and be continuing.
SECTION 11.02.
Successor Entity to be Substituted
.
In case of any such consolidation, merger, sale, conveyance, transfer or other disposition contemplated in Section 11.01 and upon the
assumption by the successor entity, by supplemental indenture, executed and delivered to the Trustee and reasonably 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 Debt 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 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 Debt Securities. Such successor entity thereupon may cause to be
signed, and may issue either in its own name or in the name of the Company, any or all of the Debt Securities 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 Debt Securities
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 Debt Securities which such successor entity thereafter shall cause to be signed and
delivered to the Trustee or the Authenticating Agent for that purpose. All the Debt Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debt Securities theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Debt Securities had been issued at the date of the execution hereof.
-54-
SECTION 11.03.
Opinion of Counsel to be Given to Trustee
.
The Trustee, subject to the provisions of Sections 6.01 and 6.02, shall receive, in addition to the Opinion of Counsel required by
Section 9.05, 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 12.01.
Discharge of Indenture
.
When (a) the Company shall deliver to the Trustee for cancellation all Debt Securities theretofore authenticated (other than any Debt
Securities which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.06) and not theretofore canceled, or (b) all the Debt Securities 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 one year or are to be called for redemption within one 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 Debt Securities (other than any Debt Securities which shall have
been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.06) 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 Debt Securities (1) theretofore repaid to the Company
in accordance with the provisions of Section 12.04, 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 2.05, 2.06, 3.01, 3.02, 3.04, 6.06, 6.09 and 12.04 hereof, which shall
survive until such Debt Securities shall mature or are redeemed, as the case may be, and are paid in full. Thereafter, Sections 6.06, 6.09 and 12.04 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, however, hereby agreeing to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with
this Indenture or the Debt Securities.
SECTION 12.02.
Deposited Moneys to be Held in Trust by Trustee
.
Subject to the provisions of Section 12.04, all moneys deposited with the Trustee pursuant to Section 12.01 shall be held in trust
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 Debt Securities 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.
-55-
SECTION 12.03.
Paying Agent to Repay Moneys Held
.
Upon the satisfaction and discharge of this Indenture, all moneys then held by any Paying Agent of the Debt Securities (other than the
Trustee) shall, upon demand of the Company, be repaid to the Company or paid to the Trustee, and thereupon such Paying Agent shall be released from all further liability with respect to such moneys.
SECTION 12.04.
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 Debt
Securities and not applied but remaining unclaimed by the holders of Debt Securities for two years after the date upon which the principal of, and premium, if any, or interest on such Debt Securities, as the case may be, shall have become due and
payable, shall be repaid to the Company by the Trustee or such Paying Agent on written demand; and the holder of any of the Debt Securities 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 13.01.
Indenture and Debt Securities Solely Corporate Obligations
.
No recourse for the payment of the principal of or premium, if any, or interest on any Debt 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 Company in this Indenture or in any supplemental indenture, or in any such Debt Security, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder, officer, director, employee or agent, as such, past, present or future, of the Company or of any predecessor or successor corporation of the Company, either directly or through
the Company or any successor corporation 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 Debt Securities.
-56-
ARTICLE XIV
MISCELLANEOUS PROVISIONS
SECTION 14.01.
Successors
.
All the covenants, stipulations, promises and agreements of the Company contained in this Indenture shall bind its successors and assigns
whether so expressed or not.
SECTION 14.02.
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 14.03.
Surrender of Company Powers
.
The Company by instrument in writing executed by authority of 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 14.04.
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 Trustee or by the
Securityholders on the Company may be given or served in writing, duly signed by the party giving such notice, and shall be delivered by facsimile ( which telecopy shall be followed by notice delivered or mailed by first class mail) or mailed by
first class mail to the Company at:
Great Western Bancorporation, Inc.
9290 West Dodge Road, Suite 203
Omaha, Nebraska 68114
Attention:
James R. Clark
Any notice, direction, request 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 LaSalle Bank National Association at:
135 S. LaSalle Street, Suite 1511
Chicago, Illinois 60603
Attn: CDO
Trust Services Group – GWB Capital Trust VI
-57-
SECTION 14.05.
Governing Law
.
This Indenture and the Debt Securities shall each be governed by, and construed in accordance with, the laws of the State of New York, without
regard to conflict of laws principles of said State other than Section 5-1401 of the New York General Obligations Law.
SECTION
14.06.
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 (except that no such Opinion of Counsel is required to be furnished to the Trustee
in connection with the authentication and issuance of Debt Securities issued on the date of this Indenture).
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 (except certificates delivered pursuant to Section 3.05) shall include (a) a statement that
the person making such certificate or opinion has read such covenant or condition and the definitions relating thereto; (b) 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; (c) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her 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 such person, such condition or covenant has been complied with.
SECTION 14.07.
Non-Business Days
.
Notwithstanding anything to the contrary contained herein, if any Interest Payment Date, other than on the Maturity Date, any Redemption Date
or the Special Redemption Date, falls on a day that is not a Business Day, then any interest payable will be paid on, and such Interest Payment Date will be moved to, the next succeeding Business Day, and additional interest will accrue for each day
that such payment is delayed as a result thereof. If the Maturity Date, any Redemption Date or the Special Redemption Date falls on a day that is not a Business Day, then the principal, premium, if any, and/or interest payable on such date will be
paid on the next succeeding Business Day, and no additional interest will accrue in respect of such payment made on such next succeeding Business Day.
SECTION 14.08.
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.
-58-
SECTION 14.09.
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.
Severability
.
In case any one or more of the provisions contained in this Indenture or in the Debt 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 such Debt Securities, but this Indenture and such Debt Securities shall be construed as if such
invalid or illegal or unenforceable provision had never been contained herein or therein.
SECTION 14.11.
Assignment
.
Subject to Article XI, the Company will have the right at all times to assign any of its rights or obligations under this Indenture and the
Debt Securities to a direct or indirect wholly owned Subsidiary of the Company;
provided
,
however
, 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 thereto.
SECTION 14.12.
Acknowledgment of Rights
.
The Company acknowledges that, with respect to any Debt Securities 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 Debt Securities held as the assets of the Trust after the holders of a majority in Liquidation Amount of the Capital Securities of the Trust have so
directed in writing 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 Institutional 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 Debt Securities on the date such interest (or premium, if any) or principal is otherwise due and payable (or in the case of redemption, on the redemption date), the
Company acknowledges 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
Debt 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 Debt Securities.
-59-
ARTICLE XV
SUBORDINATION OF DEBT SECURITIES
SECTION 15.01.
Agreement to Subordinate
.
The Company covenants and agrees, and each holder of Debt Securities issued hereunder and under any supplemental indenture (the
“Additional Provisions”) by such Security holder’s acceptance thereof likewise covenants and agrees, that all Debt Securities shall be issued subject to the provisions of this Article XV; and each holder of a Debt Security, 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 payments due on all Debt Securities issued hereunder and under any Additional Provisions 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.
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 Company in the payment of principal, premium, interest or any other payment due
on any Senior Indebtedness of the Company following any applicable 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 and such Senior Indebtedness has not been paid in full, then, in either case, no payment shall be made by the Company with respect to the payments due on the Debt Securities.
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 15.02, such payment shall, subject to Section 15.06, 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 15.03.
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 the Debt Securities; and 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, to 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 of the Company (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.
-60-
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 of the Company 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 of the Company 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 Debt Securities to the payment of all Senior Indebtedness of the Company, that may at the time be outstanding,
provided
, that (a) such Senior Indebtedness is assumed by the new corporation, if any,
resulting from any such reorganization or readjustment, and (b) 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, transfer or other disposition of its property as an entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided for in 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 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 15.02 or in this Section 15.03 shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 6.06 of this Indenture.
-61-
SECTION 15.04.
Subrogation
.
Subject to the payment in full of all Senior Indebtedness of the Company, 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 all payments due on the Debt 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 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 Debt Securities 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 Debt 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, any Additional Provisions or in the Debt Securities is intended to or
shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness of the Company, and the holders of the Debt Securities, the obligation of the Company, which is absolute and unconditional, to pay to the holders of
the Debt Securities all payments on the Debt 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 Debt Securities and creditors of
the Company, other than the holders of Senior Indebtedness of the Company, nor shall anything herein or therein prevent the Trustee or the holder of any Debt 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 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.
-62-
SECTION 15.05.
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 15.06.
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 moneys to or by the Trustee in respect of the Debt Securities pursuant to the provisions of this Article XV. Notwithstanding the provisions of this or any other provision of this
Indenture or any Additional Provisions, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of moneys to or by the Trustee in respect of the Debt Securities 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 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 on any Debt Security), 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 two 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 or herself to be a holder of Senior Indebtedness of the Company (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 15.07.
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 or any Additional Provisions shall deprive the Trustee of any of its rights as
such holder.
-63-
With respect to the holders of Senior Indebtedness of the Company, 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 or
any Additional Provisions against the Trustee. The Trustee shall not owe or 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 6.06.
SECTION 15.08.
Subordination May Not Be Impaired
.
No right of any present or future holder of any Senior Indebtedness of the Company 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 of the Company 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 Debt Securities to the holders of such Senior Indebtedness, do any one or more of the following:
(a) 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; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (c) release any Person liable in any manner
for the collection of such Senior Indebtedness; and (d) exercise or refrain from exercising any rights against the Company, and any other Person.
LaSalle Bank National Association, in its capacity as Trustee, hereby accepts the trusts in this Indenture declared and provided, upon the
terms and conditions herein above set forth.
-64-
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.
|
|
|
|
|
Great Western Bancorporation, Inc.
|
|
|
|
|
By:
|
|
/s/ Daniel A. Hamann
|
|
Name:
|
|
Daniel A. Hamann
|
|
Title:
|
|
President
|
|
|
|
LaSalle Bank National Association, as Trustee
|
|
|
|
|
By:
|
|
/s/ Suzanne Smith
|
|
Name:
|
|
Suzanne Smith
|
|
Title:
|
|
Vice President
|
EXHIBIT A
FORM OF JUNIOR SUBORDINATED DEBT SECURITY
DUE 2036
[
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 LAWS. 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. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY
(A) TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON THE HOLDER 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, (C) TO A “NON U.S. PERSON” IN AN “OFFSHORE TRANSACTION” PURSUANT TO REGULATION S
UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN “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 (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES
(D) OR (E) 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 AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES, REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT.
A-1
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 OTIIER 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 THIS SECURITY 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 THIS SECURITY 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 CONNECTION
WITH ANY TRANSFER, THE HOLDER OF THIS SECURITY WILL DELIVER TO THE COMPANY AND TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000
IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A PRINCIPAL AMOUNT OF LESS THAN $100,000 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
THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.
THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL
DEPOSIT INSURANCE CORPORATION. THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND THE CLAIMS OF GENERAL AND SECURED CREDITORS OF THE COMPANY, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE COMPANY OR ANY OF ITS SUBSIDIARIES AND IS NOT
SECURED.
A-2
Form of Junior Subordinated Debt Security due 2036
of
Great Western Bancorporation,
Inc.
Great Western Bancorporation, Inc., a bank holding company incorporated in Iowa (the “Company”), for value received
promises to pay to LaSalle Bank National Association, not in its individual capacity but solely as Institutional Trustee for GWB Capital Trust VI, a Delaware statutory trust (the “Holder”), or registered assigns, the principal sum of
Thirty Million Nine Hundred Twenty Eight Thousand Dollars on March 15, 2036 and to pay interest on said principal sum from March 10, 2006, 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 15, June 15, September 15 and December 15 of each year commencing June 15, 2006, at a
variable per annum rate equal to LIBOR (as defined in the Indenture) plus 1.48% (the “Interest Rate”) (
provided
,
however
, that the Interest Rate for any Interest Payment Period may not exceed the highest rate permitted by New
York law, as the same may be modified by United States law of general applicability) until the principal hereof shall have become due and payable, and on any overdue principal and (without duplication and to the extent that payment of such interest
is enforceable under applicable law) on any overdue installment of interest at an annual rate equal to the Interest Rate in effect for each such Extension Period compounded quarterly. The amount of interest payable on any Interest Payment Date shall
be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period. Notwithstanding anything to the contrary contained herein, if any Interest Payment Date, other than on the Maturity Date, any
Redemption Date or the Special Redemption Date, falls on a day that is not a Business Day, then any interest payable will be paid on, and such Interest Payment Date will be moved to, the next succeeding Business Day, and additional interest will
accrue for each day that such payment is delayed as a result thereof. If the Maturity Date, any Redemption Date or the Special Redemption Date falls on a day that is not a Business Day, then the principal, premium, if any, and/or interest payable on
such date will be paid on the next succeeding Business Day, and no additional interest will accrue in respect of such payment made on such next succeeding Business Day. 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 Debt 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, except that interest and any Deferred Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid. Any such interest installment not punctually paid or duly provided for
shall forthwith cease to be payable to the registered holders on such regular record date and may be paid to the Person in whose name this Debt Security (or one or more Predecessor Debt Securities) is registered at the close of business on a special
record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered holders of the Debt Securities not less than 10 days prior to such special record date, all as more fully provided in
the Indenture. The principal of and interest on this Debt Security 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
A-3
may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debt Security Register or by wire transfer or immediately available funds
to an account appropriately designated by the holder hereof. Notwithstanding the foregoing, so long as the holder of this Debt Security is the Institutional Trustee, payment of the principal of and premium, if any, and interest on this Debt Security
shall be made in immediately available funds when due at such place and to such account as may be designated by the Institutional Trustee. All payments in respect of this Debt Security shall be payable 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.
Upon submission of Notice (as defined in the
Indenture) and so long as it is acting in good faith, and so long as no Event of Default pursuant to paragraphs (c), (e) or (f) of of the Indenture 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 Debt Securities by extending the interest distribution period on the Debt Securities at any time and from time to time during the term of the Debt Securities, for up to 20
consecutive quarterly periods (each such extended interest distribution period, an “Extension Period”), during which Extension Period no interest shall be due and payable (except any Additional Interest that may be due and payable). During
any Extension Period, interest will continue to accrue on the Debt Securities, and interest on such accrued interest (such accrued interest and interest thereon referred to herein as “Deferred Interest”) will accrue at an annual rate equal
to the Interest Rate applicable during such Extension Period, compounded quarterly from the date such Deferred Interest would have been payable were it not for the Extension Period, to the extent permitted by law. 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 Deferred Interest then accrued and unpaid on the Debt Securities;
provided
,
however
, that no Extension Period may extend beyond
the Maturity Date; and
provided
,
further
, however, during any such Extension Period, the Company may not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with
respect to, any of the Company’s capital stock or (ii) make any payment of principal of or premium, if any, or interest on or repay, repurchase or redeem any debt securities of the Company that rank
pari passu
in all respects with
or junior in interest to the Debt Securities or (iii) make any payment under any guarantees of the Company that rank in all respects
pari passu
with or junior in respect to the Capital Securities Guarantee (other than
(a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company (A) 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, (B) in connection with a dividend reinvestment or stockholder stock purchase plan or (C) 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, reclassification, combination 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 stockholder’s rights plan, or the issuance of rights, stock or other property under any stockholder’s rights plan, or the redemption or
A-4
repurchase of rights pursuant thereto, or (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). Prior to the termination of any Extension Period, the Company may further extend such Extension
Period;
provided
, that no Extension Period (including all previous and further consecutive extensions that are part of such Extension Period) shall exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the
termination of any Extension Period and upon the payment of all Deferred Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Deferred Interest shall be due and payable during an Extension
Period, except at the end thereof, but Deferred Interest shall accrue upon each installment of interest that would otherwise have been due and payable during such Extension Period until such installment is paid. The Company must give the Trustee
notice of its election to begin or extend an Extension Period (“Notice”) at least one Business Day prior to the regular record date applicable to the next succeeding Interest Payment Date. The Notice shall describe why the Company has
elected to begin an Extension Period. The Notice shall acknowledge and affirm the Company’s understanding that it is prohibited from issuing dividends and other distributions during the Extension Period. Upon receipt of the Notice, an Initial
Purchaser shall have the right, at its sole discretion, to disclose the name of the Company, the fact that the Company has elected to begin an Extension Period and other information that such Initial Purchaser, at its sole discretion, deems relevant
to the Company’s election to begin an Extension Period. The Trustee shall give notice of the Company’s election to begin a new Extension Period to the Securityholders.
The indebtedness evidenced by this Debt Security 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 Debt Security is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debt Security, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the Trustee on such holder’s behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee such
holder’s attorney-in-fact for any and all such purposes. Each holder hereof, by such holder’s 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.
The Company waives diligence, presentment, demand for payment, notice of nonpayment, notice of protest, and all other demands and notices.
This Debt Security shall not be entitled to any benefit under the Indenture hereinafter referred to and shall not 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.
The
provisions of this Debt Security are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place.
A-5
IN WITNESS WHEREOF, the Company has duly executed this certificate.
|
|
|
|
|
Great Western Bancorporation, Inc.
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
Dated: , 2006
CERTIFICATE OF AUTHENTICATION
This represents Debt Securities referred to in the within-mentioned Indenture.
|
|
|
|
|
|
|
|
|
LaSalle Bank National Association, not in its individual capacity but solely as Trustee
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
Authorized Signatory
|
Dated: , 2006
A-6
[FORM OF REVERSE OF SECURITY]
This Debt Security is one of a duly authorized series of Debt Securities of the Company, all issued or to be issued pursuant to an Indenture
(the “Indenture”), dated as of March 10, 2006, duly executed and delivered between the Company and LaSalle Bank National Association, as Trustee (the “Trustee”), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debt Securities (referred to herein as the “Debt Securities”)
of which this Debt Security is a part. The summary of the terms of this Debt Security contained herein does not purport to be complete and is qualified by reference to the Indenture.
Upon the occurrence and continuation of a Tax Event, an Investment Company Event or a Capital Treatment Event (each a “Special
Event”), this Debt Security may become due and payable, in whole or in part, at any time, within 90 days following the occurrence of such Tax Event, Investment Company Event or Capital Treatment Event (the “Special Redemption Date”),
as the case may be, at the Special Redemption Price.
The Company shall also have the right to redeem this Debt Security at the option of
the Company, in whole or in part, on any March 15, June 15, September 15 or December 15 on or after March 15, 2011 (a “Redemption Date”), at the Redemption Price.
Any redemption pursuant to either of the preceding two paragraphs will be made, subject to the receipt by the Company of prior approval from
any regulatory authority with jurisdiction over the Company if such approval is then required under applicable capital guidelines or policies of such regulatory authority, upon not less than 30 days’ nor more than 60 days’ notice. If the
Debt Securities are only partially redeemed by the Company, the Debt Securities will be redeemed pro rata or by lot or by any other method utilized by the Trustee.
“Redemption Price” means 100% of the principal amount of the Debt Securities being redeemed plus accrued and unpaid interest on such
Debt Securities to the Redemption Date.
“Special Redemption Price” means, with respect to the redemption of any Debt Security
following a Tax Event, an amount in cash equal to 100% of the principal amount of the Debt Securities; and with respect to the redemption pursuant to any other Special Event, an amount in cash equal to 103.525% of the principal amount of Debt
Securities to be redeemed prior to March 15, 2007 and thereafter equal to the percentage of the principal amount of the Debt Securities that is specified below for the Special Redemption Date plus, in each case, unpaid interest accrued thereon
to the Special Redemption Date:
|
|
|
|
|
|
|
Special Redemption During the 12-Month Period Beginning March 15
|
|
Percentage of
Principal Amount
|
|
|
|
|
|
2007
|
|
|
103.140
|
%
|
|
2008
|
|
|
102.355
|
%
|
|
2009
|
|
|
101.570
|
%
|
|
2010
|
|
|
100.785
|
%
|
|
2011 and thereafter
|
|
|
100.000
|
%
|
A-7
In the event of redemption of this Debt Security in part only, a new Debt Security or Debt
Securities for the unredeemed portion hereof will be issued in the name of the holder hereof upon the cancellation hereof.
In certain
cases where an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debt Securities may be declared, and, in certain cases, shall
ipso facto
become, due and payable, and upon such
declaration of acceleration shall become due and payable, in each case, in the manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debt Securities at the time outstanding affected thereby, as specified 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 any supplemental indenture or of modifying in any manner the rights of the holders of the Debt Securities;
provided
,
however
, that no such supplemental indenture shall, among other things, without
the consent of the holders of each Debt Security then outstanding and affected thereby (i) change the Maturity Date of any Debt Security, or reduce the principal amount thereof or any premium thereon, or reduce the rate (or manner of
calculation of the rate) or extend the time of payment of interest thereon, or reduce (other than as a result of the maturity or earlier redemption of any such Debt Security in accordance with the terms of the Indenture and such Debt Security) or
increase the aggregate principal amount of Debt Securities then outstanding, or change any of the redemption provisions, or make the principal thereof or any interest or premium thereon payable in any coin or currency other than United States
Dollars, or impair or affect the right of any holder of Debt Securities to institute suit for the payment thereof, or (ii) reduce the aforesaid percentage of Debt 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 Debt Securities at the time outstanding, on behalf of all of the holders of the Debt 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) a default in payments due in respect of any of the Debt Securities, (b) in respect of covenants
or provisions of the Indenture which cannot be modified or amended without the consent of the holder of each Debt Security affected, or (c) in respect of the covenants of the Company relating to its ownership of Common Securities of the Trust.
Any such consent or waiver by the registered holder of this Debt 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 Debt Security and of any Debt
Security issued in exchange here for 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 Debt Security.
A-8
No reference herein to the Indenture and no provision of this Debt Security or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay all payments due on this Debt Security at the time and place and at the rate and in the money herein prescribed.
As provided in the Indenture and subject to certain limitations herein and therein set forth, this Debt Security is transferable by the
registered holder hereof on the Debt Security Register of the Company, upon surrender of this Debt Security for registration of transfer at the office or agency of the Trustee in Chicago, Illinois accompanied by a written instrument or instruments
of transfer in form satisfactory to the Company or the Trustee duly executed by the registered holder hereof or such holder’s attorney duly authorized in writing, and thereupon one or more new Debt 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 Company 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 Debt Security, the
Company, the Trustee, any Authenticating Agent, any Paying Agent, any transfer agent and the Debt Security registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debt Security shall be overdue and
notwithstanding any notice of ownership or writing hereon) for the purpose of receiving payment of the principal of and premium, if any, and interest on this Debt Security 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 Debt Security registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the interest on this Debt 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, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, 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.
The Debt Securities are issuable only in registered certificated form without coupons. As provided in the Indenture and subject to
certain limitations herein and therein set forth, Debt Securities are exchangeable for a like aggregate principal amount of Debt Securities of a different authorized denomination, as requested by the holder surrendering the same.
All terms used in this Debt Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE DEBT SECURITIES, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF
(OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW).
A-9
Exhibit 4.7
AMENDED AND RESTATED DECLARATION
OF TRUST
GWB CAPITAL TRUST VI
Dated as of March 10, 2006
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
ARTICLE I
|
|
|
INTERPRETATION AND DEFINITIONS
|
|
|
|
|
|
|
SECTION 1.1.
|
|
Definitions
|
|
|
1
|
|
|
|
|
ARTICLE II
|
|
|
ORGANIZATION
|
|
|
|
|
|
|
SECTION 2.1.
|
|
Name
|
|
|
9
|
|
|
|
|
|
|
SECTION 2.2.
|
|
Office
|
|
|
9
|
|
|
|
|
|
|
SECTION 2.3.
|
|
Purpose
|
|
|
9
|
|
|
|
|
|
|
SECTION 2.4.
|
|
Authority
|
|
|
9
|
|
|
|
|
|
|
SECTION 2.5.
|
|
Title to Property of the Trust
|
|
|
9
|
|
|
|
|
|
|
SECTION 2.6.
|
|
Powers and Duties of the Trustees and the Administrators
|
|
|
10
|
|
|
|
|
|
|
SECTION 2.7.
|
|
Prohibition of Actions by the Trust and the Trustees
|
|
|
14
|
|
|
|
|
|
|
SECTION 2.8.
|
|
Powers and Duties of the Institutional Trustee
|
|
|
15
|
|
|
|
|
|
|
SECTION 2.9.
|
|
Certain Duties and Responsibilities of the Trustees and the Administrators
|
|
|
17
|
|
|
|
|
|
|
SECTION 2.10.
|
|
Certain Rights of Institutional Trustee
|
|
|
18
|
|
|
|
|
|
|
SECTION 2.11.
|
|
Delaware Trustee
|
|
|
21
|
|
|
|
|
|
|
SECTION 2.12.
|
|
Execution of Documents
|
|
|
21
|
|
|
|
|
|
|
SECTION 2.13.
|
|
Not Responsible for Recitals or Issuance of Securities
|
|
|
21
|
|
|
|
|
|
|
SECTION 2.14.
|
|
Duration of Trust
|
|
|
21
|
|
|
|
|
|
|
SECTION 2.15.
|
|
Mergers
|
|
|
21
|
|
|
|
|
ARTICLE III
|
|
|
SPONSOR
|
|
|
|
|
|
|
SECTION 3.1.
|
|
Sponsor’s Purchase of Common Securities
|
|
|
23
|
|
|
|
|
|
|
SECTION 3.2.
|
|
Responsibilities of the Sponsor
|
|
|
23
|
|
i
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
ARTICLE IV
|
|
|
TRUSTEES AND ADMINISTRATORS
|
|
|
|
|
|
|
SECTION 4.1.
|
|
Number of Trustees
|
|
|
24
|
|
|
|
|
|
|
SECTION 4.2.
|
|
Delaware Trustee
|
|
|
24
|
|
|
|
|
|
|
SECTION 4.3.
|
|
Institutional Trustee; Eligibility
|
|
|
24
|
|
|
|
|
|
|
SECTION 4.4.
|
|
Certain Qualifications of the Delaware Trustee Generally
|
|
|
25
|
|
|
|
|
|
|
SECTION 4.5.
|
|
Administrators
|
|
|
25
|
|
|
|
|
|
|
SECTION 4.6.
|
|
Initial Delaware Trustee
|
|
|
25
|
|
|
|
|
|
|
SECTION 4.7.
|
|
Appointment, Removal and Resignation of the Trustees and the Administrators
|
|
|
25
|
|
|
|
|
|
|
SECTION 4.8.
|
|
Vacancies Among Trustees
|
|
|
27
|
|
|
|
|
|
|
SECTION 4.9.
|
|
Effect of Vacancies
|
|
|
27
|
|
|
|
|
|
|
SECTION 4.10.
|
|
Meetings of the Trustees and the Administrators
|
|
|
28
|
|
|
|
|
|
|
SECTION 4.11.
|
|
Delegation of Power
|
|
|
28
|
|
|
|
|
|
|
SECTION 4.12.
|
|
Merger, Conversion, Consolidation or Succession to Business
|
|
|
28
|
|
|
|
|
ARTICLE V
|
|
|
DISTRIBUTIONS
|
|
|
|
|
|
|
SECTION 5.1.
|
|
Distributions
|
|
|
29
|
|
|
|
|
ARTICLE VI
|
|
|
ISSUANCE OF SECURITIES
|
|
|
|
|
|
|
SECTION 6.1.
|
|
General Provisions Regarding Securities
|
|
|
29
|
|
|
|
|
|
|
SECTION 6.2.
|
|
Paying Agent, Transfer Agent, Calculation Agent and Registrar
|
|
|
30
|
|
|
|
|
|
|
SECTION 6.3.
|
|
Form and Dating
|
|
|
31
|
|
|
|
|
|
|
SECTION 6.4.
|
|
Book-Entry Capital Securities
|
|
|
32
|
|
|
|
|
|
|
SECTION 6.5.
|
|
Mutilated, Destroyed, Lost or Stolen Certificates
|
|
|
33
|
|
ii
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
SECTION 6.6.
|
|
Temporary Securities
|
|
|
34
|
|
|
|
|
|
|
SECTION 6.7.
|
|
Cancellation
|
|
|
34
|
|
|
|
|
|
|
SECTION 6.8.
|
|
Rights of Holders; Waivers of Past Defaults
|
|
|
34
|
|
|
|
|
ARTICLE VII
|
|
|
DISSOLUTION AND TERMINATION OF TRUST
|
|
|
|
|
|
|
SECTION 7.1.
|
|
Dissolution and Termination of Trust
|
|
|
36
|
|
|
|
|
ARTICLE VIII
|
|
|
TRANSFER OF INTERESTS
|
|
|
|
|
|
|
SECTION 8.1.
|
|
General
|
|
|
37
|
|
|
|
|
|
|
SECTION 8.2.
|
|
Transfer Procedures and Restrictions
|
|
|
38
|
|
|
|
|
|
|
SECTION 8.3.
|
|
Deemed Security Holders
|
|
|
41
|
|
|
|
|
ARTICLE IX
|
|
|
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
|
|
|
|
|
|
|
SECTION 9.1.
|
|
Liability
|
|
|
42
|
|
|
|
|
|
|
SECTION 9.2.
|
|
Exculpation
|
|
|
42
|
|
|
|
|
|
|
SECTION 9.3.
|
|
Fiduciary Duty
|
|
|
43
|
|
|
|
|
|
|
SECTION 9.4.
|
|
Indemnification
|
|
|
43
|
|
|
|
|
|
|
SECTION 9.5.
|
|
Outside Businesses
|
|
|
46
|
|
|
|
|
|
|
SECTION 9.6.
|
|
Compensation; Fee
|
|
|
47
|
|
|
|
|
ARTICLE X
|
|
|
ACCOUNTING
|
|
|
|
|
|
|
SECTION 10.1.
|
|
Fiscal Year
|
|
|
47
|
|
|
|
|
|
|
SECTION 10.2.
|
|
Certain Accounting Matters
|
|
|
47
|
|
|
|
|
|
|
SECTION 10.3.
|
|
Banking
|
|
|
48
|
|
|
|
|
|
|
SECTION 10.4.
|
|
Withholding
|
|
|
48
|
|
iii
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
ARTICLE XI
|
|
|
AMENDMENTS AND MEETINGS
|
|
|
|
|
|
|
SECTION 11.1.
|
|
Amendments
|
|
|
49
|
|
|
|
|
|
|
SECTION 11.2.
|
|
Meetings of the Holders of the Securities; Action by Written Consent
|
|
|
51
|
|
|
|
|
ARTICLE XII
|
|
|
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE
|
|
|
|
|
|
|
SECTION 12.1.
|
|
Representations and Warranties of Institutional Trustee
|
|
|
52
|
|
|
|
|
|
|
SECTION 12.2.
|
|
Representations and Warranties of Delaware Trustee
|
|
|
53
|
|
|
|
|
ARTICLE XIII
|
|
|
MISCELLANEOUS
|
|
|
|
|
|
|
SECTION 13.1.
|
|
Notices
|
|
|
54
|
|
|
|
|
|
|
SECTION 13.2.
|
|
Governing Law
|
|
|
55
|
|
|
|
|
|
|
SECTION 13.3.
|
|
Submission to Jurisdiction
|
|
|
55
|
|
|
|
|
|
|
SECTION 13.4.
|
|
Intention of the Parties
|
|
|
56
|
|
|
|
|
|
|
SECTION 13.5.
|
|
Headings
|
|
|
56
|
|
|
|
|
|
|
SECTION 13.6.
|
|
Successors and Assigns
|
|
|
56
|
|
|
|
|
|
|
SECTION 13.7.
|
|
Partial Enforceability
|
|
|
56
|
|
|
|
|
|
|
SECTION 13.8.
|
|
Counterparts
|
|
|
56
|
|
iv
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
ANNEXES AND EXHIBITS
|
|
|
|
|
|
ANNEX I
|
|
Terms of TP Securities and Common Securities
|
|
|
|
|
|
|
|
EXHIBIT A-1
|
|
Form of Capital Security Certificate
|
|
|
|
|
|
|
|
EXHIBIT A-2
|
|
Form of Common Security Certificate
|
|
|
v
AMENDED AND RESTATED DECLARATION OF TRUST
OF
GWB Capital Trust VI
March 10, 2006
AMENDED AND
RESTATED DECLARATION OF TRUST (this “Declaration”), dated and effective as of March 10, 2006, by the Trustees (as defined herein), the Administrators (as defined herein), the Sponsor (as defined herein) and the holders from time to
time of undivided beneficial interests in the assets of the Trust (as defined herein) to be issued pursuant to this Declaration.
WHEREAS,
the Delaware Trustee and the Sponsor established GWB Capital Trust VI (the “Trust”), a statutory trust under the Statutory Trust Act (as defined herein), pursuant to a Declaration of Trust, dated as of March 8, 2006 (the
“Original Declaration”), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on March 8, 2006, 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 the Debentures (as defined herein) of the Debenture Issuer (as defined herein) in connection with the issuance of the Capital Securities (as defined herein);
WHEREAS, as of the date hereof, no interests in the assets of the Trust have been issued; and
WHEREAS, all of the Trustees, 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, and 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 or, if not defined in this Section 1.1 or elsewhere herein, in the Indenture;
(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;
(e) a term defined in the Trust Indenture Act
(as defined herein) has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
“Additional Interest” has the meaning set forth in Section 3.06 of the Indenture.
“Administrative Action” has the meaning set forth in paragraph 4(a) of Annex I.
“Administrators” means each of Daniel A. Hamann and James R. Clark, solely in such Person’s capacity as Administrator of the
Trust 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.
“Applicable Depositary Procedures” means, with respect to any transfer or transaction involving a Book-Entry Capital Security. the
rules and procedures of the Depositary for such Book-Entry Capital Security, in each case to the extent applicable to such transaction and as in effect from time to time.
“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 enters 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 appoints a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of such Person or for any substantial part of its property, or
orders the winding-up or liquidation of its affairs, and such decree, appointment or order remains unstayed and in effect for a period of 90 consecutive days; or
(b) such Person commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect,
consents to the entry of an order for relief in an involuntary case under any such law, or consents to the appointment of or
2
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 makes any general
assignment for the benefit of creditors, or fails generally to pay its debts as they become due.
“Book-Entry Capital Security”
means a Capital Security, the ownership and transfers of which shall be made through book entries by a Depositary.
“Business
Day” means any day other than Saturday, Sunday or any other day on which banking institutions in Wilmington, Delaware or New York City or the city of the Corporate Trust Office are permitted or required by any applicable law or executive order
to close.
“Calculation Agent” has the meaning set forth in Section 1.01 of the Indenture.
“Capital Securities” has the meaning set forth in Section 6.1(a).
“Capital Securities Purchase Agreement” means the Capital Securities Purchase Agreement dated as of March 8, 2006 among the
Trust, the Sponsor and U.S. Bank National Association.
“Capital Security Certificate” means a definitive Certificate registered
in the name of the Holder 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.
“Certificate of Trust” means the certificate of trust filed with the Secretary of State of the State of Delaware
with respect to the Trust, as amended and restated from time to time.
“Closing Date” means the date of execution and delivery
of this Declaration.
“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.
“Common Securities” has the meaning set forth in Section 6.1(a).
“Common Security Certificate” means a definitive Certificate registered in the name of the Holder 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 shall at all times be located in the United States and at the date of
3
execution of this Declaration is located at LaSalle Bank National Association, 135 S. LaSalle Street, Suite 1511, Chicago, Illinois 60603, Attn: CDO Trust Services Group – GWB Capital Trust
VI.
“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) the Trust’s Affiliates; and (b) any Holder of Securities.
“Debenture Issuer”
means Great Western Bancorporation, Inc., a bank holding company incorporated in Iowa, in its capacity as issuer of the Debentures under the Indenture.
“Debenture Trustee” means LaSalle Bank National Association, 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 Junior
Subordinated Debt Securities due March 15, 2036 to be issued by the Debenture Issuer under the Indenture.
“Deferred
Interest” means any interest on the Debentures that would have been overdue and unpaid for more than one Distribution Payment Date but for the imposition of an Extension Period, and the interest that shall accrue (to the extent that the payment
of such interest is legally enforceable) on such interest at the Coupon Rate applicable during such Extension Period, compounded quarterly from the date on which such Deferred Interest would otherwise have been due and payable until paid or made
available for payment.
“Definitive Capital Securities” means any Capital Securities in definitive form issued by the Trust.
“Depositary” means an organization registered as a clearing agency under the Exchange Act that is designated as Depositary by
the Sponsor or any successor thereto. DTC will be the initial Depositary.
“Depositary Participant” means a broker, dealer.
bank, other financial institution or other Person for whom from time to time the Depositary effects book-entry transfers and pledges of securities deposited with the Depositary.
“Delaware Trustee” has the meaning set forth in Section 4.2.
“Direct Action” has the meaning set forth in Section 2.8(e).
“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(e) of Annex I.
“DTC” means The Depository Trust Company or any successor thereto.
4
“Distribution Payment Period” means the period from and including a Distribution
Payment Date, or in the case of the first Distribution Payment Period, the original date of issuance of the Securities, to, but excluding, the next succeeding Distribution Payment Date or, in the case of the last Distribution Payment Period, the
Redemption Date, Special Redemption Date or Maturity Date (each as defined in the Indenture), as the case may be, for the related Debentures.
“Event of Default” means the occurrence of an Indenture Event of Default.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation.
“Extension Period” has the meaning set forth in paragraph 2(e) of Annex I.
“Fiduciary Indemnified Person” shall mean each of the Institutional Trustee (including in its individual capacity), the Delaware
Trustee (including in its individual capacity), any Affiliate of the Institutional Trustee or the Delaware Trustee, and any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the
Institutional Trustee or the Delaware Trustee.
“Fiscal Year” has the meaning set forth in Section 10.1.
“Global Capital Security” means a Capital Securities Certificate evidencing ownership of Book-Entry Capital Securities.
“Guarantee” means the Guarantee Agreement, dated as of the Closing Date, of the Sponsor (the “Guarantor”) in respect of
the Capital Securities.
“Holder” means a Person in whose name a Certificate representing a Security is registered on the
register maintained by or on behalf of the Registrar, 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.
“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 4.3.
“Investment Company” means an investment company as defined in the Investment
Company Act.
5
“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.
“Legal Action” has the meaning set forth in Section 2.8(e).
“LIBOR” means the London Interbank Offered Rate for U.S. Dollar deposits in Europe as determined by the Calculation Agent
according to paragraph 2(b) of Annex I.
“LIBOR Banking Day” has the meaning set forth in paragraph 2(b)(1) of
Annex I.
“LIBOR Business Day” has the meaning set forth in paragraph 2(b)(1) of Annex I.
“LIBOR Determination Date” has the meaning set forth in paragraph 2(b)(1) 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 Holders 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.
“Notice” has the meaning set forth in Section 2.11 of the Indenture.
“Officers’ Certificate” 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 provided for in this Declaration shall include:
(a) a statement that each officer signing the Officers’ Certificate has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the
Officers’ Certificate;
(c) a statement that each such officer has made such examination or investigation as, in such officer’s
opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether) in the opinion of each such officer, such condition or covenant has been complied with.
“Owner” means each Person who is the beneficial owner of Book-Entry Capital Securities as reflected in the records of the Depositary
or, if a Depositary Participant is not the beneficial owner, then the beneficial owner as reflected in the records of the Depositary Participant.
6
“Paying Agent” has the meaning set forth in Section 6.2.
“Payment Amount” has the meaning set forth in Section 5.1.
“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.
“PORTAL” has the meaning set forth in Section 2.6(a)(i)(E).
“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.
“QIB” means a “qualified institutional buyer” as defined under Rule 144A.
“Quorum” means a majority of the Administrators or, if there are only two Administrators, both of them.
“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.
“Relevant Trustee” has the meaning set forth in Section 4.7(a).
“Responsible Officer” means, with respect to the Institutional Trustee, any officer within the Corporate Trust Office of the
Institutional Trustee with direct responsibility for the administration of this Declaration, 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 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(c).
“Rule 144A” means Rule 144A under the Securities Act.
“Rule 3a-5” means Rule 3a-5 under the Investment Company Act.
7
“Rule 3a-7” means Rule 3a-7 under the Investment Company Act.
“Securities” means the Common Securities and the Capital Securities, as applicable.
“Securities Act” means the Securities Act of 1933, as amended from time to time, or any successor legislation.
“Sponsor” means Great Western Bancorporation, Inc., a bank holding company that is a U.S. Person incorporated in Iowa, or any
successor entity in a merger, consolidation or amalgamation that is a U.S. Person, in its capacity as sponsor of the Trust.
“Statutory Trust Act” means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code § 3801 et seq., as it may be amended
from time to time, or any successor legislation.
“Successor Delaware Trustee” has the meaning set forth in Section 4.7(e).
“Successor Entity” has the meaning set forth in Section 2.15(b).
“Successor Institutional Trustee” has the meaning set forth in Section 4.7(b).
“Successor Securities” has the meaning set forth in Section 2.15(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 Holders 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.
“Transfer Agent” has the meaning set forth in Section 6.2.
“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended from time-to-time, or any successor legislation.
“Trustee” or “Trustees” means each Person who has signed this Declaration as a trustee, so long as such Person shall
continue in office 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.
“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.
8
“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 continued hereby and shall be known as “GWB Capital Trust VI,” as such name may be modified from time to time by the Administrators following written notice to the Institutional Trustee and 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, which shall be in a state of the United States or the District
of Columbia, is 9290 West Dodge Road, Suite 203, Omaha, Nebraska 68114. On ten Business Days’ written notice to the Institutional Trustee and the Holders of the Securities, the Administrators may designate another principal office, which shall
be in a state of the United States or 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 incidental thereto that are deemed necessary or advisable by the
Institutional Trustee, including, without limitation, those activities specified in this Declaration. 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 a Trustee on behalf of the Trust and in accordance with such Trustee’s 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. 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 2.6(g) and 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.
9
SECTION 2.6.
Powers and Duties of the Trustees and the Administrators
.
(a) The Trustees 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 Administrators and, at the direction of the Administrators, the Trustees, shall have the authority to enter into
all transactions and agreements determined by the Administrators to be appropriate in exercising the authority, express or implied, otherwise granted to the Trustees 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,
duty and authority, and is hereby authorized, to act on behalf of the Trust with respect to the following matters:
(A)
the issuance and sale of the Securities;
(B) to acquire the Debentures with the proceeds of the sale of the Securities;
provided
,
however
, that the Administrators shall cause legal title to the Debentures to be held of record in the name of the Institutional Trustee for the benefit of the Holders;
(C) to cause the Trust to enter into, and to execute, deliver and perform 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, a Debenture subscription agreement between the Trust and the Sponsor and a Common Securities subscription agreement between
the Trust and the Sponsor;
(D) ensuring compliance with the Securities Act and applicable state securities or blue sky
laws;
(E) if and at such time determined solely by the Sponsor at the request of the Holders, assisting in the
designation of the Capital Securities for trading in the Private Offering, Resales and Trading through the Automatic Linkages (“PORTAL”) system if available;
(F) 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, including notice 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;
10
(G) the appointment of a Paying Agent, Transfer Agent and Registrar in
accordance with this Declaration;
(H) execution and delivery of the Securities in accordance with this Declaration;
(I) execution and delivery of closing certificates pursuant to the Placement Agreement and the application for a taxpayer
identification number;
(J) 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;
(K) the taking of any action incidental to the foregoing as the Sponsor or an Administrator 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);
(L) 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;
(M) to duly prepare and file on behalf of the Trust all applicable tax returns and tax information reports that are required
to be filed with respect to the Trust;
(N) to negotiate the terms of, and the execution and delivery of, the Placement
Agreement and the Capital Securities Purchase Agreement related thereto, providing for the sale of the Capital Securities;
(O) to employ or otherwise engage employees, agents (who may be designated as officers with titles), managers, contractors,
advisors, attorneys and consultants and pay reasonable compensation for such services;
(P) to incur expenses that are
necessary or incidental to carry out any of the purposes of the Trust;
(Q) to give the certificate required by
§ 314(a)(4) of the Trust Indenture Act to the Institutional Trustee, which certificate may be executed by an Administrator; and
11
(R) 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 trust under the laws of each jurisdiction (other than the State of Delaware) 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.
(ii) As among the Trustees and the Administrators, the Institutional Trustee shall have the power, duty and authority, and is
hereby authorized, 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;
(I) after any Event of Default (of which the Institutional Trustee has knowledge (as provided in
Section 2.10(m) hereof)) (
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);
(J) 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 trust under the laws of the State of Delaware 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; and
(K) to undertake any actions set forth in § 317(a) of the Trust Indenture Act.
12
(iii) The Institutional Trustee shall have the power and authority, and is hereby
authorized, 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)(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
Trustees 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 Trustees 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 Holder’s, except as expressly provided herein, (iii) take any action that would cause (or in the case of the Institutional Trustee, to the actual knowledge of a Responsible Officer would cause) the Trust to fail or
cease to qualify as a “grantor trust” for United States federal income tax purposes, (iv) incur any indebtedness for borrowed money or issue any other debt or (v) take or consent to any action that would result in the placement
of a lien on any of the Trust Property. The 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 advisement of and direction to the Trustees of actions they must take on behalf of the
Trust, and the preparation for execution and filing of any documents to be executed and filed by the Trust or on behalf of the Trust, as the 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; and
(iii) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
13
(d) Notwithstanding anything herein to the contrary, the Administrators, the Institutional
Trustee 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 (i) the Trust will not be deemed to be an Investment Company
(in the case of the Institutional Trustee, to the actual knowledge of a Responsible Officer), and (ii) the Trust will not fail to be classified as a grantor trust for United States federal income tax purposes (in the case of the Institutional
Trustee, to the actual knowledge of a Responsible Officer) and (iii) the Trust will 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
the case of the Institutional Trustee, to the actual knowledge of a Responsible Officer). In this connection, the Institutional Trustee, 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 or this Declaration, as amended from time to time, that each of the Institutional Trustee, the Administrators and such Holders determine in their discretion to be necessary or desirable for
such purposes, even if such action adversely affects the interests of the Holders of the Capital Securities.
(e) All expenses incurred by
the Administrators or the Trustees pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the Trustees 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 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 Trustees
. The Trust shall not, and the Institutional Trustee and the Administrators shall not, and the Administrators 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 and the Administrators shall not cause the Trust to:
(a) 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;
14
(b) acquire any assets other than as expressly provided herein;
(c) possess Trust Property for other than a Trust purpose;
(d) make any loans or incur any indebtedness other than loans represented by the Debentures;
(e) possess any power or otherwise act in such a way as to vary the Trust Property or the terms of the Securities;
(f) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or
(g) other than as provided in this Declaration (including Annex I), (i) direct the time, method and place of exercising any
trust or power conferred upon the Debenture Trustee with respect to the Debentures, (ii) waive any past default that is waivable under the Indenture, (iii) exercise any right to rescind or annul any declaration that the principal of all
the Debentures shall be due and payable, or (iv) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received a written opinion of counsel
experienced in such matters to the effect that such amendment, modification or termination 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 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 4.7. 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 or to the Delaware Trustee.
(c) The Institutional Trustee shall:
(i) establish and maintain a segregated non-interest bearing trust account (the “Property Account”) in the United
States (as defined in Treasury Regulations § 301.7701-7), 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 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;
15
(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 shall take all actions and perform such duties as may be specifically required of the Institutional Trustee
pursuant to the terms of the Securities.
(e) 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 (a “Legal Action”) which arise out of or in connection with an Event of Default of which a Responsible Officer of the Institutional Trustee has
actual knowledge or the Institutional Trustee’s duties and obligations under this Declaration or the Trust Indenture Act;
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 premium, if any, on or principal of the Debentures on the date such interest, premium, if any, 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 premium, if any, 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 a Holder of the Common Securities may
exercise such right of subrogation only if no Event of Default with respect to the Capital Securities has occurred and is continuing.
(f)
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 (including Annex I) and the certificate of cancellation referenced in Section 7.1(b) has been
filed; or
(ii) a Successor Institutional Trustee has been appointed and has accepted that appointment in accordance with
Section 4.7.
(g) 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.
(h) 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.
16
SECTION 2.9.
Certain Duties and Responsibilities of the Trustees and the Administrators
.
(a) The Institutional Trustee, before the occurrence of any Event of Default (of which the Institutional Trustee has knowledge (as
provided in Section 2.10(m) hereof)) and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into
this Declaration against the Institutional Trustee. In case an Event of Default (of which the Institutional Trustee has knowledge (as provided in Section 2.10(m) hereof)), has occurred (that has not been cured or waived pursuant to
Section 6.8), 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 Trustees and the Administrators shall
be as provided by this Declaration and, in the case of the Institutional Trustee, by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Declaration shall require any Trustee or Administrator to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity
satisfactory to it against such risk or 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
Trustees or the Administrators shall be subject to the provisions of this Article. Nothing in this Declaration shall be construed to release a Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful
misconduct or bad faith. Nothing in this Declaration shall be construed to release an Administrator from liability for its own gross negligent action, its own gross negligent failure to act, or its own willful misconduct or bad faith. To the extent
that, at law or in equity, a Trustee or an Administrator has duties and liabilities relating to the Trust or to the Holders, such Trustee or Administrator shall not be liable to the Trust or to any Holder for such Trustee’s or
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 Trustees 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 Trustees.
(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 Trustees and the Administrators are not
17
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
Trustees expressly set forth elsewhere in this Declaration or, in the case of the Institutional Trustee, in the Trust Indenture Act.
(d)
No provision of this Declaration shall be construed to relieve the Institutional Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct or bad faith with respect to matters that are
within the authority of the Institutional Trustee under this Declaration. except that:
(i) the Institutional Trustee shall
not be liable for any error or judgment made in good faith by a Responsible 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, safe keeping 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 own account, subject to the protections and limitations on liability afforded to the
Institutional Trustee under this Declaration and the Trust Indenture Act;
(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, written opinion of counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other
18
certificate, statement, instrument, option, 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 opinion 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 in its sole discretion shall deem advisable and in the best interests of the Holders, in which event the Institutional Trustee shall have no liability except for its own negligence,
willful misconduct or bad faith;
(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, 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 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, upon the
occurrence of an Event of Default (of which the Institutional Trustee has knowledge (as provided in Section 2.10(m) hereof)) that has not been cured or waived, of its obligation to exercise the rights and powers vested in it by this
Declaration;
19
(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 Common Securities and the Capital Securities, which instructions may be given only by the
Holders of the same proportion in liquidation amount of the Common Securities and the Capital Securities as would be entitled to direct the Institutional Trustee under the terms of the Common Securities and 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 has actual knowledge of such event or the Institutional Trustee receives written notice of such event from any Holder, except with respect to an Event of Default pursuant to Sections 5.01(a), 5.01(b) or 5.01(c) of
the Indenture (other than an Event of Default resulting from the default in the payment of Additional Interest or premium, if any, if the Institutional Trustee does not have actual knowledge or written notice that such payment is due and payable),
of which the Institutional Trustee shall be deemed to have knowledge;
(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
20
(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.
Delaware Trustee
. Notwithstanding any other provision of this Declaration other than Section 4.2, the Delaware
Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of any of the Trustees or the Administrators described in ibis Declaration (except as may be required under the
Statutory Trust Act). Except as set forth in Section 4.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of § 3807 of the Statutory Trust Act.
SECTION 2.12.
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 and deliver on behalf of the Trust any documents, agreements, instruments or certificates that the
Trustees or the Administrators, as the case may be, have the power and authority to execute pursuant to Section 2.6.
SECTION 2.13.
Not Responsible for Recitals or Issuance of Securities
. The recitals contained in this Declaration and the Securities (except in the certificate of authentication of Trustee) 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 property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of
this Declaration, the Debentures or the Securities.
SECTION 2.14.
Duration of Trust
. The Trust, unless dissolved pursuant to the
provisions of Article VII hereof, shall have existence for thirty-five (35) years from the Closing Date.
SECTION 2.15.
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 Person, except as described in this Section 2.15 and except with respect to the distribution of Debentures to Holders of Securities pursuant to
Section 7.1(a)(iv) of the Declaration or Section 4 of Annex I.
21
(b) The Trust may, with the consent of the Administrators and the Institutional Trustee (which
consent will not be unreasonably withheld) and without the consent of the Holders of the Capital 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 a trust organized as such under the laws of any state;
provided
, that:
(i) if the
Trust is not the survivor, 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 the same powers and duties as the
Institutional Trustee;
(iii) the Capital Securities or any Successor Securities (excluding any securities substituted for
the Common Securities) are listed or quoted, or any Successor Securities will be listed or quoted upon notification of issuance, on any national securities exchange or with another organization on which the Capital Securities are then listed or
quoted, if any;
(iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause
the rating on the Capital Securities (including any Successor Securities) to be downgraded or withdrawn by any nationally recognized statistical rating organization, if the Capital Securities are then rated;
(v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of such Holders’ interests in the Successor Entity as a result of such merger,
consolidation, amalgamation or replacement);
(vi) such Successor Entity has a purpose substantially identical to that of
the Trust;
(vii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Trust
has received a written opinion of a nationally recognized 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 of the Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders’ interests in the Successor Entity);
22
(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 guarantees the obligations of such Successor Entity under the Successor Securities to the same extent provided by the Guarantee, the Debentures and this Declaration; and
(ix) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, 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 of this paragraph (b) to such transaction have been satisfied.
(c) Notwithstanding Section 2.15(b), the Trust shall not, except with the consent of Holders of 100% in 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 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 and sole decision 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 of 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;
(b) to prepare for filing and request the Administrators to
cause the filing by the Trust, as may be appropriate, of an application to the PORTAL system, for listing or quotation upon notice of issuance of any Capital Securities, as requested by the Holders of not less than a Majority in liquidation amount
of the Capital Securities; and
(c) to negotiate the terms of and/or execute and deliver on behalf of the Trust, the Placement Agreement
and other related agreements providing for the sale of the Capital Securities.
23
ARTICLE IV
TRUSTEES AND ADMINISTRATORS
SECTION 4.1.
Number of Trustees
. The number of Trustees initially shall be two, 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 Holder of a Majority in
liquidation amount of the Common Securities voting as a class at a meeting of the Holder of the Common Securities;
provided
,
however
, that there shall be a Delaware Trustee if required by Section 4.2; and there shall always be one
Trustee who shall be the Institutional Trustee, and such Trustee may also serve as Delaware Trustee if it meets the applicable requirements, in which case Section 2.11 shall have no application to such entity in its capacity as Institutional
Trustee.
SECTION 4.2.
Delaware Trustee
. If required by the Statutory Trust Act, one Trustee (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 is organized under the laws of the United States or any state thereof or the District of
Columbia, has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, including §3807 of the Statutory Trust Act.
SECTION 4.3.
Institutional Trustee; Eligibility
.
(a) There shall at all times be one Trustee which shall act as 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 national association organized and doing business under the laws of the United States of
America or any state thereof or of the District of Columbia and 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
24
federal, state or District of Columbia authority. If such corporation or national association 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 4.3(a)(iii), the combined capital and surplus of such corporation or national association 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 4.3(a), the Institutional Trustee shall immediately resign in the manner and with the effect set forth in Section 4.7.
(c) If the Institutional Trustee has or shall acquire any “conflicting interest” within the meaning of § 310(b) of the
Trust Indenture Act, 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 LaSalle Bank National Association.
SECTION 4.4.
Certain Qualifications of the Delaware Trustee Generally
. The Delaware Trustee shall be a U.S. Person and 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 4.5.
Administrators
. Each Administrator shall be a U.S. Person.
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 acting alone.
SECTION 4.6.
Initial Delaware Trustee
. The initial Delaware Trustee shall be Christiana Bank & Trust Company.
SECTION 4.7.
Appointment, Removal and Resignation of the Trustees and the Administrators
.
(a) No resignation or removal of any Trustee (the “Relevant Trustee”) and no appointment of a successor Trustee pursuant to this
Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of this Section 4.7.
(b) Subject to Section 4.7(a), a Relevant Trustee may resign at any time by giving written notice thereof to the Holders of the
Securities and by appointing a successor Relevant Trustee, except in the case of the Delaware Trustee’s successor which shall be appointed by Holders of a Majority in liquidation amount of the Common Securities. Upon the resignation of the
Institutional Trustee, the Institutional Trustee shall appoint a successor by
25
requesting from at least three Persons meeting the eligibility requirements their 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 reasonable expense and charges (the “Successor Institutional Trustee”). If the instrument of acceptance by the successor Relevant Trustee required by this Section 4.7 shall not have
been delivered to the Relevant Trustee within 60 days after the giving of such notice of resignation or delivery of the instrument of removal, the Relevant 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 Relevant Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Relevant Trustee. The Institutional Trustee shall have no
liability for the selection of such successor pursuant to this Section 4.7.
(c) Unless an Event of Default shall have occurred and
be continuing, any Trustee may be removed at any time by an act of the Holders of a Majority in liquidation amount of the Common Securities. If any Trustee shall be so removed, the Holders of the Common Securities, by act of the Holders of a
Majority in liquidation amount of the Common Securities delivered to the Relevant Trustee, shall promptly appoint a successor Relevant Trustee, and such successor Trustee shall comply with the applicable requirements of this Section 4.7. If an
Event of Default shall have occurred and be continuing, the Institutional Trustee or the Delaware Trustee, or both of them, may be removed by the act of the Holders of a Majority in liquidation amount of the Capital Securities, delivered to the
Relevant Trustee (in its individual capacity and on behalf of the Trust). If any 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 Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees, and such successor Trustee shall comply with the applicable requirements of this Section 4.7. If no successor Relevant 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 4.7 within 30 days after delivery of an instrument of removal, the Relevant Trustee or any
Holder who has been a Holder of the Securities for at least six 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 a
successor Relevant Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a successor Relevant Trustee or Trustees.
(d) The Institutional Trustee shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee
to all Holders and to the Sponsor. Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust Office if it is the Institutional Trustee.
(e) Notwithstanding the foregoing or any other provision of this Declaration, in the event a Delaware Trustee who is a natural person dies or
is adjudged by a court to have become incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by the Institutional Trustee (provided the Institutional Trustee satisfies the requirements of a Delaware
Trustee as set forth in Section 4.2) following the procedures in this Section 4.7 (with the successor being a Person who satisfies the eligibility requirement for a Delaware Trustee set forth in this Declaration) (the “Successor
Delaware Trustee”).
26
(f) In case of the appointment hereunder of a successor Relevant Trustee, the retiring Relevant
Trustee and each successor Relevant Trustee with respect to the Securities shall execute and deliver an amendment hereto wherein each successor Relevant Trustee shall accept such appointment and which (a) shall contain such provisions as shall
be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Securities and the Trust and (b) 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 Relevant Trustee, it being understood that nothing herein or in such amendment shall constitute
such Relevant Trustees co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee,
without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee; but, on request of the Trust or any successor Relevant Trustee, such retiring Relevant Trustee shall
duly assign, transfer and deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Securities and the Trust subject to the payment of all
unpaid fees, expenses and indemnities of such retiring Relevant Trustee.
(g) No Institutional Trustee or Delaware Trustee shall be liable
for the acts or omissions to act of any Successor Institutional Trustee or Successor Delaware Trustee, as the case may be.
(h) 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 Holders of the Common Securities.
(i) 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 Delaware Trustee in the State of Delaware.
SECTION 4.8.
Vacancies Among
Trustees
. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 4.1, or if the number of Trustees is increased pursuant to Section 4.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Trustees or, if there are more than two, a majority of the Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance
with Section 4.7.
SECTION 4.9.
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, terminate or annul the Trust or terminate this Declaration. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is
filled by the appointment of a Trustee in accordance with Section 4.7, the Institutional Trustee shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration.
27
SECTION 4.10.
Meetings of the Trustees and the Administrators
. Meetings of the Trustees or
the Administrators shall be held from time to time upon the call of any Trustee or Administrator, as applicable. Regular meetings of the Trustees and the Administrators, respectively, may be in person in the United States or by telephone, at a place
(if applicable) and time fixed by resolution of the Trustees or the Administrators, as applicable. Notice of any in-person meetings of the Trustees or 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 Trustees or 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 a Trustee or an Administrator, as the case may be, at a meeting shall constitute a waiver of notice of such meeting except where a 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 ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Trustees or the Administrators, as the case may be, may be taken at a
meeting by vote of a majority of the Trustees or the Administrators present (whether in person or by telephone) and eligible to vote with respect to such matter;
provided
, that, in the case of the Administrators, a Quorum is present, or
without a meeting by the unanimous written consent of the Trustees or the Administrators, as the case may be. Meetings of the Trustees and the Administrators together shall be held from time to time upon the call of any Trustee or Administrator.
SECTION 4.11.
Delegation of Power
.
(a) Any Trustee or any Administrator, as the case may be, 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, instruments or other writings contemplated in Section 2.6.
(b) The Trustees shall have power to delegate from time to time to such of their number or to any officer of the Trust that is a U.S. Person,
the doing of such things and the execution of such instruments or other writings either in the name of the Trust or the names of the Trustees or otherwise as the Trustees 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 4.12.
Merger, Conversion, Consolidation or
Succession to Business
.
Any Person into which the Institutional Trustee or the Delaware Trustee, as the case may be, may be merged or
converted or with which either may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Institutional 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 Institutional Trustee or the Delaware Trustee, as the case may be, shall be the successor of the Institutional 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
28
under this Article and,
provided
,
further
, that such Person shall file an amendment to the Certificate of Trust with the Secretary of State of the State of Delaware as contemplated
in Section 4.7(i).
ARTICLE V
DISTRIBUTIONS
SECTION 5.1.
Distributions
.
(a) 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 (including
any Additional Interest or Deferred Interest) or premium, if any, on and/or principal on the Debentures held by the Institutional Trustee (the amount of any such payment being a “Payment Amount”), the Institutional Trustee shall and is
directed, to the extent funds are available in the Property Account for that purpose, to make a distribution (a “Distribution”) of the Payment Amount to Holders. For the avoidance of doubt, funds in the Property Account shall not be
distributed to Holders to the extent of any taxes payable by the Trust, in the case of withholding taxes, as determined by the Institutional Trustee or any Paying Agent and, in the case of taxes other than withholding tax taxes, as determined by the
Administrators in a written notice to the Institutional Trustee.
(b) As a condition to the payment of any principal of or interest on the
Securities without the imposition of withholding tax, the Administrators shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or
applicable successor form) in the case of a person that is a “United States person” within the meaning of Section 7701(a)(30) of the Code or an Internal Revenue Service Form W-8 (or applicable successor form) in the case of a person
that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code, and any other certification acceptable to it to enable the Institutional Trustee or any Paying Agent to determine their respective duties and
liabilities with respect to any taxes or other charges that they may be required to pay, deduct or withhold in respect of such Securities.
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, evidenced by a certificate substantially in the
form of Exhibit A-1, representing undivided beneficial interests in the assets of the Trust and having such terms as are set forth in Annex I (the “Capital Securities”), and one series of common securities, evidenced by a
certificate substantially in the form of Exhibit A-2, representing undivided beneficial interests in the assets of the Trust and 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
29
than the Capital Securities and the Common Securities. The Capital Securities rank
pari passu
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.
(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. Any Certificate may be signed on behalf of the Trust by such person 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
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 and shall be valid upon execution by one or more Administrators.
(c) The Capital Securities issued
pursuant to Regulation S of the Securities Act or to QIBs shall be, except as provided in Section 6.4, Book-Entry Capital Securities issued in the form of one or more Global Capital Securities registered in the name of the Depositary, or
its nominee and deposited with the Depositary or a custodian for the Depositary for credit by the Depositary to the respective accounts of the Depositary Participants thereof (or such other accounts as they may direct).
(d) 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.
(e) Upon issuance of the Securities as provided in this Declaration, the Securities so issued
shall be deemed to be validly issued, fully paid and non-assessable, and each Holder thereof shall be entitled to the benefits provided by this Declaration.
(f) 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, Calculation Agent and Registrar
.
(a) The Trust shall maintain an office or agency where the Securities may be presented for
payment (the “Paying Agent”), and an office or agency where Securities may be presented for registration of transfer or exchange (the “Transfer Agent”). The Trust hereby
30
appoints the Institutional Trustee as Paying Agent and Transfer Agent at LaSalle Bank National Association, CDO Trust Services Group, 135 South LaSalle Street, Suite 1511, Chicago, Illinois 60603
– GWB Capital Trust VI. The Trust shall also keep or cause to be kept a register for the purpose of registering Securities and 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, 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 or co-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 Registrar for the Capital Securities and the Common Securities at its Corporate Trust Office. The Institutional Trustee or any
of its Affiliates in the United States may act as Paying Agent, Transfer Agent or Registrar.
(b) The Trust shall also appoint a
Calculation Agent, which shall determine the Coupon Rate in accordance with the terms of the Securities. The Trust initially appoints the Institutional Trustee as Calculation Agent.
SECTION 6.3.
Form and Dating
.
(a) 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 Certificates 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 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 Delaware 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 $100,000 and multiples of
$1,000 in excess thereof.
(b) The Capital Securities sold by the Trust to the initial purchasers pursuant to the Placement Agreement and
the Capital Securities Purchase Agreement shall be issued in book-entry form, registered in the name of Cede & Co., as nominee on behalf of the Depository Trust Company, without coupons and with the Restricted Securities Legend.
31
SECTION 6.4.
Book-Entry Capital Securities
.
(a) A Global Capital Security may be exchanged, in whole or in part, for Definitive Capital Securities Certificates registered in the names of
Owners only if such exchange complies with Article VIII and (i) the Depositary advises the Administrators and the Institutional Trustee in writing that the Depositary is no longer willing or able properly to discharge its responsibilities
with respect to the Global Capital Security, and no qualified successor is appointed by the Administrators within ninety (90) days of receipt of such notice, (ii) the Depositary ceases to be a clearing agency registered under the Exchange
Act and the Administrators fail to appoint a qualified successor within ninety (90) days of obtaining knowledge of such event, (iii) the Administrators at their option advise the Institutional Trustee in writing that the Trust elects to
terminate the book-entry system through the Depositary or (iv) an Indenture Event of Default has occurred and is continuing. Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv) above, the Administrators
shall notify the Depositary and instruct the Depositary to notify all Owners of Book-Entry Capital Securities and the Institutional Trustee of the occurrence of such event and of the availability of Definitive Capital Securities Certificates to
Owners of the Capital Securities requesting the same. Upon the issuance of Definitive Capital Securities Certificates, the Administrators and the Institutional Trustee shall recognize the Holders of the Definitive Capital Securities Certificates as
Holders. Notwithstanding the foregoing, if an Owner of a beneficial interest in a Global Capital Security wishes at any time to transfer an interest in such Global Capital Security to a Person other than a QIB, such transfer shall be effected,
subject to the Applicable Depository Procedures, in accordance with the provisions of this Section 6.4 and Article VIII, and the transferee shall receive a Definitive Capital Securities Certificate in connection with such transfer. A
holder of a Definitive Capital Securities Certificate that is a QIB may upon request, and in accordance with the provisions of this Section 6.4 and Article VIII, exchange such Definitive Capital Securities Certificate for a beneficial
interest in a Global Capital Security.
(b) If any Global Capital Security is to be exchanged for Definitive Capital Securities
Certificates or canceled in part, or if any Definitive Capital Securities Certificate is to be exchanged in whole or in part for any Global Capital Security, then either (i) such Global Capital Security shall be so surrendered for exchange or
cancellation as provided in this Section 6.4 and Article VIII or (ii) the aggregate liquidation amount represented by such Global Capital Security shall be reduced, subject to Section 6.3, or increased by an amount equal to the
liquidation amount represented by that portion of the Global Capital Security to be so exchanged or canceled, or equal to the liquidation amount represented by such Definitive Capital Securities Certificates to be so exchanged for any Global Capital
Security, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Institutional Trustee, in accordance with the Applicable Depositary Procedures, shall instruct the Depositary or its
authorized representative to make a corresponding adjustment to its records. Upon any such surrender to the Administrators or the Registrar of any Global Capital Security or Securities by the Depositary, accompanied by registration instructions, the
Administrators, or any one of them, shall execute the Definitive Capital Securities Certificates in accordance with the instructions of the Depositary. None of the Registrar, Administrators, or the Institutional Trustee shall be liable for any delay
in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions.
32
(c) Every Definitive Capital Securities Certificate executed and delivered upon registration or
transfer of, or in exchange for or in lieu of a Global Capital Security or any portion thereof shall be executed and delivered in the form of, and shall be, a Global Capital Security, unless such Definitive Capital Securities Certificate is
registered in the name of a Person other than the Depositary for such Global Capital Security or a nominee thereof.
(d) The Depositary or
its nominee, as registered owner of a Global Capital Security, shall be the Holder of such Global Capital Security for all purposes under this Declaration and the Global Capital Security, and Owners with respect to a Global Capital Security shall
hold such interests pursuant to the Applicable Depositary Procedures. The Registrar, the Administrators and the Institutional Trustee shall be entitled to deal with the Depositary for all purposes of this Declaration relating to the Global Capital
Securities (including the payment of the liquidation amount of and Distributions on the Book-Entry Capital Securities represented thereby and the giving of instructions or directions by Owners of Book-Entry Capital Securities represented thereby and
the giving of notices) as the sole Holder of the Book-Entry Capital Securities represented thereby and shall have no obligations to the Owners thereof. None of the Administrators, the Institutional Trustee nor the Registrar shall have any liability
in respect of any transfers effected by the Depositary.
(e) The rights of the Owners of the Book-Entry Capital Securities shall be
exercised only through the Depositary and shall be limited to those established by law, the Applicable Depositary Procedures and agreements between such Owners and the Depositary and/or the Depositary Participants;
provided
, solely for the
purpose of determining whether the Holders of the requisite amount of Capital Securities have voted on any matter provided for in this Declaration, to the extent that Capital Securities are represented by a Global Capital Security, the
Administrators and the Institutional Trustee may conclusively rely on, and shall be fully protected in relying on, any written instrument (including a proxy) delivered to the Institutional Trustee by the Depositary setting forth the Owners’
votes or assigning the right to vote on any matter to any other Persons either in whole or in part. To the extent that Capital Securities are represented by a Global Capital Security, the initial Depositary will make book-entry transfers among the
Depositary Participants and receive and transmit payments on the Capital Securities that are represented by a Global Capital Security to such Depositary Participants, and none of the Sponsor, the Administrators or the Institutional Trustee shall
have any responsibility or obligation with respect thereto.
(f) To the extent that a notice or other communication to the Holders is
required under this Declaration, for so long as Capital Securities are represented by a Global Capital Security, the Administrator and the Institutional Trustee shall give all such notices and communications to the Depositary, and shall have no
obligations to the Owners.
SECTION 6.5.
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 hold each of them harmless; then, in the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, an Administrator on behalf of the
Trust shall execute (and in the case of a Capital Security Certificate, the Institutional Trustee
33
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 6.5, 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 6.6.
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 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 6.7.
Cancellation
. The Administrators at any time may deliver Securities to the Registrar 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 in accordance with its standard procedures or otherwise as the Administrators direct. The Administrators may not issue new Securities to replace Securities that have been paid or, except
for Securities surrendered for purposes of transfer or exchange, that have been delivered to the Institutional Trustee for cancellation.
SECTION 6.8.
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, and the issuance of the
Securities shall not be subject to, preemptive or other similar rights and when issued and delivered to Holders against payment of the purchase price therefor, the Securities will be fully paid and nonassessable by the Trust.
(b) For so long as any Capital Securities remain outstanding, if, upon an Indenture Event of Default under Section 5.01(c), (e) or
(f) of the Indenture, 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 not
less than 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.
34
(c) Upon an Indenture Event of Default under Sections 5.01(c), (e) or (f) at any
time after a declaration of acceleration of maturity of 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,
subject to the provisions hereof, fails to annul any such declaration and waive such default, the Holders of not less than 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 Sponsor 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 Deferred Interest on all of the Debentures;
(C) all payments on any Debentures that have become due otherwise than by such declaration of acceleration and interest and
Deferred 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, documented 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 or premium, if any,
on the Debentures that has become due solely by such acceleration, have been cured or waived as provided in Section 5.07 of the Indenture.
(d) The Holders of not less than 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.
(e) 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
35
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 6.8.
(f) Except as otherwise provided in this
Section 6.8, the Holders of not less than 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 15, 2041, the expiration of the term of the Trust;
(ii) 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) the filing of a certificate of dissolution or its equivalent with respect to the Sponsor 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) the distribution of all of the Debentures to the Holders of the
Securities, upon exercise of the right of the Holders of all of the outstanding Common Securities to dissolve the Trust as provided in Annex I hereto;
(v) the entry of a decree of judicial dissolution of any Holder of the Common Securities, the Sponsor, the Trust or the
Debenture Issuer;
(vi) 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
(vii) before the
issuance of any Securities, with the consent of all of the Trustees and the Sponsor.
36
(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 Section 3808 of the Statutory Trust Act, and subject to the terms set forth in. Annex I, the Delaware Trustee,
when notified in writing of the completion of the winding up of the Trust in accordance with the Statutory Trust Act, shall terminate the Trust by filing, at the expense of the Sponsor, a certificate of cancellation with the Secretary of State of
the State of Delaware.
(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 6.4 and Section 8.1(c), when Capital Securities are presented to the 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 the requirements provided for herein for such transactions are met. To
permit registrations of transfers 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 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 Capital 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 to be issued in the name of the designated transferee or transferees. Any Security 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
37
the same benefits under this Declaration as the Security surrendered upon such registration of transfer or exchange. 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) Neither the Trust nor the Registrar shall 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 (as defined below), which shall not be removed unless there is
delivered to the Trust such satisfactory evidence, which may include an opinion of counsel reasonably acceptable to the Administrators and the Institutional Trustee, as may be reasonably required by the Trust or the Institutional Trustee, 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 or that such Securities are not “restricted” within the meaning of Rule
144 under the Securities Act. Upon provision of such satisfactory evidence, the Institutional Trustee, at the written direction of the Administrators, shall authenticate and deliver Capital Securities that do not bear the Restricted Securities
Legend (other than the legend contemplated by Section 8.2(d)).
(b) When Capital Securities are presented to the Registrar
(x) to register the transfer of such Capital Securities, or (y) to exchange such Capital Securities for an equal number of Capital Securities represented by different Certificates, the Registrar shall register the transfer or make the
exchange as requested if its reasonable requirements for such transaction are met;
provided
,
however
, that the Capital Securities surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Administrators, the Institutional Trustee and the Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.
(c) Except as permitted by Section 8.2(a), each Capital Security shall bear a legend (the “Restricted Securities Legend”) in
substantially the following form:
THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF THE DECLARATION HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (“DTC”) OR A NOMINEE OF DTC. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS
38
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION, AND NO TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A WHOLE BY DTC TO A NOMINEE OF
DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS CAPITAL
SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO GWB CAPITAL TRUST VI OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT HEREON IS MADE TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
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 LAWS. 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. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE DEBENTURE ISSUER OR THE TRUST, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) TO A PERSON THE HOLDER 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, (C) TO A “NON U.S. PERSON”
IN AN “OFFSHORE TRANSACTION” PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF
SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN “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 (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE DEBENTURE ISSUER’S
AND THE TRUST’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH
THE AMENDED AND RESTATED DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE DEBENTURE ISSUER OR THE TRUST. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
39
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS THAT IT WILL
NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS SUCH TRANSACTIONS ARE 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 THIS SECURITY 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-l 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 THIS SECURITY 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 CONNECTION WITH ANY TRANSFER, THE HOLDER OF THE CERTIFICATE WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS MAY BE REQUIRED BY THE AMENDED AND RESTATED DECLARATION OF TRUST TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF
$1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 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 THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE
40
RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.
(d) 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 void 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.
(e) Each party hereto understands and hereby agrees that the initial purchaser is intended solely to be an
interim holder of the Capital Securities and is purchasing such securities to facilitate consummation of the transactions contemplated herein and in the documents ancillary hereto. Notwithstanding any provision in this Declaration to the contrary,
the initial purchaser shall have the right upon notice (a “Transfer Notice”) to the Institutional Trustee and the Sponsor to transfer title in and to the Capital Securities; provided the initial purchaser shall take reasonable steps to
ensure that such transfer is exempt from registration under the Securities Act of 1933, as amended, and rules promulgated thereunder. Any Transfer Notice delivered to the Institutional Trustee and Sponsor pursuant to the preceding sentence shall
indicate the aggregate liquidation amount of Capital Securities being transferred, the name and address of the transferee thereof (the “Transferee”) and the date of such transfer. Notwithstanding any provision in this Declaration to the
contrary, the transfer by the initial purchaser of title in and to the Capital Securities pursuant to a Transfer Notice shall not be subject to any requirement relating to Opinions of Counsel, Certificates of Transfer or any other Opinion or
Certificate applicable to transfers hereunder and relating to Capital Securities.
(f) Neither the Institutional Trustee nor the Registrar
shall be responsible for ascertaining whether any transfer hereunder complies with the registration provisions of or any exemptions from the Securities Act, applicable state securities laws or the applicable laws of any other jurisdiction, ERISA,
the Code or the Investment Company Act.
SECTION 8.3.
Deemed Security Holders
.
The Trust, the Administrators, the Trustees, 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 Trustees,
the Paying Agent, the Transfer Agent or the Registrar shall have actual or other notice thereof.
41
ARTICLE IX
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES 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; and
(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) Except to the extent provided in Section 9.1(b), and pursuant to § 3803(a) of the Statutory Trust Act, the Holders of the
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 Delaware, except as otherwise specifically set forth
herein.
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 (other than an Administrator) shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person’s negligence or
willful misconduct or bad faith with respect to such acts or omissions and except that an Administrator shall be liable for any such loss, damage or claim incurred by reason of such Administrator’s gross negligence or willful misconduct or bad
faith 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.
42
(c) It is expressly understood and agreed by the parties hereto that insofar as any document,
agreement or certificate is executed on behalf of the Trust by any Trustee (i) such document, agreement or certificate is executed and delivered by such Trustee, not in its individual capacity, but solely as Trustee under this Declaration in
the exercise of the powers and authority conferred and vested in it, (ii) each of the representations, undertakings and agreements made on the part of the Trust is made and intended not as representations, warranties, covenants, undertakings
and agreements by any Trustee in its individual capacity, but is made and intended for the purpose of binding only the Trust and (iii) under no circumstances shall any Trustee in its individual capacity be personally liable for the payment of
any indebtedness or expenses of the Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under this Declaration or any other document, agreement or certificate.
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 (other than the duties imposed on the Institutional Trustee under the Trust Indenture Act), 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) (i) The Sponsor shall indemnify, to the fullest 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) by reason of the fact that such Person is or was
an Indemnified Person against expenses (including attorneys’ fees and expenses), judgments, fines and amounts paid in settlement actually and reasonably incurred by such
43
Person in connection with such action, suit or proceeding if such Person acted in good faith and in a manner such Person 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 such 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 such Person 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 such conduct was unlawful.
(ii)
The Sponsor shall indemnify, to the fullest 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 by reason of the fact that such Person is or was an Indemnified Person against expenses (including attorneys’ fees and expenses) actually and reasonably incurred by such Person in connection with the defense or settlement
of such action or suit if such Person acted in good faith and in a manner such Person 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 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 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 (i) and (ii) of this Section 9.4(a), or in defense of any claim,
issue or matter therein, such Person shall be indemnified, to the fullest extent permitted by law, against expenses (including attorneys’ fees and expenses) actually and reasonably incurred by such Person in connection therewith.
(iv) Any indemnification of an Administrator under paragraphs (i) and (ii) of this Section 9.4(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 Indemnified Person is proper in the circumstances because such Person has met the applicable standard of
conduct set forth in paragraphs (i) and (ii). Such determination shall be made {A) by the Administrators by a majority vote of a Quorum consisting of such Administrators who were not parties to such action, suit or proceeding, (B) 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 (C) by the Common Security Holder of the Trust.
44
(v) To the fullest extent permitted by law, expenses (including 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 (i) and (ii) of this Section 9.4(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 Indemnified Person to repay such amount if it shall ultimately be determined that such Person is not entitled to be
indemnified by the Sponsor as authorized in this Section 9.4(a). Notwithstanding the foregoing, no advance shall be made by the Sponsor if a determination is reasonably and promptly made (1) in the case of a Company Indemnified Person
(A) by the Administrators by a majority vote of a Quorum of disinterested Administrators, (B) 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 (C) 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 Person either believed to be opposed to or 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
such conduct was unlawful, or (2) in the case of a Fiduciary Indemnified Person, by independent legal counsel in a written opinion that, based upon the facts known to the counsel at the time such determination is made, such Indemnified Person
acted in bad faith or in a manner that such Indemnified Person either believed to be opposed to or 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 such conduct was unlawful. In no event shall any advance be made (i) to a Company Indemnified Person in instances where the Administrators, independent legal counsel or the Common Security Holder reasonably determine
that such Person deliberately breached such Person’s duty to the Trust or its Common or Capital Security Holders or (ii) to a Fiduciary Indemnified Person in instances where independent legal counsel promptly and reasonably determines in a
written opinion that such Person deliberately breached such Person’s duty to the Trust or its Common or Capital Security Holders.
(b) The Sponsor shall indemnify, to the fullest extent permitted by applicable law, each Indemnified Person from and against any and all loss,
damage, liability, tax (other than taxes based on the income of such Indemnified Person), penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person arising out of or in connection with or by reason of the
creation, administration or termination of the Trust, or any act or omission of such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on
such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage, liability, tax, penalty, expense or claim incurred by such Indemnified Person by reason of negligence,
willful misconduct or bad faith with respect to such acts or omissions.
45
(c) 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 such Person’s 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.
(d) 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 such Person and incurred by such Person in any such capacity, or arising out of such Person’s status as such, whether or not the Sponsor would have the power to indemnify such
Person against such liability under the provisions of this Section 9.4.
(e) 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 such Person would have with respect to such constituent entity if its separate existence had continued.
(f) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 9.4 shall, unless otherwise
provided when authorized or ratified, 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.
(g) The provisions of this Section 9.4 shall survive the termination of this Declaration or the earlier resignation or removal of the
Institutional Trustee. The obligations of the Sponsor under this Section 9.4 to compensate and indemnify the Trustees and to pay or reimburse the Trustees 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 Trustees as such, except funds held in trust for the benefit of the holders of particular Capital
Securities,
provided
, that the Sponsor is the holder of the Common Securities.
SECTION 9.5.
Outside Businesses
. Any Covered
Person, the Sponsor, the Delaware Trustee and the Institutional Trustee (subject to Section 4.3(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 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,
46
the Sponsor, the Delaware Trustee 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, the Delaware Trustee 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, the Delaware Trustee 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
.
(a) Subject to the provisions set forth in the Fee Agreement between the Institutional Trustee, Cohen Bros. & Company and the Company
of even date herewith, the Sponsor agrees:
(i) to pay to the Trustees from time to time such compensation for all services
rendered by them hereunder as the parties shall agree in writing 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
(ii) except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable, documented
expenses, disbursements and advances incurred or made by the Trustees 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 attributable to their negligence or willful misconduct.
(b) 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 any Trustee.
ARTICLE
X
ACCOUNTING
SECTION 10.1.
Fiscal Year
. The fiscal year (the “Fiscal Year”) of the Trust shall be the year ended June 30, 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 § 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 on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied.
(b)
The Administrators shall either (i) cause each Form 10-K and Form 10-Q prepared by the Sponsor and filed with the Commission in accordance with the Exchange Act to
47
be delivered to each Holder of Securities, within 90 days after the filing of each Form 10-K and within 30 days after the filing of each Form 10-Q or (ii) cause to be prepared at the
principal office of the Trust in the United States, as defined for purposes of Treasury Regulations § 301.7701-7, and delivered to each of the Holders of Securities, within 90 days after the end of each Fiscal Year of the Trust, annual
financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related statements of income or loss.
(c) 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.
(d) The Administrators shall cause to be duly prepared in the United States, as defined for purposes of Treasury Regulations
§ 301.7701-7, and tiled 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.
(e) The Administrators will cause the Sponsor’s
regulatory reports to be delivered to the Holder promptly following their filing with the Federal Reserve.
SECTION 10.3.
Banking
.
The Trust shall maintain one or more bank accounts in the United States, as defined for purposes of Treasury Regulations § 301.7701-7, 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. As a condition to the payment of any principal of or interest on any Debt Security without the imposition of
withholding tax, the Institutional Trustee or any Paying Agent shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable
successor form) in the case of a person that is a “United States person” within the meaning of Section 7701(a)(30) of the Code or an Internal Revenue Service Form W-8 (or applicable successor form) in the case of a person that is not
a “United States person” within the meaning of Section 7701(a)(30) of the Code) and any other certification acceptable to it to enable the Institutional Trustee or any Paying Agent and the Trustee to determine their respective duties
and liabilities with respect to any taxes or other charges that they may be required to pay, deduct or withhold in respect of such Debt Security or the holder of such Debt Security under any present or future law or regulation of the United States
or any political subdivision thereof or taxing authority therein or to comply with any reporting or other requirements under any such law or regulation. The Administrators shall file required forms with applicable jurisdictions and, unless
48
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 to the Holder in the amount of the
withholding. 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:
(i) the Institutional Trustee,
(ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, the Delaware
Trustee,
(iii) if the amendment affects the rights, powers, duties, obligations or immunities of the Administrators, the
Administrators, and
(iv) the Holders of a Majority in liquidation amount of the Common Securities.
(b) Notwithstanding any other provision of this Article Xl, no amendment shall be made, and any such purported amendment shall be void
and ineffective:
(i) unless 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 that all conditions precedent to the execution and delivery of such amendment have been
satisfied; or
49
(ii) if the result of such amendment would be to
(A) cause the Trust to cease 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 Institutional Trustee in contravention of the Trust Indenture Act;
(C) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act;
or
(D) cause the Debenture Issuer to be unable to treat an amount equal to the Liquidation Amount of the Capital
Securities as “Tier 1 Capital” for purposes of the capital adequacy guidelines of (x) the Federal Reserve (or, if the Debenture Issuer is not a bank holding company, such guidelines or policies applied to the Debenture Issuer as if
the Debenture Issuer were subject to such guidelines of policies) or of (y) any other regulatory authority having jurisdiction over the Debenture Issuer.
(c) Except as provided in Section 11.1(d), (e) or (g), 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 any redemption or liquidation provisions applicable to 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 (ii) restrict the right of a Holder to institute suit for the enforcement of any such payment on or after such date.
(e) Sections 9.1(b) and 9.1(c) and this Section 11.1 shall not be amended without the consent of all of the Holders of the
Securities.
(f) The rights of the Holders of the Capital Securities and Common Securities, as applicable, under Article IV 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 Capital Securities or Common Securities, as applicable.
(g) Subject to Section 11.1(a), this Declaration may be amended by the Institutional Trustee and the Holder 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
50
(iv) modify, eliminate or add to any provision of this Declaration to such extent
as may be necessary or desirable, including, without limitation, 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 right, preferences or privileges of the Holders of Securities;
provided
,
however
, that no such modification, elimination or addition referred to in clauses (i), (ii), (iii) or (iv) shall
adversely affect the powers, preferences or rights of Holders of Capital Securities.
SECTION 11.2.
Meetings of the Holders of the
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, the terms of the Securities or the rules of any
stock exchange on which the Capital Securities are listed or admitted for trading, if any. The Administrators shalt call a meeting of the Holders of such class if directed to do so by the Holders of not less than 10% in liquidation amount of such
class of Securities. Such direction shall be given by delivering to the Administrators one or more notices 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 or the rules of any stock exchange on which the
Capital Securities are listed or admitted for trading, if any, 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 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
51
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 Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were
stockholders of a Delaware 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, 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 for trading, if any, 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 § 301.7701-7).
ARTICLE XII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE
SECTION 12.1.
Representations and Warranties of Institutional Trustee
. The Trustee that acts as 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 banking corporation or national
association with trust powers, duly organized, validly existing and in good standing under the laws of the State of New York or the United States of America, respectively, with trust power and authority to execute and deliver, and to carry out and
perform its obligations under the terms of, this Declaration;
52
(b) the Institutional Trustee has a combined capital and surplus of at least fifty million U.S.
dollars ($50,000,000);
(c) the Institutional Trustee is not an affiliate of the Sponsor, nor does the Institutional Trustee offer or
provide credit or credit enhancement to the Trust;
(d) the execution, delivery and performance by the Institutional Trustee of this
Declaration has been duly authorized by all necessary action on the part of the Institutional Trustee. This Declaration has been duly executed and delivered by the Institutional Trustee, and under Delaware law (excluding any securities laws)
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 and the discretion of the court (regardless of whether considered in a proceeding in equity or at law);
(e) 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
(f) no consent, approval or authorization of, or registration with or notice to,
any state or federal banking authority governing the trust powers of the Institutional Trustee is required for the execution, delivery or performance by the Institutional Trustee of this Declaration.
SECTION 12.2.
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) if it is not a natural person, the Delaware Trustee is duly organized, validly existing and has its principal
place of business in the State of Delaware;
(b) if it is not a natural person, 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. 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 considered in a proceeding in equity or at law);
(c) if it is not a natural person, the execution, delivery and performance of this Declaration by the Delaware Trustee does not conflict with
or constitute a breach of the articles of association or by-laws of the Delaware Trustee;
(d) it has trust power and authority to execute
and deliver, and to carry out and perform its obligations under the terms of, this Declaration;
53
(e) no consent, approval or authorization of, or registration with or notice to, any state or
federal 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
(f) if the Delaware Trustee is a natural person, he or she is a resident of the State of Delaware.
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):
GWB Capital Trust VI
c/o Great Western Bancorporation, Inc.
9290 West Dodge Road, Suite 203
Omaha, Nebraska 68114
Attention: James R. Clark
Telecopy: (402) 333-8339
Telephone: (402) 333-8330
(b) if given to the Delaware Trustee> at the mailing address set forth below (or such other address as the Delaware Trustee may give notice
of to the Holders of the Securities):
Christiana Bank & Trust Company
1314 King Street
Wilmington,
Delaware 19801
Attn: Corporate Trust Administration
Telecopy: 302-421-9015
Telephone: 302-888-7437
54
(c) 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):
LaSalle Bank
National Association
135 S. LaSalle Street, Suite 1511
Chicago, Illinois 60603
Attention: CDO Trust Services Group
GWB Capital Trust VI
Telecopy:
312-904-0524
Telephone: 312-904-0283
(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 of to the Trust):
Great Western Bancorporation, Inc.
9290 West Dodge Road, Suite 203
Omaha, Nebraska 68114
Attention: James R. Clark
Telecopy: (402) 333-8339
Telephone: (402) 333-8330
(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 13.2.
Governing Law
. This Declaration and the rights and obligations of the parties hereunder
shall be governed by and interpreted in accordance with the law of the State of Delaware and all rights, obligations and remedies shall be governed by such laws without regard to the principles of conflict of laws of the State of Delaware or any
other jurisdiction that would call for the application of the law of any jurisdiction other than the State of Delaware.
SECTION 13.3.
Submission to Jurisdiction
.
(a) Each of the parties hereto agrees that any suit, action or proceeding arising out of or based upon
this Declaration, or the transactions contemplated hereby, may be instituted in any of the courts of the State of New York located in the Borough of Manhattan, City and State of New York, and further agrees to submit to the jurisdiction of Delaware,
and to any actions that arc instituted in state or Federal court in Wilmington, Delaware and any competent court in the place of its corporate domicile in respect of actions brought against it as a defendant. In addition, each such party irrevocably
waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of such suit, action or proceeding brought in any such court and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum and irrevocably waives any right to which it may be entitled on account of its place of corporate
55
domicile. Each such party hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to this Declaration or the transactions contemplated
hereby. Each such party agrees that final judgment in any proceedings brought in such a court shall be conclusive and binding upon it and may be enforced in any court to the jurisdiction of which it is subject by a suit upon such judgment.
(b) Each of the Sponsor, the Trustees, the Administrators and the Holder of the Common Securities irrevocably consents to the service of
process on it in any such suit, action or proceeding by the mailing thereof by registered or certified mail, postage prepaid, to it at its address given in or pursuant to Section 13.1 hereof.
(c) To the extent permitted by law, nothing herein contained shall preclude any party from effecting service of process in any lawful manner
or from bringing any suit, action or proceeding in respect of this Declaration in any other state, country or place.
SECTION 13.4.
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 13.5.
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 13.6.
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 13.7.
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 13.8.
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 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.
56
IN WITNESS WHEREOF, the undersigned have caused this Declaration to be duly executed as of the
day and year first above written.
|
|
|
|
|
|
|
CHRISTIANA BANK & TRUST COMPANY,
|
|
as Delaware Trustee
|
|
|
|
|
By:
|
|
/s/ James M. Young
|
|
|
|
Name:
|
|
James M. Young
|
|
|
|
Title:
|
|
Assistant Vice President
|
|
|
|
LASALLE BANK NATIONAL ASSOCIATION,
|
|
as Institutional Trustee
|
|
|
|
|
By:
|
|
/s/ Suzanne Smith
|
|
|
|
Name:
|
|
Suzanne Smith
|
|
|
|
Title:
|
|
Vice President
|
|
|
|
GREAT WESTERN BANCORPORATION, INC.,
as Sponsor
|
|
|
|
|
By:
|
|
/s/ Daniel A. Hamann
|
|
|
|
Name:
|
|
Daniel A. Hamann
|
|
|
|
Title:
|
|
President
|
|
|
|
|
By:
|
|
/s/ Daniel A. Hamann
|
|
|
|
Administrator
|
|
|
|
|
By:
|
|
/s/ James R. Clark
|
|
|
|
Administrator
|
ANNEX I
TERMS OF
CAPITAL SECURITIES AND
COMMON SECURITIES
Pursuant
to Section 6.1 of the Amended and Restated Declaration of Trust, dated as of March 10, 2006 (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) Capital Securities. 30,000 Capital Securities of GWB Capital Trust VI (the “Trust”), with an aggregate stated liquidation amount
with respect to the assets of the Trust of Thirty Million Dollars ($30,000,000) and a stated liquidation amount with respect to the assets of the Trust of $1,000 per Capital Security, are hereby designated for the purposes of identification only as
the “TP Securities” (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 or to conform to the rules of any stock exchange on which the Capital Securities are listed, if any.
(b) Common Securities. 928 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. In the absence of an Event of Default, the Common
Securities will have an aggregate stated liquidation amount with respect to the assets of the Trust of Nine Hundred Twenty Eight Thousand Dollars ($928,000) and a stated liquidation amount with respect to the assets of the Trust of $1,000 per Common
Security.
2.
Distributions.
