-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GoZIhjmsb9Gh4Y28wB03EuO+tsFMwuimc1Sa4Grhis676f/tACes0XPLkN6LkdsY zlyCT6+LPOI6juG7qF5OdA== 0001047469-99-014642.txt : 19990414 0001047469-99-014642.hdr.sgml : 19990414 ACCESSION NUMBER: 0001047469-99-014642 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19990413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAVEN CAPITAL TRUST II CENTRAL INDEX KEY: 0001083632 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-76191 FILM NUMBER: 99592912 BUSINESS ADDRESS: STREET 1: 615 MERRICK AVE CITY: WESTBURY STATE: NY ZIP: 11590 BUSINESS PHONE: 5166834483 MAIL ADDRESS: STREET 1: 615 MERRICK AVE CITY: WESTBURY STATE: NY ZIP: 11590 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAVEN BANCORP INC CENTRAL INDEX KEY: 0000900741 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 113153802 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-76191-01 FILM NUMBER: 99592913 BUSINESS ADDRESS: STREET 1: 615 MERRICK AVE CITY: WESTBURY STATE: NY ZIP: 11590 BUSINESS PHONE: 5166834100 MAIL ADDRESS: STREET 1: 93 22 JAMAICA AVE CITY: WOODHAVEN STATE: NY ZIP: 11421 S-3 1 FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1999 REGISTRATION NO. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------ HAVEN BANCORP, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------ DELAWARE 11-3153802 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.)
615 MERRICK AVENUE WESTBURY, NEW YORK 11590 (516) 683-4100 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ------------------------ HAVEN CAPITAL TRUST II (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------ DELAWARE PENDING (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.)
C/O HAVEN BANCORP, INC. 615 MERRICK AVENUE WESTBURY, NEW YORK 11590 (516) 683-4100 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ------------------------ PHILIP S. MESSINA CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER HAVEN BANCORP, INC. 615 MERRICK AVENUE WESTBURY, NEW YORK 11590 (516) 683-4100 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------ COPIES OF COMMUNICATIONS TO: OMER S.J. WILLIAMS, ESQ. ROBERT L. GROSSMAN, ESQ. MARK I. SOKOLOW, ESQ. GREENBERG TRAURIG, P.A. THACHER PROFFITT & WOOD 1221 BRICKELL AVENUE TWO WORLD TRADE CENTER MIAMI, FLORIDA 33131 38(TH) FLOOR (305) 579-0500 NEW YORK, NEW YORK 10048 (212) 912-7400
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. (COVER CONTINUED ON NEXT PAGE) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / 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 (the "Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, 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, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ------------------------ CALCULATION OF REGISTRATION FEE
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF SHARES TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION TO BE REGISTERED REGISTERED PER UNIT(1) PRICE (1) FEE Junior Subordinated Deferrable Interest Debentures of Haven Bancorp, Inc.(2) 1,610,000 $25.00 $40,250,000 $11,190 Capital Securities of Haven Capital Trust II 1,610,000 $25.00 $40,250,000 N/A The Haven Bancorp, Inc. Guarantee with respect to Capital Securities(3)(4) N/A N/A N/A N/A Total 100% $40,250,000(5) $11,190
(1) Estimated solely for the purpose of computing the registration fee. (2) The Junior Subordinated Deferrable Interest Debentures will be purchased by Haven Capital Trust II with the proceeds of the sale of the Capital Securities. (3) No separate consideration will be received for the Haven Bancorp, Inc. Guarantee. (4) This Registration Statement is deemed to cover the Junior Subordinated Deferrable Interest Debentures of Haven Bancorp, Inc., the rights of holders of Junior Subordinated Deferrable Interest Debentures of Haven Bancorp, Inc. under the Indenture, the rights of holders of Capital Securities of Haven Capital Trust II under the Trust Agreement, the rights of holders of the Capital Securities under the Guarantee, which, taken together, fully, irrevocably and unconditionally guarantee all of the respective obligations of Haven Capital Trust II under the Capital Securities. (5) Such amount represents the principal amount of Junior Subordinated Deferrable Interest Debentures issued at their principal amount and the issue price rather than the principal amount of Junior Subordinated Deferrable Interest Debentures issued at an original issue discount. Such amount also represents the initial public offering price of the Capital Securities of Haven Capital Trust II. ------------------------ THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. PRELIMINARY PROSPECTUS THE INFORMATION IN THS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURIITES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. Subject to Completion, dated , 1999 $35,000,000 HAVEN CAPITAL TRUST II % Capital Securities (Liquidation Amount $25.00 per Capital Security) Fully and unconditionally guaranteed, to the extent described herein, by HAVEN BANCORP, INC. Haven Capital Trust II is offering capital securities representing preferred beneficial interests in Haven Capital to the public. Distributions on the capital securities will be paid quarterly at an annual rate of % of the aggregate liquidation amount of the capital securities on March 31, June 30, September 30 and December 31 of each year beginning June 30, 1999. Haven Capital has granted the underwriters a 30-day option to purchase up to additional capital securities on the same terms set forth below solely to cover over-allotments. We have applied for approval for quotation of the capital securities on the Nasdaq National Market under the trading symbol " ." THE OFFERING
Per Security Total ------------- ---------- Public Price (1).................................. $ 25.00 $35,000,000 Underwriting Discounts............................ (2) (2) Proceeds to the Trust............................. $ 25.00 $35,000,000
- ------------------------ (1) Plus accrued distributions from , 1999 to the date of delivery. (2) Haven Bancorp will pay the underwriters compensation of $ per capital security, or $ per capital security sold to certain investors that Haven Bancorp has identified. Assuming capital securities are sold to these investors, Haven Bancorp will pay the underwriters a total of $ (or $ if the over-allotment option is exercised in full). PLEASE READ THE "RISK FACTORS" SECTION OF THIS PROSPECTUS, BEGINNING ON PAGE . These securities are not deposits or other obligations of a bank and are not insured by the Federal Deposit Insurance Corporation or any other government agency. Neither the Securities and Exchange Commission nor any state securities commission has approved these securities or determined that this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. FRIEDMAN BILLINGS RAMSEY FIRST ALBANY CORPORATION LADENBURG THALMANN & CO. INC. , 1999 [MAP OF LOCATIONS AND PHOTO OF SUPERMARKET BRANCH] 2 WHERE YOU CAN FIND MORE INFORMATION Haven Bancorp, Inc. ("Haven," "we," "us" or "our") files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document in our public files at the SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices at 7 World Trade Center, 13(th) Floor, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison Avenue, Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from the SEC's web site at http://www.sec.gov through the SEC's electronic data gathering, analysis and retrieval system, EDGAR. Our common stock is listed on the Nasdaq National Market under the symbol "HAVN." Information about us also is available from the NASD, 1735 K Street, N.W., Washington, D.C. 20006. This prospectus is part of a registration statement that we and Haven Capital Trust II ("Haven Capital") filed with the SEC. Because the SEC allows us to omit parts of the registration statement from this prospectus, we did not include all the information in the registration statement in this prospectus. You should review the registration statement, including the exhibits, for additional information regarding Haven Capital, the capital securities and us. The registration statement and its exhibits may be inspected at the SEC's offices described in the previous paragraph. ADDITIONAL INFORMATION WE HAVE INCORPORATED IN THE PROSPECTUS The SEC allows us to "incorporate by reference" the information we file with it, which means that we can disclose important information to you by referring you to those documents that are considered part of this prospectus. Information that we file with the SEC after the date of the registration statement will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 by us (1) after the date of the filing of our registration statement and prior to its effectiveness and (2) until our offering of securities has been completed. - Annual Report on Form 10-K for the year ended December 31, 1998. For your convenience, we have attached a copy of our Annual Report on Form 10-K for the year ended December 31, 1998 (without exhibits) to this prospectus as Appendix A. You may obtain a copy of our filings with the SEC at no cost, by writing or telephoning us at the following address: Haven Bancorp, Inc. Attention: Secretary 615 Merrick Avenue Westbury, New York 11590 (516) 683-4292 You should rely only on the information incorporated by reference or provided in this prospectus or any supplement. We have not authorized anyone else to provide you with different information. This prospectus is an offer to sell only the capital securities referred to in this prospectus, and only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of the date of the prospectus. FORWARD-LOOKING STATEMENTS RELATING TO HAVEN'S, HAVEN CAPITAL'S AND THE CAPITAL SECURITIES' FUTURE PERFORMANCE OR EXPECTATIONS We have used and incorporated by reference "forward-looking statements" in this prospectus. Words such as "believes," "expects," "may," "will," "should," "projected," "contemplates" or "anticipates" may constitute forward-looking statements. These statements are within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that 3 could cause our actual results to differ materially. We have used these statements to describe our expectations and estimates in various areas, including: - our overall business conditions particularly in the markets in which we operate, - fiscal and monetary policy, - the market for mortgage originations and purchases, - year 2000 compliance issues, - competitive products and pricing, - credit risk management and - changes in regulations affecting financial institutions. Our actual results could vary materially from the future results covered in our forward-looking statements. The statements in the "Risk Factors" section are cautionary statements identifying important factors, including certain risks and uncertainties, that could cause our results to vary materially from the future results covered in such forward-looking statements. Other factors, such as the general state of the United States economy, could also cause actual results to vary materially from the future results covered in such forward-looking statements. We disclaim any obligation to announce publicly future events or developments that affect the forward-looking statements in this prospectus. 4 SUMMARY INFORMATION THE FOLLOWING INFORMATION IS A SUMMARY OF THE MAJOR TERMS OF THE OFFERING OF CAPITAL SECURITIES. YOU SHOULD READ THE MORE DETAILED DISCUSSION AND FINANCIAL INFORMATION APPEARING ELSEWHERE OR INCORPORATED IN THIS PROSPECTUS. HAVEN BANCORP, INC. We are a Delaware corporation and the savings association holding company for CFS Bank (the "Bank"), a federally chartered savings bank. We conduct our operations primarily through the Bank. The Bank is a community-oriented savings bank, which offers mortgage, insurance and investment products through its residential lending division, CFS Intercounty, its investment services subsidiary, CFS Investment Services, and through our insurance agency subsidiary, CFS Insurance Agency, Inc. The Bank also offers commercial real estate loans. Our insurance agency subsidiary allows us to offer property and casualty insurance and business lines of insurance to our customers. With our acquisitions in 1998 of CFS Intercounty and CFS Insurance, we have complemented our package of financial products and services to position the Bank as a comprehensive financial services provider. The Bank offers these products and services through eight traditional branches and 59 supermarket branches in the New York City boroughs of Queens, Brooklyn, Manhattan and Staten Island; the New York counties of Nassau, Suffolk, Rockland and Westchester; and in New Jersey and Connecticut. In addition, the Bank operates six full-service residential loan origination offices and six satellite residential loan origination offices as part of the CFS Intercounty division in New York, New Jersey, Connecticut and Pennsylvania. CFS Insurance has three free-standing insurance agency offices in Long Island, New York. Our principal offices are located at 615 Merrick Avenue, Westbury, New York 11590, and our telephone number is (516) 683-4100. As of December 31, 1998, we had on a consolidated basis total assets of $2.40 billion, total liabilities of $2.28 billion, which included $1.72 billion of total deposits, and total stockholders' equity of $119.9 million. HAVEN CAPITAL TRUST II We organized Haven Capital as a statutory Delaware business trust on March 26, 1999. Haven Capital will sell its capital securities to the public and its common securities to us. Haven Capital will use all of the proceeds from the sale of the capital securities and the common securities to buy our % junior subordinated deferrable interest debentures due , 2029. The subordinated debentures have the same financial terms as the capital securities. We are obligated to make interest payments and other payments under the subordinated debentures to Haven Capital, which Haven Capital will use to make distribution and other payments on the capital securities to you. Our obligations under the subordinated debentures are unsecured and rank junior to all of our other borrowings, except borrowings that by their terms rank equal or junior to the capital securities. We will, on a subordinated basis, fully, irrevocably and unconditionally guarantee the payment by Haven Capital of the amounts that are required to be paid on the capital securities, to the extent that Haven Capital has funds available. Haven Capital intends to maintain its status as an entity that is not taxable as a corporation for federal income tax purposes. Haven Capital has no separate financial statements. The statements would not be material to you because Haven Capital has no independent operations. Haven Capital has a term of approximately 55 years, but may be dissolved earlier. 5 HAVEN'S INVESTMENT OF THE PROCEEDS FROM THE SALE OF THE SUBORDINATED DEBENTURES We currently intend to use the net proceeds from the sale of the subordinated debentures, which are estimated to be $ million ($ million if the underwriters exercise their over-allotment option in full), net of commissions and other estimated offering expenses, to invest in the Bank to increase its capital level and to enable the Bank to expand its deposit base and its asset base through investments in residential and commercial real estate loans in our market area and in investment-grade mortgage-backed securities and investment securities. Initially, we will invest the net proceeds in short-term investment-grade financial securities. When we refer in this prospectus to the proceeds of this offering, we have assumed that capital securities are sold to the investors that we have identified. For more information about our use of the proceeds from the sale of the subordinated debentures, you should read the "Use of Proceeds" section of this prospectus. We will pay all fees and expenses related to Haven Capital and the offering of the capital securities, as well as all of the ongoing costs and expenses of Haven Capital. We will not be responsible for Haven Capital's obligations to pay you distributions or other amounts under the capital securities, except to the extent of our guarantee of the capital securities. THE CAPITAL SECURITIES Each capital security represents an undivided preferred beneficial interest in the assets of Haven Capital. Each capital security that you own will entitle you to receive quarterly distributions as described in this prospectus. The underwriters are offering 1,400,000 capital securities at a price of $25.00 for each capital security, plus any accumulated distributions on the capital securities from , 1999. DISTRIBUTIONS ON THE CAPITAL SECURITIES If you purchase any capital securities, you will be entitled to receive quarterly cash distributions at an annual rate of % of the liquidation amount of $25.00 for each capital security. You will be entitled to be paid distributions on March 31, June 30, September 30 and December 31 of each year, beginning June 30, 1999. The amount of each distribution will include amounts accrued up to the date the distribution is due. These payments are identical to the payments that we are required to make under the subordinated debentures. HAVEN CAPITAL'S ABILITY TO DEFER PAYMENT OF YOUR DISTRIBUTIONS We can, on one or more occasions, defer interest payments on the subordinated debentures for up to 20 consecutive quarters, unless an event of default exists under the subordinated debentures. We cannot defer interest payments beyond , 2029, the stated maturity date of the subordinated debentures. If we defer interest payments on the subordinated debentures, Haven Capital will also defer distributions on the capital securities. During this deferral period, the capital securities will still accumulate distributions at an annual rate of % of the liquidation amount of $25.00 for each capital security. Additionally, any unpaid distributions on the capital securities will accumulate additional distributions at the same rate, compounded quarterly, to the extent permitted by law. If Haven Capital defers your distributions, you will still be required to accrue interest income and include it in your gross income for U.S. federal income tax purposes, even if you are a cash basis taxpayer. 6 HAVEN'S GUARANTEE OF THE CAPITAL SECURITIES We will fully, irrevocably and unconditionally guarantee, on a subordinated basis, to the extent that Haven Capital has funds legally available to make the following payment obligations: - payment of distributions on the capital securities, - payments on liquidation of Haven Capital and - payments on maturity or earlier redemption of the capital securities. If we do not make a payment on the subordinated debentures, Haven Capital will not have sufficient funds to make payments on the capital securities. Our guarantee does not cover the payment of distributions when Haven Capital does not have sufficient funds to pay the distributions. Our obligations under the guarantee and under the subordinated debentures are unsecured and rank junior to all of our other borrowings, except borrowings that by their terms rank equal or junior to the subordinated debentures. Our guarantee of the capital securities issued by Haven Capital Trust I and our 10.46% junior subordinated deferrable interest debentures that mature February 1, 2027 rank equal to our guarantee of the capital securities Haven Capital is offering by this prospectus. REDEMPTION OF THE CAPITAL SECURITIES Haven Capital will redeem the capital securities when we pay the subordinated debentures at maturity on , 2029. In addition, if we redeem some or all of the subordinated debentures before maturity, Haven Capital will use the cash it receives from the redemption of the subordinated debentures to redeem proportionately an amount of capital securities and common securities having an aggregate liquidation amount (the number of securities times $25.00) equal to the aggregate principal amount of the subordinated debentures that we redeem. We can redeem some or all of the subordinated debentures before , 2029 at their principal amount plus any accrued and unpaid interest to the date of redemption at any time on or after , 2009. If we redeem any subordinated debentures on or after , 2009, we will pay a premium that declines each year from % beginning on , 2009 to 0% on or after , 2019. We can redeem all of the subordinated debentures before , 2029 at their principal amount plus any accrued and unpaid interest to the date of redemption at any time if changes in the bank regulatory, investment company or tax laws occur that would adversely impact the status of Haven Capital, the trust securities or the subordinated debentures. We may have to obtain regulatory approvals, including the approval of the Office of Thrift Supervision, before we redeem any subordinated debentures prior to maturity. TRUSTEES OF HAVEN CAPITAL TRUST II There are five trustees of Haven Capital. The Chase Manhattan Bank will be the property trustee, Chase Manhattan Bank Delaware will be the Delaware trustee and three individuals who are employees of Haven will be the administrative trustees of Haven Capital. As the sole holder of the common securities, we can replace or remove any of the trustees. However, if an event of default exists under the trust agreement governing Haven Capital, only the holders of a majority in aggregate liquidation amount of the capital securities would be able to remove and replace the property trustee and the Delaware trustee. As owner of all of the common securities, only we can remove or replace the administrative trustees. The duties and obligations of each trustee are governed by the trust agreement. 7 FORM OF THE CAPITAL SECURITIES WHEN THEY ARE ISSUED The capital securities will be represented by one or more global securities that will be deposited with and registered in the name of The Depository Trust Company, New York, New York ("DTC") or its nominee. This means that you will not receive a certificate for the capital securities. We expect that the capital securities will be ready for delivery through DTC on or about , 1999. PURCHASES OF THE CAPITAL SECURITIES FOR AN EMPLOYEE BENEFIT PLAN If you are purchasing the capital securities for an employee benefit plan, you should read "ERISA Considerations" for a discussion of prohibited transactions and your fiduciary duties. 8 RECENT DEVELOPMENTS RESULTS FOR THE YEAR ENDED DECEMBER 31, 1998 At December 31, 1998, we had total assets of $2.40 billion, a 21.3% increase over total assets of $1.97 billion at December 31, 1997, and a 51.3% increase over total assets of $1.58 billion at December 31, 1996. Total deposits were $1.72 billion at December 31, 1998, a 26.2% increase over total deposits of $1.37 billion at December 31, 1997, and a 51.4% increase over total deposits of $1.14 billion at December 31, 1996. Our average mortgage loans outstanding increased to $1.27 billion in 1998 from $956.8 million in 1997 and $647.5 million in 1996. Along with our growth, we have maintained strong credit quality. At December 31, 1998, non-performing loans were 0.64% of total loans, and non-performing assets were 0.36% of total assets. Stockholders' equity at December 31, 1998 was $119.9 million, or 5.00% of total assets. The Bank's tangible, core and risk-based regulatory capital ratios were 5.43%, 5.43% and 11.96%, respectively. These ratios exceeded the minimum regulatory requirements of 2.00%, 4.00% and 8.00%, respectively. The Bank is considered well capitalized by regulatory standards because its core capital ratio exceeds 5.00%. We reported net income of $8.2 million, or $0.95 per basic share ($0.89 per share, diluted) for 1998 compared to net income of $11.1 million, or $1.32 per basic share ($1.24 per share diluted) for 1997. The $2.9 million decrease in earnings was primarily due to an increase of $31.5 million in non-interest expense, which resulted largely from our continuing supermarket banking expansion and the acquisition of the loan production franchise of CFS Intercounty. The increase in non-interest expense was partially offset by an increase of $6.0 million in net interest income, an increase of $19.2 million in non-interest income and a decrease of $3.2 million in income tax expense. Net interest income increased by $6.0 million, or 11.6% to $57.9 million in 1998 from $51.9 million in 1997. Total average interest-earning assets increased by $388.9 million, or 23.0% to $2.08 billion in 1998 from $1.69 billion in 1997, primarily due to the increase of $309.0 million in the average mortgage loan balance. The average yield on interest-earning assets decreased to 7.28% in 1998 from 7.46% in 1997, as a result of an overall decline in market indices which serve as leading indicators for mortgage loan rates and rates on securities. The average balance of interest-bearing liabilities increased by $408.0 million, or 25.1% between 1997 and 1998 primarily due to the growth in deposit balances in the supermarket branches. The average cost of liabilities increased by 4 basis points to 4.61% in 1998 from 4.57% in 1997 primarily due to the growth in certificate accounts and the introduction of the Liquid Asset savings account in 1998. The Liquid Asset account currently pays 4.25% on account balances of $2,500 or more. The net interest spread was 2.67% in 1998 compared to 2.89% in 1997. Non-interest income increased by $19.2 million, or 138.3% from $13.9 million in 1997 to $33.1 million in 1998. We believe that the growth in non-interest income reflects the impact of the continued maturation of our supermarket branch network and significant progress in the integration of our mortgage banking business. More than half of the increase in non-interest income is attributable to the $10.3 million in servicing released premiums and fees on loans sold in the secondary market. We did not purchase CFS Intercounty's loan production pipeline (loans committed, but not yet closed) as part of the acquisition which closed on May 1, 1998. We closed these loans and delivered them to CFS Intercounty's former parent as part of the purchase agreement. Under the purchase agreement, we did not receive a servicing released premium upon delivering those loans, which would have offset certain of our closing costs. Beginning July 1, 1998, we entered into correspondent agreements with unaffiliated third parties, and began selling loans from our pipeline on a servicing released basis to these parties. The remainder of the increase in non-interest income came primarily from retail banking fees and revenues from CFS Investment Services as a result of our supermarket banking expansion. Savings and checking fees were $9.8 million in 1998, a $4.3 million, or 79.3% increase over 1997. Insurance, annuity and mutual fund fees generated in 1998 were $5.9 million, a $2.1 million, or 56.3% increase over the 9 $3.8 million earned in 1997. Other non-interest income increased by $1.0 million, or 65.2%, to $2.6 million in 1998, from $1.6 million in 1997, primarily as a result of ATM surcharge fees. During 1998, we opened 25 new supermarket branches, and through the acquisition of the loan production franchise of CFS Intercounty, we added six full-service residential loan origination offices and six satellite residential loan origination offices to our facilities. Total non-interest expense increased by $31.5 million, or 68.6%, from $45.8 million in 1997 to $77.3 million in 1998. Compensation and benefits expense increased by $17.0 million, or 69.9%, from $24.3 million in 1997 to $41.2 million in 1998. Occupancy and equipment expense increased by $4.7 million, or 73.7% from $6.3 million in 1997 to $11.0 million in 1998. The increases in compensation and benefits, occupancy and equipment, and other general and administrative expenses were due primarily to our supermarket banking expansion, as well as the expansion of our residential lending function through CFS Intercounty. Occupancy and equipment expense also increased as a result of the purchase of our new headquarters, which was completed in the third quarter of 1998. We believe that since we have opened a majority of the supermarket branches that we are required to open under our agreement with Pathmark and have incurred the start-up costs, including the compensation costs of recruiting and training new personnel and the occupancy and equipment costs associated with setting up new branches, our non-interest expense related to supermarket banking should stabilize. Income tax expense was $2.9 million in 1998, compared to $6.1 million in 1997. The effective tax rate for 1998 was 26.4% compared to 35.6% in 1997. The decrease in the effective tax rate was primarily due to the establishment of Columbia Preferred Capital Corp., the Bank's real estate investment trust subsidiary, during the second quarter of 1997, which has resulted in certain tax savings. The tax provision for 1998 includes the effect of the real estate investment trust's operations for the full year of 1998 compared to a portion of the year in 1997. The lower tax rate was also due to an adjustment of the Bank's tax accrual upon the filing of our Federal, New York State and City tax returns for 1997 during September 1998, as well as a state tax credit recognized for mortgage recording taxes paid on loans originated in certain counties of New York State. 10 SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA We have selected highlights from the consolidated financial data of Haven and our subsidiaries as of, and for the years ended, December 31, 1998, 1997, 1996, 1995 and 1994. You should read our consolidated financial statements and related notes included in our annual report on Form 10-K for the year ended December 31, 1998, which we have incorporated in this prospectus.
AT DECEMBER 31, -------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------ ------------ ------------ ------------ ------------ (DOLLARS IN THOUSANDS) SELECTED CONSOLIDATED FINANCIAL DATA: Total assets............................... $ 2,395,523 $ 1,974,890 $ 1,583,545 $ 1,472,816 $ 1,268,774 Loans receivable, net...................... 1,296,702 1,138,253 836,882 560,385 512,035 Securities available-for-sale.............. 889,251 499,380 370,105 503,058 48,189 Debt securities held-to-maturity........... -- 66,404 97,307 127,796 130,706 Mortgage-backed securities held-to- maturity................................. -- 163,057 197,940 190,714 495,111 Real estate owned, net..................... 200 455 1,038 2,033 7,844 Deposits................................... 1,722,710 1,365,012 1,137,788 1,083,446 1,013,162 FHLB advances.............................. 325,200 247,000 178,450 134,175 86,000 Other borrowed funds....................... 115,146 219,794 147,983 136,408 39,081 Stockholders' equity....................... 119,867 112,865 99,384 98,519 86,235
11
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1998 1997 1996 1995 1994 ---------- ---------- ---------- --------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) SELECTED OPERATING DATA: Interest income........................................ $ 151,685 $ 126,306 $ 109,253 $ 96,434 $ 81,491 Interest expense....................................... 93,776 74,400 61,368 55,115 40,289 ---------- ---------- ---------- --------- --------- Net interest income.................................... 57,909 51,906 47,885 41,319 41,202 Provision for loan losses.............................. 2,665 2,750 3,125 2,775 13,400 ---------- ---------- ---------- --------- --------- Net interest income after provision for loan losses.... 55,244 49,156 44,760 38,544 27,802 ---------- ---------- ---------- --------- --------- Non-interest income: Loan fees and servicing income......................... 1,627 3,110 1,807 2,241 790 Servicing released premiums and fees on loans sold..... 10,301 -- -- -- -- Savings/checking fees.................................. 9,822 5,478 3,378 2,861 2,282 Net gain (loss) on sales of interest-earning assets.... 2,926 (5) 140 126 372 Insurance annuity and mutual fund fees................. 5,874 3,758 3,114 2,525 2,025 Other.................................................. 2,596 1,571 1,115 1,269 1,060 ---------- ---------- ---------- --------- --------- Total non-interest income............................ 33,146 13,912 9,554 9,022 6,529 ---------- ---------- ---------- --------- --------- Non-interest expense: Compensation and benefits.............................. 41,204 24,251 15,737 14,889 13,605 Occupancy and equipment................................ 11,005 6,334 3,478 3,334 3,238 Real estate operations, net............................ 8 352 277 1,405 12,253 SAIF recapitalization charge........................... -- -- 6,800 -- -- Federal deposit insurance premiums..................... 870 736 2,327 2,653 2,709 Other.................................................. 24,227 14,174 9,836 9,511 9,336 ---------- ---------- ---------- --------- --------- Total non-interest expense........................... 77,314 45,847 38,455 31,792 41,141 ---------- ---------- ---------- --------- --------- Income (loss) before income tax expense (benefit)...... 11,076 17,221 15,859 15,774 (6,810) Income tax expense (benefit)........................... 2,926 6,138 6,434 7,230 (2,475) ---------- ---------- ---------- --------- --------- Net income (loss)(1)................................. $ 8,150 $ 11,083 $ 9,425 $ 8,544 $ (4,335) ---------- ---------- ---------- --------- --------- ---------- ---------- ---------- --------- --------- Net income (loss) per common share: Basic(1)............................................... $ 0.95 $ 1.32 $ 1.13 $ 0.99 $ (0.48) Diluted(1)............................................. $ 0.89 $ 1.24 $ 1.08 $ 0.96 $ (0.47)
- ------------------------ (1) Net income for 1996, excluding the one-time special assessment charge of $6.8 million that was imposed to recapitalize the Savings Association Insurance Fund ("SAIF"), would have been $13.5 million, or $1.62 per basic share ($1.55 per share, diluted). 12
AT OR FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------ ------------ ------------ ------------ ------------ (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) PERFORMANCE RATIOS: Return on average assets (1)............... (0.35)% 0.37% 0.62% 0.62% 0.63% Return on average equity (2)............... 6.92 10.41 9.83 9.27 (4.90) Stockholders' equity to total assets....... 5.00 5.72 6.28 6.69 6.80 Net interest spread........................ 2.67 2.89 3.12 2.99 3.34 Net interest margin (3).................... 2.78 3.06 3.29 3.17 3.48 Average interest-earning assets to average interest-bearing liabilities............. 102.28 104.02 103.95 104.23 104.42 Operating expenses to average assets (4)... 3.49 2.54 2.04 2.18 2.26 Stockholders' equity per share............. $13.53 $12.85 $11.49 $10.92 $9.47 EARNINGS TO FIXED CHARGES (5): Excluding interest on deposits............. 1.38x 1.74x 1.94x 2.20x 0.19x Including interest on deposits............. 1.12x 1.23x 1.26x 1.29x 0.83x Asset Quality Ratios: Non-performing loans to total loans (6).... 0.64% 1.09% 1.64% 2.97% 5.41% Non-performing assets to total assets...... 0.36 0.66 0.94 1.28 2.85 Allowance for loan losses to non-performing loans (6)................................ 166.70 99.97 77.05 50.80 38.33 Allowance for loan losses to total loans... 1.07 1.09 1.26 1.51 2.07 CAPITAL RATIOS: Tangible Capital........................... 5.43% 6.42% 6.14% 6.01% 6.27% Core Capital............................... 5.43 6.42 6.14 6.01 6.27 Risk-based Capital......................... 11.96 14.04 13.22 14.62 14.47 OTHER DATA: Mortgage loans serviced for others......... $ 269,089 $ 174,866 $ 197,017 $ 219,752 $ 239,844 Loan originations and purchases............ $ 1,221,526 $ 471,338 $ 363,576 $ 143,329 $ 105,219 Number of deposit accounts................. 323,794 234,183 171,382 155,424 140,701 Number of shares outstanding............... 8,859,692 8,784,700 8,650,814 9,022,914 9,102,812 FACILITIES: Full service offices....................... 65 40 14 9 9
- ------------------------ (1) Return on average assets for 1996, excluding the one-time special assessment charge of $6.8 million to recapitalize the SAIF, would have been 0.89%. (2) Return on average equity for 1996, excluding the one-time special assessment charge of $6.8 million to recapitalize the SAIF, would have been 14.04%. (3) Equal to net interest income before provision for loan losses divided by average interest-earning assets. (4) For purposes of calculating these ratios, operating expenses equal non-interest expense less real estate operations, net, non-performing loan (income) expense, amortization of goodwill, and non-recurring expenses. Real estate operations, net was $8,000, $0.4 million, $0.3 million, $1.4 million and $12.3 million for the five years ended December 31, 1998, respectively. For the 13 five years ended December 31, 1998, non-performing loan (income) expense was $(1.0) million, $0.2 million, $0.4 million, $0.6 million and $0.9 million, respectively. Amortization of goodwill for the five years ended December 31, 1998 was $0.8 million, $0.1 million, $0.1 million, $40,000, and $0, respectively. For the year ended December 31, 1996, the SAIF one-time special assessment charge of $6.8 million was also excluded. (5) For purposes of computing the ratios of earnings to fixed charges, earnings represent net income plus total taxes based on income and fixed charges. Fixed charges, excluding interest on deposits, include interest expense (other than on deposits) and one-third (the proportion deemed representative of the interest factor) of rents. Fixed charges, including interest on deposits, include all interest expense and one-third (the proportion deemed representative of the interest factor) of rents. (6) For purposes of calculating these ratios, non-performing loans consist of all non-accrual loans and restricted loans. 14 RISK FACTORS AN INVESTMENT IN THE CAPITAL SECURITIES INVOLVES A NUMBER OF RISKS. SOME OF THESE RISKS RELATE TO THE CAPITAL SECURITIES AND OTHERS RELATE TO HAVEN. WE URGE YOU TO CAREFULLY CONSIDER THIS INFORMATION, TOGETHER WITH THE OTHER INFORMATION IN THIS PROSPECTUS AND IN THE DOCUMENTS THAT WE HAVE INCORPORATED BY REFERENCE IN THIS PROSPECTUS. RISKS RELATED TO YOUR INVESTMENT IN THE CAPITAL SECURITIES HAVEN CANNOT MAKE PAYMENTS UNDER THE GUARANTEE OR THE SUBORDINATED DEBENTURES IF HAVEN DEFAULTS ON ITS OTHER OBLIGATIONS THAT ARE MORE SENIOR Our obligations under the guarantee issued for your benefit are unsecured and rank - junior to all of our other borrowings, except those borrowings that by their terms are equal or junior; - equal to our 10.46% junior subordinated deferrable interest debentures that mature February 1, 2027 and our guarantee of the capital securities of Haven Capital Trust I; and - senior to our common stock. This means that we cannot pay under the guarantee if we default on payments of any of our other borrowings, unless, by their terms, those borrowings are equal or junior to the guarantee. If we liquidate, go bankrupt or dissolve, we would be able to pay under the guarantee only after we have paid all our other liabilities that are senior to the guarantee. Our obligations under the subordinated debentures are unsecured and rank junior in priority to all of our senior indebtedness, which includes our borrowings that are not by their terms equal or junior to the subordinated debentures. If we default on a payment on our senior indebtedness, we cannot pay principal or interest on the subordinated debentures. If we liquidate, go bankrupt or dissolve, we would be able to pay Haven Capital under the subordinated debentures only after we have made all payments on our senior indebtedness. These payments to Haven Capital would be made on a PRO RATA basis with our 10.46% junior subordinated deferrable interest debentures issued to Haven Capital Trust I. As of December 31, 1998, we had approximately $1.47 million in senior indebtedness. If we default on our obligations to pay principal, premium or interest on the subordinated debentures, Haven Capital will not have sufficient funds to make distribution payments or liquidation payments on the capital securities. As a result, you will not be able to rely upon our guarantee for payment of these amounts. Instead, you or the property trustee may enforce the rights of Haven Capital under the subordinated debentures against us. For more information, please refer to "Description of Subordinated Debentures--Enforcement of Certain Rights by Holders" on page . The capital securities, guarantee, the subordinated debentures and the indenture do not limit our ability to incur additional debt, including debt that is senior in priority of payment. For more information on payments under the guarantee and the subordinated debentures, you should refer to "Description of Guarantee--Status of the Guarantee" on page and "Description of Subordinated Debentures--Subordination" on page . BANKING LAWS AND REGULATIONS LIMIT HAVEN'S ACCESS TO FUNDS, WHICH MAY PREVENT HAVEN FROM MAKING PAYMENTS UNDER THE SUBORDINATED DEBENTURES Because we are a savings association holding company, substantially all of our operating assets are owned by the Bank. We rely primarily on dividends from the Bank to pay principal and interest on our 15 outstanding debt obligations and corporate expenses. The Board of Directors of the Bank has the sole discretion to declare and pay any dividends to us. The Office of Thrift Supervision regulates us, as a savings association holding company, and the Bank, as a federal stock savings bank. The Office of Thrift Supervision limits all capital distributions by the Bank directly or indirectly to us, including dividend payments. Effective April 1, 1999, the Office of Thrift Supervision amended its capital distribution regulations. Under the amended regulations, the Bank will have to file a notice with the Office of Thrift Supervision with respect to each capital distribution that it proposes to make, unless the specific capital distribution requires an application. An application would be required if the total amount of all capital distributions (including the proposed capital distribution) for the applicable calendar year exceeds net income for that year to date plus the retained net income for the preceding two years. Under the amended regulations, an application would also be required for a proposed capital distribution that would result in an institution's failure to meet any of its minimum capital requirements. If these regulations governing capital distributions and minimum capital requirements during 1999 had been in effect during 1998, the Bank could have paid dividends of $32.6 million without obtaining prior regulatory approval. The Office of Thrift Supervision and the Federal Deposit Insurance Corporation have authority to prohibit the Bank or us from engaging in an unsafe or unsound practice in conducting our business. The payment of dividends, depending upon the financial condition of the Bank and us, could be deemed an unsafe or unsound practice. In addition to regulatory restrictions on the payment of dividends, the Bank is subject to certain restrictions imposed by federal law on any extensions of credit it makes to its affiliates and on investments in stock or other securities of its affiliates. We are considered an affiliate of the Bank. These restrictions prevent affiliates of the Bank, including us, from borrowing from the Bank, unless the loans are secured by various types of collateral. Federal law limits the aggregate amount of loans to and investments in any single affiliate to 10% of the Bank's capital and surplus and also limits the aggregate amount of loans to and investments in all affiliates to 20% of the Bank's capital and surplus. As of December 31, 1998, approximately $13.1 million of credit was available to us under this limitation. Under the prompt corrective action provisions of the Federal Deposit Insurance Act, the Bank is prohibited from making capital distributions, including the payment of dividends, if, after making any capital distribution, the Bank would become undercapitalized as defined under the Federal Deposit Insurance Act. Based on the Bank's current financial condition, we do not expect that this provision will have any impact on our ability to obtain dividends from the Bank; however, we cannot be sure that the Bank will be able to pay dividends in the future. Also, as a savings association holding company, our right to receive distributions from the Bank may be limited. If the Bank is liquidated or reorganized, depositors of the Bank would have the right to receive distributions from the Bank before us, unless we were considered a creditor of the Bank. If we did not receive distributions from the Bank, we could not pay the principal of (or premium, if any) or interest on the subordinated debentures to Haven Capital, and Haven Capital could not pay you distributions on the capital securities. At December 31, 1998, the Bank had total liabilities, including deposits, of $2.28 billion. HAVEN CAN DEFER INTEREST PAYMENTS ON THE SUBORDINATED DEBENTURES, CAUSING YOUR PAYMENTS UNDER THE CAPITAL SECURITIES TO STOP, WHICH WILL HAVE TAX CONSEQUENCES TO YOU AND MAY AFFECT THE MARKET PRICE OF THE CAPITAL SECURITIES We have the right, at one or more times, unless an event of default exists under the subordinated debentures, to defer interest payments on the subordinated debentures for up to 20 consecutive quarters, but not beyond , 2029. If we defer interest payments, Haven Capital will defer 16 paying distributions to you on your capital securities during the deferral period. However, during this period, the capital securities would still accumulate distributions at the rate of % per year, compounded quarterly, to the extent permitted by law. During any deferral period, we will be prohibited from declaring or paying cash dividends on our capital stock or from paying on or repaying, repurchasing or redeeming any debt which ranks equal or junior to the subordinated debentures, including payments with respect to our 10.46% junior subordinated deferrable interest debentures due February 1, 2027 held by Haven Capital Trust I. For more information, please refer to "Description of Capital Securities--Distributions." When any deferral period ends and we pay all interest then accrued and unpaid on the subordinated debentures, we may elect to begin a new deferral period. There is no limitation on the number of times that we may elect to begin a deferral period. See "Description of Capital Securities-- Distributions" and "Description of Subordinated Debentures--Option to Extend Interest Payment Date." If we exercise our right to defer payments of interest on the subordinated debentures, you will be required to accrue income (as original issue discount) in respect of the deferred stated interest allocable to your capital securities for U.S. federal income tax purposes, which will be allocated but not distributed to you. As a result, you will be required to recognize income for U.S. federal income tax purposes before you receive any cash and will not receive the cash related to this interest income from Haven Capital if you dispose of your capital securities prior to the record date for the distribution payment. For more information, you should read "Certain Federal Income Tax Consequences--Interest Income and Original Issue Discount" and "--Sales or Redemption of Capital Securities." We do not currently intend to exercise our right to defer interest payments on the subordinated debentures. However, if we exercise this right in the future, the market price of the capital securities will probably be affected. The capital securities may trade at a price that does not fully reflect the value of accrued but unpaid interest on the subordinated debentures. If you sell your capital securities during a deferral period, you may not receive the same return on your investment as someone else who continues to hold the capital securities. THE TRUST MAY REDEEM THE CAPITAL SECURITIES BEFORE , 2009 IF A SPECIAL EVENT OCCURS If there are changes in the bank regulatory, investment company or tax laws that would adversely affect the status of Haven Capital, the trust securities or the subordinated debentures, we have the right to redeem the subordinated debentures, in whole but not in part. Our redemption of the subordinated debentures will cause Haven Capital to redeem the capital securities and the common securities at a price equal to $25.00 per security plus any accrued and unpaid distributions. We may have to obtain regulatory approval, including the approval of Office of Thrift Supervision, before we redeem any subordinated debentures. For more information, you should refer to "Description of Capital Securities--Redemption." IF WE DISTRIBUTE THE SUBORDINATED DEBENTURES, THERE MAY BE AN ADVERSE EFFECT ON THE TRADING MARKET AND TRADING PRICE OF YOUR INVESTMENT, AND THERE MAY BE ADVERSE TAX EFFECTS We have the right to dissolve Haven Capital at any time if we receive: - an opinion of counsel stating that a distribution of the subordinated debentures will not be a taxable event to you and - any required regulatory approval. Upon a dissolution of Haven Capital, and after satisfying the liabilities owed to Haven Capital's creditors under applicable law, the trustees will distribute the subordinated debentures to you, as a holder of capital securities, and us, as the holder of common securities. 17 If the trustees distribute the subordinated debentures to you, we will use our best efforts to list the subordinated debentures on the Nasdaq National Market. We cannot be sure that the subordinated debentures will be approved for listing on Nasdaq or that a trading market will exist for the subordinated debentures. Under current U.S. federal income tax law, a distribution of the subordinated debentures following the dissolution of Haven Capital would not be a taxable event to you. However, any distributions of cash for the subordinated debentures would be a taxable event to you. You should refer to "Certain Federal Income Tax Considerations--Receipt of Subordinated Debentures or Cash Upon Liquidation of Haven Capital" for more information. YOU WILL HAVE LIMITED VOTING RIGHTS As a holder of capital securities, you will have limited voting rights. You can vote only to modify the capital securities and to exercise Haven Capital's rights as a holder of the subordinated debentures. In general, only we can replace or remove any of the trustees. However, if an event of default exists under the trust agreement, the holders of the capital securities may replace the property trustee and the Delaware trustee. We, along with the property trustee and the administrative trustees, may amend the trust agreement without your consent even if these actions adversely affect your interests, to ensure that Haven Capital: (a) will not be classified as an association taxable as a corporation for U.S. federal income tax purposes and (b) will not be required to register as an "investment company" under the Investment Company Act of 1940. You will have no voting rights with respect to any matters submitted to a vote of our stockholders. For more information on your voting rights, please refer to "Description of Capital Securities--Voting Rights; Amendment of the Trust Agreement" and "--Removal of Trustees." TRADING PRICE MAY NOT REFLECT THE FULL VALUE OF THE CAPITAL SECURITIES We cannot predict the market prices for the capital securities or the subordinated debentures that may be distributed if we dissolve Haven Capital. The capital securities or the subordinated debentures may trade at a discount from the price that you paid for the capital securities. The capital securities may trade at prices that do not fully reflect the value of any accrued and unpaid interest on the underlying subordinated debentures. We have applied for the capital securities to be listed on the Nasdaq National Market. Although the underwriters of the offering have indicated that they intend to make a market in the capital securities, they are not obligated to do so and may stop any market-making activities at any time without notice. We cannot be sure that there will be a liquid trading market for the capital securities. RISKS RELATED TO HAVEN INTEREST RATE CHANGES MAY REDUCE HAVEN'S PROFITABILITY To be profitable, we have to earn more money in interest income and fee income than we pay as interest on deposits and other interest-bearing liabilities and as other expenses. If interest rates fall, the amount of interest we earn on loans, mortgage-backed securities and investment securities may decrease more quickly than the amount of interest we pay on deposits. This would result in a decrease in our profitability. 18 Changes in the general level of interest rates also affect - our ability to originate loans, - the value of our loan and securities portfolios, - our ability to realize gains from the sale of loans and securities assets, - the average life of our deposits and - our ability to obtain deposits. Fluctuations in interest rates will ultimately affect both the level of income and expense we record on a large portion of the Bank's assets and liabilities, and the market value of all interest-earning assets, other than interest-earning assets that mature in the short term. The Bank's interest rate management strategy is designed to stabilize net interest income and preserve capital over a broad range of interest rate movements by matching the interest rate sensitivity of assets and liabilities. Although we believe that our current mix of loans, mortgage-backed securities, investment securities and deposits is reasonable, significant fluctuations in interest rates may have a negative effect on our profitability. For more detailed information on our exposure to changes in interest rates, please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations--Asset/ Liability Management" in our annual report on Form 10-K for the year ended December 31, 1998 that we have incorporated by reference in, and attached as Appendix A to, this prospectus. BECAUSE A MAJORITY OF HAVEN'S SUPERMARKET BRANCHES ARE IN SUPERMARKETS OWNED AND OPERATED BY PATHMARK STORES, INC., HAVEN'S SUPERMARKET BANKING PROGRAM MAY BE MATERIALLY ADVERSELY AFFECTED BY THE ACQUISITION OF PATHMARK BY ROYAL AHOLD N.V. In 1996, we entered into a fifteen year contract with Pathmark to open supermarket branches in 44 Pathmark stores that were then existing in New York. The contract also provides that we will open a branch in all new Pathmark supermarkets that open in New York (excluding one store in New York City), Bronx, Queens, Kings, Richmond, Nassau, Suffolk, Westchester and Rockland counties. We also have a right, but no obligation, to open and operate branches in any new stores that Pathmark opens in New York State other than the specified counties through 2011. We currently operate branches in 35 Pathmark stores. Pathmark has notified us that two stores originally required to be opened under the contract would not have space available for a supermarket branch. We are presently obligated to open branches in seven additional existing Pathmark stores. In addition, Pathmark is in the process of building three new stores in New York in which we will be required to open branches. Under the contract, if Pathmark or a successor to Pathmark sells a supermarket where the Bank operates a branch, the sale would be subject to our license related to that supermarket. If Pathmark or a successor to Pathmark closes a supermarket, the license would be subject to termination and we would be entitled to, among other things, a rebate of some of the costs we incurred to open the branch. Each branch is under a five-year license that gives us an option to renew the license for three additional five-year terms. On March 9, 1999, Royal Ahold N.V., a Dutch food retailer, announced that it intends to acquire Pathmark. By acquiring Pathmark, Royal Ahold would become subject to, and bound by, our contract with Pathmark with respect to the Pathmark supermarkets that are part of Royal Ahold's acquisition. Royal Ahold also owns Edwards supermarkets and has stated that it intends to integrate its Edwards supermarkets into the Pathmark chain. We do not know if Royal Ahold intends to close any Pathmark stores, particularly in communities where there is both a Pathmark and an Edwards store. Our supermarket banking program may be materially adversely affected if Royal Ahold closes a significant number of Pathmark stores or decides not to open any additional stores in areas where it would have been advantageous for us to open supermarket branches. 19 IF HAVEN CANNOT SUCCESSFULLY MANAGE THE GROWTH IN ITS SUPERMARKET BANKING PROGRAM, HAVEN'S RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED In 1996, we began our supermarket banking program, and we opened four supermarket branches. In 1997, we opened 28 new supermarket branches, and in 1998 we opened 25 new supermarket branches. We currently operate 59 supermarket branches and are scheduled to open one additional branch in the second quarter of 1999. Under the contract with Pathmark, we have the right and the obligation to open branches in seven existing Pathmark stores, three Pathmark stores that are currently under construction and any other new stores opened by Pathmark in New York, Bronx, Queens, Kings, Richmond, Nassau, Suffolk, Westchester and Rockland counties. Although we are currently obligated to open supermarket branches in ten additional Pathmark stores, we are currently discussing the timing with respect to such openings with Pathmark. Pathmark is expanding two of the existing stores. In addition, the opening of each of the stores currently under construction is expected to be completed no earlier than the fourth quarter of 1999. We anticipate that we will not open branches in most of these Pathmark stores in 1999. We also have established a relationship with a number of ShopRite operators in New Jersey and Connecticut where we have the right, but no obligation, to open supermarket branches in all of their new or renovated stores in New Jersey and Connecticut. We currently intend that when we reach a total of 60 supermarket branches, we will not open any additional supermarket branches in 1999, unless we are obligated, or we determine that it would be in our best interest, to do so. Because supermarket banking is a relatively new business strategy for us and for other financial institutions in New York, New Jersey and Connecticut, there is little historical data with which to compare our performance and to base our expectations. We have incurred significant start-up costs with each branch opening. Non-interest expense directly attributable to these branches accounted for 28.2% of non-interest expense in 1998. Our expansion based on our supermarket banking program has increased our deposits by approximately 29.3%. The supermarket branches contributed 51.1% of deposit account fee income and non-traditional revenue in 1998. Based on our experience, we expect that supermarket branches, on average, will reach profitability after about 18 months of operations. However, we may encounter unforseen difficulties and complications, including a continued flattening of the yield curve, that could prevent, or make it more difficult, for our supermarket branches to reach profitability within our expected time frame. In addition, the profitability of the supermarket banking program could be adversely affected by business matters related to the supermarkets that are not within our control. Specifically, labor issues between a supermarket's management and its employees, decreased advertising or promotions by the supermarket or a decline in a supermarket's popularity could reduce the number of existing customers purchasing our financial products and services and could make it more difficult for us to attract new customers. We do not know if we will be able to successfully achieve the anticipated benefits of our growth and expanded operations through the supermarket banking program. IF HAVEN CANNOT SUCCESSFULLY INTEGRATE THE OPERATIONS OF CFS INTERCOUNTY MORTGAGE AND CFS INSURANCE AGENCY, HAVEN'S RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED In 1998, we completed two acquisitions. The Bank purchased the assets of Intercounty Mortgage, Inc. from Resource Bancshares Mortgage Group, Inc. in May 1998, and we purchased Century Insurance Agency, Inc. in November 1998. We are still in the process of integrating the operations of both of these companies. We have experienced, or may experience, difficulties combining the technological systems of the companies, assimilating new employees into our work environment and coordinating other operational functions that could delay our expected time to complete the integration of these companies. We will also have to continue to dedicate management and other employees to facilitate the integration of the operations of these companies. Although we expect to successfully 20 integrate these operations in 1999, if we fail to do so, our short-term financial condition and profitability could be adversely affected. IF HAVEN CANNOT SUCCESSFULLY ORIGINATE LOANS AND SELL LOANS THAT ARE HELD FOR SALE, HAVEN'S RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED The future profitability of our CFS Intercounty division depends on our ability to originate loans and to efficiently sell, directly or through securitization, loans that are held for sale. In order for us to realize fee income on loan originations, CFS Intercounty must be able to efficiently originate loans for portfolio and for sale. We will earn interest income on the loans held in portfolio. Sales of loans may produce additional non-interest income if we realize gains on these sales. However, gains on these sales may not be sufficient to offset our expense of originating the loans and to produce net gains on sales. If we are unable to sell these loans into the secondary market efficiently, our expenses of originating the loans may not be offset by any gains that we realize. Our ability to originate and to sell loans depends on general economic conditions, real estate market values, interest rates and our ability to compete with other financial institutions selling loans. Our regulatory capital and liquidity could be adversely affected if we have difficulty in selling and securitizing loans. In addition, if we are unable to sell or securitize loans in an efficient and timely manner, or we must retain a larger interest in loans than we anticipated, our ability to make and purchase loans in the future could be adversely affected. BECAUSE HAVEN PRIMARILY SERVES NEW YORK, NEW JERSEY, CONNECTICUT AND PENNSYLVANIA, PARTICULARLY THE NEW YORK CITY METROPOLITAN AREA, A DECLINE IN THE LOCAL ECONOMY COULD LOWER HAVEN'S PROFITABILITY We serve New York, New Jersey and Connecticut with 19 branches in New York City, 33 branches in Westchester, Rockland, Suffolk and Nassau counties in New York, seven branches in Connecticut and eight branches in New Jersey. In addition, the Bank operates six full-service residential loan origination offices and six satellite residential loan origination offices in New York, New Jersey, Connecticut and Pennsylvania. CFS Insurance Agency has three free-standing insurance agency offices in Long Island, New York. Our profits depend on providing products and services to customers in this local region. An increase in unemployment, a decrease in real estate values or an increase in interest rates could weaken the local economy. With a weaker local economy, - customers may not want or need our products and services; - borrowers may be unable to repay their loans; - the value of the collateral securing our loans to borrowers may decline; and - the overall quality of our loan portfolio may decline. Making residential mortgage loans is a significant source of our profits. If customers in the local area do not want residential mortgage loans, our profits may decrease. Although we could make other investments, we may earn less revenue on these investments than on residential mortgage loans. Also, our losses on loans may increase if borrowers are unable to make payments on their loans. IF HAVEN IS UNABLE TO SUCCESSFULLY COMPETE FOR CUSTOMERS IN ITS MARKET AREA, HAVEN'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED We face intense and increasing competition in making loans, attracting deposits and providing other financial products and services. The market area in which we operate, New York, New Jersey, Connecticut and Pennsylvania, has numerous financial institutions that we compete with for customers. Our competition for loans comes principally from - commercial banks, - savings banks, 21 - savings and loan associations, - mortgage banking companies, - finance companies and - credit unions. Our competition for deposits comes principally from - commercial banks, - savings banks, - savings and loan associations, - credit unions, - brokerage firms, - insurance companies, - money market mutual funds, - mutual funds (such as corporate and government securities funds) and - annuities. Many of these competitors have greater financial resources and name recognition, more locations, more advanced technology and more financial products to offer than we have. We have increased our presence in New York, New Jersey and Connecticut through our supermarket banking program. We offer a full range of financial products and services, including annuities, mutual funds, insurance and electronic banking. Our profitability depends on our continued ability to attract new customers and compete in New York, New Jersey, Connecticut and Pennsylvania. If we are unable to successfully compete, our financial condition and results of operations will be adversely affected. THE YEAR 2000 PROBLEM COULD HURT HAVEN'S OPERATIONS AND PROFITS We rely upon computers to conduct our daily business. If our computer systems fail to recognize a date using "00" as the year 2000, we may be unable to do our routine business and provide service to our customers. The failure of the computer systems of parties we do business with or utilities, including the electric and telephone companies, to recognize the year 2000 may also disrupt our operations. For example, we may not be able to process withdrawals or deposits, prepare account statements or engage in any of the transactions that constitute our normal operations. This could hurt our profits. We primarily use a third party vendor to process our electronic data. Our vendor has modified or replaced many of its computer applications and systems necessary to correct the year 2000 date issue. We have substantially completed testing the modified systems. We also use a combination of purchased and contract-based software as well as other third party vendors for many of our data processing needs. Our assessment of potential computer issues for the year 2000 has been substantially completed. Where potential computer issues have been identified, the vendors have committed to definitive dates to resolve such issues. We have established contingency plans for systems for which year 2000 issues will not be corrected. If our vendors do not achieve year 2000 compliance, our operations could be adversely affected. The Office of Thrift Supervision, our primary federal bank regulator, along with the other federal bank regulators, has identified the year 2000 issue as a substantive area of examination for both regularly scheduled and special bank examinations. Under regulatory guidelines issued by the federal banking regulators, we must substantially complete our testing of both internally and externally supplied 22 systems and all renovations by June 30, 1999. Because of this oversight by the federal bank regulatory agencies, if we do not become year 2000 compliant, we could become subject to administrative remedies similar to those imposed on financial institutions otherwise found not to be operating in a safe and sound manner, including remedies available under prompt corrective action regulations. There has been limited litigation filed against corporations regarding the year 2000 problem and a corporation's compliance efforts. However, the law in this area will probably continue to develop well into the new millennium. If we experience a year 2000 failure, our exposure could be significant and material, unless there is legislative action to limit year 2000 liability. Legislation has been introduced in several jurisdictions regarding the year 2000 problem. However, we cannot be sure that legislation will be enacted in jurisdictions where we do business that will limit any potential liability. Through December 31, 1998, we had incurred approximately $126,000 in costs associated with achieving year 2000 compliance. We expect to incur approximately $450,000 in additional costs to achieve year 2000 compliance during 1999. 23 HAVEN BANCORP, INC. We were organized on March 25, 1993 as the holding company for the Bank in connection with the Bank's conversion from a federal mutual savings bank to a federal stock savings bank. We are headquartered in Westbury, New York, and our principal business currently consists of operating the Bank. The Bank's principal business is to attract retail deposits from the general public and invest those deposits, together with funds generated from operations, primarily in one- to four-family, owner-occupied residential mortgage loans. In addition, the Bank invests in debt, equity and mortgage-backed securities to supplement its lending portfolio. The Bank also invests, to a lesser extent, in multi-family residential mortgage loans, commercial real estate loans and other marketable securities. The Bank's profits depend primarily on its net interest income, non-interest income and its ability to control operating expenses. Net interest income is the difference between the interest income earned on the Bank's loan and securities portfolios and its interest expense, which consists of the interest paid on its deposits and borrowed funds. Non-interest income, which includes the results of CFS Intercounty's operations beginning May 1998 and CFS Insurance's operations beginning November 1998, reflects fee income on products and services provided to customers and gains on sales of loans and loan servicing rights. Operating expenses include compensation and benefits, occupancy and equipment, real estate operations, net and federal deposit insurance premiums. The Bank's net income also is affected by its provision for loan losses and other general and administrative expenses. General economic and competitive conditions, particularly changes in market interest rates, and to a lesser extent by government policies and actions of regulatory authorities, also significantly affect the Bank's earnings. In addition, certain litigation that we are involved in may impact our operations. For more detailed information regarding the business of Haven and the Bank, please see our annual report on Form 10-K for the fiscal year ended December 31, 1998 that we have incorporated into this prospectus. OUR STRATEGY Our mission is to provide our customers outstanding financial products and services at competitive prices, delivered with expertise and the highest level of care. We believe the best way to accomplish this is by applying our traditional banking strengths to supermarket banking. Through this approach, we can deliver traditional banking services, plus the products and services offered by the Bank's mortgage banking division, CFS Intercounty, and investment services subsidiary, CFS Investment Services, Inc., and our insurance agency subsidiary, CFS Insurance Agency, Inc., with the conveniences and advantages of supermarket banking. We recently completed several initiatives that we believe form a solid foundation for our future. The Bank opened 25 new supermarket branches in 1998 and two additional supermarket branches to date in 1999, bringing the total of supermarket branches to 59. In May 1998, the Bank acquired the loan production franchise of Intercounty Mortgage, Inc. to improve our loan origination capabilities and to increase our net income through the interest and fee income generated from increased loan volume. Through this acquisition, we added 12 residential loan origination offices to the Bank and increased the lending staff from 20 to over 100 loan officers, enabling us to expand the volume and geographic range of our lending capabilities. In November 1998, we purchased Century Insurance Agency, Inc. to further complement our package of financial products and services that we offer to customers and to contribute to our fee income. As a result of this acquisition, we can now offer automobile, homeowners and casualty insurance in addition to life, health and disability insurance. The insurance agency has the ability to write policies for top-rated insurance carriers, such as The Hartford, Metropolitan Life Assurance Company and The Progressive Corporation. 24 Both acquisitions fit well with the supermarket banking program. The expanded residential lending division provides a mechanism for the Bank to utilize the increased deposits from the supermarket banking program to invest in high quality residential loans and to expand the customer base to which the Bank can offer its financial products and services. We believe that the added insurance capabilities, including the ability to sell insurance underwritten by nationally recognized insurance providers, are attractive to market to supermarket customers. Although each of these acquisitions required an initial investment and had some negative impact on our 1998 earnings, we believe that the Bank now possesses a high quality distribution platform and a comprehensive package of financial products and services, which will enable us to better serve our customer base and to improve our shareholder value. Our goals are to grow our earnings and achieve a high level of profitability by focusing on growing fee income from both the supermarket banking program and the residential lending division and net interest income from our supermarket banking program, while controlling operating expenses and maintaining strong credit quality. Over the past three years, our efforts have focused on establishing a supermarket branch structure by opening branches in New York, New Jersey and Connecticut. With 59 supermarket branches in operation, our focus has shifted to growing our existing supermarket branches and realizing the full potential of marketing our existing and newly acquired financial products and services to the growing supermarket customer base. We believe that through the comprehensive package of financial services and products, including our broader range of residential loans, insurance and investment products, we will continue to build relationships with, and generate business from, the customers in our branches that will help us to attain our financial goals and increase our franchise value. Through these relationships, we believe that we will grow our customer base and increase fee income and net interest income. Because we anticipate reduced start-up costs associated with opening a limited number of new supermarket branches in 1999 as compared to the 25 branches opened in 1998, we believe we can effectively control our expenses. We intend to continue to implement this strategy by using the enhanced capital base resulting from this offering to assist us in expanding our deposit base in our existing supermarket branches and by continuing to expand our asset base through investments in residential and commercial real estate loans in our market area and in investment-grade mortgage-backed securities and investment securities. SUPERMARKET BANKING PROGRAM We believe that supermarket banking is the most effective way to expand the Bank's customer base, extend its banking franchise, improve profitability and ultimately enhance our shareholder value. Our store locations cover a wide, attractive geographical area, with a demographic profile that parallels the Bank's traditional customer base: stable, middle-income neighborhoods. In addition to eight traditional branches, the Bank now operates 44 supermarket branches in New York State, eight in New Jersey and seven in Connecticut. We believe we have developed an effective marketing program for supermarket banking. The 15,000 to 30,000 customers who visit each store location per week provide marketing opportunities for our sales force. At December 31, 1998, deposits at our supermarket branches totaled $504.0 million compared to $157.2 million at year-end 1997 and $12.1 million at year-end 1996. Core deposits equaled 54.0% (consisting of 132,540 accounts) of total supermarket branch deposits, compared to core deposits of 45.5% in traditional branches. Fee income from retail banking fees and from the sales of our financial products and services through the supermarket branches was $8.8 million in 1998. Non-interest expense directly attributable to the supermarket branches was $21.8 million in 1998. Our supermarket banking philosophy is to build relationships on a continual basis with our existing customers and prospective customers by marketing to them the full range of financial products and services that the Bank provides. Each branch manager and sales associate participates in joint promotions with the supermarket and talks with prospective customers in the supermarket aisles to establish an initial relationship. Branch employees telephone customers to follow-up on information 25 gleaned from these initial meetings. Our branch employees maintain the relationships with the supermarket customers during the customers' subsequent visits to the store. We currently have 328 full time employees assigned to our supermarket banking program. A single branch employee, in addition to establishing deposit accounts, can respond to customers' needs for a variety of financial products and services, including mortgages, insurance and investment services, either directly or through a referral to the Bank's residential lending division, the Bank's investment services subsidiary or our insurance agency. Each manager is licensed to sell term life and whole life insurance policies, fixed annuity products, mutual funds and variable annuities. Each sales associate is licensed to sell term life and whole life insurance policies, and some are also licensed to sell mutual funds and variable annuities. Branch employees refer customers to teams of dedicated sales agents from our investment services subsidiary for universal life, health, disability and long-term care insurance products and mutual funds and annuities. Branch employees also refer customers to our insurance agency for sales of property and casualty, business lines and auto insurance products. Each manager and sales associate has specific individual sales and referral goals and is responsible for selling all of our products and services. The supermarket branches are open seven days a week at all locations. All of the supermarket branches are conveniently located in the front of the supermarket near the checkout aisles and have both interior and exterior signs that are easily readable from inside and outside the supermarket. Branches typically have three teller stations, a new account station and a private office for investment and loan sales as well as other customer services. Each branch typically has at least six employees: one branch sales manager, one assistant sales manager and four sales associates. In addition, some of our busier locations have dedicated part-time or full-time tellers. We believe that we have already incurred the major start-up costs of our supermarket banking program, including the costs related to recruiting staff and establishing the branches and back-office support functions. With these efforts behind us, we believe that we are poised to experience substantial revenue growth on a relatively stable expense platform. THE BANK'S RESIDENTIAL LENDING DIVISION The acquisition of the loan production franchise of Intercounty Mortgage, Inc. presented an opportunity for us to expand our loan production capabilities so that we can effectively use the strong deposit inflows from the supermarket branches. Acquiring Intercounty and integrating it into the residential lending division of the Bank has enhanced our ability to originate loans through the addition of over 80 loan officers and six full-service and six satellite residential loan origination offices in New York, New Jersey, Connecticut and Pennsylvania. We believe that our residential lending division fits well geographically with our multi-state supermarket program. The acquisition also provided the Bank with an expanded loan product mix. We have supplemented Intercounty's prior loan mix of government agency eligible conforming loans with the Bank's broader range of mortgage products, including adjustable-rate mortgages and jumbo mortgages. We believe that expanding the product line will result in increased mortgage origination opportunities. There are currently approximately 100 loan production officers employed in the residential lending division. Total residential loan origination volume was $1.0 billion in 1998. The Bank originated $68.6 million in loans in the first quarter before the acquisition of the loan production franchise of CFS Intercounty. After the acquisition of CFS Intercounty, the Bank's loan originations were $307.4 million in the second quarter, $344.9 million in the third quarter and $324.6 million in the fourth quarter in 1998. One of the residential lending division's functions is to facilitate sales of mortgage loans in the secondary market. If successful, these sales could produce gains that would increase our non-interest income. Residential loan originations in 1998 included $570.0 million of loans originated and purchased for sale in the secondary market. 26 THE BANK'S INVESTMENT SERVICES SUBSIDIARY CFS Investment is a wholly owned subsidiary of the Bank established in 1989 to distribute non-FDIC-insured products. This subsidiary is a licensed general agency for life and health insurance in New York, New Jersey and Connecticut. Through the investment services subsidiary, we offer fixed annuities to customers as a tax deferred alternative to a traditional bank account. Additionally, we offer all forms of life insurance (including term life, whole life, universal life and variable life) and health insurance (including disability, long term care and group health). Through a broker-dealer relationship, we offer customers various mutual funds and variable annuity products as well as discount brokerage services. Our investment services subsidiary produced gross revenues of $3.8 million in 1997 and $5.8 million in 1998. In 1998, this revenue was generated by investment sales exceeding $100 million of customer assets, with the preponderance of this increase generated from activities in our supermarket branches. The supermarket branches contributed 38.4% of total revenue from investment services in 1998 compared to 12.4% in 1997. HAVEN'S INSURANCE AGENCY We acquired CIA Insurance Agency, Inc. on November 2, 1998 to complement the financial products and services that we can offer to our customers, particularly in the supermarket branches. Through this agency, we offer property and casualty insurance, auto insurance and business lines of insurance. We believe that this business fits well with our life, health and disability insurance business by providing automobile, homeowners and casualty insurance through numerous top-rated carriers, including The Hartford, Metropolitan Life Assurance Company and The Progressive Corporation. This agency obtained approximately $6.0 million in new and renewal premiums through calendar year 1998 and had $107,000 in revenues from auto, homeowners and business insurance lines during its first two full months of operations as our subsidiary. We also intend to offer these products to the rest of our existing customer base, including residential and commercial real estate borrowers. 27 MANAGEMENT OF HAVEN AND THE BANK DIRECTORS Our board of directors also serves as the board of directors of the Bank. Members of each board are divided into three classes, each of which contains approximately one-third of the directors. Our shareholders elect our directors for staggered three year terms, or until their successors are elected and qualified. We, as sole shareholder of the Bank, elect the Bank's directors for the same terms. The following table sets forth information regarding the boards of directors of Haven and the Bank.
POSITION(S) HELD WITH DIRECTOR TERM NAME AGE(1) HAVEN AND THE BANK SINCE(2) EXPIRES - ------------------------------------------ ----------- ------------------------------------------ ----------- ----------- Philip S. Messina......................... 55 Chairman, President, Chief Executive 1986 2000 Officer and Director William J. Jennings....................... 53 Executive Vice President, Assistant to the 1996 2001 President and Director Robert M. Sprotte......................... 62 Director 1974 2001 George S. Worgul.......................... 71 Director 1983 2002 Michael J. Fitzpatrick.................... 60 Director 1988 2001 Michael J. Levine......................... 54 Director 1996 2002 Msgr. Thomas J. Hartman................... 52 Director 1997 2000
- ------------------------ (1) At March 31, 1999. (2) We were organized on September 23, 1993. All dates prior to 1993 reflect when a director was first elected to the board of the Bank. EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS Our executive officers are elected annually and hold office until their respective successors have been elected and qualified or until death, resignation or removal by our board. Our executive officers also serve as executive officers of the Bank and are elected annually. The following table sets forth information about our executive officers who are not directors.
NAME AGE(1) POSITION(S) HELD WITH HAVEN AND THE BANK - ---------------------------------------------------- ----------- ---------------------------------------------------- Thomas J. Seery..................................... 54 Executive Vice President--Operations Gerard H. McGuirk................................... 56 Executive Vice President--Chief Lending Officer Catherine Califano.................................. 40 Senior Vice President--Chief Financial Officer Mark A. Ricca, Esq.................................. 41 Senior Vice President--General Counsel, Secretary and Chief Compliance Officer
- ------------------------ (1) At March 31, 1999. 28 KEY EMPLOYEES The following lists some key employees of the residential lending division, the investment services subsidiary and the insurance agency:
NAME AGE(1) POSITION(S) - --------------------------------------------- ----------- ---------------------------------------------------------- Andrew L. Kaplan............................. 34 President, CFS Investment Services, Inc. Joseph V. LoBalsamo.......................... 43 Executive Vice President, CFS Insurance Agency, Inc. Robert J. Newell............................. 36 Executive Vice President, CFS Insurance Agency, Inc. Mark DiVirgilio.............................. 42 Executive Vice President, CFS Insurance Agency, Inc. Ronald A. Pasquini........................... 59 First Vice President-Lending Operations Coordinator, CFS Intercounty Mortgage James J. Carpenter........................... 38 First Vice President-Commercial Lending, CFS Bank Gary B. Johansen............................. 38 Vice President-Sales Manager, CFS Intercounty Mortgage Janet Mangafas............................... 31 Vice President, Secondary Marketing Manager, CFS Intercounty Mortgage
- ------------------------ (1) At March 31, 1999. DIRECTORS PHILIP S. MESSINA began his career at the Bank on April 6, 1964. During the course of his career, he has held the positions of President and Chief Executive Officer, Executive Vice President/Secretary, Personnel Officer, Branch Coordinator, Branch Manager and teller. He was appointed Chairman of the Board of Haven and Chairman of the Board of the Bank in April 1998. Mr. Messina attended the City University of New York--Queens College and the Indiana University Savings & Loan Graduate School. WILLIAM J. JENNINGS II recently retired as Managing Director, Chief of Staff to the Chairman of Salomon Smith Barney, Inc., a brokerage firm. He served as a Managing Director at Salomon Smith Barney, Inc. since 1997, and, prior to that, he was a Managing Director at Salomon Brothers, Inc. He received a B.B.A. from the University of Notre Dame and a J.D. from Villanova Law School. As of March 28, 1999, in addition to remaining a Director, Mr. Jennings became Executive Vice President and Assistant to the President of Haven and the Bank. ROBERT M. SPROTTE is the President of Schmelz Bros., Inc., a plumbing contractor, President of RDR Realty Corp., a real estate holding company and President of Three Rams Realty. He has a B.A. from Duke University. GEORGE S. WORGUL retired as Chairman of the Board in April 1998, a position he held since June 1994. He served as our President and Chairman from September 1993 through June 1994. He served as President and Chairman of the Bank from June 1989 through June 1994. Mr. Worgul joined the Bank in 1964. MICHAEL J. FITZPATRICK is a CPA, and is a retired Vice President-National Thrift Director at E.F. Hutton & Company, Inc., a national securities firm, and director of the Legal Aid Society of Suffolk County. He received a B.A. in Accounting and an M.B.A. in taxation from Pace University. 29 MICHAEL J. LEVINE is a CPA and President of Norse Realty Group, Inc. and Affiliates, a real estate owner and developer. He also is a partner in Levine and Schmutter, Certified Public Accountants. He received a B.S. from New York University in Public Accounting. MSGR. THOMAS J. HARTMAN is President and Chief Executive Officer of Telecare Radio and Television for the Diocese of Rockville Centre, New York for Telecare Television Studios, a cable television station. Msgr. Hartman hosts several television and radio shows including "God Squad." He is a regular religion commentator on "Good Morning America" on ABC-TV and "Imus in the Morning" on WFAN Radio. He received a B.A. from Niagra University, an M.A. in theology from Niagara University, a Master of Divinity from Our Lady of Angels Seminary and a Doctorate of Ministry from the Jesuit School of Theology. EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS THOMAS J. SEERY has served as Executive Vice President-Operations since January 1997. Mr. Seery has completed more than 20 years in the banking industry, the majority of which has been in retail banking and with the Bank. Mr. Seery joined the Bank in 1974. He received his B.A. from St. Francis College and his M.B.A. from St. John's University. GERARD H. MCGUIRK has served as our Executive Vice President-Chief Lending Officer since January 1997. He joined the Bank as Senior Vice President-Chief Lending Officer in 1993. Prior to that, he served as the Vice President-Group Head of Real Estate Workouts for Fleet Bank, N.Y. He worked at Fleet from 1990 to 1993. He received his B.S. from Fairfield University, an M.A. in Banking and Money Management from Adelphi University, and a J.D. from St. John's Law School. CATHERINE CALIFANO is a CPA and has served as our Senior Vice President-Chief Financial Officer since February 1994. Prior to that she served as our Vice-President-Controller since May 1993. She was the Senior Vice President-Chief Financial Officer of Home Savings Bank, which was located in Brooklyn, New York from 1987 to 1992. Prior to 1987, she was a Manager at KPMG LLP from 1985 to 1987. She received her B.S. in Accounting and her M.B.A. in Finance from St. John's University. MARK A. RICCA, ESQ. was a partner at Ricca & Donnelly, a general practice law firm, prior to joining Haven and the Bank in 1998. He has a B.A. from the University of Notre Dame, a J.D. from St. John's University and an LL.M. from New York University. KEY EMPLOYEES ANDREW L. KAPLAN joined the Bank in 1994 and is President of CFS Investments, Inc. Prior to joining the Bank, Mr. Kaplan held the position of Assistant Vice President at Citicorp Investment Services. He received his B.B.A. in Finance from Pace University. He holds the NASD licenses 7, 24 and 63 and is licensed for life and health insurance in New York, New Jersey and Connecticut. He is currently enrolled in the National School of Banking offered by America's Community Bankers. JOSEPH V. LOBALSAMO joined the Company in 1998 as Executive Vice President of CFS Insurance Agency, Inc. Prior to joining the Company, Mr. LoBalsamo was one of three principles who co-founded CIA Insurance Agency, Inc. He received a B.B.A. in Business Management from Dowling College. ROBERT J. NEWELL joined the Company in 1998 as Executive Vice President of CFS Insurance Agency, Inc. Prior to joining the Company, Mr. Newell was one of three principles who co-founded CIA Insurance Agency, Inc. He received a B.A. in Finance from State University of New York at Old Westbury. MARK DIVIRGILIO joined the Company in 1998 as Executive Vice President of CFS Insurance Agency, Inc. Prior to joining the Company, Mr. DiVirgilio was one of three principles who co-founded CIA Insurance Agency, Inc. He received a B.A. from the State University of New York at Oswego. 30 RONALD A. PASQUINI joined the Bank in 1993 as Vice President, Mortgage Officer. He is currently First Vice President, Operations Coordinator. Prior to this, Mr. Pasquini has also held the positions of First Vice President, Mortgage Officer and First Vice President, Wholesale Lending-Banker. He received his Columbia Society of Real Estate Appraisers Certificate from Adelphi University and his New York State Real Estate Brokers Certification from Adelphi University. He is a graduate of the American Savings & Loan Institute. JAMES J. CARPENTER joined the Bank in 1991 and is currently First Vice President-Commercial Real Estate. Since joining the Bank, Mr. Carpenter has held various positions in Commercial Real Estate Lending and Asset management including commercial loan origination, workout and the disposition of REO properties. He received a B.S. in Business Administration-Finance from the University of Richmond. He received his M.B.A. with a concentration in Accounting from Fordham University. He is currently enrolled in the National School of Banking offered by America's Community Bankers. GARY B. JOHANSEN joined the Bank in 1998 and is Vice President-Sales Manager of CFS Intercounty Mortgage. Prior to joining the Bank, Mr. Johansen was Vice President-Branch Manager of Intercounty Mortgage, Inc. from 1995 to 1998 and Vice President-Branch Manager-Fleet Mortgage Corp. from 1991 to 1995. He received a B.A. in Business Administration from Rutgers University. JANET MANGAFAS joined the Bank in April 1999 as Vice President of Secondary Marketing. Prior to joining the Company, Ms. Mangafas was employed at Long Island Savings Bank from 1994 to 1998 and held various positions in Secondary Marketing. She has a B.S. degree in finance from Fairfield University. HAVEN CAPITAL TRUST II We organized Haven Capital as a statutory business trust under Delaware law pursuant to the trust agreement that we, as sponsor, and the trustees executed. We, together with the trustees, filed a certificate of trust with the Delaware Secretary of State on March 26, 1999. Haven Capital exists solely to: - issue and sell the capital securities to the public and the common securities to us; - use the proceeds from the sale of the capital securities and common securities to purchase our subordinated debentures, which will be the only assets of Haven Capital; - maintain its status as a grantor trust for federal income tax purposes; and - engage in other activities that are necessary or incidental to these purposes. We will purchase all of the common securities of Haven Capital. The common securities will represent an aggregate liquidation amount equal to at least 3% of the Haven Capital's total capitalization. The capital securities will represent the remaining 97% of Haven Capital's total capitalization. The common securities will have terms substantially identical to the capital securities. However, if we default on our payments under the subordinated debentures, Haven Capital will only pay cash distributions and liquidation, redemption and other amounts payable to us with respect to the common securities after it pays you these amounts on the capital securities. Haven Capital has a term of approximately 55 years, but we may dissolve it earlier as provided in the trust agreement. The trustees conduct Haven Capital's business and affairs. We appoint each trustee. The trustees are: - The Chase Manhattan Bank, as property trustee; - Chase Manhattan Bank Delaware, as Delaware trustee; and - Three individuals who are our employees, as administrative trustees. 31 As the sole holder of the common securities, we can replace or remove any of the trustees. However, if an event of default exists under the trust agreement, the holders of the capital securities with at least a majority of aggregate liquidation amount of the capital securities will be able to remove and replace the property trustee and the Delaware trustee. Only we, as owner of all of the common securities, can remove or replace the administrative trustees. The duties and obligations of each trustee are governed by the trust agreement. We will pay all fees and expenses related to Haven Capital and the offering of the capital securities, as well as all of the ongoing costs and expenses of Haven Capital. We will not be responsible for Haven Capital's obligations under the capital securities, except as provided by our guarantee of the capital securities. Haven Capital has no separate financial statements. The statements would not be material to you because Haven Capital has no independent operations. The principal executive office of Haven Capital is c/o Haven Bancorp, Inc., 615 Merrick Avenue, Westbury, New York 11590 and its telephone number is (516) 683-4292. USE OF PROCEEDS Haven Capital will use all of the proceeds from the sale of the capital securities and the common securities to invest in the subordinated debentures. We expect to receive an estimated amount of net proceeds equal to $ million ($ million if the underwriters exercise their over-allotment option in full), from the sale of the subordinated debentures, which is net of estimated commissions ($ , or $ , if the underwriters' over-allotment option is exercised in full) and other estimated offering expenses of $ . The underwriters' commissions are $ per capital security, except for capital securities sold to any member of a select group of investors that we have identified, in which case, the underwriters' commissions are $ per capital security. We have assumed that capital securities will be sold to these investors. We intend to invest the net proceeds from the sale of the subordinated debentures in the Bank to increase its capital level and to enable the Bank to expand its deposit base and its asset base through investments in residential and commercial real estate loans in our market area and in investment-grade mortgage-backed securities and investment securities. Initially, we will invest the net proceeds in short-term investment grade financial securities. 32 CAPITALIZATION The following table presents our consolidated capitalization at December 31, 1998 and as adjusted to show the effect of the completion of the offering of the capital securities (without giving effect to the underwriters' over-allotment option) and the issuance of the subordinated debentures to Haven Capital. You should read this table together with the consolidated financial statements and notes incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and the "Use of Proceeds" section in this prospectus.