(a) Distributions payable on each Security will be payable at a variable per annum rate of interest, reset quarterly, equal to LIBOR, as
determined on the LIBOR Determination Date for such Distribution Payment Period, plus 1.48% (the “Coupon Rate”) of the stated liquidation amount of $1,000 per Security (provided, however, that the Coupon Rate for any Distribution Payment
Period may not exceed the highest rate permitted by New York law, as the same may be modified by United States law of general applicability), such Coupon Rate being the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Except as set forth below in respect of an Extension Period, Distributions in arrears for more than one quarterly period will bear interest thereon compounded quarterly at the applicable Coupon Rate for each such quarterly period (to the
extent permitted by applicable law). The term “Distributions” as used herein includes cash distributions, any such compounded distributions and any Additional Interest payable on the Debentures unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures held by the
A-I-1
Institutional Trustee and to the extent the Institutional Trustee has funds legally available in the Property Account therefor. The amount of Distributions payable for any Distribution Payment
Period will be computed for any full quarterly Distribution Payment Period on the basis of a 360 day year and the actual number of days elapsed in the relevant Distribution period; provided, however, that upon the occurrence of a Special Event
redemption pursuant to paragraph 4(a) below the amounts payable pursuant to this Declaration shall be calculated as set forth in the definition of Special Redemption Price.
(b) LIBOR shall be determined by the Calculation Agent in accordance with the following provisions:
(1) On the second LIBOR Business Day (
provided
, that on such day commercial banks are open for business (including
dealings in foreign currency deposits) in London (a “LIBOR Banking Day”), and otherwise the next preceding LIBOR Business Day that is also a LIBOR Banking Day) prior to March 15, June 15, September 15 and
December 15 (or, with respect to the first Distribution Payment Period, on March 8, 2006), (each such day, a “LIBOR Determination Date”) for such Distribution Payment Period), the Calculation Agent shall obtain the rate for three
month U.S. Dollar deposits in Europe, which appears on Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 2000 Interest Rate and Currency Exchange Definitions) or such other page as may replace such
Telerate Page 3750 on the Moneyline Telerate, Inc. service (or such other service or services as may be nominated by the British Banker’s Association as the information vendor for the purpose of displaying London interbank offered rates for
U.S. dollar deposits), as of 11:00 a.m. (London time) on such LIBOR Determination Date, and the rate so obtained shall be LIBOR for such Distribution Payment Period. “LIBOR Business Day” means any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in The City of New York or Chicago, Illinois are authorized or obligated by law or executive order to be closed. If such rate is superseded on Telerate Page 3750 by a corrected rate before 12:00
noon (London time) on the same LIBOR Determination Date, the corrected rate as so substituted will be the applicable LIBOR for that Distribution Payment Period.
(2) If, on any LIBOR Determination Date, such rate does not appear on Telerate Page 3750 or such other page as may replace such
Telerate Page 3750 on the Moneyline Telerate, Inc. service (or such other service or services as may be nominated by the British Banker’s Association as the information vendor for the purpose of displaying London interbank offered rates for
U.S. dollar deposits}, the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London Interbank market for three-month U.S. Dollar deposits in Europe
(in an amount determined by the Calculation Agent) by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If, on any
A-I-2
LIBOR Determination Date, at least two of the Reference Banks provide such quotations, LIBOR shall equal the arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or
none of the Reference Banks provide such a quotation, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that at least two leading banks in the City of New York (as selected by the Calculation Agent) are quoting on the
relevant LIBOR Determination Date for three-month U.S. Dollar deposits in Europe at approximately 11:00 a.m. (London time) (in an amount determined by the Calculation Agent). As used herein, “Reference Banks” means four major banks in
the London Interbank market selected by the Calculation Agent.
(3) If the Calculation Agent is required but is unable to
determine a rate in accordance with at least one of the procedures provided above, LIBOR for the applicable Distribution Payment Period shall be LIBOR in effect for the immediately preceding Distribution Payment Period.
(c) All percentages resulting from any calculations on the 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).
(d) As soon as practicable following each LIBOR Determination Date, but in no
event later than the 30th day following such LIBOR Determination Date, the Calculation Agent shall notify, in writing, the Sponsor and the Paying Agent of the applicable Coupon Rate in effect for the related Distribution Payment Period. The
Calculation Agent shall, upon the request of the Holder of any Securities, provide the Coupon Rate then in effect. All calculations made by the Calculation Agent in the absence of manifest error shall be conclusive for all purposes and binding on
the Sponsor and the Holders of the Securities. Any error in a calculation of the Coupon Rate by the Calculation Agent may be corrected at any time by the delivery of notice of such corrected Coupon Rate as provided above. The Paying Agent shall be
entitled to rely on information received from the Calculation Agent or the Sponsor as to the Coupon Rate. The Sponsor shall, from time to time, provide any necessary information to the Paying Agent relating to any original issue discount and
interest on the Securities that is included in any payment and reportable for taxable income calculation purposes. Failure to notify the Company, the Institutional Trustee or the Paying Agent of the applicable Coupon Rate shall not affect the
obligation of the Company to make payment on the Debentures at such Coupon Rate.
(e) 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 15, June 15, September 15 and December 15 of
each year, commencing June 15, 2006 (each, a “Distribution Payment Date”). Subject to prior submission of Notice (as defined in the Indenture), and so long as no Event of Default pursuant to paragraphs (c), (e) or (f) of
Section 5.01 of the Indenture has occurred and is continuing the Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures by extending the interest distribution period for up to 20 consecutive quarterly
periods (each, an “Extension Period”) at any time and from time to time on the Debentures, subject to the conditions described below, during which Extension Period no interest shall be due and payable (except any Additional Interest that
may be due and payable). During any Extension
A-I-3
Period, interest will continue to accrue on the Debentures, and interest on such accrued interest (such accrued interest and interest thereon referred to herein as “Deferred Interest”)
will accrue at an annual rate equal to the Coupon Rate in effect for each such Extension Period, compounded quarterly from the date such Deferred Interest would have been payable were it not for the Extension Period, to the extent permitted by law.
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 Deferred Interest then accrued and unpaid on the Debentures;
provided
,
however
,
that no Extension Period may extend beyond the Maturity Date; and
provided
,
further
, that, during any such Extension Period, the Debenture Issuer may not (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Debenture Issuer’s capital stock or (ii) make any payment of principal or premium or interest on or repay, repurchase or redeem any debt securities of the Debenture Issuer
that rank
pari passu
in all respects with or junior in interest to the Debentures or (iii) make any payment under any guarantees of the Debenture Issuer that rank in all respects
pari passu
with or junior in interest to the
Guarantee (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Debenture Issuer (A) 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, (B) in connection with a dividend reinvestment or stockholder stock purchase plan or (C) 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, reclassification, combination 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 stockholder’s rights plan, or the issuance of rights, stock or other property under any stockholder’s 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). 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 Deferred
Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Deferred Interest shall be due and payable during an Extension Period except at the end thereof, but Deferred Interest shall
accrue upon each installment of interest that would otherwise have been due and payable during such Extension Period until such installment is paid. If Distributions are deferred, the Distributions due shall be paid on the date that the related
Extension Period terminates, or, if such date is not a Distribution Payment Date, on the immediately following Distribution Payment Date, 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
A-I-4
funds legally 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.
(f) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Registrar 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. Notwithstanding anything to the
contrary contained herein, if any Distribution Payment Date, other than on the Maturity Date, any Redemption Date or the Special Redemption Date, falls on a day that is not a Business Day, then any Distributions payable will be paid on, and such
Distribution Payment Date will be moved to, the next succeeding Business Day, and additional Distributions will accrue for each day that such payment is delayed as a result thereof. If the Maturity Date, any Redemption Date or the Special Redemption
Date falls on a day that is not a Business Day, then the principal, premium, if any, and/or Distributions payable on such date will be paid on the next succeeding Business Day, and no additional Distributions will accrue in respect of such payment
made on such next succeeding Business Day.
(g) 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 aggregate of the stated liquidation amount of $1,000 per Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the “Liquidation Distribution”),
unless in connection with such Liquidation, the Debentures in an aggregate stated principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the Coupon 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
Section 3808(e) of 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, upon receipt of an opinion of nationally recognized
tax counsel that Holders will not recognize any gain or loss for United States federal income tax purposes as a result of the distribution
A-I-5
Debentures, dissolve the Trust (including without limitation upon the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event), subject to the receipt by the Debenture
Issuer of prior approval from any regulatory authority having jurisdiction over the Sponsor that is primarily responsible for regulating the activities of the Sponsor if such approval is then required under applicable capital guidelines or policies
of such regulatory authority, 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.
The Trust shall dissolve on the first to occur of (i) March 15, 2041, the expiration of the term of the Trust,
(ii) 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) the filing of a certificate of dissolution or its equivalent with respect to the Sponsor 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) the distribution to the Holders of the Securities of the Debentures, upon exercise of the right of the Holder of all of the outstanding Common Securities to dissolve the Trust as described above, (v) the entry of a decree of
a judicial dissolution of the Sponsor or the Trust, or (vi) 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. As soon as practicable after the dissolution of the Trust and upon completion of the winding up of the Trust, the Trust shall terminate upon the filing of a certificate of cancellation with the Secretary of State of the State of
Delaware.
If a Liquidation of the Trust occurs as described in clause (i), (ii), (iii) or (v) in the immediately preceding
paragraph, the Trust shall be liquidated by the Institutional Trustee of the Trust as expeditiously as such Trustee determines to be possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided by applicable law,
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 to 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 the immediately preceding paragraph 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 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.
Upon any such
Liquidation of the Trust involving a distribution of the Debentures, if at the time of such Liquidation, the Capital Securities were rated by at least one nationally-recognized statistical rating organization, the Debenture Issuer will use its
reasonable best efforts to obtain from at least one such or other rating organization a rating for the Debentures.
A-I-6
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) any certificates representing the Capital Securities 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 of, 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) and (iii) all rights of Holders of Securities under the Capital Securities or the Common Securities, as applicable, 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 15, 2036. The Debentures may be redeemed by the Debenture Issuer, in whole or in part, on any
March 15, June 15, September 15 or December 15 on or after March 15, 2011 at the Redemption Price, upon not less than 30 nor more than 60 days’ notice to Holders of such Debentures. In addition, upon the
occurrence and continuation of a Tax Event, an Investment Company Event or a Capital Treatment Event, the Debentures may be redeemed by the Debenture Issuer in whole or in part, at any time within 90 days following the occurrence of such Tax Event,
Investment Company Event or Capital Treatment Event, as the case may be (the “Special Redemption Date”), at the Special Redemption Price, upon not less than 30 nor more than 60 days’ notice to Holders of the Debentures so long as such
Tax Event, Investment Company Event or Capital Treatment Event, as the case may be, 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 any
regulatory authority having jurisdiction over the Debenture Issuer, if such approval is then required under applicable capital guidelines or policies of such regulatory authority.
“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, regulatory procedure, notice or announcement) (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) if the Debenture Issuer is organized and existing
A-I-7
under the laws of the United States or any state thereof or the District of Columbia, 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 (including withholding taxes), duties, assessments or other governmental charges.
“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 a change in law or regulation or written 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 original issuance of the Debentures.
“Capital Treatment Event” means, if the Debenture Issuer is organized and existing under the laws of the United States or any state
thereof or the District of Columbia, 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 (a) any amendment to, or change in the laws, rules or regulations of
the United States or any political subdivision thereof or therein, or any rules, guidelines or policies of any applicable regulatory authority for the Debenture Issuer or (b) 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, within 90 days of the receipt of such opinion, the aggregate Liquidation Amount of the Capital Securities will not be eligible to be treated by the Debenture Issuer as “Tier 1 Capital” (or the then equivalent thereof) for
purposes of the capital adequacy guidelines of the Federal Reserve (or any successor regulatory authority with jurisdiction over bank or financial holding companies), as then in effect and applicable to the Debenture Issuer (or if the Debenture
Issuer is not a bank holding company, such guidelines applied to the Debenture Issuer as if the Debenture Issuer were subject to such guidelines); provided, however, that the inability of the Debenture Issuer to treat all or any portion of the
aggregate Liquidation Amount of the Capital Securities as Tier 1 Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Debenture Issuer 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 the Debentures in connection with the liquidation of the Trust by the Debenture Issuer 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.
“Special
Event” means any of a Capital Treatment Event, a Tax Event or an Investment Company Event.
A-I-8
“Special Redemption Price” means, with respect to the redemption of any Debentures
following a Tax Event, an amount in cash equal to 100% of the principal amount of the Debt Securities; and with respect to the redemption pursuant to any other Special Event, an amount in cash equal to 103.525% of the principal amount of Debentures
to be redeemed prior to March 15, 2007 and thereafter equal to the percentage of the principal amount of the Debentures that is specified below for the Special Redemption Date plus, in each case, unpaid interest accrued thereon to the Special
Redemption Date:
|
|
|
|
|
|
|
Special Redemption During the12-Month Period Beginning March 15
|
|
Percentage of Principal Amount
|
|
|
|
|
|
2007
|
|
|
103.140
|
%
|
|
2008
|
|
|
102.355
|
%
|
|
2009
|
|
|
101.570
|
%
|
|
2010
|
|
|
100.785
|
%
|
|
2011 and thereafter
|
|
|
100.000
|
%
|
“Redemption Date” means the date fixed for the redemption of Capital Securities, which shall be any
March 15, June 15, September 15 or December 15 on or after March 15, 2011.
“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.
(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, 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 as described in Section 4(e)(ii) below,
(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
A-I-9
date of redemption or exchange and the dates on which notices are given pursuant to this Section 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 Registrar. 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) In the event that fewer than all the outstanding Securities are to be redeemed, the Securities to be redeemed shall be
redeemed Pro Rata from each Holder of Capital Securities.
(iii) 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 Section 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, with respect to Book-Entry Capital Securities, on the Redemption Date, irrevocably deposit with the Depositary for such Book-Entry Capital
Securities, to the extent available therefore, funds sufficient to pay the relevant Redemption Price and will give such Depositary irrevocable instructions and authority to pay the Redemption Price to the Owners of the Capital Securities. With
respect to Capital Securities that are not Book-Entry Capital Securities, the Institutional Trustee will pay, to the extent available therefore, the relevant Redemption Price 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. lf 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 specified in Section 4(a). If any date fixed for redemption of Securities is not a Business Day, then payment of any such Redemption Price payable on such date will be made on the next succeeding day that is a Business Day
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 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 then
applicable 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. 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,
A-I-10
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.
(iv) Redemption/Distribution Notices shall be sent by the Trust (A) in respect of the Capital Securities, to the Holders
thereof, and (B) in respect of the Common Securities, to the Holder thereof.
(v) Subject to the foregoing and
applicable law (including, without limitation, United States federal securities Jaws), 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 Sections 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 not less than 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 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 not less than 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 or Super Majority, as the case may be, 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
A-I-11
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 premium, if any, on or principal of the Debentures on the date such interest, premium, if any, on 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 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. 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 clause (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 may 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 the consent of a Super Majority, the Institutional Trustee may only give such consent at the written direction of the Holders of not less than the proportion in liquidation amount of such 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 written 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
A-I-12
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 and the Delaware Trustee.
6.
Voting Rights – Common Securities.
(a) Except as provided under Sections 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 6.8 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) waiving any past default and its consequences that are waivable under the Indenture, or (iii) exercising 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 not less than 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 Section 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 clause (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
A-I-13
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 Trustees 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 not less than 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 written direction of the Holders of not less than the proportion in liquidation amount of the
Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding.
A-I-14
(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 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 or Special 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 or Special Redemption Price the full amount of such Redemption Price or the Special 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 or the Special 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.
A-I-15
11.
No Preemptive Rights
. The Holders of the Securities shall have no, and the issuance of
the Securities is not subject to, 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.
A-I-16
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
THIS
CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (“DTC”) OR A NOMINEE OF DTC. THIS CAPITAL SECURITY IS EXCHANGEABLE
FOR CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION, AND NO TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A
WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO GWB CAPITAL TRUST VI OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
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 LAWS. 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. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE DEBENTURE
ISSUER OR THE TRUST, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) TO A PERSON THE HOLDER 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, (C) TO A “NON U.S. PERSON” IN AN “OFFSHORE TRANSACTION” PURSUANT TO REGULATION S
UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR
A-1-1
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN “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 (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE DEBENTURE ISSUER’S AND THE TRUST’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE AMENDED AND RESTATED DECLARATION OF TRUST, A COPY OF WHICH
MAY BE OBTAINED FROM THE DEBENTURE ISSUER OR THE TRUST. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING
THIS SECURITY UNLESS SUCH TRANSACTIONS ARE 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 THIS SECURITY 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 THIS SECURITY 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 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 CONNECTION WITH ANY TRANSFER, THE HOLDER OF THE CERTIFICATE WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES
A-1-2
AND OTHER INFORMATION AS MAY BE REQUIRED BY THE AMENDED AND RESTATED DECLARATION OF TRUST TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF
$1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 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 THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.
A-1-3
|
|
|
|
|
Certificate Number [P-001]
|
|
Number of Capital Securities: 30,000
|
CUSIP No.
Certificate
Evidencing Capital Securities
of
GWB Capital Trust VI
TP
Securities
(liquidation amount $1,000 per Capital Security)
GWB Capital Trust VI, a statutory trust created under the laws of the State of Delaware (the “Trust”), hereby certifies that
Cede & Co., as nominee on behalf of the Depository Trust Company (the “Holder”), is the registered owner of 30,000 capital securities of the Trust representing undivided beneficial interests in the assets of the Trust, designated
the TP Securities (liquidation amount $1,000 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 Capital Securities represented hereby are issued pursuant to, and the designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Capital Securities shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust, dated as of March 10, 2006, among Daniel A. Hamann and James R. Clark, as
Administrators, Christiana Bank & Trust Company, as Delaware Trustee, LaSalle Bank National Association, as Institutional Trustee, Great Western Bancorporation, 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 the 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.
By acceptance 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 shall be construed in accordance with, the laws of the State of Delaware, without regard to
principles of conflict of laws.
A-1-4
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
|
|
|
|
|
|
|
GWB Capital Trust VI
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
|
|
Title:
|
|
Administrator
|
|
|
|
|
Dated:
|
|
|
CERTIFICATE OF AUTHENTICATION
This represents Capital Securities referred to in the within-mentioned Declaration.
|
|
|
|
|
LASALLE BANK NATIONAL ASSOCIATION,
|
|
not in its individual capacity but solely as Institutional Trustee
|
|
|
|
|
By:
|
|
|
|
|
|
Authorized Signatory
|
|
|
|
|
Dated:
|
|
|
A-1-5
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Capital Security will be payable at a variable per annum rate of interest, reset quarterly, equal to LIBOR (as
defined in the Declaration) plus 1.48% (the “Coupon Rate”) of the stated liquidation amount of $1,000 per Capital Security (provided, however, that the Coupon Rate for any Distribution Payment Period may not exceed the highest rate
permitted by New York law, as the same may be modified by United States law of general applicability), such Coupon 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 then applicable Coupon Rate for each such quarterly period (to the extent permitted by applicable Jaw). The term “Distributions” as used herein includes cash
distributions, any such compounded distributions and any Additional Interest payable on the Debentures 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 legally available in the Property Account therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the
basis of a 360-day year and the actual number of days elapsed in the relevant Distribution Payment Period.
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 15, June 15, September 15 and December 15 of each year,
commencing on June 15, 2006 (each, a “Distribution Payment Date”). Upon submission of Notice, and so long as no Event of Default pursuant to paragraphs (c), (e) or (f) of Section 5.01 of the Indenture has occurred and
is continuing the Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures by extending the interest distribution period for up to 20 consecutive quarterly periods (each, an “Extension Period”) at
any time and from time to time on the Debentures, subject to the conditions described below, during which Extension Period no interest shall be due and payable (except any Additional Interest that may be due and payable). During any Extension
Period, interest will continue to accrue on the Debentures, and interest on such accrued interest (such accrued interest and interest thereon referred to herein as “Deferred Interest”) will accrue at an annual rate equal to the Coupon Rate
in effect for each such Extension Period, compounded quarterly from the date such Deferred Interest would have been payable were it not for the Extension Period, to the extent permitted by law. 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 Deferred Interest then accrued and unpaid on the Debentures;
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 Deferred Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing
requirements. No interest or Deferred Interest (except any Additional Amounts that may be due and payable) shall be due and payable during an Extension Period, except at the end thereof, but Deferred Interest shall accrue upon each installment of
interest that would otherwise have been due and payable during such Extension Period until such installment is paid. If Distributions are deferred, the Distributions due shall be paid on the date that the related
A-1-6
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 legally 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-1-7
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security Certificate to:
(Insert assignee’s social security or tax identification number)
(Insert address and zip code of assignee),
and irrevocably appoints
as agent
to transfer this Capital Security Certificate on the books of the Trust. The agent may substitute another to act for it, him or her.
(Sign exactly as your name appears on the other side of this
Capital Security Certificate)
|
1
|
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 Security 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 Security registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
|
A-1-8
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.
EXCEPT AS SET FORTH IN SECTION 8.1(b) OF THE DECLARATION (AS DEFINED BELOW), THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED.
A-2-1
|
|
|
|
|
Certificate Number [C-001]
|
|
Number of Common Securities: 928
|
Certificate Evidencing Common Securities
of
GWB Capital Trust VI
GWB Capital Trust VI, a statutory trust created under the laws of the State of Delaware (the “Trust”), hereby certifies that Great
Western Bancorporation, Inc. (the “Holder”) is the registered owner of 928 common securities of the Trust representing undivided beneficial interests in the assets of the Trust (liquidation amount $1,000 per Common Security) (the
“Common Securities”). The Common Securities represented hereby are issued pursuant to, and the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities shall in all respects be
subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust, dated as of March 10, 2006, among Daniel A. Hamann and James R. Clark, as Administrators, Christiana Bank & Trust Company, as Delaware Trustee,
LaSalle Bank National Association, as Institutional Trustee, the Holder, 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 Common Securities as
set forth in Annex I to the 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 Sponsor will provide a
copy of the Declaration 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, when 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.
By acceptance 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 shall
be construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws.
A-2-2
IN WITNESS WHEREOF, the Trust has executed this certificate March 10, 2006.
|
|
|
|
|
|
|
GWB Capital Trust VI
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
|
|
Title:
|
|
Administrator
|
A-2-3
[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 a
variable per annum rate of interest, reset quarterly, equal to LIBOR (as defined in the Declaration) plus 1.48% (the “Coupon Rate”) of the stated liquidation amount of $1,000 per Capital Security (provided, however, that the Coupon Rate
for any Distribution Payment Period may not exceed the highest rate permitted by New York law, as the same may be modified by United States law of general applicability), such Coupon 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 then applicable Coupon Rate for each such quarterly period (to the extent permitted by applicable
law). The term “Distributions” as used herein includes cash distributions, any such compounded distributions and any Additional Interest payable on the Debentures 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 legally available in the Property Account therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day year and the actual number of days elapsed in the relevant Distribution Payment Period.
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 15, June 15, September 15 and December 15 of each year, commencing on June 15, 2006 (each, a “Distribution Payment Date”). Upon submission of Notice, and
so long as no Event of Default pursuant to paragraphs (c), (e) or (f) of Section 5.01 of the Indenture has occurred and is continuing the Debenture Issuer has the right under the Indenture to defer payments of interest on the
Debentures by extending the interest distribution period for up to 20 consecutive quarterly periods (each, an “Extension Period”) at any time and from time to time on the Debentures, subject to the conditions described below, during which
Extension Period no interest shall be due and payable (except any Additional Interest that may be due and payable). During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest (such accrued
interest and interest thereon referred to herein as “Deferred Interest”) will accrue at an accrual rate equal to the Coupon Rate in effect for each such Extension Period, compounded quarterly from the date such Deferred Interest would have
been payable were it not for the Extension Period, to the extent permitted by law. 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 Deferred
Interest then accrued and unpaid on the Debentures; 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 Deferred Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Deferred Interest (except any Additional Interest that may be due and payable) shall be due and payable during an
Extension Period, except at the end thereof, but Deferred Interest shall accrue upon each installment of interest that would otherwise have been due and payable during such Extension Period until such installment is paid. If
A-2-4
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 legally available for the payment of such distributions in the Property Account of the Trust. The Trust’s funds legally 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-2-5
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security Certificate to:
(Insert assignee’s social security or tax identification number)
(Insert address and zip code of assignee),
and irrevocably appoints
as 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)
|
1
|
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 Security 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 Security registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
|
A-2-6
Exhibit 4.8
Sunstate Bancshares, Inc.
as
Company
INDENTURE
Dated as
of June 1, 2005
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
As Trustee
JUNIOR SUBORDINATED
DEBT SECURITIES
Due June 15, 2035
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
ARTICLE I
|
|
|
|
|
DEFINITIONS
|
|
|
|
|
|
|
SECTION 1.01
|
|
Definitions.
|
|
|
1
|
|
|
|
|
|
Additional Interest
|
|
|
1
|
|
|
|
|
|
Additional Provisions
|
|
|
1
|
|
|
|
|
|
Additional Agent
|
|
|
1
|
|
|
|
|
|
Bankruptcy Law
|
|
|
1
|
|
|
|
|
|
Board of Directors
|
|
|
1
|
|
|
|
|
|
Board Resolution
|
|
|
2
|
|
|
|
|
|
Business Day
|
|
|
2
|
|
|
|
|
|
Calculation Agent
|
|
|
2
|
|
|
|
|
|
Capital Securities
|
|
|
2
|
|
|
|
|
|
Capital Securities Guarantee
|
|
|
2
|
|
|
|
|
|
Capital Treatment Event
|
|
|
2
|
|
|
|
|
|
Certificate
|
|
|
3
|
|
|
|
|
|
Common Securities
|
|
|
3
|
|
|
|
|
|
Company
|
|
|
3
|
|
|
|
|
|
Debt Security
|
|
|
3
|
|
|
|
|
|
Debt Security Register
|
|
|
3
|
|
|
|
|
|
Declaration
|
|
|
3
|
|
|
|
|
|
Default
|
|
|
3
|
|
|
|
|
|
Defaulted Interest
|
|
|
3
|
|
|
|
|
|
Event of Default
|
|
|
3
|
|
-i-
TABLE OF CONTENTS
(CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
Extension Period
|
|
|
3
|
|
|
|
|
|
Federal Reserve
|
|
|
3
|
|
|
|
|
|
Indenture
|
|
|
3
|
|
|
|
|
|
Initial Purchaser
|
|
|
3
|
|
|
|
|
|
Institutional Trustee
|
|
|
3
|
|
|
|
|
|
Interest Payment Date
|
|
|
4
|
|
|
|
|
|
Interest Payment Period
|
|
|
4
|
|
|
|
|
|
Interest Rate
|
|
|
4
|
|
|
|
|
|
Investment Company Event
|
|
|
4
|
|
|
|
|
|
LIBOR
|
|
|
4
|
|
|
|
|
|
LIBOR Banking Day
|
|
|
4
|
|
|
|
|
|
LIBOR Business Day
|
|
|
4
|
|
|
|
|
|
LIBOR Determination Date
|
|
|
4
|
|
|
|
|
|
Liquidation Amount
|
|
|
4
|
|
|
|
|
|
Maturity Date
|
|
|
4
|
|
|
|
|
|
Notice
|
|
|
4
|
|
|
|
|
|
Officers’ Certificate
|
|
|
4
|
|
|
|
|
|
Opinion of Counsel
|
|
|
5
|
|
|
|
|
|
OTS
|
|
|
5
|
|
|
|
|
|
Outstanding
|
|
|
5
|
|
|
|
|
|
Paying Agent
|
|
|
5
|
|
|
|
|
|
Person
|
|
|
5
|
|
|
|
|
|
Predecessor Security
|
|
|
5
|
|
-ii-
TABLE OF CONTENTS
(CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
Principal Office of the Trustee
|
|
|
5
|
|
|
|
|
|
Redemption Date
|
|
|
5
|
|
|
|
|
|
Redemption Price
|
|
|
6
|
|
|
|
|
|
Responsible Officer
|
|
|
6
|
|
|
|
|
|
Securityholder
|
|
|
6
|
|
|
|
|
|
Senior Indebtedness
|
|
|
6
|
|
|
|
|
|
Special Event
|
|
|
7
|
|
|
|
|
|
Special Redemption Date
|
|
|
7
|
|
|
|
|
|
Special Redemption Price
|
|
|
7
|
|
|
|
|
|
Subsidiary
|
|
|
7
|
|
|
|
|
|
Tax Event
|
|
|
7
|
|
|
|
|
|
Trust
|
|
|
8
|
|
|
|
|
|
Trust Indenture Act
|
|
|
8
|
|
|
|
|
|
Trust Securities
|
|
|
8
|
|
|
|
|
|
Trustee
|
|
|
8
|
|
|
|
|
|
United States
|
|
|
8
|
|
|
|
|
|
U.S. Person
|
|
|
8
|
|
|
|
|
ARTICLE II
|
|
|
|
|
DEBT SECURITIES
|
|
|
|
|
|
|
SECTION 2.01
|
|
Authentication and Dating.
|
|
|
8
|
|
|
|
|
|
|
SECTION 2.02
|
|
Form of Trustee’s Certificate of Authentication.
|
|
|
9
|
|
|
|
|
|
|
SECTION 2.03
|
|
Form and Denomination of Debt Securities.
|
|
|
9
|
|
|
|
|
|
|
SECTION 2.04
|
|
Execution of Debt Securities.
|
|
|
9
|
|
-iii-
TABLE OF CONTENTS
(CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
SECTION 2.05
|
|
Exchange and Registration of Transfer of Debt Securities.
|
|
|
10
|
|
|
|
|
|
|
SECTION 2.06
|
|
Mutilated Destroyed Lost or Stolen Debt Securities.
|
|
|
13
|
|
|
|
|
|
|
SECTION 2.07
|
|
Temporary Debt Securities.
|
|
|
14
|
|
|
|
|
|
|
SECTION 2.08
|
|
Payment of Interest.
|
|
|
14
|
|
|
|
|
|
|
SECTION 2.09
|
|
Cancellation of Debt Securities Paid, etc.
|
|
|
15
|
|
|
|
|
|
|
SECTION 2.10
|
|
Computation of Interest.
|
|
|
16
|
|
|
|
|
|
|
SECTION 2.11
|
|
Extension of Interest Payment Period.
|
|
|
17
|
|
|
|
|
|
|
SECTION 2.12
|
|
CUSIP Numbers.
|
|
|
18
|
|
|
|
|
|
|
SECTION 2.13
|
|
Income Tax Certification.
|
|
|
18
|
|
|
|
|
ARTICLE III
|
|
|
|
|
PARTICULAR COVENANTS OF THE COMPANY
|
|
|
|
|
|
|
SECTION 3.01
|
|
Payment of Principal. Premium and Interest; Agreed Treatment of the Debt Securities.
|
|
|
19
|
|
|
|
|
|
|
SECTION 3.02
|
|
Offices for Notices and Payments. etc.
|
|
|
19
|
|
|
|
|
|
|
SECTION 3.03
|
|
Appointments to Fill Vacancies in Trustee’s Office.
|
|
|
20
|
|
|
|
|
|
|
SECTION 3.04
|
|
Provision as to Paying Agent.
|
|
|
20
|
|
|
|
|
|
|
SECTION 3.05
|
|
Certificate to Trustee.
|
|
|
21
|
|
|
|
|
|
|
SECTION 3.06
|
|
Additional Interest.
|
|
|
21
|
|
|
|
|
|
|
SECTION 3.07
|
|
Compliance with Consolidation Provisions.
|
|
|
22
|
|
|
|
|
|
|
SECTION 3.08
|
|
Limitation on Dividends.
|
|
|
22
|
|
|
|
|
|
|
SECTION 3.09
|
|
Covenants as to the Trust.
|
|
|
23
|
|
-iv-
TABLE OF CONTENTS
(CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
ARTICLE IV
|
|
|
|
|
LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
|
|
|
|
|
|
|
SECTION 4.01
|
|
Securityholders’ Lists.
|
|
|
23
|
|
|
|
|
|
|
SECTION 4.02
|
|
Preservation and Disclosure of Lists.
|
|
|
23
|
|
|
|
|
ARTICLE V
|
|
|
|
|
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT
|
|
|
|
|
|
|
SECTION 5.01
|
|
Events of Default.
|
|
|
25
|
|
|
|
|
|
|
SECTION 5.02
|
|
Payment of Debt Securities on Default; Suit Therefor.
|
|
|
27
|
|
|
|
|
|
|
SECTION 5.03
|
|
Application of Moneys Collected by Trustee.
|
|
|
28
|
|
|
|
|
|
|
SECTION 5.04
|
|
Proceedings by Securityholders.
|
|
|
29
|
|
|
|
|
|
|
SECTION 5.05
|
|
Proceedings by Trustee.
|
|
|
29
|
|
|
|
|
|
|
SECTION 5.06
|
|
Remedies Cumulative and Continuing.
|
|
|
29
|
|
|
|
|
|
|
SECTION 5.07
|
|
Direction of Proceedings and Waiver of Defaults by Majority of Securityholders.
|
|
|
30
|
|
|
|
|
|
|
SECTION 5.08
|
|
Notice of Defaults.
|
|
|
31
|
|
|
|
|
|
|
SECTION 5.09
|
|
Undertaking to Pay Costs.
|
|
|
31
|
|
|
|
|
ARTICLE VI
|
|
|
|
|
CONCERNING THE TRUSTEE
|
|
|
|
|
|
|
SECTION 6.01
|
|
Duties and Responsibilities of Trustee.
|
|
|
31
|
|
|
|
|
|
|
SECTION 6.02
|
|
Reliance on Documents. Opinions, etc.
|
|
|
33
|
|
|
|
|
|
|
SECTION 6.03
|
|
No Responsibility for Recitals, etc.
|
|
|
34
|
|
|
|
|
|
|
SECTION 6.04
|
|
Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Debt Securities.
|
|
|
34
|
|
-v-
TABLE OF CONTENTS
(CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
SECTION 6.05
|
|
Moneys to be Held in Trust:
|
|
|
34
|
|
|
|
|
|
|
SECTION 6.06
|
|
Compensation and Expenses of Trustee.
|
|
|
34
|
|
|
|
|
|
|
SECTION 6.07
|
|
Officers’ Certificate as Evidence.
|
|
|
35
|
|
|
|
|
|
|
SECTION 6.08
|
|
Eligibility of Trustee.
|
|
|
35
|
|
|
|
|
|
|
SECTION 6.09
|
|
Resignation or Removal of Trustee. Calculation Agent Paying Agent or Debt Security Registrar.
|
|
|
36
|
|
|
|
|
|
|
SECTION 6.10
|
|
Acceptance by Successor.
|
|
|
37
|
|
|
|
|
|
|
SECTION 6.11
|
|
Succession by Merger. etc.
|
|
|
38
|
|
|
|
|
|
|
SECTION 6.12
|
|
Authenticating Agents.
|
|
|
39
|
|
|
|
|
ARTICLE VII
|
|
|
|
|
CONCERNING THE SECURITYHOLDERS
|
|
|
|
|
|
|
SECTION 7.01
|
|
Action by Securityholders.
|
|
|
40
|
|
|
|
|
|
|
SECTION 7.02
|
|
Proof of Execution by Securityholders.
|
|
|
41
|
|
|
|
|
|
|
SECTION 7.03
|
|
Who Are Deemed Absolute Owners.
|
|
|
41
|
|
|
|
|
|
|
SECTION 7.04
|
|
Debt Securities Owned by Company Deemed Not Outstanding.
|
|
|
41
|
|
|
|
|
|
|
SECTION 7.05
|
|
Revocation of Consents; Future Securityholders Bound.
|
|
|
42
|
|
|
|
|
ARTICLE VIII
|
|
|
|
|
SECURITYHOLDERS’ MEETINGS
|
|
|
|
|
|
|
SECTION 8.01
|
|
Purposes of Meetings.
|
|
|
42
|
|
|
|
|
|
|
SECTION 8.02
|
|
Call of Meetings by Trustee.
|
|
|
42
|
|
|
|
|
|
|
SECTION 8.03
|
|
Call of Meetings by Company or Securityholders.
|
|
|
43
|
|
|
|
|
|
|
SECTION 8.04
|
|
Qualifications for Voting.
|
|
|
43
|
|
|
|
|
|
|
SECTION 8.05
|
|
Regulations.
|
|
|
43
|
|
-vi-
TABLE OF CONTENTS
(CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
SECTION 8.06
|
|
Voting.
|
|
|
44
|
|
|
|
|
|
|
SECTION 8.07
|
|
Quorum; Actions.
|
|
|
44
|
|
|
|
|
|
|
SECTION 8.08
|
|
Written Consent Without a Meeting.
|
|
|
45
|
|
|
|
|
ARTICLE IX
|
|
|
|
|
SUPPLEMENTAL INDENTURES
|
|
|
|
|
|
|
SECTION 9.01
|
|
Supplemental Indentures without Consent of Securityholders.
|
|
|
45
|
|
|
|
|
|
|
SECTION 9.02
|
|
Supplemental Indentures with Consent of Securityholders.
|
|
|
47
|
|
|
|
|
|
|
SECTION 9.03
|
|
Effect of Supplemental Indentures.
|
|
|
48
|
|
|
|
|
|
|
SECTION 9.04
|
|
Notation on Debt Securities.
|
|
|
48
|
|
|
|
|
|
|
SECTION 9.05
|
|
Evidence of Compliance of Supplemental Indenture to be furnished to Trustee.
|
|
|
48
|
|
|
|
|
ARTICLE X
|
|
|
|
|
REDEMPTION OF SECURITIES
|
|
|
|
|
|
|
SECTION 10.01
|
|
Optional Redemption.
|
|
|
48
|
|
|
|
|
|
|
SECTION 10.02
|
|
Special Event Redemption.
|
|
|
49
|
|
|
|
|
|
|
SECTION 10.03
|
|
Notice of Redemption; Selection of Debt Securities.
|
|
|
49
|
|
|
|
|
|
|
SECTION 10.04
|
|
Payment of Debt Securities Called for Redemption.
|
|
|
50
|
|
|
|
|
ARTICLE XI
|
|
|
|
|
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
|
|
|
|
|
|
|
SECTION 11.01
|
|
Company May Consolidate, etc., on Certain Terms.
|
|
|
50
|
|
|
|
|
|
|
SECTION 11.02
|
|
Successor Entity to be Substituted.
|
|
|
51
|
|
|
|
|
|
|
SECTION 11.03
|
|
Opinion of Counsel to be Given to Trustee.
|
|
|
51
|
|
-vii-
TABLE OF CONTENTS
(CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
ARTICLE XII
|
|
|
|
|
SATISFACTION AND DISCHARGE OF INDENTURE
|
|
|
|
|
|
|
SECTION 12.01
|
|
Discharge of Indenture.
|
|
|
52
|
|
|
|
|
|
|
SECTION 12.02
|
|
Deposited Moneys to be Held in Trust by Trustee.
|
|
|
52
|
|
|
|
|
|
|
SECTION 12.03
|
|
Paying Agent to Repay Moneys Held.
|
|
|
53
|
|
|
|
|
|
|
SECTION 12.04
|
|
Return of Unclaimed Moneys.
|
|
|
53
|
|
|
|
|
ARTICLE XIII
|
|
|
|
|
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
|
|
|
|
|
|
|
SECTION 13.01
|
|
Indenture and Debt Securities Solely Corporate Obligations.
|
|
|
53
|
|
|
|
|
ARTICLE XIV
|
|
|
|
|
MISCELLANEOUS PROVISIONS
|
|
|
|
|
|
|
SECTION 14.01
|
|
Successors.
|
|
|
53
|
|
|
|
|
|
|
SECTION 14.02
|
|
Official Acts by Successor Entity.
|
|
|
54
|
|
|
|
|
|
|
SECTION 14.03
|
|
Surrender of Company Powers.
|
|
|
54
|
|
|
|
|
|
|
SECTION 14.04
|
|
Addresses for Notices. etc.
|
|
|
54
|
|
|
|
|
|
|
SECTION 14.05
|
|
Governing Law.
|
|
|
54
|
|
|
|
|
|
|
SECTION 14.06
|
|
Evidence of Compliance with Conditions Precedent.
|
|
|
54
|
|
|
|
|
|
|
SECTION 14.07
|
|
Non-Business Days.
|
|
|
55
|
|
|
|
|
|
|
SECTION 14.08
|
|
Table of Contents, Headings, etc.
|
|
|
55
|
|
|
|
|
|
|
SECTION 14.09
|
|
Execution in Counterparts.
|
|
|
55
|
|
|
|
|
|
|
SECTION 14.10
|
|
Severability.
|
|
|
55
|
|
|
|
|
|
|
SECTION 14.11
|
|
Assignment.
|
|
|
56
|
|
|
|
|
|
|
SECTION 14.12
|
|
Acknowledgment of Rights.
|
|
|
56
|
|
-viii-
TABLE OF CONTENTS
(CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
ARTICLE XV
|
|
|
|
|
SUBORDINATION OF DEBT SECURITIES
|
|
|
|
|
|
|
SECTION 15.01
|
|
Agreement to Subordinate.
|
|
|
56
|
|
|
|
|
|
|
SECTION 15.02
|
|
Default on Senior Indebtedness.
|
|
|
57
|
|
|
|
|
|
|
SECTION 15.03
|
|
Liquidation; Dissolution; Bankruptcy.
|
|
|
57
|
|
|
|
|
|
|
SECTION 15.04
|
|
Subrogation.
|
|
|
58
|
|
|
|
|
|
|
SECTION 15.05
|
|
Trustee to Effectuate Subordination.
|
|
|
59
|
|
|
|
|
|
|
SECTION 15.06
|
|
Notice by the Company.
|
|
|
59
|
|
|
|
|
|
|
SECTION 15.07
|
|
Rights of the Trustee. Holders of Senior Indebtedness.
|
|
|
60
|
|
|
|
|
|
|
SECTION 15.08
|
|
Subordination May Not Be Impaired.
|
|
|
60
|
|
|
|
|
|
|
EXHIBITS
|
|
|
|
|
|
|
EXHIBIT A
|
|
FORM OF DEBT SECURITY
|
-ix-
This INDENTURE, dated as of June 1, 2005, between Sunstate Bancshares, Inc., a bank holding
company incorporated in Arizona (hereinafter sometimes called the “Company”), and JPMorgan Chase Bank, National Association as trustee (hereinafter sometimes called the “Trustee”).
WITNESSETH:
WHEREAS, for its
lawful corporate purposes, the Company has duly authorized the issuance of its Junior Subordinated Debt Securities due June 15, 2035 (the “Debt Securities”) under this Indenture and to provide, among other things, for the execution
and authentication, delivery and administration thereof, the Company has duly authorized the execution of this Indenture.
NOW, THEREFORE,
in consideration of the premises, and the purchase of the Debt Securities 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 Debt
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 and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.01. 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” shall have the meaning set forth in Section 3.06.
“Additional Provisions” shall have the meaning set forth in Section 15.01.
“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 Wilmington, Delaware,
New York City or the city of either the Principal Office of the Trustee or the principal office of the Company are permitted or required by any applicable law or executive order to close.
“Calculation Agent” means the Person identified as “Trustee” in the first paragraph hereof with respect to the Debt
Securities and the Institutional Trustee with respect to the Trust Securities.
“Capital Securities” means undivided beneficial
interests in the assets of the Trust which are designated as “TP Securities” and rank pari passu with Common Securities issued by the Trust; provided, however, that if an Event of Default (as defined in the Declaration) has occurred and is
continuing, 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 will enter into with JPMorgan Chase Bank, National
Association or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities of the Trust.
“Capital Treatment Event” means, if the Company is organized and existing under the laws of the United States or any state thereof
or the District of Columbia, 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 (a) any amendment to, or change in, the laws, rules or regulations of the United
States or any political subdivision thereof or therein, or any rules, guidelines or policies of any applicable regulatory authority for the Company or (b) 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 Debt Securities, there is more than an insubstantial risk that,
within 90 days of the receipt of such opinion, the aggregate Liquidation Amount of the Capital Securities will not be eligible to be treated by the Company as “Tier 1 Capital” (or the then equivalent thereof) for purposes of the
capital adequacy guidelines of the Federal Reserve (or any successor regulatory authority with jurisdiction over bank or financial holding companies), 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 aggregate Liquidation Amount of the Capital Securities as Tier 1
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 the Debt Securities in connection with the liquidation of
-2-
the Trust by the Company 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 are designated as “Common Securities” and rank pari passu with Capital Securities issued by the Trust; provided, however, that if an Event of Default (as defined in the Declaration) has occurred and is continuing, 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 Sunstate Bancshares, Inc., a bank holding company incorporated in Arizona, and, subject to the provisions of
Article XI, shall include its successors and assigns.
“Debt Security” or “Debt Securities” has the meaning
stated in the first recital of this Indenture.
“Debt Security Register” has the meaning specified in Section 2.05.
“Declaration” means the Amended and Restated Declaration of Trust of the Trust dated as of June 1, 2005, 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 2.08.
“Deferred Interest” has the meaning set forth in Section 2.11.
“Event of Default” means any event specified in Section 5.01, which has 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.
“Indenture” means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or
supplemented, or both.
“Initial Purchaser” means the initial purchaser of the Capital Securities.
“Institutional Trustee” has the meaning set forth in the Declaration.
-3-
“Interest Payment Date” means March 15, June 15, September 15 and
December 15 of each year, commencing on September 15, 2005, during the term of this Indenture.
“Interest Payment
Period” means the period from and including an Interest Payment Date, or in the case of the first Interest Payment Period, the original date of issuance of the Debt Securities, to, but excluding, the next succeeding Interest Payment Date or, in
the case of the last Interest Payment Period, the Redemption Date, Special Redemption Date or Maturity Date, as the case may be.
“Interest Rate” means, with respect to any Interest Period, a per annum rate of interest, equal to LIBOR, as determined on the LIBOR
Determination Date for such Interest Payment Date, plus 1.85%; provided, however, that the Interest Rate for any Interest Payment Period may not exceed the highest rate permitted by New York law, as the same may be modified by United States law of
general application.
“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 a change in law or regulation or written 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 original issuance of the Debt Securities.
“LIBOR” means the London Interbank Offered Rate for U.S. Dollar deposits in Europe as determined by the Calculation Agent
according to Section 2.10(b).
“LIBOR Banking Day” has the meaning set forth in Section 2.10(b)(l).
“LIBOR Business Day” has the meaning set forth in Section 2.10(b)(1).
“LIBOR Determination Date” has the meaning set forth in Section 2.10(b).
“Liquidation Amount” means the liquidation amount of $1,000 per Trust Security.
“Maturity Date” means June 15, 2035.
“Notice” has the meaning set forth in Section 2.11.
“Officers’ Certificate” means a certificate signed by the Chairman of the Board, the Vice Chairman, the President or any Vice
President, and by the Chief Financial Officer, 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 14.06 if and to the extent required by the provisions of such Section.
-4-
“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 14.06 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.
“Outstanding” means, when used with reference to Debt Securities, subject to
the provisions of Section 7.04, as of any particular time, all Debt Securities authenticated and delivered by the Trustee or the Authenticating Agent under this Indenture, except
(a) Debt Securities theretofore canceled by the Trustee or the Authenticating Agent or delivered to the Trustee for cancellation;
(b) Debt Securities, 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
, that, if such Debt Securities, or
portions thereof, are to be redeemed prior to maturity thereof, notice of such redemption shall have been given as provided in Articles X and XIV or provision satisfactory to the Trustee shall have been made for giving such notice; and
(c) Debt Securities paid pursuant to Section 2.06 or in lieu of or in substitution of or which other Debt Securities shall have been
authenticated and delivered pursuant to the terms of Section 2.06 unless proof satisfactory to the Company and the Trustee is presented that any such Debt Securities are held by bona fide holders in due course.
“Paying Agent” has the meaning set forth in Section 3.04(e).
“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 Debt Security means every previous Debt Security evidencing all or a portion of the same debt as that evidenced by such particular Debt Security; and, for the purposes of this definition, any Debt Security authenticated and delivered
under Section 2.06 in lieu of a lost, destroyed or stolen Debt Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Debt Security.
“Principal Office of the Trustee” means the office of the Trustee, at which at any particular time its corporate trust business
shall be principally administered, which at all times shall be located within the United States and at the time of the execution of this Indenture shall be 600 Travis Street, 50th Floor, Houston, Texas 77002.
“Redemption Date” has the meaning set forth in Section 10.01.
-5-
“Redemption Price” means 100% of the principal amount of the Debt Securities being
redeemed plus accrued and unpaid interest on such Debt Securities to the Redemption Date.
“Responsible Officer” means, with
respect to the Trustee, any officer within the Principal Office of the Trustee with direct responsibility for the administration of the Indenture, 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 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.
“Securityholder”, “holder of Debt Securities” or other similar terms, means any Person in whose name at the time a
particular Debt Security is registered on the Debt Security Register.
“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, similar obligations arising from off-balance sheet guarantees and direct credit substitutes 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 (but excluding trade accounts payable arising in the ordinary course of business, such trade accounts payable being
pari passu in right of payment to the Debt Securities); (iv) all obligations of the Company for the reimbursement of any letter of credit, any banker’s acceptance, all obligations associated with derivative products such as interest rate
and foreign exchange contracts and commodity contracts, 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, unless, it is provided in the instrument creating or evidencing the same or pursuant to which the same is outstanding, that such obligations are not superior or are pari passu in right of payment to
the Debt Securities; provided, however, that Senior Indebtedness shall not include (1) 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 in transactions substantially similar in
structure to the transactions contemplated hereunder and in the Declaration; (2) Debt Securities issued pursuant to this Indenture and guarantees in respect of such Debt Securities; (3) obligations with respect to which
-6-
(a) in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations arc pari passu, junior or otherwise not superior in
right of payment to the Debt Securities.
“Special Event” means any of a Tax Event, an Investment Company Event or a Capital
Treatment Event.
“Special Redemption Date” has the meaning set forth in Section 10.02.
“Special Redemption Price” means, with respect to the redemption of any Debt Security following a Special Event, an amount in cash
equal to 103.525% of the principal amount of Debt Securities to be redeemed prior to June 15, 2006 and thereafter equal to the percentage of the principal amount of the Debt Securities that is specified below for the Special Redemption Date
plus, in each case, unpaid interest accrued thereon to the Special Redemption Date:
|
|
|
|
|
|
|
Special Redemption During the 12-Month Period Beginning June 15
|
|
Percentage of Principal Amount
|
|
|
2006
|
|
|
103.140
|
%
|
|
2007
|
|
|
102.355
|
%
|
|
2008
|
|
|
101.570
|
%
|
|
2009
|
|
|
100.785
|
%
|
|
2010 and thereafter
|
|
|
100.000
|
%
|
“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, regulatory procedure, notice or announcement (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
-7-
announced, in each case on or after the date of original issuance of the Debt 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 Debt Securities; (ii) interest payable by the Company on the Debt Securities is not, or within 90 days of the date of such
opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to or otherwise required to pay, or
required to withhold from distributions to holders of Trust Securities, more than a de minimis amount of other taxes (including withholding taxes), duties, assessments or other governmental charges.
“Trust” means Sunstate Bancshares Trust II, the Delaware statutory trust, or any other similar trust created for the purpose of
issuing Capital Securities in connection with the issuance of Debt Securities under this Indenture, of which the Company is the sponsor.
“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended from time-to-time, or any successor legislation.
“Trust Securities” means Common Securities and Capital Securities of Sunstate Bancshares Trust II.
“Trustee” means the Person identified as “Trustee” in the first paragraph hereof, and, subject to the provisions of
Article VI hereof, shall also include its successors and assigns as Trustee hereunder.
“United States” means the United
States of America and the District of Columbia.
“U.S. Person” has the meaning given to United States Person as set forth in
Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended.
ARTICLE II
DEBT SECURITIES
SECTION 2.01
Authentication and Dating
.
Upon the execution and delivery of this Indenture, or from time to time thereafter, Debt Securities in an aggregate principal amount not in
excess of $2,062,000 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 Debt Securities to or upon the written order of the Company,
signed by its Chairman of the Board of Directors, Vice Chairman, President or Chief Financial Officer or one of its Vice Presidents, without any further action by the Company hereunder. In authenticating such Debt Securities, and accepting the
additional responsibilities under this Indenture in relation to such Debt Securities, the Trustee shall be entitled to receive, and (subject to Section 6.01) shall be fully protected in relying upon 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 or other officers with appropriate delegated authority of the
Company as the case may be.
-8-
The Trustee shall have the right to decline to authenticate and deliver any Debt Securities under
this Section if the Trustee, being advised 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 Securityholders. The Trustee shall also be entitled to receive an opinion of counsel to the effect that (1) all conditions precedent to the execution, delivery and authentication of the Securities have been complied with; (2) the
Securities are not required to be registered under the Securities Act; and (3) the Indenture is not required to be qualified under the Trust Indenture Act.
The definitive Debt Securities 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 Debt Securities, as evidenced by their execution of such Debt Securities.
SECTION 2.02
Form of Trustee’s Certificate of Authentication
.
The Trustee’s certificate of authentication on all Debt Securities shall be in substantially the following form:
This is one of the Debt Securities referred to in the within-mentioned Indenture.
JPMorgan Chase Bank, National Association, not in its individual capacity but solely as Trustee
SECTION 2.03
Form and Denomination of Debt Securities
.
The Debt Securities shall be substantially in the form of Exhibit A hereto. The Debt Securities shall be in registered, certificated form
without coupons and in minimum denominations of $100,000 and any multiple of $1,000 in excess thereof. The Debt Securities 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 2.04
Execution of Debt Securities
.
The Debt Securities shall be signed in the name and on behalf of the Company by the manual or facsimile signature of any of its Chairman of
the Board of Directors, Vice Chairman, President or Chief Financial Officer or one of its Executive Vice Presidents, Senior Vice Presidents or Vice Presidents, under its corporate seal (if legally required), which may be affixed thereto or printed,
engraved or otherwise reproduced thereon, by facsimile or otherwise, and which need not be attested. Only such Debt Securities 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 officer, 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
Debt Security executed by the Company shall be conclusive evidence that the Debt Security so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture.
-9-
In case any officer of the Company who shall have signed any of the Debt Securities shall cease
to be such officer before the Debt Securities so signed shall have been authenticated and delivered by the Trustee or the Authenticating Agent, or disposed of by the Company, such Debt Securities nevertheless may be authenticated and delivered or
disposed of as though the Person who signed such Debt Securities had not ceased to be such officer of the Company; and any Debt Security may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Debt
Security, 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 Debt Security shall be dated the date of its authentication.
SECTION 2.05
Exchange and Registration of Transfer of Debt Securities
.
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 3.02, a register (the “Debt Security Register”) for the Debt Securities issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration and
transfer of all Debt Securities as provided in this Article II. Such register shall be in written form or in any other form capable of being converted into written form within a reasonable time.
Debt Securities 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 3.02, 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 Debt Security or Debt Securities which the Securityholder making the exchange shall be entitled to receive. Upon due presentment for registration of transfer of any Debt Security at the Principal Office of the Trustee or at any office or agency
of the Company maintained for such purpose as provided in Section 3.02, 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 Debt Security for a like aggregate principal amount. Registration or registration of transfer of any Debt Security by the Trustee or by any agent of the Company appointed pursuant to Section 3.02, and
delivery of such Debt Security, shall be deemed to complete the registration or registration of transfer of such Debt Security.
All Debt
Securities 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 either the Trustee or the Authenticating Agent duly executed by, the holder or such holder’s attorney duly authorized in writing.
Neither the Trustee nor the Debt Security Registrar shall be responsible for ascertaining whether any transfer hereunder complies with the
registration provisions of or any
-10-
exemptions from the Securities Act (under and as defined in the Declaration), applicable state securities laws or the applicable laws of any other jurisdiction, ERISA, the United States Internal
Revenue Code of 1986, as amended, or the Investment Company Act (under and as defined in the Declaration).
No service charge shall be
made for any exchange or registration of transfer of Debt Securities, 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 Debt Security for a period of 15 days
immediately preceding the date of selection of Debt Securities for redemption.
Notwithstanding the foregoing, Debt Securities may not be
transferred except in compliance with the restricted securities legend set forth below, unless otherwise determined by the Company in accordance with applicable law, which legend shall be placed on each Debt 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 LAWS. 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. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE COMPANY,
(B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) TO A PERSON THE HOLDER 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, (C) TO A “NON U.S. PERSON” IN AN “OFFSHORE TRANSACTION” PURSUANT TO REGULATION S UNDER THE SECURITIES ACT,
(D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN “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 (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) 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
-11-
OBTAINED FROM THE COMPANY. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING
THIS SECURITY UNLESS SUCH TRANSACTIONS ARE 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 THIS SECURITY 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 THIS SECURITY 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 CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SECURITY WILL DELIVER TO THE COMPANY AND TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION
AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
THIS SECURITY WILL BE ISSUED
AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A PRINCIPAL AMOUNT OF LESS THAN $100,000 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 THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE
-12-
RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.
THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL
DEPOSIT INSURANCE CORPORATION. THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND THE CLAIMS OF GENERAL AND SECURED CREDITORS OF THE COMPANY, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE COMPANY OR ANY OF ITS SUBSIDIARIES AND IS NOT
SECURED.
SECTION 2.06
Mutilated, Destroyed, Lost or Stolen Debt Securities
.
In case any Debt Security 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 Debt Security bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debt Security, or in lieu of and in substitution for the Debt Security so destroyed, lost
or stolen. In every case the applicant for a substituted Debt Security 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 Debt Security and of the ownership thereof.
The Trustee may authenticate any such substituted Debt Security and deliver the same upon the written request or authorization of any officer
of the Company. Upon the issuance of any substituted Debt Security, 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 Debt Security 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 Debt Security, pay or
authorize the payment of the same (without surrender thereof except in the case of a mutilated Debt Security) 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 Security and of the ownership thereof.
Every substituted Debt Security issued pursuant to the provisions of this Section 2.06 by virtue of the fact that any such Debt Security
is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debt Security 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 Debt Securities duly issued hereunder. All Debt Securities 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 Debt Securities 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.
-13-
SECTION 2.07
Temporary Debt Securities
.
Pending the preparation of definitive Debt Securities, the Company may execute and the Trustee shall authenticate and make available for
delivery temporary Debt Securities that are typed. printed or lithographed. Temporary Debt Securities shall be issuable in any authorized denomination, and substantially in the form of the definitive Debt Securities but with such omissions.
insertions and variations as may be appropriate for temporary Debt Securities, all as may be determined by the Company. Every such temporary Debt Security 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 Debt Securities. Without unreasonable delay, the Company will execute and deliver to the Trustee or the Authenticating Agent definitive Debt Securities and thereupon
any or all temporary Debt Securities may be surrendered in exchange therefor, at the Principal Office of the Trustee or at any office or agency maintained by the Company for such purpose as provided in Section 3.02, and the Trustee or the
Authenticating Agent shall authenticate and make available for delivery in exchange for such temporary Debt Securities a like aggregate principal amount of such definitive Debt Securities. 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 Debt Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Debt Securities authenticated and delivered hereunder.
SECTION 2.08
Payment of Interest
.
Each Debt Security will bear interest at the then applicable Interest Rate from and including each Interest Payment Date or, in the case of
the first Interest Payment Period, the original date of issuance of such Debt Security to, but excluding, the next succeeding Interest Payment Date or, in the case of the last Interest Payment Period, the Redemption Date, Special Redemption Date or
Maturity Date, as applicable, on the principal thereof, on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on Deferred Interest and on any overdue installment of interest (including
Defaulted Interest), payable (subject to the provisions of Article XII) on each Interest Payment Date commencing on September 15, 2005. Interest and any Deferred Interest on any Debt Security that is payable, and is punctually paid or duly
provided for by the Company, on any Interest Payment Date shall be paid to the Person in whose name said Debt Security (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 Deferred Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid. In the event that any Debt Security 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 either on or prior to such Interest Payment Date, interest on such Debt Security will be paid upon presentation and surrender of such Debt Security.
-14-
Any interest on any Debt Security, other than Deferred Interest, that is payable. but is not
punctually paid or duly provided for by the Company, 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 Debt 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 Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Debt Security and the date of the proposed
payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements reasonably 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 fifteen nor less than ten days prior to the date of the proposed payment and not less than ten 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 his or her address as it appears in the Debt Security Register, not less than ten 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 Debt Securities (or their respective Predecessor Securities) are registered on such special record date and
thereafter the Company shall have no further payment obligation in respect of the Defaulted Interest.
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 Debt Securities.
The term “regular record date” as used in this Indenture shall mean the fifteenth day prior to the applicable Interest Payment Date
whether or not such date is a Business Day.
Subject to the foregoing provisions of this Section, each Debt Security delivered under this
Indenture upon registration of transfer of or in exchange for or in lieu of any other Debt Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Debt Security.
SECTION 2.09
Cancellation of Debt Securities Paid, etc.
All Debt Securities 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, shall be promptly canceled by it, and no Debt Securities shall be issued in lieu thereof except as expressly permitted by any
of the provisions of this Indenture. The Trustee shall dispose of all canceled Debt Securities in accordance with its customary practices, unless the Company
-15-
otherwise directs the Trustee in writing, in which case the Trustee shall dispose of such Debt Securities as directed by the Company. If the Company shall acquire any of the Debt Securities,
however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debt Securities unless and until the same are surrendered to the Trustee for cancellation.
SECTION 2.10
Computation of Interest
.
(a) The amount of interest payable for any Interest Payment Period will be computed on the basis of a 360-day year and the actual number of
days elapsed in the relevant interest period; provided, however, that upon the occurrence of a Special Event Redemption pursuant to Section 10.02 the amounts payable pursuant to this Indenture shall be calculated as set forth in the definition
of Special Redemption Price.
(b) LIBOR, for any Interest Payment Period, shall be determined by the Calculation Agent in accordance with
the following provisions:
(1) On the second LIBOR Business Day (provided, that on such day commercial banks are open for
business (including dealings in foreign currency deposits) in London (a “LIBOR Banking Day”), and otherwise the next preceding LIBOR Business Day that is also a LIBOR Banking Day) prior to March 15, June 15, September 15 and
December 15 (or, with respect to the first Interest Payment Period, on May 26, 2005) (each such day, a “LIBOR Determination Date” for the following Interest Payment Period), the Calculation Agent shall obtain the rate for
three-month U.S. Dollar deposits in Europe, which appears on Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 2000 Interest Rate and Currency Exchange Definitions) or such other page as may replace
such Telerate Page 3750 on the Moneyline Telerate, Inc. service (or such other service or services as may be nominated by the British Banker’s Association as the information vendor for the purpose of displaying London Interbank offered rates
for U.S. dollar deposits), as of 11:00 a.m. (London time) on such LIBOR Determination Date, and the rate so obtained shall be LIBOR for such Interest Payment Period. “LIBOR Business Day” means any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in The City of New York or Wilmington, Delaware are authorized or obligated by law or executive order to be closed. If such rate is superseded on Telerate Page 3750 by a corrected rate before 12:00
noon (London time) on the same LIBOR Determination Date, the corrected rate as so substituted will be LIBOR for that Interest Payment Period.
(2) If, on any LIBOR Determination Date, such rate does not appear on Telerate Page 3750 or such other page as may replace such
Telerate Page 3750 on the Moneyline Telerate, Inc. service (or such other service or services as may be nominated by the British Banker’s Association as the information vendor for the purpose of displaying London Interbank offered rates for
U.S. dollar deposits), the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the
-16-
London Interbank market for three-month U.S. Dollar deposits in Europe (in an amount determined by the Calculation Agent) by reference to requests for quotations as of approximately 11:00
a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such quotations, LIBOR shall equal the arithmetic mean of such
quotations. If, on any LIBOR Determination Date, only one or none of the Reference Banks provide such a quotation, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that at least two leading banks in the City of New York (as
selected by the Calculation Agent) are quoting on the relevant LIBOR Determination Date for three-month U.S. Dollar deposits in Europe at approximately 11:00 a.m. (London time) (in an amount determined by the Calculation Agent). As used herein,
“Reference Banks” means four major banks in the London Interbank market selected by the Calculation Agent.
(3)
If the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR for the applicable Interest Payment Period shall be LIBOR in effect for the immediately preceding Interest
Payment Period.
(c) All percentages resulting from any calculations on the Debt 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).
(d) On each LIBOR Determination Date, the Calculation
Agent shall notify, in writing, the Company and the Paying Agent of the applicable Interest Rate in effect for the related Interest Payment Period. The Calculation Agent shall, upon the request of the holder of any Debt Securities, provide the
Interest Rate then in effect. All calculations made by the Calculation Agent in the absence of manifest error shall be conclusive for all purposes and binding on the Company and the Holders of the Debt Securities. The Paying Agent shall be entitled
to rely on information received from the Calculation Agent or the Company as to the Interest Rate. The Company shall, from time to time, provide any necessary information to the Paying Agent relating to any original issue discount and interest on
the Debt Securities that is included in any payment and reportable for taxable income calculation purposes.
SECTION 2.11
Extension of Interest Payment Period
.
As long as it is acting in good faith, the Company shall have the right, from time to time
and without causing an Event of Default, to defer payments of interest on the Debt Securities by extending the interest distribution period on the Debt Securities at any time and from time to time during the term of the Debt Securities, for up to
twenty consecutive quarterly periods (each such extended interest distribution period, an “Extension Period”), during which Extension Period no interest shall be due and payable (except any Additional Interest that may be due and payable).
No Extension Period may end on a date other than an Interest Payment Date or extend beyond the Maturity Date, any Redemption Date or any Special Redemption Date, as the
-17-
case may be. During any Extension Period, interest will continue to accrue on the Debt Securities, and interest on such accrued interest (such accrued interest and interest thereon referred to
herein as “Deferred Interest”) will accrue at an annual rate equal to the Interest Rate applicable during such Extension Period, compounded quarterly from the date such Deferred Interest would have been payable were it not for the
Extension Period, to the extent permitted by law. No interest or Deferred Interest shall be due and payable during an Extension Period, except at the end thereof. At the end of any such Extension Period the Company shall pay all Deferred Interest
then accrued and unpaid on the Debt Securities;
provided
,
however
, that no Extension Period may extend beyond the Maturity Date; and
provided
further
,
however
, that during any such Extension Period, the Company
shall be subject to the restrictions set forth in Section 3.08 of this Indenture. 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 twenty consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all Deferred Interest, the Company may
commence a new Extension Period, subject to the foregoing requirements. The Company must give the Trustee notice of its election to begin such Extension Period (“Notice”) at least one Business Day prior to regular record date applicable to
the next succeeding Interest Payment date. The Trustee shall give notice of the Company’s election to begin a new Extension Period to the Securityholders promptly after receipt of notice from the Company of its election to begin or extend an
Extension Period.
SECTION 2.12
CUSIP Numbers
.
The Company in issuing the Debt Securities may use a “CUSIP” number (if then generally in use) and, if so, the Trustee shall use a
“CUSIP” number in notices of redemption as a convenience to Securityholders;
provided
, that any such notice may state that no representation is made as to the correctness of such number either as printed on the Debt 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 Debt Securities, 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 number.
SECTION 2.13
Income Tax Certification
.
As a condition to the payment of any principal of or interest on the Debt Securities without the imposition of withholding tax, the Trustee
shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor form) in the case of a person that is a “United
States person” within the meaning of Section 7701 (a)(30) of the Code (under and as defined in the Declaration) or an Internal Revenue Service Form W-8 (or applicable successor form) in the case of a person that is not a “United
States person” within the meaning of Section 7701(a)(30) of the Code, and any other certification acceptable to it to enable the Trustee or any Paying Agent to determine their respective duties and liabilities with respect to any taxes or
other charges that they may be required to pay, deduct or withhold in respect of such Debt Securities.
-18-
ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01
Payment of Principal, Premium and Interest; Agreed Treatment of the Debt Securities
.
(a) The Company covenants and agrees that it will duly and punctually pay or cause to be paid all payments due on the Debt Securities at the
place, at the respective times and in the manner provided in this Indenture and the Debt Securities. At the option of the Company, each installment of interest on the Debt Securities may be paid (i) by mailing checks for such interest payable
to the order of the holders of Debt Securities entitled thereto as they appear on the Debt Security Register or (ii) by wire transfer to any account with a banking institution located in the United States designated by such holders to the
Paying Agent no later than the related record date. Notwithstanding anything to the contrary contained in this Indenture or any Debt Security, if the Trust or the Trustee of the Trust is the holder of any Debt Security, then all payments in respect
of such Debt Security shall be made by the Company in immediately available funds when due.
(b) The Company wilt treat the Debt
Securities as indebtedness, and the interest payable in respect of such Debt Securities as interest, for all U.S. federal income tax purposes. As a condition to the payment of any principal of or interest on any Debt Security without the imposition
of withholding tax, the Company shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor form) in the case of a
Person that is a U.S. Person or an Internal Revenue Service Form W-8 (or applicable successor form) in the case of a Person that is not a U.S. Person and any other certification acceptable to it to enable the Company and the Trustee to determine
their respective duties and liabilities with respect to any taxes or other charges that they may be required to pay or withhold in respect of such Debt Security or the holder of such Debt Security under any present or future law or regulation of the
United States or any political subdivision thereof or taxing authority therein or to comply with any reporting or other requirements under any such law or regulation.
(c) As of the date of this Indenture, the Company represents that it has no intention to exercise its right under Section 2.11 to defer
payments of interest on the Debt Securities by commencing an Extension Period.
SECTION 3.02
Offices for Notices and Payments,
etc.
So long as any of the Debt Securities remain outstanding, the Company will maintain in New York, New York an office or agency
where the Debt Securities may be presented for payment, an office or agency where the Debt Securities may be presented for registration of transfer and for exchange as provided in this Indenture and an office or agency where notices and demands to
or upon the Company in respect of the Debt Securities or of this Indenture may be served. The Company hereby appoints the Trustee at ITS Unit Trust Window, 4 New York Plaza, Ground Floor, New York, New York 10004, attention: ITS (Houston) –
Sunstate Bancshares Trust II as such office or agency. In case the Company shall fail to maintain
-19-
any such office or agency in New York, New York 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 other offices or agencies where the Debt Securities 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 New York, New York for the purposes above
mentioned. The Company will give to the Trustee prompt written notice of any such designation or rescission thereof.
SECTION 3.03
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 6.09, a Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 3.04
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 3.04:
(1)
that it will hold all sums held by it as such agent for the payment of all payments due on the Debt Securities (whether such sums have been paid to it by the Company or by any other obligor on the Debt Securities) in trust for the benefit of the
holders of the Debt Securities;
(2) that it will give the Trustee prompt written notice of any failure by the Company (or
by any other obligor on the Debt Securities) to make any payment on the Debt Securities 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 payments due on the Debt Securities, set aside, segregate and hold in trust for the benefit of the holders of the Debt Securities a sum sufficient to pay such payments 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 Debt Securities) to make any payment on the Debt Securities when the same shall become due and payable.
Whenever the Company shall have one or more Paying Agents for the Debt Securities, it will, on or prior to each due date of the payments on
the Debt Securities, deposit with a Paying Agent a sum sufficient to pay all payments 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.
-20-
(c) Anything in this Section 3.04 to the contrary notwithstanding, the Company may, at any
time, for the purpose of obtaining a satisfaction and discharge with respect to the Debt Securities, 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 same terms and conditions 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 12.03 and 12.04.
(e) The Company hereby initially appoints the Trustee to act as Paying Agent (the “Paying Agent”).
SECTION 3.05
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 Debt Securities 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 by the Company in the performance of any covenants of the Company
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 thereof.
SECTION 3.06
Additional Interest
.
If and for so long as the Trust is the holder of all Debt Securities and is subject to or otherwise required to pay, or is required to
withhold from distributions to holders of Trust Securities, any additional taxes (including withholding taxes), duties, assessments or other governmental charges as a result of a Tax Event, the Company will pay such additional amounts (the
“Additional Interest”) on the Debt Securities as shall be required so that the net amounts received and retained by the Trust for distribution to holders of Trust Securities after paying all taxes (including withholding taxes), duties,
assessments or other governmental charges will be equal to the amounts the Trust would have received and retained for distribution to holders of Trust Securities after paying all taxes (including withholding taxes on distributions to holders of
Trust Securities), duties, assessments or other governmental charges if no such additional taxes, duties, assessments or other governmental charges had been imposed. Whenever in this Indenture or the Debt Securities there is a reference in any
context to the payment of principal of or premium, if any, or interest on the Debt Securities, such mention shall be deemed to include mention of payments of the Additional Interest provided for in this paragraph to the extent that, in such context,
Additional Interest is, was or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Interest (if applicable) in any provisions hereof shall not be construed as excluding
Additional Interest in those provisions hereof where such express mention is not made;
provided
,
however
, that, notwithstanding anything to the contrary contained in this Indenture or any Debt Security, the deferral of the payment of
interest during an Extension Period pursuant to Section 2.11 shall not defer the payment of any Additional Interest that may be due and payable.
-21-
SECTION 3.07
Compliance with Consolidation Provisions
.
The Company will not, while any of the Debt Securities remain outstanding, consolidate with, or merge into any other Person, or merge into
itself, or sell, convey, transfer or otherwise dispose of an or substantially all of its property or capital stock to any other Person unless the provisions of Article XI hereof are complied with.
SECTION 3.08
Limitation on Dividends
.
If Debt Securities 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 Debt Securities 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 Debt Securities by extending the interest distribution period as provided herein and such period, or any
extension thereof, shall have commenced and be continuing, then the Company may not (A) 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 (B) make any payment of principal of or interest or premium if any, on or repay, repurchase or redeem any debt securities of the Company that rank
pari passu
in all respects with or junior in interest to the Debt
Securities or (C) make any payment under any guarantees of the Company that rank
pari passu
in all respects with or junior in interest to the Capital Securities Guarantee (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company (I) 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, (II) in
connection with a dividend reinvestment or stockholder stock purchase plan or (III) 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 occurrence of (i), (ii) or (iii) above, (b) as a result of any exchange, reclassification, combination 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
stockholder’s rights plan, or the issuance of rights, stock or other property under any stockholder’s rights plan, or the redemption or repurchase of rights pursuant thereto, or (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).
-22-
SECTION 3.09
Covenants as to the Trust
.
For so long as such 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 that is a U.S. Person may succeed to the Company’s ownership of such Common Securities. The Company, as owner of the Common Securities, shall use commercially
reasonable efforts to cause the Trust (a) to remain a statutory trust, except in connection with a distribution of Debt Securities 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, (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 Debt Securities.
ARTICLE IV
LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
SECTION 4.01
Securityholders’ Lists
.
The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee:
(a) on each regular record date for an Interest Payment Date, a list, in such form as the Trustee may reasonably require, of the names and
addresses of the Securityholders of the Debt Securities 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 4.01 so long as the Trustee is in possession thereof by reason of its acting as Debt Security registrar.
SECTION 4.02
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 Debt 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 Debt Securities registrar (if so
acting) hereunder. The 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 Debt Securities (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 Debt 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 Debt Securities with respect to their rights under this Indenture or under such Debt Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall
within five Business Days after the receipt of such application, at the election of the Company, 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 4.02, or
(2) inform such applicants as to the approximate number of holders of Debt Securities 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 4.02, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any,
specified in such application.
-23-
If the Company 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 of Debt Securities 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 4.02 a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the 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 of the Company to the effect that such mailing would be contrary to the best interests of the holders of all Debt Securities, 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 Debt Securities, by receiving and holding the same, agrees
with the 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 Debt 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 Trustee shall not be held accountable by reason of mailing any material pursuant to a
request made under said subsection (b).
-24-
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT
SECTION 5.01
Events of Default
.
The following events shall be “Events of Default” with respect to Debt Securities:
(a) the Company defaults in the payment of any interest upon any Debt Security when it becomes due and payable (unless the Company has elected
and may defer interest payments pursuant to Section 2.11), and continuance of such default for a period of 30 days; for the avoidance of doubt, an extension of any interest distribution period by the Company in accordance with Section 2.11
of this Indenture shall not constitute a default under this clause 5.01(a); or
(b) the Company defaults in the payment of all or any
part of the principal of (or premium, if any, on) any Debt Securities as and when the same shall become due and payable either at maturity, upon redemption, by declaration of acceleration pursuant to Section 5.01 of this Indenture or otherwise;
or
(c) the Company defaults in the payment of any interest upon any Debt Security when it becomes due and payable following the
nonpayment of any such interest for 20 or more consecutive quarterly periods; or
(d) the Company defaults in the performance of, or
breaches, any of its covenants or agreements in Sections 3.06, 3.07, 3.08 or 3.09 of 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 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of not less than 25% in aggregate principal
amount of the outstanding Debt Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or
(e) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoints a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its
property, or orders 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
(f) the Company 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 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
-25-
(g) the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its
business or otherwise terminated its existence except in connection with (1) the distribution of the Debt Securities to holders of the Trust Securities in liquidation of their interests in the Trust, (2) the redemption of all of the
outstanding Trust Securities or (3) certain mergers, consolidations or amalgamations, each as permitted by the Declaration.
If an
Event of Default specified under clause (c) of this Section 5.01 occurs and is continuing with respect to the Debt Securities, then, and in each and every such case, unless the principal of the Debt Securities shall have already become due
and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debt Securities 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 Debt Securities and any premium and interest accrued, but unpaid, thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. If an Event of Default
specified under clause (e) or (f) of this Section 5.01 occurs, then, in each and every such case, the entire principal amount of the Debt Securities and any premium and interest accrued, but unpaid, thereon shall
ipso facto
become immediately due and payable without further action. Notwithstanding anything to the contrary in this Section 5.01, if at any time during the period in which this Indenture remains in force and effect, the Company ceases or elects to
cease to be subject to the supervision and regulations of the Federal Reserve, OTS, OCC or similar regulatory authority overseeing bank, thrift, savings and loan or financial holding companies or similar institutions requiring specifications for the
treatment of capital similar in nature to the capital adequacy guidelines under the Federal Reserve rules and regulations, then the first sentence of this paragraph shall be deemed to include clauses (a), (b) and (d) under this
Section 5.01 as an Event of Default resulting in an acceleration of payment of the Debt Securities to the same extent as provided herein for clause (c).
With respect to clause (d) of this Section 5.01, the Company agrees that in the event of a breach by the Company of its covenants or
agreements mentioned therein, any remedy at law or in damages may prove inadequate and therefore the Company agrees that the Trustee shall be entitled to injunctive relief against the Company in the event of any breach or threatened breach by the
Company, in addition to any other relief (including damages) available to the Trustee under this Indenture or under law.
The foregoing
provisions, however, are subject to the condition that if, at any time after the principal of the Debt 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 Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Debt Securities and all payments on the Debt Securities which
shall have become due otherwise than by acceleration (with interest upon all such payments and Deferred Interest, to the extent permitted by law) 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 6.06, if any, and (ii) all Events of Default under this Indenture, other than the non-payment of the payments
on Debt Securities which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein, and in each and every such case the holders of a majority in aggregate principal amount of the Debt
-26-
Securities 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;
provided
,
however
, that if the Debt Securities are held by the Trust or a trustee of the Trust, such waiver
or rescission and annulment shall not be effective until the holders of a majority in aggregate liquidation amount of the outstanding Capital Securities of the Trust shall have consented to such waiver or rescission and annulment.
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 Debt Securities 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 Debt Securities shall continue as though no such proceeding had been taken.
SECTION 5.02
Payment of Debt Securities on Default; Suit Therefor
.
The Company covenants that upon the occurrence of an Event of Default pursuant to clause 5.01(a), 5.01(b) or 5.01(c), and upon demand of the
Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Debt Securities, the whole amount that then shall have become due and payable on all Debt Securities including Deferred Interest accrued on the Debt Securities; 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 6.06. 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 Debt Securities
and collect in the manner provided by law out of the property of the Company or any other obligor on such Debt 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 Company or any other obligor on the Debt
Securities 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 Debt Securities, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Debt Securities 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 5.02, 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 Debt 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 Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys
-27-
and counsel, and for reimbursement of all other amounts due to the Trustee under Section 6.06) and of the Securityholders allowed in such judicial proceedings relative to the Company or any
other obligor on the Debt Securities, 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 Debt 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 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 6.06.
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 Debt Securities 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 Debt Securities, may be enforced by
the Trustee without the possession of any of the Debt Securities, 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 Debt Securities.
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 Debt Securities, and it shall not
be necessary to make any holders of the Debt Securities parties to any such proceedings.
SECTION 5.03
Application of Moneys
Collected by Trustee
.
Any moneys collected by the Trustee 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 Debt 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 incurred by, and reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all
other amounts due to the Trustee under Section 6.06;
Second: To the payment of all Senior Indebtedness of the Company if and to the
extent required by Article XV;
-28-
Third: To the payment of the amounts then due and unpaid upon Debt Securities, 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 Debt Securities; and
Fourth: The balance, if any, to the Company.
SECTION 5.04
Proceedings by Securityholders
.
No holder of any Debt Security 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 Debt Securities and unless the holders of not less than 25% in aggregate principal amount of the Debt Securities 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;
provided
, that no holder of Debt Securities shall have any right to prejudice the rights of any other
holder of Debt Securities, obtain priority or preference over any other such holder or enforce any right under this Indenture except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debt Securities.
Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Debt Security to receive payment of the
principal of premium, if any, and interest on such Debt Security 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. 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 5.05
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 5.06
Remedies Cumulative and Continuing
.
Except as otherwise provided in Section 2.06, 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 Debt 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 Debt Securities, and no delay or omission of the Trustee or of any holder of any of the Debt 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
-29-
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 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.
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 Debt Securities affected (voting as one class) at the time outstanding and, if
the Debt Securities are held by the Trust or a trustee of the Trust, the holders of a majority in aggregate liquidation amount of the outstanding Capital Securities of the Trust 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 Debt Securities;
provided
,
however
, that if the Debt Securities are held by the Trust or a trustee
of the Trust, such time, method and place or such exercise, as the case may be, may not be so directed until the holders of a majority in aggregate liquidation amount of the outstanding Capital Securities of the Trust shall have directed such time,
method and place or such exercise, as the case may be;
provided
,
further
, that (subject to the provisions of Section 6.01) the Trustee shall have the right to decline to follow any such direction if the Trustee being advised by
counsel 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. Prior to any declaration of acceleration, or ipso facto acceleration, of the maturity of the
Debt Securities, the holders of a majority in aggregate principal amount of the Debt Securities at the time outstanding may on behalf of the holders of all of the Debt Securities 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 Debt Securities, (b) in respect of covenants or provisions hereof which cannot be modified or amended
without the consent of the holder of each Debt Security affected, or (c) in respect of the covenants contained in Section 3.09;
provided
,
however
, that if the Debt Securities are held by the Trust or a trustee of the Trust,
such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of the 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 Debt Security is required, such waiver or modification to such waiver shall not be effective until each holder of the outstanding Capital Securities of the Trust shall have
consented to such waiver or modification to such waiver. Upon any such waiver or modification to such waiver, the Default or Event of 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 Debt Securities shall be restored to their former positions and rights hereunder, respectively; but no such waiver or modification to 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 5.07, said Default or Event of Default shall for all purposes of the Debt Securities and this Indenture be
deemed to have been cured and to be not continuing.
-30-
SECTION 5.08
Notice of Defaults
.
The Trustee shall, within 90 days after a Responsible Officer of the Trustee shall have actual knowledge or received written notice of the
occurrence of a Default with respect to the Debt Securities, mail to all Securityholders, as the names and addresses of such holders appear upon the Debt Security Register, notice of all Defaults with respect to the Debt Securities 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 5.08 being hereby defined to be the events specified in subsections (a), (b), (c), (d),
(e) and (f) of Section 5.01, not including periods of grace, if any, provided for therein);
provided
, that, except in the case of default in the payment of the principal of, premium, if any, or interest on any of the Debt
Securities, 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 5.09
Undertaking to Pay Costs
.
All parties to this Indenture agree, and each holder of any Debt Security by such holder’s 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; but the provisions of this Section 5.09 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 Debt Securities (or, if such Debt Securities are held by the Trust or a trustee of the Trust, more than 10% in liquidation amount of the outstanding Capital
Securities), 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 Debt Security against the Company on or after the same shall have become due and payable, or to
any suit instituted in accordance with Section 14.12.
ARTICLE VI
CONCERNING THE TRUSTEE
SECTION 6.01
Duties and Responsibilities of Trustee
.
With respect to the holders of Debt Securities issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to
the Debt Securities and after the curing or waiving of all Events of Default which may have occurred, with respect to the Debt Securities, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In
case an Event of Default with respect to the Debt Securities 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 person would exercise or use under the circumstances in the conduct of such person’s own affairs.
-31-
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 the Debt Securities 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 the Debt Securities 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 Debt Securities 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 on their face 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;
(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 5.07, relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;
(d) the Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Debt Securities unless either
(1) a Responsible Officer shall have actual knowledge of such Default or Event of Default or (2) 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 Debt
Securities or by any holder of the Debt Securities, except with respect to an Event of Default pursuant to Sections 5.01(a), 5.01(b) or 5.01(c) hereof (other than an Event of Default resulting from the default in the payment of Additional
Interest or premium, if any, if the Trustee does not have actual knowledge or written notice that such payment is due and payable), of which the Trustee shall be deemed to have knowledge; and
(e) in the absence of bad faith or gross negligence on the part of the Trustee, the Trustee may seek and rely on reasonable instructions from
the Company.
-32-
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.
SECTION 6.02
Reliance on Documents, Opinions, etc.
Except as otherwise provided in Section 6.01:
(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 in good faith 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 reasonably 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 Debt
Securities (that has not been cured or waived) to exercise with respect to the Debt Securities 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 person would
exercise or use under the circumstances in the conduct of such person’s 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 Debt Securities 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; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through agents (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.
-33-
SECTION 6.03
No Responsibility for Recitals, etc.
The recitals contained herein and in the Debt Securities (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 Debt Securities. The Trustee and the Authenticating Agent shall not be accountable for the use or application by the Company of any Debt Securities or the proceeds of any Debt Securities authenticated and
delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this Indenture.
SECTION 6.04
Trustee,
Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Debt Securities
.
The Trustee or any Authenticating Agent or
any Paying Agent or any transfer agent or any Debt Security registrar, in its individual or any other capacity, may become the owner or pledgee of Debt Securities with the same rights it would have if it were not Trustee, Authenticating Agent,
Paying Agent, transfer agent or Debt Security registrar.
SECTION 6.05
Moneys to be Held in Trust
.
Subject to the provisions of Section 12.04, 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, if any, shall be paid from time to time to the Company
upon the written order of the Company, signed by the Chairman of the Board of Directors, the President, the Chief Operating Officer, a Vice President, the Treasurer or an Assistant Treasurer of the Company.
SECTION 6.06
Compensation and Expenses of Trustee
.
Other than as provided in the Fee Agreement of even date herewith between Cohen Bros. & Company, the Trustee, the Company and
Delaware Trustee (as defined in the Declaration), 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 written request for all documented 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 reasonable expenses and disbursements of its counsel and of all Persons not regularly in its employ)
except any such
-34-
expense, disbursement or advance that arises from its negligence, willful misconduct or bad faith. The Company also covenants to indemnify each of the Trustee (including in its individual
capacity) and 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), except to the extent such loss, damage, claim, liability or expense results from the negligence, willful misconduct or bad faith of such indemnitee, arising out of or in connection with the acceptance or administration of this Trust,
including the costs and expenses of defending itself against any claim or liability in the premises. The obligations of the Company under this Section 6.06 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for
documented expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by (and the Company hereby grants and pledges to the Trustee) a lien prior to that of the Debt
Securities 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 Debt Securities.
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 subsections (e), (f) or (g) of Section 5.01, 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 Debt Security 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 Debt Securities or otherwise advance funds to or on behalf of the Company.
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 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,
willful misconduct or bad faith 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, willful misconduct or bad
faith 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 6.08
Eligibility of Trustee
.
The Trustee hereunder shall at all times be a U.S. Person that is a banking corporation or national association organized and doing business
under the laws of the United States of America or any state thereof or of the District of Columbia and authorized under such
-35-
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, or
District of Columbia authority. If such corporation or national association 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 6.08 the combined capital and surplus of such corporation or national association 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, notwithstanding that such corporation or national association shall be otherwise eligible and qualified under this Article.
In
case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.08, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.09.
If the Trustee has or shall acquire any “conflicting interest” within the meaning of § 310(b) of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to this Indenture.
SECTION 6.09
Resignation or Removal of Trustee, Calculation Agent, Paying Agent or Debt Security Registrar
.
(a) The Trustee, or any trustee or trustees hereafter appointed, the Calculation Agent, the Paying Agent and any Debt Security Registrar 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 Debt Securities at their addresses as they shall appear on the Debt Security Register.
Upon receiving such notice of resignation, the Company shall promptly appoint a successor or successors by written instrument, in duplicate, executed by order of its Board of Directors, one copy of which instrument shall be delivered to the
resigning party and one copy to the successor. If no successor 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 party may
petition any court of competent jurisdiction for the appointment of a successor, or any Securityholder who has been a bona fide holder of a Debt Security or Debt Securities for at least six months may, subject to the provisions of Section 5.09,
on behalf of himself or herself and all others similarly situated, petition any such court for the appointment of a successor. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of the last paragraph of Section 6.08 after written request
therefor by the Company or by any Securityholder who has been a bona fide holder of a Debt Security or Debt Securities for at least six months,
-36-
(2) the Trustee shall cease to be eligible in accordance with the provisions of
Section 6.08 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 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 5.09, if no successor Trustee shall have been so
appointed and have accepted appointment within 30 days of the occurrence of any of (1), (2) or (3) above, any Securityholder who has been a bona fide holder of a Debt Security or Debt Securities for at least six months may, on behalf of
himself or herself 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 a successor Trustee.
(c) Upon prior written notice to the Company and the Trustee, the
holders of a majority in aggregate principal amount of the Debt Securities 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 ten 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 6.09 provided, may petition any court of competent jurisdiction for an appointment of a successor.
(d) Any resignation or removal of the Trustee, the Calculation Agent, the Paying Agent and any Debt Security Registrar and appointment of a
successor pursuant to any of the provisions of this Section 6.09 shall become effective upon acceptance of appointment by the successor as provided in Section 6.10.
SECTION 6.10
Acceptance by Successor
.
Any successor Trustee, Calculation Agent, Paying Agent or Debt Security Registrar appointed as provided in Section 6.09 shall execute,
acknowledge and deliver to the Company and to its predecessor an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the retiring party shall become effective and such successor, without any further act, deed
or conveyance, shall become vested with all the rights, powers, duties and obligations with respect to the Debt Securities of its predecessor hereunder, with like effect as if originally named herein; but, nevertheless, on the written request of the
Company or of the successor, the party ceasing to act shall, upon payment of the amounts then due it pursuant to the provisions of Section 6.06, execute and deliver an instrument transferring to such successor all the rights and powers of the
party so ceasing to act and shall duly assign, transfer and deliver to such successor all property and money held by such retiring party
-37-
hereunder. Upon reasonable request of any such successor, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor all
such rights and powers. Any party ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected to secure any amounts then due it pursuant to the provisions of Section 6.06.
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 Debt Securities 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 6.10 unless at the time of such acceptance such successor Trustee shall be eligible and qualified under the provisions of Section 6.08.
In no event shall a retiring Trustee, Calculation Agent, Paying Agent or Debt Security Registrar be liable for the acts or omissions of any
successor hereunder.
Upon acceptance of appointment by a successor Trustee, Calculation Agent, Paying Agent or Debt Security Registrar as
provided in this Section 6.10, the Company shall mail notice of the succession to the holders of Debt Securities at their addresses as they shall appear on the Debt Security Register. If the Company fails to mail such notice within ten Business
Days after the acceptance of appointment by the successor, the successor shall cause such notice to be mailed at the expense of the Company.
SECTION 6.11
Succession by Merger, etc.
Any Person into which the 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 Trustee shall be a party, or any Person 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
, that such Person 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 Debt Securities 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 Debt Securities so authenticated; and in case at that time any of the Debt Securities
shall not have been authenticated, any successor to the Trustee may authenticate such Debt Securities either in the name of any predecessor hereunder or in the name of the
-38-
successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debt Securities 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 Debt Securities 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 Debt Securities 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 Debt Securities;
provided
, 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 Debt 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 $50,000,000 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such Person publishes reports of condition at east 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 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 or converted or with which it may be consolidated, or any Person resulting from
any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any Person 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 Person 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 Debt Securities 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 Debt Securities as the names and addresses of such holders appear on the Debt Security 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 Debt Securities of its predecessor hereunder, with like effect as if originally
named as Authenticating Agent herein.
-39-
Other than as provided in the Fee Agreement of even date herewith between Cohen Bros. &
Company, the Company, the Trustee and Delaware Trustee (as defined in the Declaration), 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 and shall receive such reasonable indemnity as it may require against the costs, expenses and liabilities incurred in furtherance of its
duties under this Section 6.12.
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 Debt Securities or
aggregate Liquidation Amount of the Capital 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 or any number of instruments of similar tenor executed by such Securityholders or holders of Capital Securities, as the case may be, in
person or by agent or proxy appointed in writing, or (b) by the record of such holders of Debt Securities voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII
or of such holders of Capital Securities duly called and held in accordance with the provisions of the Declaration, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Securityholders or
holders of Capital Securities, as the case may be, 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 Debt Securities 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 Debt Securities 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 Debt 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.
-40-
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 such
Securityholder’s 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 Debt Securities
shall be proved by the Debt Security Register or by a certificate of the Debt Security 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 8.06.
SECTION 7.03
Who Are Deemed Absolute Owners
.
Prior to due presentment for registration of transfer of any Debt Security, the Company, the Trustee, any Authenticating Agent, any Paying
Agent, any transfer agent and any Debt Security registrar may deem the Person in whose name such Debt Security shall be registered upon the Debt Security Register to be, and may treat such Person as, the absolute owner of such Debt Security (whether
or not such Debt Security shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debt Security 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 Debt Security registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon such holder’s 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 Debt Security.
SECTION 7.04
Debt Securities Owned by Company Deemed Not Outstanding
.
In determining whether the holders of the requisite aggregate principal amount of Debt Securities have concurred in any direction, consent or
waiver under this Indenture, Debt Securities which are owned by the Company or any other obligor on the Debt Securities or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company
(other than the Trust) or any other obligor on the Debt Securities shall be disregarded and deemed not to be outstanding for the purpose of any such determination;
provided
, that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, consent or waiver, only Debt Securities which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Debt 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 Trustee the pledgee’s right to vote such Debt Securities 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.
-41-
SECTION 7.05
Revocation of Consents; Future Securityholders Bound
.
At any time prior to (but not after) the evidencing to the 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 Debt Securities specified in this Indenture in connection with such action, any holder (in cases where no record date has been set pursuant to Section 7.01) or any holder as of an
applicable record date (in cases where a record date has been set pursuant to Section 7.01) of a Debt Security (or any Debt Security 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 Debt Securities 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 7.02,
revoke such action so far as concerns such Debt Security (or so far as concerns the principal amount represented by any exchanged or substituted Debt Security). Except as aforesaid any such action taken by the holder of any Debt Security shall be
conclusive and binding upon such holder and upon all future holders and owners of such Debt Security, and of any Debt Security 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 Debt Security or any Debt Security issued in exchange or substitution therefor.