DECEMBER 31, 1998 ----------------------- ACTUAL AS ADJUSTED ---------- ----------- (DOLLARS IN THOUSANDS) Corporation-obligated mandatorily redeemable capital securities of Haven Capital Trust II at % due 2029 (1).................................................................... $ -- $ 35,000 Corporation-obligated mandatorily redeemable capital securities of Haven Capital Trust I at 10.46% due 2/01/2027 (2)............................................................ 24,984 24,984 Other long-term debt (3)................................................................. 1,472 1,472 Stockholders' Equity: Preferred stock, $0.01 par value per share, 2,000,000 shares authorized, none issued... -- -- Common stock, par value $0.01 per share: 30,000,000 shares authorized, 9,918,750 shares issued and 8,859,692 shares outstanding at December 31, 1998......................... 100 100 Additional paid-in capital............................................................. 51,383 51,383 Retained earnings...................................................................... 79,085 79,085 Accumulated other comprehensive income: Unrealized gain on securities available for sale, net of tax effect.................. 945 945 Treasury stock, at cost, 1,059,058 shares.............................................. (9,800) (9,800) Unallocated common stock held by Employee Stock Ownership Plan......................... (1,222) (1,222) Unearned common stock held by Bank's Recognition Plans and Trusts...................... (263) (263) Unearned compensation.................................................................. (361) (361) ---------- ----------- Total stockholders' equity............................................................... $ 119,867 $ 119,867 ---------- ----------- ---------- ----------- Total capitalization..................................................................... $ 146,323 $ 181,323 ---------- ----------- ---------- -----------
- ------------------------ (1) The sole assets of Haven Capital, which we will treat as one of our subsidiaries, will be $ million aggregate principal amount of our subordinated debentures, which will mature on , 2029. Haven will own all of the common securities issued by Haven Capital. Please refer to "Description of Subordinated Debentures" on page . (2) The sole assets of Haven Capital Trust I, which we treat as one of our subsidiaries, are our 10.46% junior subordinated deferrable interest debentures, which will mature February 1, 2027. (3) Represents the Bank's Employee Stock Ownership Plan debt (repayable through September 2003) which is guaranteed by us. 33 ACCOUNTING TREATMENT For financial reporting purposes, we will treat Haven Capital as our subsidiary. We will include Haven Capital's accounts in our consolidated financial statements. The capital securities will be presented as a separate line item in our consolidated balance sheet under the caption "borrowed funds," and appropriate disclosures about the capital securities, the guarantee and the subordinated debentures will be included in the notes to our consolidated financial statements. For financial reporting purposes, we will record distributions payable on the capital securities as an expense in our consolidated statements of income. 34 DESCRIPTION OF CAPITAL SECURITIES THIS SUMMARY DESCRIBES THE MATERIAL PROVISIONS OF THE CAPITAL SECURITIES. IT IS NOT COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY, THE TRUST AGREEMENT, INCLUDING THE DEFINITIONS USED IN THE TRUST AGREEMENT, AND THE TRUST INDENTURE ACT. WE HAVE INCORPORATED THE DEFINITIONS USED IN THE TRUST AGREEMENT IN THIS PROSPECTUS. WE HAVE FILED THE FORM OF THE TRUST AGREEMENT AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART. GENERAL The capital securities of Haven Capital will rank equal to, and payments made on the capital securities will be made on a PRO RATA basis with, the common securities of Haven Capital, except as described under "--Subordination of Common Securities." The property trustee will have legal title to the subordinated debentures and will hold them in trust for the benefit of you and the other holders of the capital securities. Our guarantee for the benefit of the holders of the capital securities will be a guarantee on a subordinated basis with respect to the capital securities, but will not guarantee payment of distributions or amounts payable on redemption or liquidation of the capital securities when Haven Capital does not have funds legally available to pay distributions or other amounts to the holders of the capital securities. You should read "Description of Guarantee" for more information about our guarantee. DISTRIBUTIONS The capital securities represent beneficial ownership interests in Haven Capital. Distributions on the capital securities will be cumulative, and will accumulate from the date that the capital securities are first issued. Distributions will be made at the annual rate of % of the stated liquidation amount of $25.00, payable quarterly in arrears on the distribution dates, which are March 31, June 30, September 30 and December 31 of each year, to holders of the capital securities on the relevant record dates. If the capital securities are in book-entry form, the record dates will be one business day prior to the relevant distribution date. If the capital securities are not in book-entry form, record dates will be the 15(th) day of the month in which the distribution is to be paid. The first distribution date for the capital securities will be June 30, 1999. The period beginning on and including the date the capital securities are first issued and ending on but excluding June 30, 1999, and each period thereafter beginning on and including a distribution date and ending on but excluding the next distribution date is a distribution period. The amount of distributions payable for any distribution period will be based on a 360-day year of twelve 30-day months. If any distribution date would otherwise fall on a day that is not a business day, the distribution date will be postponed to the next day that is a business day without any additional payments for the delay, unless the distribution would fall in the next calendar year, in which case the distribution date will be the last business day of the calendar year. A business day means any day other than a Saturday or a Sunday, or a day on which banks in New York, New York or Wilmington, Delaware are authorized or required by law or executive order to remain closed or a day on which the principal corporate trust office of the property trustee is closed for business. Haven Capital's revenue available for distribution to holders of the capital securities will be limited to our payments to Haven Capital under our subordinated debentures. For more information, please refer to "Description of Subordinated Debentures--General." If we do not make interest payments on the subordinated debentures, the property trustee will not have funds available to pay distributions on the capital securities and on the common securities. We will guarantee the payment of distributions if and to the extent that Haven Capital has funds legally available to pay the distributions. You should read "Description of Guarantee" for more information about the extent of our guarantee. 35 OPTION TO DEFER INTEREST PAYMENTS As long as no event of default exists, we have the right under the indenture to elect to defer the payment of interest on the subordinated debentures, at any time or from time to time, for no more than 20 consecutive quarters with respect to each deferral period, provided that no deferral period will end on a date other than an interest payment date on the subordinated debentures, or extend beyond , 2029, the maturity date of the debentures. If we defer payments, Haven Capital will defer quarterly distributions on the capital securities during a deferral period. During any deferral period distributions will continue to accrue on the capital securities and on any accrued and unpaid distributions, compounded quarterly from the relevant distribution date at the applicable distribution rate, which will be equal to the applicable interest rate on the subordinated debentures. The term distributions includes any accumulated additional distributions. Before the end of any deferral period, we may extend the deferral period, as long as the extension does not cause the deferral period to exceed 20 consecutive quarters, or, to end on a date other than an interest payment date or extend beyond , 2029. At the end of any deferral period and upon the payment of all amounts then due on any interest payment date, we may elect to begin a new deferral period, subject to the above requirements. No interest shall be due and payable during a deferral period until the deferral period ends. We must give the property trustee, the administrative trustees and the debenture trustee notice of our election to defer interest payments or to extend a deferral period at least five business days before the earlier of: - the date the distributions on the capital securities would have been payable except for the election to begin a deferral period; and - the date the administrative trustees are required to give notice to any securities exchange or automated quotation system or to holders of the capital securities of the record date or the date such distributions are payable, but in any event not less than five business days prior to such record date. There is no limitation on the number of times that we may elect to begin a deferral period. Please refer to "Description of Subordinated Debentures--Option to Extend Interest Payment Date" and "Certain Federal Income Tax Consequences--Interest Income and Original Issue Discount." During any deferral period, we may not: - declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of our capital stock; - make any payment of principal of, or interest or premium, if any, on or repay, repurchase or redeem any debt securities (including our 10.46% junior subordinated deferrable interest debentures due 2027 and any other similar debentures) that rank equal or junior to the subordinated debentures; or - make any guarantee payments with respect to any guarantee of the debt securities of any subsidiary (including our guarantee of the capital securities issued by Haven Capital Trust I and other similar guarantees) if such guarantee ranks equal or junior to the subordinated debentures. Notwithstanding the foregoing, during a deferral period we may make the following payments: (a) dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, our common stock, (b) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, 36 (c) payments under the guarantee, (d) as a result of a reclassification of our capital stock or the exchange or conversion of one class or series of our capital stock for another class or series of our capital stock, (e) the purchase of fractional interests in shares of our capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged and (f) purchases of common stock related to the issuance of common stock or rights under any of our benefit plans for our directors, officers or employees or any of our dividend reinvestment plans. We do not currently intend to exercise our right to defer payments of interest on the subordinated debentures. Our obligations under the guarantee to make payments of distributions is limited (to the extent that Haven Capital has funds legally available to pay distributions. You should read "Description of Guarantee" for more information about the extent of our guarantee. REDEMPTION Upon repayment on , 2029 or prepayment, in whole or in part prior to , 2029, of the subordinated debentures (other than following the distribution of the subordinated debentures to you as a holder of the capital securities and us, as the holder of the common securities), the property trustee will apply the proceeds from the repayment or prepayment of the subordinated debentures (as long as the property trustee has received written notice no later than 45 days before the repayment) to redeem at the applicable redemption price (which may include a premium) an amount of trust securities having an aggregate liquidation amount equal to the principal amount of the subordinated debentures paid to Haven Capital. We will give notice of any redemption between 30 and 60 days prior to the redemption date. If we prepay less than all of the subordinated debentures on a redemption date, then the property trustee will allocate the proceeds of the prepayment on a PRO RATA basis among the capital securities and the common securities. If a court of competent jurisdiction enters an order to dissolve Haven Capital, the subordinated debentures will be subject to optional prepayment in whole, but not in part, on or after , 2009. We will have the right to prepay the subordinated debentures: (1) in whole or in part, on or after , 2009; and (2) in whole but not in part, at any time prior to March , 2009, if there are changes in the bank regulatory, investment company or tax laws that would adversely affect the status of Haven Capital, the trust securities or the subordinated debenture. We may have to obtain regulatory approval, including the approval of the Office of Thrift Supervision, before we redeem any subordinated debentures. Please refer to "Description of Subordinated Debentures--Optional Prepayment" and "--Special Event Prepayment" for information on prepayment of the subordinated debentures. LIQUIDATION OF HAVEN CAPITAL AND DISTRIBUTION OF SUBORDINATED DEBENTURES We will have the right at any time to dissolve Haven Capital and, after satisfying the liabilities owed to Haven Capital's creditors as required by applicable law, we will have the right to distribute the 37 subordinated debentures to the holders of the capital securities and to us as holder of the common securities. Our right to dissolve Haven Capital is subject to our receiving: - an opinion of counsel to the effect that if we distribute the subordinated debentures, the holders of the capital securities will not experience a taxable event; and - any required regulatory approval. Haven Capital will automatically dissolve if: (1) certain bankruptcy events occur, or we dissolve or liquidate; (2) we distribute subordinated debentures having a principal amount equal to the liquidation amount of the trust securities to holders of the trust securities and we, as sponsor, have given written directions to the property trustee to dissolve Haven Capital (which direction is at our option and, except as described above, wholly within our discretion, as sponsor); (3) Haven Capital redeems all of the trust securities as described under "--Redemption;" (4) Haven Capital's term expires; or (5) a court of competent jurisdiction enters an order for the dissolution of Haven Capital. If Haven Capital is dissolved as described in clause (1), (2), (4), or (5) above, Haven Capital will be liquidated by the trustees as quickly as the trustees determine to be possible by distributing to holders of the trust securities, after satisfying the liabilities owed to Haven Capital's creditors as provided by applicable law, subordinated debentures having a principal amount equal to the liquidation amount of the trust securities, unless the property trustee determines that this distribution is not practicable. If the property trustee determines that this distribution is not practicable, the holders of the trust securities will be entitled to receive an amount equal to the aggregate of the liquidation amount plus accumulated and unpaid distributions on the trust securities to the date of payment (such amount being the "liquidation distribution") out of the assets of Haven Capital legally available for distribution to holders, after satisfying the liabilities owed to Haven Capital's creditors as provided by applicable law. If the liquidation distribution can be paid only in part because Haven Capital has insufficient assets legally available to pay the full amount of the liquidation distribution, or if a debenture event of default exists, the capital securities will have a priority over the common securities. For more information, please refer to "--Subordination of Common Securities." After the liquidation date is fixed for any distribution of subordinated debentures to holders of the trust securities: (1) the trust securities will no longer be deemed to be outstanding; (2) DTC or its nominee will receive in respect of each registered global certificate representing trust securities a registered global certificate representing the subordinated debentures to be delivered upon this distribution; and (3) any certificates representing trust securities not held by DTC or its nominee will be deemed to represent subordinated debentures having a principal amount equal to the liquidation amount of those trust securities, and bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid distributions on those trust securities until such certificates are presented to the administrative trustees or their agent for cancellation, in which case we will issue to those holders, and the debenture trustee will authenticate, a certificate representing the subordinated debentures. We cannot assure you of the market prices for the capital securities or the subordinated debentures that may be distributed to you in exchange for the capital securities if a dissolution and liquidation of Haven Capital were to occur. Accordingly, the capital securities that you purchase, or the subordinated debentures that you may receive upon a dissolution and liquidation of Haven Capital, 38 may trade at a discount to the price that you paid to purchase the capital securities offered by this prospectus. If we elect not to prepay the subordinated debentures prior to maturity and either elect not to or we are unable to liquidate Haven Capital and distribute the subordinated debentures to holders of the trust securities, the trust securities will remain outstanding until the repayment of the subordinated debentures on , 2029. REDEMPTION PROCEDURES If we redeem the subordinated debentures, Haven Capital will redeem trust securities at the applicable redemption price with the proceeds that it receives from our redemption of the subordinated debentures. Any redemption of trust securities will be made and the applicable redemption price will be payable on the redemption date only to the extent that Haven Capital has funds legally available to pay the applicable redemption price. For more information, you should refer to "--Subordination of Common Securities." If Haven Capital gives a notice of redemption for the capital securities, then, by 12:00 noon, New York City time, on the redemption date, to the extent funds legally are available, with respect to - the capital securities held by DTC or its nominees, the property trustee will deposit, or cause the paying agent to deposit, irrevocably with DTC funds sufficient to pay the applicable redemption price. For more information, you should refer to "--Form, Denomination, Book-Entry Procedures and Transfer." - the capital securities held in certificated form, the property trustee will irrevocably deposit with the paying agent funds sufficient to pay the applicable redemption price and will give the paying agent irrevocable instructions and authority to pay the applicable redemption price to the holders upon surrender of their certificates evidencing the capital securities. For more information, you should refer to "--Payment and Paying Agency." The paying agent will initially be the property trustee and any co-paying agent chosen by the property trustee and acceptable to the administrative trustees and us. Notwithstanding the foregoing, distributions payable on or before the redemption date will be payable to the holders of the capital securities on the relevant record dates for the related distribution dates. If Haven Capital gives a notice of redemption and funds are deposited as required, then upon the date of the deposit, all rights of the holders of the capital securities called for redemption will cease, except the right of the holders of the capital securities to receive the applicable redemption price, without interest, and the capital securities called to be redeemed will cease to be outstanding. If any redemption date for the capital securities is not a business day, then the applicable redemption price, without interest or any other payment in respect of the delay, will be paid on the next business day, except that, if the next business day falls in the next calendar year, the payment shall be made on the last business day of the calendar year. If payment of the applicable redemption price is improperly withheld or refused and not paid either by Haven Capital or by us pursuant to the guarantee: (1) distributions on the capital securities will continue to accumulate at %, from the redemption date originally established by Haven Capital to the date such applicable redemption price is actually paid; and (2) the actual payment date will be the redemption date for purposes of calculating the applicable redemption price. 39 Notice of any redemption will be mailed between 30 and 60 days before the redemption date to each holder of trust securities at its registered address. Unless we default in payment of the applicable redemption price on, or in the repayment of, the subordinated debentures, on and after the redemption date, distributions will cease to accrue on the trust securities called for redemption. Subject to applicable law (including, without limitation, U.S. federal securities laws), we or our subsidiaries may at any time, and from time to time, purchase outstanding capital securities in the open market or by private agreement. SUBORDINATION OF COMMON SECURITIES Payment of distributions on, and the redemption price of, the capital securities and the common securities, as applicable, will generally be made on a PRO RATA basis. However, if a debenture event of default exists on any distribution or redemption date, no payment of any distribution on, or applicable redemption price of, any of the common securities, and no other payment on account of the redemption, liquidation or other acquisition of the common securities, will be made unless payment in full in cash of all accumulated and unpaid distributions on all of the outstanding capital securities for all distribution periods terminating on or before the distribution or redemption date, or payment of the applicable redemption price is made in full. All funds available to the property trustee will first be applied to the payment in full in cash of all distributions on, or redemption price of, the capital securities then due and payable. In the case of any event of default, we, as holder of all of the common securities, will be deemed to have waived any right to act with respect to the event of default until the effect of the event of default has been cured, waived or otherwise eliminated. Until any event of default has been cured, waived or otherwise eliminated, the property trustee will act solely on behalf of the holders of the capital securities and not on our behalf, and only the holders of the capital securities will have the right to direct the property trustee to act on their behalf. EVENTS OF DEFAULT; NOTICE An event of default under the indenture constitutes an event of default under the trust agreement. See "Description of Subordinated Debentures--Debenture Events of Default." The trust agreement provides that within five (5) business days after any event of default actually known to the property trustee occurs, the property trustee will give notice of the event of default to the holders of the capital securities, the administrative trustees and to us, as sponsor, unless the event of default has been cured or waived. We, as sponsor, and the administrative trustees are required to file annually with the property trustee a certificate as to whether we and the administrative trustees have complied with the applicable conditions and covenants of the trust agreement. If a debenture event of default exists, the capital securities will have a preference over the common securities as described under "--Liquidation of Haven Capital and Distribution of Subordinated Debentures" and "--Subordination of Common Securities." An event of default does not entitle the holders of capital securities to accelerate the maturity date of the capital securities. REMOVAL OF TRUSTEES Unless a debenture event of default exists, we may remove the property trustee and the Delaware trustee at any time. If a debenture event of default exists, the property trustee and the Delaware trustee may be removed only by the holders of a majority in liquidation amount of the outstanding capital securities. In no event will the holders of the capital securities have the right to vote to appoint, remove or replace the administrative trustees, because these voting rights are vested exclusively in us as the holder of all of the common securities. No resignation or removal of the property trustee or the 40 Delaware trustee and no appointment of a successor trustee shall be effective until the acceptance of appointment by the successor trustee in accordance with the trust agreement. MERGER OR CONSOLIDATION OF ISSUER TRUSTEES If the property trustee, the Delaware trustee or any administrative trustee that is not a natural person is merged, converted or consolidated into another entity, or the property trustee is a party to a merger, conversion or consolidation which results in a new entity, or an entity succeeds to all or substantially all of the corporate trust business of the property trustee, the new entity shall be the successor of the respective trustee under the trust agreement, provided that the entity is otherwise qualified and eligible. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF HAVEN CAPITAL Haven Capital may not merge with or into, consolidate, amalgamate or be replaced by, or convey, transfer or lease substantially all of its properties and assets to any corporation or other entity, except as described below or as otherwise described under "--Liquidation of Haven Capital and Distribution of Subordinated Debentures." Haven Capital may, at our request, as sponsor, and with the consent of the administrative trustees but without the consent of the holders of the capital securities, merge with or into, consolidate, amalgamate or be replaced by or convey, transfer or lease substantially all of its properties and assets to a trust organized as such under the laws of any state; provided, that: (1) the successor either (a) expressly assumes all of the obligations of Haven Capital with respect to the trust securities or (b) substitutes securities for the trust securities that have substantially the same terms as the trust securities so long as the substitute securities rank equal to same as the trust securities in priority with respect to distributions and payments upon liquidation, redemption and otherwise; (2) we appoint a trustee of the successor possessing the same powers and duties as the property trustee with respect to the subordinated debentures; (3) the substitute securities are listed, or any substitute securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the trust securities are then listed or quoted, if any; (4) if the capital securities, substitute securities or subordinated debentures are rated by any nationally recognized statistical rating organization prior to such transaction, the transaction does not cause any of those securities to be downgraded by the rating organization; (5) the transaction does not adversely affect the rights, preferences and privileges of the holders of the trust securities (including any successor securities) in any material respect; (6) the successor has a purpose substantially identical to that of Haven Capital; (7) prior to the transaction, we received an opinion from independent counsel to Haven Capital experienced in such matters to the effect that (a) the transaction does not adversely affect the rights, preferences and privileges of the holders of the trust securities (including any successor securities) in any material respect (other than any dilution of such holders' interests in the new entity), and (b) following the transaction, neither Haven Capital nor the successor will be required to register as an investment company under the Investment Company Act; and 41 (8) we, or any permitted successor or assignee owns all of the common securities of the successor and guarantees the obligations of the successor under the substituted securities at least to the extent provided by the guarantee and the common securities guarantee. Notwithstanding the foregoing, Haven Capital shall not, except with the consent of holders of 100% in liquidation amount of the trust 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 entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if the transaction would cause Haven Capital or the successor to be classified as an association taxable as a corporation for U.S. federal income tax purposes. VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT Except as provided below and under "--Mergers, Consolidations, Amalgamations or Replacements of Haven Capital" and "Description of Guarantee--Amendments and Assignment" and as otherwise required by law and the trust agreement, the holders of the capital securities will have no voting rights. We, together with the property trustee and the administrative trustees, may amend the trust agreement from time to time, without the consent of the holders of the trust securities: (1) to cure any ambiguity, correct or supplement any provisions in the trust agreement that may be inconsistent with any other provision, or to make any other provisions with respect to matters or questions arising under the trust agreement, which are not inconsistent with the other provisions of the trust agreement; or (2) to modify, eliminate or add to any provisions of the trust agreement as is necessary to ensure that at all times that any capital securities are outstanding, Haven Capital will not be classified as an association taxable as a corporation or to enable Haven Capital to qualify as a grantor trust, in each case for U.S. federal income tax purposes, or to ensure that Haven Capital will not be required to register as an investment company under the Investment Company Act; PROVIDED, HOWEVER, that in the case of clause (1) the amendment would not adversely affect in any material respect the interests of the holders of the capital securities. Any amendments of the trust agreement pursuant to the foregoing shall become effective when notice of the amendment is given to the holders of the capital securities. We, together with the trustees, may amend the trust agreement: (1) with the consent of holders representing a majority (based upon liquidation amount) of the outstanding trust securities; and (2) upon receipt by the trustees of an opinion of counsel experienced in such matters to the effect that the amendment or the exercise of any power granted to the trustees in accordance with the amendment will not affect Haven Capital's classification as an entity that is not taxable as a corporation or as being a grantor trust for U.S. federal income tax purposes or Haven Capital's exemption from status as an investment company under the Investment Company Act, PROVIDED that, without the consent of each holder of trust securities, no amendment may change the amount or timing of any distribution on the trust securities or otherwise adversely affect the amount of any distribution required to be made in respect of the trust securities as of a specified date; or restrict the right of a holder of trust securities to sue for the enforcement of any payment on or after the specified date. 42 So long as any subordinated debentures are held by the property trustee, the trustees may not: - direct the time, method and place of conducting any proceeding for any remedy available to the debenture trustee, or execute any trust or power conferred on the debenture trustee with respect to the subordinated debentures; - waive certain past defaults under the indenture; - exercise any right to rescind or annul a declaration accelerating the maturity of the principal of the subordinated debentures; or - consent to any amendment, modification or termination of the indenture or the subordinated debentures, where such consent shall be required, without, in each case, obtaining the prior consent of the holders of a majority in liquidation amount of all outstanding capital securities; PROVIDED, HOWEVER, that where a consent under the indenture would require the consent of each holder of subordinated debentures affected by the amendment, modification or termination, the property trustee will not give consent without the prior approval of each holder of the capital securities. The trustees shall not revoke any action previously authorized or approved by a vote of the holders of the capital securities except by subsequent vote of such holders. The property trustee shall notify each holder of capital securities of any notice of default with respect to the subordinated debentures. In addition to obtaining the approvals of the holders of the capital securities, prior to taking any of the foregoing actions, the trustees shall obtain an opinion of counsel experienced in such matters to the effect that Haven Capital will not be classified as an association taxable as a corporation for U.S. federal income tax purposes on account of such action. Any required approval of holders of capital securities may be given at a meeting of the holders convened for the purpose of approving the matter or pursuant to written consent. The property trustee will cause a notice of any meeting at which holders of capital securities are entitled to vote, or of any matter upon which action by written consent of such holders has been taken, to be given to each holder of record of capital securities in accordance with the trust agreement. No vote or consent of the holders of capital securities will be required for Haven Capital to redeem and cancel the capital securities in accordance with the trust agreement. 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 us, the trustees or any of our or any trustee's affiliates, shall, for purposes of such vote or consent, be treated as if they were not outstanding. DEPOSITARY PROCEDURES DTC has advised Haven Capital and us that it is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participating organizations (collectively, "participants") and to facilitate the clearance and settlement of transactions in those securities between participants through electronic book-entry changes in accounts of its participants, to eliminate the need for physical movement of certificates. Participants include securities brokers and dealers (including the underwriters), banks, trust companies, clearing corporations and certain other organizations. Indirect access to DTC's system is also available to banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly (collectively, "indirect participants"). Persons who are not participants may beneficially own securities held by or on behalf of DTC only through participants or 43 indirect participants. The ownership interest and transfer of ownership interest of each actual purchaser of each security held by or on behalf of DTC are recorded on the records of participants and indirect participants. DTC also has advised Haven Capital and us that, pursuant to procedures established by it, (1) upon deposit of the global capital securities, DTC will credit the accounts of participants designated by the underwriters with portions of the liquidation amount of the global capital securities and (2) ownership of interests in the global capital securities will be shown on, and the transfer of ownership of the global capital securities, will be effected only through records maintained by DTC (with respect to participants) or by participants and indirect participants (with respect to other owners of beneficial interests in the global capital securities). REGISTRATION OF CAPITAL SECURITIES The capital securities will be represented by one or more global certificates registered in the name of DTC or its nominee. Beneficial interests in the capital securities will be shown on, and transfers of the global capital securities will be effected only through, records maintained by participants. Except as described below, capital securities in certificated form will not be issued in exchange for the global certificates. See "Exchange of Book-Entry Capital Securities for Certificated Capital Securities." You may hold your interests in the global capital security directly through DTC if you are a participant, or indirectly through organizations that are participants. All interests in a global capital security will be subject to the procedures and requirements of DTC. The laws of some states require that certain persons take physical delivery in certificated form of securities that they own. Consequently, the ability to transfer beneficial interests in a global capital security to those persons will be limited to that extent. Because DTC can act only on behalf of participants, which in turn act on behalf of indirect participants and certain banks, the ability of a person having beneficial interests in a global capital security to pledge its interests to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of its interests, may be affected by the lack of a physical certificate evidencing its interests. For certain other restrictions on the transferability of the capital securities, see "--Exchange of Book-Entry Capital Securities for Certificated Capital Securities." Payments on the global capital security registered in the name of DTC, or its nominee, will be payable by the property trustee to DTC in its capacity as the registered holder under the trust agreement. Under the terms of the trust agreement, the property trustee will treat the persons in whose names the capital securities, including the global capital securities, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Neither the property trustee nor any agent thereof has or will have any responsibility or liability for: - any aspect of DTC's records or any participant's or indirect participant's records relating to, or payments made on account of, beneficial ownership interests in the global capital securities, or for maintaining, supervising or reviewing any of DTC's records or any participant's or indirect participant's records relating to the beneficial ownership interests in the global capital securities; or - any other matter relating to the actions and practices of DTC or any of its participants or indirect participants. DTC has advised Haven Capital and us that its current practice, upon receipt of any payment on the capital securities, is to credit the accounts of the relevant participants with the payment on the payment date, in amounts proportionate to their respective holdings in liquidation amount of the capital securities as shown on the records of DTC unless DTC has reason to believe it will not receive payment on the payment date. Payments by participants and indirect participants to the beneficial owners of capital securities will be governed by standing instructions and customary practices and will 44 be the responsibility of participants or indirect participants and will not be the responsibility of DTC, the property trustee, Haven Capital or us. None of Haven Capital, Haven nor the property trustee will be liable for any delay by DTC or any of its participants or indirect participants in identifying the beneficial owners of the capital securities, and Haven Capital, Haven and the property trustee may conclusively rely on, and will be protected in relying on, instructions from DTC or its nominee for all purposes. Any secondary market trading activity in interests in the global capital securities will settle in immediately available funds, subject in all cases to the rules and procedures of DTC and its participants. Transfers between participants in DTC will be effected in accordance with DTC's procedures, and will settle in same-day funds. DTC has advised Haven Capital and us that it will take any action permitted to be taken by a holder of capital securities (including, without limitation, presenting the capital securities for exchange as described below) only at the direction of one or more participants who have an interest in DTC's global capital securities in respect of the portion of the liquidation amount of the capital securities as to which the participant or participants has or have given direction. However, if an event of default exists under the trust agreement, DTC reserves the right to exchange the global capital securities for legended capital securities in certificated form and to distribute the certificated capital securities to its participants. We believe that the information in this section concerning DTC and its book-entry system has been obtained from reliable sources, but we do not take responsibility for the accuracy of this information. Although DTC has agreed to the procedures described in this section to facilitate transfers of interests in the global capital securities among participants in DTC, DTC is not obligated to perform or to continue to perform these procedures, and these procedures may be discontinued at any time. None of Haven Capital, Haven nor the property trustee will have any responsibility or liability for any aspect of the performance by DTC or its participants or indirect participants of any of their respective obligations under the rules and procedures governing their operations or for maintaining, supervising or reviewing any records relating to the global capital securities that are maintained by DTC or any of its participants or indirect participants. 45 EXCHANGE OF BOOK-ENTRY CAPITAL SECURITIES FOR CERTIFICATED CAPITAL SECURITIES A global capital security can be exchanged for capital securities in registered certificated form if: (1) DTC notifies Haven Capital that it is unwilling or unable to continue as depositary for the global capital security and Haven Capital fails to appoint a successor depositary within 90 days of receipt of DTC's notice, or has ceased to be a clearing agency registered under the Exchange Act and Haven Capital fails to appoint a successor depositary within 90 days of becoming aware of this condition; (2) we, in our sole discretion, elect to cause the capital securities to be issued in certificated form; or (3) an event of default, or any event which after notice or lapse of time or both would be an event of default, exists under the trust agreement. In addition, beneficial interests in a global capital security may be exchanged by or on behalf of DTC for certificated capital securities upon request by DTC, but only upon at least 20 days' prior written notice given to the property trustee in accordance with DTC's customary procedures. In all cases, certificated capital securities delivered in exchange for any global capital security will be registered in the names, and issued in any approved denominations, requested by or on behalf of DTC (in accordance with its customary procedures). PAYMENT AND PAYING AGENCY Haven Capital will make payments on the capital securities that are held in global form to DTC, which will credit the relevant accounts at DTC on the applicable distribution dates. Haven Capital will make payments on the capital securities that are not held by DTC by mailing a check to the address of the holder entitled to the payment as the holder's address appears on the register. The paying agent will initially be the property trustee and any co-paying agent chosen by the property trustee and acceptable to the administrative trustees and us. The paying agent will be permitted to resign as paying agent upon 30 days' notice to the property trustee, the administrative trustees and us. In the event that the property trustee is no longer the paying agent, the administrative trustees will appoint a successor (which must be a bank or trust company acceptable to the administrative trustees and us) to act as paying agent. REGISTRAR AND TRANSFER AGENT The property trustee will act as registrar and transfer agent for the capital securities. Haven Capital will register transfers of the capital securities without charge, except for any tax or other governmental charges that may be imposed in connection with any transfer or exchange. Haven Capital will not be required to have the transfer of the capital securities registered after they have been called for redemption. INFORMATION CONCERNING THE PROPERTY TRUSTEE Except if an event of default exists, the property trustee will undertake to perform only the duties specifically set forth in the trust agreement. After an event of default, the property trustee must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the property trustee is not obligated to exercise any of the powers vested in it by the trust agreement at the request of any holder of trust securities, unless it is offered reasonable indemnity against the costs, expenses and liabilities that it might incur. If no event of default exists and the property trustee is required to decide between alternative causes of action, construe ambiguous provisions in the trust agreement or is unsure of the application of any provision of 46 the trust agreement, and the matter is not one on which holders of the capital securities or the common securities are entitled under the trust agreement to vote, then the property trustee shall take such action as directed by us and, if not directed, shall take such action as it deems advisable and in the best interests of the holders of the trust securities and will have no liability, except for its own bad faith, negligence or willful misconduct. MISCELLANEOUS The administrative trustees are authorized and directed to conduct the affairs of and to operate Haven Capital in such a way that: (1) Haven Capital will not be deemed to be an investment company required to be registered under the Investment Company Act; (2) Haven Capital will be classified as a grantor trust for U.S. federal income tax purposes; and (3) the subordinated debentures will be treated as our indebtedness for U.S. federal income tax purposes. We, together with the administrative trustees, are authorized to take any action, not inconsistent with applicable law, the certificate of trust of Haven Capital or the trust agreement, that we and the administrative trustees determine in our discretion is necessary or desirable, as long as it does not materially adversely affect the interests of the holders of the trust securities. The trust agreement provides that holders of the trust securities have no preemptive or similar rights to subscribe for any additional trust securities and the issuance of trust securities is not subject to preemptive rights. Haven Capital may not borrow money, issue debt, execute mortgages or pledge any of its assets. DESCRIPTION OF SUBORDINATED DEBENTURES THIS SUMMARY DESCRIBES THE MATERIAL PROVISIONS OF THE SUBORDINATED DEBENTURES. IT IS NOT COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY, THE INDENTURE AND THE TRUST INDENTURE ACT. WE HAVE INCORPORATED THE DEFINITIONS USED IN THE INDENTURE IN THIS PROSPECTUS. WE HAVE FILED THE INDENTURE AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART. THE CHASE MANHATTAN BANK WILL ACT AS DEBENTURE TRUSTEE UNDER THE INDENTURE. THE INDENTURE IS QUALIFIED UNDER THE TRUST INDENTURE ACT. GENERAL Haven Capital will invest the proceeds from the sale of the trust securities in the subordinated debentures issued by Haven. The subordinated debentures will bear interest at the annual rate of % of the principal amount of the subordinated debentures, payable quarterly in arrears on interest payment dates of March 31, June 30, September 30 and December 31 of each year and at maturity to the person in whose name each subordinated debenture is registered at the close of business on the relevant record date. The first interest payment date for the subordinated debentures will be June 30, 1999. The period beginning on and including the date the subordinated debentures are first issued and ending on but excluding June 30, 1999 and each period beginning on and including an interest payment date and ending on but excluding the next interest payment date is an interest period. We anticipate that, until the liquidation, if any, of Haven Capital, each subordinated debenture will be held by the property trustee in trust for the benefit of the holders of the capital securities. The amount of interest payable for any interest period will be computed on the basis of a 360-day year of twelve 30-day months. In the event that any interest payment date would otherwise fall on a day that is not a business day, the interest payment date will be postponed to the next business day (without any 47 interest or other payment due to the delay) unless it would fall in the next calendar year, in which case the interest payment date shall be the last business day of the calendar year. Accrued interest that is not paid on the applicable interest payment date will bear additional interest (to the extent permitted by law) at the rate of % per annum, compounded quarterly from the relevant interest payment date. The term "interest" as used in this prospectus includes quarterly interest payments and interest on quarterly interest payments not paid on the applicable interest payment date. Notwithstanding anything to the contrary set forth above, if the maturity date falls on a day that is not a business day, the payment of principal and interest will be paid on the next business day, with the same force and effect as if made on the maturity date, and no interest on such payments will accrue from and after the maturity date. The subordinated debentures will be issued as a series of junior subordinated deferrable interest debentures under the indenture. The subordinated debentures will mature on , 2029. The subordinated debentures will rank equal to all of our other subordinated debentures which have been or may be issued to other trusts established by us, in each case similar to Haven Capital, including, without limitation, our 10.46% junior subordinated deferrable interest debentures due 2027, and will be unsecured and rank subordinate and junior to all indebtedness for money that we borrow to the extent and in the manner set forth in the indenture. See "--Subordination." We are a savings and loan holding company regulated by the Office of Thrift Supervision, and substantially all of our operating assets are owned by the Bank. We are a legal entity separate and distinct from our subsidiaries. Holders of subordinated debentures should look only to us for payments on the subordinated debentures. The principal sources of our income are dividends, interest and fees from the Bank. We rely primarily on dividends from the Bank to meet our obligations for payment of principal and interest on our outstanding debt obligations and corporate expenses. Dividend payments from the Bank are subject to regulatory limitations, generally based on current and retained earnings, imposed by the various regulatory agencies with authority over the Bank. In addition to regulatory restrictions on the payment of dividends, the Bank is subject to restrictions imposed by federal law on any extensions of credit to us and other affiliates of the Bank and on investments in stock or other securities of affiliates. Also, as a savings association holding company, our right to receive distributions from the Bank may be limited if the Bank is liquidated or reorganized. For more information about these regulatory limits, you should read "Risk Factors--Risks related to your investment in the capital securities--Banking laws and regulations limit Haven's access to funds, which may prevent Haven from making payments under the subordinated debentures." The subordinated debentures will be effectively subordinated to all existing and future liabilities of the Bank (including the Bank's deposit liabilities) and all liabilities of any of our future subsidiaries. The indenture does not limit us or the Bank from incurring or issuing other secured or unsecured debt, including senior indebtedness. See "--Subordination." FORM, REGISTRATION AND TRANSFER If the subordinated debentures are distributed to the holders of the trust securities, the subordinated debentures may be represented by one or more global certificates registered in the name of Cede & Co., as the nominee of DTC. The depositary arrangements for such subordinated debentures are expected to be substantially similar to those in effect for the capital securities. For a description of DTC and the terms of the depositary arrangements relating to payments, transfers, voting rights, redemptions and other notices and other matters, you should read "Description of Capital Securities--Form, Denomination, Book-Entry Procedures and Transfer." 48 PAYMENT AND PAYING AGENTS Payment of principal of (and premium, if any) and interest on the subordinated debentures will be made at the office of the debenture trustee in New York, New York or at the office of such paying agent or paying agents as we may designate from time to time, except that, at our option, payment of any interest may be made, except in the case of subordinated debentures in global form: - by check mailed to the address of the person or entity entitled to the interest payment as such address shall appear in the register for the subordinated debentures; or - by transfer to an account maintained by the person or entity entitled to the interest payment as specified in the register, provided that proper transfer instructions have been received by the relevant record date. Payment of any interest on any subordinated debenture will be made to the person or entity in whose name the subordinated debenture is registered at the close of business on the record date for the interest payment date, except in the case of defaulted interest. We may at any time designate additional paying agents or rescind the designation of any paying agent; however we will always be required to maintain a paying agent in each place of payment for the subordinated debentures. Any moneys deposited with the debenture trustee or any paying agent, or then held by us, in trust for the payment of the principal of (or premium, if any) or interest on any subordinated debenture and remaining unclaimed for two years after such principal (or premium, if any) or interest has become due and payable shall, at our request, be repaid to us and the holder of the subordinated debenture shall thereafter look, as a general unsecured creditor, only to us for payment. OPTION TO EXTEND INTEREST PAYMENT DATE So long as no debenture event of default exists, we will have the right under the indenture to defer the payment of interest on the subordinated debentures, at any time and from time to time, for no more than 20 consecutive quarters for each deferral period, provided that no deferral period shall end on a date other than an interest payment date or extend beyond , 2029. At the end of a deferral period, we must pay all interest then accrued and unpaid (together with interest thereon at the rate of % per year, compounded quarterly from the relevant interest payment date, to the extent permitted by applicable law). During a deferral period, interest will continue to accrue, and holders of the trust securities or, if the subordinated debentures have been distributed to holders of the trust securities, holders of subordinated debentures, will be required to include that deferred interest in gross income for U.S. federal income tax purposes on an accrual method of accounting prescribed by the Code and Treasury regulation provisions on original issue discount prior to the receipt of cash attributable to that income. See "Certain Federal Income Tax Consequences--Original Issue Discount." During any such deferral period, we may not: (1) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of our capital stock; (2) make any payment of principal of, or interest or premium, if any, on or repay, repurchase or redeem any of our debt securities (including our 10.46% junior subordinated deferrable interest debentures due 2027 and any other debentures) that rank equal to or junior to the subordinated debentures; or (3) make any guarantee payments with respect to any guarantee by us of the debt securities of any of our subsidiaries (including our guarantee of the capital securities of Haven Capital Trust I and any other guarantees) if such guarantee ranks equal or junior to the subordinated debentures other than 49 (a) dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, our common stock; (b) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any rights pursuant thereto, (c) payments under the guarantee, (d) as a result of a reclassification of our capital stock or the exchange or conversion of one class or series of our capital stock for another class or series of our capital stock, (e) the purchase of fractional interests in shares of our capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged and (f) purchases of our common stock related to the issuance of common stock or rights under any of our benefit plans for our directors, officers or employees or any of our dividend reinvestment plans. We do not currently intend to exercise our option to defer payments of interest on the subordinated debentures. Before the end of any deferral period, we may extend the deferral period, as long as no event of default exists and the extension does not cause the deferral period to exceed 20 consecutive quarterly periods, to end on a date other than an interest payment date or to extend beyond , 2029. At the end of any deferral period and upon the payment of all then accrued and unpaid interest (together with interest thereon at the rate of % per year, compounded quarterly, to the extent permitted by applicable law), we may elect to begin a new deferral period, subject to the requirements set forth herein. No interest shall be due and payable during a deferral period until the deferral period ends. We must give the property trustee, the administrative trustees and the debenture trustee notice of our election at least five business days before the earlier of: - the date the distributions on the trust securities would have been payable except for the election to begin or extend such deferral period; - the date the administrative trustees are required to give notice to any securities exchange or automated quotation system on which the capital securities are listed or quoted or to holders of capital securities of the record date for such distributions; or - the date such distributions are payable, but at least five business days prior to the record date. The debenture trustee will notify holders of the capital securities of our election to begin or extend a new deferral period. There is no limit on the number of times that we may elect to begin a deferral period. OPTIONAL PREPAYMENT The subordinated debentures will be prepayable, in whole or in part, at our option on or after , 2009, subject to our receipt of any required regulatory approval, at an optional prepayment price equal to the percentage of the outstanding principal amount of the subordinated debentures specified below, plus, in each case, accrued and unpaid interest on the subordinated 50 debentures, if any, to the date of prepayment if redeemed during the 12-month period beginning of the years indicated below:
YEAR PERCENTAGE - ---------------------------------------------------------------------------------- ----------- 2009.............................................................................. % 2010.............................................................................. % 2011.............................................................................. % 2012.............................................................................. % 2013.............................................................................. % 2014.............................................................................. % 2015.............................................................................. % 2016.............................................................................. % 2017.............................................................................. % 2018.............................................................................. % 2019 and thereafter............................................................... 100.000%
SPECIAL EVENT PREPAYMENT If there are changes in the bank regulatory, investment company or tax laws that adversely affect the status of Haven Capital, the capital securities or the subordinated debentures, we may, at our option, and subject to our receipt of any required regulatory approval, prepay the subordinated debentures, in whole but not in part, at any time within 90 days of the change in the law, at the special event prepayment price. If we exercise our option to prepay the subordinated debentures under these circumstances, then the proceeds of that prepayment must be applied to redeem the trust securities at a prepayment price equal to 100% of the principal amount of the subordinated debentures so prepaid, plus, in each case, accrued and unpaid interest on the subordinated debentures, if any, to the date of prepayment. See "Description of Capital Securities--Redemption." A change in the bank regulatory law means our receipt of an opinion of independent bank regulatory counsel experienced in such matters to the effect that, as a result of - any amendment to, or change (including any announced prospective change) in, any laws or regulations of the United States or any rules, guidelines or policies of an applicable regulatory agency or authority or - any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date the trust securities are first issued, the capital securities do not constitute, or within 90 days of the opinion will not constitute, Tier 1 Capital (or its then equivalent if we were subject to such capital requirement). A change in the investment company law means the receipt by us and Haven Capital of an opinion of independent securities counsel experienced in such matters to the effect that, as a result of - any amendment to, or change (including any announced prospective change) in, any laws or regulations of the United States or any rules, guidelines or policies of any applicable regulatory agency or authority or - any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date the trust securities are first issued, Haven Capital is, or within 90 days of the date of the 51 opinion will be, considered an investment company that is required to be registered under the Investment Company Act. A change in tax law means the receipt by us and Haven Capital of an opinion of independent tax counsel experienced in such matters to the effect that, as a result of: - any amendment to, or change (including any announced prospective change) in, any laws or regulations of the United States or any political subdivision or taxing authority thereof or therein or - any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date the trust securities are first issued, there is more than an insubstantial risk that: - Haven Capital is, or will be within 90 days of the date of such opinion, subject to U.S. federal income tax with respect to any income received or accrued on the subordinated debentures; - interest payable by us on the subordinated debentures is not, or within 90 days of the date of such opinion will not be, deductible by us, in whole or in part, for U.S. federal income tax purposes; or - Haven Capital 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. We will mail any notice of prepayment between 30 and 60 days before the prepayment date to each holder of subordinated debentures to be prepaid at its registered address. Unless we default in payment of the prepayment price, on the prepayment date interest shall cease to accrue on the subordinated debentures called for prepayment. If Haven Capital is required to pay any additional taxes, duties or other governmental charges as a result of a change in the tax law, we will pay as additional amounts on the subordinated debentures any amounts as may be necessary in order that the amount of distributions then due and payable by Haven Capital on the outstanding trust securities shall not be reduced as a result of any additional sums, including taxes, duties or other governmental charges to which Haven Capital has become subject as a result of a change in the tax law. CERTAIN COVENANTS OF HAVEN We will also covenant that we will not: (1) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of our capital stock; (2) make any payment of principal of, or interest or premium, if any, on or repay, repurchase or redeem any of our debt securities (including our 10.46% junior subordinated deferrable interest debentures due 2027) that rank equal or junior to the subordinated debentures; or (3) make any guarantee payments with respect to any of our guarantees of the debt securities of any of our subsidiaries (including our guarantee of payments on the capital securities issued by Haven Capital Trust I) if such guarantee ranks equal or junior to the subordinated debentures; other than (a) dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, our common stock, 52 (b) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) payments under the guarantee, (d) as a result of a reclassification of our capital stock or the exchange or conversion of one class or series of our capital stock for another class or series of our capital stock, (e) the purchase of fractional interests in shares of our capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, and (f) purchases of our common stock related to the issuance of common stock or rights under any of our benefit plans for its directors, officers or employees or any of our dividend reinvestment plans, if at such time: - we have actual knowledge that there is any event that is, or with the giving of notice or the lapse of time, or both, would be, a debenture event of default and that we have not taken reasonable steps to cure; - we are in default with respect to our payment of any obligations under the guarantee; or - we have given notice of our election to exercise our right to defer interest payments on the subordinated debentures as provided in the indenture and the deferral period, or any extension of the deferral period, is continuing. So long as the trust securities remain outstanding, we also will covenant: - to directly or indirectly maintain 100% direct or indirect ownership of the common securities; PROVIDED, HOWEVER, that any of our permitted successors under the indenture may succeed to our ownership of the common securities; - to use commercially reasonable efforts to cause Haven Capital to remain a business trust, except in connection with the distribution of subordinated debentures to the holders of trust securities in liquidation of Haven Capital, the redemption of all of the trust securities, or certain mergers, consolidations or amalgamations, each as permitted by the trust agreement; - to use commercially reasonable efforts to cause Haven Capital to otherwise continue not to be classified as an association taxable as a corporation and to be classified as a grantor trust for U.S. federal income tax purposes; - to use commercially reasonable efforts to cause each holder of trust securities to be treated as owning an undivided beneficial interest in the subordinated debentures; and - to not cause, as sponsor of Haven Capital, or permit, as holder of the common securities, the dissolution, winding-up or liquidation of Haven Capital, except as provided in the trust agreement. MODIFICATION OF INDENTURE From time to time, we, together with the debenture trustee, may, without the consent of the holders of subordinated debentures, amend the indenture for specified purposes, including, among other things, curing ambiguities, defects or inconsistencies, provided that any amendment in the indenture does not materially adversely affect the interest of the holders of subordinated debentures, and qualifying, or maintaining the qualification of, the indenture under the Trust Indenture Act. 53 The indenture permits us and the debenture trustee, with the consent of the holders of a majority in aggregate principal amount of subordinated debentures, to modify the indenture in a manner affecting the rights of the holders of the subordinated debentures; provided that no modification may, without the consent of the holders of each outstanding subordinated debenture affected: - change the stated maturity date, or reduce the principal amount, of the subordinated debentures, - reduce the amount payable on prepayment or reduce the rate or extend the time of payment of interest except pursuant to our right under the indenture to defer the payment of interest (see "--Option to Extend Interest Payment Date"), - make the principal of, (or premium, if any) or interest on, the subordinated debentures payable in any coin or currency other than that provided in the subordinated debentures, - impair or affect the right of any holder of subordinated debentures to institute suit for the payment thereof, or - reduce the percentage of the principal amount of the subordinated debentures, the holders of which are required to consent to any such modification. DEBENTURE EVENTS OF DEFAULT A "debenture event of default" is - our failure for 30 days to pay any interest (including compounded interest and additional sums, if any) on the subordinated debentures or any other debentures (including our 10.46% junior subordinated deferrable interest debentures due 2027) when due (subject to the deferral of any interest due date in the case of a deferral period with respect to the subordinated debentures or other debentures as the case may be); or - our failure to pay any principal or premium, if any, on the subordinated debentures or any other debentures when due whether at maturity, upon prepayment, by accelerating the maturity or otherwise; or - our failure to observe or perform, in any material respect, any other covenant contained in the indenture for 90 days after written notice to us from the debenture trustee or to us and the debenture trustee from the holders of at least 25% in aggregate outstanding principal amount of subordinated debentures; or - certain events related to our bankruptcy, insolvency or reorganization. The holders of a majority in aggregate outstanding principal amount of the subordinated debentures have, subject to certain exceptions, the right to direct the time, method and place of conducting any proceeding for any remedy available to the debenture trustee. The debenture trustee or the holders of not less than 25% in aggregate outstanding principal amount of the subordinated debentures may declare the principal due and payable immediately upon a debenture event of default. The holders of a majority in aggregate outstanding principal amount of the subordinated debentures may annul this declaration and waive the default if the default (other than the non-payment of the principal of the subordinated debentures which has become due solely by such acceleration) has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the debenture trustee. The holders of a majority in aggregate outstanding principal amount of the subordinated debentures affected may, on behalf of the holders of all the subordinated debentures, waive any past default, except a default in the payment of principal (or premium, if any) or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal (and premium, if any) due otherwise than by acceleration has been deposited with the debenture 54 trustee) or a default in respect of a covenant or provision which under the indenture cannot be modified or amended without the consent of the holder of each outstanding subordinated debenture. The indenture requires that we file with the debenture trustee a certificate annually as to the absence of defaults specified under the indenture. The indenture provides that the debenture trustee may withhold notice of a debenture event of default from the holders of the subordinated debentures if the debenture trustee considers it in the interest of the holders to do so. ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES If a debenture event of default exists that is attributable to our failure to pay the principal of (or premium, if any) or interest (including compounded interest and additional sums, if any) on the subordinated debentures on the due date, a holder of capital securities may institute a direct action. We may not amend the indenture to remove this right to bring a direct action without the prior written consent of the holders of all of the capital securities. Notwithstanding any payments that we make to a holder of capital securities in connection with a direct action, we shall remain obligated to pay the principal of (or premium, if any) or interest (including compounded interest and additional sums, if any) on the subordinated debentures, and we shall be subrogated to the rights of the holder of the capital securities with respect to payments on the capital securities to the extent that we make any payments to a holder in any direct action. The holders of the capital securities will not be able to exercise directly any remedies, other than those described in the above paragraph, available to the holders of the subordinated debentures, unless an event of default exists under the trust agreement. See "Description of Capital Securities--Events of Default; Notice." CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS The indenture provides that we will not consolidate with or merge into any other person or convey, transfer or lease all or substantially all of our properties to any person, and no person shall consolidate with or merge into us or convey, transfer or lease all or substantially all of its properties to us, unless: - in case we consolidate with or merge into another person or convey or transfer all or substantially all of our properties to any person, the successor is organized under the laws of the United States or any state or the District of Columbia, and the successor expressly assumes our obligations under the indenture with respect to the subordinated debentures; - immediately after giving effect to the transaction, no debenture event of default, and no event which, after notice or lapse of time or both, would become a debenture event of default, exists; and - certain other conditions as prescribed in the indenture are met. The general provisions of the indenture do not afford holders of the subordinated debentures protection in the event of a highly leveraged or other transaction that we may become involved in that may adversely affect holders of the subordinated debentures. SATISFACTION AND DISCHARGE The indenture provides that when, among other things, 55 - all subordinated debentures not previously delivered to the debenture trustee for cancellation have become due and payable or will become due and payable at maturity or called for prepayment within one year, and - we deposit or cause to be deposited with the debenture trustee funds, in trust, for the purpose and in an amount sufficient to pay and discharge the entire indebtedness on the subordinated debentures not previously delivered to the debenture trustee for cancellation, for the principal (and premium, if any) and interest (including compounded interest and additional sums, if any) to the date of the prepayment or to , 2029, as the case may be, then the indenture will cease to be of further effect (except as to our obligations to pay all other sums due pursuant to the indenture and to provide the officers' certificates and opinions of counsel), and we will be deemed to have satisfied and discharged the indenture. SUBORDINATION We have promised that any subordinated debentures issued under the indenture will be ranked junior to all senior indebtedness to the extent provided in the indenture. Upon any payment or distribution of our assets to creditors upon our liquidation, dissolution, winding up, reorganization, assignment for the benefit of our creditors, marshaling of our assets or any bankruptcy, insolvency, debt restructuring or similar proceedings in connection with any insolvency or bankruptcy proceeding of us, the senior indebtedness must be paid in full before the holders of the subordinated debentures will be entitled to receive or retain any payment in respect thereof. If the maturity of subordinated debentures is accelerated, the holders of all senior indebtedness outstanding at such time will first be entitled to receive payment in full of such senior indebtedness before the holders of subordinated debentures will be entitled to receive or retain any payment in respect of the principal of (or premium, if any) or interest, if any, on the subordinated debentures. No payments on account of principal (or premium, if any) or interest, if any, in respect of the subordinated debentures may be made if there is a default in any payment with respect to senior indebtedness, or an event of default exists with respect to any senior indebtedness that accelerates the maturity of the senior indebtedness, or if any judicial proceeding shall be pending with respect to the default. Indebtedness for money borrowed means any obligation of or any obligation guaranteed by us, to repay borrowed money, whether or not evidenced by bonds, debentures, notes or other written instruments; except that indebtedness for money borrowed does not include trade accounts payable or accrued liabilities arising in the ordinary course of business. Indebtedness ranking on a parity with the subordinated debentures means: - indebtedness for money borrowed, whether outstanding on the date the indenture is executed or created, assumed or incurred after the date that the indenture is executed, to the extent the indebtedness for money borrowed by its terms ranks equal to and not prior to the subordinated debentures in the right of payment upon the happening of our dissolution, winding-up, liquidation or reorganization and - all other debt securities, and guarantees in respect of those debt securities, issued to any trust other than Haven Capital, or a trustee of the trust, partnership or other entity affiliated with us, that is our financing vehicle (a "financing entity"), in connection with the issuance by the financing entity of equity securities or other securities guaranteed by us pursuant to an instrument that ranks equal to, with or junior to the guarantee, including, without limitation, our 10.46% junior subordinated deferrable interest debentures due 2027 and the guarantee issued with respect to the capital securities of Haven Capital Trust I. The securing of any indebtedness 56 otherwise constituting indebtedness ranking on a parity with the subordinated debentures shall not be deemed to prevent such indebtedness from constituting indebtedness ranking on a parity with the subordinated debentures. Indebtedness ranking junior to the subordinated debentures means any indebtedness for money borrowed, whether outstanding on the date the indenture is executed or created, assumed or incurred after the date the indenture is executed, to the extent the indebtedness for money borrowed by its terms ranks junior to and not equal to or prior to the subordinated debentures (and any other indebtedness ranking on a parity with the subordinated debentures) in right of payment upon the happening of our dissolution or winding-up or liquidation or reorganization. The securing of any indebtedness for money borrowed otherwise constituting indebtedness ranking junior to the subordinated debentures shall not be deemed to prevent the indebtedness for money borrowed from constituting indebtedness ranking junior to the subordinated debentures. Senior indebtedness means all indebtedness for money borrowed, whether outstanding on the date the indenture is executed or created, assumed or incurred after the date the indenture is executed, except indebtedness ranking on a parity with the subordinated debentures or indebtedness ranking junior to the subordinated debentures, and any deferrals, renewals or extensions of the senior indebtedness. For more information regarding the regulatory limitations applicable to dividends and other payments by the Bank, you should read "Risk Factors--Risks related to your investments in the capital securities--Banking laws and regulations limit Haven's access to funds, which may prevent Haven from making payments under the subordinated debentures." GOVERNING LAW The indenture and the subordinated debentures will be governed by and construed in accordance with the laws of the State of New York, without regard to conflict of law principles. INFORMATION CONCERNING THE DEBENTURE TRUSTEE The debenture trustee will have and be subject to all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. Subject to these provisions, the debenture trustee is not obligated to exercise any of the powers vested in it by the indenture at the request of any holder of subordinated debentures, unless offered reasonable indemnity by the holder against the costs, expenses and liabilities which might be incurred thereby. The debenture trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties under the indenture if the debenture trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. 57 DESCRIPTION OF GUARANTEE THE GUARANTEE WILL BE EXECUTED AND DELIVERED BY HAVEN AT THE SAME TIME AS THE CAPITAL SECURITIES. THE CHASE MANHATTAN BANK WILL ACT AS GUARANTEE TRUSTEE UNDER THE GUARANTEE TO COMPLY WITH THE TRUST INDENTURE ACT. THE GUARANTEE WILL BE QUALIFIED AS AN INDENTURE UNDER THE TRUST INDENTURE ACT. THIS SUMMARY OF THE MATERIAL PROVISIONS OF THE GUARANTEE IS NOT COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY, THE GUARANTEE AND THE TRUST INDENTURE ACT. THE FORM OF THE GUARANTEE HAS BEEN FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS PART. THE GUARANTEE TRUSTEE WILL HOLD THE GUARANTEE FOR THE BENEFIT OF THE HOLDERS OF THE CAPITAL SECURITIES. GENERAL We will irrevocably agree to pay in full on a subordinated basis, to the extent set forth herein, the payments with respect to the capital securities to the extent not paid by Haven Capital. The payments that will be subject to the guarantee are: - any accumulated and unpaid distributions required to be paid on the capital securities, to the extent that Haven Capital has funds legally available at that time; - the applicable redemption price with respect to the capital securities called for redemption, to the extent that Haven Capital has funds legally available at that time; and - upon a voluntary or involuntary dissolution, winding-up or liquidation of Haven Capital (other than in connection with the distribution of the subordinated debentures to holders of the capital securities or the redemption of all capital securities), the lesser of (a) the liquidation distribution, to the extent Haven Capital has funds legally available at that time, and (b) the amount of assets of Haven Capital remaining available for distribution to holders of capital securities after satisfying the liabilities owed to Haven Capital's creditors as required by applicable law. The guarantee will rank subordinate and junior to all senior indebtedness to the extent provided in the guarantee. See "--Status of the Guarantee." Our obligation to make a guarantee payment may be satisfied by our direct payment of the required amounts to the holders of the capital securities or by causing Haven Capital to pay these amounts to the holders of the capital securities. The guarantee will be an irrevocable guarantee on a subordinated basis of Haven Capital's obligations under the capital securities, but will apply only to the extent that Haven Capital has funds sufficient to make these payments. If we do not make interest payments on the subordinated debentures held by Haven Capital, Haven Capital will not be able to pay you distributions on the capital securities and will not have funds legally available. Please refer to the "Relationship Among the Capital Securities, the Subordinated Debentures and the Guarantee" section of this prospectus. The guarantee does not limit us from incurring or issuing other secured or unsecured debt, including senior indebtedness, whether under the indenture, any other indenture that we may enter into in the future or otherwise. The holders of at least a majority in aggregate liquidation amount of the capital securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the guarantee trustee in respect of our guarantee or to direct the exercise of any trust power conferred upon the guarantee trustee under our guarantee. Any holder of the capital securities may institute a legal proceeding directly against us to enforce their rights under the guarantee without first instituting a legal proceeding against Haven Capital, the guarantee trustee or any other person or entity. If we default on our obligation to pay amounts payable under the subordinated debentures, Haven Capital will lack funds for the payment of distributions or amounts payable on redemption of the capital securities or otherwise, and the holders of the capital securities will not be able to rely upon the 58 guarantee for payment of such amounts. Instead, if a debenture event of default exists that is attributable to our failure to pay principal of (or premium, if any) or interest on the subordinated debentures on a payment date, then any holder of capital securities may institute a direct action against us pursuant to the terms of the indenture for enforcement of payment to that holder of the principal of (or premium, if any) or interest on such subordinated debentures having a principal amount equal to the aggregate liquidation amount of the capital securities of that holder. In connection with a direct action, we will have a right of set-off under the indenture to the extent that we made any payment to the holder of capital securities in the direct action. Except as described herein, holders of capital securities will not be able to exercise directly any other remedy available to the holders of the subordinated debentures or assert directly any other rights in respect of the subordinated debentures. The trust agreement provides that each holder of trust securities by accepting the trust securities agrees to the provisions of the guarantee and the indenture. We will, through our guarantee, the trust agreement, the subordinated debentures and the indenture, taken together, fully, irrevocably and unconditionally guarantee all of Haven Capital's obligations under the capital securities. No single document standing alone, or operating in conjunction with fewer than all of the other documents, constitutes that guarantee. Only the combined operation of these documents provides a full, irrevocable and unconditional guarantee of Haven Capital's obligations under the capital securities. You should refer to "Relationship Among the Capital Securities, the Subordinated Debentures and the Guarantee" for more information about our guarantee. STATUS OF THE GUARANTEE Our guarantee will constitute an unsecured obligation and will rank subordinate and junior to all senior indebtedness in the same manner as the subordinated debentures. See "Description of Subordinated Debentures--Subordination." In addition, because we are a holding company, our right to participate in any distribution of the Bank's assets upon the Bank's liquidation or reorganization or otherwise is subject to the prior claims of the Bank's creditors (including its depositors), except to the extent we may be recognized as a creditor of the Bank. Accordingly, our obligations under the guarantee effectively will be subordinated to all existing and future liabilities of our present and future subsidiaries (including depositors of the Bank). As a result, claimants should look only to our assets for payments under the guarantee. See "Description of Subordinated Debentures--General." Our guarantee will rank equal to all of our other guarantees with respect to preferred beneficial interests issued by other trusts, including our guarantee of the capital securities issued by Haven Capital Trust I. Our guarantee of Haven Capital's capital securities does not limit the amount of secured or unsecured debt, including senior indebtedness, that we or any of our subsidiaries may incur. We expect from time to time that we will incur additional indebtedness and that our subsidiaries will also incur additional liabilities. Our guarantee will constitute a guarantee of payment and not of collection, enabling the guaranteed party to institute a legal proceeding directly against us to enforce their rights under the guarantee without first instituting a legal proceeding against any other person or entity. Our guarantee will be held for the benefit of the holders of the capital securities. Our guarantee will not be discharged, except by payment of the guarantee payments in full to the extent that Haven Capital has not paid, or upon distribution of the subordinated debentures to, the holders of the capital securities. EVENTS OF DEFAULT There will be an event of default under the guarantee if we fail to perform any of our payment or other obligations under the guarantee; except that with respect to a default in payment of any guarantee payment, we shall have received notice of default and shall not have cured the default within 60 days after receipt of the notice. The holders of at least a majority in liquidation amount of the capital securities will have the right to direct the time, method and place of conducting any proceeding 59 for any remedy available to the guarantee trustee in respect of our guarantee or to direct the exercise of any trust or power conferred upon the guarantee trustee under our guarantee. Any holder of the capital securities may institute a legal proceeding directly against us to enforce the rights of the holders of the capital securities under the guarantee without first instituting a legal proceeding against Haven Capital, the guarantee trustee or any other person or entity. We, as guarantor, will be required to file annually with the guarantee trustee a certificate regarding our compliance with the applicable conditions and covenants under our guarantee. AMENDMENTS AND ASSIGNMENT Except with respect to any changes that do not materially adversely affect the rights of holders of the capital securities (in which case no vote will be required), the guarantee may not be amended without the prior approval of the holders of a majority of the liquidation amount of such outstanding capital securities. You should read "Description of Capital Securities--Voting Rights; Amendment of the Trust Agreement" for more information about the manner of obtaining the holders' approval. All guarantees and agreements contained in the guarantee agreement shall bind our successors, assigns, receivers, trustees and representatives and shall inure to the benefit of the holders of the capital securities then outstanding. TERMINATION OF THE GUARANTEE Our guarantee will terminate and be of no further force and effect upon: - full payment of the applicable redemption price of all outstanding capital securities, - full payment of the liquidation amount payable upon liquidation of Haven Capital or - distribution of subordinated debentures to the holders of the capital securities. Our guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of the capital securities must restore payment of any sums paid under the capital securities or the guarantee. INFORMATION CONCERNING THE GUARANTEE TRUSTEE The guarantee trustee, except if we default under the guarantee, will undertake to perform only such duties as are specifically set forth in the guarantee and, in case a default with respect to the guarantee has occurred, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the guarantee trustee will not be obligated to exercise any of the powers vested in it by the guarantee at the request of any holder of the capital securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that it might incur. GOVERNING LAW The guarantee will be governed by and construed in accordance with the laws of the State of New York, without regard to conflict of law principles. 60 RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE SUBORDINATED DEBENTURES AND THE GUARANTEE FULL AND UNCONDITIONAL GUARANTEE TO THE EXTENT THAT HAVEN CAPITAL HAS FUNDS LEGALLY AVAILABLE TO PAY DISTRIBUTIONS We will irrevocably guarantee payments of distributions and other amounts due on the capital securities to the extent Haven Capital has funds legally available to pay distributions as and to the extent set forth under "Description of Guarantee." Taken together, our obligations under the subordinated debentures, the indenture, the trust agreement and the guarantee will provide, a full, irrevocable and unconditional guarantee of Haven Capital's payments of distributions and other amounts due on the capital securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes this guarantee. Only the combined operation of these documents effectively provides a full, irrevocable and unconditional guarantee of Haven Capital's obligations under the capital securities. If and to the extent that we do not make the required payments on the subordinated debentures, Haven Capital will not have sufficient funds to make its related payments, including distributions on the capital securities. Our guarantee will not cover any payments when Haven Capital does not have sufficient funds legally available to make those payments. Your remedy, as a holder of capital securities, is to institute a direct action. Our obligations under the guarantee will be subordinate and junior to all senior indebtedness. SUFFICIENCY OF PAYMENTS As long as we pay the interest and other payments when due on the subordinated debentures, Haven Capital will have sufficient funds to cover distributions and other payments due on the capital securities, primarily because: - the aggregate principal amount or prepayment price of the subordinated debentures will equal the sum of the liquidation amount or redemption price, as applicable, of the trust securities; - the interest rate and interest payment dates and other payment dates on the subordinated debentures will match the distribution rate and distribution payment dates and other payment dates for the trust securities; - as sponsor, we will pay for all and any costs, expenses and liabilities of Haven Capital, except for Haven Capital's obligations to holders of trust securities; and - the trust agreement also provides that Haven Capital is not authorized to engage in any activity that is not consistent with its limited purposes. ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES You, as holder of capital securities, may institute a legal proceeding directly against us to enforce your rights under our guarantee without first instituting a legal proceeding against the guarantee trustee, Haven Capital or any other person or entity. A default or event of default under any senior indebtedness would not constitute a default or event of default under the trust agreement. However, if there are payment defaults under, or accelerations of, senior indebtedness, the subordination provisions of the indenture provide that we cannot make payments in respect of the subordinated debentures until we have paid the senior indebtedness in full or we have cured any payment default or a payment default has been waived. Our failure to make required payments on subordinated debentures would constitute an event of default under the trust agreement. 