ARTICLE VIII
SECURITYHOLDERS’ MEETINGS
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 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 9.02; 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 Debt
Securities under any other provision of this Indenture or under applicable law.
SECTION 8.02
Call of Meetings by Trustee
.
The 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 The City of New York, the Borough of Manhattan. or Houston, Texas, as the Trustee shall determine. Notice of every
-42-
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 Debt
Securities affected at their addresses as they shall appear on the Debt Securities 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 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 Debt
Securities, 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 in 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 Debt Securities 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 Debt 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 Trustee and its counsel and any representatives of the Company and its counsel.
SECTION 8.05
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 Debt 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 deem appropriate.
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 8.03, 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 at the meeting.
Subject to the provisions of Section 7.04, at any meeting each holder of Debt Securities with respect to which such meeting is being held
or proxy therefor shall be entitled to one vote for each $1,000 principal amount of Debt Securities held or represented by such holder;
provided
,
however
, that no vote shall be cast or counted at any meeting in respect of any Debt
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 Debt
-43-
Securities held by such chairman or instruments in writing as aforesaid duly designating such chairman 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, whether or not constituting a quorum, 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 Debt Securities 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 Debt 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
Debt 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 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 8.07
Quorum; Actions
.
The Persons entitled to vote a majority in outstanding principal amount of the Debt Securities 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 outstanding principal amount of the Debt Securities, the Persons holding or representing such specified percentage in outstanding principal amount of the Debt Securities 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 8.02, except that such notice need be given only once not less than
five 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 outstanding principal amount of the Debt Securities
which shall constitute a quorum.
-44-
Except as limited by the proviso in the first paragraph of Section 9.02, 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 not less than a majority in outstanding principal amount of the Debt Securities;
provided
,
however
, that, except as limited by the proviso in the first paragraph of Section 9.02, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action that this
Indenture expressly provides may be given by the holders of not less than a specified percentage in outstanding principal amount of the Debt Securities 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 not less than such specified percentage in outstanding principal amount of the Debt Securities.
Any resolution passed or decision taken at any meeting of holders of Debt Securities duly held in accordance with this Section shall be
binding on all the Securityholders, whether or not present or represented at the meeting.
SECTION 8.08
Written Consent Without a
Meeting
.
Whenever under this Indenture, Securityholders are required or permitted to take any action by vote, such action may be
taken without a meeting on written consent, setting forth the action so taken, signed by the Securityholders of all outstanding Debt Securities entitled to vote thereon. No consent shall be effective to take the action referred to therein unless,
within sixty days of the earliest dated consent delivered in the manner required by this paragraph to the Trustee, written consents signed by a sufficient number of Securityholders to take action are delivered to the Trustee at its Principal Office.
Delivery made to the Trustee at its Principal Office, shall be by hand or by certificated or registered mail, return receipt requested. Written consent thus given by the Securityholders of such number of Debt Securities as is required hereunder,
shall have the same effect as a valid vote of Securityholders of such number of Debt Securities.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01
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 Debt
Securities as the Board of Directors shall consider to be for the protection of the holders of such Debt Securities, and to make the occurrence, or the occurrence and continuance, of a Default in any of such additional
-45-
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 or amend such other provisions in regard to matters or questions arising under this Indenture;
provided
, that any such action shall not
adversely affect the interests of the holders of the Debt Securities;
(d) to add to, delete from, or revise the terms of Debt Securities,
including, without limitation, any terms relating to the issuance, exchange, registration or transfer of Debt Securities, including to provide for transfer procedures and restrictions substantially similar to those applicable to the Capital
Securities, as required by Section 2.05 (for purposes of assuring that no registration of Debt Securities is required under the Securities Act of 1933, as amended);
provided
, that any such action shall not adversely affect the interests
of the holders of the Debt Securities then outstanding (it being understood, for purposes of this proviso, that transfer restrictions on Debt Securities substantially similar to those applicable to Capital Securities shall not be deemed to adversely
affect the holders of the Debt Securities);
(e) to evidence and provide for the acceptance of appointment hereunder by a successor
Trustee with respect to the Debt Securities and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the
requirements of Section 6.10;
(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 Debt Securities, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or the Debt Securities, or to add to the rights of the holders of Debt Securities.
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 9.01 may be executed by the Company and the Trustee without the consent of the holders of any of the Debt Securities at the time outstanding, notwithstanding any of the provisions of
Section 9.02.
-46-
SECTION 9.02
Supplemental Indentures with Consent of Securityholders
.
With the consent (evidenced as provided in Section 7.01) of the holders of not less than a majority in aggregate principal amount of the
Debt Securities at the time outstanding affected by such supplemental indenture, 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
(which shall conform to the provisions of the Trust Indenture Act, then in effect, applicable to indentures qualified thereunder) 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 Debt Securities;
provided
,
however
, that no such supplemental indenture shall without such consent of the holders of each Debt
Security then outstanding and affected thereby (i) change the Maturity Date of any Debt Security, or reduce the principal amount thereof or any premium thereon, or reduce the rate (or manner of calculation of the rate) or extend the time of
payment of interest thereon, or reduce (other than as a result of the maturity or earlier redemption of any such Debt Security in accordance with the terms of this Indenture and such Debt Security) or increase the aggregate principal amount of Debt
Securities then outstanding, or change any of the redemption provisions, or make the principal thereof or any interest or premium thereon payable in any coin or currency other than United States Dollars, 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 Debt Securities the holders of which are required to consent to any such
supplemental indenture; and
provided
,
further
, that if the Debt Securities are held by the Trust or a trustee of such trust, such supplemental indenture shall not be effective until the holders of a majority in Liquidation Amount of
the outstanding Capital Securities shall have consented to such supplemental indenture;
provided
,
further
, that if the consent of the Securityholder of each outstanding Debt Security is required, such supplemental indenture shall not
be effective until each holder of the outstanding Capital 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 (and holders of Capital Securities, if
required) 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 Debt Security 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.
-47-
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
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 Debt 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 Debt Securities
.
Debt Securities 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 Debt Securities 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 Debt Securities then
outstanding.
SECTION 9.05
Evidence of Compliance of Supplemental Indenture to be furnished to Trustee
.
The Trustee, subject to the provisions of Sections 6.01 and 6.02, shall, in addition to the documents required by Section 14.06,
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 10.01
Optional Redemption
.
At any time the Company shall have the right, subject to the receipt by the Company of prior approval from any regulatory authority with
jurisdiction over the Company if such approval is then required under applicable capital guidelines or policies of such regulatory authority, to redeem the Debt Securities, in whole or (provided that all accrued and unpaid interest has been paid on
all Debt Securities for all Interest Periods terminating on or prior to such date) from time to time in part, on any March 15, June 15, September 15 or December 15 on or after June 15, 2010 (the “Redemption Date”),
at the Redemption Price.
-48-
SECTION 10.02
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
from any regulatory authority with jurisdiction over the Company if such approval is then required under applicable capital guidelines or policies of such regulatory authority, to redeem the Debt Securities, in whole or in part, at any time within
90 days following the occurrence of such Special Event (the “Special Redemption Date”), at the Special Redemption Price.
SECTION 10.03
Notice of Redemption; Selection of Debt Securities
.
In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Debt Securities, it shall fix a
date for redemption and shall mail, or cause the Trustee to mail (at the expense of the Company) a notice of such redemption at least 30 and not more than 60 days prior to the date fixed for redemption to the holders of Debt Securities so to be
redeemed as a whole or in part at their last addresses as the same appear on the Debt 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 Debt Security designated for redemption as a whole or in part shall not affect the validity of
the proceedings for the redemption of any other Debt Security.
Each such notice of redemption shall specify the CUSIP number, if any, of
the Debt Securities to be redeemed, the date fixed for redemption, the redemption price (or manner of calculation of the price) at which Debt Securities are to be redeemed, the place or places of payment, that payment will be made upon presentation
and surrender of such Debt Securities, 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 Debt Securities are to be redeemed the notice of redemption shall specify the numbers of the Debt Securities to be redeemed. In case the Debt Securities 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 Debt Security, a new Debt Security or Debt Securities in principal amount equal to the unredeemed portion
thereof win be issued.
Prior to 10:00 a.m. New York City time on the Redemption Date or the Special Redemption Date specified in the
notice of redemption given as provided in this Section, 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 all the Debt Securities so called for redemption at
the appropriate redemption price, together with unpaid interest accrued to such date.
The Company will give the Trustee notice not less
than 45 nor more than 60 days prior to the Redemption Date as to the Redemption Price at which the Debt Securities are to be redeemed and the aggregate principal amount of Debt Securities to be redeemed and the Trustee shall select, in such manner
as in its sole discretion it shall deem appropriate and fair, the Debt Securities or portions thereof (in integral multiples of $1,000) to be redeemed.
-49-
SECTION 10.04
Payment of Debt Securities Called for Redemption
.
If notice of redemption has been given as provided in Section 10.03, the Debt Securities or portions of Debt Securities with respect to
which such notice has been given shall become due and payable on the Redemption Date or the Special Redemption Date (as the case may be) and at the place or places stated in such notice at the applicable redemption price, together with interest
accrued to the date fixed for redemption, and on and after said Redemption Date or the Special Redemption Date (unless the Company shall default in the payment of such Debt Securities at the redemption price, together with unpaid interest accrued
thereon to said date) interest on the Debt Securities or portions of Debt Securities so called for redemption shall cease to accrue. On presentation and surrender of such Debt Securities at a place of payment specified in said notice, such Debt
Securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable redemption price, together with unpaid interest accrued thereon to the Redemption Date or the Special Redemption Date (as the case may be).
Upon presentation of any Debt Security 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 Debt Security or Debt Securities of authorized denominations in principal amount equal to the unredeemed portion of the Debt Security so presented.
ARTICLE XI
CONSOLIDATION,
MERGER, SALE, CONVEYANCE AND LEASE
SECTION 11.01
Company May Consolidate, etc., on Certain Terms
.
Nothing contained in this Indenture or in the Debt Securities shall prevent any consolidation or merger of the Company with or into any other
corporation or corporations (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 all or substantially all of the property or capital stock of the Company or its successor or successors to any other corporation (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, (i) upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other
disposition, the successor entity shall be a corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia (unless such corporation has (1) agreed to make all payments due in respect of
the Debt Securities or, if outstanding, the Capital Securities and Capital Securities Guarantee without withholding or deduction for, or on account of, any taxes, duties, assessments or other governmental charges under the laws or regulations of the
jurisdiction of organization or residence (for tax purposes) of such corporation or any political subdivision or taxing authority thereof or therein unless required by applicable law, in which case such corporation shall have agreed to pay such
-50-
additional amounts as shall be required so that the net amounts received and retained by the holders of such Debt Securities or Capital Securities, as the case may be, after payment of all taxes
(including withholding taxes), duties, assessments or other governmental charges, will be equal to the amounts that such holders would have received and retained had no such taxes (including withholding taxes), duties, assessments or other
governmental charges been imposed, (2) irrevocably and unconditionally consented and submitted to the jurisdiction of any United States federal court or New York state court, in each case located in The City of New York, Borough of Manhattan,
in respect of any action, suit or proceeding against it arising out of or in connection with this Indenture, the Debt Securities, the Capital Securities Guarantee or the Declaration and irrevocably and unconditionally waived, to the fullest extent
permitted by law, any objection to the laying of venue in any such court or that any such action, suit or proceeding has been brought in an inconvenient forum and (3) irrevocably appointed an agent in The City of New York for service of process
in any action, suit or proceeding referred to in clause (2) above) and such corporation expressly assumes all of the obligations of the Company under the Debt Securities, this Indenture, the Capital Securities Guarantee and the Declaration and
(ii) after giving effect to any such consolidation, merger, sale, conveyance, transfer or other disposition, no Default or Event of Default shall have occurred and be continuing.
SECTION 11.02
Successor Entity to be Substituted
.
In case of any such consolidation, merger, sale, conveyance, transfer or other disposition contemplated in Section 11.01 and upon the
assumption by the successor entity, by supplemental indenture, executed and delivered to the Trustee and reasonably 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 Debt 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 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 Debt Securities. Such successor entity thereupon may cause to be
signed, and may issue either in its own name or in the name of the Company, any or all of the Debt Securities 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 Debt Securities
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 Debt Securities which such successor entity thereafter shall cause to be signed and
delivered to the Trustee or the Authenticating Agent for that purpose. All the Debt Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debt Securities theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Debt Securities had been issued at the date of the execution hereof.
SECTION 11.03
Opinion of Counsel to be Given to Trustee
.
The Trustee, subject to the provisions of Sections 6.01 and 6.02, shall receive, in addition to the Opinion of Counsel required by
Section 9.05, an Opinion of Counsel as
-51-
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 12.01
Discharge of Indenture
.
When (a) the Company shall deliver to the Trustee for cancellation all Debt Securities theretofore authenticated (other than any Debt
Securities which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.06) and not theretofore canceled, or (b) all the Debt Securities 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 one year or are to be called for redemption within one 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 Debt Securities (other than any Debt Securities which shall have
been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.06) 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 Debt Securities (1) theretofore repaid to the Company
in accordance with the provisions of Section 12.04, 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 2.05, 2.06, 3.01, 3.02, 3.04, 6.06, 6.09 and 12.04 hereof, which
shall survive until such Debt Securities shall mature or are redeemed, as the case may be, and are paid in full. Thereafter, Sections 6.06, 6.09 and 12.04 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, however, hereby agreeing to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with
this Indenture or the Debt Securities.
SECTION 12.02
Deposited Moneys to be Held in Trust by Trustee
.
Subject to the provisions of Section 12.04, all moneys deposited with the Trustee pursuant to Section 12.01 shall be held in trust
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 Debt Securities 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.
-52-
SECTION 12.03
Paying Agent to Repay Moneys Held
.
Upon the satisfaction and discharge of this Indenture, all moneys then held by any Paying Agent of the Debt Securities (other than the
Trustee) shall, upon demand of the Company, be repaid to the Company or paid to the Trustee, and thereupon such Paying Agent shall be released from all further liability with respect to such moneys.
SECTION 12.04
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 Debt
Securities and not applied but remaining unclaimed by the holders of Debt Securities for two years after the date upon which the principal of, and premium, if any, or interest on such Debt Securities, as the case may be, shall have become due and
payable, shall be repaid to the Company by the Trustee or such Paying Agent on written demand; and the holder of any of the Debt Securities 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 13.01
Indenture and Debt Securities Solely Corporate Obligations
.
No recourse for the payment of the principal of or premium, if any, or interest on any Debt 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 Company in this Indenture or in any supplemental indenture, or in any such Debt Security, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder, officer, director, employee or agent, as such, past, present or future, of the Company or of any predecessor or successor corporation of the Company, either directly or through
the Company or any successor corporation 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 Debt Securities.
ARTICLE XIV
MISCELLANEOUS
PROVISIONS
SECTION 14.01
Successors
.
All the covenants, stipulations, promises and agreements of the Company contained in this Indenture shall bind its successors and assigns
whether so expressed or not.
-53-
SECTION 14.02
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 14.03
Surrender of Company Powers.
The Company by instrument in writing executed by authority of 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 14.04
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 Trustee or by the
Securityholders on the Company may be given or served 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 to the Company at:
Sunstate Bancshares, Inc.
1300 E. Florence Blvd.
Casa
Grande, Arizona 85222
Attention: Alice J. Wilcox
Any notice, direction, request 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 JPMorgan Chase Bank, National Association at:
600 Travis
Street, 50
th
Floor
Houston, Texas 77002
Attn: Institutional Trust Services – Sunstate Bancshares Trust II
SECTION 14.05
Governing Law
.
This Indenture and the Debt Securities shall each be governed by, and construed in accordance with, the laws of the State of New York, without
regard to conflict of laws principles of said State other than Section 5-1401 of the New York General Obligations Law.
SECTION 14.06
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
-54-
have been complied with (except that no such Opinion of Counsel is required to be furnished to the Trustee in connection with the authentication and issuance of Debt Securities issued on the date
of this Indenture).
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 (except certificates delivered pursuant to Section 3.05) shall include (a) a statement that the person making such certificate or opinion has read such covenant or condition and
the definitions relating thereto; (b) 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; (c) a statement that, in the
opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her 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 such person, such condition or covenant has been complied with.
SECTION 14.07
Non-Business
Days
.
Notwithstanding anything to the contrary contained herein, if any Interest Payment Date, other than on the Maturity Date, any
Redemption Date or the Special Redemption Date, falls on a day that is not a Business Day, then any interest payable will be paid on, and such Interest Payment Date will be moved to, the next succeeding Business Day, and additional interest will
accrue for each day that such payment is delayed as a result thereof. If the Maturity Date, any Redemption Date or the Special Redemption Date falls on a day that is not a Business Day, then the principal, premium, if any, and/or interest payable on
such date will be paid on the next succeeding Business Day, and no additional interest will accrue in respect of such payment made on such next succeeding Business Day.
SECTION 14.08
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 14.09
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
Severability
.
In case any one or more of the provisions contained in this Indenture or in the Debt 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 such Debt Securities, but this Indenture and such Debt Securities shall be construed as if such
invalid or illegal or unenforceable provision had never been contained herein or therein.
-55-
SECTION 14.11
Assignment
.
Subject to Article XI, the Company will have the right at all times to assign any of its rights or obligations under this Indenture and
the Debt Securities to a direct or indirect wholly owned Subsidiary of the Company;
provided
,
however
, 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 thereto.
SECTION 14.12
Acknowledgment of Rights
.
The Company acknowledges that, with respect to any Debt Securities 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 Debt Securities held as the assets of the Trust after the holders of a majority in Liquidation Amount of the Capital Securities of the Trust have so
directed in writing 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 Institutional 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 Debt Securities on the date such interest (or premium, if any) or principal is otherwise due and payable (or in the case of redemption, on the redemption date), the
Company acknowledges 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
Debt 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 Debt Securities.
ARTICLE XV
SUBORDINATION OF DEBT
SECURITIES
SECTION 15.01
Agreement to Subordinate
.
The Company covenants and agrees, and each holder of Debt Securities issued hereunder and under any supplemental indenture (the
“Additional Provisions”) by such Securityholder’s acceptance thereof likewise covenants and agrees, that all Debt Securities shall be issued subject to the provisions of this Article XV; and each holder of a Debt Security,
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 payments due on all Debt Securities issued hereunder and under any Additional Provisions 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.
-56-
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 Company in the payment of principal, premium, interest or any other payment due
on any Senior Indebtedness of the Company following any applicable 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 and such Senior Indebtedness has not been paid in full, then, in either case, no payment shall be made by the Company with respect to the payments due on the Debt Securities.
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 15.02, such payment shall, subject to Section 15.06, 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 15.03
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 the Debt Securities; and 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, to 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 of the Company (
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.
-57-
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 of the Company 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 of the Company 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 Debt Securities to the payment of all Senior Indebtedness of the Company, that may at the time be outstanding,
provided
, that (a) such Senior Indebtedness is assumed by the new corporation, if
any, resulting from any such reorganization or readjustment, and (b) 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, transfer or other disposition 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 15.03 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 15.02 or in this Section 15.03 shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 6.06 of this Indenture.
SECTION 15.04
Subrogation
.
Subject to the payment in full of all Senior Indebtedness of the Company, 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 all payments due on the Debt 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 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 Debt Securities 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 Debt Securities, on the one hand, and the holders of such Senior Indebtedness, on the other hand.
-58-
Nothing contained in this Article XV or elsewhere in this Indenture, any Additional
Provisions or in the Debt Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness of the Company, and the holders of the Debt Securities, the obligation of the Company, which is
absolute and unconditional, to pay to the holders of the Debt Securities all payments on the Debt 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 Debt Securities and creditors of the Company, other than the holders of Senior Indebtedness of the Company, nor shall anything herein or therein prevent the Trustee or the holder of any Debt 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 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 15.05
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 15.06
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 moneys to or by the Trustee in respect of the Debt Securities pursuant to the provisions of this Article XV. Notwithstanding the provisions of this Article XV or any other
provision of this Indenture or any Additional Provisions, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of moneys to or by the Trustee in respect of the Debt Securities
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 15.06 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any
-59-
purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debt Security), 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 two 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 or herself to be a holder of Senior Indebtedness of the Company (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 bolder
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 15.07
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 or any Additional Provisions shall deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness of the Company, 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 or any Additional Provisions against the
Trustee. The Trustee shall not owe or 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 6.06.
SECTION 15.08
Subordination May Not Be Impaired
.
No right of any present or future holder of any Senior Indebtedness of the Company 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.
-60-
Without in any way limiting the generality of the foregoing paragraph, the holders of Senior
Indebtedness of the Company 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 Debt Securities to the holders of such Senior Indebtedness, do any one or more of the following: (a) 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;
(b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (c) release any Person liable in any manner for the collection of such Senior Indebtedness; and
(d) exercise or refrain from exercising any rights against the Company, and any other Person.
JPMorgan Chase Bank, National
Association, in its capacity as Trustee, hereby accepts the trusts in this Indenture declared and provided, upon the terms and conditions herein above set forth.
-61-
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.
|
|
|
|
|
Sunstate Bancshares, Inc.
|
|
|
|
|
By:
|
|
/s/ James D. Kennedy
|
|
Name:
|
|
James D. Kennedy
|
|
Title:
|
|
President, CEO
|
|
|
|
JPMorgan Chase Bank, National Association, as Trustee
|
|
|
|
|
By:
|
|
/s/ Maria D. Calzado
|
|
Name:
|
|
Maria D. Calzado
|
|
Title:
|
|
Vice President
|
-62-
EXHIBIT A
FORM OF JUNIOR SUBORDINATED DEBT SECURITY
DUE 2035
[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 LAWS. 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. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON THE HOLDER 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, (C) TO A “NON U.S. PERSON” IN AN “OFFSHORE TRANSACTION” PURSUANT TO
REGULATION S UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN “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 (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D) OR (E) 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 AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES, REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS SUCH TRANSACTIONS ARE 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,
A-1
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 THIS SECURITY 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 THIS SECURITY 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 CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SECURITY WILL DELIVER TO THE COMPANY AND TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION
AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
THIS SECURITY WILL BE ISSUED
AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A PRINCIPAL AMOUNT OF LESS THAN $100,000 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 THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED
TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.
THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE
UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION. THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND THE CLAIMS OF GENERAL AND SECURED CREDITORS OF THE COMPANY, IS INELIGIBLE
AS COLLATERAL FOR A LOAN BY THE COMPANY OR ANY OF ITS SUBSIDIARIES AND IS NOT SECURED.
A-2
Form of Junior Subordinated Debt Security due 2035
of
Sunstate Bancshares, Inc.
Sunstate Bancshares, Inc., a bank holding company incorporated in Arizona (the “Company”), for value received promises to pay
to JPMorgan Chase Bank, National Association, not in its individual capacity but solely as Institutional Trustee for Sunstate Bancshares Trust II, a Delaware statutory trust (the “Holder”), or registered assigns, the principal sum of
Two Million Sixty-Two Thousand Dollars on June 15, 2035 and to pay interest on said principal sum from June 1, 2005, 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 15, June 15, September 15 and December 15 of each year commencing September 15, 2005, at a variable per annum rate equal
to LIBOR (as defined in the Indenture) plus 1.85% (the “Interest Rate”) (provided, however, that the Interest Rate for any Interest Payment Period may not exceed the highest rate permitted by New York law, as the same may be modified by
United States law of general applicability) until the principal hereof shall have become due and payable, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on
any overdue installment of interest at an annual rate equal to the Interest Rate in effect for each such Extension Period compounded quarterly. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day
year and the actual number of days elapsed in the relevant interest period. Notwithstanding anything to the contrary contained herein, if any Interest Payment Date, other than on the Maturity Date, any Redemption Date or the Special Redemption Date,
falls on a day that is not a Business Day, then any interest payable will be paid on, and such Interest Payment Date will be moved to, the next succeeding Business Day, and additional interest will accrue for each day that such payment is delayed as
a result thereof. If the Maturity Date, any Redemption Date or the Special Redemption Date falls on a day that is not a Business Day, then the principal, premium, if any, and/or interest payable on such date will be paid on the next succeeding
Business Day, and no additional interest will accrue in respect of such payment made on such next succeeding Business Day. 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 Debt 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, except
that interest and any Deferred Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered
holders on such regular record date and may be paid to the Person in whose name this Debt Security (or one or more Predecessor Debt Securities) is registered at the close of business on a special record date to be fixed by the Trustee for the
payment of such defaulted interest, notice whereof shall be given to the registered holders of the Debt Securities not less than 10 days prior to such special record date. all as more fully provided in the Indenture. The principal of and interest on
this Debt Security 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 at
A-3
the option of the Company by check mailed to the registered holder at such address as shall appear in the Debt Security Register or by wire transfer or immediately available funds to an account
appropriately designated by the holder hereof. Notwithstanding the foregoing, so long as the holder of this Debt Security is the Institutional Trustee, payment of the principal of and premium, if any, and interest on this Debt Security shall be made
in immediately available funds when due at such place and to such account as may be designated by the Institutional Trustee. All payments in respect of this Debt Security shall be payable 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.
Upon submission of Notice (as defined in the
Indenture) the Company, acting in good faith, shall have the right, from time to time and without causing an Event of Default, to defer payments of interest on the Debt Securities by extending the interest distribution period on the Debt Securities
at any time and from time to time during the term of the Debt Securities, for up to 20 consecutive quarterly periods (each such extended interest distribution period, an “Extension Period”), during which Extension Period no interest shall
be due and payable (except any Additional Interest that may be due and payable). During any Extension Period, interest will continue to accrue on the Debt Securities, and interest on such accrued interest (such accrued interest and interest thereon
referred to herein as “Deferred Interest”) will accrue at an annual rate equal to the Interest Rate applicable during such Extension Period, compounded quarterly from the date such Deferred Interest would have been payable were it not for
the Extension Period, to the extent permitted by law. 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 Deferred Interest then accrued and unpaid on the Debt
Securities;
provided
,
however
, that no Extension Period may extend beyond the Maturity Date; and
provided
,
however
, during any such Extension Period, the Company may not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock or (ii) make any payment of principal of or premium, if any, or interest on or repay, repurchase or redeem
any debt securities of the Company that rank
pari passu
in all respects with or junior in interest to the Debt Securities or (iii) make any payment under any guarantees of the Company that rank in all respects
pari passu
with or
junior in respect to the Capital Securities Guarantee (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company (A) 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, (B) in connection with a dividend reinvestment or stockholder stock purchase plan or (C) 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, reclassification,
combination 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 stockholder’s rights plan, or the issuance of rights, stock or other property under any stockholder’s rights plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon
A-4
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). Prior to the
termination of any Extension Period, the Company may further extend such Extension Period;
provided
, that no Extension Period (including all previous and further consecutive extensions that are part of such Extension Period) shall exceed 20
consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all Deferred Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No
interest or Deferred Interest shall be due and payable during an Extension Period, except at the end thereof, but Deferred Interest shall accrue upon each installment of interest that would otherwise have been due and payable during such Extension
Period until such installment is paid. The Company must give the Trustee notice of its election to begin or extend an Extension Period at least one Business Day prior to the regular record date applicable to the next succeeding Interest Payment Date
on which interest on the Debt Securities would have been payable except for the election to begin such Extension Period.
The
indebtedness evidenced by this Debt Security 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 Debt Security is issued subject to the provisions
of the Indenture with respect thereto. Each holder of this Debt Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on such holder’s behalf to take such action
as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee such holder’s attorney-in-fact for any and all such purposes. Each holder hereof, by such holder’s 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.
The Company waives diligence, presentment, demand for payment. notice of nonpayment, notice of protest, and all
other demands and notices.
This Debt Security shall not be entitled to any benefit under the Indenture hereinafter referred to and shall
not 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.
The provisions of this Debt Security are continued on the reverse side hereof and such continued provisions shall for all purposes have the
same effect as though fully set forth at this place.
A-5
IN WITNESS WHEREOF, the Company has duly executed this certificate.
|
|
|
|
|
Sunstate Bancshares, Inc.
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
Dated:
, 2004
CERTIFICATE OF AUTHENTICATION
This is one of the Debt Securities referred to in the within-mentioned Indenture.
|
|
|
|
|
JPMorgan Chase Bank, National Association, not in its individual capacity but solely as Trustee
|
|
|
|
|
By:
|
|
|
|
|
|
Authorized Signatory
|
Dated:
, 2004
A-6
[FORM OF REVERSE OF SECURITY]
This Debt Security is one of a duly authorized series of Debt Securities of the Company, all issued or to be issued pursuant to an Indenture
(the “Indenture”), dated as of June 1, 2005, duly executed and delivered between the Company and JPMorgan Chase Bank, National Association, as Trustee (the “Trustee”), to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debt Securities (referred to herein as the “Debt
Securities”) of which this Debt Security is a part. The summary of the terms of this Debt Security contained herein does not purport to be complete and is qualified by reference to the Indenture.
Upon the occurrence and continuation of a Tax Event, an Investment Company Event or a Capital Treatment Event (each a “Special
Event”), this Debt Security may become due and payable, in whole or in part, at any time, within 90 days following the occurrence of such Tax Event, Investment Company Event or Capital Treatment Event (the “Special Redemption Date”),
as the case may be, at the Special Redemption Price.
The Company shall also have the right to redeem this Debt Security at the option of
the Company, in whole or in part, on any March 15, June 15, September 15 or December 15 on or after June 15, 2010 (a “Redemption Date”), at the Redemption Price.
Any redemption pursuant to the preceding paragraph will be made, subject to the receipt by the Company of prior approval from any regulatory
authority with jurisdiction over the Company if such approval is then required under applicable capital guidelines or policies of such regulatory authority, upon not less than 30 days’ nor more than 60 days’ notice. If the Debt Securities
are only partially redeemed by the Company, the Debt Securities will be redeemed
pro
rata
or by lot or by any other method utilized by the Trustee.
“Redemption Price” means 100% of the principal amount of the Debt Securities being redeemed plus accrued and unpaid interest on such
Debt Securities to the Redemption Date.
“Special Redemption Price” means, with respect to the redemption of any Debt Security
following a Special Event, an amount in cash equal to 103.525% of the principal amount of Debt Securities to be redeemed prior to June 15, 2006 and thereafter equal to the percentage of the principal amount of the Debt Securities that is
specified below for the Special Redemption Date plus, in each case, unpaid interest accrued thereon to the Special Redemption Date:
|
|
|
|
|
|
|
Special Redemption During the
12-Month
Period Beginning
June 15
|
|
Percentage of Principal Amount
|
|
|
2006
|
|
|
103.140
|
%
|
|
2007
|
|
|
102.355
|
%
|
|
2008
|
|
|
101.570
|
%
|
|
2009
|
|
|
100.785
|
%
|
|
2010 and thereafter
|
|
|
100.000
|
%
|
A-7
In the event of redemption of this Debt Security in part only, a new Debt Security or Debt
Securities for the unredeemed portion hereof will be issued in the name of the holder hereof upon the cancellation hereof.
In certain
cases where an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debt Securities may be declared, and, in certain cases, shall ipso facto become, due and payable, and upon such
declaration of acceleration shall become due and payable, in each case, in the manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debt Securities at the time outstanding affected thereby, as specified 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 any supplemental indenture or of modifying in any manner the rights of the holders of the Debt Securities;
provided
,
however
, that no such supplemental indenture shall, among other things, without
the consent of the holders of each Debt Security then outstanding and affected thereby (i) change the Maturity Date of any Debt Security, or reduce the principal amount thereof or any premium thereon, or reduce the rate (or manner of
calculation of the rate) or extend the time of payment of interest thereon, or reduce (other than as a result of the maturity or earlier redemption of any such Debt Security in accordance with the terms of the Indenture and such Debt Security) or
increase the aggregate principal amount of Debt Securities then outstanding, or change any of the redemption provisions, or make the principal thereof or any interest or premium thereon payable in any coin or currency other than United States
Dollars, or impair or affect the right of any holder of Debt Securities to institute suit for the payment thereof, or (ii) reduce the aforesaid percentage of Debt 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 Debt Securities at the time outstanding, on behalf of all of the holders of the Debt 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) a default in payments due in respect of any of the Debt Securities, (b) in respect of covenants
or provisions of the Indenture which cannot be modified or amended without the consent of the holder of each Debt Security affected, or (c) in respect of the covenants of the Company relating to its ownership of Common Securities of the Trust.
Any such consent or waiver by the registered bolder of this Debt 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 Debt Security and of any Debt
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 Debt Security.
No reference herein to the Indenture and no provision of this Debt Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay all payments due on this Debt Security at the time and place and at the rate and in the money herein prescribed.
A-8
As provided in the Indenture and subject to certain limitations herein and therein set forth,
this Debt Security is transferable by the registered holder hereof on the Debt Security Register of the Company, upon surrender of this Debt Security for registration of transfer at the office or agency of the Trustee in Houston, Texas accompanied
by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered bolder hereof or such holder’s attorney duly authorized in writing, and thereupon one or more new Debt
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 Company 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 Debt Security, the Company, the Trustee, any Authenticating Agent, any Paying Agent, any transfer agent and the Debt Security registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not
this Debt Security shall be overdue and notwithstanding any notice of ownership or writing hereon) for the purpose of receiving payment of the principal of and premium, if any, and interest on this Debt Security 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 Debt Security registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the interest on this Debt 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, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, 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.
The Debt Securities are issuable only in registered certificated form without coupons. As provided in the Indenture and subject to
certain limitations herein and therein set forth, Debt Securities are exchangeable for a like aggregate principal amount of Debt Securities of a different authorized denomination, as requested by the holder surrendering the same.
All terms used in this Debt Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE DEBT SECURITIES, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.
A-9
Exhibit 4.9
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”) is dated as of May 10, 2007 by and between Great Western
Bancorporation, Inc., an Iowa corporation (“Great Western”), and The Bank of New York Trust Company, National Association, a national banking association (successor to JPMorgan Chase Bank, National Association) (the “Trustee”).
RECITALS
WHEREAS,
Sunstate Bancshares, Inc., an Arizona corporation (“Sunstate”) and the JPMorgan Chase Bank, National Association, as Trustee entered into an Indenture dated as of June, 1, 2005 (the “Indenture”), pursuant to which the Junior
Subordinated Debt Securities due June 15, 2035 (the “Debt Securities”) have been issued by Sunstate; and
WHEREAS, The Bank
of New York Trust Company, National Association, is the successor Trustee under the Indenture (the “Trustee”); and
WHEREAS, on
the date of this Supplemental Indenture, Great Western has assumed the obligations of Sunstate under the Indenture and Sunstate has been relieved of any further liability or obligation under the Indenture or upon the Debt Securities in accordance
with that certain Agreement for Purchase of Common Shares of Sunstate Bank dated February 22, 2007 (the “Purchase and Assumption Agreement”) by and between Great Western and Sunstate; and
WHEREAS, Sections 11.01 and 11.02 of the Indenture require that Great Western expressly assume, by a supplemental indenture executed and
delivered to the Trustee by Great Western, the due and punctual payment of the principal of and premium, if any and the interest on all of the Debt Securities in accordance with their terms, and the due and punctual performance and observance of all
the covenants and conditions of the Indenture to be performed or observed by Sunstate; and
WHEREAS, Section 9.01(a) of the Indenture
authorizes, without the consent of any Securityholders, the execution of a supplemental indenture to evidence the succession of another corporation to Sunstate, and the assumption by any such successor of the covenants, agreements, and obligations
of Sunstate under the Indenture; and
WHEREAS, Great Western and Sunstate each have delivered to the Trustee an Officer’s Certificate
stating that the Purchase and Assumption Agreement and this Supplemental Indenture comply with Article IX and Article XI of the Indenture and that all conditions precedent therein provided for relating to the Merger have been complied with, and an
Opinion of Counsel to the same effect; and
WHEREAS, capitalized terms used and not otherwise defined herein shall have the respective
meanings assigned to such terms in the Indenture.
NOW, THEREFORE, in compliance with Articles IX and XI of the Indenture, and in consideration of
the covenants contained herein and intending to be legally bound hereby, Great Western and the Trustee, for the benefit of the Securityholders, agree as follows:
1.
Assumption of Payment and Performance
. Great Western hereby expressly assumes the due and punctual payment of the principal of and
premium, if any and interest on all of the Debt Securities and the due and punctual performance and observance of all of the covenants and conditions of the Indenture on the part of Sunstate to be performed or observed.
2.
Effect of Supplemental Indenture
. Upon the execution of this Supplemental Indenture, (i) the Indenture has been and hereby is
modified in accordance herewith; (ii) this Supplemental Indenture forms a part of the Indenture for all purposes; (iii) except as modified and amended by this Supplemental Indenture, the Indenture shall continue in full force and effect;
(iv) the Debt Securities shall continue to be governed by the Indenture; and (v) every Securityholder heretofore or hereafter under the Indenture shall be bound by this Supplemental Indenture.
3.
Successor
. Great Western also succeeds to and is substituted for Sunstate with the same effect as if the Company had originally been
named in the Amended and Restated Declaration of Trust, dated as of June 1, 2005 (the “Trust Agreement”), as Sponsor (as defined in the Trust Agreement).
4.
Representations and Warranties
. Great Western represents and warrants that (a) it has all necessary power and authority to
execute and deliver this First Supplemental Indenture and to perform the Indenture, (b) that it is the successor of Sunstate pursuant to the purchase of substantially all of the assets of Sunstate effected in accordance with applicable law,
(c) that it is a banking holding company organized and existing under the laws of the State of Iowa, (d) that both immediately before and after giving effect to this First Supplemental Indenture, no Default or Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and is continuing and (e) that this First Supplemental Indenture is executed and delivered pursuant to Section 9.01(a) and Article XI
of the Indenture and does not require the consent of the Securityholders.
5.
Notation on Debt Securities
. Debt Securities
authenticated and delivered on or after the date hereof shall bear the following notation, which may be printed or typewritten thereon:
“Pursuant to the First Supplemental Indenture, dated as of May 10, 2007 and effective on that date, Great Western Bancorporation,
Inc. has assumed the obligations of Sunstate Bancshares, Inc. and the performance of every covenant and condition of the Indenture on the part of Sunstate Bancshares, Inc. to be performed or observed.”
If Great Western shall so determine, new Debt Securities so modified as to conform to the Indenture as hereby supplemented, in form satisfactory to the
Trustee, may at any time hereafter be prepared and executed by Great Western and authenticated and delivered by the
2
Trustee or the Authenticating Agent in exchange for the Debt Securities then outstanding, and thereafter the notation herein provided shall no longer be required. Anything herein or in the
Indenture to the contrary notwithstanding, the failure to affix the notation herein provided as to any Debt Security or to exchange any Debt Security for a new Debt Security modified as herein provided shall not affect any of the rights of the
holder of such Debt Security.
6.
The Trustee
. The Trustee shall not be responsible in any manner whatsoever for or in respect of
the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by Great Western.
7.
Governing Law
. This Supplemental Indenture 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.
8.
Successors and Assigns
. This Supplemental Indenture shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto and the holders of any Debt Securities then outstanding.
9.
Headings
. The headings used in this Supplemental Indenture are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Supplemental Indenture.
10.
Counterparts
. This Supplemental Indenture may be
executed in several counterparts, each of which shall be an original and all of which shall constitute one and the same instrument.
IN
WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written.
|
|
|
|
|
GREAT WESTERN BANCORPORATION, INC.
|
|
|
|
|
By:
|
|
/s/ Jeffory A. Erickson
|
|
|
|
Jeffory A. Erickson, Vice Chairman
|
|
|
|
|
|
THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee
|
|
|
|
|
By:
|
|
/s/ Maria D. Calzado
|
|
Name:
|
|
Maria D. Calzado
|
|
Title:
|
|
Vice President
|
3
Exhibit 4.11
AMENDED AND RESTATED DECLARATION
OF TRUST
Sunstate Bancshares
Trust II
Dated as of June 1, 2005
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
ARTICLE I
|
|
|
INTERPRETATION AND DEFINITIONS
|
|
|
|
|
|
|
SECTION 1.1
|
|
Definitions
|
|
|
1
|
|
|
|
|
ARTICLE II
|
|
|
ORGANIZATION
|
|
|
|
|
|
|
SECTION 2.1
|
|
Name
|
|
|
8
|
|
|
|
|
|
|
SECTION 2.2
|
|
Office
|
|
|
8
|
|
|
|
|
|
|
SECTION 2.3
|
|
Purpose
|
|
|
9
|
|
|
|
|
|
|
SECTION 2.4
|
|
Authority
|
|
|
9
|
|
|
|
|
|
|
SECTION 2.5
|
|
Title to Property of the Trust
|
|
|
9
|
|
|
|
|
|
|
SECTION 2.6
|
|
Powers and Duties of the Trustees and the Administrators
|
|
|
9
|
|
|
|
|
|
|
SECTION 2.7
|
|
Prohibition of Actions by the Trust and the Trustees
|
|
|
14
|
|
|
|
|
|
|
SECTION 2.8
|
|
Powers and Duties of the Institutional Trustee
|
|
|
15
|
|
|
|
|
|
|
SECTION 2.9
|
|
Certain Duties and Responsibilities of the Trustees and the Administrators
|
|
|
16
|
|
|
|
|
|
|
SECTION 2.10
|
|
Certain Rights of Institutional Trustee
|
|
|
18
|
|
|
|
|
|
|
SECTION 2.11
|
|
Delaware Trustee
|
|
|
20
|
|
|
|
|
|
|
SECTION 2.12
|
|
Execution of Documents
|
|
|
21
|
|
|
|
|
|
|
SECTION 2.13
|
|
Not Responsible for Recitals or Issuance of Securities
|
|
|
21
|
|
|
|
|
|
|
SECTION 2.14
|
|
Duration of Trust
|
|
|
21
|
|
|
|
|
|
|
SECTION 2.15
|
|
Mergers
|
|
|
21
|
|
|
|
|
ARTICLE III
|
|
|
SPONSOR
|
|
|
|
|
|
|
SECTION 3.1
|
|
Sponsor’s Purchase of Common Securities
|
|
|
23
|
|
|
|
|
|
|
SECTION 3.2
|
|
Responsibilities of the Sponsor
|
|
|
23
|
|
-i-
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
ARTICLE IV
|
|
|
TRUSTEES AND ADMINISTRATORS
|
|
|
|
|
|
|
SECTION 4.1
|
|
Number of Trustees
|
|
|
24
|
|
|
|
|
|
|
SECTION 4.2
|
|
Delaware Trustee
|
|
|
24
|
|
|
|
|
|
|
SECTION 4.3
|
|
Institutional Trustee; Eligibility
|
|
|
24
|
|
|
|
|
|
|
SECTION 4.4
|
|
Certain Qualifications of the Delaware Trustee Generally
|
|
|
25
|
|
|
|
|
|
|
SECTION 4.5
|
|
Administrators
|
|
|
25
|
|
|
|
|
|
|
SECTION 4.6
|
|
Initial Delaware Trustee
|
|
|
25
|
|
|
|
|
|
|
SECTION 4.7
|
|
Appointment, Removal and Resignation of the Trustees and the Administrators
|
|
|
25
|
|
|
|
|
|
|
SECTION 4.8
|
|
Vacancies Among Trustees
|
|
|
27
|
|
|
|
|
|
|
SECTION 4.9
|
|
Effect of Vacancies
|
|
|
27
|
|
|
|
|
|
|
SECTION 4.10
|
|
Meetings of the Trustees and the Administrators
|
|
|
27
|
|
|
|
|
|
|
SECTION 4.11
|
|
Delegation of Power
|
|
|
28
|
|
|
|
|
|
|
SECTION 4.12
|
|
Merger, Conversion, Consolidation or Succession to Business
|
|
|
28
|
|
|
|
|
ARTICLE V
|
|
|
DISTRIBUTIONS
|
|
|
|
|
|
|
SECTION 5.1
|
|
Distributions
|
|
|
29
|
|
|
|
|
ARTICLE VI
|
|
|
ISSUANCE OF SECURITIES
|
|
|
|
|
|
|
SECTION 6.1
|
|
General Provisions Regarding Securities
|
|
|
29
|
|
|
|
|
|
|
SECTION 6.2
|
|
Paying Agent, Transfer Agent, Calculation Agent and Registrar
|
|
|
30
|
|
|
|
|
|
|
SECTION 6.3
|
|
Form and Dating
|
|
|
31
|
|
|
|
|
|
|
SECTION 6.4
|
|
Mutilated, Destroyed, Lost or Stolen Certificates
|
|
|
31
|
|
|
|
|
|
|
SECTION 6.5
|
|
Temporary Securities
|
|
|
32
|
|
|
|
|
|
|
SECTION 6.6
|
|
Cancellation
|
|
|
32
|
|
|
|
|
|
|
SECTION 6.7
|
|
Rights of Holders: Waivers of Past Defaults
|
|
|
32
|
|
ii
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
ARTICLE VII
|
|
|
DISSOLUTION AND TERMINATION OF TRUST
|
|
|
|
|
|
|
SECTION 7.1
|
|
Dissolution and Termination of Trust
|
|
|
34
|
|
|
|
|
ARTICLE VIII
|
|
|
TRANSFER OF INTERESTS
|
|
|
|
|
|
|
SECTION 8.1
|
|
General
|
|
|
35
|
|
|
|
|
|
|
SECTION 8.2
|
|
Transfer Procedures and Restrictions
|
|
|
36
|
|
|
|
|
|
|
SECTION 8.3
|
|
Deemed Security Holders
|
|
|
39
|
|
|
|
|
ARTICLE IX
|
|
|
LIMITATION OF LIABILITY OF HOLDERS
|
|
|
OF SECURITIES, TRUSTEES OR OTHERS
|
|
|
|
|
|
|
SECTION 9.1
|
|
Liability
|
|
|
39
|
|
|
|
|
|
|
SECTION 9.2
|
|
Exculpation
|
|
|
39
|
|
|
|
|
|
|
SECTION 9.3
|
|
Fiduciary Duty
|
|
|
40
|
|
|
|
|
|
|
SECTION 9.4
|
|
Indemnification
|
|
|
41
|
|
|
|
|
|
|
SECTION 9.5
|
|
Outside Businesses
|
|
|
44
|
|
|
|
|
|
|
SECTION 9.6
|
|
Compensation; Fee
|
|
|
44
|
|
|
|
|
ARTICLE X
|
|
|
ACCOUNTING
|
|
|
|
|
|
|
SECTION 10.1
|
|
Fiscal Year
|
|
|
45
|
|
|
|
|
|
|
SECTION 10.2
|
|
Certain Accounting Matters
|
|
|
45
|
|
|
|
|
|
|
SECTION 10.3
|
|
Banking
|
|
|
46
|
|
|
|
|
|
|
SECTION 10.4
|
|
Withholding
|
|
|
46
|
|
|
|
|
ARTICLE XI
|
|
|
AMENDMENTS AND MEETINGS
|
|
|
|
|
|
|
SECTION 11.1
|
|
Amendments
|
|
|
46
|
|
|
|
|
|
|
SECTION 11.2
|
|
Meetings of the Holders of the Securities; Action by Written Consent
|
|
|
48
|
|
iii
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
ARTICLE XII
|
|
|
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
|
|
|
AND DELAWARE TRUSTEE
|
|
|
|
|
|
|
SECTION 12.1
|
|
Representations and Warranties of Institutional Trustee
|
|
|
50
|
|
|
|
|
|
|
SECTION 12.2
|
|
Representations and Warranties of Delaware Trustee
|
|
|
51
|
|
|
|
|
ARTICLE XIII
|
|
|
MISCELLANEOUS
|
|
|
|
|
|
|
SECTION 13.1
|
|
Notices
|
|
|
51
|
|
|
|
|
|
|
SECTION 13.2
|
|
Governing Law
|
|
|
53
|
|
|
|
|
|
|
SECTION 13.3
|
|
Submission to Jurisdiction
|
|
|
53
|
|
|
|
|
|
|
SECTION 13.4
|
|
Intention of the Parties
|
|
|
53
|
|
|
|
|
|
|
SECTION 13.5
|
|
Headings
|
|
|
53
|
|
|
|
|
|
|
SECTION 13.6
|
|
Successors and Assigns
|
|
|
53
|
|
|
|
|
|
|
SECTION 13.7
|
|
Partial Enforceability
|
|
|
54
|
|
|
|
|
|
|
SECTION 13.8
|
|
Counterparts
|
|
|
54
|
|
iv
TABLE OF CONTENTS
(continued)
ANNEXES AND EXHIBITS
|
|
|
|
|
ANNEX I
|
|
Terms of TP Securities and Common Securities
|
|
|
|
|
EXHIBIT A-1
|
|
Form of Capital Security Certificate
|
|
EXHIBIT
A-2
|
|
Form of Common Security Certificate
|
-v-
AMENDED AND RESTATED DECLARATION OF TRUST
OF
Sunstate Bancshares Trust II
June 1, 2005
AMENDED
AND RESTATED DECLARATION OF TRUST (this “Declaration”), dated and effective as of June 1, 2005, by the Trustees (as defined herein), the Administrators (as defined herein), the Sponsor (as defined herein) and the holders from time to
time of undivided beneficial interests in the assets of the Trust (as defined herein) to be issued pursuant to this Declaration.
WHEREAS,
certain of the Trustees, the Administrators and the Sponsor established Sunstate Bancshares Trust II (the “Trust”), a statutory trust under the Statutory Trust Act (as defined herein), pursuant to a Declaration of Trust, dated as of
May 26, 2005 (the “Original Declaration”), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on May 26, 2005, 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 the Debentures (as defined herein) of the Debenture Issuer (as defined herein) in connection with the issuance of the Capital Securities (as defined
herein);
WHEREAS, as of the date hereof, no interests in the assets of the Trust have been issued; and
WHEREAS, all of the Trustees, 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, and 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 or, if not defined in this Section 1.1 or elsewhere herein, in the Indenture;
(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;
(e) a term defined in the Trust Indenture Act
(as defined herein) has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
“Additional Interest” has the meaning set forth in Section 3.06 of the Indenture.
“Administrative Action” has the meaning set forth in paragraph 4(a) of Annex I.
“Administrators” means each of Alice J. Wilcox and James D. Kennedy, solely in such Person’s capacity as
Administrator of the Trust 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 enters 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 appoints a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of such Person or for any substantial part of its property, or
orders the winding-up or liquidation of its affairs, and such decree, appointment or order remains unstayed and in effect for a period of 90 consecutive days; or
(b) such Person commences a voluntary case under. any applicable bankruptcy, insolvency or other similar law now or hereafter in effect,
consents to the entry of an order for relief in an involuntary case under any such law, or consents 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 makes any general assignment for the benefit of creditors, or fails generally to pay its debts as they become due.
-2-
“Business Day” means any day other than Saturday, Sunday or any other day on which
banking institutions in Wilmington, Delaware or New York City or the city of the Corporate Trust Office are permitted or required by any applicable law or executive order to close.
“Calculation Agent” has the meaning set forth in Section 1.01 of the Indenture.
“Capital Securities” has the meaning set forth in Section 6.1(a).
“Capital Securities Purchase Agreement” means the Capital Securities Purchase Agreement dated as of May 26, 2005 among the
Trust, the Sponsor and Merrill Lynch International.
“Capital Security Certificate” means a definitive Certificate registered in
the name of the Holder 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.
“Certificate of Trust” means the certificate of trust filed with the Secretary of State of the State of Delaware with respect
to the Trust, as amended and restated from time to time.
“Closing Date” means the date of execution and delivery of this
Declaration.
“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.
“Common Securities” has the meaning set forth in Section 6.1(a).
“Common Security Certificate” means a definitive Certificate registered in the name of the Holder 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 shall at all times be located in the United States and at the date of execution of this Declaration is located at 600 Travis Street,
50
th
Floor, Houston, TX 77002, Attn: Institutional Trust Services — Sunstate Bancshares Trust II.
“Coupon Rate” has the meaning set forth in paragraph 2(a) of Annex I.
-3-
“Covered Person” means: (a) any Administrator, 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 Sunstate Bancshares, Inc., a bank holding company incorporated in Arizona, in its capacity as issuer of the
Debentures under the Indenture.
“Debenture Trustee” means JPMorgan Chase Bank, National Association, 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 Junior Subordinated Debt Securities due June 15, 2035 to be issued by the Debenture Issuer under the
Indenture.
“Deferred Interest” means any interest on the Debentures that would have been overdue and unpaid for more than one
Distribution Payment Date but for the imposition of an Extension Period, and the interest that shall accrue (to the extent that the payment of such interest is legally enforceable) on such interest at the Coupon Rate applicable during such Extension
Period, compounded quarterly from the date on which such Deferred Interest would otherwise have been due and payable until paid or made available for payment.
“Definitive Capital Securities” means any Capital Securities in definitive form issued by the Trust.
“Delaware Trustee” has the meaning set forth in Section 4.2.
“Direct Action” has the meaning set forth in Section 2.8(e).
“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(e) of Annex I.
“Distribution Payment Period” means the period from and including a Distribution Payment Date, or in the case of the first
Distribution Payment Period, the original date of issuance of the Securities, to, but excluding, the next succeeding Distribution Payment Date or, in the case of the last Distribution Payment Period, the Redemption Date, Special Redemption Date or
Maturity Date (each as defined in the Indenture), as the case may be, for the related Debentures.
“Event of Default” means the
occurrence of an Indenture Event of Default.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to
time, or any successor legislation.
“Extension Period” has the meaning set forth in paragraph 2(e) of Annex I.
-4-
“Fiduciary Indemnified Person” shall mean each of the Institutional Trustee (including
in its individual capacity), the Delaware Trustee (including in its individual capacity), any Affiliate of the Institutional Trustee or the Delaware Trustee, and any officers, directors, shareholders, members, partners, employees, representatives,
custodians, nominees or agents of the Institutional Trustee or the Delaware Trustee.
“Fiscal Year” has the meaning set forth in
Section 10.1.
“Guarantee” means the Guarantee Agreement, dated as of the Closing Date, of the Sponsor (the
“Guarantor”) in respect of the Capital Securities.
“Holder” means a Person in whose name a Certificate representing a
Security is registered on the register maintained by or on behalf of the Registrar, 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.
“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 4.3.
“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.
“Legal Action” has the meaning set forth in Section 2.8(e).
“LIBOR” means the London Interbank Offered Rate for U.S. Dollar deposits in Europe as determined by the Calculation Agent
according to paragraph 2(b) of Annex I.
“LIBOR Banking Day” has the meaning set forth in paragraph 2(b)(1) of
Annex I.
“LIBOR Business Day” has the meaning set forth in paragraph 2(b)(1) of Annex I.
“LIBOR Determination Date” has the meaning set forth in paragraph 2(b)(l) 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.
-5-
“Majority in liquidation amount of the Securities” means Holders 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.
“Notice” has the meaning set forth in Section 2.11 of the Indenture.
“Officers’ Certificate” 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 provided for in this Declaration shall include:
(a) a statement that each officer signing the Officers’ Certificate has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the
Officers’ Certificate;
(c) a statement that each such officer has made such examination or investigation as, in such officer’s
opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with.
“Paying Agent” has the meaning set forth in Section 6.2.
“Payment Amount” has the meaning set forth in Section 5.1.
“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.
“PORTAL” has the meaning set forth in Section 2.6(a)(i)(E).
“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.
“QIB” means a “qualified institutional buyer” as defined under Rule 144A.
-6-
“Quorum” means a majority of the Administrators or, if there are only two
Administrators, both of them.
“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.
“Relevant Trustee” has the meaning set forth in Section 4.7(a).
“Responsible Officer” means, with respect to the Institutional Trustee, any officer within the Corporate Trust Office of the
Institutional Trustee with direct responsibility for the administration of this Declaration, 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 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(c).
“Rule 144A” means Rule 144A under the Securities Act.
“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, as applicable.
“Securities Act” means the Securities Act of 1933, as amended from time
to time, or any successor legislation.
“Sponsor” means Sunstate Bancshares, Inc., a bank holding company that is a U.S. Person
incorporated in Arizona, or any successor entity in a merger, consolidation or amalgamation that is a U.S. Person, in its capacity as sponsor of the Trust.
“Statutory Trust Act” means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code § 3801 et seq., as it may
be amended from time to time, or any successor legislation.
“Successor Delaware Trustee” has the meaning set forth in
Section 4.7(e).
“Successor Entity” has the meaning set forth in Section 2.15(b).
“Successor Institutional Trustee” has the meaning set forth in Section 4.7(b).
“Successor Securities” has the meaning set forth in Section 2.15(b).
-7-
“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 Holders 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.
“Transfer Agent” has the meaning set forth in Section 6.2.
“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended from
time-to-time,
or any successor legislation.
“Trustee” or “Trustees” means each Person who has signed this Declaration as a trustee,
so long as such Person shall continue in office 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.
“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 “Sunstate Bancshares Trust II,” as such name may be modified from time to time by the
Administrators following written notice to the Institutional Trustee and 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, which shall be in a state of the United States or the District
of Columbia, is 1300 E. Florence Blvd., Casa Grande, Arizona 85222. On ten Business Days’ written notice to the Institutional Trustee and the Holders of the Securities, the Administrators may designate another principal office, which shall be
in a state of the United States or the District of Columbia.
-8-
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 incidental thereto that are deemed necessary or advisable by the Institutional Trustee,
including, without limitation, those activities specified in this Declaration. 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 a Trustee on behalf of the Trust and in
accordance with such Trustee’s 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. 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 2.6(g) and 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 Trustees and the Administrators
.
(a) The Trustees 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 Administrators and, at the direction of the
Administrators, the Trustees, shall have the authority to enter into all transactions and agreements determined by the Administrators to be appropriate in exercising the authority, express or implied, otherwise granted to the Trustees 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, duty and authority, and is hereby authorized, to act on behalf of the Trust with
respect to the following matters:
(A) the issuance and sale of the Securities;
-9-
(B) to acquire the Debentures with the proceeds of the sale of the Securities;
provided, however, that the Administrators shall cause legal title to the Debentures to be held of record in the name of the Institutional Trustee for the benefit of the Holders;
(C) to cause the Trust to enter into, and to execute, deliver and perform 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, a Debenture subscription agreement between the Trust and the Sponsor and a Common Securities subscription agreement between
the Trust and the Sponsor;
(D) ensuring compliance with the Securities Act and applicable state securities or blue sky
laws;
(E) if and at such time determined solely by the Sponsor at the request of the Holders, assisting in the
designation of the Capital Securities for trading in the Private Offering, Resales and Trading through the Automatic Linkages (“PORTAL”) system if available;
(F) 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, including notice 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;
(G) the appointment of a Paying Agent, Transfer Agent and Registrar in accordance with this Declaration;
(H) execution and delivery of the Securities in accordance with this Declaration;
(I) execution and delivery of closing certificates pursuant to the Placement Agreement and the application for a taxpayer
identification number;
(J) 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;
(K) the taking of any action incidental to the foregoing as the Sponsor or an Administrator 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);
-10-
(L) 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;
(M) to duly prepare and file on behalf of the Trust all applicable tax returns and tax information reports
that are required to be filed with respect to the Trust;
(N) to negotiate the terms of, and the execution and delivery
of, the Placement Agreement and the Capital Securities Purchase Agreement related thereto, providing for the sale of the Capital Securities;
(O) to employ or otherwise engage employees, agents (who may be designated as officers with titles), managers, contractors,
advisors, attorneys and consultants and pay reasonable compensation for such services;
(P) to incur expenses that are
necessary or incidental to carry out any of the purposes of the Trust;
(Q) to give the certificate required by
§ 314(a)(4) of the Trust Indenture Act to the Institutional Trustee, which certificate may be executed by an Administrator; and
(R) 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 trust under the laws of each jurisdiction (other than the State of Delaware) 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.
(ii) As among the Trustees and
the Administrators, the Institutional Trustee shall have the power, duty and authority, and is hereby authorized, 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;
-11-
(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;
(I) after any Event of Default (of which the Institutional Trustee has knowledge (as provided in
Section 2.10(m) hereof)) (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);
(J) 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 trust under the laws of the State of Delaware 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; and
(K) to undertake any actions set forth in § 317(a) of the Trust Indenture Act.
(b) The Institutional Trustee shall have the power and authority, and is hereby authorized, 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)(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.
(c) So long as this Declaration remains in effect, the Trust (or the Trustees 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 Trustees 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 cause (or in the case of the Institutional Trustee, to the actual knowledge of a Responsible Officer would cause)
-12-
the Trust to fail or cease to qualify as a “grantor trust” for United States federal income tax purposes, (iv) incur any indebtedness for borrowed money or issue any other debt or
(v) take or consent to any action that would result in the placement of a lien on any of the Trust Property. The 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.
(d) 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 quality 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 advisement of and
direction to the Trustees of actions they must take on behalf of the Trust, and the preparation for execution and filing of any documents to be executed and filed by the Trust or on behalf of the Trust, as the 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; and
(iii) the taking of any other actions necessary or desirable to carry out any of the foregoing activities.
(e) Notwithstanding anything herein to the contrary, the Administrators, the Institutional Trustee 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 (i) the Trust will not be deemed to be an Investment Company (in the case of the Institutional Trustee,
to the actual knowledge of a Responsible Officer), and (ii) the Trust will not fail to be classified as a grantor trust for United States federal income tax purposes (in the case of the Institutional Trustee, to the actual knowledge of a
Responsible Officer) and (iii) the Trust will 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 the case of the Institutional Trustee,
to the actual knowledge of a Responsible Officer). In this connection, the Institutional Trustee, 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 or this Declaration, as amended from time to time, that each of the Institutional Trustee, the Administrators and such Holders determine in their discretion to be necessary or desirable for such purposes, even if such action
adversely affects the interests of the Holders of the Capital Securities.
-13-
(f) All expenses incurred by the Administrators or the Trustees pursuant to this Section 2.6
shall be reimbursed by the Sponsor, and the Trustees shall have no obligations with respect to such expenses.
(g) The assets of the Trust
shall consist of the Trust Property.
(h) 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 for the benefit of the Trust in accordance with this Declaration.
(i) 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 Trustees
. The Trust shall not, and the Institutional Trustee
and the Administrators shall not, and the Administrators 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 and the
Administrators shall not cause the Trust to:
(a) 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;
(b) acquire
any assets other than as expressly provided herein;
(c) possess Trust Property for other than a Trust purpose;
(d) make any loans or incur any indebtedness other than loans represented by the Debentures;
(e) possess any power or otherwise act in such a way as to vary the Trust Property or the terms of the Securities;
(f) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or
(g) other than as provided in this Declaration (including Annex I), (i) direct the time, method and place of exercising any
trust or power conferred upon the Debenture Trustee with respect to the Debentures, (ii) waive any past default that is waivable under the Indenture, (iii) exercise any right to rescind or annul any declaration that the principal of all
the Debentures shall be due and payable, or (iv) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received a written opinion of counsel
experienced in such matters to the effect that such amendment, modification or termination will not cause the Trust to cease to be classified as a grantor trust for United States federal income tax purposes.
-14-
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. 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 4.7. 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 or to the Delaware
Trustee.
(c) The Institutional Trustee shall:
(i) establish and maintain a segregated non-interest bearing trust account (the “Property Account”) in the United
States (as defined in Treasury Regulations
§ 301.7701-7),
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 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 shall take all actions and
perform such duties as may be specifically required of the Institutional Trustee pursuant to the terms of the Securities.
(e) 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 (a “Legal Action”) which arise out of or in connection
with an Event of Default of which a Responsible Officer of the Institutional Trustee has actual knowledge or the Institutional Trustee’s duties and obligations under this Declaration or the Trust Indenture Act;
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 premium, if any, on or
-15-
principal of the Debentures on the date such interest, premium, if any, 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 premium, if any, 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 a Holder of the Common Securities may exercise such
right of subrogation only if no Event of Default with respect to the Capital Securities has occurred and is continuing.
(f) 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 (including Annex I) and the certificate of cancellation referenced in Section 7.1(b) has been filed;
or
(ii) a Successor Institutional Trustee has been appointed and has accepted that appointment in accordance with
Section 4.7.
(g) 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.
(h) 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 Trustees and
the Administrators
.
(a) The Institutional Trustee, before the occurrence of any Event of Default (of which the Institutional Trustee
has knowledge (as provided in Section 2.10(m) hereof)) and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants
shall be read into this Declaration against the Institutional Trustee. In case an Event of Default (of which the Institutional Trustee has knowledge (as provided in Section 2.10(m) hereof)), has occurred (that has not been cured or waived
pursuant to Section 6.8), 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.
-16-
(b) The duties and responsibilities of the Trustees and the Administrators shall be as provided
by this Declaration and, in the case of the Institutional Trustee, by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Declaration shall require any Trustee or Administrator to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to
it against such risk or 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 Trustees or the
Administrators shall be subject to the provisions of this Article. Nothing in this Declaration shall be construed to release a Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct or
bad faith. Nothing in this Declaration shall be construed to release an Administrator from liability for its own gross negligent action, its own gross negligent failure to act, or its own willful misconduct or bad faith. To the extent that, at law
or in equity, a Trustee or an Administrator has duties and liabilities relating to the Trust or to the Holders, such Trustee or Administrator shall not be liable to the Trust or to any Holder for such Trustee’s or 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 Trustees 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 Trustees.
(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 Trustees 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 Trustees expressly set forth elsewhere in this Declaration or, in the case of the Institutional Trustee, in the Trust Indenture Act.
(d) No provision of this Declaration shall be construed to relieve the Institutional Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct or bad faith with respect to matters that are within the authority of the Institutional Trustee under this Declaration, except that:
(i) the Institutional Trustee shall not be liable for any error or judgment made in good faith by a Responsible 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,
-17-
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, safe keeping 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 own account, subject to the protections and limitations on liability
afforded to the Institutional Trustee under this Declaration and the Trust Indenture Act;
(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, written 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 opinion 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 in its sole discretion shall deem advisable and in
the best interests of the Holders, in which event the Institutional Trustee shall have no liability except for its own negligence or willful misconduct;
-18-
(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, 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 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, upon the
occurrence of an Event of Default (of which the Institutional Trustee has knowledge (as provided in Section 2.10(m) hereof)) that has not been cured or waived, of its obligation to exercise the rights and powers vested in it by this
Declaration;
(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 Common Securities and the Capital Securities, which instructions may be given
-19-
only by the Holders of the same proportion in liquidation amount of the Common Securities and the Capital Securities as would be entitled to direct the Institutional Trustee under the terms of
the Common Securities and 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 has actual knowledge of such event or the Institutional Trustee receives written notice of such event from any Holder, except with respect to an Event of Default pursuant to Sections 5.01(a), 5.01(b) or 5.01(c) of the Indenture (other
than an Event of Default resulting from the default in the payment of Additional Interest or premium, if any, if the Institutional Trustee does not have actual knowledge or written notice that such payment is due and payable), of which the
Institutional Trustee shall be deemed to have knowledge;
(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.
Delaware Trustee
.
Notwithstanding any other provision of this Declaration other than Section 4.2, the Delaware Trustee shall not be entitled to exercise
any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of any of the Trustees or the Administrators described in this Declaration (except as may be required under the Statutory Trust Act). Except as set forth in
Section 4.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of § 3807 of the Statutory Trust Act.
-20-
SECTION 2.12.
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 and deliver on behalf of the Trust any documents, agreements, instruments or certificates that the Trustees or the Administrators, as the
case may be, have the power and authority to execute pursuant to Section 2.6.
SECTION 2.13.
Not Responsible for Recitals or
Issuance of Securities
.
The recitals contained in this Declaration and the Securities (except in the certificate of authentication of
the Institutional Trustee) 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 property of the Trust or
any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration, the Debentures or the Securities.
SECTION 2.14.
Duration of Trust
. The Trust, unless dissolved pursuant to the provisions of Article VII hereof, shall have
existence for thirty-five (35) years from the Closing Date.
SECTION 2.15.
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 Person, except as described in this Section 2.15 and except with respect to the distribution of 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 Administrators (which consent will not be unreasonably
withheld) and without the consent of the Institutional Trustee, the Delaware Trustee or the Holders of the Capital 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 a trust organized as such under the laws of any state;
provided
, that:
(i) if the Trust is not the survivor, 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;
-21-
(ii) the Sponsor expressly appoints, as the holder of the Capital Securities, a
trustee of the Successor Entity that possesses the same powers and duties as the Institutional Trustee;
(iii) the Capital
Securities or any Successor Securities (excluding any securities substituted for the Common Securities) are listed or quoted, or any Successor Securities will be listed or quoted upon notification of issuance, on any national securities exchange or
with another organization on which the Capital Securities are then listed or quoted, if any;
(iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Capital Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, if the Capital
Securities are then rated;
(v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of such Holders’ interests in the Successor
Entity as a result of such merger, consolidation, amalgamation or replacement);
(vi) such Successor Entity has a purpose
substantially identical to that of the Trust;
(vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Trust has received a written opinion of a nationally recognized 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 of the Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders’ interests 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;
-22-
(viii) the Sponsor guarantees the obligations of such Successor Entity under the
Successor Securities to the same extent provided by the Guarantee, the Debentures and this Declaration; and
(ix) prior to
such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, 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 of this paragraph (b) to such transaction have been satisfied.
(c) Notwithstanding Section 2.15(b), the Trust shall
not, except with the consent of Holders of 100% in 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 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 and sole decision 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 of 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;
(b) to prepare for filing and request the Administrators to
cause the filing by the Trust, as may be appropriate, of an application to the PORTAL system, for listing or quotation upon notice of issuance of any Capital Securities, as requested by the Holders of not less than a Majority in liquidation amount
of the Capital Securities; and
(c) to negotiate the terms of and/or execute and deliver on behalf of the Trust, the Placement Agreement
and other related agreements providing for the sale of the Capital Securities.
-23-
ARTICLE IV
TRUSTEES AND ADMINISTRATORS
SECTION 4.1.
Number of Trustees
. The number of Trustees initially shall be two, 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 Holder of a Majority in
liquidation amount of the Common Securities voting as a class at a meeting of the Holder of the Common Securities;
provided
,
however
, that there shall be a Delaware Trustee if required by Section 4.2; and there shall always be one
Trustee who shall be the Institutional Trustee, and such Trustee may also serve as Delaware Trustee if it meets the applicable requirements, in which case Section 2.11 shall have no application to such entity in its capacity as Institutional
Trustee.
SECTION 4.2.
Delaware Trustee
. If required by the Statutory Trust Act, one Trustee (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 is organized under the laws of the United States or any state thereof or the District of
Columbia, has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, including § 3807 of the Statutory Trust Act.
SECTION 4.3.
Institutional Trustee; Eligibility
.
(a) There shall at all times be one Trustee which shall act as 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 national association organized and doing business under the laws of the United States of
America or any state thereof or of the District of Columbia and 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 or District of Columbia authority. If such corporation or national association 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 4.3(a)(iii), the combined capital and surplus of such corporation or national association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition
so published.
-24-
(b) If at any time the Institutional Trustee shall cease to be eligible to so act under
Section 4.3(a), the Institutional Trustee shall immediately resign in the manner and with the effect set forth in Section 4.7.
(c) If the Institutional Trustee has or shall acquire any “conflicting interest” within the meaning of § 310(b) of the
Trust Indenture Act, 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 JPMorgan Chase Bank, National Association.
SECTION 4.4.
Certain Qualifications of the Delaware Trustee Generally
. The Delaware Trustee shall be a U.S. Person and 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 4.5.
Administrators
. Each Administrator shall be a U.S. Person.
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 acting alone.
SECTION 4.6.
Initial Delaware Trustee
. The initial Delaware Trustee shall be Chase Bank USA, National Association.
SECTION 4.7.
Appointment, Removal and Resignation of the Trustees and the Administrators
.
(a) No resignation or removal of any Trustee (the “Relevant Trustee”) and no appointment of a successor Trustee pursuant to this
Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of this Section 4.7.
(b) Subject to Section 4.7(a), a Relevant Trustee may resign at any time by giving written notice thereof to the Holders of the
Securities and by appointing a successor Relevant Trustee, except in the case of the Delaware Trustee’s successor which shall be appointed by Holders of a Majority in liquidation amount of the Common Securities. 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 their 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 reasonable expense and charges (the “Successor Institutional Trustee”). If the instrument of acceptance by the successor Relevant Trustee required by this
Section 4.7 shall not have been delivered to the Relevant Trustee within 60 days after the giving of such notice of resignation or delivery of the instrument of removal, the Relevant Trustee may petition, at the expense of the Trust, any
federal, state or District of
-25-
Columbia court of competent jurisdiction for the appointment of a successor Relevant Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a
Relevant Trustee. The Institutional Trustee shall have no liability for the selection of such successor pursuant to this Section 4.7.
(c) Unless an Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by an act of the Holders of a
Majority in liquidation amount of the Common Securities. If any Trustee shall be so removed, the Holders of the Common Securities, by act of the Holders of a Majority in liquidation amount of the Common Securities delivered to the Relevant Trustee,
shall promptly appoint a successor Relevant Trustee, and such successor Trustee shall comply with the applicable requirements of this Section 4.7. If an Event of Default shall have occurred and be continuing, the Institutional Trustee or the
Delaware Trustee, or both of them, may be removed by the act of the Holders of a Majority in liquidation amount of the Capital Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust). If any 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 Relevant Trustee, shall promptly appoint a successor Relevant Trustee or
Trustees, and such successor Trustee shall comply with the applicable requirements of this Section 4.7. If no successor Relevant 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 4.7 within 30 days after delivery of an instrument of removal, the Relevant Trustee or any Holder who has been a Holder of the Securities for at least six 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 a successor Relevant Trustee. Such court may thereupon, after prescribing such notice, if any, as
it may deem proper, appoint a successor Relevant Trustee or Trustees.
(d) The Institutional Trustee shall give notice of each resignation
and each removal of a Trustee and each appointment of a successor Trustee to all Holders and to the Sponsor. Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust Office if it is the
Institutional Trustee.
(e) Notwithstanding the foregoing or any other provision of this Declaration, in the event a Delaware Trustee who
is a natural person dies or is adjudged by a court to have become incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by the Institutional Trustee (provided the Institutional Trustee satisfies
the requirements of a Delaware Trustee as set forth in Section 4.2) following the procedures in this Section 4.7 (with the successor being a Person who satisfies the eligibility requirement for a Delaware Trustee set forth in this
Declaration) (the “Successor Delaware Trustee”).
(f) In case of the appointment hereunder of a successor Relevant Trustee, the
retiring Relevant Trustee and each successor Relevant Trustee with respect to the Securities shall execute and deliver an amendment hereto wherein each successor Relevant Trustee shall accept such appointment and which (a) shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Securities and the Trust and
(b) shall add to or change any of the provisions of this Declaration as shall be necessary to
-26-
provide for or facilitate the administration of the Trust by more than one Relevant Trustee, it being understood that nothing herein or in such amendment shall constitute such Relevant Trustees
co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee; but, on request of the Trust or any successor Relevant Trustee, such retiring Relevant Trustee shall duly assign, transfer and
deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Securities and the Trust subject to the payment of all unpaid fees, expenses and
indemnities of such retiring Relevant Trustee.
(g) No Institutional Trustee or Delaware Trustee shall be liable for the acts or omissions
to act of any Successor Institutional Trustee or Successor Delaware Trustee, as the case maybe.
(h) 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 Holders of the Common Securities.
(i) 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 Delaware Trustee in the State of Delaware.
SECTION 4.8.
Vacancies Among
Trustees
.
If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 4.1,
or if the number of Trustees is increased pursuant to Section 4.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Trustees or, if there are more than two, a majority of the Trustees shall be conclusive
evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 4.7.
SECTION 4.9.
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, terminate or annul the Trust or terminate this Declaration. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled by the appointment of a Trustee in accordance with
Section 4.7, the Institutional Trustee shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration.
SECTION 4.10.
Meetings of the Trustees and the Administrators
.
Meetings of the Trustees or the Administrators shall be held from time to time upon the call of any Trustee or Administrator, as applicable.
Regular meetings of the Trustees and the Administrators, respectively, may be in person in the United States or by telephone, at a place (if applicable) and time fixed by resolution of the Trustees or the Administrators, as
-27-
applicable. Notice of any in-person meetings of the Trustees or 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 Trustees or 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 a Trustee or an Administrator, as
the case may be, at a meeting shall constitute a waiver of notice of such meeting except where a 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 ground
that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Trustees or the Administrators, as the case may be, may be taken at a meeting by vote of a majority of the Trustees or the
Administrators present (whether in person or by telephone) and eligible to vote with respect to such matter;
provided
, that, in the case of the Administrators, a Quorum is present, or without a meeting by the unanimous written consent of the
Trustees or the Administrators, as the case may be. Meetings of the Trustees and the Administrators together shall be held from time to time upon the call of any Trustee or Administrator.
SECTION 4.11.
Delegation of Power
.
(a) Any Trustee or any Administrator, as the case may be, 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, instruments or other writings contemplated in Section 2.6.
(b) The Trustees shall have power to delegate from time to time to such of their number or to any officer of the Trust that is a U.S. Person,
the doing of such things and the execution of such instruments or other writings either in the name of the Trust or the names of the Trustees or otherwise as the Trustees 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 4.12.
Merger, Conversion, Consolidation or
Succession to Business
.
Any Person into which the Institutional Trustee or the Delaware Trustee, as the case maybe, may be merged or
converted or with which either may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Institutional 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 Institutional Trustee or the Delaware Trustee, as the case may be, shall be the successor of the Institutional 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 Secretary of State of the State of Delaware as contemplated in Section 4.7(i).
-28-
ARTICLE V
DISTRIBUTIONS
SECTION 5.1.
Distributions
.
(a) 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 (including
any Additional Interest or Deferred Interest) or premium, if any, on and/or principal on the Debentures held by the Institutional Trustee (the amount of any such payment being a “Payment Amount”), the Institutional Trustee shall and is
directed, to the extent funds are available in the Property Account for that purpose, to make a distribution (a “Distribution”) of the Payment Amount to Holders. For the avoidance of doubt, funds in the Property Account shall not be
distributed to Holders to the extent of any taxes payable by the Trust, in the case of withholding taxes, as determined by the Institutional Trustee or any Paying Agent and, in the case of taxes other than withholding tax taxes, as determined by the
Administrators in a written notice to the Institutional Trustee.
(b) As a condition to the payment of any principal of or interest on the
Securities without the imposition of withholding tax, the Administrators shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service
Form W-9
(or applicable successor form) in the case of a person that is a “United States person” within the meaning of Section 7701(a)(30) of the Code or an Internal Revenue Service
Form W-8
(or applicable successor form) in the case of a person that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code, and any other certification acceptable
to it to enable the Institutional Trustee or any Paying Agent to determine their respective duties and liabilities with respect to any taxes or other charges that they may be required to pay, deduct or withhold in respect of such Securities.
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, evidenced by a certificate substantially in the
form of
Exhibit A-1,
representing undivided beneficial interests in the assets of the Trust and having such terms as are set forth in Annex I (the “Capital Securities”), and one series of
common securities, evidenced by a certificate substantially in the form of
Exhibit A-2,
representing undivided beneficial interests in the assets of the Trust and 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. The Capital Securities rank
pari passu
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.
-29-
(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. Any Certificate may be signed on behalf of the Trust by such person 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
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 and shall be valid upon execution by one or more Administrators.
(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 non-assessable, and each Holder thereof shall be entitled to the benefits provided by this Declaration.
(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, Calculation Agent and Registrar
.
(a) The Trust shall maintain in New York, New York, an office or agency where the Securities may be presented for payment (the “Paying
Agent”), and an office or agency where Securities may be presented for registration of transfer or exchange (the “Transfer Agent”). The Trustee hereby appoints the Institutional Trustee as Paying Agent and Transfer Agent at ITS Unit
Trust Window, 4 New York Plaza, Ground Floor, New York, New York 10004, Attn: ITS (Houston) – Sunstate Bancshares Trust ll. The Trust shall also keep or cause to be kept a register for the purpose of registering Securities and 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, 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 or co-Transfer Agent. The
-30-
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 Registrar for the Capital Securities and the Common Securities at its
Corporate Trust Office. The Institutional Trustee or any of its Affiliates in the United States may act as Paying Agent, Transfer Agent or Registrar.
(b) The Trust shall also appoint a Calculation Agent, which shall determine the Coupon Rate in accordance with the terms of the Securities.
The Trust initially appoints the Institutional Trustee as Calculation Agent.
SECTION 6.3.
Form and Dating
.
(a) 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 Certificates 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 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 Delaware 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 $100,000 and multiples of $1,000 in excess thereof.
(b) The Capital Securities sold by the Trust to the initial purchasers pursuant to the Placement Agreement and the Capital Securities Purchase
Agreement shall be issued in definitive form, registered in the name of the Holder thereof, 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 hold each of them harmless; then, in the absence of notice that such Certificate shall have been acquired by a bona fide 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
-31-
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 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 Registrar 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 in accordance with its standard procedures or otherwise 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, and the issuance of the Securities shall not be subject to, preemptive or other similar rights and when issued and delivered to Holders against payment of the purchase price therefor, the Securities will be fully paid and
nonassessable by the Trust.
(b) For so long as any Capital Securities remain outstanding, if, upon an Indenture Event of Default under
Section 5.01(c) of the Indenture, 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 not less than 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.
(c) At any time after a declaration of acceleration of maturity of 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, subject to the provisions hereof, fails to annul any such declaration and waive such default, the
-32-
Holders of not less than 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 Sponsor 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 Deferred Interest on all of the Debentures;
(C) all payments on any Debentures that have become due otherwise than by such declaration of acceleration and interest and
Deferred 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, documented 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 or premium, if any,
on the Debentures that has become due solely by such acceleration, have been cured or waived as provided in Section 5.07 of the Indenture.
(d) The Holders of not less than 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 of or premium, if any, or interest (unless such default or Event of Default bas 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.
(e) 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
-33-
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.
(f) Except as otherwise provided in
this Section 6.7, the Holders of not less than 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 June 1, 2040, the expiration of the term of the Trust;
(ii) 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) the filing of a certificate of dissolution or its equivalent with respect to the Sponsor 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) the distribution of all of the Debentures to the Holders of the
Securities, upon exercise of the right of the Holders Of all of the outstanding Common Securities to dissolve the Trust as provided in Annex I hereto;
(v) the entry of a decree of judicial dissolution of any Holder of the Common Securities, the Sponsor, the Trust or the
Debenture Issuer;
(vi) 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
(vii) before the
issuance of any Securities, with the consent of all of the Trustees 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 Section 3808 of the Statutory Trust Act, and subject to the terms set
-34-
forth in Annex I, the Delaware Trustee, when notified in writing of the completion of the winding up of the Trust in accordance with the Statutory Trust Act, shall terminate the Trust by
filing, at the expense of the Sponsor, a certificate of cancellation with the Secretary of State of the State of Delaware.
(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 6.4 and Section 8.1(c), when Capital Securities are presented to the 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 the requirements provided for herein for such
transactions are met. To permit registrations of transfers 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 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 Capital 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 to be issued in the name of the designated transferee or transferees. Any Security 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 Security surrendered upon such registration of transfer or exchange. 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
-35-
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) Neither the Trust nor the Registrar
shall 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 (as defined below), which shall not be removed unless there is
delivered to the Trust such satisfactory evidence, which may include an opinion of counsel reasonably acceptable to the Administrators and the Institutional Trustee, as may be reasonably required by the Trust or the Institutional Trustee, 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 or that such Securities are not “restricted” within the meaning of
Rule 144 under the Securities Act. Upon provision of such satisfactory evidence, the Institutional Trustee, at the written direction of the Administrators, shall authenticate and deliver Capital Securities that do not bear the Restricted
Securities Legend (other than the legend contemplated by Section 8.2(d)).
(b) When Capital Securities are presented to the Registrar
(x) to register the transfer of such Capital Securities, or (y) to exchange such Capital Securities for an equal number of Capital Securities represented by different Certificates, the Registrar shall register the transfer or make the
exchange as requested if its reasonable requirements for such transaction are met;
provided
,
however
, that the Capital Securities surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Administrators, the Institutional Trustee and the Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.
(c) Except as permitted by Section 8.2(a), each Capital Security shall bear a legend (the “Restricted Securities Legend”) in
substantially the following form:
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 LAWS. 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. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE DEBENTURE ISSUER OR THE TRUST, (B) PURSUANT TO
-36-
RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) TO A PERSON THE HOLDER 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, (C) TO A “NON U.S. PERSON” IN AN “OFFSHORE
TRANSACTION” PURSUANT TO REGULATIONS UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a) (1),
(2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN “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 (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE DEBENTURE ISSUER’S AND THE TRUST’S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE AMENDED AND
RESTATED DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE DEBENTURE ISSUER OR THE TRUST. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING
THIS SECURITY UNLESS SUCH TRANSACTIONS ARE 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 THIS SECURITY OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTION 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 THIS SECURITY 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
-37-
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 CONNECTION WITH ANY TRANSFER, THE HOLDER OF THE CERTIFICATE WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE AMENDED AND RESTATED DECLARATION OF TRUST TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF
$1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 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 THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.
(d) 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 void 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.
(e) Each party hereto understands and hereby agrees that the Initial Purchaser is intended solely to be an
interim holder of the Capital Securities and is purchasing such securities to facilitate consummation of the transactions contemplated herein and in the documents ancillary hereto. Notwithstanding any provision in this Declaration to the contrary,
the Initial Purchaser shall have the right upon notice (a “Transfer Notice”) to the Institutional Trustee and the Sponsor to transfer title in and to the Capital Securities; provided the Initial Purchaser shall take reasonable steps to
ensure that such transfer is exempt from registration under the Securities Act of 1933, as amended, and rules promulgated thereunder. Any Transfer Notice delivered to the Institutional Trustee and Sponsor pursuant to the preceding sentence shall
indicate the aggregate liquidation amount of Capital Securities being transferred, the name and address of the transferee thereof (the “Transferee”) and the date of such transfer. Notwithstanding any provision in this Declaration to the
contrary, the transfer by the Initial Purchaser of title in and to the Capital Securities pursuant to a Transfer Notice shall not be subject to any requirement relating to Opinions of Counsel, Certificates of Transfer or any other Opinion or
Certificate applicable to transfers hereunder and relating to Capital Securities.
(f) Neither the Institutional Trustee nor the Registrar
shall be responsible for ascertaining whether any transfer hereunder complies with the registration provisions of or any exemptions from the Securities Act, applicable state securities laws or the applicable laws of any other jurisdiction, ERISA,
the Code or the Investment Company Act.
-38-
SECTION 8.3.
Deemed Security Holders
. The Trust. the Administrators, the Trustees, 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 Trustees, 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, TRUSTEES 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; and
(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) Except to the extent provided in Section 9.1(b), and pursuant to § 3803(a) of the Statutory Trust Act, the Holders of the
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 Delaware, except as otherwise specifically set forth
herein.
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
-39-
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 (other than an Administrator) shall be liable for any such loss, damage or claim incurred by reason of such Indemnified
Person’s negligence or willful misconduct or bad faith with respect to such acts or omissions and except that an Administrator shall be liable for any such loss, damage or claim incurred by reason of such Administrator’s gross negligence
or willful misconduct or bad faith 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.
(c) It is expressly understood and agreed by the parties hereto that insofar as any document, agreement or certificate is executed on behalf
of the Trust by any Trustee (i) such document, agreement or certificate is executed and delivered by such Trustee, not in its individual capacity, but solely as Trustee under this Declaration in the exercise of the powers and authority
conferred and vested in it, (ii) each of the representations, undertakings and agreements made on the part of the Trust is made and intended not as representations, warranties, covenants, undertakings and agreements by any Trustee in its
individual capacity, but is made and intended for the purpose of binding only the Trust and (iii) under no circumstances shall any Trustee in its individual capacity be personally liable for the payment of any indebtedness or expenses of the
Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under this Declaration or any other document, agreement or certificate. This Section 9.2(c) is not intended to
excuse the Trustee for breaches of its responsibilities and obligations under any documents executed in its capacity as Trustee and not on behalf of the Trust.
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 (other than the duties imposed on the Institutional Trustee under the Trust Indenture Act), are agreed by the
parties hereto to replace such other duties and liabilities of the Indemnified Person.
-40-
(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) (i) The Sponsor shall indemnify, to the fullest 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) by reason of the fact
that such Person is or was an Indemnified Person against expenses (including attorneys’ fees and expenses), judgments, fines and amounts paid in settlement actually and reasonably incurred by such Person in connection with such action, suit or
proceeding if such Person acted in good faith and in a manner such Person 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 such
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 such Person 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 such conduct was
unlawful.
(ii) The Sponsor shall indemnify, to the fullest 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 by reason of the fact that such Person is or was an Indemnified Person against
expenses (including attorneys’ fees and expenses) actually and reasonably incurred by such Person in connection with the defense or settlement of such action or suit if such Person acted in good faith and in a manner such Person 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 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.
-41-
(iii) 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 (i) and (ii) of this
Section 9.4(a), or in defense of any claim, issue or matter therein, such Person shall be indemnified, to the fullest extent permitted by law, against expenses (including attorneys’ fees and expenses) actually and reasonably incurred by
such Person in connection therewith.
(iv) Any indemnification of an Administrator under paragraphs (i) and
(ii) of this Section 9.4(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 Indemnified Person is proper in the circumstances because such
Person has met the applicable standard of conduct set forth in paragraphs (i) and (ii). Such determination shall be made (A) by the Administrators by a majority vote of a Quorum consisting of such Administrators who were not parties to
such action, suit or proceeding, (B) 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 (C) by the Common Security
Holder of the Trust
(v) To the fullest extent permitted by law, expenses (including 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 (i) and (ii) of this Section 9.4(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 Indemnified Person to repay such amount if it shall ultimately be determined that such Person is not entitled to be indemnified by the
Sponsor as authorized in this Section 9.4(a). Notwithstanding the foregoing, no advance shall be made by the Sponsor if a determination is reasonably and promptly made (1) in the case of a Company Indemnified Person (A) by the
Administrators by a majority vote of a Quorum of disinterested Administrators, (B) 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 (C) 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 Person either believed to be opposed to or 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 such conduct
was unlawful, or (2) in the case of a Fiduciary Indemnified Person, by independent legal counsel in a written opinion that, based upon the facts known to the counsel at the time such determination is made, such Indemnified Person acted in bad
faith or in a manner that such Indemnified Person either believed to be opposed to or 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 such conduct was unlawful. In no event shall any advance be made (i) to a Company Indemnified
-42-
Person in instances where the Administrators, independent legal counsel or the Common Security Holder reasonably determine that such Person deliberately breached such Person’s duty to the
Trust or its Common or Capital Security Holders or (ii) to a Fiduciary Indemnified Person in instances where independent legal counsel promptly and reasonably determines in a written opinion that such Person deliberately breached such
Person’s duty to the Trust or its Common or Capital Security Holders.
(b) The Sponsor shall indemnify, to the fullest extent
permitted by applicable law, each Indemnified Person from and against any and all loss, damage, liability, tax (other than taxes based on the income of such Indemnified Person), penalty, expense or claim of any kind or nature whatsoever incurred by
such Indemnified Person arising out of or in connection with or by reason of the creation, administration or termination of the Trust, or any act or omission of such Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage, liability,
tax, penalty, expense or claim incurred by such Indemnified Person by reason of negligence, willful misconduct or bad faith with respect to such acts or omissions.
(c) 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 such Person’s 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.
(d) 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 such Person and incurred by such Person in any such capacity, or arising out of such Person’s status as such, whether or not the Sponsor would have the power to indemnify such Person against such liability under the
provisions of this Section 9.4.
(e) 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 such Person would have with respect to such constituent entity if its separate existence had continued.
-43-
(f) The indemnification and advancement of expenses provided by, or granted pursuant to, this
Section 9.4 shall, unless otherwise provided when authorized or ratified, 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.
(g) The provisions of this Section 9.4 shall survive the termination of this Declaration or the earlier resignation or removal of the
Institutional Trustee. The obligations of the Sponsor under this Section 9.4 to compensate and indemnify the Trustees and to pay or reimburse the Trustees 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 Trustees as such, except funds held in trust for the benefit of the holders of particular Capital
Securities,
provided
, that the Sponsor is the holder of the Common Securities.
(h) This Section 9.4 specifically supercedes
and replaces Section 4 of the Original Declaration.
SECTION 9.5.
Outside Businesses
. Any Covered Person, the Sponsor, the
Delaware Trustee and the Institutional Trustee (subject to Section 4.3(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 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, the Delaware Trustee 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, the Delaware Trustee 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, the Delaware Trustee 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
.
(a) Subject to the provisions set forth in the Fee Agreement between the Institutional Trustee, Cohen Bros. & Company and the Company
of even date herewith, the Sponsor agrees:
(i) to pay to the Trustees from time to time such compensation for all services
rendered by them hereunder as the parties shall agree in writing 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
(ii) except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable, documented
expenses, disbursements
-44-
and advances incurred or made by the Trustees 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 attributable to their negligence or willful misconduct.
(b) 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 any Trustee.
ARTICLE X
ACCOUNTING
SECTION 10.1.
Fiscal Year
. The fiscal year (the “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
§ 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 on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied.
(b) The Administrators shall either (i) cause each Form 10-K and Form 10-Q prepared by the Sponsor and filed with the
Commission in accordance with the Exchange Act to be delivered to each Holder of Securities, within 90 days after the filing of each Form 10-K and within 30 days after the filing of each Form 10-Q or (ii) cause to be prepared at the
principal office of the Trust in the United States, as defined for purposes of Treasury Regulations
§ 301.7701-7,
and delivered to each of the Holders of Securities, within 90 days after the end of
each Fiscal Year of the Trust, annual financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related statements of income or loss.
(c) 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.
(d) The Administrators shall cause to be duly prepared in the United States, as defined for purposes of Treasury Regulations
§ 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.
(e) The administrators. will
cause the Sponsor’s report
FR Y-9C,
FR Y-9LP
and
FR-Y6
to be delivered to the Holder promptly following their
filing with the Federal Reserve.
-45-
SECTION 10.3.
Banking
. The Trust shall maintain one or more bank accounts in the United
States, as defined for purposes of Treasury Regulations
§ 301.7701-7,
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. As a condition to the payment of any principal of or interest on any Debt Security without the imposition of withholding tax, the
Institutional Trustee or any Paying Agent shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service
Form W-9
(or applicable successor form) in the case of a person that is a “United States person” within the meaning of Section 7701(a)(30) of the Code or an Internal Revenue Service
Form W-8
(or applicable successor form) in the case of a person that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code) and any other certification acceptable
to it to enable the Institutional Trustee or any Paying Agent and the Trustee to determine their respective duties and liabilities with respect to any taxes or other charges that they may be required to pay, deduct or withhold in respect of such
Debt Security or the holder of such Debt Security under any present or future law or regulation of the United States or any political subdivision thereof or taxing authority therein or to comply with any reporting or other requirements under any
such law or regulation. 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 to the Holder in the amount of the withholding. In the event of any claimed over 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 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:
(i) the Institutional Trustee,
-46-
(ii) if the amendment affects the rights, powers, duties, obligations or
immunities of the Delaware Trustee, the Delaware Trustee,
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Administrators, the Administrators, and
(iv) the Holders of a Majority in liquidation
amount of the Common Securities.