61 LIMITED PURPOSE OF HAVEN CAPITAL The capital securities will represent beneficial interests in Haven Capital, and Haven Capital exists for the sole purpose of issuing and selling the trust securities, using the proceeds from the sale of the trust securities to acquire our subordinated debentures and engaging in only those other activities necessary, advisable or incidental thereto. A principal difference between the rights of a holder of a capital security and a holder of a subordinated debenture is that a holder of a subordinated debenture will be entitled to receive from us the principal amount of (and premium, if any) and interest on subordinated debentures held, while a holder of capital securities is entitled to receive distributions from Haven Capital (or, in certain circumstances, from us under our guarantee) if and to the extent Haven Capital has funds legally available to pay the distributions. RIGHTS UPON DISSOLUTION Unless the subordinated debentures are distributed to holders of the trust securities, if Haven Capital is voluntarily or involuntarily dissolved, wound-up or liquidated, after satisfying the liabilities owed to Haven Capital's creditors as required by applicable law, the holders of the trust securities will be entitled to receive, out of assets held by Haven Capital, the liquidation distribution in cash. See "Description of Capital Securities--Liquidation of Haven Capital and Distribution of Subordinated Debentures." If we are voluntarily or involuntarily liquidated or bankrupted, the property trustee, as holder of the subordinated debentures, would be one of our subordinated creditors, subordinated in right of payment to all senior indebtedness, but entitled to receive payment in full of principal (and premium, if any) and interest, before any of our stockholders receive payments or distributions. Since we will be the guarantor under the guarantee and will agree to pay all costs, expenses and liabilities of Haven Capital (other than Haven Capital's obligations to the holders of its trust securities), the positions of a holder of capital securities and a holder of subordinated debentures relative to other creditors and to our stockholders in the event of our liquidation or bankruptcy are expected to be substantially the same. CERTAIN FEDERAL INCOME TAX CONSEQUENCES GENERAL In the opinion of Thacher Proffitt & Wood, special federal income tax counsel to us and Haven Capital, the following describes the material U.S. federal income tax consequences of the purchase, ownership and disposition of a capital security. This summary addresses only the tax consequences to a person that acquires a capital security on its original issuance at its original issue price and that holds the security as a capital asset. This summary does not address all tax consequences that may be applicable to a beneficial owner of a capital security and does not address the tax consequences to holders subject to special tax regimes (like banks, thrifts, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, tax-exempt investors or persons that will hold a capital security as a position in a "straddle," as part of a "synthetic security" or "hedge" or as part of a "conversion transaction" or other integrated investment). This summary does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may apply to a capital security. Except as noted below in the discussion of Non-U.S. Holders, this discussion is addressed to a U.S. Holder, which is defined as a beneficial owner of a capital security that, for U.S. federal income tax purposes, is (or is treated as) (1) a citizen or individual resident of the United States, 62 (2) a corporation or partnership (or entity treated for federal income tax purposes as a corporation or partnership) created or organized in or under the laws of the United States or any political subdivision thereof, (3) an estate the income of which is includible in gross income for U.S. federal income tax purposes without regard to its source, or (4) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the ability to control all substantial decisions of the trust. This summary does not address the tax consequences to any shareholder, partner or beneficiary of a holder of a capital security. This summary is based on the Code, Treasury regulations thereunder and the administrative and judicial interpretations thereof, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. An opinion of Thacher Proffitt & Wood is not binding on the IRS or the courts. No rulings have been or are expected to be sought from the IRS with respect to any of the matters described herein. We can give no assurance that the opinions expressed herein will not be challenged by the IRS or, if challenged, that the challenge will not be successful. CLASSIFICATION OF THE SUBORDINATED DEBENTURES We intend to take the position that the subordinated debentures will be classified for U.S. federal income tax purposes as our indebtedness. Thacher Proffitt & Wood will render its opinion that, under then current law, based on the representations, facts and assumptions set forth in this prospectus and certain assumptions and qualifications referenced in the opinion, and assuming full compliance with the terms of the indenture (and other relevant documents), the subordinated debentures will be characterized for U.S. federal income tax purposes as our indebtedness. We, together with Haven Capital and the holders of the capital securities (by acceptance of a beneficial interest in a capital security) will agree to treat the subordinated debentures as our indebtedness for all U.S. federal income tax purposes. We cannot be sure that this position will not be challenged by the IRS or, if challenged, that the challenge will not be successful. The remainder of this discussion assumes that the subordinated debentures will be classified as our indebtedness for U.S. federal income tax purposes. CLASSIFICATION OF HAVEN CAPITAL In connection with the issuance of the capital securities, Thacher Proffitt & Wood will render its opinion that, under then current law and assuming full compliance with the terms of the trust agreement and the indenture (and certain other documents), and based on certain facts and assumptions contained in that opinion, Haven Capital will not be classified for U.S. federal income tax purposes as an association taxable as a corporation. Accordingly, for U.S. federal income tax purposes, Haven Capital will not be subject to U.S. federal income tax, and each holder of a capital security will be required to include in its gross income any interest (or accrued original issue discount) with respect to its allocable share of the subordinated debentures. INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT Under the indenture, we have the right to defer the payment of interest on the subordinated debentures at any time or from time to time for one or more deferral periods not exceeding 20 consecutive quarterly periods each, provided that no deferral period shall end on a date other than an interest payment date or extend beyond , 2029. By reason of that right, the Treasury regulations will subject the subordinated debentures to the rules in the Code and Treasury regulations on debt instruments issued with original issue discount (the "OID Rules"), unless the indenture or subordinated debentures contain terms or conditions that make the likelihood of exercise of the deferral option remote. Under the Treasury regulations, a "remote" contingency that stated interest will not be timely 63 paid will be ignored in determining whether a debt instrument is issued with original issue discount. Although there is no authority directly on point, we believe that the likelihood that we would exercise our option to defer payments of interest is "remote" since exercising that option would, among other things, prevent us from declaring dividends on any class of our equity securities. Accordingly, we intend to take the position that the subordinated debentures will not be considered to be issued with original issue discount and, accordingly, stated interest on the subordinated debentures generally will be taxable to a holder as ordinary income at the time it is paid or accrued in accordance with such holder's method of accounting. Under the Treasury regulations, if we were to exercise our option to defer payments of interest, the subordinated debentures would at that time be treated as issued with original issue discount, and all stated interest on the subordinated debentures would thereafter be treated as original issue discount as long as the subordinated debentures remain outstanding. If this occurred, all of a holder's interest income with respect to the subordinated debentures would thereafter be accounted for on an economic accrual basis regardless of such holder's method of tax accounting, and actual distributions of stated interest would not be reported as taxable income. Consequently, a holder of a capital security would be required to include in gross income original issue discount even though we would not make actual cash payments during a deferral period. The amount of such includible original issue discount could be significant. Also, under the Treasury regulations, if the option to defer the payment of interest were determined not to be "remote," the subordinated debentures would be treated as having been originally issued with original issue discount. In such event, a holder would be required to include in gross income an amount of original issue discount each taxable year that approximates the amount of interest that accrues on the subordinated debentures at the stated interest rate, regardless of such holder's method of tax accounting, and actual cash payments of interest on the subordinated debentures would not be separately includible in gross income. These Treasury regulations have not yet been addressed in any rulings or other interpretations by the IRS, and it is possible that the IRS could take a position contrary to the interpretation described herein. Because income on the capital securities will constitute interest or original issue discount, corporate holders of the capital securities will not be entitled to a dividends-received deduction with respect to any income recognized with respect to the capital securities. RECEIPT OF SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF HAVEN CAPITAL We will have the right at any time to liquidate Haven Capital and cause the subordinated debentures to be distributed to the holders of the trust securities. Under current law, the liquidation of Haven Capital and the distribution of the subordinated debentures to trust security holders, for U.S. federal income tax purposes, would be treated as a nontaxable event to each holder, and the aggregate tax basis of each holder in the subordinated debentures received by such holder would be equal to the holder's aggregate tax basis in those capital securities surrendered. A holder's holding period in the subordinated debentures received in liquidation of Haven Capital would be no shorter than the period during which the capital securities were held by that holder. The subordinated debentures may be prepaid in cash, and the proceeds of that prepayment would be distributed to holders in redemption of their capital securities. Under current law, that redemption would constitute, for U.S. federal income tax purposes, a taxable disposition of the redeemed capital securities, the tax consequences of which are described below under "--Sales or Redemptions of Capital Securities." SALES OR REDEMPTIONS OF CAPITAL SECURITIES On a sale or redemption of a capital security for cash, a holder will recognize gain or loss equal to the difference between its adjusted tax basis in the capital security and the amount realized on the sale 64 or redemption of that capital security. If the rules regarding original issue discount do not apply, a holder's adjusted basis in a capital security generally will be its initial purchase price, and if the holder uses an accrual method of accounting, the holder will have a basis in any accrued but unpaid interest. If the rules regarding original issue discount apply, a holder's adjusted basis in a capital security generally will be its initial purchase price increased by any original issue discount previously included in the holder's gross income to the date of disposition and decreased by any payments received on the capital security. Gain or loss recognized on a sale or redemption of a capital security will be capital gain or loss. Capital gain recognized by an individual in respect of a capital security held for more than one year as of the date of sale or redemption is subject to a maximum U.S. federal income tax rate of 20 percent. The capital securities may trade at a price that discounts any accrued but unpaid interest on the subordinated debentures. Therefore, the amount realized by a holder who disposes of a capital security between distribution payment dates and whose adjusted basis in the capital security has been increased by the amount of any accrued but unpaid original issue discount (or interest) may be less than the holder's adjusted basis in the capital security. A holder's basis in a capital security could be increased either under the rules regarding original issue discount or, if those rules do not apply, in the case of a holder that uses an accrual method of accounting, under the accrual accounting rules. In that case, the holder will recognize a capital loss. Subject to a limited exception in the case of individual taxpayers, capital losses cannot be applied to offset ordinary income for U.S. federal income tax purposes. NON-U.S. HOLDERS For purposes of this discussion, a "Non-U.S. Holder" generally is any corporation, individual, partnership, estate or trust that is not a U.S. Holder for U.S. federal income tax purposes. Under current U.S. federal income tax laws, subject to the discussion below of backup withholding, payments by Haven Capital or any of its paying agents to a Non-U.S. Holder will not be subject to U.S. federal withholding tax, provided that (a) the Non-U.S. Holder does not own, actually or constructively, ten percent or more of the total combined voting power of all classes of our stock entitled to vote, (b) the Non-U.S. Holder is not a controlled foreign corporation that is related to us through stock ownership, (c) the Non-U.S. Holder is not a bank whose receipt of interest on the subordinated debentures is described in Section 881(c)(3)(A) of the Code, and (d) either (A) the Non-U.S. Holder certifies to Haven Capital or its agent, under penalties of perjury, that it is not a U.S. Holder and provides its name and address or (B) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of business (a "Financial Institution") and holds the capital security in that capacity certifies to Haven Capital or its agent, under penalties of perjury, that the statement has been received from the Non-U.S. Holder by it or by a Financial Institution between it and the Non-U.S. Holder and furnishes Haven Capital or its agent with a copy thereof. New Treasury regulations provide alternative methods for satisfying the certification requirements described in clause (1)(d), effective for certain payments made after December 31, 1999. If a Non-U.S. Holder is engaged in a trade or business in the United States and interest on the capital securities (or the subordinated debentures) is effectively connected with the conduct of that trade or business, the Non-U.S. Holder, although exempt from the withholding tax discussed above, will be subject to U.S. federal income tax on that interest on a net income basis in generally the same manner as if it were a U.S. Holder. In addition, if such Non-U.S. Holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits that are repatriated or treated as repatriated. For this purpose, the interest income would be included in the foreign corporation's earnings and profits. In the case of a Non-U.S. Holder entitled to the benefits of a tax treaty with the United States, the foregoing discussion generally applies only if the Non-U.S. Holder is engaged in business in the United States through a U.S. permanent establishment and the income on the subordinated debentures is attributable to that permanent establishment within 65 the meaning of the treaty, and the rate of the branch profits tax may be limited to a rate prescribed by the treaty for the withholding of tax on dividends. New final Treasury regulations generally prescribe new methods for certifying that a Non-U.S. Holder is exempt from the withholding of U.S. federal income tax by reason of being engaged in trade or business in the United States. Any gain recognized upon a sale or other disposition of capital securities (or subordinated debentures) generally will not be subject to U.S. federal income tax unless (1) the gain is, or is treated as, effectively connected with a U.S. trade or business of the Non-U.S. Holder or (2) in the case of a Non-U.S. Holder who is an individual, that individual is present in the United States for 183 days or more in the taxable year of the sale or other disposition, and certain other conditions are met. BACKUP WITHHOLDING TAX AND INFORMATION REPORTING The amount of interest, including original issue discount, accrued on capital securities held of record by U.S. persons (other than corporations and other exempt holders) will be reported to the IRS. "Backup" withholding at a rate of 31% will apply to payments of interest to non-exempt U.S. persons unless the holder furnishes its taxpayer identification number in the manner prescribed in applicable Treasury regulations, certifies that the number is correct, certifies as to no loss of exemption from backup withholding and meets certain other conditions. Payment of the proceeds from the disposition of capital securities to or through the United States office of a broker is subject to information reporting and backup withholding unless the holder or beneficial owner establishes an exemption from information reporting and backup withholding. Non-U.S. Holders are generally exempt from the information reporting and backup withholding rules but may be required to comply with certain certification and identification requirements to prove their exemption. Any amount withheld from a holder under the backup withholding rules will be allowed as a refund or a credit against such holder's U.S. federal income tax liability, provided the required information is furnished to the IRS. It is anticipated that income on capital securities will be reported to holders on Form 1099 and mailed to holders of capital securities by January 31 following each calendar year. THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. YOU SHOULD CONSULT YOUR TAX ADVISER WITH RESPECT TO THE TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF A CAPITAL SECURITY, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN U.S. FEDERAL OR OTHER TAX LAWS. ERISA CONSIDERATIONS The primary purpose of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") is to protect the interests of participants in employee benefit plans by mandating standards of conduct, obligations and responsibilities for the people who serve as the fiduciaries of these plans. A person will be considered to be a fiduciary with respect to an employee benefit plan under ERISA to the extent that he or she exercises discretionary authority over the management or the investment of the plan's assets. Accordingly, before investing the assets of an employee benefit plan in capital securities, a fiduciary will be required to determine whether the investment satisfies the prudence and diversification requirements of ERISA and whether the investment, itself, is permitted under the plan's governing documents. 66 Section 406 of ERISA and Section 4975 of the Code prohibit plans, as well as individual retirement accounts and Keogh plans subject to Section 4975 of the Code, from engaging in certain transactions involving "plan assets" with persons who are "parties-in-interest" under ERISA or "disqualified persons" under the Code with respect to the plan. Violation of the "prohibited transaction" rules will result in the imposition of an excise tax or other liabilities on the "parties-in-interest" or the "disqualified persons," as applicable, unless exemptive relief is available under a statutory or administrative exemption. Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and foreign plans (as described in Section 4(b)(4) of ERISA) are not subject to the requirements of ERISA or Section 4975 of the Code; however, governmental plans may be subject to similar provisions under applicable state laws. The U.S. Department of Labor has issued special regulations governing certain investments by employee benefits plans covered by ERISA. These regulations are known as the "Plan Asset Regulations." Under these Regulations, the assets of Haven Capital will be deemed to be the assets of the employee benefit plan for purposes of ERISA and Section 4975 of the Code if the plan's assets are used to acquire an equity interest in Haven Capital and no exception under the Plan Asset Regulations applies to the transaction. An "equity interest" is defined in the Plan Asset Regulations to specifically include a beneficial interest in a trust such as Haven Capital. The Plan Asset Regulations do, however, contain certain exceptions to this general rule. Under one exception, the assets of Haven Capital will not be deemed to be the "plan assets" of the investing plans if, at all times, less than 25% of the value of each class of equity interest in Haven Capital is held by all employee benefit plans, including, for this purpose, employee benefit plans not subject to ERISA or Section 4975 of the Code, such as governmental, church and foreign plans, and any other plans whose assets qualify as "plan assets" under the Plan Asset Regulations (collectively, the "Benefit Plan Investors"). Alternatively, the assets of Haven Capital will not be deemed to be "plan assets" of the investing plans if the capital securities constitute "publicly-offered securities" within the meaning of the Plan Asset Regulations. Potential employee benefit plan investors should be aware that although these exceptions exist, we cannot give plan investors any assurance that the capital securities held by Benefit Plan Investors will be less than 25% of the total value of the capital securities either at the completion of this offering or at any subsequent time. In addition, no assurance can be given that the capital securities offered in this Prospectus constitute "publicly-offered securities" within the meaning of the Plan Asset Regulations. We will purchase and initially hold all of the common securities of Haven Capital. By operation of the Plan Asset Regulations, certain transactions involving Haven Capital and an employee benefit plan may be deemed to constitute direct or indirect prohibited transactions under ERISA and Section 4975 of the Code. A direct or indirect prohibited transaction may occur if the assets of Haven Capital are deemed to be the "plan assets" of the plan investing in Haven Capital. For example, if we were a party- in-interest with respect to a plan (either directly or by reason of its ownership of the Bank or other subsidiaries), an extension of credit between us and Haven Capital (as represented by the subordinated debentures and the guarantee) would occur which is likely to be prohibited by Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the Code, unless exemptive relief is available. In addition, if we qualify as a fiduciary with respect to Haven Capital as a result of certain powers it holds under the Trust Indenture (such as the powers to remove and replace the property trustee and the administrative trustees), it is possible that the optional redemption or acceleration of the subordinated debentures would be considered to be prohibited transactions under Section 406(b) of ERISA and Section 4975(c)(1)(E) of the Code. In order to avoid engaging in these prohibited transactions, each investing plan, by purchasing capital securities, will be deemed to have directed Haven Capital to invest in the subordinated debentures and to have appointed the property trustee. 67 The DOL has issued five separate prohibited transaction class exemptions ("PTCEs") that may provide exemptive relief to an employee benefit plan for direct or indirect prohibited transactions that may arise from the purchase or holding of the capital securities. The available PTCE's include: - PTCE 96-23 which may be applicable for certain transactions involving in-house asset managers; - PTCE 95-60 which may be applicable for certain transactions involving insurance company general accounts; - PTCE 91-38 which may be applicable for certain transactions involving bank collective investment funds; - PTCE 90-1 which may be applicable for certain transactions involving insurance company separate accounts; and - PTCE 84-14 which may be applicable for certain transactions involving independent qualified asset managers. Because the capital securities may be deemed to be equity interests in Haven for us of applying ERISA and Section 4975 of the Code, these capital securities may not be purchased or held by any employee benefit plan ("Plan"), any entity whose underlying assets include "plan assets" by reason of any plan's investment in the entity (a "Plan Asset Entity") or any person investing the "plan assets" of any plan, unless the purchaser or holder is exempt from all of ERISA's prohibited transaction rules because of the relief provided under one of the PTCE's identified above or another applicable exemption. Any purchaser or holder of capital securities (or any interest in such securities) will be deemed to have represented, through the fact of the purchase and holding of the capital securities, that the purchaser either (a) is not a Plan or a Plan Asset Entity and is not purchasing the capital securities on behalf of, or with the "plan assets" of, any Plan or (b) is exempt from ERISA's prohibited transaction rules because of the relief provided under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable exemption. If a Plan or Plan Asset Entity purchases or holds capital securities and elects to rely on an exemption other than PTCE 96-23, 95-60, 91-38, 90-1 or 84-14, we, together with Haven Capital, may require an opinion of legal counsel or other satisfactory evidence that such exemption is available. Due to the complexity of these rules and the penalties that may be imposed on persons involved in non-exempt prohibited transactions, it is critical that Plan fiduciaries consult with legal counsel regarding the consequences that may result if the assets of Haven Capital are deemed to be the "plan assets" of the Plan by operation of the Plan Asset Regulations and the exemptive relief, described above, is not available. 68 UNDERWRITING Subject to the terms and conditions set forth in the underwriting agreement, dated , 1999, we, together with Haven Capital, have agreed that Haven Capital will sell to each of the underwriters named below, and each of such underwriters has severally agreed to purchase from Haven Capital, the respective number of capital securities set forth opposite its name below:
NUMBER OF CAPITAL SECURITIES ---------------- Friedman, Billings, Ramsey & Co., Inc....................................... First Albany Corporation.................................................... Ladenburg Thalmann & Co. Inc................................................ ---------------- Total................................................................... 1,400,000 ---------------- ----------------
Under the terms and conditions of the underwriting agreement, the underwriters are committed to take and pay for all of the capital securities if any are taken. The underwriters propose initially to offer the capital securities in part directly to the public and institutional investors that we have identified at the initial public offering price set forth on the cover page of this prospectus. The underwriters also propose to offer the capital securities in part to several securities dealers at the initial public offering price less a concession of no more than $ for each capital security. The underwriters and dealers may allow and reallow, a concession of no more than $ for each capital security to other brokers and dealers. After the capital securities are released for sale to the public, the initial public offering price and other selling terms may from time to time be varied by the underwriters. No underwriter will execute any transaction in a discretionary account without prior approval of the customer. Because the proceeds from the sale of the capital securities will be used to purchase our subordinated debentures, the underwriting agreement provides that we will pay the underwriters compensation for arranging Haven Capital's investment in our subordinated debentures of $ for each capital security sold in the offering, except we will pay $ for each capital security sold to the institutional investors that we have identified. We and Haven Capital have granted the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an additional capital securities at the initial public offering price set forth on the cover page hereof less underwriting discounts. The underwriters may exercise such option to purchase additional capital securities solely for the purpose of covering over-allotments, if any, incurred in the sale of the capital securities. If this option is exercised in full, assuming that capital securities are sold to the institutional investor that Haven has identified, total proceeds to Haven Capital will be $ . To the extent that the underwriters exercise their option to purchase additional capital securities, Haven Capital will issue and sell to us additional capital securities and we will issue and sell to Haven Capital our subordinated debentures in an aggregate principal amount equal to the total liquidation amount of the additional capital securities being purchased pursuant to the option and the additional capital securities. We, together with Haven Capital, have agreed that, for a period of 180 days from the date of the underwriting agreement, we together with Haven Capital, will not offer, sell, contract to sell or otherwise dispose of, any other beneficial interests in the assets of Haven Capital, or any preferred securities or any other securities of Haven Capital or of us which are substantially similar to the capital securities, including any guarantee of these securities, or any securities convertible into or exchangeable for or representing the right to receive preferred securities or any such substantially similar securities of 69 either Haven Capital or of us, without the prior written consent of the underwriters, except for the capital securities offered in connection with this offering. Prior to the offering, there has been no public market for the capital securities. Although the underwriters have indicated to us and to Haven Capital that they intend to make a market in the capital securities, they are not obligated to do so and may discontinue any such market-making activities at any time without notice. No assurance can be given as to the liquidity of the trading markets for the capital securities. We, together with Haven Capital, have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act. It is expected that delivery of the capital securities will be made in book-entry form only through the facilities of DTC in New York, New York against payment therefor on or about , 1999, as agreed upon by us, Haven Capital and the underwriters in accordance with Rule 15c6-1 under the Exchange Act. Certain of the underwriters or their affiliates have provided from time to time, and expect to provide in the future, investment services to us and our affiliates, for which such underwriters or their affiliates have received or will receive customary fees and commissions. VALIDITY OF SECURITIES The validity of the capital securities, the guarantee and the subordinated debentures will be passed upon for us by Thacher Proffitt & Wood and for the underwriters by Greenberg Traurig, P.A. Certain matters relating to U.S. federal income tax considerations described in this prospectus will be passed upon for us by Thacher Proffitt & Wood. EXPERTS The consolidated financial statements of Haven as of December 31, 1998 and 1997, and for each of the years in the three year period ended December 31, 1998, incorporated in this prospectus by reference, have been incorporated in reliance upon the report of KPMG LLP, independent auditors, which is incorporated by reference in this prospectus and upon their authority as experts in accounting and auditing. 70 APPENDIX A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------ FORM 10-K --------------- ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMMISSION FILE NO.: 0-21628 ------------------------ HAVEN BANCORP, INC. (exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 11-3153802 (I.R.S. Employer I.D. No.) 615 MERRICK AVENUE, WESTBURY, NEW YORK 11590 (Address of principal executive offices) (516) 683-4100 (Registrant's telephone number, including area code) ------------------------ Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK PAR VALUE $0.01 PER SHARE (Title of class) ------------------------ The registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. /X/ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-1 INDEX
PAGE --------- PART I Item 1. Description of Business....................................................................... 1-48 Business.................................................................................. 1-2 Market Area and Competition............................................................... 2-3 Lending Activities........................................................................ 3-11 Delinquencies and Classified Assets....................................................... 11-15 Allowances for Loan and REO Losses........................................................ 15-18 Investment Activities..................................................................... 18-20 Mortgage-Backed Securities................................................................ 21-26 Sources of Funds.......................................................................... 26-29 Borrowings................................................................................ 30-31 Subsidiary Activities..................................................................... 32-33 Personnel................................................................................. 33 Regulation and Supervision................................................................ 33-44 Federal and State Taxation................................................................ 44-46 Item 2. Properties.................................................................................... 46-48 Item 3. Legal Proceedings............................................................................. 48 Item 4. Submission of Matters to a Vote of Security Holders........................................... 48 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......................... 49 Item 6. Selected Financial Data....................................................................... 50 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 50 Item 7a. Quantitative and Qualitative Disclosures about Market Risk.................................... 50 Item 8. Financial Statements and Supplementary Data................................................... 50 Item 9. Change In and Disagreements with Accountants on Accounting and Financial Disclosure........... 50 PART III Item 10. Directors and Executive Officers of the Registrant............................................ 50 Item 11. Executive Compensation........................................................................ 50-51 Item 12. Security Ownership of Certain Beneficial Owners and Management................................ 51 Item 13. Certain Relationships and Related Transactions................................................ 51 PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K............................. 51-53
A-2 EXHIBIT INDEX The following exhibits are physically filed with this report: Exhibit Change in Control Agreement between Haven Bancorp, Inc. and Mark A. Ricca 10.2(F) Exhibit Change in Control Agreement between CFS Bank and Mark A. Ricca 10.2(G) Exhibit 11.0 Computation of earnings per share Exhibit 13.0 Portions of the 1998 Annual Report to Stockholders Exhibit 23.0 Consent of Independent Auditors Exhibit 27.0 Financial Data Schedule Exhibit 99 Proxy Statement for 1999 Annual Meeting
Additional exhibits are incorporated herein by reference from prior filings of Haven Bancorp, Inc. set forth in Item 14. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Stockholders for the fiscal year ended December 31, 1998, are incorporated by reference into Parts I and II of this Form 10-K. Portions of the Proxy Statement for the 1999 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K. A-3 PART I ITEM 1. DESCRIPTION OF BUSINESS BUSINESS Haven Bancorp, Inc. ("Haven Bancorp" or the "Company") was incorporated under Delaware law on March 25, 1993 as the holding company for CFS Bank ("CFS" or the "Bank") in connection with the Bank's conversion from a federally chartered mutual savings bank to a federally chartered stock savings bank. The Company is a savings and loan holding company and is subject to regulation by the Office of Thrift Supervision ("OTS"), the Federal Deposit Insurance Corporation ("FDIC") and the Securities and Exchange Commission ("SEC"). The Company is headquartered in Westbury, New York and its principal business currently consists of the operation of its wholly owned subsidiary, the Bank. At December 31, 1998, the Company had consolidated total assets of $2.4 billion and stockholders' equity of $119.9 million. Currently, the Company does not transact any material business other than through its subsidiary, the Bank. The Bank was established in 1889 as a New York-chartered building and loan association and converted to a New York-chartered savings and loan association in 1940. The Bank converted to a federally chartered mutual savings bank in 1983. As the Bank expanded its presence in the New York tri-state area it changed its name to CFS Bank in 1997. The Bank is a member of the Federal Home Loan Bank ("FHLB") System, and its deposit accounts are insured to the maximum allowable amount by the FDIC. At December 31, 1998, the Bank had total assets of $2.4 billion and stockholders' equity of $137.2 million. The Bank's principal business has been and continues to be attracting retail deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, primarily in one- to four-family, owner-occupied residential mortgage loans. Since 1994, the Bank has gradually increased its activity in multi-family and commercial real estate lending. In addition, the Bank will invest in debt, equity and mortgage-backed securities to supplement its lending portfolio. Although the Bank has discontinued offering certain consumer loans, during 1998 the Bank also invested in home equity loans, home equity lines of credit and other marketable securities. On May 1, 1998, the Bank completed the purchase of the loan production franchise of Intercounty Mortgage, Inc. The business operates as a division of the Bank under the name CFS Intercounty Mortgage ("IMI") originating and purchasing residential loans for the Bank's portfolio and for sale in the secondary market, primarily through six loan origination offices located in New York, New Jersey and Pennsylvania. Loan sales in the secondary market are primarily on a servicing-released basis, for which the Bank earns servicing-released premiums. On November 2, 1998, the Company purchased 100% of the outstanding common stock of Century Insurance Agency, Inc. The insurance agency operates as a wholly owned subsidiary of the Company under the name CFS Insurance Agency, Inc. ("CIA"), providing automobile, homeowners and casualty insurance to individuals, and various lines of commercial insurance to individuals. The Bank's results of operations are dependent primarily on its net interest income, which is the difference between the interest income earned on its loan and securities portfolios and its cost of funds, which consists of the interest paid on its deposits and borrowed funds. The Bank's net income is also affected by its non-interest income, including, beginning May 1, 1998, the results of the acquisition of the loan production franchise of CFS Intercounty Mortgage, its provision for loan losses and its operating expenses consisting primarily of compensation and benefits, occupancy and equipment, real estate operations, net, federal deposit insurance premiums and other general and administrative expenses. The earnings of the Bank are significantly affected by general economic and competitive conditions, particularly changes in market interest rates, and to a lesser extent by government policies and actions of regulatory authorities. A-4 MARKET AREA AND COMPETITION The Bank has been, and continues to be, a community oriented savings institution offering a variety of traditional financial services to meet the needs of the communities in which it operates. Management considers the Bank's reputation and customer service as its major competitive advantage in attracting and retaining customers in its market area. The Bank's primary market area is concentrated in the neighborhoods surrounding its eight full service banking and fifty-nine supermarket banking facilities located in the New York City boroughs of Queens, Brooklyn, Manhattan and Staten Island, the New York counties of Nassau, Suffolk, Rockland and Westchester and in New Jersey and Connecticut. During 1998, the Bank opened twenty-five supermarket branches. Management believes that supermarket branching is a cost effective way to extend the Bank's franchise and put its sales force in touch with more prospective customers than possible through conventional bank branches. Management believes that all of its branch offices are located in communities that can generally be characterized as stable, residential neighborhoods of predominantly one- to four-family residences and middle income families. During the past five years, the Bank's expanded loan work-out and resolution efforts have successfully contributed toward reducing non-performing assets to manageable levels. Although there are encouraging signs in the local economy and the Bank's real estate markets, it is unclear how these factors will affect the Bank's asset quality in the future. See "Delinquencies and Classified Assets." The New York City metropolitan area has a large number of financial institutions, many of which are significantly larger and have greater financial resources than the Bank, and all of which are competitors of the Bank to varying degrees. The Bank's competition for loans and deposits comes principally from savings and loan associations, savings banks, commercial banks, mortgage banking companies, insurance companies and credit unions. In addition, the Bank faces increasing competition for deposits from non-bank institutions such as brokerage firms and insurance companies in such areas as short-term money market funds, corporate and government securities funds, mutual funds and annuities and insurance. Competition may also increase as a result of the lifting of restrictions on the interstate operations of financial institutions. LENDING ACTIVITIES LOAN PORTFOLIO COMPOSITION. The Bank's loan portfolio consists primarily of conventional first mortgage loans secured by owner occupied one- to four-family residences, and, to a lesser extent, multi-family residences, commercial real estate and construction and land loans. Also, the Bank's loan portfolio includes cooperative loans, which the Bank has not originated since 1990 except to facilitate the sale of real estate owned ("REO") or to restructure a problem asset. During 1998, loan originations and purchases totaled $1.22 billion (comprised of $1.04 billion of residential one- to four-family mortgage loans, $156.8 million of commercial and multi-family real estate loans, $2.8 million of construction loans and $16.4 million of consumer loans). One- to four-family mortgage loan originations included $570.0 million of loans originated and purchased for sale in the secondary market. During 1998, the Bank sold $515.8 million of one- to four-family mortgage loans in the secondary market on a servicing-released basis. At December 31, 1998, the Bank had total mortgage loans outstanding of $1.27 billion, of which $888.6 million were one- to four-family residential mortgage loans, or 67.9% of the Bank's total loans. At that same date, multi-family residential mortgage loans totaled $215.5 million, or 16.5% of total loans. The remainder of the Bank's mortgage loans, included $163.9 million of commercial real estate loans, or 12.5% of total loans, $4.0 million of cooperative apartment loans, or 0.3% of total loans and $2.7 million of construction and land loans, or 0.2% of total loans. Other loans in the Bank's portfolio principally consisted of home equity lines of credit and consumer loans totaling $34.9 million, or 2.7% of total loans at December 31, 1998. A-5 The following table sets forth the composition of the Bank's loan portfolio, excluding loans held for sale, in dollar amounts and in percentages of the respective portfolios at the dates indicated.
AT DECEMBER 31, --------------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ---------------------- ---------------------- ---------------------- ---------------------- --------- PERCENT PERCENT PERCENT PERCENT OF OF OF OF AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT --------- ----------- --------- ----------- --------- ----------- --------- ----------- --------- (DOLLARS IN THOUSANDS) Mortgage loans: One- to four-family... $ 888,610 67.85% $ 805,690 69.93% $ 556,818 65.63% $ 325,050 57.03% $ 258,698 Multi-family.......... 215,542 16.46 143,559 12.46 105,341 12.42 79,008 13.86 94,259 Commercial............ 163,935 12.52 148,745 12.91 127,956 15.08 111,038 19.48 102,415 Cooperative........... 3,970 0.30 19,596 1.70 19,936 2.35 10,187 1.79 24,369 Construction and land................ 2,731 0.20 2,263 0.20 4,227 0.50 5,737 1.01 3,491 --------- ----------- --------- ----------- --------- ----------- --------- ----------- --------- Total mortgage loans.... 1,274,788 97.33 1,119,853 97.20 814,278 95.98 531,020 93.17 483,232 Other loans: Home equity lines of credit.............. 15,173 1.16 15,449 1.34 15,677 1.85 16,454 2.89 17,802 Property improvement loans............... 2,634 0.20 4,392 0.38 6,957 0.82 10,248 1.80 11,814 Loans on deposit accounts............ 957 0.07 895 0.08 809 0.10 821 0.14 940 Commercial loans...... 445 0.03 453 0.04 351 0.04 479 0.08 605 Guaranteed student loans............... 774 0.06 882 0.08 985 0.12 1,181 0.21 1,761 Unsecured consumer loans............... 2,029 0.16 450 0.04 809 0.10 1,950 0.34 2,366 Other loans........... 12,914 0.99 9,770 0.84 8,506 0.99 7,834 1.37 5,737 --------- ----------- --------- ----------- --------- ----------- --------- ----------- --------- Total other loans....... 34,926 2.67 32,291 2.80 34,094 4.02 38,967 6.83 41,025 --------- ----------- --------- ----------- --------- ----------- --------- ----------- --------- Total loans............. 1,309,714 100.00% 1,152,144 100.00% 848,372 100.00% 569,987 100.00% 524,257 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Less: Unearned discounts, premiums and deferred loan fees, net................. 966 (1,363) (786) (1,029) (1,375) Allowance for loan losses.............. (13,978) (12,528) (10,704) (8,573) (10,847) --------- --------- --------- --------- --------- Loans, net.............. $1,296,702 $1,138,253 $ 836,882 $ 560,385 $ 512,035 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- PERCENT OF TOTAL ----------- Mortgage loans: One- to four-family... 49.34% Multi-family.......... 17.98 Commercial............ 19.54 Cooperative........... 4.65 Construction and land................ 0.67 ----------- Total mortgage loans.... 92.17 Other loans: Home equity lines of credit.............. 3.39 Property improvement loans............... 2.26 Loans on deposit accounts............ 0.18 Commercial loans...... 0.12 Guaranteed student loans............... 0.34 Unsecured consumer loans............... 0.45 Other loans........... 1.09 ----------- Total other loans....... 7.83 ----------- Total loans............. 100.00% ----------- ----------- Less: Unearned discounts, premiums and deferred loan fees, net................. Allowance for loan losses.............. Loans, net..............
A-6 The following table shows the estimated contractual maturity of the Bank's loan portfolio at December 31, 1998, assuming no prepayments.
AT DECEMBER 31, 1998 ------------------------------------- MORTGAGE OTHER TOTAL LOANS LOANS LOANS ------------ --------- ------------ (IN THOUSANDS) Amounts due: Within one year...................................... $ 42,933 $ 4,517 $ 47,450 ------------ --------- ------------ After one year: One to three years................................. 67,251 3,847 71,098 Three to five years................................ 20,807 3,048 23,855 Five to ten years.................................. 283,909 12,167 296,076 Ten to twenty years................................ 359,518 11,347 370,865 Over twenty years.................................. 500,370 -- 500,370 ------------ --------- ------------ Total due after one year......................... 1,231,855 30,409 1,262,264 ------------ --------- ------------ Total............................................ $ 1,274,788 $ 34,926 $ 1,309,714 ------------ --------- ------------ ------------ --------- ------------
The following table sets forth at December 31, 1998, the dollar amount of all loans due after December 31, 1999, and whether such loans have fixed interest rates or adjustable interest rates.