(b) Notwithstanding any other provision of this Article XI, no amendment shall be made, and any
such purported amendment shall be void and ineffective:
(i) unless 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 that all conditions precedent to the execution and delivery of such amendment
have been satisfied; or
(ii) if the result of such amendment would be to
(A) cause the Trust to cease 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 Institutional Trustee in contravention of the Trust Indenture Act;
(C) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act;
or
(D) cause the Debenture Issuer to be unable to treat an amount equal to the Liquidation Amount of the Capital
Securities as “Tier 1 Capital” for purposes of the capital adequacy guidelines of (x) the Federal Reserve (or, if the Debenture Issuer is not a bank holding company, such guidelines or policies applied to the Debenture Issuer as
if the Debenture Issuer were subject to such guidelines of policies) or of (y) any other regulatory authority having jurisdiction over the Debenture Issuer.
(c) Except as provided in Section 11.1(d), (e) or (g), 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.
-47-
(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 any redemption or liquidation provisions applicable to 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 (ii) restrict the right of a Holder to institute suit for the enforcement of any such payment on or after such date.
(e) Sections 9.1(b) and 9.1(c) and this Section 11.1 shall not be amended without the consent of all of the Holders of the
Securities.
(f) The rights of the Holders of the Capital Securities and Common Securities, as applicable, under Article IV 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 Capital Securities or Common Securities, as applicable.
(g) Subject to Section 11.1(a), this Declaration may be amended by the Institutional Trustee and the Holder 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 or desirable, including,
without limitation, 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), (iii) or (iv) shall
adversely affect the powers. preferences or rights of Holders of Capital Securities.
SECTION 11.2.
Meetings of the Holders of the
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, the terms of the Securities or the rules of any
stock exchange on which the Capital
-48-
Securities are listed or admitted for trading, if any. The Administrators shall call a meeting of the Holders of such class if directed to do so by the Holders of not less than 10% in liquidation
amount of such class of Securities. Such direction shall be given by delivering to the Administrators one or more notices 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 or the rules of any stock exchange on which the
Capital Securities are listed or admitted for trading, if any, 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 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
Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware 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, the terms of the Securities, the Trust Indenture Act or the listing rules of any stock exchange on
-49-
which the Capital Securities are then listed for trading, if any, 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
§ 301.7701-7).
ARTICLE XII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
AND DELAWARE TRUSTEE
SECTION
12.1.
Representations and Warranties of Institutional Trustee
. The Trustee that acts as 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 banking corporation or national association with trust powers, duly organized, validly existing and in good
standing under the laws of the State of New York or the United States of America, respectively, 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 Institutional Trustee has a combined capital and surplus of at least fifty million U.S. dollars ($50,000,000);
(c) the Institutional Trustee is not an affiliate of the Sponsor, nor does the Institutional Trustee offer or provide credit or credit
enhancement to the Trust;
(d) the execution, delivery and performance by the Institutional Trustee of this Declaration has been duly
authorized by all necessary action on the part of the Institutional Trustee. This Declaration has been duly executed and delivered by the Institutional Trustee, and under Delaware law (excluding any securities laws) 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 and the discretion of the court (regardless of whether considered in a proceeding in equity or at law);
(e)
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
(f) no consent, approval or authorization of, or registration with or notice to, any state or federal banking authority governing the trust
powers of the Institutional Trustee is required for the execution, delivery or performance by the Institutional Trustee of this Declaration.
-50-
SECTION 12.2.
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) if it is not a natural person, the Delaware Trustee is duly
organized and has its principal place of business in the State of Delaware;
(b) if it is not a natural person, 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. 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 considered in a proceeding in equity or at law);
(c) if it is not a natural person, the execution, delivery and performance of this Declaration by the Delaware Trustee does not conflict with
or constitute a breach of the articles of association or by-laws of the Delaware Trustee;
(d) it has trust power and authority to execute
and deliver, and to carry out and perform its obligations under the terms of, this Declaration;
(e) no consent, approval or authorization
of, or registration with or notice to, any state or federal 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
(f) if the Delaware Trustee is a natural person, he or she is a resident of the State of Delaware.
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):
-51-
Sunstate Bancshares Trust II
c/o Sunstate Bancshares, Inc.
1300 E. Florence Blvd.
Casa
Grande, Arizona 85222
Attention: Alice J. Wilcox
Telecopy:
(520) 876-5138
Telephone:
(520) 876-5050
(b) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as the Delaware Trustee may give notice of
to the Holders of the Securities):
Chase Bank USA, National Association
500 Stanton Christiana Rd., FL3/OPS4
Newark, DE 19713
Attn:
Institutional Trust Services
Telecopy:
302-552-6280
Telephone:
302-552-6279
(c) 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):
JPMorgan Chase Bank, National Association
600 Travis Street, 50
th
Floor
Houston, TX 77002
Attention:
Institutional Trust Services
Sunstate Bancshares Trust II
Telecopy:
713-216-2101
Telephone:
713-216-4781
(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 of to the Trust):
Sunstate Bancshares, Inc.
1300 E. Florence Blvd.
Casa
Grande, Arizona 85222
Attention: Alice J. Wilcox
Telecopy:
(520) 876-5138
Telephone:
(520) 876-5050
(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.
-52-
SECTION 13.2.
Governing Law
. This Declaration and the rights and obligations of the
parties hereunder shall be governed by and interpreted in accordance with the law of the State of Delaware and all rights, obligations and remedies shall be governed by such laws without regard to the principles of conflict of laws of the State of
Delaware or any other jurisdiction that would call for the application of the law of any jurisdiction other than the State of Delaware.
SECTION 13.3.
Submission to Jurisdiction
.
(a) Each of the parties hereto agrees that any suit, action or proceeding arising out of or based upon this Declaration, or the transactions
contemplated hereby, may be instituted in any of the courts of the State of New York located in the Borough of Manhattan, City and State of New York, and further agrees to submit to the jurisdiction of Delaware, and to any actions that are
instituted in state or Federal court in Wilmington, Delaware and any competent court in the place of its corporate domicile in respect of actions brought against it as a defendant. In addition, each such party irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of such suit, action or proceeding brought in any such court and irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum and irrevocably waives any right to which it may be entitled on account of its place of corporate domicile. Each such party hereby irrevocably waives any and all right to trial by jury in any
legal proceeding arising out of or relating to this Declaration or the transactions contemplated hereby. Each such party agrees that final judgment in any proceedings brought in such a court shall be conclusive and binding upon it and may be
enforced in any court to the jurisdiction of which it is subject by a suit upon such judgment.
(b) Each of the Sponsor, the Trustees, the
Administrators and the Holder of the Common Securities irrevocably consents to the service of process on it in any such suit, action or proceeding by the mailing thereof by registered or certified mail, postage prepaid, to it at its address given in
or pursuant to Section 13.1 hereof.
(c) To the extent permitted by law, nothing herein contained shall preclude any party from
effecting service of process in any lawful manner or from bringing any suit, action or proceeding in respect of this Declaration in any other state, country or place.
SECTION 13.4.
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 13.5.
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 13.6.
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.
-53-
SECTION 13.7.
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 13.8.
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 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.
-54-
IN WITNESS WHEREOF, the undersigned have caused this Declaration to be duly executed as of the
day and year first above written.
|
|
|
|
|
|
|
CHASE BANK USA, NATIONAL ASSOCIATION,
as Delaware Trustee
|
|
|
|
|
By:
|
|
/s/ Sarika M. Sheth
|
|
|
|
Name:
|
|
Sarika M. Sheth
|
|
|
|
Title:
|
|
Trust Officer
|
|
|
|
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
as Institutional Trustee
|
|
|
|
|
By:
|
|
/s/ Maria D. Calzado
|
|
|
|
Name:
|
|
Maria D. Calzado
|
|
|
|
Title:
|
|
Vice President
|
|
|
|
Sunstate Bancshares, Inc.,
as
Sponsor
|
|
|
|
|
By:
|
|
/s/ James D. Kennedy
|
|
|
|
Name:
|
|
James D. Kennedy
|
|
|
|
Title:
|
|
President, CEO
|
|
|
|
|
By:
|
|
/s/ James D. Kennedy
|
|
|
|
Administrator
|
|
|
|
|
By:
|
|
/s/ Alice J. Wilcox
|
|
|
|
Administrator
|
-55-
ANNEX I
TERMS OF
CAPITAL SECURITIES AND
COMMON SECURITIES
Pursuant
to Section 6.1 of the Amended and Restated Declaration of Trust, dated as of June 1, 2005 (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) Capital Securities. 2,000 Capital Securities of Sunstate Bancshares Trust II (the “Trust”), with an aggregate stated liquidation
amount with respect to the assets of the Trust of Two Million Dollars ($2,000,000) and a stated liquidation amount with respect to the assets of the Trust of $1,000 per Capital Security, are hereby designated for the purposes of identification only
as the “TP Securities” (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 or to conform to the rules of any stock exchange on which the Capital Securities are listed, if any.
(b) Common Securities. 62 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. In the absence of an
Event of Default, the Common Securities will have an aggregate stated liquidation amount with respect to the assets of the Trust of Sixty-Two Thousand Dollars ($62,000) and a stated liquidation amount with respect to the assets of the Trust of
$1,000 per Common Security.
2.
Distributions
.
(a) Distributions payable on each Security will be payable at a variable per annum rate of interest, reset quarterly, equal to LIBOR, as
determined on the LIBOR Determination Date for such Distribution Payment Period, plus 1.85% (the “Coupon Rate”) of the stated liquidation amount of $1,000 per Security (provided, however, that the Coupon Rate for any Distribution Payment
Period may not exceed the highest rate permitted by New York law, as the same may be modified by United States law of general applicability), such Coupon Rate being the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Except as set forth below in respect of an Extension Period, Distributions in arrears for more than one quarterly period will bear interest thereon compounded quarterly at the applicable Coupon Rate for each such quarterly period (to the
extent permitted by applicable law). The term “Distributions” as used herein includes cash distributions, any such compounded distributions and any Additional Interest payable on the Debentures unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures held by the
A-I-1
Institutional Trustee and to the extent the Institutional Trustee has funds legally available in the Property Account therefor. The amount of Distributions payable for any Distribution Payment
Period will be computed for any full quarterly Distribution Payment Period on the basis of a 360-day year and the actual number of days elapsed in the relevant Distribution period;
provided
, however, that upon the occurrence of a Special
Event redemption pursuant to paragraph 4(a) below the amounts payable pursuant to this Declaration shall be calculated as set forth in the definition of Special Redemption Price.
(b) LIBOR shall be determined by the Calculation Agent in accordance with the following provisions:
(1) On the second LIBOR Business Day (provided, that on such day commercial banks are open for business (including dealings in
foreign currency deposits) in London (a “LIBOR Banking Day”), and otherwise the next preceding LIBOR Business Day that is also a LIBOR Banking Day) prior to March 15, June 15, September 15 and December 15 (or, with
respect to the first Distribution Payment Period, on May 26, 2005), (each such day, a “LIBOR Determination Date”) for such Distribution Payment Period), the Calculation Agent shall obtain the rate for three-month U.S. Dollar
deposits in Europe, which appears on Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 2000 Interest Rate and Currency Exchange Definitions) or such other page as may replace such Telerate Page 3750 on the
Moneyline Telerate, Inc. service (or such other service or services as may be nominated by the British Banker’s Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits), as of
11:00 a.m. (London time) on such LIBOR Determination Date, and the rate so obtained shall be LIBOR for such Distribution Payment Period. “LIBOR Business Day” means any day that is not a Saturday, Sunday or other day on which commercial
banking institutions in The City of New York or Wilmington, Delaware are authorized or obligated by law or executive order to be closed. If such rate is superseded on Telerate Page 3750 by a corrected rate before 12:00 noon (London time) on the same
LIBOR Determination Date, the corrected rate as so substituted will be the applicable LIBOR for that Distribution Payment Period.
(2) If, on any LIBOR Determination Date, such rate does not appear on Telerate Page 3750 or such other page as may replace such
Telerate Page 3750 on the Moneyline Telerate, Inc. service (or such other service or services as may be nominated by the British Banker’s Association as the information vendor for the purpose of displaying London interbank offered rates for
U.S. dollar deposits), the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London Interbank market for three-month U.S. Dollar deposits in Europe
(in an amount determined by the Calculation Agent) by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. lf, on any LIBOR
Determination Date, at least two of the Reference Banks provide such quotations, LIBOR shall equal the arithmetic mean of such quotations. If, on any
A-I-2
LIBOR Determination Date, only one or none of the Reference Banks provide such a quotation, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that at least two leading
banks in the City of New York (as selected by the Calculation Agent) are quoting on the relevant LIBOR Determination Date for three-month U.S. Dollar deposits in Europe at approximately 11:00 a.m. (London time) (in an amount determined by the
Calculation Agent). As used herein, “Reference Banks” means four major banks in the London Interbank market selected by the Calculation Agent.
(3) If the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures
provided above, LIBOR for the applicable Distribution Payment Period shall be LIBOR in effect for the immediately preceding Distribution Payment Period.
(c) All percentages resulting from any calculations on the 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).
(d) On each LIBOR Determination Date, the
Calculation Agent shall notify, in writing, the Sponsor and the Paying Agent of the applicable Coupon Rate in effect for the related Distribution Payment Period. The Calculation Agent shall, upon the request of the Holder of any Securities, provide
the Coupon Rate then in effect. All calculations made by the Calculation Agent in the absence of manifest error shall be conclusive for all purposes and binding on the Sponsor and the Holders of the Securities. The Paying Agent shall be entitled to
rely on information received from the Calculation Agent or the Sponsor as to the Coupon Rate. The Sponsor shall, from time to time, provide any necessary information to the Paying Agent relating to any original issue discount and interest on the
Securities that is included in any payment and reportable for taxable income calculation purposes.
(e) 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 15, June 15, September 15 and
December 15 of each year, commencing September 15, 2005 (each, a “Distribution Payment Date”). Subject to prior submission of Notice (as defined in the Indenture), the Debenture Issuer has the right under the Indenture to defer
payments of interest on the Debentures by extending the interest distribution period for up to 20 consecutive quarterly periods (each, an “Extension Period”) at any time and from time to time on the Debentures, subject to the conditions
described below, during which Extension Period no interest shall be due and payable (except any Additional Interest that may be due and payable). During any Extension Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest (such accrued interest and interest thereon referred to herein as “Deferred Interest”) will accrue at an annual rate equal to the Coupon Rate in effect for each such Extension Period, compounded quarterly from the date
such Deferred Interest would have been payable were it not for the Extension Period, to the extent permitted by law. 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
A-I-3
Deferred Interest then accrued and unpaid on the Debentures;
provided
,
however
, that no Extension Period may extend beyond the Maturity Date; and
provided
,
further
,
that, during any such Extension Period, the Debenture Issuer may not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Debenture Issuer’s capital
stock or (ii) make any payment of principal or premium or interest on or repay, repurchase or redeem any debt securities of the Debenture Issuer that rank
pari passu
in all respects with or junior in interest to the Debentures or
(iii) make any payment under any guarantees of the Debenture Issuer that rank in all respects
pari passu
with or junior in interest to the Guarantee (other than (a) repurchases, redemptions or other acquisitions of shares of capital
stock of the Debenture Issuer (A) 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, (B) in connection with a dividend
reinvestment or stockholder stock purchase plan or (C) 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, reclassification, combination 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 stockholder’s rights plan, or the issuance of rights, stock or other property under any stockholder’s rights plan, or the redemption or repurchase of rights pursuant thereto, or (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). 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 Deferred Interest, the Debenture Issuer may commence a new Extension Period, subject to the
foregoing requirements. No interest or Deferred Interest shall be due and payable during an Extension Period, except at the end thereof, but Deferred Interest shall accrue upon each installment of interest that would otherwise have been due and
payable during such Extension Period until such installment is paid. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, or, if such date is not a Distribution Payment Date, on
the immediately following Distribution Payment Date, 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 legally 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.
(f) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Registrar on the
relevant record dates. The relevant
A-I-4
record dates shall be selected by the Administrators, which 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. Notwithstanding anything to the contrary contained herein, if any Distribution Payment Date, other than on the Maturity Date, any Redemption Date or the Special Redemption Date, falls on a day that is not a Business
Day, then any Distributions payable will be paid on, and such Distribution Payment Date will be moved to, the next succeeding Business Day, and additional Distributions will accrue for each day that such payment is delayed as a result thereof. If
the Maturity Date, any Redemption Date or the Special Redemption Date falls on a day that is not a Business Day, then the principal, premium, if any, and/or Distributions payable on such date will be paid on the next succeeding Business Day, and no
additional Distributions will accrue in respect of such payment made on such next succeeding Business Day.
(g) 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 aggregate of the stated liquidation amount of $1,000 per Security plus accrued and
unpaid Distributions thereon to the date of payment (such amount being the “Liquidation Distribution”), unless in connection with such Liquidation, the Debentures in an aggregate stated principal amount equal to the aggregate stated
liquidation amount of such Securities, with an interest rate equal to the Coupon 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 Section 3808(e) of 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, upon receipt of an opinion of
nationally recognized tax counsel that Holders will not recognize any gain or loss for United States federal income tax purposes as a result of the distribution Debentures, dissolve the Trust (including without limitation upon the occurrence of a
Tax Event, an Investment Company Event or a Capital Treatment Event), subject to the receipt by the Debenture Issuer of prior approval from any regulatory authority having jurisdiction over the Sponsor that is primarily responsible for regulating
the activities of the Sponsor if such approval is then required under applicable capital guidelines or policies of such regulatory authority, 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.
A-I-5
The Trust shall dissolve on the first to occur of (i) June 1, 2040, the expiration of
the term of the Trust, (ii) 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) the filing of a certificate of dissolution or its equivalent with respect to the Sponsor 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) the distribution to the Holders of the Securities of the Debentures, upon exercise of the right of the Holder of all of the outstanding Common Securities to dissolve the Trust as described above,
(v) the entry of a decree of a judicial dissolution of the Sponsor or the Trust, or (vi) when all of the Securities shall have been called for redemption and the amount necessary for redemption thereof shall have been paid to the Holders
in accordance with the terms of the Securities. As soon as practicable after the dissolution of the Trust and upon completion of the winding up of the Trust, the Trust shall terminate upon the filing of a certificate of cancellation with the
Secretary of State of the State of Delaware.
If a Liquidation of the Trust occurs as described in clause (i), (ii), (iii) or
(v) in the immediately preceding paragraph, the Trust shall be liquidated by the Institutional Trustee of the Trust as expeditiously as such Trustee determines to be possible by distributing, after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, 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 to 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 the immediately preceding paragraph 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 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.
Upon any such
Liquidation of the Trust involving a distribution of the Debentures, if at the time of such Liquidation, the Capital Securities were rated by at least one nationally-recognized statistical rating organization, the Debenture Issuer will use its
reasonable best efforts to obtain from at least one such or other rating organization a rating for the Debentures.
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) any certificates representing the Capital Securities will be deemed to represent undivided
beneficial interests in
A-I-6
such of the Debentures as have an aggregate principal amount equal to the aggregate stated liquidation amount of, 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) and (iii) all rights of Holders of Securities under the Capital Securities or the Common Securities, as applicable,
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 June 15, 2035. The Debentures may be redeemed by the Debenture
Issuer, in whole or in part, on any March 15, June 15, September 15 or December 15 on or after June 15, 2010 at the Redemption Price, upon not less than 30 nor more than 60 days’ notice to Holders of such Debentures. In
addition, upon the occurrence and continuation of a Tax Event, an Investment Company Event or a Capital Treatment Event, the Debentures may be redeemed by the Debenture Issuer in whole or in part, at any time within 90 days following the occurrence
of such Tax Event, Investment Company Event or Capital Treatment Event, as the case may be (the “Special Redemption Date”), at the Special Redemption Price, upon not less than 30 nor more than 60 days’ notice to Holders of the
Debentures so long as such Tax Event, Investment Company Event or Capital Treatment Event, as the case may be, 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 any regulatory authority having jurisdiction over the Debenture Issuer, if such approval is then required under applicable capital guidelines or policies of such regulatory authority.
“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, regulatory procedure, notice or announcement) (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 (including withholding taxes), duties, assessments or other governmental charges.
A-I-7
“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 a change in law or regulation or written 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 original issuance of the Debentures.
“Capital Treatment Event” means, if the Debenture Issuer is organized and existing under the laws of the United States or any state
thereof or the District of Columbia, 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 (a) any amendment to, or change in, the laws, rules or regulations of
the United States or any political subdivision thereof or therein, or any rules, guidelines or policies of any applicable regulatory authority for the Debenture Issuer or (b) 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, within 90 days of the receipt of such opinion, the aggregate Liquidation Amount of the Capital Securities will not be eligible to be treated by the Debenture Issuer as “Tier l Capital” (or the then equivalent thereof) for
purposes of the capital adequacy guidelines of the Federal Reserve (or any successor regulatory authority with jurisdiction over bank or financial holding companies), as then in effect and applicable to the Debenture Issuer (or if the Debenture
Issuer is not a bank holding company, such guidelines applied to the Debenture Issuer as if the Debenture Issuer were subject to such guidelines); provided, however, that the inability of the Debenture Issuer to treat all or any portion of the
aggregate Liquidation Amount of the Capital Securities as Tier 1 Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Debenture Issuer 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 the Debentures in connection with the liquidation of the Trust by the Debenture Issuer 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.
“Special
Event” means any of a Capital Treatment Event, a Tax Event or an Investment Company Event.
“Special Redemption Price”
means, with respect to the redemption of any Debt Security following a Special Event, an amount in cash equal to 103.525% of the principal amount of Debt Securities to be redeemed prior to June 15, 2006 and thereafter equal to the percentage of
the principal amount of the Debentures that is specified below for the Special Redemption Date plus, in each case, unpaid interest accrued thereon to the Special Redemption Date:
|
|
|
|
|
|
|
Special Redemption During the 12-Month Period Beginning June 15
|
|
Percentage of Principal Amount
|
|
|
|
|
|
2006
|
|
|
103.140
|
%
|
|
2007
|
|
|
102.355
|
%
|
|
2008
|
|
|
101.570
|
%
|
|
2009
|
|
|
100.785
|
%
|
|
2010 and thereafter
|
|
|
100.000
|
%
|
A-I-8
“Redemption Date” means the date fixed for the redemption of Capital Securities, which
shall be any March 15, June 15, September 15 or December 15 on or after June 15, 2010.
“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.
(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, 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 as described in Section 4(e)(ii) below.
(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 Section 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 Registrar. 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.
A-I-9
(ii) In the event that fewer than all the outstanding Securities are to be
redeemed, the Securities to be redeemed shall be redeemed Pro Rata from each Holder of Capital Securities.
(iii) 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 Section 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, with respect to Book-Entry Capital Securities, on the Redemption Date, irrevocably deposit
with the Depositary for such Book-Entry Capital Securities, to the extent available therefore, funds sufficient to pay the relevant Redemption Price and will give such Depositary irrevocable instructions and authority to pay the Redemption Price to
the Owners of the Capital Securities. With respect to Capital Securities that are not Book-Entry Capital Securities, the Institutional Trustee will pay, to the extent available therefore, the relevant Redemption Price 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 specified in Section 4(a). If any date fixed for redemption of Securities is not a Business Day, then payment of any such Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day 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 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 then applicable 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. 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.
A-I-10
(iv) Redemption/Distribution Notices shall be sent by the Trust (A) in
respect of the Capital Securities, to the Holders thereof, and (B) in respect of the Common Securities, to the Holder thereof.
(v) 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 anytime 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) 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 not less than 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 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 not less than 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 or Super Majority, as the case may be, 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 premium, if any, on or principal of the Debentures on the date such interest, premium, if any, on 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 premium, if any, or interest on the
A-I-11
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
clause (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 may 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 the consent of a Super Majority, the Institutional Trustee may only give such consent at the written direction of the Holders of not less than the proportion in liquidation amount of such 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 written 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.
A-I-12
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 and the Delaware Trustee.
6.
Voting Rights –
Common Securities
.
(a) Except as provided under Sections 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) waiving any past default and its consequences that are waivable under the Indenture, or (iii) exercising 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 not less than 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 Section 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 clause (i), (ii) or 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
A-I-13
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 Trustees 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 not less than 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 written direction of the Holders of not less than 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.
A-I-14
(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 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 or Special 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 or Special Redemption Price the full amount of such Redemption Price or the Special 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 or the Special 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, and the issuance of the Securities is not subject to, preemptive
or similar rights to subscribe for any additional securities.
A-I-15
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.
A-I-16
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”), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS. 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. THE HOLDER
OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE DEBENTURE ISSUER OR THE TRUST, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) TO A
PERSON THE HOLDER 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, (C) TO A “NON U.S. PERSON” IN AN “OFFSHORE TRANSACTION” PURSUANT TO REGULATIONS UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN “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 (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE DEBENTURE ISSUER’S AND THE TRUST’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE AMENDED AND RESTATED DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE DEBENTURE ISSUER OR THE TRUST. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES, REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS SUCH TRANSACTIONS ARE 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,
A-1-1
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 THIS SECURITY OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTION 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 THIS SECURITY 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 CONNECTION WITH ANY TRANSFER, THE HOLDER OF THE CERTIFICATE WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS MAY BE REQUIRED BY THE AMENDED AND RESTATED DECLARATION OF TRUST TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF
$1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 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 THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.
A-1-2
|
|
|
|
|
Certificate Number [P-001]
|
|
Number of Capital Securities: 2,000
|
Certificate Evidencing Capital Securities
of
Sunstate Bancshares Trust II
TP Securities
(liquidation
amount $1,000 per Capital Security)
Sunstate Bancshares Trust II, a statutory trust created under the laws of the State of Delaware (the
“Trust”), hereby certifies that Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Holder”), is the registered owner of 2,000 capital securities of the Trust representing undivided beneficial interests in the
assets of the Trust, designated the TP Securities (liquidation amount $1,000 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 Capital Securities represented hereby are issued pursuant to, and the designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Capital Securities shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust, dated as June 1, 2005, among Alice J.
Wilcox and James D. Kennedy, as Administrators, Chase Bank USA, National Association, as Delaware Trustee, JPMorgan Chase Bank, National Association, as Institutional Trustee, Sunstate Bancshares, 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 the 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.
By acceptance 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 shall be
construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws.
A-1-3
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
|
|
|
|
|
|
|
Sunstate Bancshares Trust II
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
|
|
Title:
|
|
Administrator
|
|
|
|
|
Dated:
|
|
|
CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the within-mentioned Declaration.
|
|
|
|
|
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Institutional Trustee
|
|
|
|
|
By:
|
|
|
|
|
|
Authorized Signatory
|
|
|
|
|
Dated:
|
|
|
A-1-4
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Capital Security will be payable at a variable per annum rate of interest, reset quarterly, equal to LIBOR (as
defined in the Declaration) plus 1.85% (the “Coupon Rate”) of the stated liquidation amount of $1,000 per Capital Security (provided, however, that the Coupon Rate for any Distribution Payment Period may not exceed the highest rate
permitted by New York law, as the same may be modified by United States law of general applicability), such Coupon 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 then applicable Coupon Rate for each such quarterly period (to the extent permitted by applicable law). The term “Distributions” as used herein includes cash
distributions, any such compounded distributions and any Additional Interest payable on the Debentures 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 legally available in the Property Account therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the
basis of a 360-day year and the actual number of days elapsed in the relevant Distribution Payment Period.
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 15, June 15, September 15 and December 15 of each year,
commencing on September 15, 2005 (each, a “Distribution Payment Date”). Upon submission of Notice, the Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures by extending the interest
distribution period for up to 20 consecutive quarterly periods (each, an “Extension Period”) at any time and from time to time on the Debentures, subject to the conditions described below, during which Extension Period no interest shall be
due and payable (except any Additional Interest that may be due and payable). During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest (such accrued interest and interest thereon referred
to herein as “Deferred Interest”) will accrue at an annual rate equal to the Coupon Rate in effect for each such Extension Period, compounded quarterly from the date such Deferred Interest would have been payable were it not for the
Extension Period, to the extent permitted by law. 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 Deferred Interest then accrued and unpaid on
the Debentures;
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, Redemption Date (to the extent redeemed) or Special Redemption Date. Upon the
termination of any Extension Period and upon the payment of all Deferred Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Deferred Interest (except any Additional Amounts that
may be due and payable) shall be due and payable during an Extension Period, except at the end thereof, but Deferred Interest shall accrue upon each installment of interest that would otherwise have been due and payable during such Extension Period
until such installment is paid. 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
A-1-5
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 legally 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 assignee’s social security or tax identification number)
(Insert address and zip code of assignee),
and irrevocably
appoints
as agent to transfer this Capital Security Certificate on the books of the Trust. The agent may substitute another to act for it, him or her.
(Sign exactly as your name appears on the other side of this
Capital Security Certificate)
|
1
|
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 Security 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 Security registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
|
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, OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.
EXCEPT AS SET FORTH IN SECTION 8.1(b) OF THE DECLARATION (AS DEFINED BELOW), THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED.
A-2-1
|
|
|
|
|
Certificate Number [C-001]
|
|
Number of Common Securities: 62
|
Certificate Evidencing Common Securities
of
Sunstate Bancshares Trust II
Sunstate Bancshares Trust II, a statutory trust created under the laws of the State of Delaware (the “Trust”), hereby certifies
that Sunstate Bancshares, Inc. (the “Holder”) is the registered owner of 62 common securities of the Trust representing undivided beneficial interests in the assets of the Trust (liquidation amount $1,000 per Common Security) (the
“Common Securities”). The Common Securities represented hereby are issued pursuant to, and the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities shall in all respects be
subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust, dated as of June 1, 2005, among Alice J. Wilcox and James D. Kennedy, as Administrators, Chase Bank USA, National Association, as Delaware
Trustee, JPMorgan Chase Bank, National Association, as Institutional Trustee, the Holder, 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
Common Securities as set forth in Annex I to the 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
Sponsor will provide a copy of the Declaration 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, when 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.
By acceptance 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 shall
be construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws.
A-2-2
IN WITNESS WHEREOF, the Trust has executed this certificate June 1, 2005.
|
|
|
|
|
|
|
Sunstate Bancshares Trust II
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
|
|
Title:
|
|
Administrator
|
A-2-3
[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 a
variable per annum rate of interest, reset quarterly, equal to LIBOR (as defined in the Declaration) plus 1.85% (the “Coupon Rate”) of the stated liquidation amount of $1,000 per Capital Security (provided, however, that the Coupon Rate
for any Distribution Payment Period may not exceed the highest rate permitted by New York law, as the same may be modified by United States law of general applicability), such Coupon 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 then applicable Coupon Rate for each such quarterly period (to the extent permitted by applicable
law). The term “Distributions” as used herein includes cash distributions, any such compounded distributions and any Additional Interest payable on the Debentures 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 legally available in the Property Account therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day year and the actual number of days elapsed in the relevant Distribution Payment Period.
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 15, June 15, September 15 and December 15 of each year, commencing on September 15, 2005 (each, a “Distribution Payment Date”). Upon submission of Notice, the
Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures by extending the interest distribution period for up to 20 consecutive quarterly periods (each, an “Extension Period”) at any time and from
time to time on the Debentures, subject to the conditions described below, during which Extension Period no interest shall be due and payable (except any Additional Interest that may be due and payable). During any Extension Period, interest will
continue to accrue on the Debentures, and interest on such accrued interest (such accrued interest and interest thereon referred to herein as “Deferred Interest”) will accrue at an annual rate equal to the Coupon Rate in effect for each
such Extension Period, compounded quarterly from the date such Deferred Interest would have been payable were it not for the Extension Period, to the extent permitted by law. 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 Deferred Interest then accrued and unpaid on the Debentures; provided, however, that no Extension Period may extend beyond the Maturity Date, Redemption Date (to the
extent redeemed) or Special Redemption 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 Deferred Interest, the Debenture Issuer may commence a new Extension Period, subject to
the foregoing requirements. No interest or Deferred Interest (except any Additional Interest that may be due and payable) shall be due and payable during an Extension Period, except at the end thereof, but Deferred Interest shall accrue upon each
installment of interest that would otherwise have been due and payable during such Extension Period until such installment is paid. 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.
A-2-4
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 legally available for the payment of such distributions in the Property Account of the Trust. The Trust’s funds legally 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-2-5
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security Certificate to:
(Insert assignee’s social security or tax identification number)
(Insert address and zip code of assignee),
and irrevocably
appoints
as agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for it, him or her.
(Sign exactly as your name appears on the other side of this
Capital Security Certificate)
|
1
|
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 Security 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 Security registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
|
A-2-6
Exhibit 4.13
REGISTERED
|
|
|
|
|
No.
1/2008
|
|
PRINCIPAL AMOUNT: $35,795,000
|
SUBORDINATED NOTE
GREAT WESTERN BANCORPORATION, INC.
THIS NOTE IS NOT A DEPOSIT OR OTHER OBLIGATION OF A DEPOSITORY INSTITUTION AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
SECURITIES LAW, AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY STATE SECURITIES LAW. EACH PURCHASER OF THIS NOTE IS HEREBY
NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER (“RULE 144A”).
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE, PRIOR TO THE DATE (THE “RESALE
RESTRICTION TERMINATION DATE”) WHICH IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER (AS DEFINED HEREIN) OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF
THIS NOTE) ONLY: (A) TO THE ISSUER; (B) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO 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; OR (C) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE
SECURITIES ACT, SUBJECT TO THE RIGHT OF THE ISSUER, PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C), TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO IT.
GREAT WESTERN BANCORPORATION, INC., an Iowa corporation (herein called the “Issuer,”
which term includes any successor entity), for value received, hereby promises to pay to NATIONAL EQUITIES LIMITED (ABN 77 004 956 549), or registered assigns, the principal amount of THIRTY-FIVE MILLION SEVEN HUNDRED NINETY-FIVE THOUSAND DOLLARS
($35,795,000) on 3
rd
June, 2018 (the “Stated Maturity”) (unless redeemed in accordance with the terms hereof prior to that date) and to pay interest on the unpaid principal hereof
from and including 3rd June 2008 (the “Original Issue Date”) or from and including the most recent Interest Payment Date (as defined herein) to which interest has been paid or duly provided for at the rate of LIBOR (as defined below),
reset quarterly on the first day of each Interest Period (as defined below), plus 2.05% during the period commencing on and including the Original Issue Date to but excluding the date of Maturity (as defined below), quarterly in arrears on each 3
rd
March, 3
rd
June, 3
rd
September and 3
rd
December, commencing 3
rd
September 2008 (each, an “Interest Payment Date”), and on the date of Maturity. On each Interest
Payment Date, interest will be paid for the period commencing on and including the immediately preceding Interest Payment Date (or commencing on and including the Original Issue Date, in the case of the first Interest Period) and ending on and
including the day next preceding that Interest Payment Date (this period being referred to as an “Interest Period”). The first Interest Payment Date will be 3
rd
September 2008 and
the first Interest Period will begin on and include the Original Issue Date and end on and include 2
nd
September 2008. The last Interest Period will begin on and include the Interest Payment
Date immediately preceding the date of Maturity and will end on and include the day next preceding the date of Maturity. The interest rate on any particular date shall be referred to herein as the “Applicable Interest Rate.” Any overdue
principal and any overdue installment of interest on this Note shall (to the extent that the payment of such interest is legally enforceable) bear interest from the due date thereof until paid in full at the rate of 1% above the Applicable Interest
Rate (the “Default Rate”), such interest to be payable on demand.
“LIBOR,” with respect to an Interest Period, shall
be the rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-month period that appears on Reuters Page LIBOR01 (as defined below) as of 11:00 a.m., London time, on the Determination Date (as defined below) for such
Interest Period. If Reuters Page LIBOR01 does not include this rate or is unavailable on the Determination Date, the Calculation Agent (as defined below) will request the principal London office of each of four major banks in the London interbank
market, as selected by the Calculation Agent, to provide that bank’s offered quotation (expressed as a percentage per annum) as of approximately 11:00 a.m., London time, on the Determination Date to prime banks in the London interbank market
for deposits in a Representative Amount (as defined below) in U.S. dollars for a three-month period beginning on the second London Banking Day (as defined below) after the Determination Date. If at least two offered quotations are so provided, LIBOR
for such Interest Period will be the arithmetic mean of those quotations. If fewer than two quotations are so provided, the Calculation Agent will request each of three major banks in New York City, as selected by the Calculation Agent, to provide
that bank’s rate (expressed as a percentage per annum), as of approximately 11:00 am., New York City time, on the Determination Date for loans in a Representative Amount in U.S. dollars to leading European banks for a three-month period
beginning on the second London Banking Day after the Determination Date. If at least two rates are so provided, LIBOR for the Interest Period will be the arithmetic mean of those rates. If fewer than two rates are so provided, then LIBOR for the
Interest Period will be LIBOR in effect with respect to the immediately preceding Interest Period or, in the case of the first Interest Period, 2.68188% per annum.
2
“Business Day” means any day that (i) is not a Saturday or Sunday, (ii) in
The City of New York is not a day on which banking institutions are authorized or required by law, regulation or executive order to close, (iii) in Melbourne, Australia is not a day on which banking institutions are authorized or required by
law, regulation or executive order to close and (iv) is also a London Banking Day.
“Determination Date”, with respect to
an Interest Period, will be the second London Banking Day preceding the first day of the Interest Period.
“London Banking Day”
means any day in which dealings in U.S. dollars are transacted or, with respect to any future date, are expected to be transacted in the London interbank market.
“Maturity,” when used herein, means the date on which the principal of this Note becomes due and payable in full in accordance with
the terms of this Note, whether at Stated Maturity, at an earlier date of redemption, by declaration of acceleration or otherwise.
“Representative Amount” means a principal amount that is representative for a single transaction in the relevant market at the
relevant time.
“Reuters Page LIBOR01” means the display designated on Reuters (or any successor service) as “Page
LIBOR01” (or such other page as may replace Page LIBOR01 on Reuters or any successor service).
In the event that any Interest
Payment Date or the date of Maturity for this Note is not a Business Day, such Interest Payment Date or the date of Maturity, as the case may be, will be postponed to the next succeeding Business Day, except that if such Business Day falls in the
next succeeding calendar month, such Interest Payment Date or the date of Maturity, as the case may be, will be the immediately preceding Business Day.
The amount of interest for each day that this Note is outstanding (the “Daily Interest Amount”) will be calculated by dividing the
Applicable Interest Rate by 360 and multiplying the result by the principal amount of this Note. The amount of interest to be payable on this Note for each Interest Period will be calculated by adding the Daily Interest Amounts for each day in the
Interest Period.
All percentages resulting from any of the calculations provided for herein will be rounded, if necessary, to the nearest
one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculations
will be rounded to the nearest cent (with one-half cent being rounded upwards).
The interest rate on this Note will in no event be higher
than the maximum rate permitted by New York law as the same may be modified by U.S. federal law of general application.
3
The Issuer shall also act as calculation agent for this Note (in such capacity, the
“Calculation Agent”) and in such capacity, shall calculate the interest rate of, and the amount of interest payable on, this Note for each Interest Period. Upon the request of the Holder, the Calculation Agent shall provide the Applicable
Interest Rate and, if determined, the interest rate that shall become effective on the first day of the next Interest Period. The determination of any interest rate by the Calculation Agent shall be final and binding absent manifest error.
The interest payable on any Interest Payment Date will be paid to the person in whose name this Note (or one or more predecessor Notes)
is registered (the “Holder”) at the close of business on the fifteenth calendar day (whether or not a Business Day) next preceding such Interest Payment Dale (a “Regular Record Date”);
provided
, that interest payable at
Maturity shall be payable to the Person to whom principal shall be payable.
All interest on this Note (other than at
Maturity) will be paid by check of the Issuer mailed to the Holder at such Holder’s address as shown in the Register (as defined on the reverse hereof) on the applicable Regular Record Date, or to such other address in the United States as such
Holder shall designate to the Issuer in writing not later than the relevant Regular Record Date;
provided
,
however
, that if this Note is in an aggregate principal amount of one million dollars ($1,000,000) or more, the Holder shall be
entitled to receive payments of interest by wire transfer of immediately available funds provided that appropriate wire transfer instructions have been received by the Issuer prior to the applicable Regular Record Date.
The payment of principal of and any accrued interest due at Maturity will be made in immediately available funds upon the presentation and
surrender of this Note to the Issuer.
The Issuer will pay any administrative costs imposed by banks in making payments in immediately
available funds, but, subject to Section 7 hereof, any tax, assessment or governmental charge imposed upon payments hereunder, including, without limitation, any withholding tax, will be borne by the Holder hereof.
This Note is not repayable at the option of the Holder.
References herein to “U.S. dollars” or “U.S. $” or “$” are to the coin or currency of the United States as at
the time of payment is legal tender for the payment of public and private debts.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF
THIS NOTE SET FORTH BELOW, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
4
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed in its corporate
name by the facsimile signature of an authorized signatory.
|
|
|
|
|
GREAT WESTERN
BANCORPORATION,
INC.
|
|
|
|
|
By:
|
|
/s/ Jeff Erickson
|
|
|
|
Authorized Signatory
|
|
Name
:
|
|
Jeff Erickson
|
|
|
|
|
Title
:
|
|
Vice Chairman
|
Dated: June 3, 2008
5
[REVERSE OF NOTE]
SECTION 1.
Subordination and Priority
. The Issuer, for itself, its successors and assigns, covenants and agrees, and each Holder
likewise covenants and agrees by his acceptance hereof, that the obligations of the Issuer to make any payment on account of the principal of and interest on this Note shall be subordinate and junior, to the extent and in the manner hereinafter set
forth, in right of payment and upon liquidation to the Issuer’s obligations to the holders of Senior Debt of the Issuer.
No payment
on account of principal or interest on this Note shall be made by the Issuer unless full payment of amounts then due for principal (and premium, if any), sinking funds, and interest on all Senior Debt of the Issuer has been made or duly provided for
in money or money’s worth in accordance with its terms. No payment on account of principal or interest on this Note shall be made by the Issuer if, at the time of such payment or immediately after giving effect thereto, there shall have
occurred an event of default with respect to any Senior Debt of the Issuer or on any instrument under which the same is outstanding, permitting the holders thereof (or a trustee on behalf of the holders thereof) to accelerate the maturity thereof,
or an event that, with the giving of notice or the passage of time or both, would constitute such event of default, and such event of default shall not have been cured or waived.
The Issuer agrees that upon (i) the occurrence of any event of default referred to in the preceding paragraph that shall not have
been cured or waived or (ii) any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or total or partial liquidation or
reorganization of the Issuer, whether voluntary or involuntary or in bankruptcy, insolvency, receivership, conservatorship or other proceedings, all principal (and premium, if any), sinking fund payments and interest due or to become due upon all
Senior Debt of the Issuer shall first be paid in full, or payment thereof provided for in money or money’s worth in accordance with its terms, before any payment is made on account of the principal of or interest on the indebtedness evidenced
by this Note due and owing at the time and upon any such dissolution or winding up or liquidation or reorganization, any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities (other than
securities of the Issuer or any other Person provided for by a plan of reorganization or readjustment, the payment of which is subordinate, at least to the extent provided in this Section 1 with respect to this Note, to the payment in full of
all Senior Debt,
provided
the rights of the holders of the Senior Debt are not altered by such reorganization or readjustment), to which the Holder of this Note would, except for the provisions hereof, be entitled, shall be paid by the Issuer
or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the Holder under this Note if received by it, directly to the holders of Senior Debt of the Issuer (
pro rata
to
each such holder on the basis of the respective amounts of Senior Debt held by such holder) or their representatives, to the extent necessary to pay all Senior Debt of the Issuer 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 Debt, before any payment or distribution is made to the Holder of the indebtedness evidenced by this Note under this instrument.
In the event that any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities,
including any such payment or distribution that
6
may be payable or deliverable by reason of the payment of any other indebtedness of the Issuer being subordinated to the payment of this Note, not permitted by the foregoing, shall be received by
the Holder of this Note before all Senior Debt of the Issuer is paid in full, or provision is made for such payment, 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 Debt of the Issuer (
pro rata
to each such holder on the basis of the respective amounts of Senior Debt held by such holder) or their representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing any of such Senior Debt of the Issuer may have been issued, as their respective interests may appear, or to any receiver, trustee in bankruptcy, liquidating trustee, agent or other
person making such distribution, for application to the payment of all Senior Debt of the Issuer remaining unpaid to the extent necessary to pay all such Senior Debt of the Issuer in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to the holders of such Senior Debt of the Issuer.
The consolidation of the Issuer with, or the merger
of the Issuer into, another corporation or the liquidation or dissolution of the Issuer following the conveyance or transfer of its properties and assets substantially as an entirety to another Person upon the terms and conditions set forth in
Section 4 hereof shall not be deemed a dissolution, winding up, liquidation or reorganization for the purposes of this Section 1 if the entity formed by such consolidation or into which the Issuer is merged or the Person that acquires by
conveyance or transfer such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions set forth in Section 4 hereof.
Subject to the prior payment in full of all Senior Debt of the Issuer, the Holder of this Note shall he subrogated (equally and ratably with
the holders of all indebtedness of the Issuer that by its express terms is subordinated to indebtedness of the Issuer to substantially the same extent as this Note is subordinated and is entitled to like rights of subrogation) to the rights of the
holders of such Senior Debt to receive payments or distributions of cash, property and securities applicable to the Senior Debt of the Issuer until this Note shall be paid in full. For purposes of such subrogation, no payments or distributions in
respect of the Senior Debt of the Issuer of any cash, property or securities to which the Holder of this Note would be entitled except for the provisions of this Section 1, and no payments over pursuant to the provisions of this Section 1
to the holders of Senior Debt by the Holder of this Note, shall, as between the Issuer, its creditors other than holders of Senior Debt of the Issuer and the Holder of this Note, be deemed to be a payment or distribution by the Issuer to or on
account of the Senior Debt of the Issuer, and no payments or distributions to the Holder of this Note of cash, property or securities that are applied to the satisfaction of Senior Debt of the Issuer, as the case may be, by virtue of the
subordination herein provided for shall, as between the Issuer, its creditors other than the holders of Senior Debt of the Issuer and the Holder of this Note, be deemed to be a payment by the Issuer to or on account of this Note.
Upon any payment or distribution of assets of the Issuer referred to in this Section 1, the Holder of this Note shall be entitled to rely
upon an order or decree made by any court of competent jurisdiction in which such dissolution or winding up or liquidation or reorganization or arrangement proceedings are pending or upon a certificate of the trustee in bankruptcy, receiver,
conservator, assignee for the benefit of creditors or other person making such payment
7
or distribution, delivered to the Holder of this Note, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Debt, the amount thereof
or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent to this Section 1.
As used
herein:
“Debt” means, with respect to any Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with
the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such Person; (iv) every
obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of
such Person; (vi) all Other Financial Obligations of such Person; and (vii) every obligation of the type referred to in clauses (i) through (vi) of another Person and all dividends of another Person the payment of which, in
either case, such Person has guaranteed or is responsible or liable, directly or indirectly, as obligor or otherwise.
“Other
Financial Obligations” means, with respect to a Person, all obligations of such Person to make payment pursuant to the terms of financial instruments, such as (i) securities contracts and foreign currency exchange contracts,
(ii) derivative instruments, such as swap agreements (including interest rate and foreign exchange rate swap agreements), cap agreements, floor agreements, collar agreements, interest rate agreements, foreign exchange rate agreements, options,
commodity futures contracts, and commodity option contracts, and (iii) in the case of both (i) and (ii) above, similar financial instruments.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, limited liability company,
trust, unincorporated organization or government or any agency or political subdivision thereof or any other entity of whatever nature.
“Senior Debt” means the principal of (and premium, if any) and interest, if any (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization relating to the Issuer whether or not such claim for post-petition interest is allowed in such proceeding), and all other amounts payable on Debt of the Issuer, whether incurred on or prior
to the date of this Note or thereafter incurred;
provided
,
however
, that Senior Debt shall not be deemed to include (i) any Debt of the Issuer that when incurred and without respect to any election under Section 1111(b) of
the United States Bankruptcy Code of 1978, as amended, was without recourse to the Issuer, (ii) trade accounts payable and accrued liabilities arising in the ordinary course of business, (iii) this Note or any Debt of the Issuer evidenced
by instruments that by their terms rank
pari passu
with, or junior to, this Note, and (iv) guarantees by the Issuer of Debt described in clause (iii).
8
This Note creates no restrictions upon the creation by the Issuer of Senior Debt or Debt ranking
on a parity with this Note or on the creation of any other Debt by the Issuer. This Note is not secured. No sinking fund has or will be established to retire this Note.
SECTION 2.
Modification and Waivers
. The terms and conditions of this Note may be modified, amended or supplemented by the Issuer,
without the consent of the Holder hereof: (i) to evidence succession of another party to the Issuer, and such party’s assumption of the Issuer’s obligations under this Note, upon the occurrence of a merger or consolidation, or
transfer, sale or lease of assets as described in Section 4 hereof; (ii) to add additional covenants, restrictions or conditions for the protection of the registered Holder hereof; or (iii) to cure ambiguities in this Note, or correct
defects or inconsistencies in the provisions hereof. However, this Note may not be modified or amended without the express written consent of the registered Holder to: (i) change the Stated Maturity; (ii) extend the time of payment for the
interest on this Note; (iii) change the coin or currency in which the principal of or interest on this Note is payable; (iv) reduce the principal amount hereof or the interest rate hereon; (v) change the method of payment to other
than wire transfer in immediately available funds; (vi) impair the right of the registered Holder hereof to institute suit for the enforcement of payments or principal of or interest on this Note; (vii) change the definition of “Event
of Default” or otherwise eliminate or impair any remedy available hereunder upon the occurrence of any Event of Default; or (viii) modify the provisions herein governing the amendment hereof.
Any Note delivered after the execution of any agreement modifying, amending or supplementing this Note may bear a notation in form approved by
the Issuer as to any matter provided for in such modification, amendment or supplement to this Note. Any new Note so modified as to conform, in the opinion of the Issuer, to any provisions contained in any such modification, amendment or supplement
may be prepared by the Issuer and delivered in exchange for this Note.
SECTION 3.
Obligations Unconditional
. No provision of
this Note shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed.
SECTION 4.
Successor to Issuer
. The Issuer may not consolidate or merge with or into any other person, or convey, transfer or
tease its properties and assets substantially as an entirety to any person, unless (i) the surviving entity in such consolidation or merger, or the person that acquires by conveyance or transfer, or that leases, the properties and assets of the
Issuer substantially as an entirety, shall be a bank, corporation or partnership organized and validly existing under the laws of the United States, any State thereof or the District of Columbia, and shall expressly assume the due and punctual
payment of the principal of and interest on this Note, and the performance or observance of every provision of this Note on the part of the Issuer to be performed or observed; and (ii) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or the lapse of time or both, would become an Event of Default, shall have happened and be continuing.
SECTION 5.
Registration of Transfer or Exchange
. The Issuer shall maintain a register (the “Register”) in which, it
shall register the name, address and taxpayer identification number of the Holder and shall register all transfers or exchanges of this Note. Subject to the limitations
9
set forth in the Legend on the face hereof and elsewhere herein, this Note may be transferred and the transfer of this Note is registrable in the Register, upon surrender of this Note for
registration of transfer at the office or agency of the Issuer in any place where the principal of and interest on this Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Issuer and
duly executed by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Holder may exchange this
Note in whole for Notes in lesser principal amounts, in total equal to the principal amount of this Note, upon presentation of documentation satisfactory to the Issuer.
All Notes issued upon any registration of transfer or exchange of this Note shall be the valid obligations of the Issuer, evidencing the same
debt, and entitled to the same benefits as this Note.
No service charge shall be made for any such registration of transfer or exchange,
but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer or exchange, the Issuer and any agent of the Issuer may treat the person in
whose name this Note is registered as the owner hereof for all purposes.
In case this Note shall become mutilated, destroyed, lost or
stolen, and upon the satisfaction by the applicant of the requirements of this paragraph for a substituted Note, the Issuer shall execute and deliver a new Note having identical terms and provisions and having a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Note or in lieu of any substitution for the Note destroyed, lost or stolen. In the case of loss, theft or destruction, the applicant for a substituted Note shall furnish to the Issuer such
security or indemnity as may be required by it to save it harmless. Such applicant shall also furnish to the Issuer evidence to its satisfaction of the loss, theft or destruction of such Note and of the ownership thereof. In the case of mutilation,
the applicant for a substituted Note shall surrender such mutilated Note to the Issuer for cancellation thereof. Upon the issuance of any substituted Note, the Issuer may require the payment of a sum sufficient to cover any expense connected
therewith. In case this Note has matured or is about to mature and it shall become mutilated or be destroyed, lost or stolen, the Issuer may, instead of issuing a substituted Note, pay or authorize the payment of the same (without surrender thereof
except in the case of a mutilated Note) if the applicant for such payment shall furnish the Issuer with such security or indemnity as may be required by it to save it harmless, and, in the case of destruction, loss or theft, evidence to the
satisfaction of the Issuer of the destruction, loss or theft of this Note and of the ownership thereof.
SECTION 6.
Events of
Default
. “Event of Default” with respect to this Note 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, rule or regulation of any administrative or governmental body):
10
(1) the entry of a decree or order by a court having jurisdiction in the premises for relief in
respect of the Issuer under the Federal bankruptcy laws, as now constituted or as hereafter amended, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or
(2) a court or other governmental agency or body having jurisdiction in the premises shall enter a decree or order for the appointment of a
receiver or other similar official (other than a conservator) in any liquidation, insolvency or similar proceeding with respect to a Major Bank Subsidiary or all or substantially all of the property of such Major Bank Subsidiary, and such decree or
order shall have remained in force undischarged or unstayed for a period of 60 days; or
(3) the commencement by the Issuer of a voluntary
case under the Federal bankruptcy laws, as now constituted or as hereafter amended, or the consent by the Issuer to the entry of a decree or order for relief in an involuntary case under any such law; or
(4) a Major Bank Subsidiary shall consent to the appointment of a receiver or other similar official (other than a conservator) in any
liquidation, insolvency or similar proceeding with respect to such Major Bank Subsidiary or all or substantially all of the property of such Major Bank Subsidiary.
“Major Bank Subsidiary” means, at any time, (i) Great Western Bank (unless it shall no longer qualify as a “major bank
subsidiary” of the Issuer within the meaning of Supervisory Letter SR 92-37(FIS) (or any successor thereto or other similar pronouncement, rule or regulation governing bank holding company subordinated debt securities) of the Board of Governors
of the Federal Revenue System (“Federal Reserve Board”)) and (ii) any other insured depository institution subsidiary of the Issuer that qualifies as such a major bank subsidiary. For purposes of this definition, “insured
depository institution” has the meaning given to that term in Section 3(c)(2) of the Federal Deposit Insurance Act or any successor statute or rule.
The registered Holder of this Note will itself be solely and entirely responsible for the exercise of any remedies provided herein.
If an Event of Default with respect to this Note shall occur and be continuing, the registered Holder hereof may: (i) by written
notice to the Issuer declare the entire outstanding principal amount of this Note, together with any unpaid interest accrued thereon, to be immediately due and payable; (ii) institute a judicial proceeding for the enforcement of the terms
hereof including the collection of all sums due and unpaid hereunder, prosecute such proceeding to judgment or final decree, enforce the same against the Issuer and collect monies adjudged or decreed to be payable in the manner provided by law out
of the property of the Issuer; and (iii) take such other action at law or in equity as may appear necessary or desirable to collect and enforce this Note;
provided
,
however
, that the registered Holder of this Note may waive any
Event of Default that occurs with respect hereto.
In the event of a failure by the Issuer to make any payment of principal of or
interest on this Note, the Issuer will, upon demand by the Holder hereof, pay to the Holder the whole amount then due and payable on this Note for principal and interest (without acceleration), with (to the extent permitted by applicable law)
interest on the overdue principal and interest
11
computed at the Default Rate. In the event the Issuer fails to pay any overdue principal or interest upon demand by the registered Holder of this Note, the registered Holder may, among other
things, institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Issuer and collect the monies adjudged or decreed to be payable
in the manner provided by law out of the property of the Issuer.
SECTION 7.
Additional Amounts
. Subject to the exemptions and
limitations set forth below, the Issuer will pay additional amounts to the Holder that is a “Non-United States person,” as defined below, in order to ensure that every net payment on this Note will not be less, due to payment of United
States withholding tax, than the amount then due and payable. For this purpose, a “net payment” on this Note means a payment by the Issuer or any paying agent, including payment of principal and interest, after deduction for any present or
future tax, assessment, or other governmental charge of the United States. These additional amounts will constitute additional interest on this Note.
The Issuer will not be required to pay additional amounts, however, in any of the circumstances described in items (1) through
(13) below.
(1) Additional amounts will not be payable if a payment on this Note is reduced as a result of any tax, assessment, or
other governmental charge that is imposed or withheld solely by reason of the Holder:
(a) having a relationship with the
United States as a citizen, resident, or otherwise;
(b) having had such a relationship in the past; or
(c) being considered as having had such a relationship.
(2) Additional amounts will not be payable if a payment on this Note is reduced as a result of any tax, assessment, or other governmental
charge that is imposed or withheld solely by reason of the Holder:
(a) being treated as present in or engaged in a trade
or business in the United States;
(b) being treated as having been present in or engaged in a trade or business in the
United States in the past;
(c) having or having had a permanent establishment in the United States; or
(d) having or having had a qualified business unit which has the U.S. dollar as its functional currency.
12
(3) Additional amounts will not be payable if a payment on this Note is reduced as a result of
any tax, assessment, or other governmental charge that is imposed or withheld solely by reason of the Holder being or having been a:
(a) foreign private foundation or other foreign tax-exempt organization;
(b) passive foreign investment company;
(c) controlled foreign corporation; or
(d) corporation which has accumulated earnings to avoid U.S. federal income tax.
(4) Additional amounts will not be payable if a payment on this Note is reduced as a result of any tax, assessment, or other governmental
charge that is imposed or withheld solely by reason of the Holder owning or having owned, actually or constructively, 10% or more of the total combined voting power of all classes of the Issuer’s stock entitled to vote;
(5) Additional amounts will not be payable if a payment on this Note is reduced as a result of any tax, assessment, or other governmental
charge that is imposed or withheld solely by reason of the Holder being a bank extending credit under a loan agreement entered into in the ordinary course of business.
For purposes of items (1) through (5) above, “Holder” includes a fiduciary, settlor, partner, member, shareholder, or
beneficiary of the Holder if the Holder is an estate, trust, partnership, limited liability company, corporation, or other entity, or a person holding a power over an estate or trust administered by a fiduciary holder.
(6) Additional amounts will not be payable to any Holder that is:
(a) a fiduciary;
(b) a partnership;
(c) a limited liability company;
(d) another fiscally transparent entity; or
(e) not the sole Holder of this Note or any portion of this Note.
However, this exception to the obligation to pay additional amounts will only apply to the extent that a beneficiary or settlor in relation to
the fiduciary, or a beneficial owner, partner, or member of the partnership, limited liability company, or other fiscally transparent entity, would not have been entitled to the payment of an additional amount had the beneficiary, settlor,
beneficial owner, partner, or member received directly its beneficial or distributive share of the payment.
13
(7) Additional amounts will not be payable if a payment on this Note is reduced as a result of
any tax, assessment, or other governmental charge that is imposed or withheld by reason of the failure of the Holder or any other person to comply with applicable certification, identification, documentation, or other information reporting
requirements. This exception to the obligation to pay additional amounts will apply only if compliance with such reporting requirements is required as a precondition to exemption from such tax, assessment or other governmental charge by statute or
regulation of the United States or by an applicable income tax treaty to which the United States is a party.
(8) Additional amounts will
not be payable if a payment on this Note is reduced as a result of any tax, assessment, or other governmental charge that is collected or imposed by any method other than by withholding from a payment on this Note by the Issuer or any paying agent.
(9) Additional amounts will not be payable if a payment on this Note is reduced as a result of any tax, assessment, or other governmental
charge that is imposed or withheld by reason of a change in law, regulation, or administrative or judicial interpretation that becomes effective more than 15 days after the payment becomes due or is duly provided for, whichever occurs later.
(10) Additional amounts will not be payable if a payment on this Note is reduced as a result of any tax, assessment, or other governmental
charge that is imposed or withheld by reason of the presentation by the Holder for payment more than 30 days after the date on which such payment becomes due or is duly provided for, whichever occurs later.
(11) Additional amounts will not be payable if a payment on this Note is reduced as a result of any:
(a) estate tax;
(b) inheritance tax;
(c) gift tax;
(d) sales tax;
(e) excise tax;
(f) transfer tax;
(g) wealth tax;
(h) personal property tax; or
(i) any similar tax, assessment, or other governmental charge.
(12) Additional amounts will not be payable if a payment on this Note is reduced as a result of any tax, assessment, or other governmental
charge required to be withheld by the Issuer or any paying agent from a payment of principal or interest on this Note if such payment can be made without such withholding by any other paying agent.
14
(13) Additional amounts will not be payable if a payment on this Subordinated Note is reduced as
a result of any combination of items (1) through (12) above.
A “United States person” means:
(a) any individual who is a citizen or resident of the United States;
(b) any corporation, partnership, or other entity created or organized in or under the laws of the United States;
(c) any estate the income of which is subject to United States federal income tax regardless of its source; and
(d) any trust if a U.S. court is able to exercise primary supervision over its administration and one or more United States
persons have the authority to control all of the substantial decisions of the trust.
A “Non-United States person” means a
person who is not a United States person, and “United States” means the United States of America, including the States and the District of Columbia, its territories, its possessions, and other areas within its jurisdiction.
SECTION 8.
Redemption
. (1) This Note may be redeemed at the option of the Issuer in whole, but not in part, at any time, at a
redemption price of 100% of the principal amount of this Note, plus accrued but unpaid interest to but excluding the date of redemption, if the Issuer has or may become obliged to pay additional amounts as a result of any change in, or amendment to,
the laws or regulations of the United States or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations, after the Original Issue
Date.
(2) Beginning on 3
rd
June, 2013, this Note may be redeemed at the option
of the Issuer in whole, but not in part, on any Interest Payment Date at a redemption price of 100% of the principal amount of this Note, plus accrued but unpaid interest to but excluding the date of redemption.
(3) The Issuer will notify the Holder at least 30 but not more than 60 days before it redeems this Note pursuant to Section 8(1) or
Section 8(2).
The Issuer may not redeem this Note pursuant to Section 8(1) or Section 8(2) unless it has (as applicable)
obtained the prior approval of or consulted with the Federal Reserve Board or its Federal Reserve Bank, if such approval or consultation, as the case may be, is then required under applicable law, rule or regulation (including, without limitation,
applicable capital regulations).
If called for redemption, this Note shall cease to be outstanding from and after the date of redemption
(unless the Issuer shall default in the payment of the redemption price, and accrued interest, if any, on such date).
SECTION 9.
GOVERNING LAW
. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
15
SECTION 10.
Notices
. All notices to the Issuer under this Note shall be in writing
and addressed to the Issuer at 100 N. Phillips Ave., P.O. Box 925, Sioux Falls, SD 57101-0925, US; Attention: James R. Clark; telephone: (605) 336-4468, or to such other address as the Issuer may notify the Holder hereof.
[Remainder of this page intentionally left blank]
16
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
|
|
|
|
|
|
|
|
|
|
|
TEN COM
|
|
—
|
|
as tenants in common
|
|
|
|
TEN ENT
|
|
—
|
|
as tenants by the entireties
|
|
|
|
JT TEN
|
|
—
|
|
as joint tenants with right of survivorship and not as tenants in common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNIF GIFT MIN ACT —
|
|
|
|
Custodian
|
|
|
|
|
|
|
|
(Cust)
|
|
|
|
(Minor)
|
|
|
|
|
|
|
|
Under Uniform Gifts to Minors Act
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(State)
|
|
|
Additional abbreviations may also be used though not in the above list.
|
|
|
FOR VALUE RECEIVED, the undersigned hereby
|
|
sell(s), assign(s) and transfer(s) unto
|
|
|
|
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
|
Please print or type name and address, including zip code of assignee
the within Note of the Issuer and all rights thereunder and does hereby irrevocably constitute and appoint
Attorney to transfer the said Note on the books of the within-named Issuer, with full power of substitution in the premises.
|
|
|
|
|
SIGNATURE GUARANTEED:
|
|
|
|
|
|
|
|
|
NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of this Note
|
Exhibit 10.1
CONFIDENTIAL
FORM OF
STOCKHOLDER AGREEMENT
between
NATIONAL AUSTRALIA
BANK LIMITED
and
GREAT
WESTERN BANCORP, INC.
Dated as of [
—
], 2014
T
ABLE
OF
C
ONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
P
AGE
|
|
|
Article I
DEFINITIONS
|
|
|
|
|
|
|
Section 1.1
|
|
Definitions
|
|
|
1
|
|
|
Section 1.2
|
|
Beneficial Ownership
|
|
|
7
|
|
|
Section 1.3
|
|
Interpretation
|
|
|
7
|
|
|
|
|
Article II
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
|
|
|
|
|
|
|
Section 2.1
|
|
Board of Directors
|
|
|
8
|
|
|
Section 2.2
|
|
Audit Committee of the Board
|
|
|
10
|
|
|
Section 2.3
|
|
Compensation Committee of the Board
|
|
|
10
|
|
|
Section 2.4
|
|
Governance and Nominating Committee of the Board
|
|
|
11
|
|
|
Section 2.5
|
|
Executive Committee of the Board
|
|
|
12
|
|
|
Section 2.6
|
|
Risk Committee of the Board
|
|
|
12
|
|
|
Section 2.7
|
|
Company Bank Subsidiary Board of Directors
|
|
|
13
|
|
|
Section 2.8
|
|
Implementation
|
|
|
13
|
|
|
|
|
Article III
APPROVAL AND CONSENT RIGHTS
|
|
|
|
|
|
|
Section 3.1
|
|
Approval and Consent Rights
|
|
|
14
|
|
|
Section 3.2
|
|
Implementation
|
|
|
16
|
|
|
|
|
Article IV
INFORMATION, DISCLOSURE AND FINANCIAL ACCOUNTING
|
|
|
|
|
|
|
Section 4.1
|
|
Information Rights During Full Consolidation Periods
|
|
|
16
|
|
|
Section 4.2
|
|
Information Rights During Equity Accounting Periods
|
|
|
17
|
|
|
Section 4.3
|
|
General Information Requirements
|
|
|
17
|
|
|
Section 4.4
|
|
Reporting Coordination Committee
|
|
|
18
|
|
|
Section 4.5
|
|
Matters Concerning Auditors
|
|
|
18
|
|
|
Section 4.6
|
|
Release of Information and Public Filings
|
|
|
19
|
|
|
Section 4.7
|
|
Information in Connection with Regulatory or Supervisory Requirements
|
|
|
20
|
|
|
Section 4.8
|
|
Implementation with Respect to Legal Disclosures
|
|
|
21
|
|
|
Section 4.9
|
|
Information Concerning NAB Equity Awards
|
|
|
22
|
|
|
Section 4.10
|
|
Expenses
|
|
|
22
|
|
-i-
|
|
|
|
|
|
|
|
|
Article V
EXCHANGE OF COMMON STOCK for NON-VOTING COMMON STOCK
|
|
|
|
|
|
|
Section 5.1
|
|
Exchange
|
|
|
22
|
|
|
|
|
Article VI
OTHER PROVISIONS
|
|
|
|
|
|
|
Section 6.1
|
|
Related Party Transactions Policy
|
|
|
23
|
|
|
Section 6.2
|
|
Certain Policies and Procedures
|
|
|
23
|
|
|
Section 6.3
|
|
Access to Personnel and Data
|
|
|
24
|
|
|
Section 6.4
|
|
Internal Communications Protocols
|
|
|
24
|
|
|
Section 6.5
|
|
Access to Historical Records
|
|
|
24
|
|
|
Section 6.6
|
|
Confidentiality
|
|
|
25
|
|
|
Section 6.7
|
|
Director and Officer Indemnification; Liability Insurance
|
|
|
26
|
|
|
Section 6.8
|
|
Non-Competition
|
|
|
29
|
|
|
|
|
Article VII
INDEMNIFICATION
|
|
|
|
|
|
|
Section 7.1
|
|
Indemnification
|
|
|
31
|
|
|
Section 7.2
|
|
Claims for Indemnification
|
|
|
32
|
|
|
Section 7.3
|
|
Indemnification Limitations
|
|
|
34
|
|
|
Section 7.4
|
|
Payments
|
|
|
34
|
|
|
Section 7.5
|
|
Investigation
|
|
|
34
|
|
|
|
|
Article VIII
GENERAL PROVISIONS
|
|
|
|
|
|
|
Section 8.1
|
|
Obligations Subject to Applicable Law
|
|
|
35
|
|
|
Section 8.2
|
|
Notices
|
|
|
35
|
|
|
Section 8.3
|
|
Binding Effect; Assignment; No Third-Party Beneficiaries
|
|
|
35
|
|
|
Section 8.4
|
|
Severability
|
|
|
36
|
|
|
Section 8.5
|
|
Entire Agreement; Amendment
|
|
|
36
|
|
|
Section 8.6
|
|
Waiver
|
|
|
36
|
|
|
Section 8.7
|
|
Governing Law; Consent to Jurisdiction
|
|
|
36
|
|
|
Section 8.8
|
|
Waiver of Jury Trial
|
|
|
36
|
|
|
Section 8.9
|
|
Remedies; Specific Performance
|
|
|
37
|
|
|
Section 8.10
|
|
Counterparts
|
|
|
37
|
|
|
Section 8.11
|
|
Further Assurances
|
|
|
37
|
|
|
Section 8.12
|
|
Term; Survival
|
|
|
37
|
|
|
Section 8.13
|
|
Subsidiary and Affiliate Action
|
|
|
38
|
|
|
Section 8.14
|
|
Expenses
|
|
|
38
|
|
Schedules
|
|
|
|
|
Schedule 2.1(f)
|
|
Lead Director Responsibilities
|
|
Schedule 4.6(b)
|
|
Public Reporting Protocol Prior to Less Than Majority Holder Date
|
-ii-
FORM OF
STOCKHOLDER AGREEMENT
Stockholder Agreement (this “
Agreement
”), dated as of [
—
], 2014, between
National Australia Bank Limited, a company incorporated under the laws of the Commonwealth of Australia (“
NAB
”), and Great Western Bancorp, Inc., a Delaware corporation (the “
Company
”).
R
ECITALS
A. The Company is an indirect, wholly owned subsidiary of NAB.
B. NAB intends to divest itself of its ownership interest in the Company and, in connection therewith, a subsidiary of NAB intends to sell
shares of Common Stock representing approximately [
—
]% of the outstanding Common Stock as of the date hereof in the Company’s initial public offering registered with the SEC on Form S-1 (the
“
IPO
”).
C. In connection with such divestiture, the Company and NAB desire to set forth certain agreements that will
govern the relationship between them following the IPO.
N
OW
,
THEREFORE
, in
consideration of the mutual covenants and agreements herein contained and other good and valid consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
Article I
DEFINITIONS
Section 1.1
Definitions
. Capitalized terms used in this Agreement shall have the meanings assigned below:
“
Affiliate
” means, with respect to any Person, any other Person which directly, or indirectly through one or
more intermediaries, Controls, or is Controlled by, or is under common Control with, such Person;
provided
that none of the Company and its Subsidiaries shall be considered Affiliates of NAB or any of NAB’s Affiliates for purposes of
this Agreement.
“
Agreed Coverage
” has the meaning set forth in
Section 6.7(b)
.
“
Applicable Accounting Standards
” means the Australian Accounting Standards, as adopted by the Australian
Accounting Standards Board, and the International Financial Reporting Standards, as adopted by the International Accounting Standards Board.
“
Applicable Law
” means any applicable law (including common law), statute, regulation, rule, executive order,
ordinance, judgment, ruling, published regulatory policy or guideline, injunction, order, consent, exemption, license, approval or permit enacted, issued, promulgated, adjudged, entered or enforced by a Governmental Authority, including, for the
avoidance of doubt, the NYSE Manual.
-1-
“
APRA
” means the Australian Prudential Regulatory Authority.
“
Bankruptcy Laws
” means Title 11 of the United States Code and other Federal, state or foreign laws
principally dealing with the liquidation, reorganization, administration, conservatorship or receivership of insolvent debtors.
“
Beneficially Own
” means, with respect to any Person, securities of which such Person or any of such
Person’s Affiliates, directly or indirectly, has “beneficial ownership” as determined pursuant to
Rule 13d-3
and Rule 13d-5 of the Exchange Act, including securities beneficially owned
by others with whom such Person or any of its Affiliates has agreed to act together for the purpose of acquiring, holding, voting or disposing of such securities;
provided
that a Person shall not be deemed to Beneficially Own
(i) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates until such tendered securities are accepted for payment, purchase or exchange, (ii) any security as a result of an
oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the Exchange Act, and (B) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report).
“
BHC Act
” means the U.S. Bank Holding Company Act of 1956.
“
Board of Directors
” or “
Board
” mean the board of directors of the Company.
“
Business Day
” means any day except a Saturday, Sunday or day on which banks in Sioux Falls, South Dakota or
Melbourne, Australia are authorized or required by Applicable Law to close.
“
Capital Stock
” means the
equity capital or other equity interests of a Person or a security convertible or exercisable (whether or not such conversion or exercise is contingent or conditional) into or for the equity capital or other equity interests of a Person.
“
CEO
” means the Chief Executive Officer of the Company (or the equivalent successor position), as elected or
appointed by the Board of Directors.
“
CFO
” means the Chief Financial Officer of the Company (or the
equivalent successor position), as elected or appointed by the Board of Directors.
“
Claim Notice
” has
the meaning set forth in
Section 7.2(a)
.
“
Common Stock
” means the Common Stock, par value
$0.01 per share, of the Company, and does not include Non-Voting Common Stock.
“
Company
” has the meaning
set forth in the Preamble.
-2-
“
Company Auditor
” means the independent registered public
accounting firm responsible for conducting the audit of the Company’s annual financial statements.
“
Company
Bank Subsidiary
” means Great Western Bank, a South Dakota commercial bank and Wholly Owned Subsidiary of the Company, together with any successor of Great Western Bank.
“
Company Slate
” means the candidates for election as Director proposed or recommended by the Board of
Directors to the Company’s stockholders in connection with a meeting of stockholders.
“
Company
States
” means South Dakota, Iowa, Nebraska, Colorado, Arizona, Kansas and Missouri.
“
Competing Branch
Bank
” has the meaning set forth in
Section 6.8(a)(i)
.
“
Competing Business
” has the
meaning set forth in
Section 6.8(a)(ii)
.
“
Competing Lending Business
” has the meaning set
forth in
Section 6.8(a)(ii)
.
“
Competing Person
” has the meaning set forth in
Section 6.8(b)(viii)
.
“
Completion of the IPO
” means the consummation of the IPO upon the
settlement of the sale of Common Stock pursuant to the Registration Statement on Form S-1 (File No. 333-[
—
]), as amended, relating to the IPO.
“
Confidential Information
” means, with respect to either Party or any of its Subsidiaries, any information
disclosed by such Party to the other Party or any of the other Party’s respective Subsidiaries, whether on or prior to the date hereof, that relates to (i) any information relating to the business, financial or other affairs (including
future plans, financial targets, trade secrets and know-how) of such other Party or such other Party’s Subsidiaries, or (ii) any information of the other Party or such other Party’s Subsidiaries provided in a manner which reasonably
indicates the confidential or proprietary nature of such information.
“
Control
” means, with respect to
any Person, direct or indirect ownership or power to vote 25% or more of any class of voting securities of such Person, control in any manner of the election of a majority of the directors or trustees of such Person, or the direct or indirect
possession of the ability to exercise a controlling influence over the management or policies of such Person. The terms and phrases “Controlling,” “Controlled” and “under common Control with” shall be given correlative
meanings.
“
Coverage Change
” has the meaning set forth in
Section 6.7(b)
.
“
Critical Policy
” has the meaning set forth in
Section 6.2(a)
.
-3-
“
CRO
” means the Chief Risk Officer of the Company (or the
equivalent successor position), as elected or appointed by the Board of Directors.
“
D&O Coverage
”
has the meaning set forth in
Section 6.7(b)
.
“
Director
” means a member of the Board of
Directors.
“
Disclosing Party
” has the meaning set forth in
Section 6.6(a)
.
“
Disclosure Controls and Procedures
” means controls and other procedures designed to ensure that information
required to be disclosed by the Company and NAB under Applicable Law is recorded, processed, summarized and reported within applicable time periods, including controls and procedures designed to ensure that such information is accumulated and
communicated to the Company’s management, including the CEO and CFO, and to NAB, as appropriate to allow timely decisions regarding required disclosure.
“
Exchange Act
” means the U.S. Securities Exchange Act of 1934.
“
Executive Officer
” means the CEO, the CFO, the CRO and all other persons qualifying as “officers”
of the Company for purposes of Rule 16a-1(f) under the Exchange Act.
“
Fiduciary Coverage
” has the
meaning set forth in
Section 6.7(b)
.
“
Final Determination
” means, with respect to a dispute
as to indemnification for a Loss under this Agreement, (i) a written agreement between the parties to such dispute resolving such dispute, (ii) a final and non-appealable order or judgment entered by a court of competent jurisdiction
resolving such dispute or (iii) a final non-appealable determination rendered by an arbitration or like panel to which the parties submitted such dispute that resolves such dispute.
“
GAAP
” means generally accepted accounting principles in the United States.
“
Governmental Authority
” means any federal, state, local, domestic or foreign agency, court, tribunal,
administrative body, arbitration panel, department or other legislative, judicial, governmental, quasi-governmental entity or self-regulatory organization with competent jurisdiction.
“
Indemnified Person
” has the meaning set forth in
Section 7.2(a)
.
“
Indemnifying Person
” has the meaning set forth in
Section 7.2(a)
.
“
Independent Director
” means a Director who is both (i) an independent director under
Section 303.A02 of the NYSE Manual and (ii) “independent” for purposes of Rule 10A-3(b)(1) under the Exchange Act.
-4-
“
Information Party
” has the meaning set forth in
Section 4.8(c)
.
“
Internal Control Over Financial Reporting
” means a process designed by, or
under the supervision of, the CEO and CFO and effected by the Board of Directors, Company management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of
the Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management of the Company and the Board of Directors and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets
that could have a material effect on its financial statements.
“
IPO
” has the meaning set forth in the
Recitals.
“
Lead Director
” shall mean the Director designated as such by the Board of Directors pursuant
to
Section 2.1(f)(i)
.
“
Less Than Majority Holder Date
” means the first date on which NAB
ceases to Beneficially Own at least 50% of the outstanding Common Stock.
“
Loss
” means any damages,
losses, charges, liabilities, claims, demands, actions, suits, proceedings, payments, judgments, settlements, assessments, deficiencies, interest, penalties, and costs and expenses (including removal costs, remediation costs, closure costs, fines,
penalties, reasonable attorneys’ fees and reasonable out of pocket disbursements).
“
NAB
” has the
meaning set forth in the Preamble.
“
NAB Auditor
” means the independent registered public accounting firm
responsible for conducting the audit of NAB’s annual financial statements.
“
NAB Director
” means a
Director designated by NAB pursuant to its nomination rights set forth in
Section 2.1(d)
or otherwise designated in writing by NAB to the Board of Directors to act in such capacity.
“
NAB Independent Director
” means a NAB Director who is also an Independent Director.
“
NAB Individual
” means (i) any director, officer or employee of NAB or any of its Subsidiaries,
(ii) any NAB Director or (iii) any person designated by NAB as a NAB Director who, with his or her consent, is named in any Registration Statement of the Company under the Securities Act as about to become a Director of the Company.
-5-
“
Non-Control Date
” means the date on which NAB ceases to
control the Company for purposes of the BHC Act as provided for in a written determination from the Board of Governors of the Federal Reserve System to NAB or as provided for in a written notice by NAB to the Company to such effect.
“
Non-Voting Common Stock
” means the Non-Voting Common Stock, par value $0.01 per share, of the Company.
“
Notice Period
” has the meaning set forth in
Section 7.2(b)
.
“
NYSE Manual
” means the Listed Company Manual of the New York Stock Exchange.
“
Party
” means either the Company or NAB.
“
Person
” means any individual, sole proprietorship, partnership, limited liability company, joint venture,
trust, incorporate organization, association, corporation, institution, public benefit corporation, Governmental Authority or any other entity.
“
Qualified Compensation Director
” means a Director who is (i) a “Non-Employee Director” as
defined in Rule 16b-3(b)(3)(i) under the Exchange Act and (ii) an “outside director” as defined in Treasury Regulations Section 1.162-27(e)(3)(i),
provided
,
however
, that a Qualified Compensation Director need
not satisfy the condition set forth in clause (ii) until the date of the first regularly scheduled meeting of the stockholders of the Company that occurs more than 12 months after the later of (1) the Completion of the IPO and (2) the
date on which the Common Stock is listed on the New York Stock Exchange.
“
Receiving Party
” has the
meaning set forth in
Section 6.6(a)
.
“
Regulation S-K
” means Regulation S-K under
the Securities Act and the Exchange Act.
“
Representatives
” means, with respect to any Person, any
officer, director, employee, advisor, agent or representative of such Person, or anyone acting on behalf of them or such Person.
“
SEC
” means the U.S. Securities and Exchange Commission.
“
Securities Act
” means the U.S. Securities Act of 1933.
“
Securities Coverage
” has the meaning set forth in
Section 6.7(b)
.
“
Subsidiary
” means, with respect to any Person, any other Person who is Controlled by such Person;
provided
that none of the Company and its Subsidiaries shall be considered Subsidiaries of NAB or any of NAB’s Subsidiaries for purposes of this Agreement.
-6-
“
Third-Party Claim
” means any claim relating to a Loss by any
Person who is not, and is not a Subsidiary of, a Party.
“
Transitional Services Agreement
” means the
Transitional Services Agreement, dated the date hereof, between the Parties.
“
Wholly Owned Subsidiary
”
means, with respect to any Person, a Subsidiary of such Person, 100% of the Capital Stock of which is owned, directly or indirectly, by such Person.
Section 1.2
Beneficial Ownership
. For purposes of this Agreement, NAB shall:
(a) be deemed to Beneficially Own securities that are Beneficially Owned by its Subsidiaries; and
(b) be deemed to be acting on behalf of its Subsidiaries with respect to their capacities as holders of legal and economic
interests, respectively, in Common Stock and Non-Voting Common Stock, as applicable.
Section 1.3
Interpretation
.
(a) Unless the context otherwise requires:
(i) references contained in this Agreement to the Preamble, Recitals and to specific Articles, Sections, Subsections or
Schedules shall refer, respectively, to the Preamble, Recitals, Articles, Sections, Subsections or Schedules of this Agreement;
(ii) references to any agreement or other document are to such agreement or document as amended, modified, supplemented or
replaced from time to time;
(iii) references to any statute or statutory provision include all rules and regulations
promulgated pursuant to such statute or statutory provision, in each case as such statute, statutory provision, rules or regulations may be amended, modified, supplemented or replaced from time to time;
(iv) references to any Governmental Authority include any successor to such Governmental Authority;
(v) terms defined in the singular have a comparable meaning when used in the plural, and vice versa;
(vi) the words “hereof”, “herein” and “hereunder” and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement;
-7-
(vii) the terms “Dollars” and “$” mean U.S. Dollars; and
(viii) wherever the word “include”, “includes” or “including” is used in this Agreement, it
shall be deemed to be followed by the words “without limitation”.
(b) The headings contained in this Agreement
are for reference purposes only and do not limit or otherwise affect any of the provisions of this Agreement.
(c) The
Parties have participated jointly in the negotiation and drafting of this Agreement. In the event of an ambiguity or a question of intent or interpretation, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption
or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
(d) In this Agreement, any provision which applies “until” a specified date shall apply on such specified date, and
shall cease to apply on the date immediately following such specified date.
Article II
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Section 2.1
Board of Directors
.
(a) As of the Completion of the IPO and until such time as otherwise provided for in this Agreement, the Board of Directors
shall consist of nine members. From the Completion of the IPO until the earlier of (i) the day prior to the one-year anniversary of the Less Than Majority Holder Date and (ii) the Non-Control Date, the Company and NAB shall use their best
efforts to cause the Board of Directors to consist of a majority of NAB Directors. From and after the one-year anniversary of the Less Than Majority Holder Date, the Board of Directors shall transition to full compliance with Section 303A.01 of
the NYSE Manual, to the extent the composition of the Board of Directors is not already in full compliance, such that on the one-year anniversary of the Less Than Majority Holder Date, the Board of Directors shall consist of a majority of
Independent Directors.
(b) At all times, the Board of Directors shall include at least two Directors who are both
Independent Directors and Qualified Compensation Directors.
(c) The CEO shall serve on the Board of Directors at all
times prior to the Non-Control Date. In accordance with
Section 2.8(c)
, the CEO shall not be deemed a NAB Director.
(d) NAB shall have the right to nominate for inclusion on the Company Slate such number of Directors, each of whom shall be a
NAB Director, such that the aggregate number of nominated Directors on the Company Slate together with the number of NAB Directors on the Board of Directors which are not subject to election at the applicable stockholder meeting is equal to the
following (or such lower number as NAB shall determine):
(i) until the earlier of (A) the day prior to the one-year
anniversary of the Less Than Majority Holder Date (or such earlier date as NAB shall determine) and (B) the Non-Control Date, five Directors, or such other number as shall represent a majority of the Directors on the Board of Directors;
-8-
(ii) from and after the one-year anniversary of the Less Than Majority Holder
Date (or such earlier date as NAB shall determine), if the Non-Control Date has not occurred, a number of Directors equal to (A) the number of Independent Directors on the Board of Directors minus (B) two;
(iii) after the Non-Control Date, and as long as NAB Beneficially Owns at least 5% of the Company’s Common Stock and
Non-Voting Common Stock, considered together as a single class of the Company’s Capital Stock, one Director; and
(iv) after the Non-Control Date, and after NAB ceases to Beneficially Own at least 5% of the Company’s Common Stock and
Non-Voting Common Stock, considered together as a single class of the Company’s Capital Stock, none.
(e) Until the
Non-Control Date, the Company shall use its best efforts:
(i) to cause there to be on the Board of Directors at all times
that number of NAB Directors for which NAB maintains nomination rights pursuant to
Section 2.1(d)
;
(ii) to
fill any vacancy on the Board of Directors created by the resignation, removal or incapacity of any NAB Director with an individual designated by NAB, to the extent NAB would then have the right to nominate such individual consistent with the
aggregate number of NAB Directors NAB shall then be entitled to nominate pursuant to
Section 2.1(d)
; and
(iii) to prevent the removal of any NAB Director without NAB’s consent, to the extent NAB would then have the right to
nominate such individual consistent with the aggregate number of NAB Directors NAB shall then be entitled to nominate pursuant to
Section 2.1(d)
.
(f) Until the Non-Control Date, if the Board of Directors has appointed a Chairperson of the Board of Directors who is not an
Independent Director:
(i) the Board of Directors shall designate one of the Independent Directors who is not a NAB
Director as its “
Lead Director
;”
(ii) the Lead Director shall preside over meetings of the Board of
Directors held in the absence of any Director who is also an Executive Officer, which meetings shall be held no less than four times per year (although the Parties expect that such meetings will be held more frequently, generally prior to or
immediately following each scheduled meeting of the Board of Directors);
-9-
(iii) the Lead Director shall also preside over meetings of the Independent
Directors, which meetings shall be held (A) in the absence of any Director who is not an Independent Director and (B) at least annually; and
(iv) the Lead Director shall have the responsibilities and authority set forth in
Schedule 2.1(f)
and, to the
extent not inconsistent with any other provision of this Agreement, such additional responsibilities as the Board of Directors may direct from time to time.
Section 2.2
Audit Committee of the Board
.
(a) As of the Completion of the IPO and until such time as otherwise provided for in this Agreement, the Board of Directors
shall have established an audit committee that shall consist of three or more Independent Directors, with the size of the audit committee established by the Board of Directors. At any time prior to the Non-Control Date during which a NAB Independent
Director serves on the Board of Directors, at least one member of the audit committee shall be a NAB Independent Director designated by NAB, so long as such NAB Independent Director also meets the standards for audit committee membership as set
forth in the NYSE Manual.
(b) The audit committee shall have responsibilities and authority consistent with
Rule 10A-3 under the Exchange Act and Rule 303A.07 of the NYSE Manual, and such additional responsibilities and authority, not inconsistent with this Agreement, as shall be delegated to it by the Board of Directors from time to time.
(c) The audit committee shall have at all times at least one member who is an “audit committee financial expert” as
defined in Item 407(d)(5) of Regulation S-K.
Section 2.3
Compensation Committee of the Board
.
(a) As of the Completion of the IPO, the Board of Directors shall have established a compensation committee that, at all times
prior to the Less Than Majority Holder Date, shall consist of three or more Directors (with the size of the compensation committee established by the Board of Directors) comprised of (i) two or more Independent Directors (at least two of which
are Qualified Compensation Directors) and (ii) one or more NAB Directors. NAB shall designate NAB Directors to fill the number of positions reserved for NAB Directors on the compensation committee pursuant to this
Section 2.3(a)
.
(b) On the Less Than Majority Holder Date (or on such earlier date as NAB shall determine), the compensation committee
shall transition to full compliance with Section 303A.05 of the NYSE Manual, to the extent the composition of the compensation committee is not already in full compliance, as follows:
(i) on or before 90 days following the Less Than Majority Holder Date, the compensation committee shall consist of a majority
of Independent Directors, at least two of whom are Qualified Compensation Directors; and
-10-
(ii) on the one-year anniversary of the Less Than Majority Holder Date (or such
earlier date as NAB shall determine), the compensation committee shall consist solely of Independent Directors, at least two of whom are Qualified Compensation Directors.
(c) From the Completion of the IPO until the day before the one-year anniversary of the Less Than Majority Holder Date, and
during any other time that the compensation committee includes members who are not Qualified Compensation Directors, the compensation committee shall maintain a subcommittee consisting solely of two or more Qualified Compensation Directors who shall
be responsible for:
(i) approving any grants of equity or equity-based compensation awards to any Executive Officer or
Director;
(ii) determining performance goals for performance-based compensation of the Executive Officers and the
satisfaction thereof; and
(iii) such other matters as shall be required by Applicable Law to be approved or determined
solely by Qualified Compensation Directors.
(d) Following the Less Than Majority Holder Date, the compensation committee
shall have responsibilities and authority consistent with Rule 303A.05 of the NYSE Manual, and such additional responsibilities and authority, not inconsistent with this Agreement, as shall be delegated to it by the Board of Directors from time
to time.
(e) After the one-year anniversary of the Less Than Majority Holder Date, if the Non-Control Date has not
occurred, at any time during which a NAB Independent Director serves on the Board of Directors, at least one member of the compensation committee shall be a NAB Independent Director.
Section 2.4
Corporate Governance and Nominating Committee of the Board
.
(a) As of the Completion of the IPO, the Board of Directors shall have established a corporate governance and nominating
committee that, at all times prior to the Less Than Majority Holder Date, shall consist of two or more Directors (with the size of the corporate governance and nominating committee established by the Board of Directors) comprised of (i) one or
more Independent Directors and (ii) one or more NAB Directors. NAB shall designate NAB Directors to fill the number of positions reserved for NAB Directors on the corporate governance and nominating committee pursuant to this
Section 2.4(a)
.
(b) On the Less Than Majority Holder Date (or on such earlier date as NAB shall determine),
the corporate governance and nominating committee shall transition to full compliance with Section 303A.06 of the NYSE Manual, to the extent the composition of the corporate governance and nominating committee is not already in full compliance,
as follows:
(i) on or before the 90th day following the Less Than Majority Holder Date, the corporate governance and
nominating committee shall consist of a majority of Independent Directors; and
-11-
(ii) on the one-year anniversary of the Less Than Majority Holder Date (or such
earlier date as NAB shall determine), the corporate governance and nominating committee shall consist solely of Independent Directors.
(c) The corporate governance and nominating committee shall at all times exercise the responsibilities and authority set forth
under Rule 303A.04 of the NYSE Manual, and such additional responsibilities and authority, not inconsistent with this Agreement, as shall be delegated to it by the Board of Directors from time to time.
(d) After the one-year anniversary of the Less Than Majority Holder Date, if the Non-Control Date has not occurred, at any
time during which a NAB Independent Director serves on the Board of Directors, at least one member of the corporate governance and nominating committee shall be a NAB Independent Director.
Section 2.5
Executive Committee of the Board
.
(a) As of the Completion of the IPO, the Board of Directors shall have established an executive committee that, at all times
prior to the one-year anniversary of the Less Than Majority Holder Date, shall consist of (i) the CEO, (ii) one Independent Director who is not a NAB Independent Director and (iii) two NAB Directors, one of whom shall be designated by
NAB as an alternate and who shall be considered a member of the Executive Committee of the Board only at such times as the other NAB Director is unable to attend a meeting or cast a vote.
(b) Until the one-year anniversary of the Less Than Majority Holder Date, the executive committee shall only act with the
consent or approval of a majority of the members of the committee, which majority must include the consent or approval of a NAB Director.
(c) Each NAB Director that is a member of the executive committee shall be available to the other committee members on short
notice (generally meaning within 24 hours of any communication being sent), or shall provide for the alternate NAB Director or for a delegate (who shall also be a NAB Director) to be available within such a time period.
(d) The executive committee shall have such responsibilities and authority, not inconsistent with this Agreement, as shall be
delegated to it by the Board of Directors from time to time;
provided
,
however
, that until the Non-Control Date, the executive committee shall report promptly to the Board of Directors any actions it has taken.
Section 2.6
Risk Committee of the Board
.
(a) As of the Completion of the IPO, the Board of Directors shall have established a risk committee that, at all times prior
to the one-year anniversary of the Less Than Majority Holder Date, shall consist of two or more Directors (with the size of the corporate governance and nominating committee established by the Board of Directors)
-12-
comprised of (i) one or more Independent Directors and (ii) one or more NAB Directors. NAB shall designate NAB Directors to fill the number of positions reserved for NAB Directors on
the risk committee pursuant to this
Section 2.6(a)
.
(b) At such time as the Company shall have total
consolidated assets in excess of $10 billion, the Chairperson of the risk committee must satisfy the requirements of 12 C.F.R. § 252.22(d)(2). At least one member of the risk committee must have experience in identifying,
assessing and managing risk exposures of large, complex firms.
Section 2.7
Company Bank Subsidiary Board of Directors
.
(a) From the Completion of the IPO until the one-year anniversary of the Less Than Majority Holder Date, subject to Applicable
Law, NAB shall be entitled to appoint up to two directors to serve on the board of directors of the Company Bank Subsidiary;
provided
that NAB shall never have the right to appoint more than 25% of the members of the board of directors of the
Company Bank Subsidiary.
(b) From the Completion of the IPO until the Non-Control Date, the Company shall not, and shall
cause the Company Bank Subsidiary not to, reduce the size of the board of directors of the Company Bank Subsidiary to less than eight members without NAB’s prior written consent.
(c) Any NAB Director shall be entitled to attend any meeting of the board of directors of the Company Bank Subsidiary, or any
committee or subcommittee thereof, as a non-voting observer;
provided
that the board of directors of the Company Bank Subsidiary, or any committee or subcommittee thereof, shall have the right to hold sessions consisting only of members of
the board of directors of the Company Bank Subsidiary or such committee or subcommittee present, as applicable.
Section 2.8
Implementation
.
(a) The Company shall make such disclosures, and shall take such other steps, as shall be required
to avail itself of such exemptions from the NYSE Manual and other Applicable Law so as to permit the full implementation of this
Article II
.
(b) Any determination by or consent of NAB pursuant to this
Article II
shall be evidenced in advance by a writing
signed on behalf of NAB by a person holding the office of General Manager, Group Development at NAB.
(c) Except as
expressly stated in this
Article II
, NAB Directors (i) shall not be required to be Independent Directors or meet any standard of independence from the Company and (ii) may be officers or employees of NAB or any of its
Affiliates, but not of the Company or any of the Company’s Subsidiaries.
(d) Any Director may attend any committee
or subcommittee meeting as a non-voting observer;
provided
that any committee or subcommittee shall have the right to hold sessions consisting only of members of such committee or subcommittee present, as applicable.
-13-
Article III
APPROVAL AND CONSENT RIGHTS
Section 3.1
Approval and Consent Rights
. Until the Non-Control Date, the Company shall not (either directly or indirectly through
a Subsidiary, or through one or a series of related transactions) take any of the following actions without NAB’s consent:
(a) any merger, consolidation or similar transaction (or any amendment to or termination of an agreement to enter into such a
transaction), other than any merger, consolidation or similar transaction involving only the Company and one or more of its Wholly Owned Subsidiaries;
(b) any acquisition or disposition of securities, assets or liabilities involving an equity value greater than $5 million
or an asset value greater than $5 million, in each case other than transactions involving investment securities or loans approved in accordance with the Company’s established policies and procedures to monitor invested assets or loans,
respectively;
(c) any increase or decrease in the authorized Capital Stock of the Company, or the creation of any new
class or series of Capital Stock of the Company (including, for the avoidance of doubt, any class or series of preferred stock of the Company);
(d) any issuance or acquisition (including stock buy-backs, redemptions and other reductions of capital) of Capital Stock of
the Company or any of its Subsidiaries, except:
(i) issuances and grants to a Director or employee of the Company of
vested or unvested shares of Common Stock or restricted Common Stock, options to acquire shares of Common Stock, restricted stock units, “phantom” stock units or similar interests in the Company’s common equity, in each case pursuant
to an equity compensation plan approved by the Board of Directors; or
(ii) issuances of Capital Stock of a Subsidiary to
a Wholly Owned Subsidiary, or acquisitions of Capital Stock of a Subsidiary by a Wholly Owned Subsidiary;
(e) any
issuance or acquisition (including redemptions, prepayments, open-market or negotiated repurchases or other transactions reducing the outstanding debt of the Company or any of its Subsidiaries) of any debt security of the Company or any of its
Subsidiaries, in each case involving an aggregate principal amount exceeding $10 million;
(f) any other incurrence
or guaranty of a debt obligation having a principal amount greater than $5 million, other than (i) debt obligations incurred by the Company Bank Subsidiary in the ordinary course and (ii) a guaranty or similar undertaking by the
Company Bank Subsidiary in the ordinary course of business;
(g) entry into, or termination of, any joint venture or
cooperation arrangements involving assets having a value exceeding $5 million;
-14-
(h) the listing or delisting of any class of Capital Stock of the Company or any
of its Subsidiaries on a securities exchange;
(i) the amendment (or approval or recommendation of the amendment) of the
Company’s certificate of incorporation or bylaws;
(j) any material change in the scope of the Company’s
business from the scope of the Company’s business immediately before the Completion of the IPO;
(k) other than as
required by Applicable Law, any change in the Company Auditors;
(l) other than as required by Applicable Law, the
formation of, or delegation of authority to, any new committee, or subcommittee thereof, of the Board of Directors, or the delegation of authority to any existing committee or subcommittee thereof not set forth in the committee’s charter
immediately prior to the Consummation of the IPO;
(m) entry into, or termination of, any material contract, or any
material amendment to any material contract, other than, in each case, (i) any employment agreement or (ii) any contract involving neither aggregate payments of $3 million or more nor aggregate annual payments of $1 million or
more;
(n) any change in the legal structure of the Company or the legal or ownership structure of any of its
Subsidiaries;
(o) settlement of any material litigation or proceeding (whether formal or informal) involving the Company
or any of its Subsidiaries;
(p) any change in any material policy relating to loans or other risk appetite settings,
investments, asset-liability management or derivatives or in any other policy that could reasonably be deemed to have a material effect on the Company’s consolidated results of operations or financial condition;
(q) any material written agreement or settlement with, or any material written commitment to, a regulatory agency, or any
material enforcement action;
(r) the election, hiring or dismissal, other than a dismissal for cause, of the CEO or CFO
of the Company or the Company Bank Subsidiary;
(s) with respect to the Company or any Subsidiary, any filing or the
making of any petition under Bankruptcy Laws, any general assignment for the benefit of creditors, any admission of an inability to meet obligations generally as they become due or any other act the consequence of which is to subject the Company or
any Subsidiary to a proceeding under Bankruptcy Laws;
(t) any dissolution or winding-up of the Company or the Company
Bank Subsidiary;
-15-
(u) any increase or decrease in the size of the Board of Directors, other than
as contemplated in this Agreement; or
(v) entry into any agreement or commitment providing for any of the foregoing.
Section 3.2
Implementation
.
(a) Any determination by or consent of NAB pursuant to this
Article III
shall be evidenced in advance by a writing
signed on behalf of NAB by a person holding the office of General Manager, Group Development at NAB.
(b) In exercising
its rights pursuant to this
Article III
, NAB may periodically consult with the Independent Directors through the Lead Director.
Article IV
INFORMATION,
DISCLOSURE AND FINANCIAL ACCOUNTING
Section 4.1
Information Rights During Full Consolidation Periods
.
(a) The Company agrees that, for so long as NAB is required under Applicable Accounting Standards to consolidate the financial
statements of the Company with its financial statements, and in any case for all financial periods commencing prior to the earlier of the Non-Control Date and the one-year anniversary of the Less Than Majority Holder Date:
(i)
General Principles.
The Company shall continue to provide NAB with (A) information and data relating to the
business and financial results of the Company and its Subsidiaries and (B) access to the Company’s personnel, data and systems, in each case in the same manner as it does immediately prior to the Completion of the IPO;
(ii)
Accounting Systems and Principles.
The Company shall maintain accounting principles, systems and reporting formats
that are consistent with NAB’s financial accounting practices in effect as of the Completion of the IPO, and shall thereafter in good faith consider any changes to such principles, systems or reporting formats requested by NAB;
(iii)
Controls and Procedures
. The Company shall, and shall cause each of its Subsidiaries to (A) maintain
Disclosure Controls and Procedures, (B) maintain Internal Control Over Financial Reporting and (C) provide quarterly certifications from its relevant officers and employees regarding Disclosure Controls and Procedures and Internal Control
Over Financial Reporting, in accordance with NAB’s internal standards;
(iv)
Advance Notice.
The Company shall
inform NAB promptly of any events or developments that might reasonably be expected to materially affect the Company’s financial condition and results of operations; and
-16-
(v)
Regulatory Information
. Subject to Applicable Law and to the extent
provided by the Company and its Subsidiaries prior to the Completion of the IPO, the Company shall provide NAB with copies of, and access to, (A) all reports of examinations and other supervisory visitations regarding the Company or any of its
Subsidiaries and prepared by or for any federal or state bank regulatory agency or authority with jurisdiction over the Company or any of its Subsidiaries, and (B) any other supervisory communications to or from any such bank regulatory agency
or authority identifying any matter requiring attention or correction by the Company or any of its Subsidiaries or regarding any existing or potential investigation or enforcement action by any such bank regulatory agency relating to the Company or
any of its Subsidiaries.
(b) In connection with its provision of information to NAB pursuant to
Section 4.1(a)
, the Company may implement reasonable procedures to restrict access to such information to only those Persons who NAB reasonably determines have a need to access such information.
Section 4.2
Information Rights During Equity Accounting Periods
. The Company agrees that, during a period that begins when
Section 4.1
ceases to apply and ends on such time as NAB shall no longer be required under Applicable Accounting Standards to account in its financial statements for its holdings in the Company under an equity method, unless NAB shall
earlier provide written notice to the Company that it is opting-out of this
Section 4.2
, the Company shall provide NAB with (a) information and data relating to the business and financial results of the Company and its Subsidiaries
and (b) access, during normal business hours, to the Company’s personnel, data and systems, in each case to the extent that such information, data or access is required for NAB to meet its legal, financial or regulatory obligations or
requirements (as determined by NAB in its reasonable judgment).
Section 4.3
General Information Requirements
.
(a) All information provided by the Company or any of its Subsidiaries to NAB pursuant to
Sections 4.1
and
4.2
shall be in the form and with the level of detail reasonably requested by NAB. All financial statements and information provided by the Company or any of its Subsidiaries to NAB pursuant to
Sections 4.1
and
4.2
shall be
provided under Applicable Accounting Standards with a reconciliation to GAAP. NAB shall provide the Company with at least 30 days’ notice of any change in its administrative practices and policies as they relate to the obligations of the
Company pursuant to this
Section 4.3(a)
, including any change in such policies relating to reporting times and delivery methods.
(b) With respect to any information provided by the Company or any of its Subsidiaries to NAB that is contained in, or used in
the preparation of, any public disclosure of NAB, the Company shall not provide any such information that contains an untrue statement of a material fact, or omits to state a material fact necessary to make such information not misleading.
-17-
(c) With respect to any information provided by NAB or any of its Subsidiaries
to the Company that is contained in, or used in the preparation of, any public disclosure of the Company, NAB shall not provide any such information that contains an untrue statement of a material fact, or omits to state a material fact necessary to
make such information not misleading.
Section 4.4
Reporting Coordination Committee
.
(a) To facilitate the coordination of financial reporting, the Company and NAB shall establish a reporting coordination
committee, which shall have a membership that includes (i) the CFO of the Company or his or her designee, (ii) a senior member of NAB Group Finance and (iii) such other members as shall be mutually agreed between the Company and NAB.
(b) The reporting coordination committee shall meet at least quarterly to (i) monitor the financial reporting
protocols between the Company and NAB and make recommendations as to any appropriate changes, (ii) determine appropriate reporting deadlines consistent with the public reporting obligations of the Company and NAB under Applicable Law, and
(iii) make such other determinations regarding reporting procedures, technologies and personnel as shall be necessary or advisable to facilitate accurate and efficient financial reporting between the Company and NAB.
(c) The Parties agree to comply with any determination reached with respect to reporting by the reporting coordination
committee to which both the CFO of the Company (or his or her designee) and the senior member of NAB Group Finance serving on the committee shall consent.
Section 4.5
Matters Concerning Auditors
.
(a) Until the date on which NAB is no longer required under Applicable Accounting Standards to consolidate the Company’s
financial statements with its financial statements, NAB shall have full access, during normal business hours, to the Company Auditor and to the Company’s internal audit function (through the Company’s head of internal audit), including
access to work papers and the personnel responsible for conducting the Company’s quarterly reviews and annual audit, and shall be provided with copies of all material correspondence between the Company and the Company Auditor.
(b) Until the Non-Control Date:
(i) the Company shall provide NAB with reasonable access to the Company Auditor and to the Company’s internal audit
function (through the Company’s head of internal audit) and shall extend all reasonably requested cooperation with the NAB Auditor in connection with NAB’s internal and external audit function;
(ii) the Company shall use its reasonable best efforts to enable the Company Auditor to complete its quarterly review and
annual audit such that the Company Auditor shall date its report on such quarterly review or annual audit opinion on the Company’s audited annual financial statements on or before the date that the NAB Auditor date their report or opinion on
NAB’s financial
-18-
statements, and to enable NAB to meet its timetable for the printing, filing and public dissemination of its financial statements. The Company shall instruct the Company Auditor to perform the
work requested by the NAB Auditor pursuant to this Agreement, and the Company shall use its reasonable best efforts to enable the Company Auditor to comply with the instructions received; and
(iii) upon reasonable notice, the Company shall authorize the Company Auditor to make available to the NAB Auditor both the
personnel responsible for conducting the Company’s quarterly reviews and annual audit and, consistent with customary professional practice and courtesy of such auditors with respect to the furnishing of work papers, work papers related to the
quarterly review or annual audit of the Company, in all cases within a reasonable time after the Company Auditor’s opinion date, so that the NAB Auditor is able to perform the procedures they consider necessary to take responsibility for the
work of the Company Auditor as it relates to the NAB Auditor’s report on NAB’s financial statements, all within sufficient time to enable NAB to meet its timetable for the printing, filing and public dissemination of its financial
statements.
(c) Neither Party shall take any action that would cause either the Company Auditor or the NAB Auditor not to
be independent with respect to the Company or NAB, respectively.
Section 4.6
Release of Information and Public Filings
.
(a) Until the Non-Control Date:
(i) to the extent practicable under the circumstances, the Company shall (A) coordinate with NAB with respect to the
public release of any material information relating to the Company; and (B) provide NAB with a copy of any such proposed public release no later than two Business Days prior to publication, and shall consider in good faith incorporating any
comments provided thereon by NAB and received by the Company reasonably in advance of such publication;
(ii) to the
extent practicable under the circumstances, NAB shall (A) coordinate with the Company with respect to the public release of any material information relating to the Company, and (B) provide the Company with a copy of any such proposed
public release no later than two Business Days prior to publication, and shall consider in good faith incorporating any comments provided thereon by the Company and received by NAB reasonably in advance of such publication. Notwithstanding anything
to the contrary set forth in this Agreement, except to the extent required by Applicable Law, NAB shall not release any material information relative to the Company prior to the public release thereof by the Company;
-19-
(iii) the Company and NAB shall consult on the timing of their annual and
quarterly earnings releases and, to the extent practicable, each Party shall give the other Party an opportunity to review the information therein relating to the Company and its Subsidiaries and to comment thereon. In the event that the Company is
required by Applicable Law to publicly release information concerning the Company’s financial information for a period for which NAB has yet to publicly release financial information, the Company shall provide NAB notice of such release of such
information as soon as practicable prior to such release of such information; and
(iv) each of NAB and the Company shall
take reasonable steps to cooperate with each other in connection with the preparation, printing, filing, and public dissemination of their respective annual and quarterly statements, their respective audited annual financial statements, their
respective annual reports to stockholders, any other required regulatory filings and, with respect to the Company, annual, quarterly and current reports under the Securities Act, any prospectuses and other filings made with the SEC.
(b) Until the one-year anniversary of the Less Than Majority Holder Date, NAB shall have the rights with respect to the
Company’s public communications and filings set forth in
Schedule 4.6(b)
;
provided
,
however
, that such rights shall not apply to the extent that they would prevent the Company from complying with its disclosure
or other obligations under Applicable Law.
Section 4.7
Information in Connection with Regulatory or Supervisory Requirements
.
(a) For a period of ten years following the Non-Control Date, subject to an extension of up to five years upon the
demonstration of a legal, tax or regulatory requirement for such extension by the requesting Party and subject to any restrictions contained in Applicable Law:
(i) the Company shall (A) provide, as promptly as reasonably practicable, but in any case within three Business Days of
any request from NAB (unless not reasonably available within such time, in which case as soon as possible thereafter), any information, records or documents (1) requested or demanded by any Governmental Authority having jurisdiction or
oversight authority over NAB or any of its Subsidiaries (including, for the avoidance of doubt, APRA) or (2) deemed necessary or advisable by NAB in connection with any filing, report, response or communication made by NAB or its Subsidiaries
with or to a Governmental Authority having jurisdiction or oversight authority over NAB or any of its Subsidiaries (including, for the avoidance of doubt, APRA), whether made pursuant to a specific request from such Governmental Authority or in the
ordinary course, and (B) upon reasonable notice, provide access to any Governmental Authority having jurisdiction or oversight authority over NAB or any of its Subsidiaries (including, for the avoidance of doubt, APRA) to its offices, employees
and management in a reasonable manner where and as required under Applicable Law; and
-20-
(ii) NAB shall provide, as promptly as reasonably practicable, but in any case
within three Business Days of any request from the Company (unless not reasonably available within such time, in which case as soon as possible thereafter), any information, records or documents relating to the Company or any of its Subsidiaries
(A) requested or demanded by any Governmental Authority having jurisdiction or oversight authority over the Company or any of its Subsidiaries; or (B) deemed necessary or advisable by the Company in connection with any filing, report,
response or communication by the Company or its Subsidiaries with or to any Governmental Authority having jurisdiction or oversight authority over the Company or any of its Subsidiaries, whether made pursuant to a specific request from such
Governmental Authority or in the ordinary course.
(b) Each Party shall use its reasonable best efforts to keep the other
Party informed of the type of information such Party expects to require on a regular basis (including the expected timing requirements for such information) in order to meet its reporting or filing obligations, and the reporting and filing
obligations of its Subsidiaries, with Governmental Authorities;
provided
,
however
, that no failure to abide by this
Section 4.7(b)
shall affect the validity of any demand made pursuant to
Section 4.7(a)
.
(c) Each Party shall use its reasonable best efforts to obtain any consent required under Applicable Law to share any
information requested pursuant to
Section 4.7(a)
.
Section 4.8
Implementation with Respect to Legal Disclosures
.
(a) All requests for information or documents under
Sections 4.1
,
4.2
,
4.7(a)(i)
or
6.3
relating to legal or regulatory matters or with respect to which legal privilege may be sought or asserted shall be made solely to the office of the General Counsel of the Company, and all responses thereunder shall be made solely to the office of
the Head of Corporate Advisory Legal of NAB. For the avoidance of doubt, such information or documents contained in databases, reports or systems of the Company to which NAB has unrestricted access prior to the date hereof may be redacted, or access
to the relevant databases, reports or systems may be restricted or denied, to the extent necessary so that such information and documents are handled in accordance with this
Section 4.8
.
(b) All requests for information or documents under
Sections 4.7(a)(ii)
shall be made solely to the office of the
Head of Corporate Advisory Legal of NAB, and all responses thereunder shall be made solely to the office of the General Counsel of the Company.
(c) If the Party required to deliver the information or documents pursuant to
Sections 4.1
,
4.2
,
4.7
or
6.3
(the “
Information Party
”) believes in good faith, based upon legal advice (from internal or external counsel), that the delivery of any information or documents pursuant to this Agreement would cause the loss of any
applicable legal privilege (or create a risk of such loss), then both Parties shall work in good faith to determine an alternate means of delivering the requested information or documents, or the substance thereof, that does not result in the loss
of such privilege. If needed to preserve a legal privilege, the Parties shall
-21-
negotiate in good faith and enter into a customary common interest agreement in advance of, and as a condition to, such delivery. Notwithstanding the foregoing, if no alternate means can be
agreed by the Parties and external counsel to the Information Party informs the other Party in writing that a common interest cannot be established, or with sufficient confidence be asserted, to preserve the legal privilege with respect to the
information or documents in question, even if a common interest agreement were to be entered into, or that for any other reason the information or documents cannot be delivered without loss of the legal privilege (such external counsel to explain
the reasons for its conclusion briefly but in reasonable detail so that the other Party can review the legal analysis with its own counsel), then the Information Party is excused from providing such information or documents, but only to the extent
and for the time necessary to preserve the privileged character thereof.
Section 4.9
Information Concerning NAB Equity
Awards
. Each Party shall provide the other Party with any information reasonably requested in connection with the continued vesting of equity awards granted by NAB to employees of the Company and its Subsidiaries prior to the Completion of the
IPO in accordance with their respective terms. In the case of the Company, the information provided shall include, upon request, information concerning the value, vesting schedule and outstanding amount of NAB restricted stock for each employee.
Section 4.10
Expenses
. The Company shall be responsible for any expenses it incurs in connection with the fulfillment of its
obligations under this
Article IV
, except out-of-pocket expenses incurred with respect to specific requests by NAB for information, documents or access, in excess of amounts historically incurred by the Company (if any) for the
provisions of similar information, documents and access.
Article V
EXCHANGE OF COMMON STOCK FOR NON-VOTING COMMON STOCK
Section 5.1
Exchange
.
(a) Upon at least five Business Days prior written notice from NAB, the Company shall exchange all or part of the shares of
Common Stock Beneficially Owned by NAB for an equal number of fully paid and non-assessable shares of Non-Voting Common Stock in accordance with the procedures set forth in this
Section 5.1
.
(b) Any notice requesting exchange of shares of Common Stock delivered pursuant to
Section 5.1(a)
shall contain
(i) the name of each registered holder of shares of Common Stock Beneficially Owned by NAB to be exchanged for shares of Non-Voting Common Stock and (ii) the number of shares of Common Stock each such registered holder desires to exchange
for shares of Non-Voting Common Stock.
(c) The Company shall promptly deliver to any holder of shares of Common Stock for
which an election of exchange is given in accordance with this
Section 5.1
a stock certificate in the name of such holder, or evidence of uncertificated shares registered in the name of such holder, representing the applicable number of
shares of Non-Voting Common Stock issued in exchange for the shares of Common Stock exchanged. All shares of Non-Voting Common Stock issued in exchange for shares of Common Stock pursuant to this
Section 5.1
shall be validly issued and,
upon issuance, fully paid and non-assessable.
-22-
(d) The Company shall bear all costs and expenses incurred by it in connection
with, and any issuance tax (other than stock transfer tax) resulting from, the exchange of shares of Common Stock pursuant to this
Section 5.1
.
(e) The Company shall from time to time reserve for issuance out of its authorized but unissued shares of Non-Voting Common
Stock, or shall keep available (solely for the purposes of issuance upon exchange of shares of Common Stock) shares of Non-Voting Common Stock held by the Company as treasury stock, the number of shares of Non-Voting Common Stock into which all
outstanding shares of Common Stock held by NAB or a Subsidiary of NAB may be exchanged.
Article VI
OTHER PROVISIONS
Section 6.1
Related Party Transactions Policy
. The review and approval of the corporate governance and nominating committee in
accordance with the charter of the corporate governance and nominating committee and the Company’s related party transaction policy shall be required prior to the Company or any Subsidiary of the Company entering into (i) any transaction
that would be reportable by the Company pursuant to Item 404(a) of Regulation S-K in the Company’s subsequent Annual Report on Form 10-K or (ii) any material amendment to this Agreement.
Section 6.2
Certain Policies and Procedures
.
(a) Until the one-year anniversary of the Less Than Majority Holder Date, the Board of Directors shall, when determining to
implement, amend or rescind any policy of the Company or any of its Subsidiaries relating to risk, capital, investment, environmental and social responsibility or regulatory compliance (each, a “
Critical Policy
”), take into account
the Company’s status as a consolidated Subsidiary of NAB, and take into account the interests of NAB therein.
(b)
During any period in which NAB is deemed to control the Company for U.S. or Australian regulatory purposes, and in any case at all times prior to the Non-Control Date, the Company and its Subsidiaries:
(i) shall not adopt or implement any policies or procedures, and at NAB’s reasonable request, shall refrain from taking
any actions, that would cause NAB to violate any Applicable Law;
(ii) shall, prior to implementing, amending or
rescinding any Critical Policy, consult with NAB (through one or more NAB Directors, if any shall be in office at such time, or else through the Head of Corporate Advisory Legal of NAB), and, to the extent consistent with its fiduciary duties, the
Board of Directors shall take into account the reasonable interests of NAB with respect thereto; and
-23-
(iii) shall maintain and observe the policies of NAB to the extent necessary for
NAB to comply with its legal and regulatory obligations under Applicable Law;
provided
, that this
Section 6.2(b)
shall
not require the Company to take any action (including adopting or implementing any policy) or refrain from taking any action where such action or inaction would cause the Company or any of its Subsidiaries to violate Applicable Law.
Section 6.3
Access to Personnel and Data
. In addition to the rights set forth elsewhere in this Agreement, until the Non-Control
Date:
(a) the Company and its Subsidiaries shall continue to provide Representatives of NAB with reasonable access to the
Company’s personnel (including senior-level management and other employees) and data, in a manner consistent with the status of the Company as a consolidated Subsidiary of NAB (if then applicable) and NAB’s control of the Company and its
Subsidiaries for purposes of the BHC Act; and
(b) NAB shall continue to provide Representatives of the Company with
reasonable access to NAB’s personnel (including senior-level management and other employees) and data, in a manner consistent with the status of NAB as the corporate parent of the Company (if then applicable).
Section 6.4
Internal Communications Protocols
. In addition to the rights set forth elsewhere in this Agreement, until the
Non-Control Date, the Company agrees to consult with NAB prior to issuing any internal communications which could reasonably be expected to be material to NAB or to NAB’s control of the Company for purposes of the BHC Act.
Section 6.5
Access to Historical Records
. For a period of ten years following the Non-Control Date, subject to an extension of up
to five years upon the demonstration of a legal, tax or regulatory requirement for such extension by the requesting Party, NAB and the Company shall retain the right to access such records of the other which exist resulting from NAB’s control
or ownership of all or a portion of the Company and its Subsidiaries. Upon reasonable notice and at each Party’s own expense, NAB (and its authorized Representatives) and the Company (and its authorized Representatives) shall be afforded access
to such records at reasonable times and during normal business hours, and each Party (and its authorized Representatives) shall be permitted, at its own expense, to make abstracts from, or copies of, any such records;
provided
that access to
such records may be denied if (a) NAB or the Company, as the case may be, cannot demonstrate a legitimate business need (during the ten year period following the Non-Control Date), or a legal, tax or regulatory requirement (during the extension
period described above), for such access to the records; (b) the information contained in the records is subject to any applicable confidentiality commitment to a third party; (c) a
bona fide
competitive reason exists to deny such
access; (d) the records are to be used for the initiation of, or as part of, a suit or claim against the other Party; (e) such access would serve as a waiver of any privilege afforded to such record; or (f) such access would
unreasonably disrupt the normal operations of NAB or the Company, as the case may be.
-24-
Section 6.6
Confidentiality
.
(a) Subject to
Section 6.6(b)
, from and after the date hereof, each Party that receives or obtains Confidential
Information, or whose Subsidiaries receive or obtain Confidential Information (collectively, the “
Receiving Party
”), from the other Party or any of its Subsidiaries (collectively, the “
Disclosing Party
”) as a result
of the transactions contemplated by this Agreement shall treat such Confidential Information as confidential, shall use such Confidential Information only for the purposes of performing or giving effect to this Agreement and shall not disclose or
use any such Confidential Information except as provided herein.
(b)
Section 6.6(a)
shall not prohibit
disclosure or use of any Confidential Information if and to the extent:
(i) the disclosure or use is required by
Applicable Law, any Governmental Authority (
provided
that, to the extent practicable and permitted by Applicable Law, prior to such disclosure or use the Receiving Party shall (a) promptly notify the Disclosing Party of such requirement
and provide the Disclosing Party with a list of Confidential Information to be disclosed (unless the provision of such notice is not permissible under Applicable Law) and (b) reasonably cooperate in obtaining a protective order covering, or
confidential treatment for, such Confidential Information);
(ii) the disclosure to any Governmental Authority having
jurisdiction over the Receiving Party in connection with ordinary course discussions with, and examinations by, such Governmental Authority;
(iii) the disclosure or use is required for the purpose of any judicial proceedings arising out of this Agreement or any other
agreement entered into under or pursuant to this Agreement or the disclosure is made in connection with the tax affairs of the Disclosing Party;
(iv) the disclosure is made to the Receiving Party’s Representatives on a need-to-know basis (with the understanding that
the Receiving Party shall be responsible for any breach by such Persons of this
Section 6.6
);
(v) the
Confidential Information is or becomes generally available to the public (other than as a result of an unauthorized disclosure, directly or indirectly, by the Receiving Party or its Representatives);
(vi) the Confidential Information is or becomes available to the Receiving Party on a non-confidential basis from a source
other than the Disclosing Party (
provided
that such sources are not known by the Receiving Party to be subject to another confidentiality obligation);
(vii) the disclosure or use of such Confidential Information is made with the Disclosing Party’s prior written approval;
or
-25-
(viii) subject to Applicable Law, the disclosure or use of such Confidential
Information is made by NAB or any of its Subsidiaries in connection with the sale of any shares of Common Stock or Non-Voting Common Stock Beneficially Owned by NAB or any of its Subsidiaries (
provided
that the recipient of any such
Confidential Information shall agree to keep such Confidential Information confidential on terms and conditions that are no less favorable to the Company and its Subsidiaries than the provisions of this
Section 6.6
).
(c) Each Party’s Confidential Information shall remain the property of that Party except as expressly provided otherwise
by the other provisions of this Agreement. Except as otherwise provided in this Agreement, each Party shall use at least the same degree of care, but in any event no less than a reasonable degree of care, to prevent disclosing to third parties the
Confidential Information of the other as it employs to avoid unauthorized disclosure, publication or dissemination of its own information of a similar nature.
(d) In the event of any disclosure or loss of any Confidential Information of the Disclosing Party due to the fault of the
Receiving Party, the Receiving Party shall promptly, at its own expense: (a) notify the Disclosing Party in writing; and (b) cooperate in all reasonable respects with the Disclosing Party to minimize the violation and any damage resulting
therefrom.
(e) For the avoidance of doubt, any NAB Director may disclose any information about the Company and its
Subsidiaries received by such NAB Director (whether or not in his capacity as a Director of the Company) to the other NAB Directors and to NAB and its Subsidiaries,
provided
that any such information disclosed that would otherwise constitute
Confidential Information shall be treated by NAB and its Subsidiaries in accordance with this
Section 6.6
.
Section 6.7
Director and Officer Indemnification; Liability Insurance
.
(a) Until at least the day after the last date on which
a NAB Individual is a Director, officer or employee of the Company, the Company shall grant indemnification (including advancement of expenses) to each such Director, officer and employee of the Company to the greatest extent permitted under
Section 145 of the General Corporation Law of the State of Delaware and other Applicable Law. Such indemnification and advancement shall continue as to any NAB Individual (i) who becomes entitled to indemnification or advancement on
or prior to such date, notwithstanding any change (except those changes made as required by Applicable Law) in the Company’s indemnification or advancement policies following such date, and (ii) with respect to liabilities existing or
arising from events that have occurred on or prior to such date, notwithstanding such NAB Individual’s ceasing to be a Director, officer or employee of the Company.
(b) As of the date of this Agreement, NAB has procured on behalf of the Company insurance coverage with respect to
(i) director and officer liability (“
D&O Coverage
”) and fiduciary liability (“
Fiduciary Coverage
”) covering Directors, officers and employees of the Company, including NAB Individuals serving in any such
capacity at the Company, and (ii) liabilities under U.S. federal and state securities laws (“
Securities
-26-
Coverage
” and, together with the D&O Coverage and the Fiduciary Coverage, the “
Agreed Coverage
”) covering Directors, officers and employees of the Company, NAB
Individuals, the Company, NAB and respective Subsidiaries of the Company and NAB equally and to the same extent. As used in this
Section 6.7
, the terms “D&O Coverage”, “Fiduciary Coverage”, “Securities
Coverage” and “Agreed Coverage” shall mean the coverages in place as of the date of this Agreement as well as any renewal, amendment, endorsement or replacement (each, a “
Coverage Change
”) of such coverages. A change
in premium for any such Agreed Coverage shall not be considered a “Coverage Change.”
(c) At all times prior to
the one-year anniversary of the Less Than Majority Holder Date, NAB shall provide the Agreed Coverage contemplated by this
Section 6.7
to the Company in accordance with the terms and conditions of the Transitional Services Agreement, and
the Parties shall take all actions reasonably necessary to cause the Agreed Coverage with respect to the Company and its Subsidiaries to be renewed annually and kept in full force and effect. From and after the one-year anniversary of the Less Than
Majority Holder Date, the Company shall annually renew and keep in full force and effect the Agreed Coverage contemplated by this
Section 6.7
.
(d) Subject to the provisions of this
Section 6.7
, (i) the D&O Coverage and Fiduciary Coverage shall at
all times be on substantially the same terms as on the date hereof (or, if substantially the same terms are not available, the best market terms then available) in order to cover any claims made on or prior to the sixth anniversary of the last date
on which any NAB Individual is a Director, officer or employee of the Company, and (ii) the Securities Coverage shall at all times be on substantially the same terms as on the date hereof (or, if substantially the same terms are not available,
the best market terms then available) in order to cover any claims made on or prior to the sixth anniversary of the last date on which the closing occurred for any offering of securities by the Company (A) in which NAB or any of its
Subsidiaries is a selling or controlling securityholder or (B) completed while any NAB Individual is a Director (or was named in any Registration Statement of the Company under the Securities Act for such offering as about to become a Director
of the Company), officer, employee of the Company. The Company shall at all times be responsible for the cost of that portion of the Agreed Coverage that covers Directors, officers and employees of the Company, including NAB Individuals serving in
any such capacity at the Company.
(e) After the one-year anniversary of the Less Than Majority Holder Date, the Company
shall supply NAB with copies of any policies of insurance, binders, proposed terms or wording and other relevant information or documents with respect to the Agreed Coverage or any actual or proposed Coverage Change regarding the Agreed Coverage or
Coverage Change promptly upon receipt of any written request for such materials from NAB.
(f) From and after the one-year
anniversary of the Less Than Majority Holder Date, NAB shall receive reasonable prior notice of any proposed Coverage Change. No Coverage Change shall become effective that would have the effect of making the Agreed Coverage (i) less favorable
to NAB Individuals in comparison to Directors, officers or employees of the Company than is the Agreed Coverage prior to such Coverage Change, or (ii) less favorable to NAB and its Subsidiaries in comparison to the Company and its Subsidiaries
than is the Agreed Coverage prior to such Coverage Change without the prior written consent of NAB.
-27-
(g) If a Coverage Change to the Securities Coverage is required by the relevant
insurers because certain terms and conditions are no longer available, and such Coverage Change would have the effect of making the Securities Coverage (i) less favorable to NAB Individuals in comparison to other Directors, officers, employees
or agents of the Company than the Securities Coverage prior to such Coverage Change, or (ii) less favorable to NAB and its Subsidiaries in comparison to the Company and its Subsidiaries than is the Securities Coverage prior to such Coverage
Change, NAB shall have the option of either (x) consenting to such Coverage Changes, or (y) requiring the Company to procure “run-off” or “tail” coverage on behalf of NAB for Securities Coverage for a period of time
equal to the statute of limitations applicable to the last offering covered by the Securities Coverage. Such “run-off” or “tail” coverage must remain part of the same policy otherwise kept in force by the Company in order to
ensure that there are not two separate policies covering a NAB Individual with respect to claims made under the D&O Coverage, including the Securities Coverage. The cost of such “run-off” or “tail” coverage shall be borne by
the Company.
(h) From and after the one-year anniversary of the Less Than Majority Holder Date, NAB may at any time
request in writing a Coverage Change with respect to the Securities Coverage of NAB Individuals or NAB or any of its Subsidiaries. The Company shall use reasonable best efforts to effect such Coverage Change so long as such Coverage Change would not
have the effect of making the Agreed Coverage (i) less favorable to the Company or any of its Subsidiaries or any Director, officer or employee of the Company and its Subsidiaries than the Agreed Coverage prior to such Coverage Change,
(ii) more favorable to NAB Individuals in comparison to Directors, officers or employees of the Company than is the Agreed Coverage prior to such Coverage Change, or (iii) more favorable to NAB and its Subsidiaries in comparison to the
Company and its Subsidiaries than is the Agreed Coverage prior to such Coverage Change. If such Coverage Change would increase the premium for such coverage above the premium that would prevail in the absence of such Coverage Change, NAB shall
reimburse the Company for the total cost of such Coverage Change. NAB may request, at any time, the termination of the Securities Coverage by advanced written notice to the Company. Upon receipt of such notice, the Company shall use reasonable best
efforts to promptly terminate such coverage.
(i) In the event that any insured makes a claim or delivers a notice of
circumstances under any insurance policy providing the Agreed Coverage, then each of the Company (with respect to claims or notices by the Company or any of its Subsidiaries or any Director, officer or employee of the Company) and NAB (with respect
to claims or notices by NAB or any of its Subsidiaries or any NAB Individual) shall promptly provide written notice to the other of such claim or notice of circumstances and shall continue to keep the other informed of the status and progress of
such claim or notice of circumstances, including providing copies of such relevant documentation and correspondence with the insurers as the other may request;
provided
that any applicable attorney-client privilege and attorney-work product
protection are protected and preserved with respect to such matters (including, if necessary, by negotiating in good faith and entering into a customary common interest agreement).
-28-
(j) In the event that multiple insureds make claims or deliver notices of
circumstances with respect to the same underlying events or facts under any insurance policy providing the Agreed Coverage, then each of the Company (with respect to claims or notices by the Company or any of its Subsidiaries or any Director,
officer or employee of the Company) and NAB (with respect to claims or notices by NAB or any of its Subsidiaries or any NAB Individual) shall cooperate with the other in connection with (i) the defense of allegations from third parties with
respect to the underlying events or facts, and (ii) dealing with the insurers providing the Agreed Coverage with respect to asserting rights to coverage in respect of such third party claims and the underlying events or facts, in all cases with
the intention of seeking to maximize the aggregate benefits to all insureds under the Agreed Coverage in respect of such third party claims and the underlying events or facts;
provided
that any applicable attorney-client privilege and
attorney-work product protection are protected and preserved with respect to such matters (including, if necessary, by negotiating in good faith and entering into a customary common interest agreement).
(k) In the event that any conflict of interest arises between insureds that make claims or deliver notices under any Agreed
Coverage, then each of the Company (with respect to claims or notices by the Company or any of its Subsidiaries or any Director, officer or employee of the Company) and NAB (with respect to claims or notices by NAB or any of its Subsidiaries or any
NAB Individual) shall use reasonable best efforts to resolve such conflict or to manage it in such a way as to maximize the aggregate benefits to all insureds under the Agreed Coverage.
Section 6.8
Non-Competition
.
(a) From the date this Agreement becomes effective until the two-year anniversary of the earlier of (1) the Non-Control
Date and (2) the one year anniversary of the Less than Majority Holder Date, NAB shall not, and shall cause its Subsidiaries not to:
(i) control, for purposes of the BHC Act, a bank for purposes of the BHC Act or an insured institution for purposes of the BHC
Act, having a main office or one or more branches in any of the Company States (a “
Competing Branch Bank
”); or
(ii) own, manage or operate, or participate in the ownership, management or operation of, any business principally engaged in
making (A) consumer loans to individuals or households located in the Company States or (B) loans to businesses located in the Company States with total annual revenues of less than $250,000,000 (any such business, a “
Competing
Lending Business
,” and either a Competing Branch Bank or Competing Lending Business, a “
Competing Business
”).
(b) Notwithstanding anything in
Section 6.8(a)
to the contrary, NAB and its Affiliates shall not be prohibited or
prevented from:
(i) owning, managing or operating, or participating in the ownership, management or operation of, the
Company and its Subsidiaries;
-29-
(ii) operating any business or engaging in any activity conducted by the New
York Branch of NAB during the five years preceding the date hereof;
(iii) owning, managing or operating, or participating
in the ownership, management or operation of, any Competing Branch Bank with its main office and all of its branches solely outside the Company States;
(iv) performing any act or conducting any business expressly required by any agreement related to the IPO;
(v) acquiring the capital stock or other equity interests of a Person engaged in a Competing Business that would
otherwise constitute an exempt investment under Section (4)(c)(6) of the BHC Act;
(vi) making any investment
(or engaging in an activity related thereto) in a fiduciary, custodial or agency capacity and carried out, either directly or indirectly, on behalf of clients or other third party beneficiaries;
(vii) engaging in any investment management or asset management activity or in any activity related to the provision of asset
management or investment management services, including those activities and services involving the use of mutual funds or private funds;
(viii) providing any products and services as part of the conduct of MLC Limited and its Subsidiaries substantially as
comparable businesses are conducted in the United States;
(ix) owning or affiliating with, or conducting any other
activity prohibited under
Section 6.8(a)
with respect to, a person that conducts, either directly or indirectly, a Competing Business and that prior to the consummation of the transactions referred to in clause (A) or (B) below
was not an Affiliate of NAB or any of its Affiliates (any such person, together with all of its Affiliates, a “
Competing Person
”) if such ownership, affiliation or other activity is the result of (A) any merger, consolidation,
share exchange, sale or purchase of assets, scheme of arrangement or similar business combination involving NAB or any of its Affiliates with any Competing Person or (B) the acquisition of any Competing Person or any interests in or securities
of any Competing Person by NAB or any of its Affiliates, if, in the case of either (A) or (B), no more than 50% of the total consolidated revenues (including as revenues net interest income revenues with respect to a lending business) of such
Competing Person in the calendar year prior to such ownership, affiliation or other activity relates to a Competing Business operated in the Company States;
(x) acquiring any equity securities or other assets in satisfaction of a debt previously contracted in a distressed or
troubled situation;
-30-
(xi) making loans or providing other services to businesses that own, manage or
operate, or that participate in the ownership, management or operation of, a Competing Business; or
(xii) acting in the
ordinary course of their respective businesses, including without limitation dealing in any securities and acting in the course of trading, dealing, broking, margin lending, custodial, life insurance, funds management, investment planning, advisory
services, derivatives issuance and risk management and investment banking.
(c) From the date this Agreement becomes
effective until the two-year anniversary of the earlier of (1) the Non-Control Date and (2) the one year anniversary of the Less than Majority Holder Date, NAB shall not, and shall cause its Subsidiaries not to, directly or indirectly
solicit for employment or any similar arrangement or hire any officer or employee of the Company or any of its Subsidiaries;
provided
,
however
, that this
Section 6.8(c)
shall not apply to (i) any Person no longer
employed by the Company or any of its Subsidiaries, (ii) any general solicitations for employment through advertisements or other means not targeted at officers or employees of the Company or any of its Subsidiaries (and the hiring of any
Persons identified by such general solicitations), and (iii) any Person who independently approaches NAB or any of its Subsidiaries where neither NAB nor any of its Subsidiaries had solicited such Person for employment or any similar
arrangement in any manner prohibited by this
Section 6.8(c)
.
(d) NAB agrees that (i) if any restraint
set forth in this
Section 6.8
is unenforceable, illegal or void, that restraint is severed and the other restraints remain in force, (ii) if any restraint set forth in this
Section 6.8
is void for being unreasonable, or
would be reasonable if part of the wording was deleted or the period of time was reduced, the restraints will apply with the modifications necessary to make them reasonable, (iii) each of the restraints set forth in this
Section 6.8
goes no further than is reasonably necessary to protect the Company’s corporate legitimate business interests, (iv) adequate and sufficient consideration has been received for the restraints set forth in this
Section 6.8
,
(v) compliance with this Section 6.8 will not result in severe economic hardship for NAB, (vi) any breach by NAB of the restraints in
Section 6.8
would lead to substantial loss to the Company and that the Company would not
have entered into this Agreement if NAB did not agree to this
Section 6.8
, and (vii) nothing in this
Section 6.8
will be construed as preventing the Company from pursuing any and all remedies available to it for the
breach or threatened breach of this
Section 6.8
, including recovery of money damages or temporary or permanent injunctive relief.
Article VII
INDEMNIFICATION
Section 7.1
Indemnification
.
(a) NAB hereby agrees to indemnify, defend and hold harmless the Company, its Subsidiaries and their respective directors,
officers, stockholders, partners, members, attorneys, accountants, agents, representatives and employees and their heirs, successors and
-31-
permitted assigns, each in their capacity as such, from, against and in respect of any and all Losses imposed on, sustained by, incurred or suffered by, or asserted against, any such Person,
whether in respect of third-party claims, claims between NAB and its Subsidiaries, on the one hand, and the Company and its subsidiaries, on the other hand, or otherwise, arising out of or as a result of (i) any breach by NAB or any of its
Subsidiaries of this Agreement and (ii) any and all liabilities of National Americas Investments, Inc., contingent or otherwise, that exist as of the day the merger of National Americas Investments, Inc. with and into the Company becomes
effective, other than any liabilities reflected on the balance sheet for National Americas Investments, Inc. as of August 30, 2014.
(b) The Company hereby agrees to indemnify, defend and hold harmless the NAB, its Subsidiaries and their respective directors,
officers, stockholders, partners, members, attorneys, accountants, agents, representatives and employees and their heirs, successors and permitted assigns, each in their capacity as such, from, against and in respect of any and all Losses imposed
on, sustained by, incurred or suffered by, or asserted against, any such Person, whether in respect of third-party claims, claims between NAB and its Subsidiaries, on the one hand, and the Company and its subsidiaries, on the other hand, or
otherwise, arising out of or as a result of any breach by the Company or any of its Subsidiaries of this Agreement.
Section 7.2
Claims for Indemnification
.
(a)
Notice of Claim
. Any Person who is claiming indemnification pursuant to the
provisions of
Section 7.1
(the “
Indemnified Person
”) shall deliver a written notification to the Person to provide indemnification under this Agreement (the “
Indemnifying Person
”) of each
such claim for indemnification no later than 10 Business Days after such claim becomes known to the Indemnified Person, specifying the facts known to such Indemnified Person constituting the basis for, and the amount (if known) of (including
the basis of calculation of such amount), the claim asserted (a “
Claim Notice
”). Such written notice shall be accompanied by a copy of all papers served, if any, and any memoranda, recordings or other records of the
Indemnified Person relating to the claim. Failure of the Indemnified Person to give such notice or to give such notice in such form shall not relieve the Indemnifying Person from its obligations under this Agreement except to the extent that the
Indemnifying Person is actually and materially prejudiced by such failure.
(b)
Defense and Settlement of
Third-Party Claims
.
(i) The Indemnifying Person shall have 30 days (or such lesser number of days set forth
in the Claim Notice as may be required by court proceedings in the event of a litigated matter) after receipt of the Claim Notice (the “
Notice Period
”) to notify the Indemnified Person that it desires to assume the defense of the
Indemnified Person against any Third-Party Claim specified in such Claim Notice. In the event that the Indemnifying Person notifies the Indemnified Person within the Notice Period that it desires to defend the Indemnified Person against a
Third-Party Claim, the Indemnifying Person shall have the right to defend the Indemnified Person by appropriate proceedings and shall have the sole power to direct and control such defense at its expense. Once
-32-
the Indemnifying Person has duly assumed the defense of such Third-Party Claim, the Indemnified Person shall have the right, but not the obligation, to participate in any such defense and to
employ separate counsel of its choosing. The Indemnified Person shall participate in any such defense at its expense (which expense shall not constitute a Loss) unless the Indemnifying Person and the Indemnified Person are both named parties to the
proceedings and the Indemnified Person shall have reasonably concluded, based on the written advice of counsel, that representation of both parties by the same counsel would be inappropriate due to actual or potential differing material interests
between them. The Indemnifying Person shall not, without the prior written consent of the Indemnified Person, settle, compromise or offer to settle or compromise any Third-Party Claim; provided, however, that no such prior written consent of the
Indemnified Person shall be required to any proposed settlement that involves only the payment of money by the Indemnifying Person, includes as an unconditional term thereof the granting by the person asserting such claim or bringing such action of
an unconditional release from liability to all Indemnified Parties with respect to such claim; such proposed settlement is not dispositive with respect to other claims that may be made by any Indemnified Person; no injunctive or equitable is entered
against any Indemnified Person; that the proposed settlement contains no requirement for a press release or other public statement that would likely have a negative impact on any Indemnified Person; and the proposed settlement does not include any
admission of culpability.
(ii) If the Indemnifying Person elects not to defend the Indemnified Person against such
Third-Party Claim, whether by not giving the Indemnified Person timely notice of its desire to so defend or otherwise, the Indemnified Person shall have the right but not the obligation to assume its own defense;
it
being
understood
that the Indemnified Person’s right to indemnification for a Third-Party Claim shall not be adversely affected by assuming the defense of such Third-Party Claim. The Indemnified Person shall not settle a Third-Party Claim
without the consent of the Indemnifying Person and, if applicable, its respective insurer.
(iii) Each Party shall
cooperate, and shall cause its respective Representatives and Subsidiaries to corporate, with the other in order to ensure the proper and adequate defense of any such Third-Party Claim, including by providing access to relevant business records,
other documents and employees. Each Party shall use reasonable best efforts to avoid production of confidential information (consistent with Applicable Law), and to cause all communications among employees, counsel and other Persons representing any
party to such Third-Party Claim to be made so as to preserve any applicable attorney-client or work-product privilege.
(c)
Response to Claims Not Involving Third-Party Claims
. In the event any Indemnifying Person receives a Claim Notice
from an Indemnified Person pursuant to
Section 7.2(a)
that does not involve a Third-Party Claim, the Indemnifying Person shall notify the Indemnified Person within 30 Business Days following its receipt of such notice whether the
Indemnifying Person disputes its liability to the Indemnified Person under this
Article VII
.
-33-
Section 7.3
Indemnification Limitations
.
(a) Subject to the other provisions of this
Article VII
, each Indemnified Person shall act in good faith, and will make
the same decisions in the use of personnel and the incurring of expenses as it would make if it were engaged and acting entirely at its own cost and for its own account regarding the conduct of any proceedings or the taking of any action for which
indemnification may be sought.
(b) Each Indemnified Person shall use its commercially reasonable efforts to mitigate any
Loss that is subject to indemnification pursuant to the provisions of
Section 7.1
. In the event an Indemnified Person fails to so mitigate a Loss, the Indemnifying Person shall have no liability for any portion of such Loss that
reasonably could have been avoided had the Indemnified Person made such efforts.
(c) Upon making any indemnification
payment in respect of a Third-Party Claim, the Indemnifying Person will, to the extent of such payment, be subrogated to all rights of the Indemnified Person against the relevant third party in respect of the Loss to which the payment relates;
provided
,
however
, that until the Indemnified Person recovers full payment for such Loss, any and all claims of the Indemnifying Person against any such third party on account of said payment are hereby made expressly subordinated and
subjected in right of payment to the Indemnified Person’s rights against such third party. Without limiting the generality of any other provision of this Agreement, each such Indemnified Person and Indemnifying Person will duly execute upon
request all instruments reasonably necessary to evidence and perfect the above-described subrogation and subordination rights.
Section 7.4
Payments
. The Indemnifying Person shall pay all amounts payable pursuant to this
Article VII
by wire
transfer of immediately available funds, promptly following receipt from an Indemnified Person of a bill, together with all accompanying reasonably detailed back-up documentation, for a Loss that is the subject of indemnification under this
Agreement, unless the Indemnifying Person in good faith disputes the Loss, in which event it shall so notify the Indemnified Person. In any event, the Indemnifying Person shall pay to the Indemnified Person, by wire transfer of immediately available
funds, the amount of any Loss for which the Indemnifying Person is liable under this Agreement no later than three Business Days following any Final Determination of any dispute with respect to such Loss finding the Indemnifying Person’s
liability therefor. Any Losses for which an Indemnified Person is entitled to indemnification or contribution under this
Article VII
shall be paid by the Indemnifying Person to the Indemnified Person as such Losses are incurred.
Section 7.5
Investigation
. The indemnity agreements contained in this
Article VII
shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any Indemnified Person, any Indemnifying Person, or any of their respective officers, directors, stockholders or employees.
-34-
Article VIII
GENERAL PROVISIONS
Section 8.1
Obligations Subject to Applicable Law
. The obligations of each Party under this Agreement shall be subject to
Applicable Law, and, to the extent inconsistent therewith, the Parties shall adopt such modified arrangements as are as close as possible to the requirements of this Agreement while remaining compliant with Applicable Law,
provided
,
however
, that the Company shall fully avail itself of all exemptions, phase-in provisions and other relief available under Applicable Law before any modified arrangements shall be adopted.
Section 8.2
Notices
. Unless otherwise provided in this Agreement, All notices, requests, demands and other communications required
hereunder shall be in writing and shall be deemed to have been duly given or made if delivered personally, sent by facsimile transmission confirmed in writing within two Business Days, confirmed electronic mail, or sent by prepaid overnight,
trackable courier service, as follows:
If to NAB, to:
National Australia Bank Limited
Pier 3 Level 4
800 Bourke
Street
Docklands, Victoria, Australia 3008
Attention: HO Corporate Advisory Legal
Facsimile: +61 1300 728 820
Email: notices@nab.com.au
If
to the Company:
Great Western Bank
100 North Phillips Avenue
Sioux Falls, South Dakota 57104
Attention: General Counsel
E-mail: donald.straka@greatwesternbank.com
Fax: (605) 373-3151
Any Party may change
the address or fax number to which such communications are to be sent to it by giving written notice of change of address to the other Parties in the manner provided above for giving notice.
Section 8.3
Binding Effect; Assignment; No Third-Party Beneficiaries
. This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors and assigns. Except as expressly provided in this Agreement, this Agreement and all rights hereunder may not be assigned by any Party except by prior written consent of the other Parties, and
any purported assignment without such consent shall be null and void. The Parties intend that this Agreement shall not benefit or create any right or cause of action in or on behalf of any Person other than the Parties and their respective
Subsidiaries;
provided
that the provisions of
Article VII
shall inure to the benefit of each of the Indemnified Persons.
-35-
Section 8.4
Severability
. The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. In the event that any one
or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the Parties shall in good faith use reasonable best efforts to find and effect an
alternative means to achieve the same or substantially the same result as that contemplated by such provision.
Section 8.5
Entire
Agreement; Amendment
. All schedules included with this Agreement shall be deemed to be incorporated into and made part of this Agreement. This Agreement, together with the Transitional Services Agreement, contains the entire agreement and
understanding between the Parties with respect to the subject matter hereof (and supersedes any prior agreements, arrangements or understandings between the Parties with respect to the subject matter hereof) and there are no agreements,
representations, or warranties with respect to the subject matter hereof which are not set forth in this Agreement. This Agreement may not be amended or revised except by a writing signed by the Parties.
Section 8.6
Waiver
. Any waiver, permit, consent or approval of any kind or character of any breach or default under this
Agreement, or any waiver of any provision or condition of this Agreement shall be effective only to the extent specifically set forth in writing. Notwithstanding any provision set forth in this Agreement, no Party shall be required to take any
action or refrain from taking any action that would cause it to violate any Applicable Law, statute, legal restriction, regulation, rule or order of any Governmental Authority.
Section 8.7
Governing Law; Consent to Jurisdiction
. The execution, interpretation, and performance of this Agreement shall be
governed by the laws of the State of New York without giving effect to any conflict of laws provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the law of any other jurisdiction other
than the State of New York. EACH PARTY HERETO, TO THE EXTENT IT MAY LAWFULLY DO SO, HEREBY EXCLUSIVELY SUBMITS TO THE JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY AND THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AS WELL AS TO THE JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL MAY BE TAKEN OR OTHER REVIEW SOUGHT FROM THE AFORESAID COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION, APPEAL OR OTHER PROCEEDING
UNDER OR WITH RESPECT TO THIS AGREEMENT OR ANY OF THE AGREEMENTS, INSTRUMENTS OR DOCUMENTS CONTEMPLATED HEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE IN ANY OF SUCH COURTS.
Section 8.8
Waiver of Jury Trial
. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY SUIT, ACTION, APPEAL, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY OF THEM AGAINST THE OTHER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH, OR THE ADMINISTRATION THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN
OR THEREIN,
-36-
AND NO PARTY TO THIS AGREEMENT SHALL SEEK A JURY TRIAL IN ANY SUCH LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED UPON, OR ARISING OUT OF, THIS AGREEMENT OR ANY
RELATED INSTRUMENTS OR THE RELATIONSHIP BETWEEN THE PARTIES. NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF
THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
Section 8.9
Remedies; Specific Performance
. The Parties expressly recognize and acknowledge that
immediate, extensive and irreparable damage would result, that no adequate remedy at law would exist and that damages would be difficult to determine in the event that any provision of this Agreement is not performed in accordance with its specific
terms or is otherwise breached. Therefore, in addition to, and not in limitation of, any other remedy available to any Party, an aggrieved Party under this Agreement shall be entitled to specific performance of the terms hereof and immediate
injunctive relief, without the necessity of proving the inadequacy of money damages as a remedy. Each Party further agrees that in the event of any action by the other Party for specific performance or injunctive relief, it will not assert that a
remedy at law or other remedy would be adequate or that specific performance or injunctive relief in respect of such breach or violation should not be available on the grounds that money damages are adequate or any other grounds. Neither Party shall
be required to obtain or furnish any bond or similar instrument in connection with or as a condition to obtaining or seeking any such remedy.
Section 8.10
Counterparts
. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an
original as against any Party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when counterparts, individually or taken together, shall bear the signatures
of all of the Parties reflected hereon as the signatories. The execution and delivery of this Agreement may be effected by facsimile or any other electronic means such as “.pdf” or “.tiff” files.
Section 8.11
Further Assurances
. Each Party hereto shall, on notice of request from any other Party hereto, take such further
action not specifically required hereby at the expense of the requesting Party, as the requesting Party may reasonably request for the implementation of the transactions contemplated hereby.
Section 8.12
Term; Survival
. The covenants, obligations and other agreements contained in this Agreement shall continue until such
time as they are fully performed or satisfied in accordance with their terms, or are no longer required to be performed or satisfied;
provided
that no covenant, obligation or other agreement shall be considered to be performed or satisfied to
the extent of any breach of such covenant, obligation or other agreement.
-37-
Section 8.13
Subsidiary and Affiliate Action
. Wherever a Party has an obligation
under this Agreement to “cause” a Subsidiary or Affiliate of such Party or any such Subsidiary’s or Affiliate’s officers, directors, management or employees to take, or refrain from taking, any action, or such action that may be
necessary to accomplish the purposes of this Agreement, such obligation of such Party shall be deemed to include an undertaking on the part of such Party to cause such Subsidiary or Affiliate to take such necessary action. Wherever this Agreement
provides that a Subsidiary or Affiliate of a Party has an obligation to act or refrain from taking any action, such party shall be deemed to have an obligation under this Agreement to cause such Subsidiary or Affiliate, or any such Subsidiary’s
or Affiliate’s officers, directors, management or employees, to take, or refrain from taking, any action, or such action as may be necessary to accomplish the purposes of this Agreement. To the extent necessary or appropriate to give meaning or
effect to the provisions of this Agreement or to accomplish the purposes of this Agreement, NAB and the Company, as the case may be, shall be deemed to have an obligation under this Agreement to cause any Subsidiary thereof to take, or refrain from
taking, any action, and to cause such Subsidiary’s officers, directors, management or employees, to take, or refrain from taking, any action otherwise contemplated herein. Any failure by an Affiliate of NAB or the Company to act or refrain from
taking any action contemplated by this Agreement shall be deemed to be a breach of this Agreement by NAB or the Company, respectively.
Section 8.14
Expenses
. Except as otherwise expressly provided in this Agreement, each Party will bear all expenses incurred by it
in connection with the performance of its obligations under this Agreement.
Section 8.15
Conditions Precedent
. The provisions
of this Agreement will only take effect upon the Consummation of the IPO and only if the IPO is consummated by [
—
], 2014 (or such later date as may be agreed to in writing by the Parties).
[
Signature Page Follows
]
-38-
IN WITNESS WHEREOF, the Parties have caused this Stockholder Agreement to be executed and
delivered as of the date first above written.
|
|
|
|
|
N
ATIONAL
A
USTRALIA
B
ANK
L
IMITED
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
|
|
|
G
REAT
W
ESTERN
B
ANCORP
, I
NC
.
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
[Signature Page to Stockholder Agreement]
Schedule 2.1(f)
Lead Director Responsibilities
As provided in
Section 2.1(f)
, in circumstances in which the non-management Directors meet without any management present, the
Lead Director shall preside over such meetings of the Board of Directors. When the Chairperson of the Board of Directors is absent, the Lead Director shall preside over meetings of the Board of Directors. The Lead Director shall also have the
authority:
|
|
•
|
|
To call meetings of the Independent Directors;
|
|
|
•
|
|
To consult on and approve Board of Directors meeting agendas;
|
|
|
•
|
|
To consult and approve Board of Directors meeting schedules to ensure there is sufficient time for discussion of all agenda items;
|
|
|
•
|
|
Together with the chair of the compensation committee of the Board of Directors, to coordinate the evaluation of the performance of the CEO by the non-management Directors;
|
|
|
•
|
|
To serve as liaison between the non-management members of the Board of Directors and the Chairperson of the Board of Directors, and as a contact person to facilitate communications by the Company’s employees,
stockholders and others with the non-management members of the Board of Directors; and
|
|
|
•
|
|
To review the quality, quantity, appropriateness and timeliness of information provided to the Board of Directors.
|
Schedule 4.6(b)
Public Reporting Protocol Prior to Less Than Majority Holder Date
|
|
|
|
|
|
|
Item / Principle
|
|
Principal Contact /
Addressee
|
|
Lead Time
|
|
The Board of Directors has oversight and sign-off on communications strategy, timing and content, any significant changes to which will be reported to NAB.
|
|
The Heads of Corporate Communications, Investor Relations and other functions of the Company to contact Head of Group Media of NAB or other relevant NAB personnel
|
|
As needed
|
|
|
|
|
|
Use reasonable best efforts to inform NAB timely and adequately of any development / information that may be considered (i) price sensitive for NAB or (ii) may otherwise have a significant adverse effect on NAB, its
financial condition or reputation so that NAB can issue a press release, should NAB deem it necessary.
|
|
The Head of Corporate Communications of the Company to contact EGM Investor Relations, Head of Corporate Advisory Legal and Head of Group Media of NAB
|
|
At least one week in advance to the extent practicable and reasonable
|
|
|
|
|
|
Use reasonable best efforts to inform NAB timely and adequately of considerations, strategy, content and timing of Company press releases.
|
|
The Head of Corporate Communications of the Company to contact the Head of Group Media of NAB
|
|
At least one week in advance to the extent practicable and reasonable
|
|
|
|
|
|
Use reasonable best efforts to provide any internal communications that could reasonably be considered material to NAB.
|
|
The Head of Corporate Communications of the Company to contact the Head of Group Media of NAB
|
|
At least one week in advance to the extent practicable and reasonable
|
Exhibit 10.2
FORM OF
TRANSITIONAL SERVICES
AGREEMENT
between
NATIONAL
AUSTRALIA BANK LIMITED
and
GREAT WESTERN BANCORP, INC.
Dated as of [
—
], 2014
T
ABLE
OF
C
ONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
P
AGE
|
|
|
|
|
Article I
|
|
|
|
|
|
|
|
DEFINITIONS
|
|
|
|
|
|
Section 1.1
|
|
Definitions
|
|
|
1
|
|
|
Section 1.2
|
|
Interpretation
|
|
|
6
|
|
|
|
|
|
|
|
|
Article II
|
|
|
|
|
|
|
|
SERVICES AND PROCEDURES
|
|
|
|
|
|
Section 2.1
|
|
Provision of Services
|
|
|
7
|
|
|
Section 2.2
|
|
Replacement Services
|
|
|
7
|
|
|
Section 2.3
|
|
Standard of Performance; Scope of Service
|
|
|
7
|
|
|
Section 2.4
|
|
Service Coordinator
|
|
|
7
|
|
|
Section 2.5
|
|
Third-Party Providers
|
|
|
8
|
|
|
Section 2.6
|
|
Service Provider’s Employees
|
|
|
9
|
|
|
Section 2.7
|
|
Availability of Information and Records; Audit
|
|
|
9
|
|
|
Section 2.8
|
|
Limited Warranty
|
|
|
10
|
|
|
Section 2.9
|
|
Transition Support
|
|
|
10
|
|
|
Section 2.10
|
|
Exclusivity
|
|
|
11
|
|
|
|
|
|
|
|
|
Article III
|
|
|
|
|
|
|
|
FEES AND PAYMENTS
|
|
|
|
|
|
Section 3.1
|
|
Fees for Services
|
|
|
11
|
|
|
Section 3.2
|
|
Capital Expenditures
|
|
|
12
|
|
|
Section 3.3
|
|
No Set-Off; Netting
|
|
|
12
|
|
|
Section 3.4
|
|
Taxes
|
|
|
12
|
|
|
|
|
|
|
|
|
Article IV
|
|
|
|
|
|
|
|
TERM AND TERMINATION
|
|
|
|
|
|
Section 4.1
|
|
Term
|
|
|
13
|
|
|
Section 4.2
|
|
Termination
|
|
|
13
|
|
|
Section 4.3
|
|
Extension of Service Term
|
|
|
14
|
|
|
Section 4.4
|
|
Effect of Termination
|
|
|
14
|
|
|
|
|
|
|
|
|
Article V
|
|
|
|
|
|
|
|
INDEMNIFICATION
|
|
|
|
|
|
Section 5.1
|
|
Indemnification by NAB
|
|
|
15
|
|
|
Section 5.2
|
|
Indemnification by GWB
|
|
|
15
|
|
|
Section 5.3
|
|
Claims for Indemnification
|
|
|
15
|
|
|
Section 5.4
|
|
Indemnification Limitations
|
|
|
17
|
|
|
Section 5.5
|
|
Payments
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
Article VI
|
|
|
|
|
|
|
INTELLECTUAL PROPERTY
|
|
|
|
|
|
Section 6.1
|
|
Ownership of Intellectual Property
|
|
|
18
|
|
|
Section 6.2
|
|
Licensing of Intellectual Property
|
|
|
18
|
|
|
Section 6.3
|
|
Ownership of Data
|
|
|
19
|
|
|
|
|
|
|
|
|
Article VII
|
|
|
|
|
|
|
|
CONFIDENTIALITY; SYSTEMS SECURITY
|
|
|
|
|
|
Section 7.1
|
|
Confidentiality
|
|
|
19
|
|
|
Section 7.2
|
|
Systems Security
|
|
|
19
|
|
|
|
|
|
|
|
|
Article VIII
|
|
|
|
|
|
|
|
SETTLEMENT; DISPUTE RESOLUTION
|
|
|
|
|
|
Section 8.1
|
|
Resolution Procedure
|
|
|
20
|
|
|
Section 8.2
|
|
Exchange Of Written Statements
|
|
|
21
|
|
|
Section 8.3
|
|
Good-Faith Negotiations
|
|
|
21
|
|
|
Section 8.4
|
|
Injunctive Relief
|
|
|
21
|
|
|
Section 8.5
|
|
Limitations on Damages
|
|
|
21
|
|
|
|
|
|
|
|
|
Article IX
|
|
|
|
|
|
|
|
MISCELLANEOUS
|
|
|
|
|
|
Section 9.1
|
|
Notices
|
|
|
22
|
|
|
Section 9.2
|
|
Binding Effect; Assignment; No Third-Party Beneficiaries
|
|
|
22
|
|
|
Section 9.3
|
|
Severability
|
|
|
22
|
|
|
Section 9.4
|
|
Entire Agreement; Amendment
|
|
|
23
|
|
|
Section 9.5
|
|
Waiver
|
|
|
23
|
|
|
Section 9.6
|
|
Governing Law; Consent to Jurisdiction
|
|
|
23
|
|
|
Section 9.7
|
|
Waiver of Jury Trial
|
|
|
23
|
|
|
Section 9.8
|
|
Counterparts
|
|
|
24
|
|
|
Section 9.9
|
|
Relationship of the Parties
|
|
|
24
|
|
|
Section 9.10
|
|
Force Majeure
|
|
|
24
|
|
|
Section 9.11
|
|
Further Assurances
|
|
|
24
|
|
|
Section 9.12
|
|
Conditions Precedent
|
|
|
25
|
|
|
|
|
|
|
EXHIBITS
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit A
|
|
Services
|
|
|
|
|
FORM OF
TRANSITIONAL SERVICES AGREEMENT
Transitional Services Agreement, dated [
—
], 2014 (this “
Agreement
”),
between National Australia Bank Limited, a company incorporated under the laws of the Commonwealth of Australia (“
NAB
”), and Great Western Bancorp, Inc., a Delaware corporation (“
GWB
”).
R
ECITALS
A. GWB is an indirect, wholly owned subsidiary of NAB, and GWB and its Subsidiaries rely on NAB and its Subsidiaries for the provision of
certain services.
B. NAB intends to divest itself of its ownership interest in GWB and, in connection therewith, a subsidiary of NAB
intends to sell shares of common stock, par value $0.01 per share, of GWB representing approximately [
—
]% of the outstanding common stock of GWB as of the date hereof in GWB’s initial public
offering registered with the U.S. Securities and Exchange Commission on Form S-1 (the “
IPO
”).
C. In connection with such
divestiture, GWB requires certain services, as specified and on the terms contained in this Agreement, to be provided to it and its Subsidiaries on a transitional basis on and following the effective date of this Agreement. NAB has agreed to provide
or procure the provision of these Services on the terms of this Agreement.
D. In addition, GWB requires assistance from NAB in
transitioning its business off the Services during the term of this Agreement. NAB has agreed to provide or procure the provision such assistance as more fully described in this Agreement.
N
OW
,
THEREFORE
, in consideration of the mutual covenants and agreements herein contained
and other good and valid consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
Article I
DEFINITIONS
Section 1.1
Definitions
. Capitalized terms used in this Agreement shall have the meanings assigned below:
“
Accessing Party
” has the meaning set forth in
Section 7.2(a)
.
“
Agreement
” has the meaning set forth in the Preamble.
“
Applicable Law
” means any law (including common law), statute, regulation, rule, executive order, ordinance,
judgment, ruling, published regulatory policy or guideline, injunction, consent, order, exemption, license, approval or permit enacted, issued, promulgated, adjudged, entered or enforced by a Governmental Authority.
“
Business Day
” means any day other than a Saturday, Sunday or
day on which banks in New York, New York, Sioux Falls, South Dakota or Melbourne, Australia are authorized or required by Applicable Law to close.
“
Claim Notice
” has the meaning set forth in
Section 5.3(a)
.
“
Contracting Party
” has the meaning set forth in
Section 2.5(b)
.
“
Control
” means, with respect to any Person, direct or indirect ownership or power to vote 25% or more of any
class of voting securities of such Person, control in any manner the election of a majority of the directors or trustees of such Person, or the direct or indirect possession of the ability to exercise a controlling influence over the management or
policies of such Person.
“
Disabling Procedures
” has the meaning set forth in
Section 7.2(b)
.
“
Disclosing Party
” has the meaning set forth in
Section 7.2(a)
.
“
Effective Date Form
” means, in relation to any Service, if a service substantially equivalent to such Service
was provided to GWB or any of its Subsidiaries in the twelve-month period prior to the date hereof by NAB or any of its Subsidiaries, the same form in which such service was last provided prior to the date hereof. For purposes of this definition,
“form” includes the configuration, version, patch levels and other implementation specific details of any relevant software and systems.
“
Effective Date Standard
” means, in relation to any Service, if a service substantially equivalent to such
Service was provided to GWB or any of its Subsidiaries in the twelve-month period prior to the date hereof by NAB or any of its Subsidiaries, the overall standards of quality and availability at which such service was then provided during those
preceding twelve months (or the portion thereof during which such service was provided).
“
Effective Date
Volume
” means, in relation to any Service, if a service substantially equivalent to such Service was provided to GWB or any of its Subsidiaries in the twelve-month period prior to the date hereof by NAB or any of its Subsidiaries, the
average (subject to seasonal fluctuations) amount, quantity or volume at which that service was then provided during those preceding twelve months (or the portion thereof during which such service was provided). Notwithstanding the foregoing,
Effective Date Volume shall include any increase in volume reasonably attributable to organic growth in the applicable Service Recipient’s business (
i.e.
, growth that is not the result of the acquisition of a business or shares in a
business) or any increase in volume agreed by the Parties.
“
Event of Default
” means, with respect to any
Person, the occurrence of any of the following:
(i) Such Person commences any proceeding under any bankruptcy,
reorganization, dissolution or liquidation law or statute of any jurisdiction
-2-
whether now or hereafter in effect or such Person has had any such petition or application filed or any such proceeding commenced against it after the date of this Agreement in which an order for
relief is entered or an adjudication or appointment is made and which remains un-dismissed for a period of 60 days or more;
(ii) Any Governmental Authority appoints a trustee, conservator or receiver for all or a substantial part of the property of
such Person;
(iii) Such Person makes an assignment for the benefit of creditors, or makes an admission of inability to pay
its debts generally as they become due; or
(iv) Such Person breaches, in any material respect, any of its material
obligations, representations or warranties contained in this Agreement, which shall include, with respect to GWB, the payment of any undisputed amounts owing to NAB under this Agreement.
“
Final Determination
” means, with respect to a dispute as to indemnification for a Loss under this Agreement,
(i) a written agreement between the parties to such dispute resolving such dispute, (ii) a final and non-appealable order or judgment entered by a court of competent jurisdiction resolving such dispute or (iii) a final non-appealable
determination rendered by an arbitration or like panel to which the parties submitted such dispute that resolves such dispute.
“
Governmental Authority
” means any national, federal, state, municipal, local, territorial, domestic, foreign
or other government or any department, commission, board, bureau, agency, regulatory authority or instrumentality thereof, or any court, judicial, administrative or arbitral body, public or private tribunal or self-regulatory organization.
“
GWB
” has the meaning set forth in the Preamble.
“
Indemnified Person
” has the meaning set forth in
Section 5.3(a)
.
“
Indemnifying Person
” has the meaning set forth in
Section 5.3(a)
.
“
Intellectual Property
” means, in any and all jurisdictions throughout the world, any (i) patent rights,
including all patents, pending patent applications (including all provisional applications, substitutions, continuations, continuations-in-part, divisions, renewals, and all patents granted thereon), and foreign counterparts of any of the foregoing;
(ii) copyrights, mask works, and all registrations thereof and applications therefor; (iii) Trademarks; (iv) domain names and uniform resource locators associated with the Internet, including registrations thereof; and (v) rights
with respect to information and materials not generally known to the public and from which independent economic value is derived from such information and materials not being generally known to the public, including trade secrets and other
confidential and proprietary information, including rights to limit the use or disclosure thereof by any Person.
-3-
“
IPO
” has the meaning set forth in the Recitals.
“
Loss
” means any damages, losses, charges, liabilities, claims, demands, actions, suits, proceedings,
payments, judgments, settlements, assessments, deficiencies, interest, penalties, and costs and expenses (including removal costs, remediation costs, closure costs, fines, penalties, reasonable attorneys’ fees and reasonable out of pocket
disbursements).
“
NAB
” has the meaning set forth in the Preamble.
“
Non-Contracting Party
” has the meaning set forth in
Section 2.5(b)
.
“
Notice Period
” has the meaning set forth in
Section 5.3(b)(i)
.
“
Party
” means either GWB or NAB.
“
Person
” means any individual, sole proprietorship, partnership, limited liability company, joint venture,
trust, incorporate organization, association, corporation, institution, public benefit corporation, Governmental Authority or any other entity.
“
Personnel
” means, with respect to any Service Provider, the employees and agents of such Service Provider who
are assigned to perform any Service provided by such Service Provider pursuant to this Agreement.
“
Replacement
Service
” has the meaning set forth in
Section 2.2
.
“
Representatives
” means, with
respect to any Person, any officer, director, employee, advisor, agent or representative of such Person, or anyone acting on behalf of them or such Person.
“
Service Coordinator
” has the meaning set forth in
Section 2.4
.
“
Service IP
” has the meaning set forth in
Section 6.2(a)
.
“
Service Provider
” means, with respect to any Service, NAB or any of its Subsidiaries responsible for
providing such Service.
“
Service Recipient
” means, with respect to any Service, GWB or any of its
Subsidiaries receiving such Service.
“
Service Records
” means, with respect to any Service, all records,
data, files and other information received or generated for the benefit of the applicable Service Recipient in connection with the provision of such Service.
“
Service Term
” means, with respect to any Service, the period beginning on the effective date of this
Agreement and continuing for the duration set forth on
Exhibit A
, as amended from time to time, and any extension to such duration in accordance with
Article IV
.
-4-
“
Services
” means the services and other support set forth on
Exhibit A
, as amended from time to time, provided by one or more Service Providers, in each case (i) in accordance with the terms and conditions set forth in this Agreement and (ii) other than any Service which is terminated
pursuant to this Agreement.
“
Stockholder Agreement
” means the Stockholder Agreement, dated the date
hereof, between NAB and GWB.
“
Subsidiary
” means, with respect to any Person, any other Person which
Controls such Person;
provided
that none of GWB and its Subsidiaries shall be considered Subsidiaries of NAB or any of NAB’s Subsidiaries for purposes of this Agreement.
“
Systems
” has the meaning set forth in
Section 7.2(a)
.
“
Tax
” means any and all U.S. federal, state, and local taxes, non U.S. taxes, and other levies, fees, imposts,
duties, tariffs and other charges in the nature of tax, together with any interest, penalties or additions imposed in connection therewith or with respect thereto, imposed by any Governmental Authority or political subdivision thereof, including
taxes imposed on, or measured by, income, franchise, profits or gross receipts, and also alternative minimum, add-on minimum, ad valorem, value added, sales, use, service, real or personal property, capital stock, license, registration, documentary,
environmental, disability, payroll, withholding, employment, social security, workers’ compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, transfer and gains taxes and
customs duties.
“
Technology
” means tangible embodiments, whether in electronic, written or other media,
of technology, including inventions, ideas, designs, documentation (such as bill of materials, build instructions, test reports and invention disclosure forms), schematics, layouts, reports, algorithms, routines, software (including source code and
object code), data, databases, lab notebooks, equipment, processes, prototypes and devices.
“
Third-Party
Claim
” means any claim relating to a Loss by any Person who is not, and is not a Subsidiary of, a Party.
“
Third-Party IP
” has the meaning set forth in
Section 6.2(b)
.
“
Third-Party Provider
” has the meaning set forth in
Section 2.5(a)
.
“
Trademarks
” means trademarks, service marks, logos and design marks, trade dress, trade names, and brand
names, together with all goodwill associated with any of the foregoing, and all registrations thereof and applications therefor.
-5-
Section 1.2
Interpretation
.
(a) Unless the context otherwise requires:
(i) References contained in this Agreement to the Preamble, Recitals and to specific Articles, Sections, Subsections or
Exhibits shall refer, respectively, to the Preamble, Recitals, Articles, Sections, Subsections or Exhibits of this Agreement;
(ii) References to any agreement or other document are to such agreement or document as amended, modified, supplemented or
replaced from time to time;
(iii) References to any statute or statutory provision include all rules and regulations
promulgated pursuant to such statute or statutory provision, in each case as such statute, statutory provision, rules or regulations may be amended, modified, supplemented or replaced from time to time;
(iv) References to any Governmental Authority include any successor to such Governmental Authority;
(v) Terms defined in the singular have a comparable meaning when used in the plural, and vice versa;
(vi) The words “hereof,” “herein,” and “hereunder” and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement;
(vii) The terms
“Dollars” and “$” mean U.S. Dollars; and
(viii) Wherever the word “include,”
“includes,” or “including” is used in this Agreement, it shall be deemed to be followed by the words “without limitation.”
(b) In the event of any inconsistency between this Agreement and any Exhibit hereto, the terms of such Exhibit shall prevail.
(c) The headings contained in this Agreement are for reference purposes only and do not limit or otherwise affect any of
the provisions of this Agreement.
(d) The Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event of an ambiguity or a question of intent or interpretation, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any provision of this Agreement.
-6-
(e) In this Agreement, any provision which applies “until” a specified
date shall apply on such specified date, and shall cease to apply on the date immediately following such specified date.
Article II
SERVICES AND PROCEDURES
Section 2.1
Provision of Services
.
(a) Upon the terms and subject to the conditions contained in this Agreement, NAB shall provide, or shall cause one or more of
its Subsidiaries to provide, the Services to each applicable Service Recipient. Each Party shall, and shall cause its Subsidiaries to, use their respective commercially reasonable efforts to cooperate with the other Party and such other Party’s
Subsidiaries in all matters necessary to the provision of Services under this Agreement. Except as otherwise set forth in
Exhibit A
, any decision as to which entity will be a Service Provider will be made by NAB (in its sole discretion),
and any decision as to which entity will be a Service Recipient will be made by GWB (in its sole discretion).
Section 2.2
Replacement Services
. If NAB and its Subsidiaries are (i) unable to provide any Service for any reason outside NAB’s control or (ii) excused from providing any Service by reason of
Section 2.3(b)
, NAB shall use its,
or shall cause its Subsidiaries to use their respective, commercially reasonable efforts to provide to the applicable Service Recipient substantially equivalent services and support in accordance with the terms of this Agreement (such service and
support, a “
Replacement Service
”). Any Replacement Service provided pursuant to this
Section 2.2
shall be considered a Service for all purposes of this Agreement, and the Parties shall amend
Exhibit A
as
appropriate to include the terms of any such Replacement Service.
Section 2.3
Standard of Performance; Scope of Service
.
(a) Except as explicitly set forth in
Exhibit A
, each Service Provider shall provide each applicable Service (i) in
good faith, in a professional, timely and workmanlike manner, and with reasonable care, and (ii) where applicable, substantially in the Effective Date Form, at the Effective Date Standard and up to no more than the Effective Date Volume.
(b) Notwithstanding anything to the contrary contained in this Agreement, NAB shall not be obligated to provide, or cause any
Service Provider to provide, any Service to the extent the provision of such Service would violate (i) any agreement or license with a third party to which NAB or any of its Subsidiaries is subject as of the date of this Agreement or
(ii) any Applicable Law. NAB shall use its commercially reasonable efforts to make or obtain any approvals, agreements, permits, consents, waivers and licenses from any third parties that are necessary to permit any affiliated Service Provider
to provide the applicable Services under this Agreement;
provided
that such Party shall not be obligated to incur any cost or expense in connection with obtaining any such approvals, agreements, permits, consents, waivers and licenses.
Section 2.4
Service Coordinator
. In order to monitor, coordinate and facilitate implementation of the terms and conditions of this
Agreement, each Party shall nominate a
-7-
representative to act as the contact person for the provision of the Services (each such representative, a “
Service Coordinator
”). The Service Coordinators will meet as
reasonably necessary to carry out the terms and conditions of this Agreement, but no less than once per quarter during the term of this Agreement, to discuss any matters relating to this Agreement and to monitor the progress of GWB’s migration
planning pursuant to
Section 2.9
. Each Party shall have the right at any time, and from time to time, to replace its Service Coordinator by advising the other Party in writing of such replacement. The Parties agree that the Service
Coordinators will be the initial point of contact for each Party responsible for monitoring and coordinating the provision and receipt of Services under this Agreement. Each Party may treat an act of the Service Coordinator nominated by the other
Party as an act of and authorized by the other Party without inquiring behind such act or ascertaining whether such Service Coordinator had authority to take such act.
Section 2.5
Third-Party Providers
.
(a) Each Service Provider may use one or more third-party service providers (each, a “
Third-Party Provider
”)
to provide the applicable Services under this Agreement with respect to and to the extent (A) such Services were outsourced or subcontracted prior to the effective date of this Agreement or (B) such Services, or substantially similar
services, are outsourced or subcontracted by NAB and its Subsidiaries after the effective date of this Agreement in connection with the operation of one or more of their respective business lines or divisions. Notwithstanding anything in this
Agreement to the contrary, (i) each Service Provider shall cause any Third-Party Providers performing Services on such Service Provider’s behalf to adhere to the terms and conditions of this Agreement in performing such Services;
(ii) each Service Provider shall be responsible for any breach of the terms of this Agreement by any Third-Party Provider performing Services on such Service Provider’s behalf; and (iii) NAB shall be GWB’s sole point of contact
regarding the Services provided by any Third-Party Provider, including with respect to payment.
(b) If, during the term of
this Agreement, any agreement between any Service Provider (the “
Contracting Party
”) and a Third-Party Provider pursuant to which Services are provided to a Service Recipient under this Agreement is terminated or not renewed, GWB
(the
Non-Contracting Party
”) shall use its, and shall cause its Subsidiaries to use their, commercially reasonable efforts to secure an agreement with such Third-Party Provider or with another third-party service provider for the
provision of such Service independent of this Agreement;
provided
that if the Non-Contracting Party determines in good faith that it would have an adverse impact on the quality or continuous availability of such Service or other Services if
the Non-Contracting Party were to secure such an agreement at the time of the termination or non-renewal, the Parties shall reasonably cooperate to identify an alternative solution. In any of the scenarios described in the immediately preceding
sentence, the Contracting Party will utilize commercially reasonable efforts to (i) minimize any service disruption in connection with obtaining such services, (ii) assist the Non-Contracting Party in obtaining a quality of service
reasonably requested by the Non-Contracting Party and (iii) minimize the cost to the Non-Contracting Party of obtaining such services,
provided
, that the Contracting Party shall not be obligated to incur any cost or expense in connection
with any of clauses (i), (ii) or (iii). If the Non-Contracting Party enters into an agreement with a Third-Party Provider for the provision of any Service as a result of this
Section 2.5(b)
, the
-8-
provision of such Service under this Agreement shall be immediately terminated upon the commencement of the provision of the relevant services under such agreement with a third-party service
provider. The Contracting Party shall provide the Non-Contracting Party with notice (1) no less than 90 days prior to the scheduled termination date of any agreement with a Third Party Provider pursuant to which Services are provided to a
Service Recipient under this Agreement and (2) immediately after any material breach of any such agreement. Any notice delivered pursuant to
Section 2.5(b)(2)
shall, to the extent practicable, include a detailed description of the
breach, the implications of such breach on the provision of any Services, and the Contracting Party’s planned course of action in response to such breach.
(c) Each Service Provider shall continue to manage its relationships with any Third Party Provider with the same standard of
care as if the Third Party Provider were supporting such Service Provider’s own businesses.
Section 2.6
Service
Provider’s Employees
.
(a) Each Service Provider shall be responsible for selecting and supervising in good faith
the Personnel who will perform any particular Service and performing all administrative support with respect to such Personnel, including maintaining and adjusting the compensation structure and the workload balancing of such Personnel. Each Service
Provider shall be responsible for ensuring that the Personnel it selects to perform Services hereunder have all requisite licenses and qualifications required to render such Services.
(b) No provision of this Agreement is intended or shall be deemed to have the effect of placing the management or policies of
any Service Recipient under the control or direction of any Service Provider, or vice versa, including the management of any Personnel of any Service Provider.
Section 2.7
Availability of Information and Records; Audit
.
(a) Subject to
Article VII
, GWB shall, or shall cause its Subsidiaries to, (i) make available, subject to
Applicable Law and on a timely basis, to each Service Provider all information reasonably requested by such Service Provider to enable such Service Provider to provide any of the applicable Services and (ii) provide such Service Provider with
reasonable access to the applicable Service Recipient’s premises and systems to the extent necessary for purposes of providing the applicable Services.
(b) During the term of this Agreement with respect to any particular Service, in the event that a Service Provider is required
to maintain Service Records under Applicable Law, it shall maintain such Service Records in compliance with Applicable Law in respect of the Service provided. NAB shall, or shall cause its Subsidiaries to, make available, subject to Applicable Law
and within 30 days of receipt of any Service Recipient’s request or such shorter period as may be required by Applicable Law, access to all available Service Records relating to the provisions of any Services to a Service Recipient.
(c) Upon reasonable advance notice, GWB shall have the right, at its sole cost and expense, to review and audit NAB’s
compliance with this Agreement and the systems and procedures employed by any Service Provider in providing the Services. GWB shall not be
-9-
entitled to conduct more than one audit during any twelve consecutive month period, except for audits in response to requests by a Governmental Authority or, to the extent relevant to any
internal investigation, internal or external audit, GWB’s General Counsel or any committee of the board of directors of GWB. Any audit conducted pursuant to this
Section 2.7(c)
shall be conducted during normal business hours, shall
employ reasonable procedures and methods as necessary and appropriate in the circumstances and shall not unreasonably interfere with relevant Service Provider’s normal business operations. NAB shall use its commercially reasonable efforts, and
cause each Service Provider to use commercially reasonable efforts, to facilitate any audit conducted by GWB pursuant to this
Section 2.7(c)
;
provided
that nothing shall require NAB or its Subsidiaries to provide any information
or records to the extent (i) such provision would be prohibited by contract or Applicable Law or (ii) such information or records are legally privileged. In coordination with GWB, each applicable Service Provider shall use its commercially
reasonable efforts to remedy in a commercially reasonable timeframe any material deficiencies determined by any audit conducted pursuant to this
Section 2.7(c)
. Each Party shall bear its own costs with respect to any audits conducted
pursuant to this
Section 2.7(c)
.
Section 2.8
Limited Warranty
. Except as otherwise expressly set forth in this
Agreement, (a) NAB specifically disclaims all warranties of any kind, express or implied, arising out of or related to this Agreement, including any implied warranties of merchantability and fitness for a particular purpose, with respect to the
Services, (b) NAB makes no representations or warranties as to the quality, suitability or adequacy of the Services provided by NAB and its Subsidiaries for any purpose or use, and (c) no information or description concerning the Services,
whether written or oral, shall in any way alter the Services to be provided under this Agreement, including the scope, level of service or other attributes with respect to any Service.
Section 2.9
Transition Support
.
(a) Within 60 days following the effective date of this Agreement or any later date agreed by the Parties, the Parties will
work together in good faith to mutually agree upon written migration plans for each of the Services addressing (i) the steps the Parties shall take to operate independently of one another or otherwise replace or migrate away from the Services,
(ii) any inter-dependence between the steps in any of the migration plans, (iii) timelines for conclusion of these steps and separation activities and (iv) any additional reasonable assistance either Party requires from the other in
connection with completion of separation activities. The Parties agree to reasonably cooperate in good faith to revise the written migration plans as necessary based on changes in circumstances during the term of this Agreement.
(b) Each Service Provider shall (i) reasonably cooperate in good faith to facilitate each applicable Service Recipient
operating independently of or otherwise replacing or migrating away from each Service and (ii) utilize commercially reasonable efforts to minimize (1) any disruption in connection with the receipt of Services, (2) any quality
degradation in connection with the Services and (3) any cost to the applicable Service Recipient’s independent operation or replacement or migration away from each Service;
provided
that each applicable Service Provider shall not be
obligated to incur any out-of-pocket cost or expense in connection with any of the actions taken pursuant to this
Section 2.9(b)
.
-10-
(c) Promptly after the termination of any Service in accordance with this
Agreement, the applicable Service Provider shall, subject to Applicable Law and at the applicable Service Recipient’s expense, use its commercially reasonable efforts to transfer all requested and relevant data concerning such Service (if any)
to the applicable Service Recipient, or such Service Recipient’s third party designee, and to cooperate in the conversion of any and all such data from Service Provider’s systems to those of the Service Recipient, or such Service
Recipient’s third party designee. In addition, if reasonably requested by the applicable Service Recipient, the applicable Service Provider shall deliver to such Service Recipient as promptly as practicable (but in no event more than 45 days
after such request) all available Service Records related to such Service;
provided
,
however
, that the applicable Service Provider shall have the right to retain an archival copy of such records to the extent required by Applicable Law
or for the purpose of responding to regulatory requests or intraparty claims.
Section 2.10
Exclusivity
. This Agreement is not
exclusive. GWB shall be entitled to purchase the same or similar Services from any third party or may elect to internally provide any of the Services.
Article III
FEES AND
PAYMENTS
Section 3.1
Fees for Services
.
(a) As consideration for each of the Services, GWB shall pay to NAB the corresponding amount specified for such Service in
Exhibit A
. The Parties shall negotiate in good faith to establish the consideration to be paid in connection with any Replacement Service, which consideration shall at a minimum reimburse the applicable Service Provider for all costs incurred
by the Service Provider in connection with the provision of such Replacement Service.
(b) GWB agrees to pay all costs
charged pursuant to this Agreement for Services delivered during the term of this Agreement. Within 10 days after the end of each month, NAB will provide GWB with an invoice for the fees and expenses payable for such month and identifying the fees
and expenses of each Service Provider with respect to such month. Within 5 Business Days after receipt of each invoice, GWB will pay to NAB all invoiced amounts with respect to the immediately preceding month;
provided
that GWB shall not be
required to pay any invoiced amount that GWB contests in good faith by giving written notice to NAB of such dispute on or prior to the applicable payment due date. As soon as reasonably practicable after receipt of any request from GWB, the
applicable Service Provider shall provide GWB with data and documentation supporting the calculation of any invoiced amounts contested by GWB for the purpose of verifying the accuracy of such calculation and such further documentation and
information relating to the calculation of such invoiced amounts as GWB may reasonably request. The Parties shall attempt to resolve any disputes relating to an invoiced amount in accordance with the procedures set forth in
Article VIII
. In
the event such dispute is resolved, GWB shall pay any required amount to NAB within 5 Business Days after the date such resolution occurs.
-11-
(c) For the avoidance of doubt, NAB may include recoverable costs and expenses,
including fees for Services provided pursuant to this Agreement, incurred in any prior month in an invoice relating to any future month (without double-counting).
(d) All payments made pursuant to this
Section 3.1
shall be made in U.S. dollars by wire transfer to an account
designated by NAB in advance in writing from time to time. Amounts payable under this
Section 3.1
shall accrue interest at a rate of 1% over the prime interest rate published in
The Wall Street Journal
on the due date beginning on
the fifth day after such amount is due for payment until the date of actual payment.
Section 3.2
Capital Expenditures
. Other
than where contemplated by this Agreement, neither NAB nor any Service Provider shall be required to incur any capital expenditure with respect to the provision of any Service. In the event the Parties agree to any capital expenditures with respect
to the provision of any Services, NAB shall include any such capital expenditures in the invoice for Services prepared pursuant to
Section 3.1
for the month in which such capital expenditures are incurred.
Section 3.3
No Set-Off; Netting
. Neither Party nor any of their respective Subsidiaries shall have any right of set-off or any
other similar rights with respect to any amounts owed pursuant to this Agreement or any other amounts claimed to be owed and arising out of any other agreements between the Parties or any of their respective Subsidiaries.
Section 3.4
Taxes
.
(a) Notwithstanding anything in this Agreement to the contrary, the Parties’ respective responsibilities for Taxes arising
under or in connection with this Agreement shall be as set forth in this
Section 3.4
.