DUE AFTER DECEMBER 31, 1999 ------------------------------------ FIXED ADJUSTABLE TOTAL ---------- ---------- ------------ (IN THOUSANDS) Mortgage loans: One- to four-family.................................. $ 474,056 $ 388,921 $ 862,977 Multi-family......................................... 34,708 167,195 201,903 Commercial real estate............................... 62,230 101,653 163,883 Cooperative.......................................... 804 2,288 3,092 Other loans............................................ 9,643 20,766 30,409 ---------- ---------- ------------ Total................................................ $ 581,441 $ 680,823 $ 1,262,264 ---------- ---------- ------------ ---------- ---------- ------------
A-7 The following table sets forth the Bank's loan originations, loan purchases, sales and principal repayments for the periods indicated:
YEARS ENDED DECEMBER 31, --------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------ ------------ ---------- ---------- ----------- (IN THOUSANDS) Mortgage loans (gross): At beginning of year............................ $ 1,119,853 $ 814,278 $ 531,020 $ 483,232 $ 648,321 Mortgage loans originated: One- to four-family......................... 177,544 121,498 98,783 64,139 77,499 Multi-family................................ 88,504 64,181 46,310 11,726 -- Commercial real estate...................... 68,319 69,495 35,886 26,047 4,688 Cooperative (1)............................. 34 -- -- 63 499 Construction and land loans................. 2,806 3,773 1,562 4,367 1,000 ------------ ------------ ---------- ---------- ----------- Total mortgage loans originated........... 337,207 258,947 182,541 106,342 83,686 Mortgage loans purchased...................... 297,906 200,900 172,300 26,241 -- Transfer of mortgage loans to REO............. (623) (1,695) (3,470) (4,638) (10,998) Transfer of mortgage loans from/(to) loans held for sale............................... -- -- 10,594 (12,038) -- Principal repayments.......................... (269,164) (151,215) (78,209) (67,274) (64,686) Sales of mortgage loans (2)................... (104,700) (1,362) (498) (845) (173,091) Transfer of loans to MBSs (3)................. (105,691) -- -- -- -- ------------ ------------ ---------- ---------- ----------- At end of year.................................. $ 1,274,788 $ 1,119,853 $ 814,278 $ 531,020 $ 483,232 ------------ ------------ ---------- ---------- ----------- ------------ ------------ ---------- ---------- ----------- Other loans (gross): At beginning of year............................ $ 32,291 $ 34,094 $ 38,967 $ 41,025 $ 33,898 Other loans originated........................ 16,413 11,491 8,735 10,746 21,533 Principal repayments.......................... (13,778) (13,294) (13,608) (12,804) (14,406) ------------ ------------ ---------- ---------- ----------- At end of year.................................. $ 34,926 $ 32,291 $ 34,094 $ 38,967 $ 41,025 ------------ ------------ ---------- ---------- ----------- ------------ ------------ ---------- ---------- -----------
- ------------------------ (1) Cooperative loans originated in the five years ended December 31, 1998 were done solely to facilitate the restructuring and the sale of delinquent cooperative loans and cooperative units held by the Bank as REO. (2) During 1998, the Bank sold $83.3 million of adjustable-rate mortgage loans in several bulk sales transactions. Also during 1998, the Bank sold $14.0 million of cooperative apartment loans. As part of a major bulk sales program in 1994, the Bank sold $170.5 million of loans. (3) During 1998, the Bank securitized $105.7 million in loans with Fannie Mae ("FNMA"). The resulting securities were retained and transferred to the Bank's securities available for sale portfolio. ONE- TO FOUR-FAMILY MORTGAGE LENDING. The Bank offers both fixed-rate and adjustable-rate mortgage ("ARM") loans secured by one- to four-family residences located primarily in Long Island (in the New York counties of Nassau and Suffolk Counties), the New York City boroughs of Queens, Manhattan, Brooklyn and Staten Island, the New York counties of Rockland and Westchester Counties, as well as in Albany and Rochester, New York, New Jersey, Pennsylvania and Connecticut. Loan originations are generally obtained from existing or past customers, members of the local communities, local real estate brokers and attorney referrals. The substantial majority of the Bank's loans are originated through efforts of Bank-employed sales representatives who solicit loans from the communities served by the Bank by calling on real estate attorneys, brokers and individuals who have expressed an interest in obtaining a mortgage loan. The Bank also originates loans from its customer base in its branch A-8 offices. In 1995, the Bank also began purchasing loans on a flow basis from correspondent mortgage bankers in New York, New Jersey and Connecticut to supplement its one- to four-family loan originations. The Bank generally originates one- to four-family residential mortgage loans in amounts up to 95% of the lower of the appraised value or selling price of the property securing the loan. Properties securing such loans are primarily owner-occupied principal residences. One- to four-family mortgage loans may be originated with loan-to-value ratios of up to 97% of the appraised value of the property under the FNMA Community Home Buyers Program, which targets low to low/moderate income borrowers. Residential condominium loans are originated in amounts up to a maximum of 95% of the appraised value of the condominium unit. Private Mortgage Insurance ("PMI") is required whenever loan-to-value ratios exceed 80% of the price or appraised value of the property securing the loan. Loan amounts generally conform to Freddie Mac ("FHLMC") limits. Mortgage loans originated by the Bank generally include due-on-sale clauses that provide the Bank with the contractual right to deem the loan immediately due and payable in the event that the borrower transfers ownership of the property without the Bank's consent. Due-on-sale clauses are an important means of enabling the Bank to redeploy funds at current rates thereby causing the Bank's loan portfolio to be more interest rate sensitive. The Bank has generally exercised its rights under these clauses. The Bank currently offers fixed-rate loans up to $1,000,000 on one- to four-family residences with terms up to 30 years. During 1996, the Bank introduced 30 year and 15 year fixed-rate bi-weekly loans. Interest rates charged on fixed-rate mortgage loans are competitively priced based on market conditions and the Bank's cost of funds. Origination fees on fixed-rate loans typically range from 0% to 3% of the principal amount of the loan. Generally, the Bank's standard underwriting guidelines conform to the FNMA/FHLMC guidelines. The Bank currently offers ARM loans up to $1,000,000 which adjust either annually, or in 3, 5, 7, 10 or 15 years with maximum loan terms of 30 years. The Bank's ARM loans typically carry an initial interest rate below the fully-indexed rate for the loan. For one year ARMs, the Bank qualifies borrowers based upon a rate of 2% over the initial rate. The initial discounted rate is determined by the Bank in accordance with market and competitive factors and, as of December 31, 1998, the discount offered by the Bank on the one year ARM loan ranged from 126 basis points (with 0% origination fees) to 176 basis points (with 2% origination fees) below the fully-indexed rate, which was 7.38% as of such date. The discount offered by the Bank on the three year ARM loan ranged from 88 basis points (with 0% origination fees) to 130 basis points (with 2% origination fees) below the fully-indexed rate, which was 7.38% as of December 31, 1998. The discount offered by the Bank on the five year ARM loan ranged from 100 basis points (with 0% origination fees) to 150 basis points (with 2% origination fees) below the fully-indexed rate, which was 7.38% as of December 31, 1998. As of December 31, 1998, the discount offered by the Bank on the seven year ARM loan ranged from 88 basis points (with 0% origination fees) to 138 basis points (with 2% origination fees) below the fully-indexed rate, which was 7.38% as of such date. As of December 31, 1998, the discount offered by the Bank on the ten year ARM loan ranged from 63 basis points (with 0% origination fees) to 113 basis points (with 2% origination fees) below the fully indexed rate, which was 7.38% as of such date. Finally, as of December 31, 1998, the discount offered by the Bank on the fifteen year ARM loan ranged from 13 basis points (with 0% origination fees) to 63 basis points (with 2% origination fees) below the fully-indexed rate which was 7.38%. As of December 31, 1998, the Bank's ARM loans, with the exception of the seven, ten and fifteen year ARM loans, adjust by a maximum of 2.0% each adjustment period, with a life-time cap of 6% over the initial note rate. The maximum periodic rate adjustment on the seven year, ten year and fifteen year ARM loans for the first adjustment period are 5% which defaults to 2% for all adjustment periods thereafter. The Bank currently charges origination fees ranging from 0% to 2.0% for its one- to four-family ARM loans. ARM loans generally pose a risk that as interest rates rise, the amount of a borrower's monthly loan payment also rises, thereby increasing the potential for delinquencies and loan losses. This potential risk is mitigated by the Bank's policy of originating ARM loans with annual and lifetime interest rate caps that limit the amount that a borrower's A-9 monthly payment may increase. During 1998, the Bank originated or purchased $363.3 million of one- to four-family ARM loans for portfolio. The Bank originates 30 year and 15 year fixed-rate loans for immediate sale, primarily to private investors while generally retaining ARM loans, 10, and 20 year fixed-rate loans, and 15 and 30 year bi-weekly fixed-rate loans for portfolio. The Bank arranges for the sale of such loans at the acceptance of the commitment by the applicant to the investor through "best efforts" commitments. The Bank sells loans on a servicing-released basis. For the year ended December 31, 1998, the Bank originated and purchased approximately $570.0 million of primarily fixed-rate, one- to four-family loans for sale in the secondary market, $515.8 million of which were sold in 1998. COOPERATIVE APARTMENT LOANS. Until 1990, the Bank originated loans secured by cooperative units. Since 1990, the Bank has not originated any loans secured by cooperative units with the exception of loans to facilitate the restructuring of a classified asset or sale of REO. In 1994, the Bank was approved as a seller/servicer in a FNMA pilot program, enabling it to originate cooperative apartment loans for immediate sale to FNMA. MULTI-FAMILY LENDING. The Bank originates multi-family loans with contractual terms of up to 15 years where the interest rate generally reprices during the term of the loan and is tied to matching U.S. Treasury Notes plus a margin. These loans are generally secured by apartment and mixed-use (commercial and residential, with the majority of income coming from the residential units) properties, located in the Bank's primary market area and are made in amounts of up to 75% of the appraised value of the property. In making such loans, the Bank bases its underwriting decision primarily on the net operating income generated by the real estate to support the debt service, the financial resources credit history and ownership/management experience of the principals/guarantors, and the marketability of the property. The Bank generally requires a debt service coverage ratio of at least 1.20x and sometimes requires personal guarantees from borrowers. As of December 31, 1998, $215.5 million, or 16.4% of the Bank's total loan portfolio, consisted of multi-family residential loans. Multi-family, commercial real estate and construction and land lending are generally believed to involve a higher degree of credit risk than one- to four-family lending because such loans typically involve higher principal amounts and the repayment of such loans generally is dependent on income produced by the property to cover operating expenses and debt service. Economic events that are outside the control of the borrower or lender could adversely impact the value of the security for the loan or the future cash flows from the borrower's property. In recognition of these risks, the Bank applies stringent underwriting criteria for all of its loans. The Bank originates multi-family, commercial real estate and construction and land loans on a conservative basis. See "Commercial Real Estate Lending" and "Construction and Land Lending". COMMERCIAL REAL ESTATE LENDING. The Bank originates commercial real estate loans that are generally secured by properties used exclusively for business purposes such as retail stores, mixed-use properties (residential and retail or professional offices combined where the majority of the income from the property comes from the commercial business), light industrial and small office buildings located in the Bank's primary market area. The Bank's commercial real estate loans are generally made in amounts up to the lesser of 70% of the appraised value of the property or 65% for owner occupied properties. Commercial real estate loans are made on a negotiated basis for terms of up to 15 years where the interest rate generally reprices during the term of the loan and is tied to the prime rate or the U.S. Treasury Note rate matched to the repricing frequency of the loan. The Bank's underwriting standards and procedures are similar to those applicable to its multi-family loans, whereby the Bank considers the net operating income of the property and the borrower's expertise, credit history and profitability. The Bank generally requires that the properties securing commercial real estate loans have debt service coverage ratios of not less than 1.30x and also generally requires personal guarantees from the borrowers or the principals of the A-10 borrowing entity. At December 31, 1998, the Bank's commercial real estate loan portfolio totaled $163.9 million, or 12.5% of the Bank's total loan portfolio. CONSTRUCTION AND LAND LENDING. The Bank's construction loans primarily have been made to finance the construction of one- to four-family residential properties, multi-family residential properties and retail properties. The Bank's policies provide that construction and land development loans may generally be made in amounts up to 70% of the value when completed for commercial properties and 75% for multi-family. The Bank generally requires personal guarantees and evidence that the borrower has invested an amount equal to and not less than 20% of the estimated cost of the land and improvements. Construction loans generally are made on a floating rate basis (subject to daily adjustment) and a maximum term of 18 months, subject to renewal. Construction loans are generally made based on pre-sales or pre-leasing. Loan proceeds are disbursed in increments as construction progresses and as inspections warrant. As of December 31, 1998, the Bank had $2.7 million, or 0.2% of its total loan portfolio invested in construction and land loans. OTHER LOANS. During 1998, the Bank also offered home equity loans, equity lines of credit, business lines of credit and Government-guaranteed student loans. As of December 31, 1998, other loans totaled $34.9 million, or 2.7% of the Bank's total loan portfolio. Effective January 1, 1999, the Bank indefinitely discontinued offering consumer loan products, including home equity loans and home equity lines of credit due to shrinking volume and spreads coupled with high origination costs. LOAN APPROVAL PROCEDURES AND AUTHORITY. For one- to four-family real estate loans each loan is reviewed and approved by an underwriter and another departmental officer with credit authority appropriate for the loan amount and type in accordance with the policies approved by the Board of Directors. Multi-family, commercial and construction loans are approved by designated lending officers respective of the amounts within their lending authorities which are approved by the Board of Directors. Commercial loans up to $3,000,000 must be approved by the Officers Loan Committee, whereas, loans between $3,000,000 and $5,000,000 must be approved by the Loan Committee of the Board of Directors. Loans exceeding $5,000,000 must be approved by the Board. Loans not secured by real estate as well as unsecured loans, depending on the amount of the loan and the loan-to-value ratio, where applicable, require the approval of at least one lending officer and/or underwriter designated by the Board. For all loans originated by the Bank, upon receipt of a completed loan application from a prospective borrower, a credit report is ordered and certain other information is verified by the Bank's loan underwriters and, if necessary, additional financial information is required. An appraisal of the real estate intended to secure the proposed loan is performed, as required by OTS regulations and prepared by an independent appraiser designated and approved by the Bank. The Board annually approves the independent appraisers used by the Bank and approves the Bank's appraisal policy. It is the Bank's policy to obtain title insurance on all real estate first mortgage loans. Borrowers must also obtain hazard insurance prior to closing and flood insurance and PMI where required. Borrowers generally are required to advance funds on a monthly basis together with each payment of principal and interest to a mortgage escrow account from which the Bank makes disbursements for items such as real estate taxes, and in some cases, hazard insurance premiums. LOAN CONCENTRATIONS. As a result of OTS regulations, the Bank may not extend credit to a single borrower or related group of borrowers in an amount greater than 15% of the Bank's unimpaired capital and surplus. An additional amount of credit may be extended, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which does not include real estate. At December 31, 1998, the Bank's loans-to-one borrower limit was $22.7 million. None of the Bank's borrowers exceeded this limit in accordance with applicable regulatory requirements. A-11 DELINQUENCIES AND CLASSIFIED ASSETS DELINQUENT LOANS. The Bank entered into a sub-servicing agreement with Norwest Mortgage, Inc. ("Norwest"), commencing on November 16, 1998, under which Norwest performs all residential mortgage loan servicing functions on behalf of the Bank for the Bank's portfolio loans, as well as for loans serviced for third party investors. Norwest's collection procedures for mortgage loans include sending a notice after the loan is 16 days past due. In the event that payment is not received after the late notice, phone calls are made to the borrower by Norwest's collection department. When contact is made with the borrower at any time prior to foreclosure, the collection department attempts to obtain full payment or the loss mitigation department attempts to work out a repayment schedule with the borrower to avoid foreclosure. Generally, foreclosure procedures are initiated when a loan is over 95 days delinquent. Loss mitigation efforts continue throughout the foreclosure process. CLASSIFIED ASSETS. Federal regulations and the Bank's Classification of Assets Policy provide for the classification of loans and other assets considered by the Bank to be of lesser quality as "substandard", "doubtful" or "loss" assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor and/or of the collateral pledged, if any. Substandard assets include those characterized by the "distinct possibility" that the insured institution will sustain "some loss" if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make "collection or liquidation in full," on the basis of currently existing facts, conditions, and values, "highly questionable and improbable." Assets classified as loss are those considered "uncollectible" and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Pursuant to OTS guidelines, the Bank is no longer required to classify assets as "special mention" if such assets possess weaknesses but do not expose the Bank to sufficient risk to warrant classification in one of the aforementioned categories. However, the Bank continues to classify assets as "special mention" for internal monitoring purposes. Non-performing loans (consisting of non-accrual loans and restructured loans) decreased from $28.3 million at December 31, 1994 to $16.9 million at December 31, 1995, $13.9 million at December 31, 1996, $12.5 million at December 31, 1997 and $8.4 million at December 31, 1998. The continued decline in the balance of non-performing loans during the five year period was due to the Bank's ongoing efforts to reduce non-performing assets, as well as to an improved economy. REO decreased each year during the five years ended December 31, 1998 from $7.8 million at December 31, 1994 (net of an allowance for REO of $717,000) to a balance at December 31, 1998 of $200,000 (net of an allowance for REO of $25,000). The Bank intends to continue its efforts to reduce non-performing assets in the normal course of business, but it may continue to seek opportunities to dispose of its non-performing assets through sales to investors or otherwise. The Bank also has restructured loans, which has enabled the Bank to avoid the costs involved with foreclosing on the properties securing such loans while continuing to collect payments on the loans under their modified terms. Troubled debt restructurings ("TDRs") are loans for which certain concessions, such as the reduction of interest rates or the deferral of interest or principal payments, have been granted due to the borrower's financial condition. At December 31, 1998, the Bank had 13 restructured loans with aggregate principal balances of $1.9 million. Of this amount, 34.7% were residential loans (including cooperative apartment loans) and 65.3% were multi-family loans. Management is able to avoid the costs of foreclosing on loans that it has restructured. However, restructured loans have a higher probability of becoming delinquent than loans that have no previous history of delinquency. To the extent that the Bank is unable to return these loans to performing status, the Bank will have to foreclose on such loans, which will increase the Bank's REO. The Bank's policy is to recognize income on a cash basis for restructured loans for a period of six months, after which such loans are returned to an accrual basis if they are performing in accordance with their modified terms. At December 31, 1998, the Bank had 11 restructured loans with principal balances of $1.9 million that were on accrual status. For restructured loans that are 90 days or more past due, the loan is returned to non-accrual status and previously accrued but uncollected interest is reversed. A-12 At December 31, 1998, the Bank's classified assets consisted of $6.6 million of loans and REO of which $55,000 was classified as doubtful. The Bank's assets classified as substandard at December 31, 1998 consisted of $5.7 million of loans and $202,000 of gross REO. Classified assets in total declined $4.6 million, or 41.1% since December 31, 1997. At December 31, 1998, the Bank also had $5.6 million of commercial real estate loans that it had designated special mention. The loans were performing in accordance with their terms at December 31, 1998 but were deemed to warrant close monitoring by management due to one or more factors, such as the absence of current financial information relating to the borrower and/or the collateral, financial difficulties of the borrower or inadequate cash flow from the security property. At December 31, 1998, 1997 and 1996, delinquencies in the Bank's loan portfolio were as follows:
AT DECEMBER 31, 1998 AT DECEMBER 31, 1997 -------------------------------------------------- ----------------------------------------- 90 DAYS OR 60-89 DAYS 90 DAYS OR MORE 60-89 DAYS MORE ------------------------ ------------------------ -------------------------- ------------- NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER OF BALANCE OF BALANCE OF BALANCE OF LOANS OF LOANS LOANS OF LOANS LOANS OF LOANS LOANS ----------- ----------- ----------- ----------- ------------- ----------- ------------- (DOLLARS IN THOUSANDS) One- to four-family........... 50 $ 5,201 40 $ 3,843 8 $ 1,339 42 Multi-family.................. 2 591 -- -- -- -- 9 Commercial.................... 2 306 7 2,175 1 33 9 Cooperative................... -- -- 26 303 3 128 8 Construction and land loans... -- -- -- -- -- -- 1 Other loans................... 94 1,177 47 207 26 452 19 -- -- --- ----------- --- ----------- ----------- Total loans............... 148 $ 7,275 120 $ 6,528 38 $ 1,952 88 -- -- -- -- --- ----------- --- ----------- ----------- --- ----------- --- ----------- ----------- Delinquent loans to total loans (1)............... 0.56% 0.50% 0.17% ----------- ----------- ----------- ----------- ----------- ----------- AT DECEMBER 31, 1996 ------------------------------------------------------ 60-89 DAYS 90 DAYS OR MORE -------------------------- -------------------------- PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL BALANCE OF BALANCE OF BALANCE OF LOANS LOANS OF LOANS LOANS OF LOANS ----------- ------------- ----------- ------------- ----------- One- to four-family........... $ 3,534 9 $ 950 47 $ 4,083 Multi-family.................. 2,362 -- -- 6 1,463 Commercial.................... 3,305 -- -- 11 4,321 Cooperative................... 699 5 281 9 431 Construction and land loans... 100 -- -- 1 60 Other loans................... 396 26 171 21 375 -- -- ----------- ----------- ----------- Total loans............... $ 10,396 40 $ 1,402 95 $ 10,733 -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Delinquent loans to total loans (1)............... 0.90% 0.17% 1.27% ----------- ----------- ----------- ----------- ----------- -----------
- ------------------------ (1) Restructured loans that have become seasoned for the required six month period and are currently performing in accordance with their restructured terms are not included in delinquent loans. There was 1 residential restructured loan for $183,000 that was included in loans delinquent 90 days or more at December 31, 1998. At December 31, 1996, there was 1 restructured loan for $77,000 that was included in loans delinquent 90 days or more because it had not yet performed in accordance with its modified terms for the required six-month seasoning period. NON-PERFORMING ASSETS. The Bank does not accrue interest on loans 90 days past due and restructured loans that have not yet performed in accordance with their modified terms for at least six months. If non-accrual loans had been performing in accordance with their original terms, the Bank would have recorded interest income from such loans of approximately $425,000, $736,000 and $688,000 for the years ended December 31, 1998, 1997 and 1996, respectively, compared to $117,000, $146,000 and $220,000, which was recognized on non-accrual loans for such periods, respectively. If all restructured loans, as of December 31, 1998, 1997 and 1996, had been performing in accordance with their original loan terms (prior to being restructured), the Bank would have recognized interest income from such loans of approximately $396,000, $197,000 and $305,000 for the years ended December 31, 1998, 1997 and 1996, respectively. The following table sets forth information regarding all non-accrual loans (which consist of A-13 loans 90 days or more past due and restructured loans that have not yet performed in accordance with their modified terms for the required six-month seasoning period), restructured loans and REO.
AT DECEMBER 31, ----------------------------------------------------- 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- (DOLLARS IN THOUSANDS) Non-accrual mortgage loans.................................. $ 6,321 $ 10,000 $ 10,358 $ 9,116 $ 18,474 Restructured mortgage loans................................. 1,857 2,136 3,160 7,072 9,550 Non-accrual other loans..................................... 207 396 375 689 275 --------- --------- --------- --------- --------- Total non-performing loans................................ 8,385 12,532 13,893 16,877 28,299 Real estate owned, net of related reserves.................. 200 455 1,038 2,033 7,844 --------- --------- --------- --------- --------- Total non-performing assets............................... $ 8,585 $ 12,987 $ 14,931 $ 18,910 $ 36,143 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Non-performing loans to total loans......................... 0.64% 1.09% 1.64% 2.97% 5.41% Non-performing assets to total assets....................... 0.36 0.66 0.94 1.28 2.85 Non-performing loans to total assets........................ 0.35 0.63 0.88 1.15 2.23
ALLOWANCES FOR LOAN AND REO LOSSES The allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries). Impaired loans and related reserves have been identified and calculated in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan", and the amendment thereof, SFAS No. 118, "Accounting by Creditors for Impairment of a Loan--Income Recognition and Disclosures". The total allowance for loan losses has been determined in accordance with the provisions of SFAS No. 5, "Accounting for Contingencies". The Bank's allowance for loan losses is intended to be maintained at a level sufficient to absorb all estimable and probable losses inherent in the loan portfolio. The Bank reviews the adequacy of the allowance for loan losses on a monthly basis taking into account past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, current and prospective economic conditions and current regulatory guidance. During the five years ended December 31, 1998, the allowance for loan losses as a percentage of non-performing loans increased steadily to 166.7% at December 31, 1998. The increase is a direct result of the steady decline in non-performing loans during that five year period. Non-performing loans as a percentage of total loans declined steadily from 5.41% at December 31, 1994 to 0.64% at December 31, 1998. The decline is due to the decrease in non-performing loans, as well as an increase in total loans. The Bank's provisions for loan losses has remained relatively stable over the last three years. Specifically, the Bank made provisions for loan losses of $13.4 million, $2.8 million, $3.1 million, $2.8 million and $2.7 million for the five years ended December 31, 1998, respectively. The Bank will continue to monitor and modify its allowances for loan and REO losses as conditions dictate. Although the Bank maintains its allowances at levels that it considers adequate to provide for potential losses, there can be no assurance that such losses will not exceed the estimated amounts. A-14 The following table sets forth the changes in the Bank's allowance for loan losses at the dates indicated.
AT OR FOR THE YEARS ENDED DECEMBER 31, ----------------------------------------------------- 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- (DOLLARS IN THOUSANDS) Balance at beginning of year............................... $ 12,528 $ 10,704 $ 8,573 $ 10,847 $ 21,606 Charge-offs: One- to four-family...................................... (435) (964) (771) (472) (264) Cooperative.............................................. (256) (370) (524) (2,142) (8,747) Multi-family............................................. (708) -- (30) (1,299) (7,932) Non-residential and other................................ (935) (352) (560) (1,541) (7,798) --------- --------- --------- --------- --------- Total charge-offs (1).................................. (2,334) (1,686) (1,885) (5,454) (24,741) Recoveries................................................. 1,119 760 891 405 582 --------- --------- --------- --------- --------- Net charge-offs............................................ (1,215) (926) (994) (5,049) (24,159) Provision for loan losses.................................. 2,665 2,750 3,125 2,775 13,400 --------- --------- --------- --------- --------- Balance at end of year..................................... $ 13,978 $ 12,528 $ 10,704 $ 8,573 $ 10,847 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Ratio of net charge-offs during the year to average loans outstanding during the year.............................. 0.09% 0.09% 0.15% 0.93% 3.83% Ratio of allowance for loan losses to total loans at the end of year (2).......................................... 1.07 1.09 1.26 1.51 2.07 Ratio of allowance for loan losses to non-performing loans at the end of the year (3)............................... 166.70 99.97 77.05 50.80 38.33
- ------------------------ (1) Total charge-offs for the year ended 1994 were attributable to bulk sale transactions. (2) The steady decline in the ratio of allowance for loan losses to total loans is attributable to a decline in non-performing loans as previously mentioned coupled with growth in the Bank's total loans outstanding. (3) The ratio of allowance for loan losses to non-performing loans has increased significantly over the last five years as non-performing loans have declined. The following table sets forth the Bank's allocation of its allowance for loan losses to the total amount of loans in each of the categories listed.
AT DECEMBER 31, ------------------------------------------------------------------------------------------------------ 1998 1997 1996 1995 ------------------------ ------------------------ ------------------------ ------------------------ % OF % OF % OF % OF LOANS IN LOANS IN LOANS IN LOANS IN CATEGORY CATEGORY CATEGORY CATEGORY TO TOTAL TO TOTAL TO TOTAL TO TOTAL AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS) Mortgage loans: Residential (1)....... $ 10,139 84.62% $ 7,039 84.09% $ 5,929 80.40% $ 3,838 72.67% Commercial............ 3,579 12.51 5,201 12.91 4,340 15.08 4,175 19.48 Construction.......... -- 0.21 -- 0.20 -- 0.50 69 1.00 Other loans............. 260 2.66 288 2.80 435 4.02 491 6.85 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total allowance for loan losses (2)............ $ 13,978 100.00% $ 12,528 100.00% $ 10,704 100.00% $ 8,573 100.00% ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 1994 ------------------------ % OF LOANS IN CATEGORY TO TOTAL AMOUNT LOANS ----------- ----------- Mortgage loans: Residential (1)....... $ 5,685 71.97% Commercial............ 4,308 19.53 Construction.......... 248 0.66 Other loans............. 606 7.84 ----------- ----------- Total allowance for loan losses (2)............ $ 10,847 100.00% ----------- ----------- ----------- -----------
- ------------------------ (1) Includes one- to four-family, multi-family and cooperative loans. (2) In order to comply with certain regulatory reporting requirements, management has prepared the above allocation of the Bank's allowance for loan losses among various categories of the loan portfolio for each of the years in the five-year period ended December 31, 1998. In management's opinion, such allocation has, at best, a limited utility. It is based on management's assessment as of a given point in time of the risk characteristics of each of the component parts of the total loan portfolio and is subject to changes as and when the risk factors of each such component changes. Such allocation is not indicative of either the specific amounts or the loan categories in which future charge-offs may be taken, nor should it be taken as an indicator of future loss trends. In addition, by presenting such allocation, management does not mean to imply that the allocation is exact or that the allowance has been precisely determined from such allocation. A-15 INVESTMENT ACTIVITIES The investment policy of the Bank, which is established by the Board of Directors and implemented by the Bank's Asset/Liability Committee, is designed primarily to provide and maintain liquidity, to generate a favorable return on investments without incurring undue interest rate and credit risks, and to complement the Bank's lending activities. Federally chartered savings institutions have the authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies, certain certificates of deposit of insured banks and savings institutions, certain bankers' acceptances, repurchase agreements and federal funds. Subject to various restrictions, federally chartered savings institutions may also invest their assets in commercial paper, investment grade corporate debt securities and mutual funds whose assets conform to the investments that a federally chartered savings institution is otherwise authorized to make directly. Additionally, the Bank must maintain minimum levels of investments that qualify as liquid assets under OTS regulations. See "Regulation and Supervision--Federal Savings Institution Regulation--Liquidity." Historically, the Bank has maintained liquid assets above the minimum OTS requirements and at a level believed to be adequate to meet its normal daily activities. At December 31, 1998, the Bank had money market investments and debt and equity securities available for sale in the aggregate amount of $1.7 million and $109.6 million, respectively, with fair values of $1.7 million and $109.0 million, respectively. On June 30, 1998, the Company transferred the then remaining $138.2 million of MBSs and $45.4 million of debt securities held to maturity to securities available for sale ("AFS"). The transfer was done to enhance liquidity and take advantage of market opportunities. At December 31, 1998, the securities AFS portfolio totaled $889.3 million of which $266.3 million were adjustable-rate securities and $623.0 million were fixed-rate securities. The following table sets forth certain information regarding the carrying and market values of the Company's money market investments, debt and equity securities and FHLB-NY stock at the dates indicated:
AT DECEMBER 31, ---------------------------------------------------------------------- 1998 1997 1996 ---------------------- ---------------------- ---------------------- CARRYING MARKET CARRYING MARKET CARRYING MARKET VALUE VALUE VALUE VALUE VALUE VALUE ---------- ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS) Debt and Equity Securities: U.S. Government and agency obligations.................... $ 77,705 $ 77,705 $ 135,672 $ 135,715 $ 170,709 $ 169,849 Corporate debt securities........ 19,684 19,684 45,390 45,315 45,350 45,227 Preferred stock.................. 11,590 11,590 4,123 4,123 27,329 27,329 ---------- ---------- ---------- ---------- ---------- ---------- Subtotal....................... 108,979 108,979 185,185 185,153 243,388 242,405 ---------- ---------- ---------- ---------- ---------- ---------- Federal Funds sold............... -- -- -- -- 5,000 5,000 FHLB-NY stock.................... 21,990 21,990 12,885 12,885 9,890 9,890 Money market investments......... 1,720 1,720 4,561 4,561 1,869 1,869 ---------- ---------- ---------- ---------- ---------- ---------- Total.......................... $ 132,689(1) $ 132,689(1) $ 202,631(1) $ 202,599(1) $ 260,147(1) $ 259,164(1) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
- ------------------------ (1) Includes debt and equity securities AFS totaling $109.0 million, $118.8 million and $146.1 million at December 31, 1998, 1997 and 1996, respectively, carried at fair value. A-16 The table below sets forth certain information regarding the carrying value, weighted average yields and maturities of the Company's money market investments and debt and equity securities at December 31, 1998.
AT DECEMBER 31, 1998 --------------------------------------------------------------------------------------------- MORE THAN MORE THAN FIVE DUE AFTER ONE YEAR OR LESS ONE TO FIVE YEARS TO TEN YEARS 10 YEARS ------------------------ -------------------------- -------------------------- ----------- WEIGHTED WEIGHTED WEIGHTED CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING VALUE YIELD VALUE YIELD VALUE YIELD VALUE ----------- ----------- ----------- ------------- ----------- ------------- ----------- (DOLLARS IN THOUSANDS) U.S. Government securities and agency obligations........... $ 5,030 6.5% $ 9,944 5.4% $ -- --% $ 62,731 Corporate debt securities............ 18,670 5.3 -- -- -- -- 1,014 Money market investments........... 1,720 4.4 -- -- -- -- -- ----------- ----------- ----- ----------- Total................... $ 25,420 5.5% $ 9,944 5.4% $ -- --% $ 63,745 ----------- ----------- ----- ----------- ----------- ----------- ----- ----------- Preferred Stock......... FHLB-NY stock........... TOTAL MONEY MARKET INVESTMENTS AND DEBT AND EQUITY SECURITIES ------------------------------------------------------ AVERAGE WEIGHTED REMAINING ESTIMATED WEIGHTED AVERAGE YEARS TO CARRYING FAIR AVERAGE YIELD MATURITY VALUE VALUE YIELD ------------- ------------- ----------- ----------- ------------- U.S. Government securities and agency obligations........... 7.0% 17.1 $ 77,705 $ 77,705 6.7% Corporate debt securities............ 8.7 1.9 19,684 19,684 5.5 Money market investments........... -- -- 1,720 1,720 4.4 ----------- ----------- Total................... 7.0% 13.8 $ 99,109 $ 99,109 6.4% ----------- ----------- ----------- ----------- Preferred Stock......... $ 11,590 $ 11,590 5.0% FHLB-NY stock........... $ 21,990 $ 21,990 7.0% ----------- ----------- ----------- -----------
MORTGAGE-BACKED SECURITIES The Bank also invests in mortgage-backed securities ("MBSs"). At December 31, 1998, total MBSs, net, aggregated $780.3 million, or 32.6% of total assets. At December 31, 1998, 43.3% of the MBS portfolio, including Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage Investment Conduits ("REMICs"), were insured or guaranteed by either FNMA, FHLMC or the Ginnie Mae ("GNMA"). At December 31, 1998, $242.6 million, or 31.1% of total MBSs were adjustable-rate and $537.7 million, or 68.9% of total MBSs were fixed-rate. The following table sets forth the carrying amount of the Company's MBS portfolio in dollar amounts and in percentages at the dates indicated.
AT DECEMBER 31, ------------------------------------------------------------------- 1998 1997 1996 --------------------- --------------------- --------------------- CARRYING PERCENT CARRYING PERCENT CARRYING PERCENT VALUE OF TOTAL VALUE OF TOTAL VALUE OF TOTAL ---------- --------- ---------- --------- ---------- --------- (DOLLARS IN THOUSANDS) MBSs(1): CMOs and REMICS-- Agency-backed(2)....................... $ 106,552 13.66% $ 174,707 32.14% $ 117,969 27.96% CMOs and REMICS-- Non-agency(2).......................... 442,352 56.69 169,480 31.17 94,877 22.48 FHLMC.................................... 52,167 6.69 91,110 16.76 97,953 23.21 FNMA..................................... 178,767 22.91 107,377 19.75 110,182 26.12 GNMA..................................... 434 0.05 982 0.18 983 0.23 ---------- --------- ---------- --------- ---------- --------- Net MBSs................................... $ 780,272 100.00% $ 543,656 100.00% $ 421,964 100.00% ---------- --------- ---------- --------- ---------- --------- ---------- --------- ---------- --------- ---------- ---------
- ------------------------ (1) Includes MBSs AFS of $780.3 million, $380.6 million and $224.0 million at December 31, 1998, 1997 and 1996, respectively. (2) Included in total MBSs are CMOs and REMICs, which, at December 31, 1998, had a gross carrying value of $548.9 million. A CMO is a special type of pass-through debt in which the stream of principal and interest payments on the underlying mortgages or MBSs is used to create classes with different maturities and, in some cases, amortization schedules, as well as a residual interest, with each such class possessing different risk characteristics. The Bank has in recent periods increased its investment in REMICs and CMOs because these securities generally exhibit a more predictable cash flow than mortgage pass-through securities. The Bank's policy is to limit its purchases of REMICs to non high-risk securities as defined by the OTS. A-17 The following tables set forth certain information regarding the carrying and market values and percentage of total carrying values of the Bank's mortgage-backed and related securities portfolio.
AT DECEMBER 31, -------------------------------------------------------------------------------------------- 1998 1997 1996 --------------------------------- --------------------------------- ---------------------- CARRYING % OF MARKET CARRYING % OF MARKET CARRYING % OF VALUE TOTAL VALUE VALUE TOTAL VALUE VALUE TOTAL ----------- --------- --------- ----------- --------- --------- ----------- --------- (DOLLARS IN THOUSANDS) Held to maturity: MBSs: FHLMC.......................... $ -- --% $ -- $ 27,472 5.05% $ 27,769 $ 39,889 9.45% FNMA........................... -- -- -- 61,492 11.31 61,093 71,460 16.94 ----------- --------- --------- ----------- --------- --------- ----------- --------- Total MBSs....................... -- -- -- 88,964 16.36 88,862 111,349 26.39 ----------- --------- --------- ----------- --------- --------- ----------- --------- Mortgage-related securities: CMOs and REMICS-- Agency backed................ -- -- -- 21,217 3.90 21,101 24,449 5.79 CMOs and REMICS-- Non-agency................... -- -- -- 52,876 9.73 53,363 62,142 14.73 ----------- --------- --------- ----------- --------- --------- ----------- --------- Total mortgage-related securities..................... -- -- -- 74,093 13.63 74,464 86,591 20.52 ----------- --------- --------- ----------- --------- --------- ----------- --------- Total mortgage-backed and related securities held to maturity.... -- -- -- 163,057 29.99 163,326 197,940 46.91 ----------- --------- --------- ----------- --------- --------- ----------- --------- Available for sale: MBSs: GNMA........................... 434 0.05 434 982 0.18 982 983 0.23 FHLMC.......................... 52,167 6.69 52,167 63,638 11.71 63,638 58,064 13.76 FNMA........................... 178,767 22.91 178,767 45,885 8.44 45,885 38,722 9.18 ----------- --------- --------- ----------- --------- --------- ----------- --------- Total MBSs....................... 231,368 29.65 231,368 110,505 20.33 110,505 97,769 23.17 ----------- --------- --------- ----------- --------- --------- ----------- --------- Mortgage-related securities: CMOs and REMICs-- Agency backed................ 106,552 13.66 106,552 153,490 28.23 153,490 93,520 22.16 CMOs and REMICs-- Non-agency................... 442,352 56.69 442,352 116,604 21.45 116,604 32,735 7.76 ----------- --------- --------- ----------- --------- --------- ----------- --------- Total mortgage-related securities..................... 548,904 70.35 548,904 270,094 49.68 270,094 126,255 29.92 ----------- --------- --------- ----------- --------- --------- ----------- --------- Total mortgage-backed and mortgage-related securities available for sale............. 780,272 100.00 780,272 380,599 70.01 380,599 224,024 53.09 ----------- --------- --------- ----------- --------- --------- ----------- --------- Total mortgage-backed and related securities..................... $ 780,272 100.00% $ 780,272 $ 543,656 100.00% $ 543,925 $ 421,964 100.00% ----------- --------- --------- ----------- --------- --------- ----------- --------- ----------- --------- --------- ----------- --------- --------- ----------- --------- MARKET VALUE --------- Held to maturity: MBSs: FHLMC.......................... $ 39,594 FNMA........................... 69,914 --------- Total MBSs....................... 109,508 --------- Mortgage-related securities: CMOs and REMICS-- Agency backed................ 24,142 CMOs and REMICS-- Non-agency................... 62,032 --------- Total mortgage-related securities..................... 86,174 --------- Total mortgage-backed and related securities held to maturity.... 195,682 --------- Available for sale: MBSs: GNMA........................... 983 FHLMC.......................... 58,064 FNMA........................... 38,722 --------- Total MBSs....................... 97,769 --------- Mortgage-related securities: CMOs and REMICs-- Agency backed................ 93,520 CMOs and REMICs-- Non-agency................... 32,735 --------- Total mortgage-related securities..................... 126,255 --------- Total mortgage-backed and mortgage-related securities available for sale............. 224,024 --------- Total mortgage-backed and related securities..................... $ 419,706 --------- ---------
A-18 The table below sets forth certain information regarding the carrying value, weighted average yields and maturities of the Company's mortgage-backed and related securities at December 31, 1998.
AT DECEMBER 31, 1998 ----------------------------------------------------------------------------------------------- OVER ONE TO OVER FIVE TO OVER TEN ONE YEAR OR LESS FIVE YEARS TEN YEARS YEARS -------------------------- -------------------------- -------------------------- ----------- WEIGHTED WEIGHTED WEIGHTED CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING VALUE YIELD VALUE YIELD VALUE YIELD VALUE ----------- ------------- ----------- ------------- ----------- ------------- ----------- (DOLLARS IN THOUSANDS) Available for sale: FNMA..................... $ 797 7.50% $ -- --% $ 10,417 5.80% $ 167,553 FHLMC.................... 203 6.38 1,170 6.02 6,137 6.44 44,657 GNMA..................... -- -- -- -- -- -- 434 CMOs and REMICs.......... -- -- 3,534 5.84 -- -- 545,370 ----------- --- ----------- --- ----------- --- ----------- Total mortgage-backed and related securities....... $ 1,000 7.27 $ 4,704 5.89% $ 16,554 6.03% $ 758,014 ----------- --- ----------- --- ----------- --- ----------- ----------- --- ----------- --- ----------- --- ----------- MORTGAGE-BACKED AND RELATED SECURITIES TOTALS ------------------------------------------------------ AVERAGE WEIGHTED REMAINING ESTIMATED WEIGHTED AVERAGE YEARS TO CARRYING MARKET AVERAGE YIELD MATURITY VALUE VALUE YIELD ------------- ------------- ----------- ----------- ------------- Available for sale: FNMA..................... 6.50% 18.1 $ 178,767 $ 178,767 6.46% FHLMC.................... 6.63 22.0 52,167 52,167 6.60 GNMA..................... 6.33 25.3 434 434 6.33 CMOs and REMICs.......... 6.50 27.1 548,904 548,904 6.50 --- --- ----------- ----------- --- Total mortgage-backed and related securities....... 6.51% 24.7 $ 780,272 $ 780,272 6.50% --- --- ----------- ----------- --- --- --- ----------- ----------- ---
At December 31, 1998, the weighted average contractual maturity of the Bank's mortgage-backed and related securities portfolio was 24.7 years. The following table shows the carrying value, maturity or period to repricing of the Company's mortgage-backed and related securities portfolio at December 31, 1998.
AT DECEMBER 31, 1998 ----------------------------------------------------------- TOTAL FIXED- MORTGAGE- ARM RATE BACKED FIXED-RATE MBSS & CMOS & ARM AND RELATED MBSS REMICS REMICS CMOS SECURITIES ----------- --------- ---------- ---------- ----------- (IN THOUSANDS) Amounts due or repricing: Within one year.................................... $ 990 $ 39,559 $ -- $ 181,314 $ 221,863 ----------- --------- ---------- ---------- ----------- After one year: One to three years................................. 6 20,671 3,521 -- 24,198 Three to five years................................ 4,973 -- -- -- 4,973 Five to 10 years................................... 12,563 -- -- -- 12,563 10 to 20 years..................................... 99,266 -- 14,365 -- 113,631 Over 20 years...................................... 50,173 -- 350,766 -- 400,939 ----------- --------- ---------- ---------- ----------- Total due or repricing after one year................ 166,981 20,671 368,652 -- 556,304 ----------- --------- ---------- ---------- ----------- Total................................................ 167,971 60,230 368,652 181,314 778,167 Adjusted for: Unamortized yield adjustment....................... 753 561 (1,752) 430 (8) Unrealized gain(loss).............................. 1,492 361 566 (306) 2,113 ----------- --------- ---------- ---------- ----------- Total mortgage-backed and related securities......... $ 170,216 $ 61,152 $ 367,466 $ 181,438 $ 780,272 ----------- --------- ---------- ---------- ----------- ----------- --------- ---------- ---------- -----------
A-19 The following table sets forth the carrying value and the activity in the Company's mortgage-backed and related securities portfolio during the periods indicated.
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------- 1998 1997 1996 ---------- ---------- ---------- (IN THOUSANDS) Mortgage-backed and related securities: At beginning of period....................................................... $ 543,656 $ 421,964 $ 629,889 Loans securitized.......................................................... 105,691 -- -- MBSs purchased............................................................. -- 56,941 41,647 MBSs sold.................................................................. (6,618) (18,932) (101,604) CMOs and REMICs purchased.................................................. 687,923 365,002 158,654 CMOs and REMICs sold....................................................... (349,464) (206,901) (205,760) Amortization and repayments................................................ (199,636) (76,771) (97,969) Change in unrealized gain (loss)............................................. (1,280) 2,353 (2,893) ---------- ---------- ---------- Balance of mortgage-backed and related securities at end of period (1).......................................................... $ 780,272 $ 543,656 $ 421,964 ---------- ---------- ---------- ---------- ---------- ----------
- ------------------------ (1) Includes $780.3 million, $380.6 million and $224.0 million of mortgage-backed and related securities AFS at December 31, 1998, 1997 and 1996, respectively, carried at fair value. The Asset/Liability Committee determines when to make substantial changes in the MBS portfolio. In 1998, the Company purchased $687.9 million of CMOs and REMICs, of which $106.3 million were adjustable-rate and $581.6 million were fixed-rate securities. During 1998, the Bank continued to emphasize MBSs reflecting management's strategy to improve duration and yield of the AFS portfolio. Adjustable-rate securities as a percentage of total MBSs was 31%, 48% and 42% at December 31, 1998, 1997 and 1996, respectively. At December 31, 1998, $337.9 million, or 43.3% of the Bank's MBS portfolio, was directly insured or guaranteed by the FNMA, FHLMC or GNMA. FNMA and FHLMC provide the certificate holder a guarantee of timely payments of interest and scheduled principal payments, whether or not they have been collected. The GNMA MBSs provide a guarantee to the holder of timely payments of principal and interest and is backed by the full faith and credit of the U.S. Government. The privately-issued CMOs and REMICs contained in the Bank's AFS portfolio at December 31, 1998 totaling $442.4 million, or 56.7% of MBSs have generally been underwritten by large investment banking firms with the timely payment of principal and interest on these securities supported (credit enhanced) in varying degrees by either insurance issued by a financial guarantee insurer, letters of credit or subordination techniques. Substantially all such securities are rated AAA by one or more of the nationally recognized securities rating agencies. MBSs generally yield less than the loans that underlie such securities, because of the cost of payment guarantees or credit enhancements that result in nominal credit risk. The MBS portfolio had a weighted average yield of 6.50% for the year ended December 31, 1998. In addition, MBSs are more liquid than individual mortgage loans and may be used to collateralize obligations of the Bank. In general, MBSs issued or guaranteed by FNMA and FHLMC and certain AA-rated mortgage-backed pass-through securities are weighted at no more than 20% for risk-based capital purposes, and MBSs issued or guaranteed by GNMA are weighted at 0% for risk-based capital purposes, compared to an assigned risk weighting of 50% to 100% for whole residential mortgage loans. These types of securities thus allow the Bank to optimize regulatory capital to a greater extent than non-securitized whole loans. A-20 SOURCES OF FUNDS GENERAL. Deposits, loans, mortgage-backed and debt securities repayments, retained earnings and, to a lesser extent, FHLB advances are the primary source of the Company's and the Bank's funds for use in lending, investing and for other general purposes. DEPOSITS. The Bank offers a variety of deposit accounts having a range of interest rates and terms. The Bank's deposits consist of savings, NOW, checking, money market and certificate accounts. The flow of deposits is influenced significantly by general economic conditions, changes in money market rates, prevailing interest rates and competition. During 1996, the Bank implemented its supermarket banking program. During September of 1996, the Bank and Pathmark Stores, Inc. entered into an agreement to open approximately 44 full-service bank branches in Pathmark supermarkets throughout New York City, Long Island, Westchester and Rockland counties by early 1999. By the end of 1996, the Bank had opened four supermarket branches with deposits totaling $12.1 million. During 1997, the Bank opened twenty-eight supermarket branches resulting in a total of thirty-two locations at December 31, 1997 with deposits totaling $157.2 million. During 1998, the Bank opened an additional twenty-five supermarket branches resulting in a total of fifty-seven locations at December 31, 1998 with deposits totaling $504.0 million. The supermarket branches are located in the New York City boroughs of Queens, Brooklyn, Manhattan and Staten Island, the New York counties of Nassau, Suffolk, Rockland and Westchester and in New Jersey and Connecticut. At December 31, 1998, the Bank had 35 branches in Pathmark Stores, Inc., 14 in ShopRite Supermarket, Inc., 4 in Edward Super Food Stores, 2 in Big Y Food Stores, 1 in Shaws and 1 mini-branch in The Grand Union Co. Core deposits equaled 54.0% of total in-store branch deposits, compared to 45.5% in traditional branches. Overall core deposits represented 47.7% of total deposits at December 31, 1998 compared to 42.7% at December 31, 1997. The Bank believes that supermarket branching is a cost-effective way to extend its franchise and put its sales force in touch with a significant number of prospective customers. The branches are open seven days a week and provide a broad range of traditional banking services, as well as the full package of financial services offered by CFS Investments, Inc. ("CFSI"). In 1999, the Bank has opened two additional supermarket branches and is scheduled to open one more. The Bank has established a relationship with ShopRite Stores under which the Bank has the right to open in-store branches in all new or renovated ShopRite Stores in New Jersey and Connecticut. The Bank's deposits are obtained primarily from the areas in which its branch offices are located. The Bank relies primarily on customer service and long-standing relationships with customers to attract and retain these deposits. Certificate accounts in excess of $100,000 are not actively solicited by the Bank nor does the Bank use brokers to obtain deposits. During 1998, the Bank continued to offer competitive rates without jeopardizing the value of existing core deposits. During 1997, the Bank experienced a shift in deposits from certificate of deposit accounts into savings and checking accounts which continued in 1998. Certificates of deposit decreased from 57.3% of deposits at December 31, 1997 to 52.3% of deposits at December 31, 1998. During 1998, the Bank introduced a "Liquid Asset" savings account in all supermarket branches which pays the account holder a fixed-rate of interest in the first year on account balances of $2,500 or more. The Liquid Asset account currently pays 4.25% for the first year. The Company has been able to maintain a substantial level of core deposits which the Company believes helps to limit interest rate risk by providing a relatively stable, low cost long-term funding base. The Company expects to attract a higher percentage of core deposits from its supermarket branch locations as these locations continue to grow and mature. A-21 The following table presents the deposit activity of the Bank for the periods indicated.
YEARS ENDED DECEMBER 31, ---------------------------------------- 1998 1997 1996 ------------ ------------ ------------ (IN THOUSANDS) Deposits............................................ $ 5,753,644 $ 3,208,355 $ 2,441,295 Withdrawals......................................... 5,458,274 3,031,457 2,428,315 ------------ ------------ ------------ Net deposits........................................ 295,370 176,898 12,980 Interest credited on deposits....................... 62,328 50,326 41,362 ------------ ------------ ------------ Total increase in deposits.......................... $ 357,698 $ 227,224 $ 54,342 ------------ ------------ ------------ ------------ ------------ ------------
Time deposits by maturity at December 31, 1998 over $100,000 are as follows:
MATURITY PERIOD AMOUNT - ------------------------------------------------------------------------------ -------------- (IN THOUSANDS) Three months or less.......................................................... $ 24,244 Over three through six months................................................. 27,618 Over six through 12 months.................................................... 18,605 Over 12 months................................................................ 14,042 ------- Total..................................................................... $ 84,509 ------- -------
The following table sets forth the distribution of the Bank's deposit accounts for the periods indicated and the weighted average nominal interest rates for each category of deposits presented.
YEARS ENDED DECEMBER 31, ---------------------------------------------------------------------------------------------------- 1998 1997 1996 ------------------------------------- ------------------------------------- ---------------------- PERCENT WEIGHTED PERCENT WEIGHTED PERCENT OF AVERAGE OF AVERAGE OF AVERAGE TOTAL NOMINAL AVERAGE TOTAL NOMINAL AVERAGE TOTAL BALANCE DEPOSITS RATE BALANCE DEPOSITS RATE BALANCE DEPOSITS --------- ----------- ------------- --------- ----------- ------------- --------- ----------- (DOLLARS IN THOUSANDS) Savings accounts.... $ 441,759 28.22% 2.81% $ 371,872 30.01% 2.51% $ 373,337 33.46% Checking accounts... 187,297 11.96 0.73 134,546 10.86 1.31 111,425 9.99 --------- ----------- --- --------- ----------- --- --------- ----------- Total savings and checking accounts.......... 629,056 40.18 2.19 506,418 40.87 2.07 484,762 43.45 --------- ----------- --- --------- ----------- --- --------- ----------- Money market accounts.......... 57,597 3.68 3.54 54,107 4.37 3.37 58,108 5.21 --------- ----------- --- --------- ----------- --- --------- ----------- Certificate accounts: 91 days........... 5,620 0.36 3.87 5,799 0.47 3.83 7,783 0.70 6 months.......... 164,647 10.52 5.33 85,558 6.90 5.37 85,768 7.69 7 months.......... 4,519 0.29 3.93 13,116 1.06 5.26 2,228 0.20 One year.......... 382,497 24.43 5.62 265,891 21.45 5.69 203,259 18.22 13 months......... 27,514 1.76 5.53 21,314 1.72 5.79 11,036 0.99 18 months......... 33,985 2.17 5.77 34,321 2.77 5.79 23,407 2.10 2 to 4 years...... 160,667 10.26 5.99 145,081 11.71 6.04 131,931 11.82 Five years........ 93,898 5.99 6.23 101,972 8.23 6.23 101,690 9.11 7 to 10 years..... 5,644 0.36 6.31 5,547 0.45 6.31 5,666 0.51 --------- ----------- --- --------- ----------- --- --------- ----------- Total certificate accounts.......... 878,991 56.14 5.68 678,599 54.76 5.79 572,768 51.34 --------- ----------- --- --------- ----------- --- --------- ----------- Total deposits...... $1,565,644 100.00% 4.20% $1,239,124 100.00% 4.16% $1,115,638 100.00% --------- ----------- --- --------- ----------- --- --------- ----------- --------- ----------- --- --------- ----------- --- --------- ----------- WEIGHTED AVERAGE NOMINAL RATE ------------- Savings accounts.... 2.49% Checking accounts... 1.01 --- Total savings and checking accounts.......... 2.13 --- Money market accounts.......... 3.32 --- Certificate accounts: 91 days........... 3.92 6 months.......... 5.12 7 months.......... 2.99 One year.......... 5.51 13 months......... 5.12 18 months......... 5.98 2 to 4 years...... 5.87 Five years........ 6.30 7 to 10 years..... 6.28 --- Total certificate accounts.......... 5.66 --- Total deposits...... 4.00% --- ---
A-22 The following table presents, by various rate categories, the amount of certificate accounts outstanding at December 31, 1998, 1997 and 1996 and the periods to maturity of the certificate accounts outstanding at December 31, 1998.
PERIOD OF MATURITY FROM DECEMBER 31, 1998 ------------------------------------------ AT DECEMBER 31, WITHIN ONE TO TWO TO OVER ------------------------------- ONE TWO THREE THREE 1998 1997 1996 YEAR YEARS YEARS YEARS --------- --------- --------- --------- --------- --------- --------- (IN THOUSANDS) Certificate accounts: 3.99% or less.............................. $ 31,712 $ 6,682 $ 10,396 $ 26,493 $ 3,592 $ 77 $ 1,550 4.00% to 4.99%............................. 131,330 6,942 18,545 121,015 7,774 1,467 1,074 5.00% to 5.99%............................. 610,219 548,849 456,789 557,808 27,230 9,528 15,658 6.00% to 6.99%............................. 123,436 211,302 104,732 62,068 19,600 41 41,727 7.00% to 7.99%............................. 5,052 7,808 10,637 492 4,560 -- -- --------- --------- --------- --------- --------- --------- --------- Total.................................... $ 901,749 $ 781,583 $ 601,099 $ 767,876 $ 62,756 $ 11,108 $ 60,009 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- TOTAL --------- Certificate accounts: 3.99% or less.............................. $ 31,712 4.00% to 4.99%............................. 131,330 5.00% to 5.99%............................. 610,219 6.00% to 6.99%............................. 123,436 7.00% to 7.99%............................. 5,052 --------- Total.................................... $ 901,749 --------- ---------
BORROWINGS Although deposits are the Bank's primary source of funds, the Bank has from time to time utilized borrowings as an alternative or less costly source of funds. The Bank's primary source of borrowing is advances from the FHLB-NY. These advances are collateralized by the capital stock of the FHLB-NY held by the Bank and certain of the Bank's MBSs. See "Regulation and Supervision--Federal Home Loan Bank System." Such advances are made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. The maximum amount that the FHLB-NY will advance to member institutions, including the Bank, for purposes other than meeting withdrawals, fluctuates from time to time in accordance with the policies of the OTS and the FHLB-NY. At December 31, 1998, the Bank had $325.2 million of advances outstanding from the FHLB-NY. In addition, the Bank may, from time to time, enter into sales of securities under agreements, generally for up to 30 days, to repurchase ("reverse repurchase agreements") with nationally recognized investment banking firms. Reverse repurchase agreements are accounted for as borrowings by the Bank and are secured by designated securities. The proceeds of these transactions are used to meet cash flow or asset/liability needs of the Bank. At December 31, 1998, the Bank had $88.7 million of reverse repurchase agreements outstanding. On February 12, 1997, Haven Capital Trust I, a trust formed under the laws of the State of Delaware, issued $25 million of 10.46% capital securities. The Company is the owner of all the beneficial interests represented by common securities of the Trust. The Trust used the proceeds from the sale of the capital securities to purchase the Company's 10.46% junior subordinated deferrable interest debentures due 2027. See Note 11 of Notes to Consolidated Financial Statements in the Registrant's 1998 Annual Report to Stockholders on page 37 which is incorporated herein by reference. The Bank has an ESOP loan from an unrelated third party lender with an outstanding balance of $1.5 million and an interest rate of 7.06% at December 31, 1998. See Note 14 of Notes to Consolidated Financial Statements in the Registrant's 1998 Annual Report to Stockholders on page 42 which is incorporated herein by reference. The loan, as amended on December 29, 1995, is payable in thirty-two equal quarterly installments beginning December 1995 through September 2003. The loan bears interest at a floating rate based on the federal funds rate plus 250 basis points. A-23 The following table sets forth certain information regarding borrowed funds for the dates indicated:
AT OR FOR THE YEARS ENDED DECEMBER 31, ---------------------------------- 1998 1997 1996 ---------- ---------- ---------- (DOLLARS IN THOUSANDS) FHLB-NY Advances: Average balance outstanding................................................ $ 301,557 $ 191,550 $ 152,005 Maximum amount outstanding at any month-end during the period.............. 431,000 247,000 195,000 Balance outstanding at end of period....................................... 325,200 247,000 178,450 Weighted average interest rate during the period........................... 5.19% 5.69% 5.54% Weighted average interest rate at end of period............................ 5.13% 5.86% 4.72% Securities Sold under Agreements to Repurchase: Average balance outstanding................................................ $ 142,348 $ 172,310 $ 128,677 Maximum amount outstanding at any month-end during the period.............. 191,291 229,280 142,906 Balance outstanding at end of period....................................... 88,690 193,028 142,906 Weighted average interest rate during the period........................... 5.71% 5.68% 5.65% Weighted average interest rate at end of period............................ 5.50% 5.94% 5.09% Other Borrowings (1): Average balance outstanding................................................ $ 26,626 $ 25,231 $ 7,667 Maximum amount outstanding at any month-end during the period.............. 26,766 30,120 10,725 Balance outstanding at end of period....................................... 26,456 26,766 5,077 Weighted average interest rate during the period........................... 10.32% 8.15% 6.38% Weighted average interest rate at end of period............................ 10.20% 10.29% 9.63% Total Borrowings: Average balance outstanding................................................ $ 470,531 $ 389,091 $ 285,951 Maximum amount outstanding at any month-end during the period.............. 649,057 466,794 348,631 Balance outstanding at end of period....................................... 440,346 466,794 326,433 Weighted average interest rate during the period........................... 5.95% 5.86% 5.84% Weighted average interest rate at end of period............................ 5.51% 6.15% 5.11%
- ------------------------ (1) Includes the CMO, ESOP loan and Holding Company Obligated Mandatorily Redeemable Capital Securities. SUBSIDIARY ACTIVITIES COLUMBIA RESOURCES CORP. ("COLUMBIA RESOURCES"). Columbia Resources is a wholly owned subsidiary of the Bank and was formed in 1984 for the sole purpose of acting as a conduit for a partnership to acquire and develop a parcel of property in New York City. Columbia Resources acquired the property, but never developed it. The property was later sold. During 1996, two REO commercial properties totaling $524,000 were transferred from the Bank to Columbia Resources to limit exposure to the Bank from unknown creditors. By December 31, 1996 the properties were written down to a combined value of $440,000. The properties were subsequently sold during 1997. CFS INVESTMENTS, INC. ("CFSI"). CFSI is a wholly owned subsidiary of the Bank organized in 1989 that is engaged in the sale of tax deferred annuities, securities brokerage activities and insurance. CFSI participates with FISERV Investor Services, Inc., which is registered as a broker-dealer with the SEC, NASD, and state securities regulatory authorities. All employees of CFSI engaged in securities brokerage activities are dual employees of FISERV. Products offered through FISERV include debt and equity securities, mutual funds, unit investment trusts and variable annuities. Fixed annuities, life and health insurance, and long term nursing care products are offered through CFSI; a licensed general agent with the New York State Department of Insurance. A-24 HAVEN CAPITAL TRUST I. On February 12, 1997, Haven Capital Trust I, a statutory business trust formed under the laws of the State of Delaware issued $25 million of 10.46% capital securities. See Note 11 of Notes to Consolidated Financial Statements in the Registrant's 1998 Annual Report to Stockholders on page 37 which is incorporated herein by reference. COLUMBIA PREFERRED CAPITAL CORPORATION ("CPCC"). On June 9, 1997, the Bank established a real estate investment trust ("REIT") subsidiary, CPCC. At December 31, 1998, the REIT held $334.0 million of the Bank's residential loan portfolio. The establishment of the REIT enables the Bank to achieve certain business goals including providing the Bank with a contingency funding mechanism without disrupting its investment policies and enhancing the Bank's ability to track and manage the mortgage portfolio transferred to CPCC since the transferred portion of its mortgage loan portfolio is segregated into a separate legal entity. CFS TRAVEL SERVICES, INC. The Company, through its wholly owned subsidiary, CFS Travel Services, Inc. ("CFS Travel"), established February 28, 1998 offered customers and their families and friends, organized, escorted day long excursions and overnight trips. This subsidiary was subsequently dissolved on March 31, 1999. CFS INSURANCE AGENCY, INC. On November 2, 1998, the Company completed the purchase of 100% of the oustanding common stock of CIA. CIA, headquartered in Centereach, New York, provides automobile, homeowners and casualty insurance to individuals and various lines of commercial insurance to businesses. CIA operates as a wholly-owned subsidiary of the Company. PERSONNEL As of December 31, 1998, the Bank had 941 full-time employees and 65 part-time employees. Even though the employees are not represented by a collective bargaining unit, the Bank considers its relationship with its employees to be good. REGULATION AND SUPERVISION GENERAL The Bank is subject to regulation, examination and supervision by the OTS, as its chartering agency, and the FDIC, as the deposit insurer. The Bank is a member of the FHLB System and its deposit accounts are insured up to applicable limits by the Savings Association Insurance Fund ("SAIF") managed by the FDIC. The Bank must file reports with the OTS and the FDIC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with, or acquisitions of, other financial institutions. Periodic examinations by the OTS and the FDIC monitor the Bank's compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of the insurance fund and depositors. FEDERAL SAVINGS INSTITUTION REGULATION BUSINESS ACTIVITIES. The activities of federal savings institutions are governed by the Home Owners' Loan Act, as amended (the "HOLA") and, in certain respects, the Federal Deposit Insurance Act ("FDI Act") and the regulations issued by the agencies to implement these statutes. These laws and regulations delineate the nature and extent of the activities in which federal associations may engage. In particular, many types of lending authority for federal associations, (e.g., commercial, non-residential real property loans, consumer loans), are limited to a specified percentage of the institutions's capital or assets. LOANS TO ONE BORROWER. Under the HOLA, savings institutions are generally subject to the national bank limit on loans to one borrower. Generally, this limit is 15% of the Bank's unimpaired capital and A-25 surplus plus an additional 10% of unimpaired capital and surplus if such loan is secured by readily-marketable collateral, which is defined to include certain financial instruments and bullion. At December 31, 1998, the Bank's unimpaired capital and surplus was $151.1 million and its limit on loans to one borrower was $22.7 million. At December 31, 1998, the Bank's largest aggregate amount of loans to one borrower had an aggregate balance of $13.0 million. QTL TEST. The HOLA requires savings institutions to meet a Qualified Thrift Lender ("QTL") test. Under the QTL test, a savings association is required to maintain at least 65% of its "portfolio assets" (total assets less: (i) specified liquid assets up to 20% of total assets; (ii) intangibles, including goodwill; and (iii) the value of property used to conduct business) in certain "qualified thrift investments" (primarily residential mortgages and related investments, including certain mortgage-backed and related securities) in at least 9 months out of each 12 month period. A savings association that fails the QTL test must either convert to a bank charter or operate under certain restrictions. As of December 31, 1998, the Bank maintained 72.06% of its portfolio assets in qualified thrift investments and had more than 65% of its portfolio assets in qualified thrift investments in each of the prior 12 months. Therefore, the Bank met the QTL test. LIMITATION ON CAPITAL DISTRIBUTIONS. OTS regulations impose limitations upon all capital distributions by savings institutions, such as cash dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of another institution in a cash-out merger and other distributions charged against capital. Effective April 1, 1999, the OTS amended its capital distribution regulations to reduce regulatory burdens on savings associations. The regulations being replaced, which were effective throughout 1998, established three tiers of institutions, which are based primarily on an institution's capital level. An institution that exceeded all fully phased-in regulatory capital requirements before and after a proposed capital distribution ("Tier 1 Bank") and had not been advised by the OTS that it was in need of more than normal supervision, could, after prior notice to, but without the approval of the OTS, make capital distributions during a calendar year equal to the greater of: (i) 100% of its net earnings to date during the calendar year plus the amount that would reduce by one-half its "surplus capital ratio" (the excess capital over its fully phased-in capital requirements) at the beginning of the calendar year; or (ii) 75% of its net earnings for the previous four quarters. Any additional capital distributions would have required prior OTS approval. In the event the Bank's capital fell below its capital requirements or the OTS notified it that it was in need of more than normal supervision, the Bank's ability to make capital distributions could be restricted. In addition, the OTS could prohibit a proposed capital distribution by any institution, which would otherwise be permitted by the regulation, if the OTS determines that such distribution would constitute an unsafe or unsound practice. Under the amendments adopted by the OTS, certain savings associations will be permitted to pay capital distributions during a calendar year that do not exceed the association's net income for that year plus its retained net income for the prior two years, without notice to, or the approval of, the OTS. If adopted as proposed, certain savings associations will be permitted to pay capital distributions within the amounts described above for Tier 1 institutions without notice to, or the approval of, the OTS. However, a savings association subsidiary of a savings and loan holding company, such as the Bank, will continue to have to file a notice unless the specific capital distribution requires an application. LIQUIDITY. The Bank is required to maintain an average daily balance of specified liquid assets equal to a monthly average of not less than a specified percentage (currently 4%) of its net withdrawable deposit accounts plus short-term borrowings. Monetary penalties may be imposed for failure to meet the liquidity requirements. The Bank's average liquidity ratio for December 31, 1998 was 4.24% which exceeded the then applicable requirement. The Bank has never been subject to monetary penalties for failure to meet its liquidity requirements. ASSESSMENTS. Savings institutions are required by regulation to pay assessments to the OTS to fund the agency's operations. The general assessment, paid on a semi-annual basis, is computed upon the A-26 savings institution's total assets, including consolidated subsidiaries, as reported in the Bank's latest quarterly Thrift Financial Report. The assessments paid by the Bank for the years ended December 31, 1998 and 1997, totaled $322,000 and $285,000, respectively. The OTS has adopted amendments to its regulations, effective January 1, 1999, that are intended to assess savings associations on a more equitable basis. The new regulations will base the assessment for an individual savings association on three components: the size of the association, on which the basic assessment would be based; the association's supervisory condition, which would result in an additional assessment based on a percentage of the basic assessment for any savings institution with a composite rating of 3, 4 or 5 in its most recent safety and soundness examination; and the complexity of the association's operations, which would result in an additional assessment based on a percentage of the basic assessment for any savings association that managed over $1 billion in trust assets, serviced for others loans aggregating more than $1 billion, or had certain off-balance sheet assets aggregating more than $1 billion. In order to avoid a disproportionate impact on the smaller savings institutions, which are those whose total assets never exceeded $100 million, the new regulations provide that the portion of the assessment based on assets size will be the lesser of the assessment under the amended regulations or the regulations before the amendment. Management believes that any change in its rate of OTS assessments under the amended regulations will not be material. BRANCHING. OTS regulations permit federally chartered savings associations to branch nationwide under certain conditions. Generally, federal savings associations may establish interstate networks and geographically diversify their loan portfolios and lines of business. The OTS authority preempts any state law purporting to regulate branching by federal savings associations. TRANSACTIONS WITH RELATED PARTIES. The Bank's authority to engage in transactions with related parties or "affiliates" (i.e., any company that controls or is under common control with an institution, including the Company and its non-savings institution subsidiaries) is limited by Sections 23A and 23B of the Federal Reserve Act ("FRA"). Section 23A limits the aggregate amount of covered transactions with any individual affiliate to 10% of the capital and surplus of the savings institution and also limits the aggregate amount of transactions with all affiliates to 20% of the savings institution's capital and surplus. Certain transactions with affiliates are required to be secured by collateral in an amount and of a type described in Section 23A, and the purchase of low quality assets from affiliates is generally prohibited. Section 23B generally requires that certain transactions with affiliates, including loans and asset purchases, must be on terms and under circumstances, including credit underwriting standards, that are substantially the same or at least as favorable to the institution as those prevailing at the time for comparable transactions with non-affiliated companies. Notwithstanding Sections 23A and 23B, savings institutions are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act ("BHC Act"). Further, no savings institution may purchase the securities of any affiliate other than a subsidiary. The Bank's authority to extend credit to its executive officers, directors and 10% shareholders, as well as to entities controlled by such persons, is currently governed by Sections 22(g) and 22(h) of the FRA, and Regulation O thereunder. Among other things, these regulations require that such loans to be made on terms and conditions, including credit underwriting standards, substantially the same as those offered to unaffiliated individuals and not involve more than the normal risk of repayment. Regulation O also places individual and aggregate limits on the amount of loans the Bank may make to such persons based, in part, on the Bank's capital position, and requires that certain board approval procedures be followed. HOLA and the OTS regulations, with certain minor variances, apply Regulation O to savings institutions. ENFORCEMENT. Under the FDI Act, the OTS has primary enforcement responsibility over savings institutions and has the authority to bring action against all "institution-affiliated parties," including controlling stockholders, and any stockholders, attorneys, appraisers and accountants who knowingly or recklessly participate in any violation of applicable law or regulation or breach of fiduciary duty or certain A-27 other wrongful actions that causes or is likely to cause a more than a minimal loss or other significant adverse effect on an insured savings association. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers or directors, receivership, conservatorship or termination of deposit insurance. Civil penalties cover a wide range of violations and can amount to $5,000 per day for less serious violations, and up to $1 million per day in more egregious cases. Under the FDI Act, the FDIC has the authority to recommend to the Director of the OTS that enforcement action be taken with respect to a particular savings institution. If action is not taken by the Director of the OTS, the FDIC has authority to take such action under certain circumstances. Federal law also establishes criminal penalties for certain violations. STANDARDS FOR SAFETY AND SOUNDNESS. The FDI Act requires each federal banking agency to prescribe for all insured depository institutions standards relating to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, and compensation, fees and benefits and such other operational and managerial standards as the agency deems appropriate. The OTS and the federal banking agencies have adopted a final rule and Interagency Guidelines Prescribing Standards for Safety and Soundness ("Guidelines") to implement these safety and soundness standards. The Guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. The Guidelines address internal controls and information systems; internal audit system; credit underwriting; loan documentation; interest rate risk exposure; asset growth; asset quality; earnings and compensation, fees and benefits. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the Guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard, as required by the FDI Act. The final rule establishes deadlines for the submission and review of such safety and soundness compliance plans, when such plans are required. CAPITAL REQUIREMENTS. The OTS capital regulations require savings institutions to meet three minimum capital standards: a tangible capital ratio requirement of 1.5% of total assets as adjusted under the OTS regulations, a core capital ratio requirement of 3.0% of core capital to such adjusted total assets, which ratio requirement will, effective April 1, 1999, be 3% only for those savings institutions who been assigned a composite rating of 1 under the Uniform Financial Institutions Rating System, and will be 4% for all other savings institutions, and a risk-based capital ratio requirement of 8.0% of core and supplementary capital to total risk-based assets. Tangible capital is defined, generally, as common stockholders' equity (including retained earnings), certain noncumulative perpetual preferred stock and related earnings, minority interests in equity accounts of fully consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and investments in and loans to subsidiaries engaged in activities not permissible for a national bank. Core capital (also called "Tier 1" capital) is defined similarly to tangible capital, but core capital also includes certain qualifying supervisory goodwill and certain purchased credit card relationships. In addition, the OTS prompt corrective action regulation provides that a savings institution that has a core capital ratio of less than 4% (3% for institutions receiving the highest rating under the Uniform Financial Institutions Rating System, will be deemed to be "undercapitalized" and may be subject to certain restrictions). See "--Prompt Corrective Regulatory Action." The risk-based capital standard for savings institutions requires the maintenance of total capital (which is defined as core capital and supplementary capital) to risk-weighted assets of at least 8%. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight of 0% to 100%, as assigned by the OTS capital regulation based on the risks OTS believes are inherent in the type of asset. The components of core capital are equivalent to those discussed earlier under the 3% leverage standard. The components of supplementary capital currently include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible debt securities, subordinated debt and intermediate preferred stock and, within specified limits, the allowance A-28 for loan and lease losses. Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital. The OTS has incorporated an interest rate risk component into its regulatory capital rule. The final interest rate risk rule also adjusts the risk-weighting for certain mortgage derivative securities. Under the rule, savings associations with "above normal" interest rate risk exposure would be subject to a deduction from total capital for purposes of calculating their risk-based capital requirements. A savings association's interest rate risk is measured by the decline in the net portfolio value of its assets (i.e., the difference between incoming and outgoing discounted cash flows from assets, liabilities and off-balance sheet contracts) that would result from a hypothetical 200-basis point increase or decrease in market interest rates divided by the estimated economic value of the association's assets, as calculated in accordance with guidelines set forth by the OTS. A savings association whose measured interest rate risk exposure exceeds 2% must deduct an interest rate component in calculating its total capital under the risk-based capital rule. The interest rate risk component is an amount equal to one-half of the difference between the institution's measured interest rate risk and 2%, multiplied by the estimated economic value of the association's assets. That dollar amount is deducted from an association's total capital in calculating compliance with its risk-based capital requirement. Under the rule, there is a two quarter lag between the reporting date of an institution's financial data and the effective date for the new capital requirement based on that data. A savings association with assets of less than $300 million and risk-based capital ratios in excess of 12% is not subject to the interest rate risk component, unless the OTS determines otherwise. The rule also provides that the Director of the OTS may waive or defer an association's interest rate risk component on a case-by-case basis. The OTS has indefinitely deferred the implementation of the interest rate risk component in the computation of an institution's risk-based capital requirement. The OTS continues to monitor the interest rate risk of individual institutions and retains the right to impose additional capital on individual institutions. If the Bank had been subject to an interest rate risk capital component as of December 31, 1998, there would have been no material effect on the Bank's risk-weighted capital. At December 31, 1998, the Bank met each of its capital requirements, in each case on a fully phased-in basis. A chart which sets forth the Bank's compliance with its capital requirements appears in Note 17 to Notes to Consolidated Financial Statements in the Registrant's 1998 Annual Report to Stockholders on page 46, and is incorporated herein by reference. PROMPT CORRECTIVE REGULATORY ACTION Under the OTS prompt corrective action regulations, the OTS is required to take certain supervisory actions against undercapitalized institutions, the severity of which depends upon the institution's degree of capitalization. Generally, a savings institution that has a total risk-based capital of less than 8.0% or either a leverage ratio or a Tier 1 risk-based capital ratio that is less than 4.0% is considered to be undercapitalized. A savings institution that has a total risk-based capital less than 6.0%, a Tier 1 risk-based capital ratio of less than 3.0% or a leverage ratio that is less than 3.0% is considered to be "significantly undercapitalized" and a savings institution that has a tangible capital to assets ratio equal to or less than 2.0% is deemed to be "critically undercapitalized." Subject to a narrow exception, the banking regulator is required to appoint a receiver or conservator for an institution that is critically undercapitalized. The regulation also provides that a capital restoration plan must be filed with the OTS within 45 days of the date an association receives notice that it is "under-capitalized", "significantly undercapitalized" or "critically undercapitalized." Compliance with the plan must be guaranteed by any parent holding company. In addition, numerous mandatory supervisory actions become immediately applicable to the institution depending upon its category, including, but not limited to, increased monitoring by regulators, restrictions on growth, and capital distributions and limitations on expansion. The OTS could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors. A-29 INSURANCE OF DEPOSIT ACCOUNTS The FDIC has adopted a risk-based insurance assessment system. The FDIC assigns an institution to one of three capital categories based on the institution's financial information, as of the reporting period ending seven months before the assessment period, consisting of (1) well capitalized, (2) adequately capitalized or (3) undercapitalized, and one of three supervisory subcategories within each capital group. The supervisory subgroup to which an institution is assigned is based on a supervisory evaluation provided to the FDIC by the institution's primary federal regulator and information which the FDIC determines to be relevant to the institution's financial condition and the risk posed to the deposit insurance funds. An institution's assessment rate depends on the capital category and supervisory category to which it is assigned. Assessment rates currently range from 0.0% of deposits for an institution in the highest category (i.e., well-capitalized and financially sound, with no more than a few minor weaknesses) to 0.27% of deposits for an institution in the lowest category (i.e., undercapitalized and substantial supervisory concern). The FDIC is authorized to raise the assessment rates as necessary to maintain the required reserve ratio of 1.25%. As a result of the Deposit Insurance Funds Act of 1996 (the "Funds Act"), both the BIF and the SAIF currently satisfy the reserve ratio requirement. If the FDIC determines that assessment rates should be increased, institutions in all risk categories could be affected. The FDIC has exercised this authority several times in the past and could raise insurance assessment rates in the future. If such action is taken by the FDIC, it could have an adverse effect on the earnings of the Bank. The Funds Act also amended the FDI Act to expand the assessment base for the payments on the Financing Corporation ("FICO") obligations. Beginning January 1, 1997, the assessment base included the deposits of both BIF- and SAIF-insured institutions. Until December 31, 1999, or any earlier date on which the last savings association ceases to exist, the rate of assessment for BIF-assessable deposits shall be one-fifth of the rate imposed on SAIF-assessable deposits. The annual rate of assessments for the payments on the FICO obligations for the quarterly semi-annual period beginning on January 1, 1998 was 0.0156% for BIF-assessable deposits and 0.0628% for SAIF-assessable deposits. For the quarterly period beginning on July 1, 1998, the rates of assessment for the FICO obligations are 0.0122% for BIF-assessable deposits and 0.0610% for SAIF-assessable deposits. Accordingly, as a result of the Funds Act, the Bank has seen a decrease in the deposit assessments paid to the FDIC. FEDERAL HOME LOAN BANK SYSTEM The Bank is a member of the FHLB System, which consists of 12 regional FHLBs. The FHLB provides a central credit facility primarily for member institutions. The Bank, as a member of the FHLB of New York, is required to acquire and hold shares of capital stock in the FHLB in an amount at least equal to 1% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year, or 1/20 of its advances (borrowings) from the FHLB, whichever is greater. The Bank was in compliance with this requirement with an investment in FHLB stock at December 31, 1998 of $22.0 million. FHLB advances must be secured by specified types of collateral, and all long-term advances may only be obtained for the purpose of providing funds for residential housing finance. The FHLBs are required to provide funds for the resolution of insolvent thrifts and to contribute funds for affordable housing programs. These requirements could reduce the amount of dividends that the FHLBs pay to their members and could also result in the FHLBs imposing a higher rate of interest on advances to their members. For the years ended December 31, 1998, 1997 and 1996, dividends from the FHLB to the Bank amounted to $1.2 million, $710,000 and $571,000, respectively. If dividends were reduced or interest on future FHLB advances increased, the Bank's net interest income would likely also be reduced. Further, there can be no assurance that the impact of recent legislation on the FHLBs will not also cause a decrease in the value of the FHLB stock held by the Bank. A-30 FEDERAL RESERVE SYSTEM The Federal Reserve Board regulations require depository institutions, including savings institutions, to maintain non-interest-earning reserves against their transaction accounts (primarily NOW and regular checking accounts). The current Federal Reserve Board regulations generally require that reserves be maintained against aggregate transaction accounts as follows: for accounts aggregating $46.5 million or less (subject to adjustment by the Federal Reserve Board) the reserve requirement is 3%; and for accounts greater than $46.5 million, the reserve requirement is $1,395,000 plus 10% (subject to adjustment by the Federal Reserve Board between 8% and 14%) against that portion of total transaction accounts in excess of $46.5 million. The first $4.9 million of otherwise reservable balances (subject to adjustments by the Federal Reserve Board) are exempted from the reserve requirements. The Bank is in compliance with the foregoing requirements. Because required reserves must be maintained in the form of either vault cash, a non-interest-bearing account at a Federal Reserve Bank or a pass-through account as defined by the Federal Reserve Board, the effect of this reserve requirement is to reduce the Bank's interest-earning assets. FHLB System members are also authorized to borrow from the Federal Reserve "discount window," but Federal Reserve Board regulations require institutions to exhaust all FHLB sources before borrowing from a Federal Reserve Bank. HOLDING COMPANY REGULATION The Company is a non-diversified unitary savings and loan holding company within the meaning of the HOLA. As such, the Company is required to be registered with the OTS and is subject to OTS regulations, examinations, supervision and reporting requirements. In addition, the OTS has enforcement authority over the Company and its non-savings institution subsidiaries. Among other things, this authority permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution. The Bank must notify the OTS 30 days before declaring any dividend to the Company. As a unitary savings and loan holding company, the Company generally is not restricted under existing laws as to the types of business activities in which it may engage, provided that the Bank continues to be a QTL. See "--Federal Savings Institution Regulation--QTL Test" for a discussion of the QTL requirements. Upon any non-supervisory acquisition by the Company of another savings association, the Company would become a multiple savings and loan holding company (if the acquired institution is held as a separate subsidiary) and would be subject to extensive limitations on the types of business activities in which it could engage. The HOLA limits the activities of a multiple savings and loan holding company and its non-insured institution subsidiaries primarily to activities permissible for bank holding companies under Section 4(c)(8) of the BHC Act, subject to the prior approval of the OTS, and to other activities authorized by OTS regulation. The HOLA prohibits a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of the voting stock of another savings institution or holding company thereof, without prior written approval of the OTS; and from acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary holding company, or a non-subsidiary company engaged in activities other than those permitted by the HOLA; or acquiring or retaining control of a depository institution that is not insured by the FDIC. In evaluating applications by holding companies to acquire savings institutions, the OTS must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors. The OTS is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, except: (i) the approval of interstate supervisory acquisitions by savings and loan holding companies, and (ii) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions. A-31 LEGISLATIVE DEVELOPMENTS Congress continues to work toward passage of legislation to modernize the financial services industries. Proposed legislation being considered by committees of the House of Representatives and of the Senate would permit affiliations between banking, insurance and securities companies and, thereby, expand significantly the financial services that could be offered by bank holding companies. Such expanded financial activities would be permissible for financial holding companies that controlled subsidiary depository institutions that qualified as well capitalized and well managed and that had satisfactory CRA ratings. The proposed legislation would grandfather unitary savings and loan holding companies in activities currently permitted such holding companies. The outcome of such proposed legislation is uncertain. Therefore, the Company is unable to determine the extent to which such legislation, if enacted, would affect the Company's business. FEDERAL SECURITIES LAWS The Company's Common Stock is registered with the Securities and Exchange Commission under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act. The registration, under the Securities Act of 1933, as amended (the "Securities Act") of shares of the Common Stock issued in the Conversion does not cover the resale of such shares. Shares of the Common Stock purchased by persons who are not affiliates of the Company may be resold without registration. Shares purchased by an affiliate of the Company will be subject to the resale restrictions of Rule 144 under the Securities Act. If the Company meets the current public information requirements of Rule 144 under the Securities Act, each affiliate of the Company who complies with the other conditions of Rule 144 (including those that require the affiliate's sale to be aggregated with those of certain other persons) would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of (i) 1% of the outstanding shares of the Company or (ii) the average weekly volume of trading in such shares during the preceding four calendar weeks. Shares acquired through the Company's option plans have been registered under the Securities Act and, therefore, are not subject to resale restrictions. Provision may be made in the future by the Company to permit affiliates to have their shares registered for sale under the Securities Act under certain circumstances. THE YEAR 2000 PROBLEM The information related to the Year 2000 problem is incorporated herein by reference to "Management's Discussion and Analysis of Financial Condition and Results of Operations--Computer Issues for the Year 2000" in the Registrant's 1998 Annual Report to Stockholders on page 21. FEDERAL AND STATE TAXATION FEDERAL TAXATION GENERAL. The Company and the Bank report their income on a calendar year basis using the accrual method of accounting and will be subject to federal income taxation in the same manner as other corporations with some exceptions. The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to the Bank or the Company. The Company and its subsidiaries file a consolidated Federal income tax return on a calendar-year basis. The Bank and the Company have not been audited by the Internal Revenue Service during the last five fiscal years. Under the Small Business Job Protection Act of 1996 ("1996 Act"), signed into law in August 1996, the special rules for bad debt reserves of thrift institutions no longer apply and, therefore, the Bank cannot A-32 make additions to the tax bad debt reserves but is permitted to deduct bad debts as they occur. Additionally, under the 1996 Act, the Bank is required to recapture (that is, include in taxable income) the excess of the balance of its bad debt reserves as of December 31, 1995 over the balance of such reserves as of December 31, 1987 ("base year"). The Bank's federal tax bad debt reserves at December 31, 1995 exceeded its base year reserves by $2.7 million which will be recaptured into taxable income ratably over a six year period. This recapture was suspended for 1996 and 1997, whereas, one-sixth of the excess reserves was recaptured into taxable income for 1998. The base year reserves will be subject to recapture, and the Bank could be required to recognize a tax liability, if (i) the Bank fails to qualify as a "bank" for Federal income tax purposes; (ii) certain distributions are made with respect to the stock of the Bank (see "Distributions"); (iii) the Bank uses the bad debt reserves for any purpose other than to absorb bad debt losses; or (iv) there is a change in Federal tax law. Management is not aware of the occurrence of any such event. DISTRIBUTIONS. To the extent that the Bank makes "non-dividend distributions" to stockholders, such distributions will be considered as made from the Bank's base year reserve to the extent thereof, and then from the supplemental reserve for losses on loans and an amount based on the amount distributed will be included in the Bank's taxable income. Non-dividend distributions include distributions in excess of the Bank's current and accumulated earnings and profits, distributions in redemption of stock, and distributions in partial or complete liquidation. However, dividends paid out of the Bank's current or accumulated earnings and profits, as calculated for federal income tax purposes, will not be considered to result in a distribution from the Bank's bad debt reserves. CORPORATE ALTERNATIVE MINIMUM TAX. The Internal Revenue Code of 1986, as amended, imposes a tax on alternative minimum taxable income ("AMTI") at a rate of 20%. AMTI is increased by an amount equal to 75% of the amount by which a corporation's adjusted current earnings exceeds its AMTI (determined without regard to this adjustment and prior to reduction for net operating losses). DIVIDENDS RECEIVED DEDUCTION AND OTHER MATTERS. The Company may exclude from its income 100% of dividends received from the Bank as a member of the same affiliated group of corporations. The corporate dividends received deduction is generally 70% in the case of dividends received from unaffiliated corporations with which the Company and the Bank will not file a consolidated tax return, except that if the Company or the Bank owns more than 20% of the stock of a corporation distributing a dividend, 80% of any dividends received may be deducted. STATE AND LOCAL TAXATION NEW YORK STATE AND NEW YORK CITY TAXATION. The Bank and the Company are subject to New York State and City franchise taxes on net income or one of several alternative bases, whichever results in the highest tax. "Net income" means Federal taxable income with adjustments. The Company's annual tax liability for each year is the greatest of a tax on allocated entire net income; allocated alternative entire net income; allocated assets to New York State and/or New York City; or a minimum tax. Operating losses cannot be carried back or carried forward for New York State or New York City tax purposes. The Bank is also subject to the 17% Metropolitan Commuter District Surcharge on its New York State tax after the deduction of credits. The Company is also subject to taxes in New Jersey and Connecticut due to the establishment of in-store branches. In response to the 1996 Act, the New York State and New York City tax laws have been amended to prevent the recapture of existing tax bad debt reserves and to allow for the continued use of the PTI method to determine the bad debt deduction in computing New York City and New York State tax liability. DELAWARE TAXATION. As a Delaware holding company not earning income in Delaware, the Company is exempted from Delaware Corporate income tax but is required to file an annual report with and pay an annual franchise tax to the State of Delaware. A-33 ITEM 2. PROPERTIES The Bank conducts its business through eight full-service banking and fifty-nine supermarket banking facilities (two of which were opened during the first quarter of 1999) located in the New York City boroughs of Queens, Brooklyn, Manhattan and Staten Island, the New York counties of Nassau, Suffolk, Rockland and Westchester and in New Jersey and Connecticut. The Bank provides residential mortgage banking services through its CFS Intercounty Mortgage division operating from six loan origination offices in New York, New Jersey and Pennsylvania. The Company provides casualty insurance through its subsidiary, CIA, from three offices located in Long Island, New York. In December 1997, the Company purchased an office building and land in Westbury, New York for its new administrative headquarters. The purchase was consummated under the terms of a lease agreement and Payment-in-lieu-of-Tax ("PILOT") agreement with the Town of Hempstead Industrial Development Agency ("IDA"). The Company completed improvements to the building and began using the building as its corporate headquarters in July 1998. The cost of the land and building, including improvements was $12.8 million. The total net book value of the Company's and the Bank's premises and equipment was $39.2 million at December 31, 1998, which included fifty-seven supermarket branches. The Company believes that the Bank's current facilities are adequate to meet the present and immediately foreseeable needs of the Bank and the Company.