(b) Each Party shall be
responsible for:
(i) any personal property Taxes on property it uses, regardless of whether such property is owned or
leased;
(ii) franchise and privilege Taxes on its business;
(iii) Taxes based on its net income or gross receipts; and
(iv) Taxes based on the employment or wages of its employees, including FICA, Medicare, unemployment, worker’s
compensation and other similar Taxes.
(c) Each Service Provider shall be responsible for any sales, use, excise,
value-added, services, consumption and other Taxes payable by such Service Provider on the goods or services used or consumed by such Service Provider in providing the Services.
-12-
(d) Each Service Recipient shall be responsible for any sales, use, excise,
value-added, services, consumption and other Taxes that are assessed on the provision of the any particular Service to such Service Recipient.
(e) Each Service Recipient will make all payments to the Service Provider under this Agreement without deduction or withholding
for Taxes except to the extent that any such deduction or withholding is required by Applicable Law in effect at the time of payment. Any tax required to be withheld on amounts payable under this Agreement will promptly be paid by the Service
Recipient to the appropriate Governmental Authority, and the Service Recipient will furnish the Service Provider with proof of payment of such Tax. If a Service Recipient is required under Applicable Law to withhold any Tax from any payment made
pursuant to this Agreement, the amount of the payment will be increased such that the Service Provider receives the full amount due hereunder as if there was no withholding Tax. The Parties will cooperate with respect to all documentation required
by any Governmental Authority or reasonably requested by the Service Recipient to secure a reduction in the rate of applicable withholding Taxes.
Article IV
TERM AND
TERMINATION
Section 4.1
Term
. Each Service will be provided for the duration of the Service Term with respect to such
Service and will lapse automatically thereafter, or at the time such Service is terminated prior to the expiration of the Service Term in accordance with
Section 4.2
. This Agreement shall terminate upon completion of performance by both
Parties relative to all Services or earlier pursuant to the provisions of
Section 4.2
.
Section 4.2
Termination
.
(a) This Agreement may be terminated prior to the end of the term set forth in
Section 4.1
:
(i) By either Party upon 30 days’ prior written notice following an Event of Default by the other Party (unless such Event
of Default results from the breach by such Party in any material respect of any of their respective material obligations, representations or warranties contained in this Agreement), which written notice shall describe in detail the Event of Default,
unless such Event of Default is cured during such 30-day period from the date notice is given;
(ii) By either Party if
required by Applicable Law;
(iii) By NAB upon 30 days’ prior written notice in the event that, after the date of this
Agreement, a third party acquires Control of GWB;
provided
that (1) the IPO shall not be considered an acquisition of Control and (2) NAB must exercise its right to terminate pursuant to this
Section 4.2(a)(iii)
within
30 days following such acquisition of Control of GWB by a third party; or
(iv) Upon the mutual agreement of the Parties.
-13-
(b) Subject to
Section 4.2(c)
, any particular Service provided
pursuant to this Agreement may be terminated prior to the end of the term set forth in
Section 4.1
:
(i) By GWB
upon 60 days’ prior written notice (
provided
that GWB shall be responsible for paying any and all fees and expenses incurred by any Service Provider as a result of such termination,
provided
,
further
that the applicable
Service Provider shall use commercially reasonable efforts to minimize any and all such fees and expenses);
(ii) By either
Party upon 30 days’ prior written notice following an Event of Default by the other Party (unless such Event of Default results from the breach by such Party in any material respect of any of their respective material obligations,
representations or warranties contained in this Agreement), which written notice shall describe in detail the Event of Default, unless such Event of Default is cured during such 30-day period from the date notice is given;
(iii) By either Party if required by Applicable Law; or
(iv) Upon the mutual written agreement of the Parties.
(c) Notwithstanding anything in
Section 4.2(b)
to the contrary, if GWB elects to terminate any particular Service
pursuant to
Section 4.2(b)(i)
or
Section 4.2(b)(ii)
, and NAB reasonably determines and provides GWB with written notice prior to the termination of such Service that such termination will adversely affect the ability of any
Service Provider to provide any other Service or portion of any other Service in any material respect, such Service shall not be terminated and shall continue for the term set forth in
Section 4.1
. The Parties agree to each use their
commercially reasonable efforts to minimize the impact of the termination of any Service on the remainder of this Agreement.
Section 4.3
Extension of Service Term
. Except as otherwise indicated in Exhibit A, upon written notice from GWB to NAB at least 30
days prior to the expiry of the Service Term for any Service, the Service Term shall be extended for up to three one-month periods; provided that GWB may only exercise such extension pursuant to this
Section 4.3
to the extent GWB and the
applicable Service Recipient has made all commercially reasonable efforts to, but is unable to, operate independently of or otherwise replace such Service.
Section 4.4
Effect of Termination
.
(a) Subject to
Section 4.4(b)
, in the event of the termination of this Agreement as provided in this
Article
IV
, this Agreement shall forthwith become void and have no further effect, except that (i) this
Section 4.4
and
Article VII
,
Article VIII
and
Article IX
shall survive the termination of this Agreement, and
(ii)
Article V
shall survive the termination of this Agreement for a period of one year. Upon the termination of this Agreement, NAB shall have no further obligation to provide, or cause to be provided, any of the Services, and GWB shall
promptly pay all costs, expenses and fees in respect of Services provided prior to the termination of this Agreement (which costs shall be pro-rated where necessary). The termination of this Agreement will not terminate, affect or impair any rights,
obligations, or liabilities of any Party that have accrued prior to such termination or which under the terms of this Agreement continue after termination.
-14-
(b) Upon the termination or expiration of any Service pursuant to this Agreement,
NAB shall have no further obligation to provide, or cause to be provided, such Service, and GWB shall promptly pay all costs, expenses and fees in respect of such Service prior to the termination of this Agreement (which costs shall be pro-rated
where necessary).
Article V
INDEMNIFICATION
Section 5.1
Indemnification by NAB
. Subject to
Section 8.5
, NAB hereby agrees to indemnify, defend and hold harmless
GWB, its Subsidiaries, and their respective directors, officers, shareholders, partners, members, attorneys, accountants, agents, representatives and employees and their heirs, successors and permitted assigns, each in their capacity as such, from,
against and in respect of any and all Losses imposed on, sustained by, incurred or suffered by, or asserted against, any such Person, whether in respect of third-party claims, claims between NAB and GWB, or otherwise, arising out of or as a result
of (a) NAB’s or its Subsidiaries’ breach of this Agreement or (b) any specific actions taken by GWB or any Service Recipient at the express written direction of NAB or its Subsidiaries given after the effective date of this
Agreement;
provided
,
however
, that NAB shall not have any liability of any kind for any Service rendered by it (or by any Service Provider) under this Agreement except to the extent that such Losses arise out of NAB’s or any of
its Subsidiaries’ own gross negligence or willful misconduct. NAB shall not be liable hereunder for any specific act or omission to act by NAB (or by any Service Provider) if such specific action is taken at GWB’s or any of its
Subsidiaries’ express written direction given after the effective date of this Agreement.
Section 5.2
Indemnification by
GWB
. Subject to
Section 8.5
, GWB hereby agrees to indemnify, defend and hold harmless NAB, its Subsidiaries, and their respective directors, officers, shareholders, partners, members, attorneys, accountants, agents, representatives
and employees and their heirs, successors and permitted assigns, each in their capacity as such, from, against and in respect of any and all Losses imposed on, sustained by, incurred or suffered by, or asserted against, any such Person, whether in
respect of third-party claims, claims between NAB and GWB, or otherwise, arising out of or as a result of (a) GWB’s or its Subsidiaries’ breach of this Agreement or (b) any specific actions taken by NAB or any Service Provider at
the express written direction of GWB or its Subsidiaries given after the effective date of this Agreement. GWB shall not be liable hereunder for any specific act or omission to act by GWB (or by any Service Recipient) if such specific action is
taken at NAB’s or any of its Subsidiaries’ express written direction given after the effective date of this Agreement.
Section 5.3
Claims for Indemnification
.
(a)
Notice of Claim
. Any Person who is claiming indemnification pursuant to the provisions of
Section 5.1
or
Section 5.2
(the “
Indemnified Person
”) shall deliver a written notification to the Person to provide indemnification under this Agreement (the “
Indemnifying Person
”) of each such claim for
indemnification no later than 10 Business Days after such
-15-
claim becomes known to the Indemnified Person, specifying the facts known to such Indemnified Person constituting the basis for, and the amount (if known) of (including the basis of calculation
of such amount), the claim asserted (a “
Claim Notice
”). Such written notice shall be accompanied by a copy of all papers served, if any, and any memoranda, recordings or other records of the Indemnified Person relating to the claim.
Failure of the Indemnified Person to give such notice or to give such notice in such form shall not relieve the Indemnifying Person from its obligations under this Agreement except to the extent that the Indemnifying Person is actually and
materially prejudiced by such failure.
(b)
Defense and Settlement of Third-Party Claims
.
(i) The Indemnifying Person shall have 30 days (or such lesser number of days set forth in the Claim Notice as may be required
by court proceedings in the event of a litigated matter) after receipt of the Claim Notice (the “Notice Period”) to notify the Indemnified Person that it desires to assume the defense of the Indemnified Person against the Third-Party Claim
specified in such Claim Notice. In the event that the Indemnifying Person notifies the Indemnified Person within the Notice Period that it desires to defend the Indemnified Person against any Third-Party Claim, the Indemnifying Person shall have the
right to defend the Indemnified Person by appropriate proceedings and shall have the sole power to direct and control such defense at its expense. Once the Indemnifying Person has duly assumed the defense of such Third-Party Claim, the Indemnified
Person shall have the right, but not the obligation, to participate in any such defense and to employ separate counsel of its choosing. The Indemnified Person shall participate in any such defense at its expense (which expense shall not constitute a
Loss) unless the Indemnifying Person and the Indemnified Person are both named parties to the proceedings and the Indemnified Person shall have reasonably concluded, based on the written advice of counsel, that representation of both parties by the
same counsel would be inappropriate due to actual or potential differing material interests between them. The Indemnifying Person shall not, without the prior written consent of the Indemnified Person, settle, compromise or offer to settle or
compromise any Third-Party Claim; provided, however, that no such prior written consent of the Indemnified Person shall be required to any proposed settlement that involves only the payment of money by the Indemnifying Person, includes as an
unconditional term thereof the granting by the person asserting such claim or bringing such action of an unconditional release from liability to all Indemnified Parties with respect to such claim; such proposed settlement is not dispositive with
respect to other claims that may be made by any Indemnified Person; no injunctive or equitable is entered against any Indemnified Person; that the proposed settlement contains no requirement for a press release or other public statement that would
likely have a negative impact on any Indemnified Person; and the proposed settlement does not include any admission of culpability.
(ii) If the Indemnifying Person elects not to defend the Indemnified Person against such Third-Party Claim, whether by not
giving the Indemnified Person timely notice of its desire to so defend or otherwise, the Indemnified
-16-
Person shall have the right but not the obligation to assume its own defense;
it
being
understood
that the Indemnified Person’s right to indemnification for a
Third-Party Claim shall not be adversely affected by assuming the defense of such Third-Party Claim. The Indemnified Person shall not settle a Third-Party Claim without the consent of the Indemnifying Person and, if applicable, its respective
insurer.
(iii) Each Party shall cooperate, and shall cause its respective Representatives and Subsidiaries to corporate,
with the other in order to ensure the proper and adequate defense of any such Third-Party Claim, including by providing access to relevant business records, other documents and employees. Each Party shall use reasonable best efforts to avoid
production of confidential information (consistent with Applicable Law), and to cause all communications among employees, counsel and other Persons representing any party to such Third-Party Claim to be made so as to preserve any applicable
attorney-client or work-product privilege.
(c)
Response to Claims Not Involving Third-Party Claims.
In the event
any Indemnifying Person receives a Claim Notice from an Indemnified Person pursuant to
Section 5.3(a)
that does not involve a Third-Party Claim, the Indemnifying Person shall notify the Indemnified Person within 30 Business Days
following its receipt of such notice whether the Indemnifying Person disputes its liability to the Indemnified Person under this
Article V
.
Section 5.4
Indemnification Limitations
.
(a) Subject to the other provisions of this
Article V
, each Indemnified Person shall act in good faith, and will make
the same decisions in the use of personnel and the incurring of expenses as it would make if it were engaged and acting entirely at its own cost and for its own account regarding the conduct of any proceedings or the taking of any action for which
indemnification may be sought.
(b) Each Indemnified Person shall use its commercially reasonable efforts to mitigate any
Loss that is subject to indemnification pursuant to the provisions of
Section 5.1
or
Section 5.2
. In the event an Indemnified Person fails to so mitigate a Loss, the Indemnifying Person shall have no liability for any portion
of such Loss that reasonably could have been avoided had the Indemnified Person made such efforts.
(c) Upon making any
indemnification payment in respect of a Third-Party Claim, the Indemnifying Person will, to the extent of such payment, be subrogated to all rights of the Indemnified Person against the relevant third party in respect of the Loss to which the
payment relates;
provided
,
however
, that until the Indemnified Person recovers full payment for such Loss, any and all claims of the Indemnifying Person against any such third party on account of said payment are hereby made expressly
subordinated and subjected in right of payment to the Indemnified Person’s rights against such third party. Without limiting the generality of any other provision of this Agreement, each such Indemnified Person and Indemnifying Person will duly
execute upon request all instruments reasonably necessary to evidence and perfect the above-described subrogation and subordination rights.
-17-
Section 5.5
Payments
. The Indemnifying Person shall pay all amounts payable pursuant
to this
Article V
, by wire transfer of immediately available funds, promptly following receipt from an Indemnified Person of a bill, together with all accompanying reasonably detailed back-up documentation, for a Loss that is the subject of
indemnification under this Agreement, unless the Indemnifying Person in good faith disputes the Loss, in which event it shall so notify the Indemnified Person. In any event, the Indemnifying Person shall pay to the Indemnified Person, by wire
transfer of immediately available funds, the amount of any Loss for which the Indemnifying Person is liable under this Agreement no later than three Business Days following any Final Determination of any dispute with respect to such Loss finding the
Indemnifying Person’s liability therefor. All payments made pursuant to this
Article V
shall be made in U.S. dollars.
Article VI
INTELLECTUAL
PROPERTY
Section 6.1
Ownership of Intellectual Property
. Ownership of any Intellectual Property developed or generated
after the date hereof by or on behalf of any Party in connection with any Service shall vest in the Service Provider of such Service, other than Intellectual Property constituting derivative works of any Service Recipient’s pre-existing or
independently developed Intellectual Property or of third party Intellectual Property licensed to any Service Recipient. GWB, on behalf of each applicable Service Recipient, agrees to assign, and hereby assigns, all right, title and interest in any
such Intellectual Property developed or generated after the date hereof by or on behalf of GWB and its Subsidiaries in connection with any Service to the applicable Service Provider.
Section 6.2
Licensing of Intellectual Property
.
(a) To the extent that, in connection with its provision of any Service, any Service Provider provides any Service Recipient
with access to any Technology the receipt of which would, in the absence of a license from Service Provider, infringe or misappropriate any Intellectual Property (excluding Trademarks) owned and licensable by Service Provider (collectively,
“
Service IP
”), then Service Provider hereby grants to the applicable Service Recipient, during the term of this Agreement, a non-exclusive, revocable, personal, non-transferable, royalty-free, fully paid-up license, without the
right to sublicense, under such Service IP, solely to the extent necessary for the applicable Service Recipient to receive such Services in accordance with this Agreement.
(b) To the extent that, in connection with its provision of any Service, any Service Provider provides any Service Recipient
with access to any Technology the Intellectual Property rights in which are not owned by such Service Provider but which are licensed by a third party to such Service Provider with a right of such Service Provider to grant a sublicense as set forth
herein (“
Third-Party IP
”), such Service Provider hereby grants to such Service Recipient, during the term of this Agreement, a non-exclusive, revocable, personal, non-transferable, royalty-free, fully paid-up sublicense, without the
right to further sublicense, under such Third-Party IP, to internally use such Technology, solely to the extent such grant would not breach or otherwise violate any agreement between such Service Provider with any third party and solely to the
extent necessary for such Service Recipient to
-18-
receive Services in accordance with this Agreement;
provided
that such Service Recipient’s access to, use of and rights for such Third-Party IP shall be subject in all regards to any
restrictions, limitations or other terms or conditions imposed by the licensor of such Third-Party IP, which terms and conditions will be provided to the applicable Service Recipient by the applicable Service Provider to the extent permitted by such
terms and conditions.
(c) Upon the termination or expiration of any Service pursuant to this Agreement, the license or
sublicense, as applicable, to the relevant Intellectual Property granted hereunder in connection with such Service will automatically terminate (except to the extent such license or sublicense also applies to one or more Services that has not
terminated or expired);
provided
,
however
, that all licenses and sublicenses granted hereunder shall terminate immediately upon the expiration or earlier termination of this Agreement for any reason.
Section 6.3
Ownership of Data
. Any and all data, documents and other records originally provided by any Service Recipient to any
Service Provider in connection with the provision of the Services shall be and remain the exclusive property of such Service Recipient. The Service Recipient may at any time request that the Service Provider (a) deliver such data, documents and
records in the format provided by the Service Recipient, together with information codes and tools necessary to reasonably process such data and records; and (b) delete and otherwise destroy such Service Recipient data, documents and other
records permanently, except to the extent the Service Provider is required by Applicable Law to retain a copy for its records or to the extent any such data, documents and other records are included in internal board, board committee or senior
executive meeting papers.
Article VII
CONFIDENTIALITY; SYSTEMS SECURITY
Section 7.1
Confidentiality
. All non-public information provided by either Party or any of their respective Subsidiaries to the
other Party or any of the other Party’s Subsidiaries shall be kept confidential in accordance with the terms of Section 6.6 of the Stockholder Agreement. Notwithstanding anything in Section 6.6 of the Stockholder Agreement to the
contrary, each Service Provider shall have the right to disclose non-public information to any Third-Party Provider to the extent reasonably necessary for such Service Provider to provide the Services in the manner required by this Agreement;
provided
that such disclosure shall be made under confidentiality terms and conditions that are no less favorable to GWB and its Subsidiaries than the provisions of Section 6.6 of the Stockholder Agreement.
Section 7.2
Systems Securit
y.
(a) If either Party or any of its respective Subsidiaries (such Party together with its Subsidiaries, the “
Accessing
Party
”) is given access to the computer system(s), facilities, networks (including voice or data networks) or software (collectively, “
Systems
”) used by the other Party or any of the other Party’s Subsidiaries (such
other Party and its Subsidiaries, the “
Disclosing Party
”) in connection with the provision of the Services, the Accessing Party shall comply with the Disclosing Party’s security regulations, which shall be provided by the
Disclosing Party prior to access to the Systems. The Accessing Party will not
-19-
tamper with, compromise or circumvent any security or audit measures employed by the Disclosing Party. The Accessing Party shall (i) ensure that only those users who are specifically
authorized to gain access to the other’s Systems gain such access and (ii) prevent unauthorized destruction, alteration or loss of information contained therein. If at any time the Disclosing Party determines that any personnel of the
Accessing Party has sought to circumvent or has circumvented the Disclosing Party’s security regulations or other security or audit measures or that an unauthorized person has accessed or may access the Disclosing Party’s Systems or a
person has engaged in activities that may lead to the unauthorized access, destruction or alteration or loss of data, information or software, the Disclosing Party may immediately terminate any such person’s access to the Systems and, if such
person’s access is terminated, shall immediately notify the Accessing Party. In addition, a material failure to comply with the Disclosing Party’s security regulations shall be a breach of this Agreement, and the Parties shall work
together to rectify any such failure to comply with the Disclosing Party’s security regulations. If any breach of the Disclosing Party’s security regulations is not rectified within ten days following its occurrence, the Disclosing Party
shall be entitled to immediately terminate the Services to which the breach relates or, if it relates to all the Services that the Disclosing Party receives or provides, as applicable, the non-breaching Party shall be entitled to immediately
terminate the Agreement in its entirety.
(b) The Accessing Party represents and warrants to the Disclosing Party that all
software code, any related deliverables and any data or information input into any Systems in connection with the Services does not and will not contain any program, routine, device, code, instructions (including any code or instructions provided by
third parties) or other undisclosed feature, including a time bomb, virus, software lock, drop-dead device, malicious logic, worm, Trojan horse, spyware, bug, error, defect or trap door, that is capable of (or has the effect of allowing any
untrusted party to be capable of) accessing, modifying, deleting, damaging, disabling, deactivating, interfering with or otherwise harming the Services or any of the Disclosing Party’s Systems, data or other electronically stored information
(collectively, “
Disabling Procedures
”). Such representation and warranty applies regardless of whether such Disabling Procedures are authorized by the Disclosing Party to be included in the Services or related deliverables.
Notwithstanding any other limitations in this Agreement, each Accessing Party agrees to notify the applicable Disclosing Party immediately upon discovery of any Disabling Procedures that are or reasonably suspected to be included in the Services or
related deliverables, and if Disabling Procedures are discovered or reasonably suspected to be present therein, the Accessing Party shall immediately take all actions reasonably necessary, at its own expense, to identify and eradicate (or equip the
other party to identify and eradicate) such Disabling Procedures and carry out any recovery necessary to remedy any impact of such Disabling Procedures.
Article VIII
SETTLEMENT; DISPUTE RESOLUTION
Section 8.1
Resolution Procedure
. Prior to the initiation of legal proceedings, other than the proceedings referred to in
Section 8.4
, each Party agrees to use its commercially reasonable efforts to resolve disputes under this Agreement by a negotiated resolution between the Parties or as provided for in this
Article VIII
.
-20-
Section 8.2
Exchange Of Written Statements
. In the event of a dispute under this
Agreement, either Party may give a notice to the other of a dispute. Not later than 30 days after such notice (or such later date as agreed by the Parties), unless the dispute has been resolved in the interim, NAB and GWB shall each submit to the
other a written statement setting forth their respective description of the dispute and of the positions of the Parties on such dispute and their respective recommended resolution and the reasons why such recommended resolution is fair and equitable
in light of the terms and spirit of this Agreement. Such statements represent part of a good-faith effort to resolve a dispute and as such, no statements prepared by any Party pursuant to this
Article VIII
may be introduced as evidence or
used as an admission against interest in any arbitral or judicial resolution of such dispute.
Section 8.3
Good-Faith
Negotiations
. After the simultaneous exchange of such written statements, NAB and GWB shall promptly commence good-faith negotiations to resolve such dispute but without any obligation to resolve it. The negotiating meetings may be conducted by
teleconference or in person, as the Parties deem appropriate. If the Parties, acting reasonably and in good faith, are unable to resolve the dispute within 30 days following the commencement of negotiations, then either Party may commence legal
proceedings in any court of competent jurisdiction.
Section 8.4
Injunctive Relief
. The Parties recognize and acknowledge that
in the event of a potential, anticipatory or actual breach of this Agreement, it may be necessary or appropriate for the non-breaching Party to seek injunctive relief, if and to the extent legally available, in order to avoid harm or further harm to
the non-breaching Party. If a Party desires injunctive relief, it may pursue the same in any court of competent jurisdiction;
provided
,
however
, that, if granted, such injunctive relief shall apply only to prevent a breach or further
breaches and shall remain in effect only so long as the court deems necessary or appropriate to permit resolution of the underlying disputes in accordance with this
Article VIII
. Neither the seeking of injunctive relief nor the granting
thereof is intended or shall result in the application of a substantive or procedural law other than the applicable governing law pursuant to this Agreement.
Section 8.5
Limitations on Damages
.
(a) Neither Party shall be liable or responsible for (i) any Losses that are not direct, actual damages or (ii) any
consequential, punitive, special or speculative damages or lost profits, in each case, with respect to any claim made under or in respect of this Agreement (including claims made pursuant to
Article V
) or otherwise relating to, arising from
or regarding the provision (or failure to provide) or receipt of any Services.
(b) In no event shall the aggregate
liability of either Party under this Agreement (including, for the avoidance of doubt, liability for any Losses pursuant to
Article V
) exceed an amount equal to the aggregate payments made for Services under this Agreement during the
term of this Agreement, except for any Losses as a result of any breach of Applicable Law,
Article VI
or
Article VII
of this Agreement, which shall be uncapped.
(c) Neither NAB nor any of its Subsidiaries shall be liable (including as a result of claims made pursuant to
Article V
)
for (i) the accuracy or completeness of any data
-21-
provided by GWB or any of its Subsidiaries in connection with the provision of the Services or (ii) the use of any deliverables supplied by NAB and its Subsidiaries to GWB and its
Subsidiaries as a result of the Services provided pursuant to this Agreement.
Article IX
MISCELLANEOUS
Section 9.1
Notices
. All notices, requests, demands and other communications required hereunder shall be in writing and shall be
deemed to have been duly given or made if delivered personally, sent by facsimile transmission or telex confirmed in writing within two Business Days, confirmed electronic mail, or sent by prepaid overnight, trackable courier service, as follows:
If to NAB, to:
National Australia Bank Limited
Pier 3 Level 4
800 Bourke
Street
Docklands, Victoria, Australia 3008
Attention: HO Corporate Advisory Legal
Facsimile: +61 1300 728 820
Email: notices@nab.com.au
If to GWB, to:
Great Western Bancorp, Inc.
100 North Phillips Avenue
Sioux Falls, South Dakota 57104
Attention: General Counsel
Facsimile: (605) 333-7882
Email: donald.straka@greatwesternbank.com
Any
Party may change the address or fax number to which such communications are to be sent to it by giving written notice of change of address to the other Parties in the manner provided above for giving notice.
Section 9.2
Binding Effect; Assignment; No Third-Party Beneficiaries
. This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors and assigns. Except as expressly provided in this Agreement, this Agreement and all rights hereunder may not be assigned by any Party except by prior written consent of the other Parties, and
any purported assignment without such consent shall be null and void. The Parties intend that this Agreement shall not benefit or create any right or cause of action in or on behalf of any Person other than the Parties and their respective
Subsidiaries; that the provisions of
Article V
shall inure to the benefit of each of the Indemnified Persons.
Section 9.3
Severability
. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may
be invalid
-22-
or unenforceable in whole or in part. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the Parties shall in good faith use commercially reasonable efforts to find and effect an alternative means to achieve the same or substantially the same result as that contemplated by such provision.
Section 9.4
Entire Agreement; Amendment
. All Exhibits shall be deemed to be incorporated into and made part of this
Agreement. This Agreement, together with the Stockholder Agreement, contain the entire agreement and understanding between the Parties with respect to the subject matter hereof (and supersede any prior agreements, arrangements or understandings
between the Parties with respect to the subject matter hereof) and there are no agreements, representations, or warranties with respect to the subject matter hereof which are not set forth in this Agreement. This Agreement may not be amended or
revised except by a writing signed by the Parties.
Section 9.5
Waiver
. Any waiver, permit, consent or approval of any kind or
character of any breach or default under this Agreement, or any waiver of any provision or condition of this Agreement shall be effective only to the extent specifically set forth in writing. Notwithstanding any provision set forth in this
Agreement, no Party shall be required to take any action or refrain from taking any action that would cause it to violate any Applicable Law, statute, legal restriction, regulation, rule or order of any Governmental Authority.
Section 9.6
Governing Law; Consent to Jurisdiction
. The execution, interpretation, and performance of this Agreement shall be
governed by the laws of the State of New York without giving effect to any conflict of laws provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the law of any other jurisdiction other
than the State of New York. EACH PARTY HERETO, TO THE EXTENT IT MAY LAWFULLY DO SO, HEREBY EXCLUSIVELY SUBMITS TO THE JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY AND THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AS WELL AS TO THE JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL MAY BE TAKEN OR OTHER REVIEW SOUGHT FROM THE AFORESAID COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION, APPEAL OR OTHER PROCEEDING
UNDER OR WITH RESPECT TO THIS AGREEMENT OR ANY OF THE AGREEMENTS, INSTRUMENTS OR DOCUMENTS CONTEMPLATED HEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE IN ANY OF SUCH COURTS.
Section 9.7
Waiver of Jury Trial
. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY SUIT, ACTION, APPEAL, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY OF THEM AGAINST THE OTHER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH, OR THE ADMINISTRATION THEREOF OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN
OR THEREIN, AND NO PARTY TO THIS AGREEMENT SHALL SEEK A JURY TRIAL IN ANY SUCH LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED UPON, OR ARISING OUT OF, THIS AGREEMENT OR ANY
-23-
RELATED INSTRUMENTS OR THE RELATIONSHIP BETWEEN THE PARTIES. NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL
CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
Section 9.8
Counterparts
. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an original as against any Party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding
when counterparts, individually or taken together, shall bear the signatures of all of the Parties reflected hereon as the signatories. The execution and delivery of this Agreement may be effected by facsimile or any other electronic means such as
“.pdf” or “.tiff” files.
Section 9.9
Relationship of the Parties
. The Parties agree that in performing
their responsibilities pursuant to this Agreement, they are in the position of independent contractors, and this Agreement shall not create any partnership, joint venture or other similar arrangement between the Parties or any of their respective
Subsidiaries.
Section 9.10
Force Majeure
. No Party shall be liable for any failure or performance to the extent attributable
to acts, events or causes (including war, riot, rebellion, civil disturbances, flood, storm, fire and earthquake or other acts of God or conditions or events of nature, or any act of any Governmental Entity) beyond its control to prevent in whole or
in part performance by such Party under this Agreement.
Section 9.11
Further Assurances
. The Parties hereby agree to do such
further acts and things, and to execute and deliver such additional conveyances, assignments, agreements and instruments, as either may at any time reasonably request in order to better assure and confirm unto each Party their respective rights,
powers and remedies conferred hereunder.
Section 9.12
Subsidiary Action
. Wherever a Party has an obligation under this
Agreement to “cause” a Subsidiary of such Party or any such Subsidiary’s officers, directors, management or employees to take, or refrain from taking, any action, or such action that may be necessary to accomplish the purposes of this
Agreement, such obligation of such Party shall be deemed to include an undertaking on the part of such Party to cause such Subsidiary to take such necessary action. Wherever this Agreement provides that a Subsidiary of a Party has an obligation to
act or refrain from taking any action, such party shall be deemed to have an obligation under this Agreement to cause such Subsidiary, or any such Subsidiary’s officers, directors, management or employees, to take, or refrain from taking, any
action, or such action as may be necessary to accomplish the purposes of this Agreement. To the extent necessary or appropriate to give meaning or effect to the provisions of this Agreement or to accomplish the purposes of this Agreement, NAB and
GWB, as the case may be, shall be deemed to have an
-24-
obligation under this Agreement to cause any Subsidiary thereof to take, or refrain from taking, any action, and to cause such Subsidiary’s officers, directors, management or employees, to
take, or refrain from taking, any action otherwise contemplated herein. Any failure by an Subsidiary of NAB or GWB to act or refrain from taking any action contemplated by this Agreement shall be deemed to be a breach of this Agreement by NAB or
GWB, respectively.
Section 9.13
Conditions Precedent
. The provisions of this Agreement will only take effect upon the
consummation of the IPO and only if the IPO is consummated by [
—
], 2014 (or such later date as may be agreed to in writing by the Parties).
[
Signature Page Follows
]
-25-
I
N
W
ITNESS
W
HEREOF
, the parties hereto have executed
and delivered this Agreement on the day and year first above written.
|
|
|
|
|
N
ATIONAL
A
USTRALIA
B
ANK
L
IMITED
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
G
REAT
W
ESTERN
B
ANCORP
, I
NC
.
|
|
|
|
|
By:
|
|
|
[Signature Page to Transitional Services Agreement]
Exhibit A – Services
Capitalized terms used in this Exhibit A and not otherwise defined have the respective meanings ascribed thereto in the Transition Services
Agreement (the “
Agreement
”) to which this Exhibit A is attached and of which the Exhibit A forms a part. For purposes of this Exhibit A, “
Less Than Majority Holder Date
” and “
Non-Control Date
” have
the respective meaning ascribed in the Stockholder Agreement.
Each of the services listed in this Exhibit A will be required by GWB and
its Subsidiaries following the expiration of the applicable Service Term and will be included in the migration plans developed pursuant to Section 2.9 of the Agreement:
|
|
•
|
|
Asset Liability Management Modeling.
|
|
|
•
|
|
Risk Systems and Support – Solely with respect to services relating to provision of access to the credit rating system (“CRS”) environment maintained by NAB and related subject matter expertise supporting
the CRS environment.
|
|
|
•
|
|
Other Systems Access – Solely with respect to services related to Hyperion Planning.
|
|
|
•
|
|
Tax Support – Solely with respect to those items of tax support which do not relate to reporting GWB tax related information to NAB for NAB’s internal tax strategy and monitoring.
|
|
|
•
|
|
Insurance Arrangements.
|
A-1 of A-9
Exhibit A – Series
|
I.
|
Asset Liability Management Modeling
|
GWB relies on the usage of the NAB
asset-liability management modelling framework for interest rate risk in the banking book (“
IRRBB
”) and liquidity risk measurement (“
LIFT
”) reporting.
|
|
|
|
|
|
|
Service
|
|
Duration
|
|
Cost/
Month
|
|
Provide access to modelling frameworks associated with the Kamakura Risk Management (“
KRM
”) model (which includes
databases called Aquadata and other tables) necessary to run (1) liquidity risk calculations (known as the LIFT process) for NAB’s name crisis and going concern calculations and (2) the interest rate risk calculations for NAB’s
economic value sensitivity (“
EVS
”), net interest income simulations (“
NIIS
”), value at risk (“
VaR
”) and earnings at risk (“
EaR
”) calculations.
|
|
Non-Control
Date
|
|
$2,764
|
|
|
|
|
|
Support
|
|
|
|
|
|
|
|
|
|
• National Australia Bank Limited New York Branch (a branch of National
Australia Bank Limited) (“
NAB NY
”) to run KRM software for GWB and produce required reports from the KRM output.
• NAB KRM production team will process in KRM all files received from GWB via the file
transfer protocol (“
FTP
”) process for submission to NAB.
• NAB ESSO team to provide support as requested by GWB concerning KRM related services
(including providing software support for GWB treasuring reporting (as needed), configuring the IRRBB model assumptions and executing any model enhancements required by NAB, and executing all functions related to the LIFT model).
|
|
Non-Control
Date
|
|
N/A
|
|
|
|
|
|
Systems
|
|
|
|
|
|
|
|
|
|
Access will be provided through access to NAB App Central. Data files will be uploaded by GWB using FTP or, for data files associated with the LIFT process, Spring CM.
|
|
Non-Control
Date
|
|
N/A
|
Service Contacts
|
|
|
|
|
|
|
|
|
Service Provider:
|
|
Service Recipient:
|
|
|
|
|
|
|
Attn:
|
|
|
|
Attn:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A-2 of A-9
Exhibit A – Services
|
II.
|
GWAN and App Central Support
|
GWB relies on being able to access certain NAB
applications
via
the GWAN data circuit for certain reporting and business related activities.
|
|
|
|
|
|
|
Service
|
|
Duration
|
|
Cost/
Month
|
|
The following services are to be provided by NAB NY:
|
|
Non-Control
Date
|
|
$8,808
|
|
• Connectivity either remotely or from GWB network to GWAN.
• Setup and changes
to user access entitlements for NAB related systems and applications.
• Support for Hyperion Financial Management application (connectivity issues), uploading
file, setup, etc.
• Hosting Great Western Bank’s intranet site.
• Support for any new
user to setup in Secured Access Registry Depository (SARD), system access.
• Software support for laptop, NAB cell phone and troubleshooting of any devices.
• General workstation
support.
• User
admin maintenance and clean-up of old/unused accounts.
|
|
|
|
|
Service Contacts
|
|
|
|
|
|
|
|
|
Service Provider
:
|
|
Service Recipient
:
|
|
|
|
|
|
|
Attn:
|
|
|
|
Attn:
|
|
|
A-3 of A-9
Exhibit A – Services
|
III.
|
Risk Systems and Support
|
GWB relies on the CRS system and resource support in
order to produce credit risk ratings on commercial and agricultural loans. GWB also reports information on its and its Subsidiaries risk weighted assets to NAB in connection with NAB’s internal risk management processes.
|
|
|
|
|
|
|
Service
|
|
Duration
|
|
Cost/
Month
|
|
Provide access to the CRS environment and subject matter expertise from the NAB Risk Modeling & Management group to support the CRS
environment at GWB, including support in model development, model validation, systems support, project management and general consultation.
|
|
Non-Control
Date
|
|
$2,902
|
|
|
|
|
|
Provide access to applications required for GWB to report its and its Subsidiaries risk weighted assets positions and related
information to NAB consistent with past practice.
|
|
|
|
|
Service Contacts
|
|
|
|
|
|
|
|
|
Service Provider:
|
|
Service Recipient:
|
|
|
|
|
|
|
Attn:
|
|
|
|
Attn:
|
|
|
A-4 of A-9
Exhibit A – Services
GWB relies on the App Central in order to log into the NAB
system to utilize HFM and Smartview systems which are used to provide NAB with GWB’s financial results and analysis on a monthly basis as well as provide annual budget and forecasting information and I-Certify which is used to submit quarterly
and annual certifications to NAB for various financial and operational activities. GWB uses Hyperion Planning annually for budgeting/forecasting purposes.
|
|
|
|
|
|
|
Service
|
|
Duration
|
|
Cost/
Month
|
|
Provide GWB with access to the following:
|
|
|
|
|
|
|
|
|
|
• NAB App Central –to be used in order to utilize tools necessary to report GWB financial data and
certifications.
|
|
Non-Control
Date
|
|
N/A
|
|
|
|
|
|
• Hyperion Financial Management – to be used to upload monthly financial data through journal uploads
via templates provided by NAB, access past financial data related to GWB and access other templates/tools for use in reporting information to NAB.
|
|
Non-Control
Date
|
|
N/A
|
|
|
|
|
|
• Smartview – to be used in connection with Hyperion Financial Management for reporting GWB financial
information to NAB.
|
|
Non-Control
Date
|
|
N/A
|
|
|
|
|
|
• Hyperian Planning – to be used to provide GWB budget and forecast information to NAB.
|
|
Non-Control
Date
|
|
N/A
|
|
|
|
|
|
• I-Certify – to be used to prepare quarterly and annual financial and operational certifications by
GWB in connection with information reported to NAB, such as information on capital, MSA/RWAs, FDCs and ROMs.
|
|
One-year
anniversary
of the Less
Than
Majority
Holder Date
|
|
N/A
|
|
|
|
|
|
• Corporate Responsibility – Provide access to applications required for GWB to report its and its
Subsidiaries information as requested by NAB in response to NAB’s corporate responsibility initiatives.
|
|
One-year
anniversary
of the Less
Than
Majority
Holder Date
|
|
N/A
|
Service Contacts
|
|
|
|
|
|
|
|
|
Service Provider:
|
|
Service Recipient:
|
|
|
|
|
|
|
Attn:
|
|
|
|
Attn:
|
|
|
A-5 of A-9
Exhibit A – Services
Prior to the date of the Agreement NAB provided GWB oversight
related to various tax considerations pertaining to GWB entities and tax structures to ensure adherence to tax laws that may affect GWB or NAB related entities.
|
|
|
|
|
|
|
Service
|
|
Duration
|
|
Cost/
Month
|
|
Perform half year and year-end (or more frequently if needed) GWB tax accounting and financial reporting; review of tax matters
affecting FIN48 related documentation; tax returns; and other one-time initiatives where tax treatment oversight and recommendations would be required.
|
|
One-year anniversary of
the Less Than Majority
Holder Date
|
|
$10,819
|
Service Contacts
|
|
|
|
|
|
|
|
|
Service Provider:
|
|
Service Recipient:
|
|
|
|
|
|
|
Attn:
|
|
|
|
Attn:
|
|
|
A-6 of A-9
Exhibit A – Services
|
VI.
|
Ops Risk Event Capture System (“ORECS”)
|
GWB utilizes NAB’s ORECS
system for communicating the operational risk loss events experienced by GWB to NAB, to comply with NAB operational risk framework.
|
|
|
|
|
|
|
Service
|
|
Duration
|
|
Cost/
Month
|
|
Provide access to Excel-based spreadsheets and templates for reviewing and reporting operational risk events. Provide access to ORECS
within NAB App Central.
|
|
One-year anniversary of
the Less Than Majority
Holder Date
|
|
NA
|
Service Contacts
|
|
|
|
|
|
|
|
|
Service Provider:
|
|
Service Recipient:
|
|
|
|
|
|
|
Attn:
|
|
|
|
Attn:
|
|
|
A-7 of A-9
Exhibit A – Services
GWB utilizes NAB as a counterparty for interest rate swap
transactions for the purposes of hedging the GWB loan portfolio.
|
|
|
|
|
|
|
Service
|
|
Duration
|
|
Cost/
Month
|
|
NAB London Branch will continue to act as a counterparty to GWB on interest rate swap transactions GWB seeks to complete, provided that
NAB’s decision to act as counterparty to any particular interest rate swap transaction shall be made consistent with NAB’s prior practice together with such modifications as NAB shall make regarding participation in such transactions from
time to time.
|
|
One-year anniversary of
the Less Than Majority
Holder Date
|
|
N/A
1
|
|
|
|
|
|
Provide the interest rate swap services identified in, and on the terms and conditions set forth in, that certain Services Agreement
between NAB and Great Western Bank attached as
Schedule 1
to this Exhibit A (the “
Swap Services Agreement
”). To avoid doubt, this will include booking, confirmation, maintenance and settlement of interest rate swap
transactions on behalf of GWB; preparation, execution, management and maintenance of such transactions; and anything which the Parties agree constitutes transaction processing for the purposes of this Agreement.
|
|
Maturity of all
outstanding swaps
between NAB, on one
hand, and GWB and
any of its Subsidiaries,
on the other hand
|
|
N/A
|
Service Contacts
|
|
|
|
|
|
|
|
|
Service Provider:
|
|
Service Recipient:
|
|
|
|
|
|
|
Attn:
|
|
|
|
Attn:
|
|
|
|
|
|
|
|
|
Attn:
|
|
|
|
|
|
|
|
1
|
Costs on any particular interest rate swap transaction will be set in accordance with prevailing market terms at the time of the transactions and consistent with past practice between NAB and GWB (including payment by
NAB of 30% annual gross revenue on any such transaction in equal monthly installments consistent with the Swap Services Agreement).
|
A-8 of A-9
Exhibit A – Services
|
VIII.
|
Insurance Arrangements
|
GWB utilizes NAB to maintain GWB’s current insurance
arrangements.
|
|
|
|
|
|
|
Service
|
|
Duration
|
|
Cost
|
|
Provide insurance services for both the general lines and financial lines, including negotiating all policy wordings and premiums,
selection of insurers, management of claims and provision of specialist support to GWB.
|
|
One-year
anniversary of
the Less Than
Majority Holder
Date
|
|
Annual Premiums, Annual Insurance Brokers Fee, and an annual
negotiated amount based on claims notified and extra services provided
(under 25 hours = no charge; over 25 hours = $325 per
hour or agreed market
rates at the time of the claim)
|
|
Financial Lines:
Directors and Officers Liability
Crime and Professional Indemnity
Employment Practices Liability
Fiduciary Liability
General Lines:
Property
Liability
|
|
|
Service Contacts
|
|
|
|
|
|
|
|
|
Service Provider:
|
|
Service Recipient:
|
|
|
|
|
|
|
Attn:
|
|
|
|
Attn:
|
|
|
A-9 of A-9
Schedule 1 to Exhibit A
Services Agreement between National Australia Bank Limited and Great Western Bank
Dated
2009
(1) NATIONAL AUSTRALIA BANK LIMITED
(2) GREAT WESTERN BANK
SERVICES
AGREEMENT
in respect of Interest Rate Swaps
THIS AGREEMENT
is made the day of
2009
BETWEEN:
|
(1)
|
NATIONAL AUSTRALIA BANK LIMITED
(registered in the State of Victoria, Australia with number ABN 12 004 044 937) (
“NAB”
); and
|
|
(2)
|
GREAT WESTERN BANK
(registered in the State of South Dakota) whose registered PO Box 925 100 N Phillips Av, Sioux Falls, SD 57101 (
“GWB”
).
|
RECITALS
|
(A)
|
GWB is a wholly-owned subsidiary of NAB. GWB is authorised by the FDIC and SDBC to carry out certain banking activities in the US pursuant to the US regulations.
|
|
(B)
|
NAB is prepared to provide the Services to GWB to assist its operations on the terms set out in this Agreement.
|
NOW IT IS AGREED
as follows:
|
1.
|
Definitions and Interpretation
|
|
1.1
|
In this Agreement (including the Recitals) except where the context otherwise requires, the following words and expressions shall have the following meanings:
|
“
Business Day
”
means a day (other than a Saturday or Sunday) when banks open for business in London and the
United States of America;
“
Dispute
”
means any dispute in relation to this Agreement;
“
Dispute Notice
”
means a written notice as set out in clause 8.2
“
DPA
”
means the Data Protection Act 1998;
“
FDIC
”
means Federal Deposit Insurance Corp, a regulatory body governing banks in the US;
“
FSA
”
means the Financial Services Authority and any successor regulator to it;
“
FSA Rules
”
means the principles and rules of the Financial Services Authority or any successor regulator, as
may be amended from time to time;
“
FSMA
”
means the Financial Services and Markets Act 2000 and any amending
or replacement legislation which regulates the carrying on of investment or financial business in the United Kingdom. Reference to any section in the FSMA shall be to that section as amended from time to time and, if it is repealed and replaced,
then to that new section which most closely corresponds to the original section;
“GWB Activities”
entering into interest rate swap transactions between GWB and
NAB for the purposes of hedging the GWB loan portfolio;
“GWB Staff”
means the certain individuals nominated by GWB and as
notified to NAB from time to time as being responsible for dealing with the GWB Activities;
“Legislation and Regulations”
means all legislation (including the FSMA), statutory instruments, the NIPs Code and the FSA Rules insofar as they relate to the performance of the various obligations under this Agreement or to the regulation of GWB or NAB;
“OCC”
means the Office of the Comptroller of the Currency, a regulatory body governing Banks in the US;
“NIPs Code”
means the Non-Investment Products Code, as published by the Bank of England from time to time, and any codes of
practice or regulations which may replace or supersede it;
“Reporting Lines”
means such reporting lines as the parties
may agree from time to time;
“SDBC”
means the South Dakota Banking Commission, a body charged with the regulation and
supervision of state chartered and licensed financial institution in South Dakota.
“Services”
means the services to be
provided by NAB to GWB in accordance with the terms of this Agreement and as agreed between the parties in writing from time to time which, on the date hereof, shall be those services described in schedule 1; and
“Transaction Processing”
means the booking, confirmation, maintenance and settlement of Interest Rate Swap transactions on
behalf of GWB, including (but not limited to) the preparation, execution, management, and maintenance of said transactions, and anything which the parties agree is Transaction Processing for the purposes of this Agreement.
|
1.2
|
In this Agreement, unless the context suggests otherwise, words importing the singular include the plural and vice versa, words importing a gender include every gender and any reference to a person shall include bodies
corporate, unincorporated associations, partnerships and individuals.
|
|
1.3
|
The clause headings in this Agreement are for ease of reference and shall not affect the interpretation of this Agreement.
|
|
1.4
|
References to clauses and schedules are, unless otherwise stated, to clauses of and schedules to this Agreement.
|
|
1.5
|
In this Agreement any reference to any enactment shall include references to any statutory modification or re-enactment thereof or to any regulation or order made under such enactment (or under such a modification or
re-enactment).
|
2
|
2.1
|
NAB shall provide the Services to GWB subject to the terms and conditions of this Agreement. GWB appoints NAB as its agent to execute such documents and enter into such agreements as NAB may consider necessary or
desirable for the proper performance of the Services.
|
|
2.2
|
NAB shall provide the Services at all times in accordance with the Legislation and Regulations but subject to this NAB is to have wide discretion and autonomy in how it chooses to provide the Services and to meet its
obligations under this Agreement.
|
|
2.3
|
NAB shall perform the Services in good faith, with reasonable skill and care and to the same standards and service levels as it performs such functions in respect of its own business activities.
|
|
2.4
|
The appointment of NAB to provide the Services hereby effected by this Agreement is non-exclusive, so that GWB is entitled to undertake tasks the same as or similar to the Services or to retain the services of a third
party to provide services that are the same as or similar to the Services, and NAB is entitled to provide services that are the same as or similar to the Services to any third party, but in any case without affecting the relevant party’s
obligations under this Agreement. If either party intends to undertake tasks for a third party which are the same as or similar to the Services or to retain the services of a third party to provide services that are the same as or similar to the
Services then it shall inform the other party immediately.
|
|
2.5
|
In consideration of NAB agreeing to carry out its obligations under this Agreement and providing the Services, NAB shall remunerate GWB if this Agreement results in the provision of Services by NAB to GWB, Nab shall pay
to GWB 30% of the annual gross revenue realized by NAB, which shall be paid in 12 monthly instalments based on NAB’s annual revenues realized.
|
|
2.6
|
NAB shall bear its own costs and expenses in providing the Services under this Agreement, unless agreed otherwise between the parties in writing.
|
|
|
3.1.1
|
appoint a relationship manager to meet with the other party’s relationship manager periodically in accordance with the Reporting Lines to discuss and deal with matters arising out of this Agreement;
|
|
|
3.1.2
|
keep or cause to be kept such books, records and statements as may be necessary to provide a complete and accurate record of its activities in relation to this Agreement and to show at any time that the requirements of
the Legislation and Regulations have been complied with;
|
3
|
|
3.1.3
|
on request both during and after termination of this Agreement, promptly supply the other party with all information and provide such explanations as it may reasonably request so far as is necessary or desirable to
enable that party to comply with the Legislation and Regulations or otherwise for the purposes of this Agreement;
|
|
|
3.1.4
|
permit the other party (or its agents or contractors) and/ or the FSA/FDIC/OCC / SDBC at any time upon written request, to review its premises, records, controls and security procedures;
|
|
|
3.1.5
|
promptly notify the other party if it becomes aware or has reason to believe it will or may be the subject of, or named in any claim, action, suit, proceeding, arbitration, investigation or enquiry relating to any
alleged breach of the Legislation and Regulations which relates in any way to this Agreement and shall provide the other party with such information as it may reasonably require in order to acquaint itself with the material facts and circumstances
with respect thereto;
|
|
|
3.1.6
|
procure and maintain all technical, human and financial resources sufficient to perform its obligations under this Agreement and to discharge any liabilities as may arise under this Agreement;
|
|
|
3.1.7
|
co-operate with any third party providing services to the other party so far as may reasonably be necessary;
|
|
|
3.1.8
|
give such assistance and information to the other party as it may reasonably require from time to time to enable it to perform its obligations under this Agreement;
|
|
|
3.1.9
|
immediately notify the other of any material alteration to any licence, permission, authorisation or consent, including those from the FSA, that are necessary to enable it fully and effectively to carry out its
obligations under this Agreement or if any of the same cease to be in full force and effect;
|
|
|
3.1.10
|
at all times, comply with the Legislation and Regulations and any reasonable and necessary written instructions issued from time to time by the other party in relation to the matters covered by this Agreement;
|
|
|
3.1.11
|
not knowingly do or omit to do anything that would cause the other party to be in breach of the Legislation and Regulations; and
|
|
|
3.1.12
|
comply with the terms and conditions set out in this Agreement.
|
|
3.2
|
NAB shall co-operate with any duly authorised employee, agent or other representative of GWB or the FSA/OCC / SDBC in such matters as they reasonably require, including in connection with the discharge of any duty under
the Legislation and Regulations, and such co-operation may include access to personnel, documentation, information, data, systems, premises and communications networks in the possession, custody or control of NAB and used for the purpose of the
Services.
|
4
|
3.3
|
NAB shall immediately notify GWB of any developments that may have a material adverse impact on NAB’s ability to meet its obligations under this Agreement, including any relevant material control weaknesses
identified by NAB’s internal or external auditors.
|
|
3.4
|
GWB is entitled at any time to require NAB to permit any duly authorised employee, agent or other representative of GWB or the FSA/OCC / SDBC to audit NAB’s records, systems and procedures for either or both of the
following purposes:
|
|
|
3.4.1
|
to assess the compliance thereof with the Legislation and Regulations or this Agreement; or
|
|
|
3.4.2
|
to enable GWB or the relevant employee, agent or other representative of GWB or the FSA to carry out any right or duty conferred or imposed by the Legislation and Regulations.
|
|
3.5
|
NAB shall for the purpose of an audit under clause 3.4 at all reasonable times during office hours provide access to its premises, records, systems, procedures and staff as may be reasonably necessary or desirable in
connection with the audit, and shall permit GWB or the relevant employee, agent or other representative of GWB or the FSA/OCC / SDBC to take copies of relevant documents or computer files.
|
|
3.6
|
NAB shall correct any material omissions or failures in its records, systems or procedures which have been identified by an audit under clause 3.4. GWB is entitled to review these measures to ensure their adequacy.
|
|
4.
|
Representations and Warranties
|
Each party represents and warrants to the
other that it possesses and shall continue to possess all licences, permissions, authorisations and consents, including those from the FSA, that are necessary to enable it fully and effectively to carry out its obligations under this Agreement.
|
5.1
|
Except as provided for in, or required for the performance of, this Agreement or where disclosure is required to comply with the Legislation and Regulations, court order or a request or requirement of a competent
statutory or regulatory authority, both parties shall at all times use their respective best endeavours to prohibit unauthorised access to any confidential information of the other party acquired pursuant to this Agreement and will not themselves
use or disclose such information. For the avoidance of doubt, information which enters the public domain other than through the breach by either party of their obligations under this clause 6 shall not be deemed to be confidential information.
|
|
5.2
|
This clause 5 shall survive termination of this Agreement.
|
5
|
6.1
|
Each party undertakes and warrants that it will comply in all respects with the provisions of the DPA including without limitation the Data Protection Principles and Parts II and III of the DPA with respect to the
processing of any personal data obtained by it or the other party whilst undertaking its obligations set out in this Agreement.
|
|
6.2
|
This clause 6 shall survive termination of this Agreement.
|
|
7.1
|
Either party may terminate this Agreement at any time on giving not less than 3 months notice in writing to the other.
|
|
7.2
|
If either party commits any material breach of the terms and conditions of this Agreement and, in the case of a breach capable of remedy, has failed to remedy the breach within 10 Business Days after receipt of a
written notice provided by the other party giving full particulars of the breach and requiring it to be remedied, then the other shall be entitled to terminate this Agreement forthwith by written notice to the other.
|
|
7.3
|
On termination of this Agreement for any reason NAB shall hand over to GWB without charge or undue delay:
|
|
|
7.3.1
|
all property of GWB;
|
|
|
7.3.2
|
all records as required by GWB to meet its obligations under the Legislation and Regulations; and
|
|
|
7.3.3
|
copies of all records relating to this Agreement which NAB has kept pursuant to this Agreement.
|
|
8.1
|
Mechanism for Dispute Resolution
|
Before resorting to any external dispute resolution
mechanisms, the parties agree to use their best efforts in good faith to settle a Dispute. In order to facilitate the other party’s fulfilment of its obligations and to minimise the possibility of loss or damage to itself, each party agrees to
inform the appropriate personnel of the other party of any matter which is likely to cause a Dispute promptly after that matter comes to its notice.
If a Dispute arises between the parties, the party that believes a Dispute
exists will give the other party a Dispute Notice, giving details of the Dispute and requesting a meeting of the parties at the Bank’s premises as soon as practicable to discuss and attempt to resolve the Dispute.
6
|
8.3
|
Resolution by escalation procedure
|
Any Dispute submitted by the parties to the dispute
resolution process pursuant to clause 8.2 will be dealt with in the following manner:
|
|
8.3.1
|
the Dispute will be referred initially to the relationship manager of each party;
|
|
|
8.3.2
|
if the relationship managers are unable to resolve the Dispute within 5 Business Days after the Dispute Notice is given, the Dispute will be escalated by each party in accordance with the Reporting Lines; and
|
|
|
8.3.3
|
if the Dispute has not been settled within 15 Business Days after the Dispute Notice is given, the parties will, as soon as practicable, convene a meeting to review and attempt to resolve the Dispute, such meeting to be
attended by all appropriate and relevant personnel of both parties (including legal personnel), who will have full settlement authority.
|
|
|
8.4.1
|
If the parties have not resolved the Dispute to their mutual satisfaction within 20 Business Days after the Dispute Notice is given, either party may submit the Dispute to mediation by providing a written notice
requesting mediation, setting forth the subject of the Dispute and the relief requested, to the other party as well as options for a mediator which will be considered by the parties. Appointment of the mediator and the mediation shall be pursuant to
the rules of the Centre of Dispute Resolution (CEDR), unless otherwise agreed between the parties.
|
|
|
8.4.2
|
The parties will cooperate with the mediator and with one another in scheduling the mediation proceedings, will participate in the mediation in good faith, and will share equally in its costs.
|
|
|
8.4.3
|
All offers, promises, conduct and statements, whether oral or written, made in the course of the mediation by any of the parties, their agents, employees, experts and attorneys, and by the mediator, are confidential,
privileged and inadmissible for any purpose, including impeachment, in any legal proceeding involving the parties, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result
of its use in the mediation.
|
|
|
8.4.4
|
Each party may be represented by a duly qualified practitioner at the mediation.
|
At any time after the initial mediation session or 30 Business Days after the
notice requesting mediation is given, whichever occurs first, if the parties have not resolved the Dispute to their mutual satisfaction, either party may commence legal proceedings in respect of the Dispute.
7
Nothing in this clause precludes either party from taking immediate steps to
seek equitable relief before the appropriate court.
|
9.1
|
The relationship between NAB and GWB is one of independent contractors and not one of employer and employee or of partnership, and nothing in this Agreement and no action by the parties pursuant to this Agreement shall
be taken to imply the contrary.
|
|
9.2
|
Neither party may assign, delegate, transfer or sub-contract its rights and obligations without the prior written consent of the other party.
|
|
9.3
|
If NAB sub-contracts any of the Services to a third party they will continue to be contractually liable to GWB for those sub-contracted services and shall be responsible for ensuring that the provisions of this
Agreement are included in the sub-contract to ensure that GWB is able to monitor and audit the sub-contractor.
|
|
9.4
|
The terms and conditions of this Agreement may be varied at any time by the prior agreement between the parties in writing.
|
|
9.5
|
Either party may vary the terms of this Agreement forthwith by giving written notice to the other party at any time if required to do so by the FSA or by any change to the Legislation and Regulations.
|
|
9.6
|
If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, that shall not affect or impair:
|
|
|
9.6.1
|
the legality, validity or enforceability in that jurisdiction of any other provisions of this Agreement; or
|
|
|
9.6.2
|
the legality, validity or enforceability under the law of any other jurisdiction of that or any other provision of this Agreement.
|
|
9.7
|
Neither party shall be liable in any way for any delay, hindrance or failure to perform its obligations or for loss, damage or delay incurred by the other party resulting from circumstances beyond its reasonable
control.
|
|
9.8
|
The failure by either party to enforce at any time or for any period any one or more of the terms and conditions of this Agreement shall not be a waiver of them or of the right at any time subsequently to enforce all
terms and conditions of this Agreement.
|
|
9.9
|
Nothing in this Agreement is intended to confer on any person any right to enforce any term of this Agreement which that person would not have had but for the Contracts (Rights of Third Parties) Act 1999.
|
8
|
9.10
|
This Agreement shall be governed by and construed in accordance with the laws of England and each of the parties hereto submits to the exclusive jurisdiction of the English Courts as regards any claim or matter arising
under this Agreement.
|
|
9.11
|
Any notice or other communication given or made under or in connection with the matters contemplated by this Agreement shall be in writing or in such form as may be agreed between the parties from time to time.
|
|
9.12
|
This Agreement may be executed in any number of documents or counterparts each in the like form, all of which taken together shall constitute one and the same document and any party may execute this Agreement by signing
any one or more of such documents or counterparts.
|
9
AS WITNESS
the hands of the parties or their duly authorised representatives on the date appearing at the
head of this Agreement
|
|
|
|
|
|
|
|
|
SIGNED by
|
|
)
|
|
|
|
|
|
for and on behalf of
|
|
)
|
|
|
|
|
|
NATIONAL AUSTRALIA
|
|
)
|
|
|
|
|
|
BANK LIMITED
|
|
)
|
|
|
|
|
|
(ABN 12 004 044 937)
|
|
|
|
|
|
|
|
|
|
|
|
|
SIGNED by
|
|
)
|
|
|
|
|
|
for and on behalf of
|
|
)
|
|
|
|
|
|
GREAT WESTERN BANK
|
|
)
|
|
|
|
|
10
Schedule 1
Services
The Services to be provided by
NAB to GWB in respect of the GWB Activities shall include the following:
Back office functions
|
1.
|
Confirmation: confirming with counterparties or agents that trades made by GWB are valid;
|
|
2.
|
Payment: NAB will make payment to GWB’s correspondent and GWB will make payment to NAB’s correspondent when required;
|
|
3.
|
Settlement: the processing of payments in accordance with industry guidelines on timings;
|
|
4.
|
Validation: confirming that payments to/ due from GWB or counterparties are correct (in particular, the amount, the account and timing, and to provide email confirmation by NAB to GWB);
|
|
5.
|
Transaction Processing and providing such other assistance to the GWB Staff in carrying out the GWB Activities as may reasonably be required;
|
Risk functions
|
6.
|
Limit monitoring: ensuring that the operations of GWB are conducted in accordance with (i) approved risk limits; (ii) approved credit limits and (iii) in accordance with NAB Policy statements. GWB will
utilise NAB credit limits for the purposes of transacting with clients as riskless principal;
|
|
7.
|
Product usage: ensuring that GWB is only marketing and distributing products that can be processed through GWB and NAB systems and processes in accordance with approved product usage authorities.
|
Front office functions
|
8.
|
Providing pricing for the interest rate swap for GWB hedging requirements and to book the interest rate swap transaction on NAB’s books (in London portfolio);
|
Technology
|
9.
|
Application Support – ensuring all systems and infrastructure including necessary IT data storage and communication systems are maintained and developed to support the strategy of GWB;
|
|
10.
|
Help Desk Support – provide system support, as well as fault capture and diagnosis;
|
11
|
11.
|
Development Support – ensure that all changes made to the systems are conducted under a strict change management protocol;
|
|
12.
|
Business Continuity – ensure that a technical disaster recovery plan is in place and fully functional;
|
|
13.
|
Financial Information – provide the necessary transactional and financial information to GWB from NAB core systems;
|
|
14.
|
Risk Information – provide the necessary transactional and risk information to GWB from NAB core systems;
|
12
Exhibit 10.3
FORM OF
REGISTRATION RIGHTS
AGREEMENT
among
NATIONAL
AUSTRALIA BANK LIMITED,
NATIONAL AMERICAS HOLDINGS LLC
and
GREAT WESTERN BANCORP, INC.
Dated as of , 2014
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
Section 1.
|
|
Certain Definitions
|
|
|
1
|
|
|
|
|
|
|
Section 2.
|
|
Demand Registrations
|
|
|
5
|
|
|
|
|
|
|
Section 3.
|
|
Piggyback Registrations
|
|
|
7
|
|
|
|
|
|
|
Section 4.
|
|
S-3
Registrations
|
|
|
8
|
|
|
|
|
|
|
Section 5.
|
|
Suspension Periods; Blackout Periods
|
|
|
9
|
|
|
|
|
|
|
Section 6.
|
|
Holdback Agreements
|
|
|
10
|
|
|
|
|
|
|
Section 7.
|
|
Registration Procedures
|
|
|
12
|
|
|
|
|
|
|
Section 8.
|
|
Registration Expenses
|
|
|
16
|
|
|
|
|
|
|
Section 9.
|
|
Indemnification
|
|
|
16
|
|
|
|
|
|
|
Section 10.
|
|
Participation in Underwritten Offerings
|
|
|
18
|
|
|
|
|
|
|
Section 11.
|
|
Securities Act Restrictions
|
|
|
18
|
|
|
|
|
|
|
Section 12.
|
|
Transfers of Rights and Collective Action
|
|
|
19
|
|
|
|
|
|
|
Section 13.
|
|
Miscellaneous
|
|
|
20
|
|
-i-
FORM OF REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement, dated , 2014 (this “
Agreemen
t”), among National Australia Bank Limited, a company incorporated
under the laws of the Commonwealth of Australia (“
NAB
”), National Americas Holdings LLC, a Delaware limited liability company (“
NAH
”), and Great Western Bancorp, Inc., a Delaware corporation (the
“
Company
”).
In consideration of the mutual covenants and agreements herein contained and other good and valid
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
Section 1.
Certain Definitions
. In this Agreement, the following terms shall have the meanings assigned below:
“
Affiliate
” means, with respect to any Person, any other Person that controls, or is controlled by, or is under common
control with, such Person. The term “control” (including the terms “controlling,” “controlled” and “under common control with”) as used with respect to any Person means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
“
Agreement
” has the meaning set forth in the Preamble and includes all amendments, modifications and supplements and any
exhibits or schedules to any of the foregoing. All references to this Agreement shall refer to this Registration Rights Agreement as the same may be in effect at the time such reference becomes operative.
“
beneficially own
” means, with respect to any Person, securities of which such Person or any of such Person’s
Affiliates, directly or indirectly, has “beneficial ownership” as determined pursuant to
Rule 13d-3
and Rule 13d-5 of the Exchange Act, including securities beneficially owned by others
with whom such Person or any of its Affiliates has agreed to act together for the purpose of acquiring, holding, voting or disposing of such securities;
provided
that a Person shall not be deemed to “beneficially own”
(i) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates until such tendered securities are accepted for payment, purchase or exchange, (ii) any security as a result of an
oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (1) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the Exchange Act, and (2) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report).
“
Blackout Period
” has the meaning set forth in Section 5(b).
“
Common Stock
” means any of the common stock issued by the Company. If at any time Registrable Common Stock includes
securities other than common stock issued by the Company then, when referring to Common Stock other than Registrable Common Stock, “Common Stock” shall include securities of the same class or classes as such other securities.
“
Company
” has the meaning set forth in the Preamble.
“
Demand Registration
” has the meaning set forth in Section 2(a).
“
Demand Registration Statement
” has the meaning set forth in Section 2(a).
“
Exchange Act
” means the Securities Exchange Act of 1934.
“
Form S-3
” means a registration statement on
Form S-3
under the Securities Act or such successor forms thereto permitting registration of securities under the Securities Act.
“
Governmental Authority
” means any national, federal, state, municipal, local, territorial, domestic, foreign or other
government or any department, commission, board, bureau, agency, regulatory authority or instrumentality thereof, or any court, judicial, administrative or arbitral body or public or private tribunal.
“
Holdback Agreement
” has the meaning set forth in Section 6.
“
Holdback Period
” has the meaning set forth in Section 6.
“
IPO Lockup
” means the restrictions contained in the IPO Underwriting Agreement (or agreements contemplated therein) on
offers, sales and registrations of Common Stock and related matters following the pricing of the initial public offering of the Common Stock, after giving effect to any waivers, modifications or terminations of such restrictions.
“
IPO Underwriting Agreement
” means the Underwriting Agreement between the Company, NAB, NAH and Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Deutsche Bank Securities Inc., dated , 2014, relating to the initial public offering of the Common Stock.
“
Minimum Amount
” means the lesser of (i) $50,000,000 and (ii) 5% of the aggregate market value of all outstanding
Common Stock unless, at any time, the total number of all remaining shares of Registrable Common Stock would, if fully sold, yield gross proceeds to the Stockholder of less than such amount, in which case the “Minimum Amount” shall mean
the gross proceeds to be realized upon the sale of all such remaining Registrable Common Stock.
“
NAB
” has the meaning
set forth in the Preamble.
“
NAH
” has the meaning set forth in the Preamble.
“
Non-Control Date
” means the date on which NAB ceases to control the Company for purposes of the Bank Holding Company Act of
1956, as amended.
“
Other Holdback Parties
” has the meaning set forth in Section 6.
“
Person
” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporate
organization, association, corporation, institution, public benefit corporation, Governmental Authority or any other entity.
- 2 -
“
Piggyback Registration
” has the meaning set forth in Section 3(b).
“
Prospectus
” means the prospectus or prospectuses (whether preliminary or final) included in any Registration Statement, as
amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Common Stock covered by such Registration Statement and by all other amendments and supplements to the prospectus,
including post-effective amendments and all material incorporated by reference in such prospectus or prospectuses.
“
Registrable
Common Stock
” means, at any time, (i) all Common Stock held of record by NAH as of the date hereof, (ii) any securities of the Company issued or issuable after the date hereof with respect to the Common Stock referred to in
clause (i) by way of stock dividend or stock split or in connection with a combination of stock, recapitalization, merger, consolidation or other reorganization or otherwise, (iii) all Common Stock issued upon conversion of shares of
non-voting common stock issued by the Company to NAB or any of its Affiliates as of or after the date hereof and (iv) securities issued by the issuer thereof in exchange for or in replacement of any securities referred to in clauses (i),
(ii) and (iii), but excluding (v) any and all such Common Stock and other securities referred to in clauses (i), (ii), (iii) and (iv) that (1) have been sold pursuant to an effective registration statement or
Rule 144 under the Securities Act, (2) have been sold in a transaction where a subsequent public distribution of such securities would not require registration under the Securities Act, (3) are eligible for sale pursuant to
Rule 144(k) under the Securities Act or (4) are not outstanding (or any combination of clauses (1), (2), (3) and (4)).
“
Registration Expenses
” has the meaning set forth in Section 8(a).
“
Registration Statement
” means any registration statement of the Company which covers any of the Registrable Common Stock
pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all documents incorporated by reference in such Registration
Statement.
“
S-3
Registration
” has the meaning set forth in Section 4(a).
“
SEC
” means the Securities and Exchange Commission.
“
Securities Act
” means the Securities Act of 1933.
“
Stockholder
” means initially NAH and thereafter any other transferee of the Registrable Common Stock that becomes a
Stockholder pursuant to Section 12, but in each case only if and for as long as NAH or any such transferee is both (i) a wholly owned subsidiary of NAB (or is NAB) and (ii) the holder of record of Registrable Common Stock. If at any
time there is more than one Stockholder, the term “Stockholder” shall mean all Stockholders, collectively, unless the context otherwise requires. For purposes of this Agreement, the Company may deem and treat the registered holder of
Registrable Common Stock as the holder and absolute owner thereof, and the Company shall not be affected by any notice to the contrary.
- 3 -
“
Stockholder Agreement
” means Stockholder Agreement, dated the date hereof,
between the Company and NAB.
“
Stockholder’s Counsel
” has the meaning set forth in Section 7(a)(i).
“
Suspension Period
” has the meaning set forth in Section 5.
“
Termination Date
” means the earlier of (i) the first date on which there is no Registrable Common Stock or there is no
Stockholder and (ii) the date three years after the date of this Agreement,
provided
that, in the case of this clause (ii), (x) such three-year period shall be extended by the number of days in any Suspension Period commenced
pursuant to Section 5 during such period (as it may be so extended) and by the number of days in any Third Party Holdback Period commenced during such period (as it may be so extended) and (y) the Termination Date shall be at least 45 days
after the end of the last Suspension Period and at least 45 days after the end of the last Third Party Holdback Period.
“
Third
Party Holdback Period
” means any Holdback Period imposed on the Stockholder pursuant to Section 6 in respect of an underwritten offering of Common Stock in which (i) the Stockholder did not participate or (ii) the
Stockholder’s participation was reduced pursuant to Section 3(c) or 3(d).
“
underwritten offering
” means a
registered offering in which securities of the Company are sold to one or more underwriters on a firm-commitment basis for reoffering to the public, and “underwritten Shelf Takedown” means an underwritten offering effected pursuant to an
S-3 Registration.
In addition to the above definitions, unless the context requires otherwise:
(i) any reference to any statute, regulation, rule or form as of any time shall mean such statute, regulation, rule or form as
amended or modified and shall also include any successor statute, regulation, rule or form from time to time;
(ii)
“include”, “includes” and “including” shall be construed as inclusive without limitation, in each case notwithstanding the absence of any express statement to such effect, or the presence of such express statement in
some contexts and not in others;
(iii) references to “Section” or the “Preamble” are references to
Sections or the introductory paragraph of this Agreement, respectively;
(iv) references to any Governmental Authority
include any successor to such Governmental Authority;
(v) references to any agreement or other document are to such
agreement or document as amended, modified, supplemented or replaced from time to time;
(vi) words such as
“herein”, “hereof”, “hereinafter” and “hereby” when used in this Agreement refer to this Agreement as a whole; and
- 4 -
(vii) references to “business day” mean a business day in The City of
New York.
Section 2.
Demand Registrations
.
(a)
Right to Request Registration
. Subject to the provisions hereof and to the IPO Lockup and continuing until the Termination Date, the
Stockholder may at any time request registration for resale under the Securities Act of all or part of the Registrable Common Stock separate from an
S-3
Registration (a “
Demand Registration
”);
provided
,
however
, that (based on the then-current market prices) the number of shares of Registrable Common Stock included in the Demand Registration would, if fully sold, yield gross proceeds to the Stockholder of at least the
Minimum Amount. Subject to Section 2(d) and Section 5 below, the Company shall use reasonable best efforts to (i) file a Registration Statement registering for resale such number of shares of Registrable Common Stock as requested
to be so registered pursuant to this Section 2(a) (a “
Demand Registration Statement
”) within forty-five (45) days after the Stockholder’s request therefor and (ii) cause such Demand Registration Statement to be
declared effective by the SEC as soon as practical thereafter. If permitted under the Securities Act, such Registration Statement shall be one that is automatically effective upon filing.
(b)
Number of Demand Registrations
. Subject to the limitations of Section 2(a), the Stockholder shall be entitled to request up to
five (5) Demand Registrations in the aggregate (for all Persons who are or may become a Stockholder pursuant to Section 12). A Registration Statement shall not count as a permitted Demand Registration unless and until it has become
effective and the Stockholder is able to register and sell at least seventy-five percent (75%) of the Registrable Common Stock requested to be included in such registration.
(c)
Priority on Demand Registrations
. The Company may include Common Stock other than Registrable Common Stock in a Demand Registration
for any accounts on the terms provided below and in Section 2(g) and, if such Demand Registration is an underwritten offering, only with the consent of the managing underwriters of such offering. If the managing underwriters of the requested
Demand Registration advise the Company and the Stockholder requesting such Demand Registration that in their opinion the number of shares of Common Stock proposed to be included in the Demand Registration exceeds the number of shares of Common Stock
that can be sold in such underwritten offering without materially delaying or jeopardizing the success of the offering (including the price per share of the Common Stock proposed to be sold in such underwritten offering), the Company shall include
in such Demand Registration (i) first, the number of shares of Registrable Common Stock that the Stockholder proposes to sell, and (ii) second, the number of shares of Common Stock proposed to be included therein by any other Persons
(including Common Stock to be sold for the account of the Company) allocated among such Persons in such manner as the Company may determine. If the number of shares of Common Stock that can be sold is less than the number of shares of Common Stock
proposed to be registered pursuant to clause (i) above by the Stockholder, the amount of Common Stock to be sold shall be allocated to the Stockholder.
(d)
Restrictions on Demand Registrations
. The Stockholder shall not be entitled to request a Demand Registration (i) within sixty
(60) days after the effective date of any prior Demand Registration, Piggyback Registration or
S-3
Registration or the pricing date of any
- 5 -
underwritten Shelf Takedown or (ii) when the Company is diligently pursuing a primary underwritten offering pursuant to a Piggyback Registration. The restriction in clause (i) shall not
apply to any request for a Demand Registration if the request is to register and sell all remaining Registrable Common Stock in an underwritten offering and the managing underwriters for the offering advise the Company that in their judgment
(subject to subsequent changes in market conditions) all such remaining stock could be sold in such offering. Notwithstanding the foregoing, the Company shall not be obligated to take any action that would violate any lockup or similar restriction
relating to any Demand Registration or underwritten Shelf Takedown then in effect. The Company, however, shall not be obligated to proceed with a Demand Registration if the offering to be effected pursuant to such registration can be effected
pursuant to an
S-3
Registration and the Company, in accordance with Section 4, effects or has effected an S-3 Registration pursuant to which such offering can be effected.
(e)
Selection of Underwriters
. If any of the Registrable Common Stock covered by a Demand Registration is to be sold in an underwritten
offering, the Stockholder shall have the right to select the managing underwriter or underwriters to administer the offering, but only with the prior written consent of the Company (not to be unreasonably withheld, conditioned or delayed).
(f)
Other Registration Rights
. The Company shall not grant to any Person the right to request the Company (i) to register
securities in a Demand Registration unless such rights are consistent with the provisions hereof, or (ii) to register any securities other than securities of the same class as the Registrable Common Stock being registered in a Demand
Registration.
(g)
Effective Period of Demand Registrations
. Upon the date of effectiveness of any Demand Registration for an
underwritten offering and if such offering is priced promptly on or after such date, the Company shall use commercially reasonable efforts to keep such Demand Registration Statement effective for a period equal to sixty (60) days from such date
or such shorter period which shall terminate when all of the Registrable Common Stock covered by such Demand Registration has been sold by the Stockholder pursuant to such Demand Registration. If the Company shall withdraw any Demand Registration
pursuant to Section 5 before such sixty (60) days end and before all of the Registrable Common Stock covered by such Demand Registration has been sold pursuant thereto, the Stockholder shall be entitled to a replacement Demand Registration
which shall be subject to all of the provisions of this Agreement. A Demand Registration shall not count against the limit on the number of such registrations set forth in Section 2(b) if (i) after the applicable Registration Statement has
become effective, such Registration Statement or the related offer, sale or distribution of Registrable Common Stock thereunder becomes the subject of any stop order, injunction or other order or restriction imposed by the SEC or any other
governmental agency or court for any reason not attributable to the Stockholder or its Affiliates (other than the Company and its controlled Affiliates) and such interference is not thereafter eliminated so as to permit the completion of the
contemplated distribution of Registrable Common Stock or (ii) in the case of an underwritten offering, the conditions specified in the related underwriting agreement, if any, are not satisfied or waived due to a breach by the Company of its
covenants, representations or warranties therein, and as a result of any such circumstances described in clause (i) or (ii), less than all of the Registrable Common Stock covered by the Registration Statement is sold by the Stockholder pursuant
to such Registration Statement.
- 6 -
Section 3.
Piggyback Registrations
.
(a)
Certain Offerings by the Company
. Prior to the Non-Control Date, the Company shall not register or propose to register any Common
Stock under the Securities Act for its own account other than a registration statement on Form S-8 or with NAB’s prior written consent as required by Section 3.1 of the Stockholder Agreement.
(b)
Right to Piggyback
. Whenever on or after the Non-Control Date the Company proposes to register any Common Stock under the
Securities Act (other than a registration statement on Form S-8 or S-4) for its own account, or whenever on or after the date hereof the Company proposes to register any Common Stock under the Securities Act for the account of one or more
holders of Common Stock (other than the Stockholder), and the form of registration statement to be used may be used for any registration of Registrable Common Stock (a “
Piggyback Registration
”), the Company shall give written notice
to the Stockholder of its intention to effect such a registration and, subject to Sections 3(c) and 3(d), shall include in such registration statement and in any offering of Common Stock to be made pursuant to that registration statement all
Registrable Common Stock with respect to which the Company has received a written request for inclusion therein from the Stockholder within ten (10) days after the Stockholder’s receipt of the Company’s notice. The Company shall have
no obligation to proceed with any Piggyback Registration and may abandon, terminate and/or withdraw such registration for any reason at any time prior to the pricing thereof. If the Company or any other Person other than the Stockholder proposes to
sell Common Stock in an underwritten offering pursuant to a registration statement under the Securities Act, such offering shall be treated as a primary or secondary underwritten offering, as applicable, pursuant to a Piggyback Registration.
(c)
Priority on Primary Piggyback Registrations
. If a Piggyback Registration is initiated as a primary underwritten offering on behalf
of the Company and the managing underwriters advise the Company and the Stockholder (if the Stockholder has elected to include Registrable Common Stock in such Piggyback Registration) that in their opinion the number of shares of Common Stock
proposed to be included in such offering exceeds the number of shares of Common Stock which can be sold in such offering without materially delaying or jeopardizing the success of the offering (including the price per share of the Common Stock
proposed to be sold in such offering), the Company shall include in such registration and offering (i) first, the number of shares of Common Stock that the Company proposes to sell, and (ii) second, the number of shares of Common Stock
requested to be included therein by holders of Common Stock, including the Stockholder (if the Stockholder has elected to include Registrable Common Stock in such Piggyback Registration),
pro rata
among all such holders on the basis of the
number of shares of Common Stock requested to be included therein by all such holders or as such holders and the Company may otherwise agree.
(d)
Priority on Secondary Registrations
. If a Piggyback Registration is initiated as an underwritten registration on behalf of a holder
of Common Stock other than the Stockholder, and the managing underwriters advise the Company that in their opinion the number of shares of Common Stock proposed to be included in such registration exceeds the number of shares of Common Stock that
can be sold in such offering without materially delaying or jeopardizing the success of the offering (including the price per share of the Common Stock to be sold in such offering), then the Company shall include in such registration (i) first,
the number of shares of
- 7 -
Common Stock requested to be included therein by the holder(s) requesting such registration, (ii) second, the number of shares of Common Stock requested to be included therein by other
holders of Common Stock including the Stockholder (if the Stockholder has elected to include Registrable Common Stock in such Piggyback Registration),
pro rata
among such holders on the basis of the number of shares of Common Stock requested
to be included therein by such holders or as such holders and the Company may otherwise agree, and (iii) third, the number of shares of Common Stock that the Company proposes to sell.
(e)
Selection of Underwriters
. The Company shall have the right to select the managing underwriter or underwriters to administer any
underwritten offering pursuant to a Piggyback Registration.
(f)
Other Registration Rights
. The Company shall not grant to any
Person the right to request the Company to register any Common Stock in a Piggyback Registration unless such rights are consistent with the provisions hereof.
Section 4.
S-3
Registrations
.
(a)
Right to Request Registration
. At any time that the Company is eligible to use
Form S-3
and continuing until the Termination Date, the Stockholder shall be entitled to request on up to three (3) occasions that the Company file a Registration Statement on
Form S-3
(or an amendment or
supplement to an existing registration statement on
Form S-3)
for a public offering of all or any portion of the Registrable Common Stock pursuant to Rule 415 promulgated under the Securities Act or
otherwise (an “
S-3
Registration
”). Upon each such request, and subject to Section 5, the Company shall use reasonable best efforts to (i) file a Registration Statement (or any
amendment or supplement thereto) covering the number of shares of Registrable Common Stock specified in such request under the Securities Act on
Form S-3
(an
“
S-3
Registration Statement
”) for public sale in accordance with the method of disposition specified in such request within thirty (30) days after the Stockholder’s written request
therefor and (ii) cause such
S-3
Registration Statement to become effective as soon as practical thereafter. If permitted under the Securities Act, each such Registration Statement shall be one that is
automatically effective upon filing.
(b)
Right to Effect a Shelf Takedown
. The Stockholder shall be entitled, at any time and from
time to time when an S-3 Registration Statement is effective and until the Termination Date, to sell such Registrable Common Stock as is then registered pursuant to such Registration Statement (each, a “
Shelf Takedown
”), but only
upon not less than three (3) business days’ prior written notice to the Company (whether or not such takedown is underwritten);
provided
, that no prior notice shall be required of any sale pursuant to a plan that complies with Rule
10b5-1 under the Exchange Act. The Stockholder shall be entitled to request that a Shelf Takedown shall be an underwritten offering,
provided
,
however
, that (based on the then-current market prices) the number of shares of Registrable
Common Stock included in such underwritten Shelf Takedown would yield gross proceeds to the Stockholder of at least the Minimum Amount; and
provided
,
further
, that the Stockholder shall not be entitled to request any underwritten Shelf
Takedown within sixty (60) days after the pricing date of any other underwritten offering effected pursuant to a Demand Registration, a Piggyback Registration or an S-3 Registration, or when the Company is diligently pursuing an underwritten
offering pursuant to (or treated as being pursuant to) a Piggyback Registration. The Stockholder shall also give the Company prompt written notice of the consummation of each Shelf Takedown (whether or not underwritten).
- 8 -
(c)
Priority on Underwritten Shelf Takedowns
. The Company may include Common Stock other
than Registrable Common Stock in an underwritten Shelf Takedown for any accounts on the terms provided below, but only with the consent of the managing underwriters of such offering. If the managing underwriters of the requested underwritten Shelf
Takedown advise the Company and the Stockholder that in their opinion the number of shares of Common Stock proposed to be included in the underwritten Shelf Takedown exceeds the number of shares of Common Stock that can be sold in such offering
without materially delaying or jeopardizing the success of the offering (including the price per share of the Common Stock proposed to be sold in such offering), the Company shall include in such underwritten Shelf Takedown (i) first, the
number of shares of Common Stock that the Stockholder proposes to sell, and (ii) second, the number of shares of Common Stock proposed to be included therein by any other Persons (including Common Stock to be sold for the account of the
Company) allocated among such Persons in such manner as the Company may determine. If the number of shares of Common Stock that can be sold is less than the number of shares of Registrable Common Stock proposed to be included in the underwritten
Shelf Takedown pursuant to clause (i) above, the amount of Common Stock to be so sold shall be allocated to the Stockholder. The provisions of this paragraph (c) apply only to a Shelf Takedown that the Stockholder has requested be an
underwritten offering.
(d)
Selection of Underwriters
. If any of the Registrable Common Stock is to be sold in an underwritten
Shelf Takedown initiated by the Stockholder, the Stockholder shall have the right to select the underwriter or underwriters, but only with the prior written consent of the Company (not to be unreasonably withheld, conditioned or delayed).
(e)
Other Registration Rights
. The Company shall not grant to any Person the right to request the Company (i) to register any
Common Stock in an
S-3
Registration unless such rights are consistent with the provisions hereof, or (ii) to include any securities of the Company other than Common Stock in an underwritten Shelf
Takedown.
(f)
Effective Period of S-3 Registrations
. The Company shall use reasonable best efforts to keep any
S-3
Registration Statement effective for a period of one year after the effective date of such registration statement. Notwithstanding the foregoing, the Company shall not be obligated to keep any such registration
statement effective, or to permit Registrable Common Stock to be registered, offered or sold thereunder, at any time on or after the Termination Date, unless an underwritten Shelf Takedown has been priced but not completed prior to the Termination
Date, in which event the Company shall remain so obligated until such offering is completed.
Section 5.
Suspension Periods;
Blackout Periods
.
(a)
Suspension Periods
. The Company may (i) delay the filing of a Registration Statement in conjunction
with a Demand Registration or an
S-3
Registration or (ii) prior to the pricing of any underwritten offering or other offering of Registrable Common Stock pursuant to a Demand Registration or an
S-3
Registration, delay such underwritten or other offering (and, if
- 9 -
it so chooses, withdraw any registration statement that has been filed), but in each case described in clauses (i) and (ii) only if the board of directors of the Company determines in
good faith that the registration or offering to be delayed would, if not delayed, materially adversely affect the Company and its subsidiaries taken as a whole or materially interfere with, or jeopardize the success of, any pending or proposed
material transaction, including any material debt or equity financing, any material acquisition or disposition, any material recapitalization or reorganization or any other material transaction, whether due to commercial reasons, a desire to avoid
premature disclosure of information or any other reason. Any period during which the Company has delayed a filing or an offering pursuant to this Section 5 is herein called a “
Suspension Period
.” In no event shall there be more
than two Suspension Periods during any rolling period of three hundred sixty-five (365) days, and the number of days covered by any one or more Suspension Periods shall not exceed sixty (60) days in the aggregate during any rolling period
of three hundred sixty-five (365) days. If pursuant to this Section 5 the Company delays a Demand Registration requested by the Stockholder, the Stockholder shall be entitled to withdraw such request and, if it does so, such request shall
not count against the limitation on the number of such registrations set forth in Section 2(b). If pursuant to this Section 5 the Company withdraws an
S-3
Registration Statement requested by the
Stockholder, the Stockholder shall be entitled to make a further request for an
S-3
Registration pursuant to this Agreement, which will not count against the limitation on the number of such registrations set
forth in Section 4(a). The Company shall provide prompt written notice to the Stockholder of the commencement and termination of any Suspension Period (and any withdrawal of a registration statement pursuant to this Section 5), but shall
not be obligated under this Agreement to disclose the reasons therefor. NAB shall (and shall cause its controlled Affiliates to) keep the existence of each Suspension Period confidential and refrain from making offers and sales of Registrable Common
Stock (and direct any other Persons making such offers and sales to refrain from doing so) during each Suspension Period. For the avoidance of doubt, nothing in this Section 5(a) shall affect any of NAB’s rights pursuant to the Stockholder
Agreement.
(b)
Blackout Periods
. Unless the Company otherwise permits by notice in writing to the Stockholder, the Stockholder
shall not make any offers or sales of Registrable Common Stock during the period (each a “
Blackout Period
”) beginning on the 15th day of the third month of each fiscal quarter of the Company and ending one full trading day
after the Company publicly issues its earnings release for such fiscal quarter (or fiscal year in the case of the fourth fiscal quarter). A “
full trading day
” after an earnings release means at least one full-day trading session on
the New York Stock Exchange shall have elapsed after the public issuance of such earnings release. Notwithstanding this Section 5(b), but subject to the other provisions hereof, Registrable Common Stock may be offered and sold during a Blackout
Period if such offers and sales are made pursuant to a plan that complies with
Rule 10b5-1
under the Exchange Act (and is established outside a Blackout Period). Notwithstanding this Section 5(b),
the Stockholder may make offers and sales of Registrable Common Stock in an underwritten offering pursuant to a Demand Registration or in an underwritten Shelf Takedown during a Blackout Period, unless a Suspension Period is in effect.
Section 6.
Holdback Agreements
.
The restrictions in this Section 6 shall apply only for as long as NAB is the beneficial owner of any Registrable Common Stock. If the
Company sells Common Stock or other
- 10 -
securities convertible into or exchangeable for (or otherwise representing a right to acquire) Common Stock in a primary underwritten offering pursuant to any registration statement under the
Securities Act (whether or not the Stockholder is given an opportunity to participate), or if any other Person sells Common Stock in a secondary underwritten offering pursuant to a Piggyback Registration and the Stockholder is given an opportunity
(not subsequently reduced by more than twenty-five percent (25%) or withdrawn pursuant to the “cut-back” provisions of this Agreement) to participate in the offering, and if the managing underwriters for such offering advise the
Company (in which case the Company promptly shall notify the Stockholder) that a public sale or distribution of Registrable Common Stock outside such offering would materially adversely affect such offering, then, if requested by the Company, NAB
shall agree, as contemplated in this Section 6, not to (and to cause its controlled Affiliates not to) sell, transfer, pledge, issue, grant or otherwise dispose of, directly or indirectly (including by means of any short sale), or request the
registration of, any Registrable Common Stock (or any securities of any Person that are convertible into or exchangeable for, or otherwise represent a right to acquire, Registrable Common Stock) for a period equal (each such period, a
“
Holdback Period
”) to the lesser of (i) ninety (90) days beginning on and including the pricing date for such underwritten offering and (ii) such shorter period as to which the managing underwriters for such offering
may agree (each such agreement of NAB, a “
Holdback Agreement
”). Notwithstanding the foregoing, the Stockholder shall not be subject to more than one Holdback Agreement relating to an underwritten offering pursuant to a Piggyback
Registration during any rolling period of three hundred sixty-five (365) days, other than any such Holdback Agreement relating to an underwritten offering in which the Stockholder was permitted to participate without being subject to an
underwriters’ cutback. Each Holdback Agreement shall be in writing in form satisfactory to the Company and the managing underwriters. Notwithstanding the foregoing, NAB shall not be obligated to make a Holdback Agreement unless the
Company, each selling shareholder in such offering, all of the Company’s officers and directors and each Person (if any) who beneficially owns ten percent (10%) or more of the outstanding Common Stock and has the right to require the
Company to register Common Stock for sale under the Securities Act (collectively, “
Other Holdback Parties
”) also execute agreements substantially identical to such Holdback Agreement. Each Holdback Agreement shall provide that NAB
shall be released from its obligations thereunder if and when any of the Other Holdback Parties is released (in whole or in part) from the prohibition on offers and sales of Common Stock in its hold back agreement relating to the same offering
(other than a release of an individual that is due to a personal hardship and affects only a small number of Common Stock), and the Company shall promptly notify NAB of any such release. A Holdback Agreement shall not apply to (i) the exercise
of any warrants or stock options to purchase stock of the Company (
provided
that such restrictions shall apply with respect to the securities issuable upon such exercise), (ii) transfers to Affiliates where the transferee agrees in
writing with the Company to be bound by the terms hereof, or (iii) any Registrable Common Stock included in the underwritten offering giving rise to the application of this Section 6. A Holdback Agreement shall prohibit NAB and its
controlled Affiliates from entering into any hedging or similar arrangement in respect of the Registrable Common Stock.
- 11 -
Section 7.
Registration Procedures
.
(a) Whenever the Stockholder requests that any Registrable Common Stock be registered pursuant to this Agreement, the Company shall use
reasonable best efforts to effect, as soon as practical as provided herein, the registration and the sale of such Registrable Common Stock in accordance with the intended methods of disposition thereof, and, pursuant thereto, the Company shall, as
soon as practical as provided herein:
(i) subject to the other provisions of this Agreement, use reasonable best
efforts to prepare and file with the SEC a Registration Statement with respect to such Registrable Common Stock and cause such Registration Statement to become effective (unless it is automatically effective upon filing); and before filing a
Registration Statement or Prospectus or any amendments or supplements thereto, furnish to the Stockholder and the underwriters or other distributors, if any, identified by the Stockholder copies of all such documents proposed to be filed, including
documents incorporated by reference in the Prospectus and, if requested by the Stockholder, one set of the exhibits incorporated by reference, and the Stockholder and a single counsel selected by the Stockholder (“
Stockholder’s
Counsel
”) shall have a reasonable opportunity to review and comment on the Registration Statement and each such Prospectus (and each amendment or supplement thereto) before it is filed with the SEC, and the Stockholder shall have the
opportunity to object to any information pertaining to the Stockholder that is contained therein and the Company will make the corrections reasonably requested by the Stockholder with respect to such information prior to filing any Registration
Statement or Prospectus or any amendment or supplement thereto;
(ii) use reasonable best efforts to prepare and file
with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to comply with the applicable requirements of the Securities Act and to keep such Registration Statement
effective for the relevant period required hereunder, but no longer than is necessary to complete the distribution of the Common Stock covered by such Registration Statement, and to comply with the applicable requirements of the Securities Act with
respect to the disposition of all the Common Stock covered by such Registration Statement during such period in accordance with the intended methods of disposition set forth in such Registration Statement;
(iii) use reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration
Statement, or the lifting of any suspension of the qualification or exemption from qualification of any Registrable Common Stock for sale in any jurisdiction in the United States;
(iv) furnish to the Stockholder and each managing underwriter, if any, without charge, conformed copies of each Registration
Statement and amendment thereto and copies of each supplement thereto promptly after they are filed with the SEC (but only one set of exhibits thereto need be provided); and deliver, without charge, such number of copies of the preliminary and final
Prospectus and any supplement thereto as the Stockholder may reasonably request in order to facilitate the disposition of the Registrable Common Stock of the Stockholder covered by such Registration Statement in conformity with the requirements of
the Securities Act;
(v) use reasonable best efforts to register or qualify such Registrable Common Stock under such other
securities or blue sky laws of such U.S. jurisdictions as the Stockholder reasonably requests and continue such registration or qualification in effect
- 12 -
in such jurisdictions for as long as the applicable Registration Statement may be required to be kept effective under this Agreement (
provided
that the Company will not be required to
(1) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph (v), (2) subject itself to taxation in any such jurisdiction or (3) consent to general service
of process in any such jurisdiction);
(vi) notify the Stockholder and each distributor of such Registrable Common Stock
identified by the Stockholder, at any time when a Prospectus relating thereto is required under the Securities Act to be delivered by such distributor, of the occurrence of any event as a result of which the Prospectus included in such Registration
Statement contains an untrue statement of a material fact or omits a material fact necessary to make the statements therein not misleading, and, at the request of the Stockholder, the Company shall use reasonable best efforts to prepare, as
soon as practical, and in any event within two Business Days, a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of such Registrable Common Stock, such Prospectus shall not contain an untrue statement of
a material fact or omit to state any material fact necessary to make the statements therein not misleading;
(vii) in the
case of an underwritten offering in which the Stockholder participates pursuant to a Demand Registration, Piggyback Registration or an
S-3
Registration, enter into an underwriting agreement containing such
provisions (including provisions for indemnification, lockups, opinions of counsel and comfort letters) as are customary and reasonable for an offering of such kind, and take all such other customary and reasonable actions as the managing
underwriters of such offering may request in order to facilitate the disposition of such Registrable Common Stock (including, making members of senior management of the Company available to participate in “road-show” and other customary
marketing activities);
(viii) in the case of an underwritten offering in which the Stockholder participates pursuant to a
Demand Registration, Piggyback Registration or an
S-3
Registration, and to the extent not prohibited by applicable law or pre-existing applicable contractual restrictions, (A) make reasonably available,
for inspection by the Stockholder, Stockholder’s Counsel, the managing underwriters of such offering and one counsel (and one accountant) for such managing underwriter, pertinent corporate documents and financial and other records of the
Company and its subsidiaries and controlled Affiliates, (B) cause the Company’s officers and employees to supply information reasonably requested by the Stockholder or such managing underwriters or attorney in connection with such offering
and (C) make the Company’s independent accountants available for any such managing underwriters’ due diligence;
provided
,
however
, that such records and other information shall be subject to such confidential treatment
as is customary for underwriters’ due diligence reviews;
(ix) use reasonable best efforts to cause all such
Registrable Common Stock to be listed on each securities exchange on which securities of the same class issued by the Company are then listed;
- 13 -
(x) provide a transfer agent and registrar for all such Registrable Common Stock
not later than the effective date of such Registration Statement and, a reasonable time before any proposed sale of Registrable Common Stock pursuant to a Registration Statement, provide the transfer agent with printed certificates for the
Registrable Common Stock to be sold, subject to the provisions of Section 11;
(xi) make generally available to its
shareholders a consolidated earnings statement (which need not be audited) for a period of twelve (12) months beginning after the effective date of the Registration Statement as soon as reasonably practicable after the end of such period, which
earnings statement shall satisfy the requirements of an earning statement under Section 11(a) of the Securities Act and Rule 158 thereunder; and
(xii) promptly notify the Stockholder and the managing underwriters of any underwritten offering:
(1) when the Registration Statement, any pre-effective amendment, the Prospectus or any Prospectus supplement or any
post-effective amendment to the Registration Statement has been filed and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective;
(2) of any request by the SEC for amendments or supplements to the Registration Statement or the Prospectus or for any
additional information regarding the Stockholder;
(3) of the notification to the Company by the SEC of its initiation of
any proceeding with respect to the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement; and
(4) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable
Common Stock for sale under the applicable securities or blue sky laws of any jurisdiction; and
(xiii) keep
Stockholder’s Counsel reasonably apprised as to the intention and progress of the Company with respect to any Registration Statement hereunder, including by providing Stockholder’s Counsel with copies of all written correspondence with the
SEC in connection with any Registration Statement or Prospectus filed hereunder.
For the avoidance of doubt, the provisions of
clauses (vii), (viii) and (xi) of this Section 7(a) shall apply only in respect of an underwritten offering and only if (based on market prices at the time the offering is requested by the Stockholder) the number of shares of
Registrable Common Stock to be sold in the offering would yield gross proceeds to the Stockholder of at least the Minimum Amount. Notwithstanding any provision of this Agreement, the Company shall not be obligated to prepare for inclusion in any
Registration Statement any audited financial statements for any period other than a fiscal year of the Company beginning on or after October 1, 2012 or any unaudited financial statements for any period other than a first, second or third fiscal
quarter of any such fiscal year.
- 14 -
(b) No Registration Statement (including any amendments thereto) shall contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein not misleading, and no Prospectus (including any supplements thereto) shall contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case, except for any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact made in reliance on and in conformity with written information furnished to the Company by or on behalf of NAB or the Stockholder or any underwriter or other distributor specifically
for use therein.
(c) At all times after the Company has filed a registration statement with the SEC pursuant to the requirements of the
Securities Act and until the Termination Date, the Company shall use reasonable best efforts to continuously maintain in effect the registration statement of Common Stock under Section 12 of the Exchange Act and to use reasonable best efforts
to file all reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder, all to the extent required to enable the Stockholder to be eligible to sell Registrable Common
Stock pursuant to Rule 144 under the Securities Act prior to the Termination Date.
(d) The Company may require the Stockholder and
each distributor of Registrable Common Stock as to which any registration is being effected to furnish to the Company any other information regarding such Person and the distribution of such securities as the Company may from time to time reasonably
request.
(e) The Stockholder agrees by having its stock treated as Registrable Common Stock hereunder that, upon being advised in writing
by the Company of the occurrence of an event pursuant to Section 7(a)(vi), the Stockholder will immediately discontinue (and direct any other Persons making offers and sales of Registrable Common Stock to immediately discontinue) offers and
sales of Registrable Common Stock until it is advised in writing by the Company that the use of the Prospectus may be resumed and is furnished with a supplemented or amended Prospectus as contemplated by Section 7(a)(vi), and, if so directed by
the Company, the Stockholder will deliver to the Company all copies, other than permanent file copies then in the Stockholder’s possession, of the Prospectus covering such Registrable Common Stock current at the time of receipt of such notice.
(f) The Company may prepare and deliver an issuer free-writing prospectus (as such term is defined in Rule 405 under the Securities
Act) in lieu of any supplement to a prospectus, and references herein to any “supplement” to a Prospectus shall include any such issuer free-writing prospectus. Neither the Stockholder nor any other seller of Registrable Common Stock may
use a free-writing prospectus to offer or sell any such stock without the Company’s prior written consent.
(g) It is understood and
agreed that any failure of the Company to file a registration statement or any amendment or supplement thereto or to cause any such document to become or remain effective or usable within or for any particular period of time as provided in
Section 2, 4 or 7 or otherwise in this Agreement, due to reasons that are not reasonably within its control, or due to any refusal of the SEC to permit a registration statement or prospectus to become or
- 15 -
remain effective or to be used because of unresolved SEC comments thereon (or on any documents incorporated therein by reference) despite the Company’s good faith and diligent efforts to
resolve those comments, shall not be a breach of this Agreement. However, neither shall any such failure relieve the Company of its obligations hereunder to use reasonable best efforts to remedy such failure.
(h) It is further understood and agreed that the Company shall not have any obligations under this Section 7 at any time on or after the
Termination Date, unless an underwritten offering in which the Stockholder participates has been priced but not completed prior to the Termination Date, in which event the Company’s obligations under this Section 7 shall continue with
respect to such offering until such offering is completed or for 15 business days, whichever is shorter.
Section 8.
Registration
Expenses
.
(a) All expenses incident to the Company’s performance of or compliance with this Agreement, including all registration
and filing fees, fees and expenses of compliance with securities or blue sky laws, Financial Industry Regulatory Authority fees, listing application fees, printing expenses, transfer agent’s and registrar’s fees, cost of distributing
Prospectuses in preliminary and final form as well as any supplements thereto, fees and disbursements of counsel for the Company and all independent certified public accountants and other Persons retained by the Company, and fees and disbursements
of one counsel representing the Stockholder (all such expenses being herein called “
Registration Expenses
”) (but not including any underwriting discounts or commissions attributable to the sale of Registrable Common Stock or fees
and expenses of counsel representing any underwriters or other distributors), shall be borne by the Company.
(b) The obligation of the
Company to bear the expenses described in Section 8(a) shall apply irrespective of whether a registration, once properly demanded or requested, if applicable, becomes effective, is withdrawn or suspended, is converted to another form of
registration and irrespective of when any of the foregoing shall occur;
provided
,
however
, that Registration Expenses for any Registration Statement withdrawn solely at the request of the Stockholder (unless withdrawn following
commencement of a Suspension Period pursuant to Section 5) shall be borne by the Stockholder.
Section 9.
Indemnification
.
(a) The Company shall indemnify, to the fullest extent permitted by law, the Stockholder and each Person who
controls the Stockholder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities, judgments, costs (including reasonable costs of investigation) and expenses (including reasonable attorneys’ fees arising out
of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus) or any amendment thereof or supplement thereto or arising out of or based upon any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are made in reliance and in conformity with information furnished in writing to the Company by NAB or the Stockholder
expressly for use therein. In connection with an underwritten offering in which the Stockholder
- 16 -
participates conducted pursuant to a registration effected hereunder, the Company shall indemnify each participating underwriter and each Person who controls such underwriter (within the meaning
of the Securities Act) to the same extent as provided above with respect to the indemnification of the Stockholder,
provided
,
however
, that this sentence shall apply only if (based on the current market prices immediately prior
thereto) the number of shares of Registrable Common Stock to be sold in the offering would yield gross proceeds to the Stockholder of at least the Minimum Amount (or if the Company otherwise approves the offering for purposes of this
Section 9).
(b) In connection with any Registration Statement in which the Stockholder is participating, NAB and the Stockholder
shall furnish to the Company in writing such information and certificates as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus, or amendment or supplement thereto, and shall indemnify, to the
fullest extent permitted by law, the Company, its officers and directors and each Person who controls the Company (within the meaning of the Securities Act) against all losses, claims, damages, liabilities, judgments, costs (including reasonable
costs of investigation) and expenses (including reasonable attorneys’ fees) arising out of or based upon any untrue or alleged untrue statement of material fact contained in the Registration Statement or Prospectus, or any amendment or
supplement thereto or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that the same are made in
reliance and in conformity with information furnished in writing to the Company by NAB or the Stockholder expressly for use therein.
(c)
Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying Person of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying Person to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified Person. Failure so to notify the indemnifying Person shall not relieve it from any liability that it may have to an indemnified Person otherwise than under this Section 9. If
such defense is assumed, the indemnifying Person shall not be subject to any liability for any settlement made by the indemnified Person without its consent (but such consent will not be unreasonably withheld). An indemnifying Person who is entitled
to, and elects to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel (in addition to one local counsel) for all Persons indemnified by such indemnifying Person with respect to such claim (and
all other claims arising out of the same circumstances), unless in the reasonable judgment of any indemnified Person there may be one or more legal or equitable defenses available to such indemnified Person which are in addition to or may conflict
with those available to another indemnified Person with respect to such claim, in which case such maximum number of counsel for all indemnified Persons shall be two rather than one). Failure to give prompt written notice shall not release the
indemnifying Person from its obligations hereunder. The indemnifying Person shall not consent to the entry of any judgment or enter into or agree to any settlement relating to a claim or action for which any indemnified Person would be entitled to
indemnification by any indemnifying Person hereunder unless such judgment or settlement includes as an unconditional term the giving, by all relevant claimants and plaintiffs to such indemnified Person, a release, satisfactory in form and substance
to such indemnified Person, from all liabilities in respect of such claim or action for which such indemnified Person would be entitled to such indemnification. The indemnifying Person shall
- 17 -
not be liable hereunder for any amount paid or payable or incurred pursuant to or in connection with any judgment entered or settlement effected with the consent of an indemnified Person unless
the indemnifying Person has also consented to such judgment or settlement.
(d) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified Person or any officer, director or controlling Person of such indemnified Person and shall survive the transfer of securities and the
Termination Date but only with respect to offers and sales of Registrable Common Stock made before the Termination Date, and offers and sales of Registrable Common Stock made pursuant to a Shelf Takedown that has been priced by not completed prior
to the Termination Date.
(e) If the indemnification provided for in or pursuant to this Section 9 is due in accordance with the
terms hereof, but is held by a court to be unavailable or unenforceable in respect of any losses, claims, damages, liabilities or expenses referred to herein, then each applicable indemnifying Person, in lieu of indemnifying such indemnified Person,
shall contribute to the amount paid or payable by such indemnified Person as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying Person on the one
hand and of the indemnified Person on the other in connection with the statements or omissions which result in such losses, claims, damages, liabilities or expenses as well as any other relevant equitable considerations. The relative fault of the
indemnifying Person on the one hand and of the indemnified Person on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying Person or by the indemnified Person, and by such Person’s relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. In
no event shall the liability of the Stockholder or NAB be greater in amount than the amount for which such indemnifying Person would have been obligated to pay by way of indemnification if the indemnification provided for under Section 9(a) or
9(b) hereof had been available under the circumstances.
Section 10.
Participation in Underwritten Offerings
.
No Person (including the Stockholder) may participate in any underwritten offering pursuant to a registration effected hereunder unless such
Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Stockholder, in the case of any underwritten offering pursuant to a Demand Registration or any underwritten Shelf
Takedown, or by the Company, in any other case and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, lockups and other documents required under the terms of such underwriting arrangements.
Section 11.
Securities Act Restrictions
.
The shares of Registrable Common Stock are restricted securities under the Securities Act and may not be offered or sold except pursuant to an
effective registration statement or an available exemption from registration under the Securities Act. Accordingly, the Stockholder shall not, directly or through others, offer or sell any shares of Registrable Common Stock except
- 18 -
pursuant to a Registration Statement as contemplated herein or pursuant to Rule 144 or another exemption from registration under the Securities Act, if available. Prior to any transfer of
shares of Registrable Common Stock other than pursuant to an effective registration statement, the Stockholder shall notify the Company of such transfer and the Company may require the Stockholder to provide, prior to such transfer, such evidence
that the transfer will comply with the Securities Act (including written representations or an opinion of counsel) as the Company may reasonably request. The Company may impose stop-transfer instructions with respect to any shares of Registrable
Common Stock that are to be transferred in contravention of this Agreement (including Section 6 and this Section 11). Any certificates representing shares of the Registrable Common Stock may bear a legend (and the Company’s share
registry may bear a notation) referencing the restrictions on transfer contained in this Agreement, until such time as such securities have ceased to be or are to be transferred in a manner that results in their ceasing to be, Registrable Common
Stock. Subject to the provisions of this Section 11, the Company will replace any such legended certificates with unlegended certificates promptly upon request by any Stockholder in order to facilitate a lawful transfer or at any time after
such stock ceases to be Registrable Common Stock.
Section 12.
Transfers of Rights and Collective Action
.
(a)
Transfers to NAB and Subsidiaries
. Shares of Registrable Common Stock may be transferred to and held by NAB or any majority-owned
subsidiary of NAB from time to time and in whole or in part, but only if the transfer complies with Section 11. Each such transfer shall be effective when (but only when) the transferred securities are registered in the name of the transferee.
Upon any such effective transfer, the transferee shall automatically become and have the rights of a Stockholder with respect to the Registrable Common Stock so transferred and the transferor shall automatically cease to be and to have the rights of
a Stockholder with respect to the transferred shares of Registrable Common Stock. The Company may require any transferee that becomes a Stockholder to sign a written acknowledgement that it has become a Stockholder hereunder. Notwithstanding the
foregoing, any Stockholder that (i) ceases to be the registered owner of Registrable Common Stock or (ii) ceases to be NAB or a majority-owned subsidiary of NAB, shall automatically cease to be a Stockholder and, in the case of clause
(ii), any shares of Registrable Common Stock held by such Person shall automatically cease to be Registrable Common Stock for all purposes hereunder. With respect to any Person that ceases to be a Stockholder (either entirely or only with respect to
transferred securities), the rights and obligations of such Person arising under Section 9 or otherwise hereunder with respect to periods and matters existing before such cessation shall survive such cessation.
(b)
Collective Action
. At any time when there is more than one Stockholder, they shall act collectively as if they were one Stockholder
holding all of their shares of Registrable Common Stock, and any act, determination or request permitted or required to be done or made hereunder by any of them shall be done or made solely by NAB on their behalf in a coordinated manner as if they
were one Stockholder. NAB shall cause each Stockholder (and former Stockholder) to perform its obligations under, and otherwise comply with, the provisions of this Agreement.
- 19 -
(c)
Transfers to Other Persons
. Shares of Registrable Common Stock may be transferred to
and held by Persons other than NAB or a majority-owned subsidiary of NAB, but only if the transfer complies with Section 11 and only if, before any such shares are transferred to any such other Person (other than pursuant to a Registration
Statement or Rule 144 under the Securities Act), or otherwise become held by any such other Person, such other Person agrees in writing with the Company, in a form reasonably satisfactory to the Company, to comply with Section 11 with respect
to any future transfers of such shares. Notwithstanding any other provision of this Agreement, however, no such other Person shall have the rights of a Stockholder or of NAB hereunder, and no shares transferred to or held by any such other Person
shall have the benefits afforded to Registrable Common Stock hereunder.
Section 13.
Miscellaneous
.
(a)
Notices
. Except as otherwise provided herein, all notices, requests, consents and other communications required or permitted
hereunder shall be in writing and shall be hand delivered, mailed (postage prepaid) by registered or certified mail or sent by
e-mail
or facsimile transmission (with telephone confirmation promptly
thereafter),
If to the Company:
Great Western Bancorp, Inc.
100
North Phillips Avenue
Sioux Falls, SD 57104
Attention: General Counsel
Facsimile: (605) 333-7882
E-mail: donald.straka@greatwesternbank.com
If to the Stockholder:
National
Australia Bank Limited
Pier 3 Level 4
800 Bourke Street
Docklands,
Victoria, Australia 3008
Attention: HO Corporate Advisory Legal
Facsimile: +61 1300 728 820
Email: notices@nab.com.au
or at such other
address as any such party hereto may specify by written notice to the others, and, except as otherwise provided herein, each such notice, request, consent and other communication shall for all purposes of the Agreement be treated as being effective
or having been given when delivered personally or by mail or, in the case of e-mail or facsimile delivery, upon receipt of
e-mail
or facsimile confirmation of delivery and telephonic confirmation.
(b)
No Waivers
. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
- 20 -
(c)
Successors and Assigns.
The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and permitted assigns, it being understood that there are no intended third party beneficiaries hereof.
(d)
Governing Law
. This Agreement shall be governed by and construed in accordance with the law of the State of New York.
(e)
Jurisdiction
. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby must be brought in any federal or state court located in the Borough of Manhattan in The City of New York, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere
in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 13(a) shall be deemed effective service of process on
such party.
(f)
Waiver of Jury Trial
. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(g)
Counterparts;
Effectiveness
. This Agreement may be executed in any number of counterparts (including by
e-mail
or facsimile) and by different parties hereto in separate counterparts, with the same effect as if all
parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
(h)
Entire Agreement
. This Agreement contains the entire agreement
between the parties hereto with respect to the subject matter hereof and supersedes and replaces all other prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof.
(i)
Captions
. The headings and other captions in this Agreement are for convenience and reference only and shall not be used in
interpreting, construing or enforcing any provision of this Agreement.
(j)
Severability
. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties
shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to
the fullest extent possible.
- 21 -
(k)
Amendments
. The provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the prior written consent of the Company and NAB.
(l)
Conditions Precedent
. The provisions of this Agreement will only take effect upon the consummation of the initial public offering
of the Common Stock and only if the initial public offering of such Common Stock is consummated by , 2014 (or such later date as may be agreed to in writing by the parties
hereto).
[Signature Page Follows]
- 22 -
IN WITNESS WHEREOF, this Registration Rights Agreement has been duly executed by each of the
parties hereto as of the date first written above.
|
|
|
|
|
GREAT WESTERN BANCORP, INC.
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
|
|
|
NATIONAL AUSTRALIA BANK LIMITED
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
|
|
|
NATIONAL AMERICAS HOLDINGS LLC
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
[Signature Page to Registration Rights Agreement]
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT,
dated and effective this 16th day of January, 2014, between GREAT WESTERN BANK, a South Dakota corporation, hereinafter called “Employer”, which is an indirect subsidiary of National Australia Bank Limited (“NAB”), and KENNETH
KARELS, of Sioux Falls, South Dakota, hereinafter called “Employee,”
THE PARTIES HERETO AGREE AS FOLLOWS:
The Employee has been employed by the Employer as its President and Chief
Executive Officer, since November 5, 2010 (Employment) and will continue to employ the Employee, upon the terms and conditions hereinafter set forth.
The Employment commenced on November 5, 2010 and will continue
on the terms and conditions contained herein. Such terms and conditions may be amended from time to time. All amendments to this Agreement shall not be effective unless made in writing and signed by both parties.
|
|
(a)
|
As compensation for services provided under this Agreement, the Employer shall pay to the Employee a base salary of $550,000.00 per year, prorated for any partial year in which this Agreement is in effect. Said salary
shall be payable in equal bi-weekly installments according to Employer’s usual payroll schedule. Any salary increase shall be at the sole discretion of NAB and Employer’s Board of Directors (“Board”).
|
|
|
(b)
|
In addition to the base salary Employee will be entitled during each fiscal year during the Term hereof, to participate in the Short Term Incentive (STI) Plan with a target of 75% of his base salary pursuant to and
under the terms of the Short-Term Incentive (“STI”) Plan of Employer. Nothing in this provision shall be construed to alter Employee’s right to a STI Plan rewards earned in his previous position with Employer. Additionally, Employee
will be eligible during each fiscal year during the Term hereof, to participate in the executive Long-Term Incentive (“LTI”) Plan of Employer. Employee’s participation in the STI Plan and LTI Plan shall be subject to each Plan’s
particular rules, regulations and provisions, as may be amended from time to time.
|
|
|
(a)
|
Group Health Insurance.
Employee shall be entitled to participate in such group health and dental insurance maintained by Employer, upon the same terms and conditions as other employees of Employer.
|
|
|
(b)
|
Retirement Plans.
Employee shall be entitled to participate or receive any contributions of benefits in such retirement plans as the Employer shall adopt and have in place for all employees, as provided by (and
subject to) the rules, regulations and provisions of such retirement plan(s).
|
|
|
(c)
|
Working Facilities.
The Employer shall furnish the Employee, at the expense of the Employer, equipment and a staff as is reasonably necessary for the Employee to perform his duties as the President and Chief
Executive Office of the Employer and which is comparable to those provide to the other senior executives.
|
|
|
(d)
|
Automobile.
During the term of this Agreement, Employer will make a company automobile available for use by the Employee. In addition, the Employer will pay all operating costs for the operation of the automobile
including license, gas, insurance and maintenance.
|
|
|
(e)
|
Business Expense.
Employer shall, upon submission and approval of written statements and bills in accordance with the then regular procedures of Employer, pay and reimburse Employee for any and all necessary,
customary and usual expenses (including reasonable entertainment) incurred by Employee for or on behalf of Employer in the normal course of business as determined to be appropriate by Employer.
|
|
|
(f)
|
Disability Insurance.
Employee shall be entitled to participate in such long or short term disability insurance coverage offered by Employer, upon the same terms and conditions as other employees of Employer.
|
|
|
(g)
|
Life Insurance.
Employee shall be entitled to participate in such life insurance programs offered by Employer, upon the same terms and conditions as other employees of Employer.
|
|
|
(h)
|
Vacation.
Employee shall be entitled to vacation leave in an amount and under the conditions set forth in the Employer’s current vacation policy, prorated for any partial calendar year in which this
Agreement is in effect, which shall be taken at such time or times as mutually agreed upon by Employee and the Board.
|
|
|
(i)
|
Sick Leave.
Employee shall be entitled to sick leave in the amount and under the conditions set forth in the Employer’s current sick leave policy.
|
There is no guarantee that any such Employer-offered benefits will continue, and the available amount of such employee benefits to be solely at
Employer’s discretion. Employee’s rights with respect to the benefits set forth herein shall be subject to (i) the provisions of all relevant contracts, policies, or plans providing such benefits; and (ii) the right of Employer
to amend, modify or terminate any such benefits if that occurs with respect to all classes of employees covered by a given benefit. The Employee shall be entitled to no other compensation if he fails to meet the coverage requirements under any of
the plans enumerated herein.
|
|
(a)
|
Employee agrees to serve as the President and Chief Executive Office of Employer and to perform such duties as may reasonably be assigned to him by the Board, provided, however, that such duties shall be of the same
character as those generally associated with the office held by Employee. Employee acknowledges that he will have one or more reporting lines to certain senior managers of NAB, who may reasonably assign him duties consistent with the wishes of the
Board. Employee shall devote all of the Employee’s best efforts working time, knowledge, ability and skill to the business of the Employer. Employee shall report directly to the Board of the Employer, as well as to senior management of NAB whom
NAB shall determine from time to time in its sole discretion. All earnings, fees, honorariums or other remuneration whatsoever earned or payable to the Employee as a result of activities associated with his with employment with the Employer belong
to the Employer.
|
|
|
(b)
|
The Employee shall at all times perform Employee’s duties to the utmost of Employee’s capacity and ability and commensurate with the highest business and professional standards and ethics.
|
|
|
(c)
|
The Employee agrees to observe and comply with any applicable rules and regulations established by the Employer. The power to direct, control and supervise the duties to be performed, the manner of performing such
duties, and the time for performing such duties shall be exercised by the Employer subject to the provisions of this Agreement.
|
|
|
(d)
|
The Employer shall not impose any employment duties of any kind which would require the Employee to violate any law or local ordinance.
|
|
|
(e)
|
The Employee shall perform all services and discharge his duties pursuant to this Agreement at the Employer’s executive offices which are located in Sioux Falls, South Dakota, but which may relocate as determined
by the Board.
|
This Agreement is for the provision of personal services from Employee to
Employer, and Employee may not assign or delegate his duties or obligations hereunder.
|
7.
|
Disability During Employment
.
|
If the Employee from any cause becomes wholly disabled
from continuing the duties of employment, Employee shall receive compensation on the following basis: For ninety (90) days only of such disability, the disabled Employee shall be paid 100% of Employee’s monthly base compensation. At the
conclusion of ninety (90) days of such disability, base compensation shall cease. At the conclusion of the ninety (90) days of such disability, Employee’s employment hereunder shall be terminated.
|
8.
|
Death During Employment.
|
If the Employee dies during the term of Employee’s
employment, the Employer shall pay to the estate of the Employee the compensation which would otherwise be payable to the Employee up to the date of death.
This Employment Contract shall continue until and unless it is terminated
by any of the following events:
|
|
(a)
|
Termination upon disability or death as provided above.
|
|
|
(b)
|
Immediately by Employer due to termination for cause, including, without limitation, the failure of Employee to comply with the terms and conditions of this Employment Contract, as provided by law, or any of the
following.
|
|
|
(1)
|
Employee has been formally indicted or charged with any felonious criminal violation, or violent crimes.
|
|
|
(2)
|
The Employee’s conviction of any crime or offense involving monies or other property, or his commission of fraud or embezzlement.
|
|
|
(3)
|
The Employee’s willful or continual neglect or failure to discharge his duties.
|
|
|
(4)
|
The Employee’s violation of any material South Dakota law, federal law, or any other conduct, which reveals or demonstrates behavior or character traits of Employee which are reasonably considered detrimental to
Employer.
|
|
|
(c)
|
A mutual written agreement between Employee and Employer to terminate this Employment Contract.
|
|
|
(d)
|
By either party without cause upon fifty two (52) weeks written notice to the other party, or, if the Employer provides written notice under this clause, by the Employer paying the Employee 52 week base salary in
lieu of notice, subject to law.
|
The Employee covenants and agrees that:
|
|
(a)
|
Non-Competition.
During the term of this Agreement or so long as the Employee is an employee of Employer and for a period of one year thereafter, the Employee shall not without the prior written consent of
Employer, which consent may be withheld at Employer’s sole and absolute discretion, directly or indirectly, as an employee, employer, independent contractor, agent, principal, proprietor, partner, member, stockholder, owner, investor,
financier, consultant, director, corporate officer or otherwise engage in any business or render any services to any business, person or entity that completes in the same business or profession of Employer in Lincoln and/or Minnehaha Counties, South
Dakota, or within a twenty-five (25) mile radius of any office where Employer or Employee has a branch or facility. If Employee is terminated without cause by Employer, Employer shall have the burden of proving the reasonableness of this
Section NW2d513.
|
|
|
(b)
|
Modification
. If the scope of any restrictions contained in this section are too broad to permit enforcement of such restrictions to their full extent, then such restrictions shall be enforced to the maximum
extent permitted by law, and the Employee hereby consents and agrees that such scope may be modified accordingly in any proceeding brought to enforce such restrictions.
|
|
11.
|
Trade Secrets and Confidential Information - Nondisclosure.
|
Employee acknowledges that
in the course of his relationship with the Employer, Employee will acquire confidential information of a special and unique nature and value relating to Employer’s business. Such information shall be considered a trade secret owned by Employer,
which information shall include, but is not limited to, the names and addresses of customers and potential customers, customer records, contracts, records concerning potential business locations, information concerning Employer’s systems,
policies, methods of operation, plans, processes, procedures, manuals, marketing strategies, pricing and all other non-public information acquired by Employee as a result of or during the course of his relationship with the Employer. Employee agrees
that all such information acquired during the course of his relationship with the Employer, whether such information is communicated in written or verbal form, constitute trade secrets of Employer. Employee agrees that Employee shall not at any time
or in any manner, either directly or indirectly, divulge or disclose Employer’s trade secrets to any other person or entity. In addition, Employee agrees that Employee shall not use such trade secrets in competition with Employer or for the
gain or benefit of Employee or any other person or company. Employee further agrees that, following termination of this Agreement, Employee shall not remove or retain any document, copy of document or any other recording, in any type or form,
relating to said trade secrets and, further, Employee shall not utilize or divulge said trade secrets to any other person or company, regardless of whether such knowledge or information is in recorded form or otherwise.
Employee acknowledges that compliance with Section 10 and
Section 11 of this Agreement is necessary to protect the business and goodwill of Employer. A breach of which will result in immediate and irreparable injury, loss, or damage to Employer, for which money damages may not provide adequate relief.
Consequently, Employee agrees that, in the event Employee breaches the covenants contained in Section I 0 and/or Section 11 herein, Employer shall be entitled to both preliminary or permanent injunction in order to prevent the continuation of
such harm. In addition, the non-competition covenant shall be tolled during the period of time any breach occurs. Said injunctive relief and other remedies shall be cumulative and non-exclusive, and shall be in addition to any other remedy that
Employer may have. Furthermore, the parties agree that, in the event that Employer takes action to enforce either or both sections, the losing party in the litigation shall pay all of the winning party’s costs of enforcement hereof, including
reasonable attorney’s fees.
Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and if sent by certified mail to Employee’s residence in the case of the Employee or to its principal office in the case of the Employer.
The waiver by the Employer of a breach of any provisions of this
Agreement by the Employee shall not operate or be construed as a waiver of any subsequent breach by Employee.
This instrument contains the entire agreement of the parties and
replaces all current employment agreements. It may not be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.
This Agreement shall be binding upon and inure to the benefit of the
parties, their heirs, legal representatives, successors and permitted assigns.
|
17.
|
Invalidity or Unenforceability of Particular Provisions
.
|
The invalidity or
unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted.
This Agreement shall be construed and enforced under and in accordance
with the laws of South Dakota, without reference to its conflict or choice of law provisions, with exclusive venue for resolution of disputes in the State Circuit Court for the Second Judicial Circuit, Minnehaha County, South Dakota.
|
19
|
No Third-Party Rights
.
|
Nothing in this Agreement shall be construed as creating or
giving rise to any rights in any third parties or any persons other than the parties hereto.
Employer and Employee agree that they participated in the
drafting of this Agreement and, in the event that any dispute arises in the interpretation or construction of this Agreement, no presumption shall arise that either one party or the other drafted this Agreement.
|
21.
|
Survival of Representations and Covenants.
|
The provisions of this Agreement shall
survive the term of this Agreement and the performance of the provisions by the parties hereto.
This Agreement may be amended only by the written agreement by the parties
hereto.
The Company shall only enter into such amendment upon the unanimous written consent of the Company shareholders.
The parties hereto shall execute and deliver all documents, provide all
information and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of the Agreement.
This Agreement may be executed in several counterparts and all so
executed shall constitute one Agreement, binding on all the parties hereto even though all the parties are not signatories to the original or the same counterpart.
This Agreement and any documents obtained in the course of the
negotiation of the same shall remain confidential and shall not be disclosed by Employee to any party, except for Employee’s spouse, legal advisors, accountants, and tax preparers, who agree to hold such information on a confidential basis.
IN WITNESS WHEREOF, this Employment Contract has been signed on the day and year first above written.
|
|
|
GREAT WESTERN BANK
|
|
|
|
/s/ Andrew Thorburn
|
|
ANDREW THORBURN
|
|
CEO, BNZ (People Leader of Ken Karels)
|
|
|
|
/s/ Kenneth Karels
|
|
KENNETH KARELS
|
|
EMPLOYEE (Direct Report of Andrew Thorburn)
|
Exhibit 10.5
|
|
|
|
|
|
|
|
|
National Australia Bank Limited
|
|
|
|
|
ABN 12 004 044 937
|
|
|
|
|
AFSL 230686
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Assignment Services
800
Bourke Street
Docklands, VIC 3008
Direct Telephone: +61 3
8634 8730
|
8 November 2012
Peter
Chapman
General Manager Finance,
Performance
Management &
Non-Traded Business
500 Bourke Street
Melbourne, VIC, 3000
Dear Peter,
I am pleased to confirm your appointment to the position of Chief Financial Officer, Great Western Bank reporting to Ken Karels and located Sioux Falls in the
United States of America (US). During this international assignment to the US, you will remain an employee of National Australia Bank Limited.
Your
remuneration and other assignment conditions will be determined in accordance with the NAB’s
Group International assignment Policy
(the “Policy”), which may be amended from time to time. The Policy is essential reading for you
to enable you to become familiar with the remuneration, benefits and relocation arrangements that will apply to your international assignment to the US.
TERM OF APPOINTMENT
Your international assignment to the
US will commence during the month of January 2013 and is expected to be for an initial period of two years; however, the NAB reserves the right to amend the term at any time and for any reason.
REMUNERATION AND BENEFITS
Total Fixed Employment
Compensation
During the period of your international assignment, you will be paid in the US as a regional member of staff. Your fixed employment
compensation in the US has been set after taking into consideration US salary rates and the temporary nature of your international assignment.
As your
fixed employment compensation will be paid in the US you will be required to pay US taxes and statutory government levies on that remuneration. This will be paid from the Commencement Date and paid in line with the NAB’s US pay cycles.
Your fixed employment compensation in the US will be USD $310,000 per annum.
Housing, Furniture and Utilities
As an exception to the
Policy you may be reimbursed up to a net amount of USD 3200 per month to assist towards the cost of rental accommodation in the US, however, you will be responsible for the cost of all utilities (gas, electricity, etc).
Superannuation Fund
You will remain a member of your home country fund where applicable (“the Fund”). The NAB will continue to make appropriate employer contributions to
the Fund on your behalf during your international assignment, based on your home country base salary.
Superannuation Cash Allowance
The Maximum Earnings Benefit is set by the ATO each year and determines the maximum amount of employer superannuation contributions an individual can receive
in that year. This means that anyone earning above the MEB will have some of their employer superannuation contributions converted to cash and redirected into their pay (subject to tax at the applicable rate).
The MEB is currently AUD $183,000 meaning the maximum employer superannuation contribution to an employee’s account will be AUD $18,300 per annum. Your
superannuation cash allowance is therefore confirmed as follows:
|
|
|
|
|
Effective:
|
|
November 2012
|
|
Australia TEC:
|
|
AUD $300,000
|
|
Australia TRP:
|
|
AUD $272,727.27
|
|
Current Employer Superannuation Contribution:
|
|
AUD $ 27272.73
|
|
MEB Contribution Limit:
|
|
AUD $ 18,300
|
|
Superannuation Contribution in Excess of the MEB:
|
|
AUD $ 8,972.73
|
|
Rate of Exchange:
|
|
1.02273
|
|
Host Currency Amount to be Paid:
|
|
USD $ 9176.68 per annum
|
Performance Incentive
You are eligible to participate in the National’s Short-Term Incentive (STI) plan. Your target annual STI reward for your assignment is 30% of your US
fixed remuneration. STI rewards are subject to the terms and conditions of the STI Plan in respect of those rewards at the relevant time.
NAB Employee
Equity - Performance Options, Performance Rights, and Share Schemes
Where applicable, participation will be in accordance with the eligibility
criteria of NAB’s performance options, performance rights and share plans. This benefit will not be “tax equalised” or “tax protected” from the Commencement Date.
Personal Income Tax
You will need to have a good
understanding of your tax position that will apply during your international assignment to the US, as there will be no tax equalisation or tax protection on employment or non-employment income. You will be required to have a tax briefing with
Deloitte (currently the NAB’s taxation service providers) to gain a better understanding of any tax implications arising on your accepting this International assignment. By signing this letter, you agree that all taxation matters are your
responsibility from the Commencement Date.
During your international assignment, your US and Australian tax returns will be prepared by Deloitte for
yourself, the cost of which will be borne by the NAB. Tax return assistance will be provided during your International assignment and for the year of return to Australia.
Annual Leave
Annual leave will be in accordance with
NAB’s US policy and effective from the Commencement Date.
Sick Leave
Sick leave will be in accordance with NAB’s US policy and will be effective from the Commencement Date.
Home Travel
As an exception to the Policy, one home
travel benefit will accrue after each completed year of assignment. Return economy class airfares will be provided for you and your dependent family. Home travel may be taken by mutual agreement between you and you line manager.
Motor Vehicle
As an exception to the Policy, two motor
vehicles will be provided for your personal use, the cost of which is benchmarked in terms of Great Western Bank policy. You will not be charged for the cost of the motor vehicle.
Health Insurance
The NAB’s global provider, Marsh
Pty Ltd, will provide Health Insurance for you and your dependent family for the term of your international assignment.
Transfer Allowance
A transfer allowance of AUD 4,300 (net) will be paid to you prior to your departure in accordance with Policy. This amount is to be grossed up for Australian
tax purposes. This allowance is to cover costs associated with your transfer excluding those costs outlined in “Pre-Departure Transfer Arrangements” below. In accordance with Policy, a Transfer Allowance will also be payable to you upon
your repatriation.
PRE-DEPARTURE TRANSFER ARRANGEMENTS
A Global Assignment Coordinator (GAC) from Sirva, the NAB’s global provider of relocation services, will be in contact with you shortly after your
acceptance of this international assignment to provide you with a US briefing. Your GAC will also guide you through the entire moving process and will assist you on your arrival in the US. Your GAC will also keep you updated with the progress of
your move and relevant information will be available to you through Sirva’s website. Access and password details will be provided to you by your GAC.
Visa Status
The NAB will sponsor you for a temporary
work visa to allow you to work in the US. This appointment and your participation in the assignment are conditional upon a work permit or visa being approved. An immigration consultant from Sirva will be in touch to coordinate the visa application.
Health Assessment
You and your dependent family are
required to participate in the NAB’s international assignee health assessment program prior to your departure for the US. Details and forms are available through the Sirva website. It is advisable to have these assessments carried out quickly,
as you will be unable to commence your assignment until they have been completed. This will also be required upon your repatriation.
Taxation Briefing
It is essential that you have a comprehensive understanding of the tax implications of your international assignment to the US. Therefore, it is suggested that
you meet with Deloitte to discuss your tax position as soon as possible. Deloitte have been notified of your proposed assignment and a consultant will be in contact with you to arrange a mutually-suitable time for the briefing.
Cross-Cultural Briefing
Prior to moving to the US, you
and your dependent family will have the opportunity to attend a briefing on the cultural differences between the US and Australia. This will also provide useful on the ground information, and it is suggested that you undertake this early in the
pre-departure process. Your GAC will arrange this for you.
Shipping and Storage
Your GAC will arrange for a quote to be carried out by a shipping company with regard to moving your personal effects to the US. You will be permitted to send
100 kilograms per family member by airfreight and the remainder by seafreight. This sea shipment will be limited to a twenty-foot container. Your GAC will also arrange transit insurance for your freight.
During the term of your international assignment to the US, the NAB will meet the cost of storing and insuring your furniture and personal effects in
Australia including one motor vehicle. Your GAC will also arrange storage requirements.
Temporary Accommodation
Your GAC will arrange for up to three days’ accommodation in a serviced apartment (if required) immediately prior to your departure to the US. The NAB
will meet the cost of this accommodation; however, all other costs (food, laundry, telephone calls, etc.) will be borne by you.
Travel to and from
Assignment
Business class travel is approved for you and your dependent family when travelling on the approved travel route to your international
assignment and will similarly apply on your repatriation.
ARRIVAL IN THE US
Temporary Accommodation
Your GAC will arrange
transportation for you and your dependent family from the airport to your temporary accommodation in the US. This accommodation will have been booked in advance and is generally for a period of up to six weeks while you find more permanent
accommodation. The NAB will meet the cost of this accommodation; however, all other costs (food, laundry, telephone calls, etc.) will be borne by you.
Home Search and Orientation
A relocation consultant from
Sirva in the US will assist with your home search and will provide you with an arrival information pack. The consultant will also be available to answer any immediate questions you may have regarding your new location.
Settling-in Leave
You are entitled to two working days’ paid special leave for settling-in purposes in the US.
FURTHER INFORMATION
Please contact me on +61 3 8634 8765
if you have any queries regarding your international assignment to the US.
ACCEPTANCE
Would you please sign and return the original of this letter and return it to me to confirm your acceptance of the terms of your International assignment to
the US.
Peter, I would like to take this opportunity to wish you success on your international assignment to the US and look forward to your ongoing
support and commitment to the NAB.
Yours sincerely
Kelly Kotsakis
Manager
Global Assignment Services
ACCEPTANCE
I, Peter Chapman, acknowledge that I have read and understood the terms of the International assignment to the US, as set out in this letter and as contained
in the NAB’s
Group International assignment Policy
(as amended from time to time) (the “International assignment”), and I hereby:
|
1.
|
accept the terms and conditions of the international assignment and agree not to discuss this information with other employees or international assignees of the NAB or any subsidiary or associated company of the NAB;
|
|
2.
|
agree to abide by the terms and conditions of the NAB’s
Group International Assignment Policy
and associated attachments and agree not to discuss this information with other employees or international
assignees of the NAB or any subsidiary or associated company of the NAB;
|
|
3.
|
agree to abide by the NAB’s corporate principles and behaviours and compliance standards, the NAB’s policies and procedures and all local laws, regulations and obligations that are applicable to me and my
position during the term of the International assignment;
|
|
4.
|
agree to abide by the terms and conditions of all visas and work permits granted to enable me to perform the work required in respect of the International assignment;
|
|
5.
|
declare that where I have provided personal information about an individual (such as myself, family, relative, solicitor or contact person), I have made, or will immediately make, the individual aware of that fact and:
|
|
|
•
|
|
that their personal information has been collected by National Australia Bank Limited for the purposes of the International assignment;
|
|
|
•
|
|
that their personal information may be disclosed to other organisations involved in the relocation, management or administration of the International assignment, as required by law or with their consent;
|
|
|
•
|
|
that I may not be able to obtain some services as part of the international assignment if that individual’s personal information is not provided;
|
|
|
•
|
|
that the individual can gain access to their personal information by contacting Global Assignment Services, Melbourne, Australia.
|
|
|
•
|
|
I understand that the National Australia Bank is working with Deloitte Touche Tohmatsu Ltd (Deloitte), to develop a workflow management tool to facilitate the international assignment process (referred to as a Global
Mobility Assignment Platform (GMAP)) and I consent to NAB disclosing my relevant personal information to Deloitte for the purpose of developing the GMAP workflow tool.
|
SUMMARY OF MAIN TERMS OF YOUR INTERNATIONAL ASSIGNMENT
|
|
|
|
|
Employee Name:
|
|
Peter Chapman
|
|
|
|
|
Home Business Unit:
|
|
Wholesale Banking, Melbourne
|
|
|
|
|
Host Business Unit:
|
|
Great Western Bank, Sioux Falls
|
|
|
|
|
Host Location:
|
|
Sioux Falls - USA
|
|
|
|
|
Job Title:
|
|
Chief Financial Officer
|
|
|
|
|
Commencement Date of Assignment:
|
|
Month of January 2013
|
|
|
|
|
Period of Assignment:
|
|
2 years
|
|
|
|
|
US Pay Cycle:
|
|
Monthly
|
|
|
|
|
US Fixed Remuneration:
|
|
USD $310,000 per annum
|
|
|
|
|
Performance Incentive:
|
|
30%
|
|
|
|
|
Home Country Total Employment Compensation:
|
|
AUD $300,000 per annum
|
|
|
|
|
Housing Allowance:
|
|
USD $3200 net per month
|
|
|
|
|
Motor Vehicle:
|
|
Two vehicles provided.
|
|
|
|
|
Travel Home:
|
|
Economy class per family member per annum
|
|
|
|
|
Net Transfer Allowance
(each way)
:
|
|
AUD 4,300 net
|
|
|
|
|
Annual Leave:
|
|
20 days
|
|
|
|
|
Travel Days
(each way)
:
|
|
Two days
|
|
|
|
|
Settling In Leave:
|
|
Two days
|
Exhibit 10.6
|
|
|
|
|
|
National Australia Bank Limited
ABN 12 004
044 937
AFSL 230686
|
5 August 2010
Steve
Ulenberg
Head of Enterprise Risk Insight
Bank of New
Zealand
Level 4, BNZ Tower
125 Queen St
Auckland, NEW ZEALAND
Dear Steve,
I am pleased to confirm your appointment as Chief Risk Officer, Great Western Bank reporting to Jeff Erickson, President & CEO, Great Western
Bank, located in Sioux Falls, South Dakota — United States of America (US). During this expatriate assignment, you will remain an employee of Bank of New Zealand (the “National”).
Your remuneration and other assignment conditions will be determined in accordance with the National’s
Group Expatriate Policy
(the
“Policy”). A copy of the current Policy is attached, which may be amended by the National from time to time. The Policy is essential reading to enable you to become familiar with the remuneration, benefits and relocation arrangements that
will apply to your expatriate appointment.
TERM OF APPOINTMENT
Your expatriate assignment to the US will commence on mutually agreed date and is expected to be for an initial term of 3 years; however, the National reserves
the right to amend the term of your expatriate assignment at any time and for any reason.
REMUNERATION AND BENEFITS
Fixed Remuneration
A separate international pay structure
operates for expatriates and is called Expatriate Net Pay (“ENP”). An ENP worksheet is attached, which includes a detailed explanation of the ENP methodology. The ENP is calculated with reference to your home country Total Employment
Compensation (“TEC”) of NZD 250,000 per annum.
Performance Incentive
You are eligible to participate in the National’s Short-Term Incentive (STI) Plan. Your target annual STI reward for the duration of your Local Plus
assignment is 30% of your home country TEC. STI rewards are subject to the terms and conditions of the STI Plan in respect of those rewards at the relevant time. STI rewards are not guaranteed, as they are subject to the achievement of your
individual, and the National’s, performance targets and to your passing the behaviour and compliance “quality gates”. STI rewards may, at the discretion of the National, be provided in cash or in deferred National shares or a
combination of both. Any cash payment provided as part of the STI Plan will be made in New Zealand and will be tax equalised. Any National shares provided as part of the STI Plan will be subject to particular terms and conditions attached to those
shares at the relevant time. The National may, in its discretion, discontinue, replace, or vary the terms of the STI Plan at any time. STI rewards, if paid, are normally paid in December of each year.
Options/Share Schemes
Participation will be in accordance with the eligibility criteria of the National’s employee performance options and performance rights plans and share
plans (as applicable).
Annual Leave
While on your
expatriate assignment, you will be entitled to annual leave of 20 working days per annum. Annual leave may be taken by mutual agreement between you and you line manager.
Home Leave
One home leave benefit will accrue after each
completed year of expatriate service. Return economy class airfares will be provided for you and your dependent family. Home leave may be taken by mutual agreement between you and you line manager.
Health Insurance
The National Group’s global
provider, Marsh Pty Ltd, will provide health insurance for the term of your expatriate assignment.
Housing, Furniture and Utilities
Housing and furnishings will be provided to you in the US, the maximum cost of which is benchmarked in terms of Policy, currently USD 2,500 per month. You
will not be charged for the cost of housing in the US up to the above amount; however, you will be responsible for the cost of all utilities (gas, electricity, etc.), except for initial connection fees, which are reimburseable.
Partner Vocational Assistance
Partner vocational
assistance will be provided in line with Policy, currently NZD 2,500 per annum.
Motor Vehicle
A motor vehicle will be provided for your personal use, the cost of which is benchmarked in terms of US Policy. You will not be charged for the cost of the
motor vehicle.
Tax Return Preparation
Deloitte
Touche Tohmatsu (“Deloitte”) or another service provider appointed by the National, will prepare your home country and host country income tax returns for each year of expatriate assignment, including for the year of repatriation to your
home country.
Transfer Allowance
A transfer
allowance of NZD 6,800 net will be paid to you prior to your departure from New Zealand. This amount is to be grossed up for New Zealand tax purposes. This allowance is to cover costs associated with your transfer excluding those costs outlined in
“Pre-Departure Transfer Arrangements” below. In accordance with policy, this allowance will be payable upon your repatriation.
PRE-DEPARTURE
TRANSFER ARRANGEMENTS
A Service Coordinator (“SC”) from Sirva, the National’s global provider of relocation services, will be in
contact with you shortly after your acceptance of this assignment. Your SC will guide you and your dependant family, Liz and Tom, through the entire moving process and will assist you on your
arrival in the US. Your SC will also keep you updated with the progress of your move and relevant information will be available to you through Sirva’s website. Access and password details
will be provided to you by your SC.
Visa Status
The
National will sponsor you for a temporary work permit to enable you to work in the US. However, you and your expatriate assignment role must meet specific US immigration/visa requirements before a visa application is lodged. You will be provided
with instructions the National’s preferred Attorney’s in the US.
Health Assessment
You and your dependent family are required to participate in the National’s international assignee health assessment program prior to your departure for
the US. Details and forms are available through the Sirva’s website. It is advisable to have these assessments carried out quickly, as you will be unable to commence your assignment until they have been completed. This will also be required
upon repatriation.
Taxation Briefing
It is
essential that you have a comprehensive understanding of the tax implications of your expatriate assignment to the US. Therefore, it is suggested that you meet with Deloitte to discuss your tax position as soon as possible. Your tax manager’s
contact details for home and host countries can be found on Sirva’s website.
Cross-Cultural Briefing
Prior to moving to moving to the US, you and your dependent family will have the opportunity to attend a briefing on the cultural differences between the US
and New Zealand. This will also provide useful “on the ground” information and it is suggested that you undertake this early in the pre-departure process. Your SC will arrange this for you.
Shipping and Storage
Your SC will arrange for a quote to
be prepared by a shipping company with regard to moving your personal effects to the US. You will be permitted to send 100 kilograms per family member by airfreight, with the remainder to be sent by seafreight. This sea shipment will be limited to a
twenty-foot container. Your SC will also arrange transit insurance for your freight.
During the term of your expatriate assignment to the US, the
National will continue to meet the cost of storing and insuring your furniture and personal effects in New Zealand, including one motor vehicle. Your SC will also arrange storage requirements.
Temporary Accommodation
Your SC will arrange for up to
three days’ accommodation in a serviced apartment (if required) immediately prior to your departure to the US. While the National will meet the cost of this accommodation, all other costs (food, laundry, telephone calls, etc.) will be borne by
you.
Travel to and from Assignment
Business class
travel is approved for you and your dependent family when travelling on the approved travel route to your expatriate assignment and will similarly apply on repatriation.
ARRIVAL IN HOST COUNTRY
Temporary Accommodation
Your SC will arrange
transportation for you and your dependent family from the airport to your temporary accommodation in the US. This accommodation will have been booked in advance and is generally for a period of four to six weeks while you find more permanent
accommodation. The National will meet the cost of this temporary accommodation; however, all other costs (food, laundry, telephone calls, etc.) will be borne by you.
Home Search and Orientation
A Service Coordinator from
Sirva in the US will assist with home search and will provide you with an arrival information pack. The consultant will also be available to answer any immediate questions you may have regarding your new location.
Settling-in Leave
You are entitled to two working
days’ paid special leave for settling-in purposes in the US.
REPATRIATION
In the event that the Great Western Bank no longer operates as an entity of the National Australia Bank Limited, the National will transfer you and your
dependant family back to your home country New Zealand at the National’s cost, in accordance to the transfer arrangements detailed in this letter and the “Policy”.
FURTHER INFORMATION
Please contact me, on +61 3 8641
3434, if you have any queries regarding your relocation to the US.
ACCEPTANCE
Would you please sign and return the original of this letter and return it to me to confirm your acceptance of the terms of your expatriate assignment to the
US.
Steve, I would like to take this opportunity to wish you success on your expatriate assignment to the US and look forward to your ongoing support and
commitment to the National.
|
|
|
Yours sincerely,
|
|
|
|
/s/ Kelly Kotsakis
|
|
|
|
Kelly Kotsakis
|
|
Consultant – Global Assignment Services
|
ACCEPTANCE
I, Steve Ulenberg, acknowledge that I have read and understood the terms of the expatriate assignment to the US, as set out in this letter and as
contained in the National’s
Group Expatriate Policy
(as amended from time to time) (the “expatriate assignment”), and I hereby:
|
1.
|
accept the terms and conditions of the expatriate assignment and agree not to discuss this information with other employees or international assignees of the National or any subsidiary or associated company of the
National;
|
|
2.
|
agree to abide by the terms and conditions of the National’s
Group Expatriate Policy
and associated attachments and agree not to discuss this information with other employees or international assignees of
the National or any subsidiary or associated company of the National;
|
|
3.
|
agree to abide by the National’s corporate principles and behaviours and compliance standards, the National’s policies and procedures and all local laws, regulations and obligations that are applicable to me
and my position during the term of the expatriate assignment;
|
|
4.
|
agree to abide by the terms and conditions of all visas and work permits granted to enable me to perform the work required in respect of the expatriate assignment;
|
|
5.
|
declare that where I have provided personal information about an individual (such as myself, family, relative, solicitor or contact person), I have made, or will immediately make, the individual aware of that fact and:
|
|
|
•
|
|
that their personal information has been collected by National Australia Bank Limited for the purposes of the expatriate assignment;
|
|
|
•
|
|
that their personal information may be disclosed to other organisations involved in the relocation, management or administration of the expatriate assignment, as required by law or with their consent;
|
|
|
•
|
|
that I may not be able to obtain some services as part of the expatriate assignment if that individual’s personal information is not provided;
|
|
|
•
|
|
that the individual can gain access to their personal information by contacting People and Culture, National Australia Bank Limited, Melbourne, Australia.
|
SUMMARY OF MAIN TERMS OF EXPATRIATE ASSIGNMENT
|
|
|
|
|
Employee Name:
|
|
Steve Ulenberg
|
|
|
|
|
Home Business Unit:
|
|
Risk, Bank of New Zealand
|
|
|
|
|
Host Business Unit:
|
|
Risk, Great Western Bank
|
|
|
|
|
Host Location:
|
|
Sioux Falls, South Dakota - US
|
|
|
|
|
Job Title:
|
|
Chief Risk Officer
|
|
|
|
|
|
Date of Commencement of Assignment:
|
|
To be confirmed.
|
|
|
|
|
Period of Assignment:
|
|
3 years
|
|
|
|
|
Home Country Total Employment Compensation:
|
|
NZD 250,000 gross per annum
|
|
|
|
|
Net Transfer Allowance (each way):
|
|
NZD 6,800 net
|
|
|
|
|
Housing Allowance:
|
|
USD 2,500 per month
|
|
|
|
|
Partner Vocational Allowance:
|
|
NZD 2,500 per annum
|
|
|
|
|
Motor Vehicle:
|
|
Provided by company
|
|
|
|
|
Annual Leave:
|
|
20 working days
|
|
|
|
|
Travel Days (each way):
|
|
Two working days
|
|
|
|
|
Settling-in Leave:
|
|
Two working days
|
|
|
|
|
|
|
National Australia Bank Limited
ABN 12 004 044 937
|
Global Assignment Services
Level 7, 700 Bourke Street
Docklands
VIC 3008
Direct Telephone: +61 3 8641 4879
23 December 2013
Steve Ulenberg
100N Phillips Avenue
Sioux Falls
SD 57101
USA
Dear Steve,
Further to your initial letter of offer dated
5 August 2010 and previous assignment extension letters, I am pleased to confirm the further extension of your International Assignment to the Great Western Bank, US to 15 October 2015; however the Group reserves the right to amend the
term of appointment at any time and for any reason.
During your international assignment you will continue to remain an employee of Bank of New Zealand,
seconded to the Great Western Bank, US.
Your position details are confirmed as follows:
|
|
|
|
|
Position Title:
|
|
Chief Risk Officer, GWB
|
|
|
|
|
Salary
|
|
NZD 300,000 per annum (effective 1 January 2014)
|
|
|
|
|
STI:
|
|
30%
|
|
|
|
|
People Leader:
|
|
Ken Karels
|
All other assignment conditions will continue to be determined in accordance with the Group International Assignment Policy. A
copy of the current policy is attached which may be amended from time to time.
As your assignment is being extended it is important that you check your
visa details. The extension of your assignment is subject to you having the appropriate visa approval to work in the US.
If the extension of your
international assignment and enclosed policy are acceptable to you, please sign the attached copy and return via email to the Global Assignment Services mailbox.
|
|
|
|
|
|
|
National Australia Bank Limited
ABN 12 004 044 937
|
Please do not hesitate to contact Joanne Sammut on +61 3 8641 4879, should you have any queries, otherwise I
take this opportunity to wish you continued success on your overseas assignment.
|
|
|
Yours Sincerely,
|
|
|
|
|
Victor Brusco
|
|
Manager P&R Programs & Planning
|
|
|
|
|
|
|
|
National Australia Bank Limited
ABN 12 004 044 93
|
I, Steve Ulenberg, have read the enclosed documentation and acknowledge that:
|
1.
|
I understand and accept the terms and conditions outlined in this extension letter and agree not to discuss this information with other employees or international assignees within NAB.
|
|
2.
|
I agree to abide by the
Group International Assignment Policy
and associated attachments and agree not to discuss this information with other employees or international assignees within NAB.
|
|
3.
|
I understand that I must abide by the terms and conditions of all visas and work permits granted to enable me to perform the work required for this assignment.
|
|
4.
|
I declare where I have provided personal information about an individual (such as myself, family, relative, solicitor or contact person), I have made, or will immediately make, the individual aware of that fact and:
|
|
|
•
|
|
that their personal information has been collected by the National Australia Bank Group organisation for the purposes of my international assignment;
|
|
|
•
|
|
that their personal information may be disclosed to other organisations involved in the relocation, management or administration of my international assignment, as required by law or with their consent;
|
|
|
•
|
|
that I may not be able to obtain some services as part of the international assignment if that individual’s personal information is not provided;
|
|
|
•
|
|
that the individual can gain access to their personal information by contacting Global Assignment Services.
|
|
|
|
|
|
Signature /s/ Steve Ulenberg
|
|
Date 5/23/2014
|
Exhibit 10.10
FORM OF
GREAT WESTERN
BANCORP, INC.
2014 OMNIBUS INCENTIVE COMPENSATION PLAN
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
ARTICLE I GENERAL
|
|
|
1
|
|
|
|
|
|
|
|
|
|
1.1
|
|
Purpose
|
|
|
1
|
|
|
|
|
1.2
|
|
Definitions of Certain Terms
|
|
|
1
|
|
|
|
|
1.3
|
|
Administration
|
|
|
6
|
|
|
|
|
1.4
|
|
Persons Eligible for Awards
|
|
|
9
|
|
|
|
|
1.5
|
|
Types of Awards Under Plan
|
|
|
9
|
|
|
|
|
1.6
|
|
Shares of Common Stock Available for Awards
|
|
|
9
|
|
|
|
|
1.7
|
|
Individual Limitations
|
|
|
10
|
|
|
|
|
|
ARTICLE II AWARDS UNDER THE PLAN
|
|
|
10
|
|
|
|
|
|
|
|
|
|
2.1
|
|
Agreements Evidencing Awards
|
|
|
10
|
|
|
|
|
2.2
|
|
No Rights as a Stockholder
|
|
|
11
|
|
|
|
|
2.3
|
|
Options
|
|
|
11
|
|
|
|
|
2.4
|
|
Stock Appreciation Rights
|
|
|
13
|
|
|
|
|
2.5
|
|
Restricted Shares
|
|
|
14
|
|
|
|
|
2.6
|
|
Restricted Stock Units
|
|
|
14
|
|
|
|
|
2.7
|
|
Dividend Equivalent Rights
|
|
|
15
|
|
|
|
|
2.8
|
|
Other Stock-Based or Cash-Based Awards
|
|
|
15
|
|
|
|
|
2.9
|
|
Repayment If Conditions Not Met
|
|
|
17
|
|
|
|
|
|
ARTICLE III MISCELLANEOUS
|
|
|
17
|
|
|
|
|
|
|
|
|
|
3.1
|
|
Amendment of the Plan
|
|
|
17
|
|
|
|
|
3.2
|
|
Tax Withholding
|
|
|
17
|
|
|
|
|
3.3
|
|
Required Consents and Legends
|
|
|
18
|
|
|
|
|
3.4
|
|
Right of Offset
|
|
|
19
|
|
|
|
|
3.5
|
|
Nonassignability; No Hedging
|
|
|
19
|
|
|
|
|
3.6
|
|
Change in Control
|
|
|
20
|
|
|
|
|
3.7
|
|
No Continued Employment or Engagement; Right of Discharge Reserved
|
|
|
20
|
|
|
|
|
3.8
|
|
Nature of Payments
|
|
|
21
|
|
|
|
|
3.9
|
|
Non-Uniform Determinations
|
|
|
21
|
|
|
|
|
3.10
|
|
Other Payments or Awards
|
|
|
21
|
|
|
|
|
3.11
|
|
Plan Headings
|
|
|
22
|
|
|
|
|
3.12
|
|
Termination of Plan
|
|
|
22
|
|
|
|
|
3.13
|
|
Clawback/Recapture Policy
|
|
|
22
|
|
|
|
|
3.14
|
|
FDIC Limits on Golden Parachute Payments
|
|
|
22
|
|
|
|
|
3.15
|
|
Section 409A
|
|
|
22
|
|
|
|
|
3.16
|
|
Governing Law
|
|
|
23
|
|
|
|
|
3.17
|
|
Disputes; Choice of Forum
|
|
|
24
|
|
|
|
|
3.18
|
|
Waiver of Jury Trial
|
|
|
24
|
|
|
|
|
3.19
|
|
Waiver of Claims
|
|
|
25
|
|
|
|
|
3.20
|
|
Severability; Entire Agreement
|
|
|
25
|
|
|
|
|
3.21
|
|
No Liability With Respect to Tax Qualification or Adverse Tax Treatment
|
|
|
25
|
|
|
|
|
3.22
|
|
No Third-Party Beneficiaries
|
|
|
25
|
|
|
|
|
3.23
|
|
Successors and Assigns of the Company
|
|
|
25
|
|
|
|
|
3.24
|
|
Date of Adoption and Approval of Stockholders
|
|
|
26
|
|
FORM OF
GREAT WESTERN BANCORP, INC.
2014 OMNIBUS INCENTIVE COMPENSATION PLAN
ARTICLE I
GENERAL
1.1 Purpose
The purpose of the Great
Western Bancorp, Inc. 2014 Omnibus Incentive Compensation Plan (as amended from time to time, the “
Plan
”) is to help the Company (as hereinafter defined): (1) attract, retain and motivate key employees (including
prospective employees) and consultants (other than non-employee directors of Great Western Bancorp, Inc., a Delaware corporation (“
Great Western
”); (2) align the interests of such persons with Great Western’s
stockholders; and (3) promote ownership of Great Western’s equity.
1.2 Definitions of Certain Terms
For purposes of this Plan, the following terms have the meanings set forth below:
1.2.1 “
Acquisition Awards
” has the meaning set forth in
Section 1.6.1
.
1.2.2 “
Award
” means an award made pursuant to the Plan.
1.2.3 “
Award Agreement
” means the written document by which each Award is evidenced, and which may, but need
not be (as determined by the Committee) executed or acknowledged by a Grantee as a condition to receiving an Award or the benefits under an Award, and which sets forth the terms and provisions applicable to Awards granted under the Plan to such
Grantee. Any reference herein to an agreement in writing will be deemed to include an electronic writing to the extent permitted by applicable law.
1.2.4 “
Board
” means the Board of Directors of Great Western.
1.2.5 “
Business Combination
” has the meaning provided in the definition of Change in Control.
1.2.6 “
Cause
” means (a) with respect to a Grantee employed pursuant to a written employment agreement
which agreement includes a definition of “Cause,” “Cause” as defined in that agreement or (b) with respect to any other Grantee, the occurrence of any of the following: (i) such Grantee’s conviction of, or plea of
guilty or no contest to, any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof or under the laws of any other jurisdiction, (ii) such Grantee’s attempted commission
of, or participation in, a fraud or theft against the Company or any client of the Company, (iii) such Grantee’s engagement in gross misconduct that causes financial or reputation harm to the Company, (iv) such Grantee’s repeated
failure to substantially perform his or her duties and responsibilities to the Company (other than failure resulting from incapacity due to mental or
physical illness or injury or from any permitted leave required by law), (v) such Grantee’s material violation of any contract or agreement between the Grantee and the Company or
any written Company policy, (vi) such Grantee’s habitual abuse of narcotics or (vii) such Grantee’s disqualification or bar by any governmental or self-regulatory authority from serving in the capacity required by his or her job
description or such Grantee’s loss of any governmental or self-regulatory license that is reasonably necessary for such Grantee to perform his or her duties or responsibilities, in each case as an Employee or a Consultant, as applicable, of the
Company.
1.2.7 “
Certificate
” means a stock certificate (or other appropriate document or evidence
of ownership) representing Shares.
1.2.8 “
Change in Control
” means, except in connection with any
initial public offering of the Common Stock, the occurrence of any of the following events after the completion of the initial public offering of the Company:
(a) during any period of not more than 36 months, individuals who constitute the Board as of the beginning of the period (the
“
Incumbent Directors
”)
cease for any reason to constitute at least a majority of the Board,
provided
that
any person becoming a director subsequent to the beginning of such period, whose election or nomination
for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of Great Western in which such person is named as a nominee for director,
without written objection to such nomination) will be an Incumbent Director;
provided
,
however
, that no individual initially elected or nominated as a director of Great Western as a result of an actual or publicly threatened election
contest with respect to directors or as a result of any other actual or publicly threatened solicitation of proxies by or on behalf of any person other than the Board will be deemed to be an Incumbent Director;
provided
,
further
, that
this
Section 1.2.8(a)
shall not be in effect until the earlier to occur of (A) the Non-Control Date (as defined in the Stockholder Agreement between National Australia Bank Limited and Great Western, dated as of
[
—
]
, 2014) and (B) the date on which National Australia Bank Limited owns less than 5% of Great Western’s outstanding Shares;
(b) any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act), is or becomes a “beneficial owner” (as defined in
Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of Great Western representing 30%
or more of the combined voting power of Great Western’s then-outstanding securities eligible to vote for the election of the Board (“
Company Voting Securities
”);
provided
,
however
, that the event described
in this paragraph (b) will not be deemed to be a Change in Control by virtue of the ownership, or acquisition, of Company Voting Securities: (A) by the Company, (B) by any employee benefit plan (or related trust) sponsored or
maintained by the Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (c) of this definition) or (E) by
National Australia Bank Limited or any of its direct or indirect Subsidiaries or a transferee thereof and such transferee’s affiliates;
(c) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving Great
Western that requires the approval of Great Western’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “
Business Combination
”), excluding such a Business Combination with
National Australia Bank Limited or any of its direct or indirect Subsidiaries or a transferee thereof and such transferee’s affiliates, unless immediately following such Business Combination: (A) more than 50% of the total voting power of
(x) the entity resulting from such Business Combination (the “
Surviving Entity
”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the
voting
-2-
power, is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company
Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof
immediately prior to the Business Combination, (B) no person (other than National Australia Bank Limited or any employee benefit plan (or related trust) sponsored or maintained by the Surviving Entity or the parent), is or becomes the
beneficial owner, directly or indirectly, of 30% or more of the total voting power of the outstanding voting securities eligible to elect directors of the parent (or, if there is no parent, the Surviving Entity) and (C) at least 50% of the
members of the board of directors of the parent (or, if there is no parent, the Surviving Entity) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the
initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) of this paragraph (c) will be deemed to be a “
Non-Qualifying
Transaction
”); or
(d) the consummation of a sale of all or substantially all of Great Western’s assets (other
than to National Australia Bank Limited or any of its direct or indirect Subsidiaries or a transferee thereof and such transferee’s affiliates or an affiliate of Great Western); or
(e) Great Western’s stockholders approve a plan of complete liquidation or dissolution of Great Western.
Notwithstanding the foregoing, a Change in Control will not be deemed to occur solely because any person acquires beneficial ownership of more
than 30% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding;
provided
that
if after such acquisition by the
Company such person (other than National Australia Bank Limited or any of its direct or indirect Subsidiaries or a transferee thereof and such transferee’s affiliates) becomes the beneficial owner of additional Company Voting Securities that
increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control will then occur.
1.2.9 “
Code
” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto,
and the applicable rulings and regulations thereunder.
1.2.10 “
Committee
” has the meaning set forth in
Section 1.3.1
.
1.2.11 “
Common Stock
” means the common stock of Great Western, par value $0.01 per
share, and any other securities or property issued in exchange therefor or in lieu thereof pursuant to
Section 1.6.3
.
1.2.12 “
Company
” means Great Western and any Subsidiary, and any successor entity thereto.
1.2.13 “
Company Voting Securities
” has the meaning provided in the definition of Change in Control.
-3-
1.2.14 “
Consent
” has the meaning set forth in
Section 3.3.2
.
1.2.15 “
Consultant
” means any individual (other than a non-employee Director), corporation, partnership,
limited liability company or other entity that provides bona fide consulting or advisory services to the Company.
1.2.16
“
Covered Person
” has the meaning set forth in
Section 1.3.4
.
1.2.17
“
Director
” means a member of the Board.
1.2.18 “
Disability
” has the meaning
provided in the Company’s Disability Policy, as may be amended from time to time.
1.2.19 “
Effective
Date
” has the meaning set forth in
Section 3.23
.
1.2.20 “
Employee
” means
a regular, active employee and/or a prospective employee of the Company, but not including a non-employee Director.
1.2.21
“
Employment
” means a Grantee’s performance of services for the Company, as determined by the Committee. The terms “employ” and “employed” will have their correlative meanings. The Committee in its
sole discretion may determine (a) whether and when a Grantee’s leave of absence results in a termination of Employment, (b) whether and when a change in a Grantee’s association with the Company results in a termination of
Employment and (c) the impact, if any, of any such leave of absence or change in association on outstanding Awards. Unless expressly provided otherwise, any references in the Plan or any Award Agreement to a Grantee’s Employment being
terminated will include both voluntary and involuntary terminations.
1.2.22 “
Exchange Act
” means
the Securities Exchange Act of 1934, as amended from time to time, or any successor thereto, and the applicable rules and regulations thereunder.
1.2.23 “
Fair Market Value
” means, with respect to a Share, the closing price reported for the Common Stock on
the applicable date as reported on the New York Stock Exchange or, if not so reported, as determined in accordance with a valuation methodology approved by the Committee, unless determined as otherwise specified herein. For purposes of the grant of
any Award, the applicable date will be the trading day on which the Award is granted or, if the date the Award is granted is not a trading day, the trading day immediately prior to the date the Award is granted. For purposes of the exercise of any
Award, the applicable date is the date a notice of exercise is received by the Company or, if such date is not a trading day, the trading day immediately following the date a notice of exercise is received by the Company.
1.2.24 “
Good Reason
” means (a) with respect to a Grantee employed pursuant to a written employment
agreement which agreement includes a definition of “Good Reason,” “Good Reason” as defined in that agreement or (b) with respect to any other Grantee, the occurrence of any of the following in the absence of the
Grantee’s written consent: (i) any material and adverse change in the Grantee’s position or authority with the Company as in effect immediately before a Change in Control, other than an isolated and insubstantial action not taken in
bad faith and which is remedied by the Company within 30 days after receipt of notice thereof given by
-4-
the Grantee; (ii) the transfer of the Grantee’s primary work site to a new primary work site that is more than 50 miles from the Grantee’s primary work site in effect immediately
before a Change in Control; or (iii) a diminution of the Grantee’s base salary in effect immediately before a Change in Control by more than 10%, unless such diminution applies to all similarly situated employees. If the Grantee does not
deliver to the Company a written notice of termination within 60 days after the Grantee has knowledge that an event constituting Good Reason has occurred, the event will no longer constitute Good Reason. In addition, the Grantee must give the
Company 30 days to cure the event constituting Good Reason.
1.2.25 “
Grantee
” means an Employee or
Consultant who receives an Award.
1.2.26 “
Incentive Stock Option
” means a stock option to purchase
Shares that is intended to be an “incentive stock option” within the meaning of Sections 421 and 422 of the Code, as now constituted or subsequently amended, or pursuant to a successor provision of the Code, and which is designated as an
Incentive Stock Option in the applicable Award Agreement.
1.2.27 “
Incumbent Directors
” has the
meaning provided in the definition of Change in Control.
1.2.28 “
Non-Qualifying Transaction
” has the
meaning provided in the definition of Change in Control.
1.2.29 “
Other Stock-Based or Cash-Based Awards
”
has the meaning set forth in
Section 2.8.1
.
1.2.30 “
Performance-Based Awards
” means certain
Other Stock-Based or Cash-Based Awards granted pursuant to
Section 2.8.2
.
1.2.31 “
Performance
Criteria
” has the meaning set forth in
Section 2.8.2
.
1.2.32 “
Performance
Goals
” means the performance goals established by the Committee in connection with the grant of Awards, which may or may not be based on Performance Criteria.
1.2.33 “
Plan
” has the meaning set forth in
Section 1.1
.
1.2.34 “
Plan Action
” has the meaning set forth in
Section 3.3.1
.
1.2.35 “
Retirement
” means termination of Employment by the Grantee (while such Grantee is in good standing with
the Company) on or after the Grantee’s attainment of age 55, provided that the sum of the Grantee’s age and years of service with the Company is 75 or greater.
1.2.36 “
Section 409A
” means Section 409A of the Code, including any amendments or successor provisions to
that section, and any regulations and other administrative guidance thereunder, in each case as they may be from time to time amended or interpreted through further administrative guidance.
-5-
1.2.37 “
Securities Act
” means the Securities Act of 1933, as
amended from time to time, or any successor thereto, and the applicable rules and regulations thereunder.
1.2.38 “
Share
Limit
” has the meaning set forth in
Section 1.6.1
.
1.2.39 “
Shares
” means shares
of Common Stock.
1.2.40 “
Subsidiary
” means any corporation, partnership, limited liability company
or other legal entity in which Great Western, directly or indirectly, owns stock or other equity interests possessing 25% or more of the total combined voting power of all classes of the then-outstanding stock or other equity interests.
1.2.41 “
Surviving Entity
” has the meaning provided in the definition of Change in Control.
1.2.42 “
Ten Percent Stockholder
” means a person owning stock possessing more than 10% of the total combined voting
power of all classes of stock of Great Western and of any Subsidiary or parent corporation of Great Western.
1.2.43
“
Treasury Regulations
” means the regulations promulgated under the Code by the United States Treasury Department, as amended.
1.3 Administration
1.3.1 The
Compensation Committee of the Board (as constituted from time to time, and including any successor committee, the “
Committee
”) will administer the Plan. In particular, the Committee will have the authority in its sole
discretion to:
(a) exercise all of the powers granted to it under the Plan;
(b) construe, interpret and implement the Plan and all Award Agreements;
(c) prescribe, amend and rescind rules and regulations relating to the Plan, including rules governing the Committee’s own operations;
(d) make all determinations necessary or advisable in administering the Plan;
(e) correct any defect, supply any omission and reconcile any inconsistency in the Plan;
(f) amend the Plan to reflect changes in applicable law;
(g) grant, or recommend to the Board for approval to grant, Awards and determine who will receive Awards, when such Awards will be granted and
the terms of such Awards, including setting forth provisions with regard to the effect of a termination of Employment on such Awards and conditioning the vesting of, or the lapsing of any applicable vesting restrictions or other vesting conditions
on, Awards upon the attainment of Performance Goals and/or upon continued service;
-6-
(h) amend any outstanding Award Agreement in any respect including, without limitation, to
(1) accelerate the time or times at which the Award becomes vested, unrestricted or may be exercised (and, in connection with such
acceleration, the Committee may provide that any Shares acquired pursuant to such Award will be restricted shares, which are subject to vesting, transfer, forfeiture or repayment provisions similar to those in the Grantee’s underlying Award),
(2) accelerate the time or times at which Shares are delivered under the Award (and, without limitation on the Committee’s rights, in
connection with such acceleration, the Committee may provide that any Shares delivered pursuant to such Award will be restricted shares, which are subject to vesting, transfer, forfeiture or repayment provisions similar to those in the
Grantee’s underlying Award),
(3) waive or amend any goals, restrictions, vesting provisions or conditions set forth in such Award
Agreement, or impose new goals, restrictions, vesting provisions and conditions or
(4) reflect a change in the Grantee’s
circumstances (
e.g.
, a change to part-time employment status or a change in position, duties or responsibilities); and
(i)
determine at any time whether, to what extent and under what circumstances and method or methods, subject to
Section 3.15
,
(1)
Awards may be
(A) settled in cash, Shares, other securities, other Awards or other property (in which event, the Committee may specify
what other effects such settlement will have on the Grantee’s Award, including the effect on any repayment provisions under the Plan or Award Agreement),
(B) exercised or
(C) canceled,
forfeited or suspended,
(2) Shares, other securities, other Awards or other property and other amounts payable with respect to an Award
may be deferred either automatically or at the election of the Grantee thereof or of the Committee,
(3) to the extent permitted under
applicable law, loans (whether or not secured by Common Stock) may be extended by the Company with respect to any Awards,
(4) Awards may
be settled by Great Western, any of its Subsidiaries or affiliates or any of their designees and
(5) the exercise price for any stock
option (other than an Incentive Stock Option, unless the Committee determines that such a stock option will no longer constitute an Incentive Stock Option) or stock appreciation right may be reset.
-7-
1.3.2 Actions of the Committee may be taken by the vote of a majority of its members present at a
meeting (which may be held telephonically). Any action may be taken by a written instrument signed by a majority of the Committee members, and action so taken will be as fully effective as if it had been taken by a vote at a meeting. The
determination of the Committee on all matters relating to the Plan or any Award Agreement will be final, binding and conclusive. The Committee may allocate among its members and delegate to any person who is not a member of the Committee, or to any
administrative group within the Company, any of its powers, responsibilities or duties. In delegating its authority, the Committee will consider the extent to which any delegation may cause Awards to fail to be deductible under Section 162(m)
of the Code or to fail to meet the requirements of Rule 16(b)-3(d)(1) or Rule 16(b)-3(e) under the Exchange Act. Except as specifically provided to the contrary, references to the Committee include any administrative group, individual or individuals
to whom the Committee has delegated its duties and powers.
1.3.3 Notwithstanding anything to the contrary contained herein, the Board
may, in its sole discretion, at any time and from time to time, grant Awards or administer the Plan. In any such case, the Board will have all of the authority and responsibility granted to the Committee herein.
1.3.4 No member of the Committee or any person to whom the Committee delegates its powers, responsibilities or duties in writing, including by
resolution (each such person, a “
Covered Person
”), will have any liability to any person (including any Grantee) for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award,
except as expressly provided by statute. Each Covered Person will be indemnified and held harmless by the Company against and from:
(a)
any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon or incurred by such Covered Person in connection with or resulting from any action, suit or proceeding to which such Covered Person may be a party or in
which such Covered Person may be involved by reason of any action taken or omitted to be taken under the Plan or any Award Agreement, in each case, in good faith and
(b) any and all amounts paid by such Covered Person, with the Company’s approval, in settlement thereof, or paid by such Covered Person
in satisfaction of any judgment in any such action, suit or proceeding against such Covered Person,
provided
that
the Company will have the right, at its own expense, to assume and defend any such action, suit or proceeding and, once
the Company gives notice of its intent to assume the defense, the Company will have sole control over such defense with counsel of the Company’s choice.
The foregoing right of indemnification will not be available to a Covered Person to the extent that a court of competent jurisdiction in a
final judgment or other final adjudication, in either case, not subject to further appeal, determines that the acts or omissions of such Covered Person giving rise to the indemnification claim resulted from such Covered Person’s bad faith,
fraud or willful misconduct. The foregoing right of indemnification will not be exclusive of any
-8-
other rights of indemnification to which Covered Persons may be entitled under Great Western’s Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws, pursuant to
any individual indemnification agreements between such Covered Person and the Company, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such persons or hold them harmless.
1.4 Persons Eligible for Awards
Awards
under the Plan may be made to Employees and Consultants.
1.5 Types of Awards Under Plan
Awards may be made under the Plan in the form of cash-based or stock-based Awards. Stock-based Awards may be in the form of any of the
following, in each case in respect of Common Stock:
(a) stock options,
(b) stock appreciation rights,
(c) restricted shares,
(d)
restricted stock units,
(e) dividend equivalent rights and
(f) other equity-based or equity-related Awards (as further described in
Section 2.8
), that the Committee determines to be
consistent with the purposes of the Plan and the interests of the Company.
1.6 Shares of Common Stock Available for Awards
1.6.1
Common Stock Subject to the Plan
.
Subject to the other provisions of this
Section 1.6
, the
total number of Shares that may be granted under the Plan will be
(the “
Share Limit
”).
Shares of Common Stock subject to awards that are assumed, converted or substituted under the Plan as a result of the Company’s acquisition of another company (including by way of merger, combination or similar transaction)
(“
Acquisition Awards
”) will not count against the number of shares that may be granted under the Plan. Available shares under a stockholder approved plan of an acquired company (as appropriately adjusted to reflect the
transaction) may be used for Awards under the Plan and do not reduce the maximum number of shares available for grant under the Plan, subject to applicable stock exchange requirements.
1.6.2
Replacement of Shares
.
Shares subject to an Award that is forfeited (including any restricted shares
repurchased by the Company at the same price paid by the Grantee so that such Shares are returned to the Company), expires or is settled for cash (in whole or in part), to the extent of such forfeiture, expiration or cash settlement will be
available for future grants of Awards under the Plan and will be added back in the same number of Shares as were deducted in respect of the grant of such Award. The payment of dividend equivalent rights in cash in
-9-
conjunction with any outstanding Awards will not be counted against the Shares available for issuance under the Plan. Shares tendered by a Grantee or withheld by the Company in payment of the
exercise price of a stock option or to satisfy any tax withholding obligation with respect to an Award will not again be available for Awards.
1.6.3
Adjustments
.
The Committee will:
(a) adjust the number of Shares authorized pursuant to
Section 1.6.1
,
(b) adjust the individual Grantee limitations set forth in
Sections 1.7
,
2.4.1
and
2.5.1
,
(c) adjust the number of Shares set forth in
Section 2.3.2
that can be issued through Incentive Stock Options and
(d) adjust the terms of any outstanding Awards (including, without limitation, the number of Shares covered by each outstanding Award, the
type of property or securities to which the Award relates and the exercise or strike price of any Award),
in such manner as it deems
appropriate (including, without limitation, by payment of cash) to prevent the enlargement or dilution of rights, as a result of any increase or decrease in the number of issued Shares (or issuance of shares of stock other than Shares) resulting
from a recapitalization, stock split, reverse stock split, stock dividend, spinoff, split up, combination, reclassification or exchange of Shares, merger, consolidation, rights offering, separation, reorganization or liquidation or any other change
in the corporate structure or Shares, including any extraordinary dividend or extraordinary distribution;
provided
that
no such adjustment may be made if or to the extent that it would cause an outstanding Award to cease to be exempt
from, or to fail to comply with, Section 409A of the Code.
1.7 Individual Limitations
The maximum number of Shares with respect to which Awards (other than stock options and stock appreciation rights) may be granted during any fiscal year to any
Grantee who is an Employee will be 1,000,000 (as adjusted pursuant to the provisions of
Section 1.6.3
). The grant limit under the preceding sentence will (i) apply to an Award other than a stock option or stock appreciation right
only if the Award is intended to be “performance-based compensation” as that term is used in Section 162(m) of the Code and (ii) be adjusted upward or downward, as applicable, on a pro rata basis for each full or partial fiscal
year in the applicable performance period.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements
Evidencing Awards
Each Award granted under the Plan will be evidenced by an Award Agreement that will contain such provisions and conditions as the
Committee deems appropriate. Unless otherwise provided herein, the Committee may grant Awards in tandem with or, subject to
Section 3.15
, in
-10-
substitution for or satisfaction of any other Award or Awards granted under the Plan or any award granted under any other plan of the Company. By accepting an Award pursuant to the Plan, a
Grantee thereby agrees that the Award will be subject to all of the terms and provisions of the Plan and the applicable Award Agreement.
2.2 No Rights
as a Stockholder
No Grantee (or other person having rights pursuant to an Award) will have any of the rights of a stockholder of Great Western with
respect to Shares subject to an Award until the delivery of such Shares. Except as otherwise provided in
Section 1.6.3
, no adjustments will be made for dividends, distributions or other rights (whether ordinary or extraordinary, and
whether in cash, Common Stock, other securities or other property) for which the record date is before the date the Certificates for the Shares are delivered, or in the event the Committee elects to use another system, such as book entries by the
transfer agent, before the date in which such system evidences the Grantee’s ownership of such Shares.
2.3 Options
2.3.1
Grant
. Stock options may be granted to eligible recipients in such number and at such times during the term of the Plan as
the Committee may determine;
provided
,
however
, that the maximum number of Shares as to which stock options may be granted under the Plan to any one individual in any fiscal year may not exceed 1,000,000 Shares (as adjusted
pursuant to the provisions of
Section 1.6.3
).
2.3.2
Incentive Stock Options
.
At the time
of grant, the Committee will determine:
(a) whether all or any part of a stock option granted to an eligible Employee will be an
Incentive Stock Option and
(b) the number of Shares subject to such Incentive Stock Option;
provided
,
however
, that
(1) the aggregate Fair Market Value (determined as of the time the option is granted) of the stock with respect to which Incentive Stock
Options are exercisable for the first time by an eligible Employee during any fiscal year (under all such plans of Great Western and of any Subsidiary or parent corporation of Great Western) may not exceed $100,000 and
(2) no Incentive Stock Option (other than an Incentive Stock Option that may be assumed or issued by the Company in connection with a
transaction to which Section 424(a) of the Code applies) may be granted to a person who is not eligible to receive an Incentive Stock Option under the Code.
The form of any stock option which is entirely or in part an Incentive Stock Option will clearly indicate that such stock option is an
Incentive Stock Option or, if applicable, the number of Shares subject to the Incentive Stock Option. No more than
Shares (as adjusted pursuant to the provisions of
Section 1.6.3
) that can be delivered under the Plan may be issued through Incentive Stock Options.
-11-
2.3.3
Exercise Price
.
The exercise price per share with respect to each
stock option will be determined by the Committee but, except as otherwise permitted by
Section 1.6.3
, may never be less than the Fair Market Value of a share of Common Stock (or, in the case of an Incentive Stock Option granted to a Ten
Percent Stockholder, 110% of the Fair Market Value). Unless otherwise noted in the Award Agreement, the Fair Market Value of the Common Stock will be its closing price on the New York Stock Exchange on the date of grant of the Award of stock
options.
2.3.4
Term of Stock Option
.
In no event will any stock option be exercisable after the expiration of 10
years (or, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, 5 years) from the date on which the stock option is granted.
2.3.5
Vesting and Exercise of Stock Option and Payment for Shares
.
A stock option may
v
est and be
exercised at such time or times and subject to such terms and conditions as will be determined by the Committee at the time the stock option is granted and set forth in the Award Agreement. Subject to any limitations in the applicable Award
Agreement, any Shares not acquired pursuant to the exercise of a stock option on the applicable vesting date may be acquired thereafter at any time before the final expiration of the stock option.
To exercise a stock option, the Grantee must give written notice to the Company specifying the number of Shares to be acquired and accompanied
by payment of the full purchase price therefor in cash or by certified or official bank check or in another form as determined by the Company, which may include:
(a) personal check,
(b)
Shares, based on the Fair Market Value as of the exercise date,
(c) any other form of consideration approved by the Company and permitted
by applicable law and
(d) any combination of the foregoing.
The Committee may also make arrangements for the cashless exercise of a stock option. Any person exercising a stock option will make such
representations and agreements and furnish such information as the Committee may, in its sole discretion, deem necessary or desirable to effect or assure compliance by the Company on terms acceptable to the Company with the provisions of the
Securities Act, the Exchange Act and any other applicable legal requirements. The Committee may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing
legends on share certificates and issuing stop-transfer notices to agents and registrars. If a Grantee so requests, Shares acquired pursuant to the exercise of a stock option may be issued in the name of the Grantee and another jointly with the
right of survivorship.
2.3.6
Repricing
.
Except as otherwise permitted by
Section 1.6.3
, reducing the
exercise price of stock options issued and outstanding under the Plan, including through amendment, cancellation in exchange for the grant of a substitute Award or repurchase for cash or other consideration (in each case that has the effect of
reducing the exercise price), will require approval of Great Western’s stockholders.
-12-
2.4 Stock Appreciation Rights
2.4.1
Grant
.
Stock appreciation rights may be granted to eligible recipients in such number and at such times during the
term of the Plan as the Committee may determine;
provided
,
however
, that the maximum number of Shares as to which stock appreciation rights may be granted under the Plan to any one individual in any fiscal year may not exceed
1,000,000 Shares (as adjusted pursuant to the provisions of
Section 1.6.3
).
2.4.2
Exercise Price
.
The exercise price per share with respect to each stock appreciation right will be determined by the Committee but, except as otherwise permitted by
Section 1.6.3
, may never be less than the Fair Market Value of the Common
Stock. Unless otherwise noted in the Award Agreement, the Fair Market Value of the Common Stock will be its closing price on the New York Stock Exchange on the date of grant of the Award of stock appreciation rights.
2.4.3
Term of Stock Appreciation Right
.
In no event will any stock appreciation right be exercisable after the expiration
of 10 years from the date on which the stock appreciation right is granted.
2.4.4
Vesting and Exercise of Stock
Appreciation Right and Delivery of Shares
.
Each stock appreciation right may vest and be exercised in such installments as may be determined in the Award Agreement at the time the stock appreciation right is granted. Subject to
any limitations in the applicable Award Agreement, any stock appreciation rights not exercised on the applicable vesting date may be exercised thereafter at any time before the final expiration of the stock appreciation right.
To exercise a stock appreciation right, the Grantee must give written notice to the Company specifying the number of stock appreciation rights
to be exercised. Upon exercise of stock appreciation rights, Shares, cash or other securities or property, or a combination thereof, as specified by the Committee, equal in value to:
(a) the excess of:
|
|
(1)
|
the Fair Market Value of the Common Stock on the date of exercise
over
|
|
|
(2)
|
the exercise price of such stock appreciation right
|
multiplied by
(b) the number of stock appreciation rights exercised that will be delivered to the Grantee.
Any person exercising a stock appreciation right will make such representations and agreements and furnish such information as the Committee
may, in its sole discretion, deem necessary or desirable to effect or assure compliance by the Company on terms acceptable to the
-13-
Company with the provisions of the Securities Act, the Exchange Act and any other applicable legal requirements. If a Grantee so requests, Shares purchased may be issued in the name of the
Grantee and another jointly with the right of survivorship.
2.4.5
Repricing
. Except as otherwise permitted by
Section 1.6.3
, reducing the exercise price of stock appreciation rights issued and outstanding under the Plan, including through amendment, cancellation in exchange for the grant of a substitute Award or repurchase for cash or other
consideration (in each case that has the effect of reducing the exercise price), will require approval of Great Western’s stockholders.
2.5
Restricted Shares
2.5.1
Grants
.
The Committee may grant or offer for sale restricted shares in such
amounts and subject to such terms and conditions as the Committee may determine. Upon the delivery of such shares, the Grantee will have the rights of a stockholder with respect to the restricted shares, subject to any other restrictions and
conditions as the Committee may include in the applicable Award Agreement. Each Grantee of an Award of restricted shares will be issued a Certificate in respect of such shares, unless the Committee elects to use another system, such as book entries
by the transfer agent, as evidencing ownership of such shares. In the event that a Certificate is issued in respect of restricted shares, such Certificate may be registered in the name of the Grantee, and will, in addition to such legends required
by applicable securities laws, bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, but will be held by the Company or its designated agent until the time the restrictions lapse.
2.5.2
Right to Vote and Receive Dividends on Restricted Shares
.
Each Grantee of an Award of restricted
shares will, during the period of restriction, be the beneficial and record owner of such restricted shares and will have full voting rights with respect thereto. Unless the Committee determines otherwise in an Award Agreement, during the period of
restriction, all dividends (whether ordinary or extraordinary and whether paid in cash, additional shares or other property) or other distributions paid upon any restricted share will be retained by the Company for the account of the relevant
Grantee. Such dividends or other distributions will revert back to the Company if for any reason the restricted share upon which such dividends or other distributions were paid reverts back to the Company. Upon the expiration of the period of
restriction, all such dividends or other distributions made on such restricted share and retained by the Company will be paid to the relevant Grantee (without interest).
2.6 Restricted Stock Units
The Committee may grant
Awards of restricted stock units in such amounts and subject to such terms and conditions as the Committee may determine. A Grantee of a restricted stock unit will have only the rights of a general unsecured creditor of Great Western, until delivery
of Shares, cash or other securities or property is made as specified in the applicable Award Agreement. On the delivery date specified in the Award Agreement, the Grantee of each restricted stock unit not previously forfeited or terminated will
receive one share of Common Stock, cash or other securities or property equal in value to a share of Common Stock or a combination thereof, as specified by the Committee.
-14-
2.7 Dividend Equivalent Rights
The Committee may include in the Award Agreement with respect to any Award a dividend equivalent right entitling the Grantee to receive amounts equal to all or
any portion of the regular cash dividends that would be paid on the Shares covered by such Award if such Shares had been delivered pursuant to such Award. The grantee of a dividend equivalent right will have only the rights of a general unsecured
creditor of Great Western until payment of such amounts is made as specified in the applicable Award Agreement. In the event such a provision is included in an Award Agreement, the Committee will determine whether such payments will be made in cash,
in Shares or in another form, whether they will be conditioned upon the exercise of the Award to which they relate (subject to compliance with Section 409A of the Code), the time or times at which they will be made, and such other terms and
conditions as the Committee will deem appropriate.
2.8 Other Stock-Based or Cash-Based Awards
2.8.1
Grant
.
The Committee may grant other types of equity-based, equity-related or cash-based Awards (including the grant or
offer for sale of unrestricted Shares, performance share awards, performance units settled in cash) (“
Other Stock-Based or Cash-Based Awards
”) in such amounts and subject to such terms and conditions as the Committee may
determine. The terms and conditions set forth by the Committee in the applicable Award Agreement may relate to the achievement of Performance Goals, as determined by the Committee at the time of grant. Such Awards may entail the transfer of actual
Shares to Award recipients and may include Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
2.8.2
Performance-Based Awards
.
Notwithstanding anything to the contrary herein, Other Stock-Based or Cash-Based Awards may, at
the discretion of the Committee, be granted in a manner which is intended to be deductible by the Company under Section 162(m) of the Code. In such event, the Committee will follow the following procedures to the extent required to comply with
Section 162(m) of the Code (taking into account any transition relief available thereunder):
(a)
Establishment of the
Performance Period, Performance Goals and Formula
.
A Grantee’s Performance-Based Award will be determined based on the attainment of written objective Performance Goals approved by the Committee for a performance period established by
the Committee (i) while the outcome for that performance period is substantially uncertain and (ii) no more than 90 days after the commencement of the performance period to which the Performance Goal relates or, if the performance period
is less than one year, the number of days which is equal to 25% of the relevant performance period. At the same time as the Performance Goals are established, the Committee will prescribe a formula to determine the amount of the Performance-Based
Award that may be payable based upon the level of attainment of the Performance Goals during the performance period.
(b)
Performance Criteria
.
The Performance Goals will be based on one or more of the following business criteria (either separately or in combination) with regard to Great Western (or a Subsidiary, division, other operational unit or
administrative department of Great
-15-
Western) (“
Performance Criteria
”): measures of efficiency (including operating efficiency, productivity ratios or other similar measures); measures of achievement of
expense targets, costs reductions, working capital, cash levels or general expense ratios; asset growth; earnings per share; enterprise value or value creation targets; combined net worth; debt to equity ratio; revenues, sales, net revenues or net
sales measures; gross profit or operating profit measures (including before or after taxes or other similar measures); investment performance; income or operating income measures (with or without investment income or income taxes, before or after
risk-adjustment, or other similar measures); cash flow; margin; net income, before or after taxes; earnings before interest, taxes, depreciation and/or amortization; return measures (including return on capital, total capital, tangible capital,
expenses, tangible expenses, equity, revenue, assets, or net assets or total shareholder return or similar measures); market share measures; measures of balance sheet achievements (including debt reductions, leverage ratios or other similar
measures) and increase in Fair Market Value of Common Stock.
Except as otherwise expressly provided, all financial terms are used
as defined under Generally Accepted Accounting Principles (“GAAP”) or such other objective principles, as may be designated by the Committee. To the extent financial terms are defined under GAAP, all determinations will be made in
accordance with GAAP, as applied by the Company in the preparation of its periodic reports to stockholders.
Any Performance Goals may be
measured in absolute terms or relative to historic performance or the performance of other companies or an index.
To the extent permitted
under Section 162(m) of the Code (including, without limitation, compliance with any requirements for stockholder approval), for each fiscal year of Great Western, the Committee may (i) designate additional business criteria on which the
Performance Goals may be based or (ii) provide for objectively determinable adjustments, modifications or amendments, as determined in accordance with GAAP, to any of the Performance Criteria described above for one or more of the items of
gain, loss, profit or expense: (A) determined to be extraordinary or unusual in nature or infrequent in occurrence, (B) related to the disposal of a segment of a business, (C) related to a change in accounting principle under GAAP,
(D) related to discontinued operations that do not qualify as a segment of business under GAAP or (E) attributable to the business operations of any entity acquired by the Company during the fiscal year.
(c)
Certification of Performance
.
Following the completion of each performance period, the Committee will have the sole
discretion to determine whether the applicable Performance Goals have been met with respect to a given Grantee and, if they have, will so certify in writing and ascertain the amount of the applicable Performance-Based Award. No Performance-Based
Awards will be paid for such performance period until such certification is made by the Committee. The amount of the Performance-Based Award actually paid to a given Grantee may be less (but not more) than the amount determined by the applicable
Performance Goal formula, at the discretion of the Committee. The amount of the Performance-Based Award determined by the Committee for a performance period will be paid to the Grantee at such time as determined by the Committee in its sole
discretion after the end of such performance period.
-16-
2.9 Repayment If Conditions Not Met
If the Committee determines that all terms and conditions of the Plan and a Grantee’s Award Agreement were not satisfied, and that the failure to satisfy
such terms and conditions is material, then the Grantee will be obligated to pay the Company immediately upon demand therefor, (a) with respect to a stock option and a stock appreciation right, an amount equal to the excess of the Fair Market
Value (determined at the time of exercise) of the Shares that were delivered in respect of such exercised stock option or stock appreciation right, as applicable, over the exercise price paid therefor, (b) with respect to restricted shares, an
amount equal to the Fair Market Value (determined at the time such shares became vested) of such restricted shares and (c) with respect to restricted stock units, an amount equal to the Fair Market Value (determined at the time of delivery) of
the Shares delivered with respect to the applicable delivery date, in each case with respect to clauses (a), (b) and (c) of this
Section 2.9
, without reduction for any amount applied to satisfy withholding tax or other
obligations in respect of such Award.
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the
Plan
3.1.1 Unless otherwise provided in the Plan or in an Award Agreement, the Board may at any time and from time to time suspend,
discontinue, revise or amend the Plan in any respect whatsoever but, subject to
Sections
1.3
,
1.6.3
and
3.7
, no such amendment may materially adversely impair the rights of the Grantee of any Award without the
Grantee’s consent. Subject to
Sections
1.3
,
1.6.3
and
3.7
, an Award Agreement may not be amended to materially adversely impair the rights of a Grantee without the Grantee’s consent.
3.1.2 Unless otherwise determined by the Board, stockholder approval of any suspension, discontinuance, revision or amendment will be obtained
only to the extent necessary to comply with any applicable laws, regulations or rules of a securities exchange or self-regulatory agency;
provided
,
however
, if and to the extent the Board determines that it is appropriate for Awards
granted under the Plan to constitute performance-based compensation within the meaning of Section 162(m)(4)(C) of the Code (taking into account any “transition relief” available to the Company under the Code), no amendment that would
require stockholder approval in order for amounts paid pursuant to the Plan to constitute performance-based compensation within the meaning of Section 162(m)(4)(C) of the Code will be effective without the approval of Great Western’s
stockholders as required by Section 162(m) of the Code and, if and to the extent the Board determines it is appropriate for the Plan to comply with the provisions of Section 422 of the Code, no amendment that would require stockholder
approval under Section 422 of the Code will be effective without the approval of Great Western’s stockholders.
3.2 Tax Withholding
Grantees will be solely responsible for any applicable taxes (including, without limitation, income and excise taxes) and penalties, and any interest that
accrues thereon, that they incur in connection with the receipt, vesting or exercise of any Award. As a condition to the delivery of
-17-
any Shares, cash or other securities or property pursuant to any Award or the lifting or lapse of restrictions on any Award, or in connection with any other event that gives rise to a federal or
other governmental tax withholding obligation on the part of the Company relating to an Award (including, without limitation, the Federal Insurance Contributions Act (FICA) tax),
(a) the Company may deduct or withhold (or cause to be deducted or withheld) from any payment or distribution to a Grantee whether or not
pursuant to the Plan (including Shares otherwise deliverable),
(b) the Committee will be entitled to require that the Grantee remit cash
to the Company (through payroll deduction or otherwise) or
(c) the Company may enter into any other suitable arrangements to withhold, in
each case in an amount not to exceed in the opinion of the Company the minimum amounts of such taxes required by law to be withheld.
3.3 Required
Consents and Legends
3.3.1 If the Committee at any time determines that any Consent (as hereinafter defined) is necessary or desirable
as a condition of, or in connection with, the granting of any Award, the delivery of Shares or the delivery of any cash, securities or other property under the Plan, or the taking of any other action thereunder (each such action a “
Plan
Action
”), then, subject to
Section 3.15
such Plan Action will not be taken, in whole or in part, unless and until such Consent will have been effected or obtained to the full satisfaction of the Committee. The Committee may
direct that any Certificate evidencing Shares delivered pursuant to the Plan will bear a legend setting forth such restrictions on transferability as the Committee may determine to be necessary or desirable, and may advise the transfer agent to
place a stop transfer order against any legended shares.
3.3.2 The term “
Consent
” as used in this Article
III with respect to any Plan Action includes:
(a) any and all listings, registrations or qualifications in respect thereof upon
any securities exchange or under any federal, state, or local law, or law, rule or regulation of a jurisdiction outside the United States,
(b) any and all written agreements and representations by the Grantee with respect to the disposition of Shares, or with respect to any other
matter, which the Committee may deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made,
(c) any and all other consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory body or any stock
exchange or self-regulatory agency,
-18-
(d) any and all consents by the Grantee to:
(i) the Company’s supplying to any third party recordkeeper of the Plan such personal information as the Committee deems advisable to
administer the Plan,
(ii) the Company’s deducting amounts from the Grantee’s wages, or another arrangement satisfactory to the
Committee, to reimburse the Company for advances made on the Grantee’s behalf to satisfy certain withholding and other tax obligations in connection with an Award and
(iii) the Company’s imposing sales and transfer procedures and restrictions and hedging restrictions on Shares delivered under the Plan
and
(e) any and all consents or authorizations required to comply with, or required to be obtained under, applicable local law or
otherwise required by the Committee. Nothing herein will require the Company to list, register or qualify the Shares on any securities exchange.
3.4
Right of Offset
The Company will have the right to offset against its obligation to deliver Shares (or other property or cash) under the Plan or any
Award Agreement any outstanding amounts (including, without limitation, travel and entertainment or advance account balances, loans, repayment obligations under any Awards, or amounts repayable to the Company pursuant to tax equalization, housing,
automobile or other employee programs) that the Grantee then owes to the Company and any amounts the Committee otherwise deems appropriate pursuant to any tax equalization policy or agreement. Notwithstanding the foregoing, if an Award provides for
the deferral of compensation within the meaning of Section 409A of the Code, the Committee will have no right to offset against its obligation to deliver Shares (or other property or cash) under the Plan or any Award Agreement if such offset
could subject the Grantee to the additional tax imposed under Section 409A of the Code in respect of an outstanding Award.
3.5 Nonassignability;
No Hedging
Unless otherwise provided in an Award Agreement, no Award (or any rights and obligations thereunder) granted to any person under the Plan
may be sold, exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of or hedged, in any manner (including through the use of any cash-settled instrument), whether voluntarily or involuntarily and whether by operation of law
or otherwise, other than by will or by the laws of descent and distribution, and all such Awards (and any rights thereunder) will be exercisable during the life of the Grantee only by the Grantee or the Grantee’s legal representative.
Notwithstanding the foregoing, the Committee may permit, under such terms and conditions that it deems appropriate in its sole discretion, a Grantee to transfer any Award to any person or entity that the Committee so determines. Any sale, exchange,
transfer, assignment, pledge, hypothecation, or other disposition in violation of the provisions of this
Section 3.5
will be null and void and any Award which is hedged in any manner will immediately be forfeited. All of the terms and
conditions of the Plan and the Award Agreements will be binding upon any permitted successors and assigns.
-19-
3.6 Change in Control
3.6.1 Unless the Committee determines otherwise or as otherwise provided in the applicable Award Agreement, if a Grantee’s Employment is
terminated by the Company or any successor entity thereto without Cause, or the Grantee resigns his or her Employment for Good Reason, in either case, on or within two (2) years after a Change in Control, (i) each Award granted to such
Grantee prior to such Change in Control will become fully vested (including the lapsing of all restrictions and conditions) and, as applicable, exercisable, (ii) any outstanding Performance-Based Awards will be deemed earned at the target level
(or if no target level is specified, the maximum level) with respect to all open performance periods and (iii) any Shares deliverable pursuant to restricted stock units will be delivered promptly (but no later than 15 days) following such
Grantee’s termination of Employment.
3.6.2 In the event of a Change in Control, a Grantee’s Award will be treated, to the
extent determined by the Committee to be permitted under Section 409A, in accordance with one or more of the following methods as determined by the Committee in its sole discretion: (i) settle such Awards for an amount (as determined in
the sole discretion of the Committee) of cash or securities, where in the case of stock options and stock appreciation rights, the value of such amount, if any, will be equal to the in-the-money spread value (if any) of such awards;
(ii) provide for the assumption of or the issuance of substitute awards that will substantially preserve the otherwise applicable terms of any affected Awards previously granted under the Plan, as determined by the Committee in its sole
discretion; (iii) modify the terms of such awards to add events, conditions or circumstances (including termination of Employment within a specified period after a Change in Control) upon which the vesting of such Awards or lapse of
restrictions thereon will accelerate; (iv) deem any performance conditions satisfied at target, maximum or actual performance through closing or provide for the performance conditions to continue (as is or as adjusted by the Committee) after
closing or (v) provide that for a period of at least 20 days prior to the Change in Control, any stock options or stock appreciation rights that would not otherwise become exercisable prior to the Change in Control will be exercisable as to all
Shares subject thereto (but any such exercise will be contingent upon and subject to the occurrence of the Change in Control and if the Change in Control does not take place within a specified period after giving such notice for any reason
whatsoever, the exercise will be null and void) and that any stock options or stock appreciation rights not exercised prior to the consummation of the Change in Control will terminate and be of no further force and effect as of the consummation of
the Change in Control. For the avoidance of doubt, in the event of a Change in Control where all stock options and stock appreciation rights are settled for an amount (as determined in the sole discretion of the Committee) of cash or securities, the
Committee may, in its sole discretion, terminate any stock option or stock appreciation right for which the exercise price is equal to or exceeds the per share value of the consideration to be paid in the Change in Control transaction without
payment of consideration therefor. Similar actions to those specified in this
Section 3.6.2
may be taken in the event of a merger or other corporate reorganization that does not constitute a Change in Control.
3.7 No Continued Employment or Engagement; Right of Discharge Reserved
Neither the adoption of the Plan nor the grant of any Award (or any provision in the Plan or Award Agreement) will confer upon any Grantee any right to
continued Employment, or other
-20-
engagement, with the Company, nor will it interfere in any way with the right of the Company to terminate, or alter the terms and conditions of, such Employment or other engagement at any time.
3.8 Nature of Payments
3.8.1 Any
and all grants of Awards and deliveries of Common Stock, cash, securities or other property under the Plan will be in consideration of services performed or to be performed for the Company by the Grantee. Awards under the Plan may, in the discretion
of the Committee, be made in substitution in whole or in part for cash or other compensation otherwise payable to a Grantee. Only whole Shares will be delivered under the Plan. Awards will, to the extent reasonably practicable, be aggregated in
order to eliminate any fractional shares. Fractional shares may, in the discretion of the Committee, be forfeited or be settled in cash or otherwise as the Committee may determine.
3.8.2 All such grants and deliveries of Shares, cash, securities or other property under the Plan will constitute a special discretionary
incentive payment to the Grantee, will not entitle the Grantee to the grant of any future Awards and will not be required to be taken into account in computing the amount of salary or compensation of the Grantee for the purpose of determining any
contributions to or any benefits under any pension, retirement, profit-sharing, bonus, life insurance, severance or other benefit plan of the Company or under any agreement with the Grantee, unless the Company specifically provides otherwise.
3.9 Non-Uniform Determinations
3.9.1 The
Committee’s determinations under the Plan and Award Agreements need not be uniform and any such determinations may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan (whether or not such
persons are similarly situated). Without limiting the generality of the foregoing, the Committee will be entitled, among other things, to make non-uniform and selective determinations under Award Agreements, and to enter into non-uniform and
selective Award Agreements, as to (a) the persons to receive Awards, (b) the terms and provisions of Awards and (c) whether a Grantee’s Employment has been terminated for purposes of the Plan.
3.9.2 To the extent the Committee deems it necessary, appropriate or desirable to comply with foreign law or practices and to further the
purposes of the Plan, the Committee may, in its sole discretion and without amending the Plan, (a) establish special rules applicable to Awards to Grantees who are foreign nationals, are employed outside the United States or both and grant
Awards (or amend existing Awards) in accordance with those rules and (b) cause Great Western to enter into an agreement with any local Subsidiary pursuant to which such Subsidiary will reimburse the Company for the cost of such equity
incentives.
|
3.10
|
Other Payments or Awards
|
Nothing contained in the Plan will be deemed in any way to limit or restrict
the Company from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.
-21-
The headings in the Plan are for the purpose of convenience only and are not intended to
define or limit the construction of the provisions hereof.
The Board reserves the right to terminate the Plan at any time;
provided
,
however
, that in any case, the Plan will terminate on the day before the tenth anniversary of the Effective Date, and
provided
further
, that all Awards made under the Plan before its termination will remain in effect until
such Awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable Award Agreements.
|
3.13
|
Clawback/Recapture Policy
|
Awards under the Plan will be subject to any clawback or recapture policy
that the Company may adopt from time to time to the extent provided in such policy and, in accordance with such policy, may be subject to the requirement that the Awards be repaid to the Company after they have been distributed to the Grantee.
|
3.14
|
FDIC Limits on Golden Parachute Payments
|
Notwithstanding anything to the contrary, the Company will not
be required to make any payment or grant any Award under the Plan or any Award Agreement that would otherwise be a prohibited golden parachute payment within the meaning of Section 18(k) of the Federal Deposit Insurance Act.
3.15.1 All Awards made under the Plan that are intended to be
“deferred compensation” subject to Section 409A will be interpreted, administered and construed to comply with Section 409A, and all Awards made under the Plan that are intended to be exempt from Section 409A will be
interpreted, administered and construed to comply with and preserve such exemption. The Board and the Committee will have full authority to give effect to the intent of the foregoing sentence. To the extent necessary to give effect to this intent,
in the case of any conflict or potential inconsistency between the Plan and a provision of any Award or Award Agreement with respect to an Award, the Plan will govern.
3.15.2 Without limiting the generality of
Section 3.15.1
, with respect to any Award made under the Plan that is intended to be
“deferred compensation” subject to Section 409A:
(a) any payment due upon a Grantee’s termination of Employment will
be paid only upon such Grantee’s separation from service from the Company within the meaning of Section 409A;
(b) any payment
to be made with respect to such Award in connection with the Grantee’s separation from service from the Company within the meaning of Section 409A (and any other payment that would be subject to the limitations in
Section 409A(a)(2)(B) of the Code) will be delayed until six months after the Grantee’s separation from service (or earlier death) in accordance with the requirements of Section 409A;
-22-
(c) if any payment to be made with respect to such Award would occur at a time when the tax
deduction with respect to such payment would be limited or eliminated by Section 162(m) of the Code, such payment may be deferred by the Company under the circumstances described in Section 409A until the earliest date that the Company
reasonably anticipates that the deduction or payment will not be limited or eliminated;
(d) to the extent necessary to comply with
Section 409A, any other securities, other Awards or other property that the Company may deliver in lieu of Shares in respect of an Award will not have the effect of deferring delivery or payment beyond the date on which such delivery or payment
would occur with respect to the Shares that would otherwise have been deliverable (unless the Committee elects a later date for this purpose in accordance with the requirements of Section 409A);
(e) with respect to any required Consent described in
Section 3.3
or the applicable Award Agreement, if such Consent has not been
effected or obtained as of the latest date provided by such Award Agreement for payment in respect of such Award and further delay of payment is not permitted in accordance with the requirements of Section 409A, such Award or portion thereof,
as applicable, will be forfeited and terminate notwithstanding any prior earning or vesting;
(f) if the Award includes a “series of
installment payments” (within the meaning of Section 1.409A-2(b)(2)(iii) of the Treasury Regulations), the Grantee’s right to the series of installment payments will be treated as a right to a series of separate payments and not as a
right to a single payment;
(g) if the Award includes “dividend equivalents” (within the meaning of Section 1.409A-3(e) of
the Treasury Regulations), the Grantee’s right to the dividend equivalents will be treated separately from the right to other amounts under the Award; and
(h) for purposes of determining whether the Grantee has experienced a separation from service from the Company within the meaning of
Section 409A, “subsidiary” will mean a corporation or other entity in a chain of corporations or other entities in which each corporation or other entity, starting with Great Western, has a controlling interest in another corporation
or other entity in the chain, ending with such corporation or other entity. For purposes of the preceding sentence, the term “controlling interest” has the same meaning as provided in Section 1.414(c)-2(b)(2)(i) of the Treasury
Regulations,
provided
that
the language “at least 20 percent” is used instead of “at least 80 percent” each place it appears in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations.
THE PLAN AND ALL AWARDS MADE AND ACTIONS TAKEN THEREUNDER WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF SOUTH DAKOTA, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS.
-23-
|
3.17
|
Disputes; Choice of Forum
|
3.17.1 The Company and each Grantee, as a condition to such
Grantee’s participation in the Plan, hereby irrevocably submit to the exclusive jurisdiction of any state or federal court located in the County of Minnehaha, State of South Dakota, over any suit, action or proceeding arising out of or relating
to or concerning the Plan or, to the extent not otherwise specified in any individual agreement between the Company and the Grantee, any aspect of the Grantee’s Employment with the Company or the termination of that Employment. The Company and
each Grantee, as a condition to such Grantee’s participation in the Plan, acknowledge that the forum designated by this
Section 3.17.1
has a reasonable relation to the Plan and to the relationship between such Grantee and the
Company. Notwithstanding the foregoing, nothing herein will preclude the Company from bringing any action or proceeding in any other court for the purpose of enforcing the provisions of this
Section 3.17.1
.
3.17.2 The agreement by the Company and each Grantee as to forum is independent of the law that may be applied in the action, and the Company
and each Grantee, as a condition to such Grantee’s participation in the Plan, (i) agree to such forum even if the forum may under applicable law choose to apply non-forum law, (ii) hereby waive, to the fullest extent permitted by
applicable law, any objection which the Company or such Grantee now or hereafter may have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding in any court referred to in
Section 3.17.1
,
(iii) undertake not to commence any action arising out of or relating to or concerning the Plan in any forum other than the forum described in this
Section 3.17
and (iv) agree that, to the fullest extent permitted by applicable
law, a final and non-appealable judgment in any such suit, action or proceeding in any such court will be conclusive and binding upon the Company and each Grantee.
3.17.3 Each Grantee, as a condition to such Grantee’s participation in the Plan, hereby irrevocably appoints the General Counsel of the
Company as such Grantee’s agent for service of process in connection with any action, suit or proceeding arising out of or relating to or concerning the Plan, who will promptly advise such Grantee of any such service of process.
3.17.4 Each Grantee, as a condition to such Grantee’s participation in the Plan, agrees to keep confidential the existence of, and any
information concerning, a dispute, controversy or claim described in
Section 3.19
, except that a Grantee may disclose information concerning such dispute, controversy or claim to the court that is considering such dispute, controversy or
claim or to such Grantee’s legal counsel (provided that such counsel agrees not to disclose any such information other than as necessary to the prosecution or defense of the dispute, controversy or claim).
|
3.18
|
Waiver of Jury Trial
|
EACH GRANTEE WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THE PLAN.
-24-
Each Grantee of an Award recognizes and agrees that before being selected by the
Committee to receive an Award the Grantee has no right to any benefits under the Plan. Accordingly, in consideration of the Grantee’s receipt of any Award hereunder, the Grantee expressly waives any right to contest the amount of any Award, the
terms of any Award Agreement, any determination, action or omission hereunder or under any Award Agreement by the Committee, the Company or the Board, or any amendment to the Plan or any Award Agreement (other than an amendment to the Plan or an
Award Agreement to which his or her consent is expressly required by the express terms of an Award Agreement). Nothing contained in the Plan, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind
or a fiduciary relationship between the Company and any Grantee. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974 (ERISA), as amended.
|
3.20
|
Severability; Entire Agreement
|
If any of the provisions of the Plan or any Award Agreement is finally
held to be invalid, illegal or unenforceable (whether in whole or in part), such provision will be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions will not be
affected thereby;
provided
that
if any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such
provision will be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and any Award Agreements contain the entire agreement of the parties with respect to the
subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof.
|
3.21
|
No Liability With Respect to Tax Qualification or Adverse Tax Treatment
|
Notwithstanding anything to the
contrary contained herein, in no event will the Company be liable to a Grantee on account of an Award’s failure to (a) qualify for favorable United States or foreign tax treatment or (b) avoid adverse tax treatment under United States
or foreign law, including, without limitation, Section 409A.
|
3.22
|
No Third-Party Beneficiaries
|
Except as expressly provided in an Award Agreement, neither the Plan nor
any Award Agreement will confer on any person other than the Company and the Grantee of any Award any rights or remedies thereunder. The exculpation and indemnification provisions of
Section 1.3.4
will inure to the benefit of a Covered
Person’s estate and beneficiaries and legatees.
|
3.23
|
Successors and Assigns of the Company
|
The terms of the Plan will be binding upon and inure to the
benefit of the Company and any successor entity, including as contemplated by
Section 3.6
.
-25-
|
3.24
|
Date of Adoption and Approval of Stockholders
|
The Plan was adopted by the Board on
, 2014 and was approved by Great Western’s stockholders on
, 2014 (the “
Effective Date
”).
-26-
Exhibit 10.11
FORM OF
GREAT WESTERN
BANCORP, INC.
2014 NON-EMPLOYEE DIRECTOR PLAN
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
ARTICLE I GENERAL
|
|
|
1
|
|
|
|
|
|
|
|
|
|
1.1
|
|
Purpose
|
|
|
1
|
|
|
|
|
1.2
|
|
Definitions of Certain Terms
|
|
|
1
|
|
|
|
|
1.3
|
|
Administration
|
|
|
4
|
|
|
|
|
1.4
|
|
Persons Eligible for Awards
|
|
|
7
|
|
|
|
|
1.5
|
|
Types of Awards Under Plan
|
|
|
7
|
|
|
|
|
1.6
|
|
Shares of Common Stock Available for Awards
|
|
|
8
|
|
|
|
|
|
ARTICLE II AWARDS UNDER THE PLAN
|
|
|
8
|
|
|
|
|
|
|
|
|
|
2.1
|
|
Agreements Evidencing Awards
|
|
|
8
|
|
|
|
|
2.2
|
|
No Rights as a Stockholder
|
|
|
9
|
|
|
|
|
2.3
|
|
Options
|
|
|
9
|
|
|
|
|
2.4
|
|
Stock Appreciation Rights
|
|
|
10
|
|
|
|
|
2.5
|
|
Restricted Shares
|
|
|
11
|
|
|
|
|
2.6
|
|
Restricted Stock Units
|
|
|
12
|
|
|
|
|
2.7
|
|
Dividend Equivalent Rights
|
|
|
12
|
|
|
|
|
2.8
|
|
Other Stock-Based or Cash-Based Awards
|
|
|
12
|
|
|
|
|
2.9
|
|
Repayment If Conditions Not Met
|
|
|
13
|
|
|
|
|
|
ARTICLE III MISCELLANEOUS
|
|
|
13
|
|
|
|
|
|
|
|
|
|
3.1
|
|
Amendment of the Plan
|
|
|
13
|
|
|
|
|
3.2
|
|
Tax Withholding
|
|
|
13
|
|
|
|
|
3.3
|
|
Required Consents and Legends
|
|
|
14
|
|
|
|
|
3.4
|
|
Right of Offset
|
|
|
15
|
|
|
|
|
3.5
|
|
Nonassignability; No Hedging
|
|
|
15
|
|
|
|
|
3.6
|
|
Change in Control
|
|
|
15
|
|
|
|
|
3.7
|
|
Right of Discharge Reserved
|
|
|
16
|
|
|
|
|
3.8
|
|
Nature of Payments
|
|
|
16
|
|
|
|
|
3.9
|
|
Non-Uniform Determinations
|
|
|
17
|
|
|
|
|
3.10
|
|
Other Payments or Awards
|
|
|
17
|
|
|
|
|
3.11
|
|
Plan Headings
|
|
|
17
|
|
|
|
|
3.12
|
|
Termination of Plan
|
|
|
17
|
|
|
|
|
3.13
|
|
Clawback/Recapture Policy
|
|
|
17
|
|
|
|
|
3.14
|
|
FDIC Limits on Golden Parachute Payments
|
|
|
18
|
|
|
|
|
3.15
|
|
Section 409A
|
|
|
18
|
|
|
|
|
3.16
|
|
Governing Law
|
|
|
19
|
|
|
|
|
3.17
|
|
Disputes; Choice of Forum
|
|
|
19
|
|
|
|
|
3.18
|
|
Waiver of Jury Trial
|
|
|
20
|
|
|
|
|
3.19
|
|
Waiver of Claims
|
|
|
20
|
|
|
|
|
3.20
|
|
Severability; Entire Agreement
|
|
|
21
|
|
|
|
|
3.21
|
|
No Liability With Respect to Tax Qualification or Adverse Tax Treatment
|
|
|
21
|
|
|
|
|
3.22
|
|
No Third-Party Beneficiaries
|
|
|
21
|
|
|
|
|
3.23
|
|
Successors and Assigns of the Company
|
|
|
21
|
|
|
|
|
3.24
|
|
Date of Adoption and Approval of Stockholders
|
|
|
21
|
|
FORM OF
GREAT WESTERN BANCORP, INC.
2014 NON-EMPLOYEE DIRECTOR PLAN
ARTICLE I
GENERAL
1.1 Purpose
The purpose of the Great
Western Bancorp, Inc. 2014 Non-Employee Director Plan (as amended from time to time, the “
Plan
”) is to: (1) attract, retain and motivate non-employee directors of the Board of Directors of Great Western Bancorp, Inc., a
Delaware corporation (“
Great Western
”) (each such director, a “
Non-Employee Director
”) and non-employee directors of Great Western’s Subsidiaries; (2) align the interests of such persons with
Great Western’s stockholders; and (3) promote ownership of Great Western’s equity.
1.2 Definitions of Certain Terms
For purposes of this Plan, the following terms have the meanings set forth below:
1.2.1 “
Award
” means an award made pursuant to the Plan.
1.2.2 “
Award Agreement
” means the written document by which each Award is evidenced, and which may, but need not be
(as determined by the Committee) executed or acknowledged by a Grantee as a condition to receiving an Award or the benefits under an Award, and which sets forth the terms and provisions applicable to Awards granted under the Plan to such Grantee.
Any reference herein to an agreement in writing will be deemed to include an electronic writing to the extent permitted by applicable law.
1.2.3 “
Board
” means the Board of Directors of Great Western.
1.2.4 “
Business Combination
” has the meaning provided in the definition of Change in Control.
1.2.5 “
Certificate
” means a stock certificate (or other appropriate document or evidence of ownership) representing
Shares.
1.2.6 “
Change in Control
” means, except in connection with any initial public offering of the Common
Stock, the occurrence of any of the following events after the completion of the initial public offering of the Company:
(a) during any
period of not more than 36 months, individuals who constitute the Board as of the beginning of the period (the “
Incumbent Directors
”) cease for any reason to constitute at least a majority of the Board,
provided
that
any person becoming a director subsequent to the beginning of such period, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or
by approval of the proxy statement of Great Western in which such person is
named as a nominee for director, without written objection to such nomination) will be an Incumbent Director;
provided
,
however
, that no individual initially elected or nominated as
a director of Great Western as a result of an actual or publicly threatened election contest with respect to directors or as a result of any other actual or publicly threatened solicitation of proxies by or on behalf of any person other than the
Board will be deemed to be an Incumbent Director;
provided
,
further
, that this
Section 1.2.6(a)
shall not be in effect until the earlier to occur of (A) the Non-Control Date (as defined in the Stockholder Agreement between
National Australia Bank Limited and Great Western, dated as of
[
—
]
, 2014) and (B) the date on which National Australia Bank Limited owns less than 5% of Great Western’s
outstanding Shares;
(b) any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act), is or becomes a “beneficial owner” (as defined in
Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of Great
Western representing 30% or more of the combined voting power of Great Western’s then-outstanding securities eligible to vote for the election of the Board (“
Company Voting Securities
”);
provided
,
however
,
that the event described in this paragraph (b) will not be deemed to be a Change in Control by virtue of the ownership, or acquisition, of Company Voting Securities: (A) by the Company, (B) by any employee benefit plan (or
related trust) sponsored or maintained by the Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (c) of this
definition) or (E) by National Australia Bank Limited or any of its direct or indirect Subsidiaries or a transferee thereof and such transferee’s affiliates;
(c) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving Great Western
that requires the approval of Great Western’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “
Business Combination
”), excluding such a Business Combination with National
Australia Bank Limited or any of its direct or indirect Subsidiaries or a transferee thereof and such transferee’s affiliates, unless immediately following such Business Combination: (A) more than 50% of the total voting power of
(x) the entity resulting from such Business Combination (the “
Surviving Entity
”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the
voting power, is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no
person (other than National Australia Bank Limited or any employee benefit plan (or related trust) sponsored or maintained by the Surviving Entity or the parent), is or becomes the beneficial owner, directly or indirectly, of 30% or more of the
total voting power of the outstanding voting securities eligible to elect directors of the parent (or, if there is no parent, the Surviving Entity) and (C) at least 50% of the members of the board of directors of the parent (or, if there is no
parent, the Surviving Entity) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in (A), (B) and (C) of this paragraph (c) will be deemed to be a “
Non-Qualifying Transaction
”); or
(d) the consummation of a sale of all or substantially all of Great Western’s assets (other than to National Australia Bank Limited or
any of its direct or indirect Subsidiaries or a transferee thereof and such transferee’s affiliates or an affiliate of Great Western); or
(e) Great Western’s stockholders approve a plan of complete liquidation or dissolution of Great Western.
-2-
Notwithstanding the foregoing, a Change in Control will not be deemed to occur solely because any
person acquires beneficial ownership of more than 30% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding;
provided
that
if after such acquisition by the Company such person (other than National Australia Bank Limited or any of its direct or indirect Subsidiaries or a transferee thereof and such transferee’s affiliates) becomes the beneficial owner of
additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control will then occur.
1.2.7 “
Code
” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto, and the
applicable rulings and regulations thereunder.
1.2.8 “
Committee
” has the meaning set forth in
Section 1.3.1
.
1.2.9 “
Common Stock
” means the common stock of Great Western, par value $0.01 per
share, and any other securities or property issued in exchange therefor or in lieu thereof pursuant to
Section 1.6.3
.
1.2.10
“
Company
” means Great Western and any Subsidiary, and any successor entity thereto.
1.2.11 “
Company
Voting Securities
” has the meaning provided in the definition of Change in Control.
1.2.12 “
Consent
”
has the meaning set forth in
Section 3.3.2
.
1.2.13 “
Covered Person
” has the meaning set forth in
Section 1.3.4
.
1.2.14 “
Effective Date
” has the meaning set forth in
Section 3.23
.
1.2.15 “
Exchange Act
” means the Securities Exchange Act of 1934, as amended from time to time, or any successor
thereto, and the applicable rules and regulations thereunder.
1.2.16 “
Fair Market Value
” means, with
respect to a Share, the closing price reported for the Common Stock on the applicable date as reported on the New York Stock Exchange or, if not so reported, as determined in accordance with a valuation methodology approved by the Committee, unless
determined as otherwise specified herein. For purposes of the grant of any Award, the applicable date will be the trading day on which the Award is granted or, if the date the Award is granted is not a trading day, the trading day immediately prior
to the date the Award is granted. For purposes of the exercise of any Award, the applicable date is the date a notice of exercise is received by the Company or, if such date is not a trading day, the trading day immediately following the date a
notice of exercise is received by the Company.
-3-
1.2.17 “
Grantee
” means a Non-Employee Director or a non-employee director
of a Subsidiary of Great Western who receives an Award.
1.2.18 “
Incumbent Directors
” has the meaning provided in
the definition of Change in Control.
1.2.19 “
Non-Employee Director
” has the meaning set forth in
Section 1.1
. For the avoidance of doubt, a director who is also an employee of Great Western, National Australia Bank Limited or any of their respective Subsidiaries will not be a Non-Employee Director.
1.2.20 “
Non-Qualifying Transaction
” has the meaning provided in the definition of Change in Control.
1.2.21 “
Other Stock-Based or Cash-Based Awards
” has the meaning set forth in
Section 2.8
.
1.2.22 “
Plan
” has the meaning set forth in
Section 1.1
.
1.2.23 “
Plan Action
” has the meaning set forth in
Section 3.3.1
.
1.2.24 “
Section 409A
” means Section 409A of the Code, including any amendments or successor provisions to that
section, and any regulations and other administrative guidance thereunder, in each case as they may be from time to time amended or interpreted through further administrative guidance.
1.2.25 “
Securities Act
” means the Securities Act of 1933, as amended from time to time, or any successor thereto, and
the applicable rules and regulations thereunder.
1.2.26 “
Share Limit
” has the meaning set forth in
Section 1.6.1
.
1.2.27 “
Shares
” means shares of Common Stock.
1.2.28 “
Subsidiary
” means any corporation, partnership, limited liability company or other legal entity in which Great
Western, directly or indirectly, owns stock or other equity interests possessing 25% or more of the total combined voting power of all classes of the then-outstanding stock or other equity interests.
1.2.29 “
Surviving Entity
” has the meaning provided in the definition of Change in Control.
1.2.30 “
Treasury Regulations
” means the regulations promulgated under the Code by the United States Treasury
Department, as amended.
1.3 Administration
1.3.1 The Compensation Committee of the Board (as constituted from time to time, and including any successor committee, the
“
Committee
”) will administer the Plan. In particular, the Committee will have the authority in its sole discretion to:
(a) exercise all of the powers granted to it under the Plan;
-4-
(b) construe, interpret and implement the Plan and all Award Agreements;
(c) prescribe, amend and rescind rules and regulations relating to the Plan, including rules governing the Committee’s own operations;
(d) make all determinations necessary or advisable in administering the Plan;
(e) correct any defect, supply any omission and reconcile any inconsistency in the Plan;
(f) amend the Plan to reflect changes in applicable law;
(g) grant, or recommend to the Board for approval to grant, Awards and determine who will receive Awards, when such Awards will be granted and
the terms of such Awards, including setting forth provisions with regard to the effect of a termination of directorship on such Awards and conditioning the vesting of, or the lapsing of any applicable vesting restrictions or other vesting conditions
on, Awards upon continued service;
(h) amend any outstanding Award Agreement in any respect, including, without limitation, to
(1) accelerate the time or times at which the Award becomes vested, unrestricted or may be exercised (and, in connection with such
acceleration, the Committee may provide that any Shares acquired pursuant to such Award will be restricted shares, which are subject to vesting, transfer, forfeiture or repayment provisions similar to those in the Grantee’s underlying Award),
(2) accelerate the time or times at which Shares are delivered under the Award (and, without limitation on the Committee’s rights, in
connection with such acceleration, the Committee may provide that any Shares delivered pursuant to such Award will be restricted shares, which are subject to vesting, transfer, forfeiture or repayment provisions similar to those in the
Grantee’s underlying Award),
(3) waive or amend any goals, restrictions, vesting provisions or conditions set forth in such Award
Agreement, or impose new goals, restrictions, vesting provisions and conditions or
(4) reflect a change in the Grantee’s
circumstances (
e.g.
, a change in position, duties or responsibilities); and
-5-
(i) determine at any time whether, to what extent and under what circumstances and method or
methods, subject to
Section 3.15
,
(1) Awards may be
(A) settled in cash, Shares, other securities, other Awards or other property (in which event, the Committee may specify what other effects
such settlement will have on the Grantee’s Award, including the effect on any repayment provisions under the Plan or Award Agreement),
(B) exercised or
(C) canceled,
forfeited or suspended,
(2) Shares, other securities, other Awards or other property and other amounts payable with respect to an Award
may be deferred either automatically or at the election of the Grantee thereof or of the Committee,
(3) to the extent permitted under
applicable law, loans (whether or not secured by Common Stock) may be extended by the Company with respect to any Awards,
(4) Awards may
be settled by Great Western, any of its Subsidiaries or affiliates or any of their designees and
(5) the exercise price for any stock
option or stock appreciation right may be reset.
1.3.2 Actions of the Committee may be taken by the vote of a majority of its members
present at a meeting (which may be held telephonically). Any action may be taken by a written instrument signed by a majority of the Committee members, and action so taken will be as fully effective as if it had been taken by a vote at a meeting.
The determination of the Committee on all matters relating to the Plan or any Award Agreement will be final, binding and conclusive. The Committee may allocate among its members and delegate to any person who is not a member of the Committee, or to
any administrative group within the Company, any of its powers, responsibilities or duties. In delegating its authority, the Committee will consider the extent to which any delegation may cause Awards to fail to meet the requirements of Rule
16(b)-3(d)(1) or Rule 16(b)-3(e) under the Exchange Act. Except as specifically provided to the contrary, references to the Committee include any administrative group, individual or individuals to whom the Committee has delegated its duties and
powers.
1.3.3 Notwithstanding anything to the contrary contained herein, the Board may, in its sole discretion, at any time and from time
to time, grant Awards or administer the Plan. In any such case, the Board will have all of the authority and responsibility granted to the Committee herein.
1.3.4 No member of the Committee or any person to whom the Committee delegates its powers, responsibilities or duties in writing, including by
resolution (each such person, a “
Covered Person
”), will have any liability to any person (including any Grantee) for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award,
except as expressly provided by statute. Each Covered Person will be indemnified and held harmless by the Company against and from:
(a)
any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon or incurred by such Covered Person in connection with or resulting from any
-6-
action, suit or proceeding to which such Covered Person may be a party or in which such Covered Person may be involved by reason of any action taken or omitted to be taken under the Plan or any
Award Agreement, in each case, in good faith and
(b) any and all amounts paid by such Covered Person, with the Company’s approval,
in settlement thereof, or paid by such Covered Person in satisfaction of any judgment in any such action, suit or proceeding against such Covered Person,
provided
that
the Company will have the right, at its own expense, to assume and
defend any such action, suit or proceeding and, once the Company gives notice of its intent to assume the defense, the Company will have sole control over such defense with counsel of the Company’s choice.
The foregoing right of indemnification will not be available to a Covered Person to the extent that a court of competent jurisdiction in a
final judgment or other final adjudication, in either case, not subject to further appeal, determines that the acts or omissions of such Covered Person giving rise to the indemnification claim resulted from such Covered Person’s bad faith,
fraud or willful misconduct. The foregoing right of indemnification will not be exclusive of any other rights of indemnification to which Covered Persons may be entitled under Great Western’s Amended and Restated Certificate of Incorporation or
Amended and Restated Bylaws, pursuant to any individual indemnification agreements between such Covered Person and the Company, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such persons or hold them
harmless.
1.4 Persons Eligible for Awards
Awards under the Plan may be made only to Non-Employee Directors and non-employee directors of Great Western’s Subsidiaries.
1.5 Types of Awards Under Plan
Awards
may be made under the Plan in the form of cash-based or stock-based Awards. Stock-based Awards may be in the form of any of the following, in each case in respect of Common Stock:
(a) stock options,
(b) stock
appreciation rights,
(c) restricted shares,
(d) restricted stock units,
(e) dividend equivalent rights and
(f) other equity-based or equity-related Awards (as further described in
Section 2.8
), that the Committee determines to be
consistent with the purposes of the Plan and the interests of the Company.
-7-
1.6 Shares of Common Stock Available for Awards
1.6.1
Common Stock Subject to the Plan
.
Subject to the other provisions of this
Section 1.6
, the total number
of Shares that may be granted under the Plan will be
[
—
]
1
(the “
Share Limit
”). Aggregate Awards to any one
Grantee in respect of any fiscal year, solely with respect to his or her service as a director of the Board, may not exceed $1,000,000 based on the aggregate value of cash Awards and Fair Market Value of stock-based Awards, in each case, determined
as of the date of grant.
1.6.2
Replacement of Shares
.
Shares subject to an Award that is forfeited (including any
restricted shares repurchased by the Company at the same price paid by the Grantee so that such Shares are returned to the Company), expires or is settled for cash (in whole or in part), to the extent of such forfeiture, expiration or cash
settlement will be available for future grants of Awards under the Plan and will be added back in the same number of Shares as were deducted in respect of the grant of such Award. The payment of dividend equivalent rights in cash in conjunction with
any outstanding Awards will not be counted against the Shares available for issuance under the Plan. Shares tendered by a Grantee or withheld by the Company in payment of the exercise price of a stock option or to satisfy any tax withholding
obligation with respect to an Award will not again be available for Awards.
1.6.3
Adjustments
.
The Committee will:
(a) adjust the number of Shares authorized pursuant to
Section 1.6.1
, and
(b) adjust the terms of any outstanding Awards (including, without limitation, the number of Shares covered by each outstanding Award, the
type of property or securities to which the Award relates and the exercise or strike price of any Award),
in such manner as it deems
appropriate (including, without limitation, by payment of cash) to prevent the enlargement or dilution of rights, as a result of any increase or decrease in the number of issued Shares (or issuance of shares of stock other than Shares) resulting
from a recapitalization, stock split, reverse stock split, stock dividend, spinoff, split up, combination, reclassification or exchange of Shares, merger, consolidation, rights offering, separation, reorganization or liquidation or any other change
in the corporate structure or Shares, including any extraordinary dividend or extraordinary distribution;
provided
that
no such adjustment may be made if or to the extent that it would cause an outstanding Award to cease to be exempt
from, or to fail to comply with, Section 409A of the Code.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements
Evidencing Awards
Each Award granted under the Plan will be evidenced by an Award Agreement that will contain such provisions and conditions as the
Committee deems appropriate. Unless otherwise provided
|
1
|
The number of shares will have an aggregate fair value of $1,500,000 upon the IPO.
|
-8-
herein, the Committee may grant Awards in tandem with or, subject to
Section 3.15
, in substitution for or satisfaction of any other Award or Awards granted under the Plan or any award
granted under any other plan of the Company. By accepting an Award pursuant to the Plan, a Grantee thereby agrees that the Award will be subject to all of the terms and provisions of the Plan and the applicable Award Agreement.
2.2 No Rights as a Stockholder
No Grantee (or other
person having rights pursuant to an Award) will have any of the rights of a stockholder of Great Western with respect to Shares subject to an Award until the delivery of such Shares. Except as otherwise provided in
Section 1.6.3
, no
adjustments will be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, Common Stock, other securities or other property) for which the record date is before the date the Certificates for the
Shares are delivered, or in the event the Committee elects to use another system, such as book entries by the transfer agent, before the date in which such system evidences the Grantee’s ownership of such Shares.
2.3 Options
2.3.1
Grant
. Stock options may be granted to eligible recipients in such number and at such times during the term of the Plan as the Committee may determine.
2.3.2
Exercise Price
.
The exercise price per share with respect to each stock option will be determined by the Committee
but, except as otherwise permitted by
Section 1.6.3
, may never be less than the Fair Market Value of a share of Common Stock. Unless otherwise noted in the Award Agreement, the Fair Market Value of the Common Stock will be its closing
price on the New York Stock Exchange on the date of grant of the Award of stock options.
2.3.3
Term of Stock Option
.
In no event will any stock option be exercisable after the expiration of 10 years from the date on which the stock option is granted.
2.3.4
Vesting and Exercise of Stock Option and Payment for Shares
.
A stock option may vest and be exercised
at such time or times and subject to such terms and conditions as will be determined by the Committee at the time the stock option is granted and set forth in the Award Agreement. Subject to any limitations in the applicable Award Agreement, any
Shares not acquired pursuant to the exercise of a stock option on the applicable vesting date may be acquired thereafter at any time before the final expiration of the stock option.
To exercise a stock option, the Grantee must give written notice to the Company specifying the number of Shares to be acquired and accompanied
by payment of the full purchase price therefor in cash or by certified or official bank check or in another form as determined by the Company, which may include:
(a) personal check,
(b)
Shares, based on the Fair Market Value as of the exercise date,
-9-
(c) any other form of consideration approved by the Company and permitted by applicable law and
(d) any combination of the foregoing.
The Committee may also make arrangements for the cashless exercise of a stock option. Any person exercising a stock option will make such
representations and agreements and furnish such information as the Committee may, in its sole discretion, deem necessary or desirable to effect or assure compliance by the Company on terms acceptable to the Company with the provisions of the
Securities Act, the Exchange Act and any other applicable legal requirements. The Committee may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing
legends on share certificates and issuing stop-transfer notices to agents and registrars. If a Grantee so requests, Shares acquired pursuant to the exercise of a stock option may be issued in the name of the Grantee and another jointly with the
right of survivorship.
2.3.5
Repricing
.
Except as otherwise permitted by
Section 1.6.3
, reducing the
exercise price of stock options issued and outstanding under the Plan, including through amendment, cancellation in exchange for the grant of a substitute Award or repurchase for cash or other consideration (in each case that has the effect of
reducing the exercise price), will require approval of Great Western’s stockholders.
2.4 Stock Appreciation Rights
2.4.1
Grant
.
Stock appreciation rights may be granted to eligible recipients in such number and at such
times during the term of the Plan as the Committee may determine.
2.4.2
Exercise Price
.
The
exercise price per share with respect to each stock appreciation right will be determined by the Committee but, except as otherwise permitted by
Section 1.6.3
, may never be less than the Fair Market Value of the Common Stock. Unless
otherwise noted in the Award Agreement, the Fair Market Value of the Common Stock will be its closing price on the New York Stock Exchange on the date of grant of the Award of stock appreciation rights.
2.4.3
Term of Stock Appreciation Right
.
In no event will any stock appreciation right be exercisable after the expiration
of 10 years from the date on which the stock appreciation right is granted.
2.4.4
Vesting and Exercise of Stock Appreciation
Right and Delivery of Shares
.
Each stock appreciation right may vest and be exercised in such installments as may be determined in the Award Agreement at the time the stock appreciation right is granted. Subject to any
limitations in the applicable Award Agreement, any stock appreciation rights not exercised on the applicable vesting date may be exercised thereafter at any time before the final expiration of the stock appreciation right.
-10-
To exercise a stock appreciation right, the Grantee must give written notice to the Company
specifying the number of stock appreciation rights to be exercised. Upon exercise of stock appreciation rights, Shares, cash or other securities or property, or a combination thereof, as specified by the Committee, equal in value to:
(a) the excess of:
|
|
(1)
|
the Fair Market Value of the Common Stock on the date of exercise over
|
|
|
(2)
|
the exercise price of such stock appreciation right
|
multiplied by
(b) the number of stock appreciation rights exercised that will be delivered to the Grantee.
Any person exercising a stock appreciation right will make such representations and agreements and furnish such information as the Committee
may, in its sole discretion, deem necessary or desirable to effect or assure compliance by the Company on terms acceptable to the Company with the provisions of the Securities Act, the Exchange Act and any other applicable legal requirements. If a
Grantee so requests, Shares purchased may be issued in the name of the Grantee and another jointly with the right of survivorship.
2.4.5
Repricing
.
Except as otherwise permitted by Section 1.6.3, reducing the exercise price of stock appreciation rights issued and outstanding under the Plan, including through amendment, cancellation in exchange for the grant
of a substitute Award or repurchase for cash or other consideration (in each case that has the effect of reducing the exercise price), will require approval of Great Western’s stockholders.
2.5 Restricted Shares
2.5.1
Grants
.
The Committee may grant or offer for sale restricted shares in such amounts and subject to such terms and conditions as the Committee may determine. Upon the delivery of such shares, the Grantee will have the
rights of a stockholder with respect to the restricted shares, subject to any other restrictions and conditions as the Committee may include in the applicable Award Agreement. Each Grantee of an Award of restricted shares will be issued a
Certificate in respect of such shares, unless the Committee elects to use another system, such as book entries by the transfer agent, as evidencing ownership of such shares. In the event that a Certificate is issued in respect of restricted shares,
such Certificate may be registered in the name of the Grantee, and will, in addition to such legends required by applicable securities laws, bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award,
but will be held by the Company or its designated agent until the time the restrictions lapse.
2.5.2
Right to Vote
and Receive Dividends on Restricted Shares
.
Each Grantee of an Award of restricted shares will, during the period of restriction, be the beneficial and record owner of such restricted shares and will have full voting rights
with respect thereto. Unless the Committee determines otherwise in an Award Agreement, during the period of restriction, all dividends (whether ordinary or extraordinary and whether paid in cash, additional shares or other property) or other
distributions paid upon any restricted share will be retained by the Company
-11-
for the account of the relevant Grantee. Such dividends or other distributions will revert back to the Company if for any reason the restricted share upon which such dividends or other
distributions were paid reverts back to the Company. Upon the expiration of the period of restriction, all such dividends or other distributions made on such restricted share and retained by the Company will be paid to the relevant Grantee (without
interest).
2.6 Restricted Stock Units
The Committee
may grant Awards of restricted stock units in such amounts and subject to such terms and conditions as the Committee may determine. A Grantee of a restricted stock unit will have only the rights of a general unsecured creditor of Great Western,
until delivery of Shares, cash or other securities or property is made as specified in the applicable Award Agreement. On the delivery date specified in the Award Agreement, the Grantee of each restricted stock unit not previously forfeited or
terminated will receive one share of Common Stock, cash or other securities or property equal in value to a share of Common Stock or a combination thereof, as specified by the Committee. Unless otherwise specified in an Award Agreement, in the event
that a Grantee is removed or terminated as a director, or otherwise ceases to be a director of the Company, then, subject to and in accordance with the terms of this Plan, each vested restricted stock unit then held by the Grantee as of the date of
such cessation of services will be settled as of such date.
2.7 Dividend Equivalent Rights
The Committee may include in the Award Agreement with respect to any Award a dividend equivalent right entitling the Grantee to receive amounts equal to all or
any portion of the regular cash dividends that would be paid on the Shares covered by such Award if such Shares had been delivered pursuant to such Award. The grantee of a dividend equivalent right will have only the rights of a general unsecured
creditor of Great Western until payment of such amounts is made as specified in the applicable Award Agreement. In the event such a provision is included in an Award Agreement, the Committee will determine whether such payments will be made in cash,
in Shares or in another form, whether they will be conditioned upon the exercise of the Award to which they relate (subject to compliance with Section 409A of the Code), the time or times at which they will be made, and such other terms and
conditions as the Committee will deem appropriate.
2.8 Other Stock-Based or Cash-Based Awards
The Committee may grant other types of equity-based, equity-related or cash-based Awards (including retainers and meeting-based fees and the grant or offer for
sale of unrestricted Shares, performance share awards, performance units settled in cash) (“
Other Stock-Based or Cash-Based Awards
”) in such amounts and subject to such terms and conditions as the Committee may determine.
Such Awards may entail the transfer of actual Shares to Award recipients and may include Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
-12-
2.9 Repayment If Conditions Not Met
If the Committee determines that all terms and conditions of the Plan and a Grantee’s Award Agreement were not satisfied, and that the failure to satisfy
such terms and conditions is material, then the Grantee will be obligated to pay the Company immediately upon demand therefor, (a) with respect to a stock option and a stock appreciation right, an amount equal to the excess of the Fair Market
Value (determined at the time of exercise) of the Shares that were delivered in respect of such exercised stock option or stock appreciation right, as applicable, over the exercise price paid therefor, (b) with respect to restricted shares, an
amount equal to the Fair Market Value (determined at the time such shares became vested) of such restricted shares and (c) with respect to restricted stock units, an amount equal to the Fair Market Value (determined at the time of delivery) of
the Shares delivered with respect to the applicable delivery date, in each case with respect to clauses (a), (b) and (c) of this
Section 2.9
, without reduction for any amount applied to satisfy withholding tax or other
obligations in respect of such Award.
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the
Plan
3.1.1 Unless otherwise provided in the Plan or in an Award Agreement, the Board may at any time and from time to time suspend,
discontinue, revise or amend the Plan in any respect whatsoever but, subject to
Sections
1.3
,
1.6.3
and
3.7
, no such amendment may materially adversely impair the rights of the Grantee of any Award without the
Grantee’s consent. Subject to
Sections
1.3
,
1.6.3
and
3.7
, an Award Agreement may not be amended to materially adversely impair the rights of a Grantee without the Grantee’s consent.
3.1.2 Unless otherwise determined by the Board, stockholder approval of any suspension, discontinuance, revision or amendment will be obtained
only to the extent necessary to comply with any applicable laws, regulations or rules of a securities exchange or self-regulatory agency.
3.2 Tax
Withholding
Grantees will be solely responsible for any applicable taxes (including, without limitation, income and excise taxes) and penalties, and
any interest that accrues thereon, that they incur in connection with the receipt, vesting or exercise of any Award. As a condition to the delivery of any Shares, cash or other securities or property pursuant to any Award or the lifting or lapse of
restrictions on any Award, or in connection with any other event that gives rise to a federal or other governmental tax withholding obligation on the part of the Company relating to an Award (including, without limitation, the Federal Insurance
Contributions Act (FICA) tax),
(a) the Company may deduct or withhold (or cause to be deducted or withheld) from any payment or
distribution to a Grantee whether or not pursuant to the Plan (including Shares otherwise deliverable),
(b) the Committee will be
entitled to require that the Grantee remit cash to the Company (through payroll deduction or otherwise) or
(c) the Company may enter into
any other suitable arrangements to withhold, in each case in an amount not to exceed in the opinion of the Company the minimum amounts of such taxes required by law to be withheld.
-13-
3.3 Required Consents and Legends
3.3.1 If the Committee at any time determines that any Consent (as hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any Award, the delivery of Shares or the delivery of any cash, securities or other property under the Plan, or the taking of any other action thereunder (each such action a “
Plan Action
”),
then, subject to
Section 3.15
, such Plan Action will not be taken, in whole or in part, unless and until such Consent will have been effected or obtained to the full satisfaction of the Committee. The Committee may direct that any
Certificate evidencing Shares delivered pursuant to the Plan will bear a legend setting forth such restrictions on transferability as the Committee may determine to be necessary or desirable, and may advise the transfer agent to place a stop
transfer order against any legended shares.
3.3.2 The term “
Consent
” as used in this Article III with respect to
any Plan Action includes:
(a) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or
under any federal, state, or local law, or law, rule or regulation of a jurisdiction outside the United States;
(b) any and all written
agreements and representations by the Grantee with respect to the disposition of Shares, or with respect to any other matter, which the Committee may deem necessary or desirable to comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made;
(c) any and
all other consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory body or any stock exchange or self-regulatory agency;
(d) any and all consents by the Grantee to:
(i) the Company’s supplying to any third party recordkeeper of the Plan such personal information as the Committee deems advisable to
administer the Plan,
(ii) the Company’s deducting amounts from the Grantee’s wages, or another arrangement satisfactory to the
Committee, to reimburse the Company for advances made on the Grantee’s behalf to satisfy certain withholding and other tax obligations in connection with an Award and
(iii) the Company’s imposing sales and transfer procedures and restrictions and hedging restrictions on Shares delivered under the Plan;
and
(e) any and all consents or authorizations required to comply with, or required to be obtained under, applicable local law or
otherwise required by the Committee. Nothing herein will require the Company to list, register or qualify the Shares on any securities exchange.
-14-
3.4 Right of Offset
The Company will have the right to offset against its obligation to deliver Shares (or other property or cash) under the Plan or any Award Agreement any
outstanding amounts (including, without limitation, travel and entertainment or advance account balances, loans, repayment obligations under any Awards, or amounts repayable to the Company pursuant to tax equalization, housing, automobile or other
programs) that the Grantee then owes to the Company and any amounts the Committee otherwise deems appropriate pursuant to any tax equalization policy or agreement. Notwithstanding the foregoing, if an Award provides for the deferral of compensation
within the meaning of Section 409A of the Code, the Committee will have no right to offset against its obligation to deliver Shares (or other property or cash) under the Plan or any Award Agreement if such offset could subject the Grantee to
the additional tax imposed under Section 409A of the Code in respect of an outstanding Award.
3.5 Nonassignability; No Hedging
Unless otherwise provided in an Award Agreement, no Award (or any rights and obligations thereunder) granted to any person under the Plan may be sold,
exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of or hedged, in any manner (including through the use of any cash-settled instrument), whether voluntarily or involuntarily and whether by operation of law or otherwise,
other than by will or by the laws of descent and distribution, and all such Awards (and any rights thereunder) will be exercisable during the life of the Grantee only by the Grantee or the Grantee’s legal representative. Notwithstanding the
foregoing, the Committee may permit, under such terms and conditions that it deems appropriate in its sole discretion, a Grantee to transfer any Award to any person or entity that the Committee so determines. Any sale, exchange, transfer,
assignment, pledge, hypothecation, or other disposition in violation of the provisions of this
Section 3.5
will be null and void and any Award which is hedged in any manner will immediately be forfeited. All of the terms and conditions
of the Plan and the Award Agreements will be binding upon any permitted successors and assigns.
3.6 Change in Control
3.6.1 Unless the Committee determines otherwise or as otherwise provided in the applicable Award Agreement, each Award will become fully vested
(including the lapsing of all restrictions and conditions) and, as applicable, exercisable upon a Change in Control, and any Shares deliverable pursuant to restricted stock units will be delivered promptly (but no later than 15 days) following such
Change in Control.
3.6.2 In the event of a Change in Control, a Grantee’s Award will be treated, to the extent determined by the
Committee to be permitted under Section 409A, in accordance with one or more of the following methods as determined by the Committee in its sole discretion: (i) settle such Awards for an amount (as determined in the sole discretion of the
Committee) of cash or securities, where in the case of stock options and stock appreciation rights, the value of such
-15-
amount, if any, will be equal to the in-the-money spread value (if any) of such awards; (ii) provide for the assumption of or the issuance of substitute awards that will substantially
preserve the otherwise applicable terms of any affected Awards previously granted under the Plan, as determined by the Committee in its sole discretion; (iii) modify the terms of such awards to add events, conditions or circumstances (including
termination of directorship within a specified period after a Change in Control) upon which the vesting of such Awards or lapse of restrictions thereon will accelerate; (iv) deem any performance conditions satisfied at target, maximum or actual
performance through closing or provide for the performance conditions to continue (as is or as adjusted by the Committee) after closing or (v) provide that for a period of at least 20 days prior to the Change in Control, any stock options or
stock appreciation rights that would not otherwise become exercisable prior to the Change in Control will be exercisable as to all Shares subject thereto (but any such exercise will be contingent upon and subject to the occurrence of the Change in
Control and if the Change in Control does not take place within a specified period after giving such notice for any reason whatsoever, the exercise will be null and void) and that any stock options or stock appreciation rights not exercised prior to
the consummation of the Change in Control will terminate and be of no further force and effect as of the consummation of the Change in Control. For the avoidance of doubt, in the event of a Change in Control where all stock options and stock
appreciation rights are settled for an amount (as determined in the sole discretion of the Committee) of cash or securities, the Committee may, in its sole discretion, terminate any stock option or stock appreciation right for which the exercise
price is equal to or exceeds the per share value of the consideration to be paid in the Change in Control transaction without payment of consideration therefor. Similar actions to those specified in this
Section 3.6.2
may be taken in the
event of a merger or other corporate reorganization that does not constitute a Change in Control.
3.7 Right of Discharge Reserved
Neither the adoption of the Plan nor the grant of any Award (or any provision in the Plan or Award Agreement) will (1) confer upon any Grantee the right
to remain in the service of Great Western or any of its Subsidiaries as a Non-Employee Director, (2) affect any right which Great Western or any of its Subsidiaries may have to terminate or alter the terms and conditions of such service or
(3) create any obligation on behalf of the Board to nominate any Non-Employee Director for re-election to the Board by Great Western’s stockholders or to nominate and elect such person to the board of directors of any of Great
Western’s Subsidiaries.
3.8 Nature of Payments
3.8.1 Any and all grants of Awards and deliveries of Common Stock, cash, securities or other property under the Plan will be in consideration
of services performed or to be performed for the Company by the Grantee. Awards under the Plan may, in the discretion of the Committee, be made in substitution in whole or in part for cash or other compensation otherwise payable to a Grantee. Only
whole Shares will be delivered under the Plan. Awards will, to the extent reasonably practicable, be aggregated in order to eliminate any fractional shares. Fractional shares may, in the discretion of the Committee, be forfeited or be settled in
cash or otherwise as the Committee may determine.
-16-
3.8.2 All such grants and deliveries of Shares, cash, securities or other property under the Plan
will constitute a special discretionary incentive payment to the Grantee, will not entitle the Grantee to the grant of any future Awards and will not be required to be taken into account in computing the amount of salary or compensation of the
Grantee for the purpose of determining any contributions to or any benefits under any pension, retirement, profit-sharing, bonus, life insurance, severance or other benefit plan of the Company or under any agreement with the Grantee, unless the
Company specifically provides otherwise.
3.9 Non-Uniform Determinations
3.9.1 The Committee’s determinations under the Plan and Award Agreements need not be uniform and any such determinations may be made by it
selectively among persons who receive, or are eligible to receive, Awards under the Plan (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Committee will be entitled, among other things, to
make non-uniform and selective determinations under Award Agreements, and to enter into non-uniform and selective Award Agreements, as to (a) the persons to receive Awards, (b) the terms and provisions of Awards and (c) whether a
Grantee’s directorship has been terminated for purposes of the Plan.
3.9.2 To the extent the Committee deems it necessary,
appropriate or desirable to comply with foreign law or practices and to further the purposes of the Plan, the Committee may, in its sole discretion and without amending the Plan, establish special rules applicable to Awards to Grantees who are
foreign nationals and grant Awards (or amend existing Awards) in accordance with those rules.
|
3.10
|
Other Payments or Awards
|
Nothing contained in the Plan will be deemed in any way to limit or restrict
the Company from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.
The headings in the Plan are for the purpose of convenience only and are not intended to
define or limit the construction of the provisions hereof.
The Board reserves the right to terminate the Plan at any time;
provided
,
however
, that in any case, the Plan will terminate on the day before the tenth anniversary of the Effective Date, and
provided
further
, that all Awards made under the Plan before its termination will remain in effect until
such Awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable Award Agreements.
|
3.13
|
Clawback/Recapture Policy
|
Awards under the Plan will be subject to any clawback or recapture policy
that the Company may adopt from time to time to the extent provided in such policy and, in accordance with such policy, may be subject to the requirement that the Awards be repaid to the Company after they have been distributed to the Grantee.
-17-
|
3.14
|
FDIC Limits on Golden Parachute Payments
|
Notwithstanding anything to the contrary, the Company will not
be required to make any payment or grant any Award under the Plan or any Award Agreement that would otherwise be a prohibited golden parachute payment within the meaning of Section 18(k) of the Federal Deposit Insurance Act.
3.15.1 All Awards made under the Plan that are intended to be
“deferred compensation” subject to Section 409A will be interpreted, administered and construed to comply with Section 409A, and all Awards made under the Plan that are intended to be exempt from Section 409A will be
interpreted, administered and construed to comply with and preserve such exemption. The Board and the Committee will have full authority to give effect to the intent of the foregoing sentence. To the extent necessary to give effect to this intent,
in the case of any conflict or potential inconsistency between the Plan and a provision of any Award or Award Agreement with respect to an Award, the Plan will govern.
3.15.2 Without limiting the generality of
Section 3.15.1
, with respect to any Award made under the Plan that is intended to be
“deferred compensation” subject to Section 409A:
(a) any payment due upon a Grantee’s ceasing to provide services to
the Company will be paid only upon such Grantee’s separation from service from the Company within the meaning of Section 409A;
(b) any payment to be made with respect to such Award in connection with the Grantee’s separation from service from the Company within
the meaning of Section 409A (and any other payment that would be subject to the limitations in Section 409A(a)(2)(B) of the Code) will be delayed until six months after the Grantee’s separation from service (or earlier death) in
accordance with the requirements of Section 409A;
(c) if any payment to be made with respect to such Award would occur at a time
when the tax deduction with respect to such payment would be limited or eliminated by Section 162(m) of the Code, such payment may be deferred by the Company under the circumstances described in Section 409A until the earliest date that
the Company reasonably anticipates that the deduction or payment will not be limited or eliminated;
(d) to the extent necessary to comply
with Section 409A, any other securities, other Awards or other property that the Company may deliver in lieu of Shares in respect of an Award will not have the effect of deferring delivery or payment beyond the date on which such delivery or
payment would occur with respect to the Shares that would otherwise have been deliverable (unless the Committee elects a later date for this purpose in accordance with the requirements of Section 409A);
-18-
(e) with respect to any required Consent described in
Section 3.3
or the applicable
Award Agreement, if such Consent has not been effected or obtained as of the latest date provided by such Award Agreement for payment in respect of such Award and further delay of payment is not permitted in accordance with the requirements of
Section 409A, such Award or portion thereof, as applicable, will be forfeited and terminate notwithstanding any prior earning or vesting;
(f) if the Award includes a “series of installment payments” (within the meaning of Section 1.409A-2(b)(2)(iii) of the Treasury
Regulations), the Grantee’s right to the series of installment payments will be treated as a right to a series of separate payments and not as a right to a single payment;
(g) if the Award includes “dividend equivalents” (within the meaning of Section 1.409A-3(e) of the Treasury Regulations), the
Grantee’s right to the dividend equivalents will be treated separately from the right to other amounts under the Award; and
(h) for
purposes of determining whether the Grantee has experienced a separation from service from the Company within the meaning of Section 409A, “subsidiary” will mean a corporation or other entity in a chain of corporations or other
entities in which each corporation or other entity, starting with Great Western, has a controlling interest in another corporation or other entity in the chain, ending with such corporation or other entity. For purposes of the preceding sentence,
the term “controlling interest” has the same meaning as provided in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations,
provided
that
the language “at least 20 percent” is used instead of “at least 80
percent” each place it appears in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations.
THE PLAN AND ALL AWARDS MADE AND ACTIONS TAKEN THEREUNDER WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF SOUTH DAKOTA, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS.
|
3.17
|
Disputes; Choice of Forum
|
3.17.1 The Company and each Grantee, as a condition to such
Grantee’s participation in the Plan, hereby irrevocably submit to the exclusive jurisdiction of any state or federal court located in the County of Minnehaha, State of South Dakota, over any suit, action or proceeding arising out of or relating
to or concerning the Plan or, to the extent not otherwise specified in any individual agreement between the Company and the Grantee, any aspect of the Grantee’s continuation of service with the Company or the termination of that service. The
Company and each Grantee, as a condition to such Grantee’s participation in the Plan, acknowledge that the forum designated by this
Section 3.17.1
has a reasonable relation to the Plan and to the relationship between such Grantee
and the Company. Notwithstanding the foregoing, nothing herein will preclude the Company from bringing any action or proceeding in any other court for the purpose of enforcing the provisions of this
Section 3.17.1
.
-19-
3.17.2 The agreement by the Company and each Grantee as to forum is independent of the law that
may be applied in the action, and the Company and each Grantee, as a condition to such Grantee’s participation in the Plan, (i) agree to such forum even if the forum may under applicable law choose to apply non-forum law, (ii) hereby
waive, to the fullest extent permitted by applicable law, any objection which the Company or such Grantee now or hereafter may have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding in any court referred to in
Section 3.17.1
, (iii) undertake not to commence any action arising out of or relating to or concerning the Plan in any forum other than the forum described in this
Section 3.17
and (iv) agree that, to the fullest
extent permitted by applicable law, a final and non-appealable judgment in any such suit, action or proceeding in any such court will be conclusive and binding upon the Company and each Grantee.
3.17.3 Each Grantee, as a condition to such Grantee’s participation in the Plan, hereby irrevocably appoints the General Counsel of the
Company as such Grantee’s agent for service of process in connection with any action, suit or proceeding arising out of or relating to or concerning the Plan, who will promptly advise such Grantee of any such service of process.
3.17.4 Each Grantee, as a condition to such Grantee’s participation in the Plan, agrees to keep confidential the existence of, and any
information concerning, a dispute, controversy or claim described in
Section 3.19
, except that a Grantee may disclose information concerning such dispute, controversy or claim to the court that is considering such dispute, controversy or
claim or to such Grantee’s legal counsel (provided that such counsel agrees not to disclose any such information other than as necessary to the prosecution or defense of the dispute, controversy or claim).
|
3.18
|
Waiver of Jury Trial
|
EACH GRANTEE WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THE PLAN.
Each Grantee of an Award recognizes and agrees that before being selected by the
Committee to receive an Award the Grantee has no right to any benefits under the Plan. Accordingly, in consideration of the Grantee’s receipt of any Award hereunder, the Grantee expressly waives any right to contest the amount of any Award, the
terms of any Award Agreement, any determination, action or omission hereunder or under any Award Agreement by the Committee, the Company or the Board, or any amendment to the Plan or any Award Agreement (other than an amendment to the Plan or an
Award Agreement to which his or her consent is expressly required by the express terms of an Award Agreement). Nothing contained in the Plan, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind
or a fiduciary relationship between the Company and any Grantee. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974 (ERISA), as amended.
-20-
|
3.20
|
Severability; Entire Agreement
|
If any of the provisions of the Plan or any Award Agreement is finally
held to be invalid, illegal or unenforceable (whether in whole or in part), such provision will be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions will not be
affected thereby;
provided
that
if any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such
provision will be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and any Award Agreements contain the entire agreement of the parties with respect to the
subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof.
|
3.21
|
No Liability With Respect to Tax Qualification or Adverse Tax Treatment
|
Notwithstanding anything to the
contrary contained herein, in no event will the Company be liable to a Grantee on account of an Award’s failure to (a) qualify for favorable United States or foreign tax treatment or (b) avoid adverse tax treatment under United States
or foreign law, including, without limitation, Section 409A.
|
3.22
|
No Third-Party Beneficiaries
|
Except as expressly provided in an Award Agreement, neither the Plan nor
any Award Agreement will confer on any person other than the Company and the Grantee of any Award any rights or remedies thereunder. The exculpation and indemnification provisions of
Section 1.3.4
will inure to the benefit of a Covered
Person’s estate and beneficiaries and legatees.
|
3.23
|
Successors and Assigns of the Company
|
The terms of the Plan will be binding upon and inure to the
benefit of the Company and any successor entity, including as contemplated by
Section 3.6
.
|
3.24
|
Date of Adoption and Approval of Stockholders
|
The Plan was adopted by the Board on
[
—
]
, 2014 and was approved by Great Western’s stockholders on
[
—
]
, 2014 (the “
Effective Date
”).
-21-
Exhibit 10.12
FORM OF
GREAT WESTERN
BANCORP, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
The purpose of the Great Western Bancorp, Inc. Executive Incentive Compensation
Plan (as amended from time to time, the “
Plan
”) is to help the Company (as hereinafter defined) attract, retain and motivate participating eligible executives by providing incentive awards that ensure a strong
pay-for-performance linkage, and to permit the incentive awards to qualify as performance-based compensation under Section 162(m) (taking into account any transition relief available thereunder).
|
2.
|
Definitions of Certain Terms
|
(a) “
Award
” means an amount
calculated and awarded to a Participant pursuant to the Plan. Awards may be cash-based or based on the Company’s Shares (i.e., stock-based).
(b) “
Board
” means the Board of Directors of Great Western Bancorp, Inc., a Delaware corporation (“
Great
Western
”).
(c) “
Code
” means the Internal Revenue Code of 1986, as amended from time to time, or any
successor thereto, and the applicable rulings and regulations thereunder.
(d) “
Committee
” has the meaning set
forth in
Section 3(a)
.
(e) “
Company
” means Great Western and any Subsidiary, and any successor entity
thereto.
(f) “
Eligible Executive
” means an employee of the Company who, in the discretion of the Committee, is
likely to be a “covered employee” under Section 162(m) for the year in which an Award is payable and any other executives of the Company who are selected by the Committee for participation in the Plan.
(g) “
Exchange Act
” means the Securities Exchange Act of 1934, as amended from time to time, or any successor thereto,
and the applicable rules and regulations thereunder.
(h) “
Fiscal Year
” means Great Western’s fiscal year.
(i) “
GAAP
” has the meaning set forth in
Section 5(a)
.
(j) “
Omnibus Plan
” means the 2014 Great Western Bancorp, Inc. Omnibus Incentive Plan.
(k) “
Participant
” means an Eligible Executive participating in the Plan
for a Performance Period as provided in
Section 4(b)
.
(l) “
Performance Criteria
” has the meaning set
forth in
Section 5(a)
.
(m) “
Performance Goals
” has the meaning set forth in
Section 5(a)
.
(n) “
Performance Period
” means a Fiscal Year or other period of time (which may be longer or shorter than a
Fiscal Year) set by the Committee during which the achievement of the Performance Goals is to be measured.
(o) “
Section
162(m)
” means Section 162(m) of the Code and the applicable rulings and regulations thereunder.
(p) “
Section
162(m) Exemption
” means the exemption from the limitation on deductibility imposed by Section 162(m) as set forth in Section 162(m)(4)(C) of the Code and the applicable rulings and regulations thereunder.
(q) “
Section 409A
” means Section 409A of the Code, including any amendments or successor provisions to that
section, and any regulations and other administrative guidance thereunder, in each case as they may be from time to time amended or interpreted through further administrative guidance.
(r) “
Shares
” means shares of common stock of Great Western, par value $0.01 per share.
(s) “
Subsidiary
” means any corporation, partnership, limited liability company or other legal entity in which Great
Western, directly or indirectly, owns stock or other equity interests possessing 25% or more of the total combined voting power of all classes of the then-outstanding stock or other equity interests.
|
3.
|
Administration of the Plan
|
(a)
Committee
. The Compensation Committee of
the Board (as constituted from time to time, and including any successor committee, the “
Committee
”) will administer the Plan. The Committee will be appointed by the Board and will consist of not less than two members of the
Board who are intended to meet the definition of “outside director” under the provisions of Section 162(m) and the definition of “non-employee director” under the provisions of the Exchange Act, and each of whom is intended
to be “independent” as set forth in the applicable rules and regulations of the Securities and Exchange Commission and the New York Stock Exchange.
(b)
Administration
. The Committee will have all the powers vested in it by the terms of this Plan, such powers to include the
authority (within the limitations described herein) to select the persons to be granted awards under the Plan, to determine the time when Awards will be granted, to determine whether objectives and conditions for earning Awards have been met, to
determine whether Awards will be paid at the end of the Performance Period or deferred (consistent with Section 409A), and to determine whether an Award or payment of an Award
-2-
should be reduced or eliminated. The Committee will have full power and authority to administer and interpret the Plan and to adopt such rules, regulations, agreements, guidelines and instruments
for the administration of the Plan and for the conduct of its business as the Committee deems necessary or advisable. The Committee’s interpretations of the Plan, and all actions taken and determinations made by the Committee pursuant to the
powers hereunder, will be final, binding and conclusive for all purposes and on all parties, including the Company, Great Western’s shareholders, its employees and any person receiving an Award under the Plan, as well as their respective
successors in interest. The provisions of the Plan are intended to ensure that all Awards granted hereunder qualify for the Section 162(m) Exemption (taking into account any transition relief available), and this Plan is intended to be
interpreted and operated consistent with this intention. No member of the Committee will be liable for any action taken or determination made in good faith with respect to the Plan or any Award.
(c)
Guidelines
.
The Committee may adopt from time to time written policies or rules as it deems necessary or desirable
for the Committee’s implementation and administration of the Plan.
(d)
Delegation of Administrative Authority
.
The Committee may delegate its responsibilities for administering the Plan to employees of the Company as it deems necessary or appropriate for the proper administration of the Plan. In delegating its authority, the Committee will consider the
extent to which any delegation may cause Awards to fail to be deductible under Section 162(m) (taking into account any transition relief available).
|
4.
|
Eligibility and Participation
|
(a)
Eligibility
. All Eligible Executives
are eligible to participate in the Plan for any Performance Period.
(b)
Participation
. For each Performance Period, the
Committee, in its discretion, will select the Eligible Executives who will participate in this Plan. The Committee will select the Participants no later than 90 days after the beginning of the Performance Period (or, if shorter, before 25% of the
Performance Period has elapsed) in accordance with Section 162(m).
(a)
Performance Goals
.
The “
Performance
Goals
” means the written, objective performance goals established by the Committee for each Performance Period. The Performance Goals will be based on one or more of the following business criteria (either separately or in combination)
with regard to Great Western (or a Subsidiary, division, other operational unit or administrative department of Great Western) (“
Performance Criteria
”): asset growth; earnings per share; enterprise value or value creation
targets; combined net worth; debt to equity ratio; revenues; investment performance; operating income (with or without investment income or income taxes); cash flow; margin; net income, before or after taxes; earnings before interest, taxes,
depreciation and/or amortization; return on total capital, equity, revenue or assets; and increase in the fair market value of a Share.
Except as otherwise expressly provided, all financial terms are used as defined under Generally Accepted Accounting Principles
(“
GAAP
”) and all determinations will be made in
-3-
accordance with GAAP, as applied by the Company in the preparation of its periodic reports to stockholders. Any Performance Goals may be measured in absolute terms or relative to historic
performance or the performance of other companies or an index. To the extent permitted under Section 162(m) (including, without limitation, compliance with any requirements for stockholder approval), for each Fiscal Year, the Committee may
(i) designate additional business criteria on which the Performance Goals may be based or (ii) provide for objectively determinable adjustments, modifications or amendments, as determined in accordance with GAAP, to any of the Performance
Criteria described above for one or more of the items of gain, loss, profit or expense: (A) determined to be extraordinary or unusual in nature or infrequent in occurrence, (B) related to the disposal of a segment of a business,
(C) related to a change in accounting principle under GAAP, (D) related to discontinued operations that do not qualify as a segment of business under GAAP or (E) attributable to the business operations of any entity acquired by the
Company during a Fiscal Year.
Separate Performance Goals may be established by the Committee for Great Western or a Subsidiary, division,
or individual thereof, and different Performance Criteria may be given different weights. To the extent permissible for Awards to qualify for the Section 162(m) Exemption (taking into account any transition relief), the Committee may establish
other subjective or objective goals, including individual Performance Goals, which it deems appropriate, for purposes of applying negative discretion in determining the Award amount.
(b)
Grant of Awards
.
In connection with the grant of each Award, the Committee will (i) establish the Performance
Goal(s) and the Performance Period applicable to such Award, (ii) establish the formula for determining the amounts payable based on achievement of the applicable Performance Goal(s), (iii) determine the consequences for the Award of the
Participant’s termination of employment for various reasons or the Participant’s demotion or promotion during the Performance Period and (iv) establish such other terms and conditions for the Award as the Committee deems appropriate.
The foregoing will be accomplished (1) while the outcome for the Performance Period is substantially uncertain and (2) no more than 90 days after the commencement of the Performance Period or, if the Performance Period is less than one
year, the number of days which is equal to 25% of the Performance Period.
(c)
Certification of Performance
.
Following the completion of the Performance Period, the Committee will certify in writing the degree to which the Performance Goal(s) applicable to each Participant for the Performance Period were achieved or exceeded. No Awards will be paid for the
Performance Period until such certification is made by the Committee. Subject to
Section 5(d)
, the Award for each Participant will be determined by applying the applicable formula for the Performance Period based upon the level of
achievement of the Performance Goal(s) certified by the Committee.
(d)
Committee Discretion
.
Notwithstanding
anything to the contrary in the Plan, the Committee may, in its sole discretion, reduce or eliminate, but not increase, any Award payable to any Participant for any reason, including without limitation to reflect individual or business performance
and/or unanticipated or subjective factors.
(e)
Maximum Awards
.
No Participant may receive with respect to any
Fiscal Year an Award under the Plan of more than $5,000,000. In addition, no Participant may receive with
-4-
respect to any Fiscal Year an Award under the Plan of more than 1,000,000 Shares. In the event the Performance Period for an Award is more than one Fiscal Year, then for purposes of the limits
above, the Award amount will be proportionately spread across the actual Performance Period (
provided
that
for this purpose, the Award amount may not be spread across more than four (4) years).
(f)
Timing of Payment
. Awards will generally be payable by the Company to Participants promptly following the determination and
written certification of the Committee for the Performance Period pursuant to
Section 5(c)
above. Notwithstanding the prior sentence, the Committee, in its discretion, may defer the payout or vesting of any Award and/or provide to
Participants the opportunity to elect to defer the payment of any Award, subject to
Section 6(j)
.
(g)
Form of
Payment
. Awards may be paid in cash or in the form of stock-based awards. Awards that are granted and denominated in cash may be paid under the Plan, the Omnibus Plan or any other plan maintained by the Company, and Awards that are granted
in the form of stock-based awards will be issued pursuant to the Omnibus Plan or any other plan maintained by the Company for
stock-based
awards at the time of grant.
(h)
Certain Participants not Eligible
. To be eligible for payment of any Award, the Participant must be employed by the Company
on the last day of the Performance Period unless the Committee specifies otherwise.
|
6.
|
Miscellaneous Provisions
|
(a)
Effect on Benefit Plans
. Awards under the
Plan will not be considered eligible pay under other plans, benefit arrangements or fringe benefit arrangements of the Company unless otherwise provided under the terms of such other plans.
(b)
Restriction on Transfer
.
No Award (or any rights and obligations thereunder) granted under the Plan may be sold,
exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of or hedged, in any manner (including through the use of any cash-settled instrument), whether voluntarily or involuntarily and whether by operation of law or otherwise,
other than by will or by the laws of descent and distribution. Notwithstanding the foregoing, the Committee may permit, under such terms and conditions that it deems appropriate in its sole discretion, a Participant to transfer any Award to any
person or entity that the Committee so determines. Any sale, exchange, transfer, assignment, pledge, hypothecation, or other disposition in violation of the provisions of this
Section 6(b)
will be null and void and any Award which is
hedged in any manner will immediately be forfeited. All of the terms and conditions of the Plan and the Award will be binding upon any permitted successors and assigns.
(c)
Tax Withholding
.
Participants will be solely responsible for any applicable taxes (including, without limitation,
income and excise taxes) and penalties, and any interest that accrues thereon, that they incur in connection with the receipt or vesting of any Award. As a condition to the delivery of any payment under this Plan or the lifting or lapse of
restrictions on any Award, or in connection with any other event that gives rise to a federal or other governmental tax withholding obligation on the part of the Company relating to an Award (including, without limitation, Federal Insurance
Contributions (FICA) tax), (i) the Company
-5-
may deduct or withhold (or cause to be deducted or withheld) from any payment or distribution to a Participant whether or not pursuant to the Plan, (ii) the Committee will be entitled to
require that the Participant remit cash to the Company (through payroll deduction or otherwise) or (iii) the Company may enter into any other suitable arrangements to withhold, in each case in an amount not to exceed in the opinion of the
Company the minimum amounts of such taxes required by law to be withheld.
(d)
No Rights to Awards
.
No Company
employee or other person will have any claim or right to be granted an Award under the Plan. Neither the adoption of the Plan nor the grant of any Award will confer upon any employee any right to continued employment with the Company, nor will it
interfere in any way with the right of the Company to terminate, or alter the terms and conditions of, the employment at any time. The Committee’s determinations under the Plan and Awards need not be uniform and any such determinations may be
made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan (whether or not such persons are similarly situated).
(e)
No Funding of Plan
.
The Plan will be unfunded, and the Awards will be paid solely from the general assets of the
Company. The Company will not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Award under the Plan. To the extent that any person acquires a right to receive payments
under the Plan, the right is no greater than the right of any other unsecured general creditor.
(f)
Right of Offset
. The
Company will have the right to offset against any payments under the Plan any outstanding amounts (including, without limitation, travel and entertainment or advance account balances, loans, repayment obligations under any Awards, or amounts
repayable to the Company pursuant to tax equalization, housing, automobile or other employee programs) that the Participant then owes to the Company and any amounts the Committee otherwise deems appropriate pursuant to any tax equalization policy or
agreement. Notwithstanding the foregoing, if an Award provides for the deferral of compensation within the meaning of Section 409A, the Committee will have no such right if such offset could subject the Participant to the additional tax imposed
under Section 409A in respect of an outstanding Award.
(g)
Other Payments or Awards
. Nothing contained in the Plan
will be deemed in any way to limit or restrict the Company from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.
(h)
Successors
. All obligations of Great Western under the Plan will be binding on any successor to Great Western whether the
existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise of all or substantially all of the business or assets of Great Western.
(i)
FDIC Limits on Golden Parachute Payments
. Notwithstanding anything to the contrary, the Company will not be required
to make any payment or grant any Award under the Plan or any Award agreement that would otherwise be a prohibited golden parachute payment within the meaning of Section 18(k) of the Federal Deposit Insurance Act.
-6-
(j)
Section 409A
. All Awards made under the Plan that are intended to
be “deferred compensation” subject to Section 409A will be interpreted, administered and construed to comply with Section 409A, and all Awards made under the Plan that are intended to be exempt from Section 409A will be
interpreted, administered and construed to comply with and preserve such exemption. The Board and the Committee will have full authority to give effect to the intent of the foregoing sentence.
Without limiting the generality of the foregoing, with respect to any Award made under the Plan that is intended to be “deferred
compensation” subject to Section 409A: (i) any payment due upon a Participant’s termination of employment will be paid only upon such Participant’s separation from service from the Company within the meaning of
Section 409A; (ii) any payment to be made with respect to such Award in connection with the Participant’s separation from service from the Company within the meaning of Section 409A (and any other payment that would be subject to
the limitations in Section 409A(a)(2)(B) of the Code) will be delayed until six months after the Participant’s separation from service (or earlier death) in accordance with the requirements of Section 409A; (iii) if any payment
to be made with respect to such Award would occur at a time when the tax deduction with respect to such payment would be limited or eliminated by Section 162(m), such payment may be deferred by the Company under the circumstances described in
Section 409A until the earliest date that the Company reasonably anticipates that the deduction or payment will not be limited or eliminated; (iv) if the Award includes a “series of installment payments” (within the meaning of
Section 1.409A-2(b)(2)(iii) of the Treasury Regulations), the Participant’s right to the series of installment payments will be treated as a right to a series of separate payments and not as a right to a single payment; and (v) for
purposes of determining whether the Participant has experienced a separation from service from the Company within the meaning of Section 409A, “subsidiary” will mean a corporation or other entity in a chain of corporations or other
entities in which each corporation or other entity, starting with Great Western, has a controlling interest in another corporation or other entity in the chain, ending with such corporation or other entity. For purposes of the preceding sentence,
the term “controlling interest” has the same meaning as provided in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations,
provided
that
the language “at least 20 percent” is used instead of “at least 80
percent” each place it appears in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations.
(k)
Clawback/Recapture
Policy
. Awards under the Plan will be subject to any clawback or recapture policy that the Company may adopt from time to time to the extent provided in such policy and, in accordance with such policy, may be subject to the requirement that
the Awards be repaid to the Company after they have been distributed to the Participant.
(l)
Severability; Entire
Agreement
.
If any of the provisions of the Plan or any Award agreement is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision will be deemed modified to the extent, but only to the
extent, of such invalidity, illegality or unenforceability and the remaining provisions will not be affected thereby;
provided
that
if any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds
the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision will be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The
Plan and any Award agreements contain the entire agreement of the parties with respect to
-7-
the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect
to the subject matter thereof.
(m)
Governing Law
.
The Plan and all Awards made and actions taken thereunder will be
governed by and construed in accordance with the laws of the State of South Dakota, without reference to principles of conflict of laws.
|
7.
|
Effective Date, Amendments and Termination
|
(a)
Effective
Date
.
The Plan was adopted by the Board on
[
—
]
, 2014 and was approved by the stockholders of Great Western on
[
—
]
, 2014 (the “
Effective Date
”).
(b)
Amendments
.
The Committee may at any time terminate or from time to time amend the Plan in whole or in part, but no
such action will adversely affect any rights or obligations with respect to any Awards made under the Plan. No such amendment or modification, however, may be effective without approval of Great Western’s shareholders if such approval is
necessary to comply with the requirements of the Section 162(m) Exemption (taking into account any transition relief available thereunder) including (i) any change to the class of persons eligible to participate in the Plan, (ii) any
change to the Performance Goals or Performance Criteria or (iii) any increase to the maximum dollar amount that may be paid to a Participant for a Performance Period.
(c)
Termination
.
The Plan will continue in effect until terminated by the Committee.
-8-
Exhibit 21.1
Subsidiaries of Great Western Bancorp, Inc.*
|
|
|
|
|
Name
|
|
Jurisdiction of Incorporation/Organization
|
|
Great Western Bank
|
|
South Dakota
|
|
First Federal Investment Services, Inc.
|
|
Iowa
|
|
First Iowa Mortgage, Inc.
|
|
Iowa
|
|
FITS, Inc.
|
|
Iowa
|
|
Great Western Service Corporation
|
|
South Dakota
|
|
GW Leasing, Inc.
|
|
Nebraska
|
|
GWB, LLC
|
|
Nebraska
|
|
Security Bancservices Group, Inc.
|
|
Iowa
|
|
TMS Corporation of the Americas
|
|
Nebraska
|
|
Great Western Financial Services, Inc.
|
|
Nebraska
|
|
TierOne Reinsurance Company
|
|
Arizona
|
|
Valley Heights Lincoln LLC
|
|
Nevada
|
|
Wintergreen Real Estate Holding, LLC
|
|
Colorado
|
|
Great Western Statutory Trust IV
|
|
Connecticut
|
|
GWB Capital Trust VI
|
|
Delaware
|
|
Sunstate Bancshares Trust II
|
|
Delaware
|
|
*
|
This list of subsidiaries of Great Western Bancorp, Inc. assumes the effectiveness of the Formation Transactions described in the prospectus contained in the registration statement to which this exhibit is attached.
|
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption “Experts” and to the use of our report dated July 18, 2014, with respect to the
consolidated financial statements of Great Western Bancorporation, Inc. included in the Registration Statement (Form S-1) and related Prospectus of Great Western Bancorp, Inc. for the registration of its common stock.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
August 28, 2014