NET BOOK VALUE OF PROPERTY OR LEASEHOLD DATE IMPROVEMENTS LEASED OR LEASED OR DATE OF LEASE AT DECEMBER 31, LOCATION OWNED ACQUIRED EXPIRATION(1) 1998 - ---------------------------------------------------------- ----------- ------------- --------------- --------------- (IN THOUSANDS) Main Office Complex(2): 93-22/93-30 & 94-09/94-13 Jamaica Avenue & 87-14/86-35 94th St. Woodhaven, NY 11421............ Owned 1957 -- $ 2,208 Traditional Branches: 80-35 Jamaica Avenue, Woodhaven, NY 11421............... Owned 1979 -- 251 82-10 153rd Avenue, Howard Beach, NY 11414.............. Owned 1971 -- 561 98-16 101st Avenue, Ozone Park, NY 11416................ Owned 1976 -- 451 244-19 Braddock Avenue, Bellerose, NY 11426(3).......... Leased 1973 2003 117 106-17 Continental Ave, Forest Hills, NY 11375.......... Leased 1959 1999 13 343 Merrick Road, Amityville, NY 11701.................. Leased 1977 2001 416 104-08 Rockaway Beach Blvd., Rockaway Beach, NY 11693... Leased 1996 1999 34 Supermarket Branches: 700-60 Patchogue Rd., Medford, NY 11763................. Leased 1996 2001 173 1121 Jerusalem Avenue, Uniondale, NY 11553.............. Leased 1996 2001 192 533 Montauk Highway, Bayshore, NY 11708................. Leased 1996 2001 223 625 Atlantic Avenue, Brooklyn, NY 11217................. Leased 1996 2001 198 575 Montauk Highway, W. Babylon, NY 11704............... Leased 1997 2002 203 2335 New Hyde Park Rd, New Hyde Park, NY 11040.......... Leased 1997 2002 223 1251 Deer Park Ave., N. Babylon, NY 11703............... Leased 1997 2002 212 101 Wicks Road, Brentwood, New York 11717............... Leased 1997 2002 222 3635 Hempstead Turnpike, Levittown, NY 11756............ Leased 1997 2002 228 6070 Jericho Turnpike, Commack, NY 11726................ Leased 1997 2002 226 2150 Middle Country Rd., Centereach, NY 11720........... Leased 1997 2002 227 1897 Front Street, East Meadow, NY 11554................ Leased 1997 2002 235 8101 Jericho Turnpike, Woodbury, NY 11796............... Leased 1997 2002 227 92-10 Atlantic Avenue, Ozone Park, NY 11416............. Leased 1997 2002 230
A-34
NET BOOK VALUE OF PROPERTY OR LEASEHOLD DATE IMPROVEMENTS LEASED OR LEASED OR DATE OF LEASE AT DECEMBER 31, LOCATION OWNED ACQUIRED EXPIRATION(1) 1998 - ---------------------------------------------------------- ----------- ------------- --------------- --------------- (IN THOUSANDS) 395 Route 112, Patchogue, NY 11772...................... Leased 1997 2002 219 1764 Grand Avenue, Baldwin, NY 11510.................... Leased 1997 2002 226 5145 Nesconset Hwy., Port Jefferson, NY 11776........... Leased 1997 2002 248 31-06 Farrington Street, Whitestone, NY 11357........... Leased 1997 2002 226 5801 Sunrise Highway, Sayville, NY 11741................ Leased 1997 2002 220 531 Montauk Highway, W. Babylon, NY 11776............... Leased 1997 2002 229 155 Islip Avenue, Islip, NY 11751....................... Leased 1997 2002 232 800 Montauk Highway, Shirley, NY 11967.................. Leased 1997 2002 237 253-01 Rockaway Turnpike, Woodmere, NY 11422............ Leased 1997 2002 227 227 Cherry Street, New York, NY 10002................... Leased 1997 2002 227 45 Route 59 Monsey, NY 10952............................ Leased 1997 2002 233 195 Rockland Center, Rte. 59, Nanuet, NY 10954.......... Leased 1997 2002 244 1905 Sunrise Highway, Bayshore, NY 11708................ Leased 1997 2002 243 941 Carmens Road, Massapequa, NY 11758.................. Leased 1997 2002 84 500 South River Street, Hackensack, NJ 07470............ Leased 1997 2002 180 1 Pathmark Plaza, Mount Vernon, NY...................... Leased 1997 2002 268 2875 Richmond Avenue, Staten Island, NY 10306........... Leased 1997 2002 257 111-10 Flatlands Avenue, Brooklyn, NY 11230............. Leased 1997 2002 236 1245 61st Street, Boro Park, NY 11219................... Leased 1998 2003 257 2650 Sunrise Highway, East Islip, NY 11730.............. Leased 1998 2003 172 492 E. Atlantic Avenue, E. Rockaway, NY 11554........... Leased 1998 2003 245 1-37 12th Street, Brooklyn, NY 11205.................... Leased 1998 2003 243 130 Wheatley Plaza, Greenvale, NY 11548................. Leased 1998 2003 258 335 Nesconset Highway, Hauppauge, NY 11788.............. Leased 1998 2003 162 360 No. Broadway, Jericho, NY 11753..................... Leased 1998 2003 244 42-02 Northern Blvd., L.I.C., NY 11100.................. Leased 1998 2003 237 2540 Central Park Ave, No. Yonkers, NY 10710............ Leased 1998 2003 222 130 Midland Avenue, Portchester, NY 10573............... Leased 1998 2003 285 1351 Forest Avenue, Staten Island, NY 10302............. Leased 1998 2003 247 2424 Hylan Blvd., Staten Island, NY 10306............... Leased 1998 2003 24 1757 Central Park Ave, Yonkers, NY 10710................ Leased 1998 2003 293 Route 28 and Union Ave, Bound Brook, NJ 08805........... Leased 1998 2003 201 Rte 70 & Chambers Bridge Rd, Bricktown, NJ 08723........ Leased 1998 2003 213 367 Highway 22 West, Hillside, NJ 07205................. Leased 1998 2003 327 201 Roosevelt Place, Palisades Park, NJ 07650........... Leased 1998 2003 211 625 Hamburg Turnpike, Wayne, NJ 07470................... Leased 1998 2003 189 145 Highway 36 West, Long Branch, NJ 07764.............. Leased 1998 2003 202 23 Marshall Hill Road, West Milford, NJ 07480........... Leased 1998 2003 210 404 Main Street, Ansonia, CT 06401...................... Leased 1998 2003 173 500 Sylvan Avenue, Bridgeport, CT 06610................. Leased 1998 2003 238 533 South Broad Street, Meridan, CT 06450............... Leased 1998 2003 254 157 Cherry Street, Milford, CT 06460.................... Leased 1998 2003 177 6 Queen Street, Newtown, CT 06460....................... Leased 1998 2003 201 650 Wolcott Street, Waterbury, CT 06705................. Leased 1998 2003 260
A-35
NET BOOK VALUE OF PROPERTY OR LEASEHOLD DATE IMPROVEMENTS LEASED OR LEASED OR DATE OF LEASE AT DECEMBER 31, LOCATION OWNED ACQUIRED EXPIRATION(1) 1998 - ---------------------------------------------------------- ----------- ------------- --------------- --------------- (IN THOUSANDS) 131 Campbell Avenue, West Haven, CT 06516............... Leased 1998 2003 176 Corporate Headquarters: 615 Merrick Avenue, Westbury, NY........................ Owned 1997 -- 11,419
- ------------------------ (1) Rent expense for the year ended December 31, 1998 was $1.7 million. (2) On March 25, 1999, the Bank sold the properties, consisting of land, buildings and building improvements located at 93-22 and 93-30 Jamaica Avenue, Woodhaven, New York. As of December 31, 1998, the Bank entered into a contract of sale for its properties located at 94-09 and 94-13 Jamaica Avenue and 87-14 and 86-35 94th Street, Woodhaven, New York. These properties are expected to be sold in the second quarter of 1999. (3) Includes land that is adjacent to the branch office that was acquired by the Bank in 1973. ITEM 3. LEGAL PROCEEDINGS In February, 1983, a burglary of the contents of safe deposit boxes occurred at a branch office of the Bank. At December 31, 1998 and currently, the Bank has a class action lawsuit related thereto pending, whereby the plaintiffs are seeking recovery of approximately $12,900,000 in actual damages and an additional $12,900,000 in unspecified damages. The Bank's ultimate liability, if any, which might arise from the disposition of these claims cannot presently be determined. Management believes it has meritorious defenses against this action and has and will continue to defend its position. Accordingly, no provision for any liability that may result upon adjudication of this action has been recognized in the accompanying consolidated financial statements. The Company is involved in various legal actions arising in the ordinary course of business, which in the aggregate, are believed by management to be immaterial to the financial position of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. A-36 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information relating to the market for Registrant's common equity and related stockholder matters appears under "Common Stock Information" in the Registrant's 1998 Annual Report to Stockholders on page 53, and is incorporated herein by reference. Information relating to the payment of dividends by the Registrant appears in Note 17 to Notes to Consolidated Financial Statements in the Registrant's Annual Report on page 45 and is incorporated herein by reference. The Company initiated a quarterly cash dividend of $0.05 per share in the third quarter of 1995 paid on October 20, 1995. The following schedule summarizes the cash dividends paid for 1996, 1997 and 1998:
DIVIDEND PAID DIVIDEND PAYMENT DATE PER SHARE (1) RECORD DATE - --------------------------------------------- ----------------- ---------------------- January 19, 1996............................. .05 January 2, 1996 April 29, 1996............................... .05 April 8, 1996 July 12, 1996................................ .075 June 27, 1996 October 28, 1996............................. .075 October 7, 1996 January 17, 1997............................. .075 December 30, 1996 April 24, 1997............................... .075 April 4, 1997 July 18, 1997................................ .075 June 30, 1997 October 17, 1997............................. .075 September 29, 1997 January 1998................................. .075 December 1998 April 1998................................... .075 March 1998 July 1998.................................... .075 June 1998 October 1998................................. .075 September 1998
- ------------------------ (1) As adjusted to reflect the 2-for-1 stock split effective November 1997 ("stock split"). The following schedule summarizes the dividend payout ratio (dividends declared per share divided by net income per share):
DIVIDENDS NET INCOME YEAR PAID PER SHARE PER SHARE PAYOUT RATIO - ------------------------------------------ --------------- ------------- --------------- 1996...................................... $ 0.25 $ 1.13 .221% 1997...................................... 0.30 1.32 .227 1998...................................... 0.30 0.95 .316
ITEM 6. SELECTED FINANCIAL DATA The above-captioned information appears in the Registrant's 1998 Annual Report to Stockholders on pages 6 and 7 and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The above-captioned information appears under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrant's 1998 Annual Report to Stockholders on pages 8 through 22 and is incorporated herein by reference. A-37 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The above-captioned information appears under "Management's Discussion and Analysis of Financial Condition and Results of Operations--Asset/Liability Management" and "--Interest Rate Sensitivity Analysis" in the Registrant's 1998 Annual Report to Stockholders on pages 9 through 11 and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements of Haven Bancorp, Inc. and its subsidiaries, and the notes related thereto together with the report thereon by KPMG LLP appears in the Registrant's 1998 Annual Report to Stockholders on pages 23 through 51 and are incorporated herein by reference. ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information relating to Directors and Executive Officers of the Registrant is incorporated herein by reference to the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on April 21, 1999, on pages 5 through 8. ITEM 11. EXECUTIVE COMPENSATION The information relating to executive compensation is incorporated herein by reference to the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on April 21, 1999, on pages 9 through 22 (excluding the Report of the Compensation Committee on pages 12 through 14 and the Stock Performance Graph on page 15). ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information relating to security ownership of certain beneficial owners and management is incorporated herein by reference to the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on April 21, 1999, on pages 3 through 4 and pages 6 through 8. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information relating to certain relationships and related transactions is incorporated herein by reference to the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on April 21, 1999, on pages 22 and 23. A-38 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report: (1) Consolidated Financial Statements of the Company are incorporated by reference to the following indicated pages of the 1998 Annual Report to Stockholders.
PAGES --------- Consolidated Statements of Financial Condition as of December 31, 1998 and 1997....... 23 Consolidated Statements of Income for the Years Ended December 31, 1998, 1997 and 1996................................................................................ 24 Consolidated Statements of Changes In Stockholders' Equity for the Three Years Ended December 31, 1998................................................................... 25 Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996................................................................................ 26 Notes to Consolidated Financial Statements............................................ 27-50 Independent Auditors' Report.......................................................... 51
The remaining information appearing in the Annual Report to Stockholders is not deemed to be filed as part of this report, except as expressly provided herein. (2) All schedules are omitted because they are not required or applicable, or the required information is shown in the consolidated financial statements or the notes thereto. (3) Exhibits (filed herewith unless otherwise noted) (a) The following exhibits are filed as part of this report: 3.1 Amended Certificate of Incorporation of Haven Bancorp, Inc.(1) 3.2 Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred Stock(2) 3.3 Bylaws of Haven Bancorp, Inc.(3) 4.0 Rights Agreement between Haven Bancorp, Inc. and Chase Manhattan Bank (formerly Chemical Bank)(2) 10.1(A) Employment Agreement between Haven Bancorp, Inc. and Philip S. Messina(4) 10.1(B) Amendatory Agreement to the Employment Agreement between Haven Bancorp, Inc. and Philip S. Messina(5) 10.1(C) Employment Agreement between CFS Bank and Philip S. Messina(5) 10.2(A) Form of Change in Control Agreement between Columbia Federal Savings Bank and certain executive officers, as amended(4) 10.2(B) Form of Amendment to Change in Control Agreement between CFS Bank and certain executive officers(5) 10.2(C) Form of Change in Control Agreement between Haven Bancorp, Inc. and certain executive officers, as amended(4) 10.2(D) Form of Amendment to Change in Control Agreement between Haven Bancorp, Inc. and certain executive officers(5) 10.2(E) Employment Agreement between Columbia Federal Savings Bank and Andrew L. Kaplan(5)
A-39 10.2(F) Change in Control Agreement between Haven Bancorp, Inc. and Mark A. Ricca dated as of April 10, 1998 (filed herewith) 10.2(G) Change in Control Agreement between CFS Bank and Mark A. Ricca dated as of April 10, 1998 (filed herewith) 10.4 (a) Amended and Restated Columbia Federal Savings Bank Recognition and Retention Plans and Trusts for Officers and Employees(6) 10.4 (b) Amended and Restated Recognition and Retention Plan and Trusts for Outside Directors(6) 10.5 Haven Bancorp, Inc. 1993 Incentive Stock Option Plan(6) 10.6 Haven Bancorp, Inc. 1993 Stock Option Plan for Outside Directors(6) 10.7 Columbia Federal Savings Bank Employee Severance Compensation Plan, as amended(4) 10.8 Columbia Federal Savings Bank Consultation and Retirement Plan for Non-Employee Directors(6) 10.9 Form of Supplemental Executive Retirement Plan(3) 10.10 Haven Bancorp, Inc. 1996 Stock Incentive Plan(4) 10.11 Purchase and Assumption Agreement, dated as of March 11, 1998, by and among Intercounty Mortgage, Inc., CFS Bank and Resource Bancshares Mortgage Group, Inc.(7) 11.0 Computation of earnings per share (filed herewith) 13.0 1998 Annual Report to Stockholders (filed herewith) 21.0 Subsidiary information is incorporated herein by reference to "Part I--Subsidiaries" 23.0 Consent of Independent Auditors (filed herewith) 27.0 Financial Data Schedule (filed herewith) 99 Proxy Statement for 1999 Annual Meeting (filed herewith)
- ------------------------ (1) Incorporated by reference into this document from the Exhibits to Form 10-Q for the quarter ended September 30, 1998, filed on November 16, 1998. (2) Incorporated by reference into this document from the Exhibits to Form 8-K, Current Report, filed on January 30, 1996. (3) Incorporated by reference into this document from the Exhibits to Form S-1, Registration Statement and any amendments thereto, filed on April 14, 1993, Registration No. 33-61048. (4) Incorporated by reference into this document from the Exhibits to Form 10-K for the year ended December 31, 1995, filed on March 29, 1996. (5) Incorporated by reference into this document from the Exhibits to Form 10-K for the year ended December 31, 1997, filed on March 31, 1998. (6) Incorporated by reference into this document from the Exhibits to Form 10-K for the year ended December 31, 1994, filed on March 30, 1995. (7) Incorporated by reference into this document from the Exhibits to Form 8-K, Current Report, filed on July 2, 1998. (b) Reports on Form 8-K. A report on Form 8-K was filed by the Company dated October 9, 1998 relating to the Company's execution of a definitive purchase agreement in connection with the purchase of Century Insurance Agency, Inc. A-40 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HAVEN BANCORP, INC. By: /s/ PHILIP S. MESSINA ----------------------------------------- Philip S. Messina Chairman of the Board Dated: March 30, 1999 Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. NAME TITLE DATE - ------------------------------ --------------------------- ------------------- /s/ PHILIP S. MESSINA Chairman of the Board, - ------------------------------ President and Chief March 30, 1999 Philip S. Messina Executive Officer /s/ GEORGE S. WORGUL Director - ------------------------------ March 30, 1999 George S. Worgul /s/ ROBERT M. SPROTTE Director - ------------------------------ March 30, 1999 Robert M. Sprotte /s/ MICHAEL J. FITZPATRICK Director - ------------------------------ March 30, 1999 Michael J. Fitzpatrick /s/ WILLIAM J. JENNINGS II Director - ------------------------------ March 30, 1999 William J. Jennings II /s/ MICHAEL J. LEVINE Director - ------------------------------ March 30, 1999 Michael J. Levine /s/ MSGR. THOMAS J. HARTMAN Director - ------------------------------ March 30, 1999 Msgr. Thomas J. Hartman /s/ CATHERINE CALIFANO Senior Vice President and - ------------------------------ Chief Financial Officer March 30, 1999 Catherine Califano A-41 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances where it is lawful to do so. The information contained in this prospectus is current only as of its date. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of Haven Bancorp, Inc. since the date hereof or that the information contained herein is correct as of any time subsequent to the date of this prospectus. ------------------------ TABLE OF CONTENTS
PAGE --------- Where you can find more information............. 3 Additional information we have incorporated in the prospectus................................ 3 Forward-looking statements relating to Haven's, Haven Capital's and the capital securities' future performance or expectations............ 3 Summary Information............................. 5 Recent Developments............................. 9 Summary Selected Consolidated Financial Data.... 11 Risk Factors.................................... 15 Haven Bancorp, Inc.............................. 24 Management of Haven and the Bank................ 28 Haven Capital Trust II.......................... 31 Use of Proceeds................................. 32 Capitalization.................................. 33 Accounting Treatment............................ 34 Description of Capital Securities............... 35 Description of Subordinated Debentures.......... 47 Description of Guarantee........................ 58 Relationship Among the Capital Securities, the Subordinated Debentures and the Guarantee..... 61 Certain Federal Income Tax Consequences......... 62 ERISA Considerations............................ 66 Underwriting.................................... 69 Validity of Securities.......................... 70 Experts......................................... 70 Annual Report on Form 10-K...................... A-1
HAVEN CAPITAL TRUST II $35,000,000 % Capital Securities Liquidation Amount $25 per Capital Security Fully and unconditionally guaranteed, to the extent described herein, by HAVEN BANCORP, INC. ------------------------ PROSPECTUS ------------------------ FRIEDMAN BILLINGS RAMSEY FIRST ALBANY CORPORATION LADENBURG THALMANN & CO. INC. , 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The Corporation will pay all of the expenses incurred in connection with the offering described in this registration statement. Such expenses, other than underwriting commissions and discounts, are estimated to be as follows: Securities and Exchange Commission registration fee............... $ 11,190 Legal fees and expenses........................................... * Accounting fees and expenses...................................... * Blue Sky fees and expenses........................................ * Printing and engraving fees....................................... * Fees and expenses of registrars, transfer agents, paying agents and trustees.................................................... * Fees of rating agencies........................................... * Listing fees...................................................... * Miscellaneous..................................................... * --------- Total........................................................... $ * --------- ---------
* To be filed by amendment. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law, INTER ALIA,empowers a Delaware corporation to indemnify any 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 (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of another corporation or other enterprise, against expenses (including attorneys' fees), 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 interest of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Similar indemnity is authorized for such person against expenses (including attorneys' fees) actually and reasonably incurred in connection with the defense or settlement of any such threatened, pending or completed action or suit if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and provided further that (unless a court of competent jurisdiction otherwise provides) such person shall not have been adjudged liable to the corporation. Any such indemnification may be made only as authorized in each specific case upon a determination by the stockholders or disinterested directors or by independent legal counsel in a written opinion that indemnification is proper because the indemnitee has met the applicable standard of conduct. Section 145 further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, 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 corporation would otherwise have the power to indemnify him under Section 145. The Corporation's certificate of incorporation contains provisions indemnifying directors and officers to the fullest extent permitted by law. II-1 The Corporation has also entered into employment agreements with certain executive officers, which agreements require that the Corporation maintain a directors' and officers' liability policy for the benefit of such officers and that the Corporation will indemnify such officers to the fullest extent permitted by law. The Corporation has obtained directors' and officers' liability insurance policies which insure its directors and officers and the directors and officers of its subsidiaries in certain instances. The Amended and Restated Declaration of Trust (the "Declaration") for Haven Capital Trust II (the "Trust") provides that to the full extent permitted by law, the Corporation shall indemnify any Administrative Trustee or affiliate of an Administrative Trustee, any officers, directors, stockholders, members, partners, employees or representatives or agents of any Administrative Trustee or any employee or agent of the Trust or its affiliates (each, a "Company Indemnified Person") who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of any such Trust) by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees), 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 any such Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The Declaration also provides that to the full extent permitted by law, the Corporation shall indemnify any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of any such trust to procure a judgment in its favor by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees) 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 any such trust and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such Company Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. The Declaration further provides that expenses (including attorneys' fees) incurred by a Company Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in the immediately preceding two sentences shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Company Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in any such Declaration. The Declaration for the Trust also provides that the Corporation shall indemnify the Property Trustee and the Delaware Trustee, any affiliate of the Property Trustee and the Delaware Trustee, and any officers, directors, stockholders, members, partners, employees, representatives, nominees, custodians or agents of the Property Trustee and the Delaware Trustee against any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts under the Trust, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties thereunder. II-2 ITEM 16. EXHIBITS.
EXHIBIT NUMBER DESCRIPTION - ----------- -------------------------------------------------------------------------------------------------------- 1.1 Form of Underwriting Agreement. 4.1 Certificate of Trust for Haven Capital Trust II. 4.2 Declaration of Trust for Haven Capital Trust II. 4.3 Form of Amended and Restated Declaration of Trust. 4.4 Form of Subordinated Debenture. 4.5 Form of Capital Security. 4.6 Form of Capital Securities Guarantee Agreement. 4.7 Form of Indenture. 5.1 Form of Opinion of Thacher Proffitt & Wood as to the legality of the Capital Securities, the Subordinated Debentures and the Guarantee to be issued by the Corporation. 8.1 Form of Opinion of Thacher Proffitt & Wood as to certain tax matters.* 12.1 Computation of ratio of earnings to fixed charges. 23.1 Consent of KPMG LLP. 23.2 Consent of Thacher Proffitt & Wood (included in Exhibit 5.1) 25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank and Chase Manhattan Bank Delaware to act as trustees under the Declaration of Trust of Haven Capital Trust II. 25.2 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under the Indenture. 25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under the Guarantee for the benefit of the holders of Capital Securities of Haven Capital Trust II. 27.1 Financial Data Schedule.*
- ------------------------ *To be filed by amendment ITEM 17. UNDERTAKINGS. (a) Each of the undersigned registrants hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of a registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of each registrant pursuant to the foregoing provisions, or otherwise, each registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a registrant of expenses incurred or paid by a director, officer, or controlling person of a 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 respective registrant will, unless in the opinion of 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 Securities Act of 1933 and will be governed by the final adjudication of such issue. II-3 (c) The undersigned registrants hereby undertake to provide to the Underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the Underwriters to permit the prompt delivery to each purchaser. (d) The undersigned registrants hereby undertake that: (1) For the purpose 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. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Westbury, state of New York, on April 13, 1999. HAVEN BANCORP, INC. By: /s/ PHILIP S. MESSINA ----------------------------------------- Philip S. Messina CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Catherine Califano and Mark A. Ricca, and each of them, as the true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign the Form S-3 Registration Statement and any or all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - ------------------------------ --------------------------- ------------------- Chairman of the Board, /s/ PHILIP S. MESSINA President and Chief - ------------------------------ Executive Officer April 13, 1999 Philip S. Messina (Principal executive officer) Senior Vice President and /s/ CATHERINE CALIFANO Chief Financial Officer - ------------------------------ (Principal accounting April 13, 1999 Catherine Califano officer) /s/ GEORGE S. WORGUL Director - ------------------------------ April 13, 1999 George S. Worgul /s/ ROBERT M. SPROTTE Director - ------------------------------ April 13, 1999 Robert M. Sprotte
II-5
SIGNATURE TITLE DATE - ------------------------------ --------------------------- ------------------- /s/ MICHAEL J. FITZPATRICK Director - ------------------------------ April 13, 1999 Michael J. Fitzpatrick /s/ WILLIAM J. JENNINGS II Director - ------------------------------ April 13, 1999 William J. Jennings II /s/ MICHAEL J. LEVINE Director - ------------------------------ April 13, 1999 Michael J. Levine /s/ MSGR. THOMAS J. HARTMAN Director - ------------------------------ April 13, 1999 Msgr. Thomas J. Hartman
II-6 Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Westbury, state of New York, on April 13, 1999. HAVEN CAPITAL TRUST II By: /s/ CATHERINE CALIFANO ----------------------------------------- Catherine Califano ADMINISTRATIVE TRUSTEE By: /s/ ROBERT B. LUNT ----------------------------------------- Robert B. Lunt ADMINISTRATIVE TRUSTEE By: /s/ MARK A. RICCA ----------------------------------------- Mark A. Ricca ADMINISTRATIVE TRUSTEE
POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Catherine Califano and Mark A. Ricca, and each of them, as the true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign the Form S-3 Registration Statement and any or all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - ------------------------------ -------------------------- ------------------- /s/ CATHERINE CALIFANO - ------------------------------ Administrative Trustee April 13, 1999 Catherine Califano /s/ ROBERT B. LUNT - ------------------------------ Administrative Trustee April 13, 1999 Robert B. Lunt /s/ MARK A. RICCA - ------------------------------ Administrative Trustee April 13, 1999 Mark A. Ricca
II-7 EX-1.1 2 EXHIBIT 1.1 Exhibit 1.1 $------------ HAVEN CAPITAL TRUST II ____% CAPITAL SECURITIES (LIQUIDATION AMOUNT OF $25 PER CAPITAL SECURITY) UNDERWRITING AGREEMENT April ____, 1999 FRIEDMAN, BILLINGS, RAMSEY & CO., INC. FIRST ALBANY CORPORATION LADENBURG THALMANN & CO. INC. as Representatives of the several Underwriters c/o Friedman, Billings, Ramsey & Co., Inc. 1001 19th Street North Arlington, Virginia 22209 Ladies and Gentlemen: Haven Capital Trust II (the "Trust"), a statutory business trust created under the Business Trust Act (the "Delaware Act") of the State of Delaware, and Haven Bancorp, Inc., a corporation organized under the laws of the State of Delaware (the "Company"), each confirms its agreement with each of the Underwriters listed on Schedule I hereto (collectively, the "Underwriters"), for whom Friedman, Billings, Ramsey & Co., Inc., First Albany Corporation and Ladenburg Thalmann & Co. Inc. are acting as representatives (in such capacity, the "Representatives"), with respect to (i) the sale of $______ (the "Initial Securities") of the Trust's ____% Capital Securities (liquidation amount $25 per security), and the purchase by the Underwriters, acting severally and not jointly, of the respective number of Initial Securities set forth opposite the names of the Underwriters in Schedule I hereto, and (ii) the grant of the option described in Section 1(b) hereof to purchase all or any part of an additional $________ (the "Option Securities") of the Trust's ____% Capital Securities (liquidation amount of $25 per security) to cover overallotments, to the Underwriters, acting severally and not jointly, in the respective numbers of Option Securities set forth opposite the names of the Underwriters in Schedule I hereto. The Initial Securities to be purchased by the Underwriters and all or any part of the Option Securities subject to the option described in Section l(b) hereof are hereinafter called, collectively, the "Capital Securities." The Capital Securities will be guaranteed by the Company with respect to distributions and amounts payable upon liquidation or redemption of such Capital Securities (the "Guarantee") to the extent set forth in the Guarantee Agreement (the "Guarantee Agreement"), to be entered into between the Company and The Chase Manhattan Bank, as trustee (the "Guarantee Trustee"), for the benefit of holders, from time to time, of the Capital Securities. The Company will be the owner of all of the beneficial ownership interests represented by the common securities (the "Common Securities") of the Trust. Proceeds from the sale of Capital Securities to the Underwriters and from the concurrent sale of Common Securities to the Company will be used to purchase ______% Junior Subordinated Deferrable Interest Debentures due ____________, 2029 (the "Debentures") of the Company. The Debentures will be issued by the Company pursuant to an Indenture (the "Indenture"), to be entered into between the Company and The Chase Manhattan Bank, as trustee (the "Debenture Trustee"). This Agreement, the Indenture, the Debentures, the Declaration (as defined in Section 3(ee) hereof) and the Guarantee Agreement are referred to collectively as the "Operative Documents." The Trust and the Company have filed with the Securities and Exchange Commission (the "Commission"), a registration statement on Form S-3 (No. 333-________) and a related preliminary prospectus for the registration of the Capital Securities under the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations thereunder (the "Securities Act Regulations"). The Trust and the Company have prepared and filed such amendments thereto, if any, and such amended preliminary prospectuses, if any, as may have been required to the date hereof, and will file such additional amendments thereto and such amended prospectuses as may hereafter be required. The registration statement has been declared effective under the Securities Act by the Commission. The registration statement as amended at the time it became effective (including all information deemed (whether by incorporation by reference or otherwise) to be a part of the registration statement at the time it became effective pursuant to Rule 430A(b) of the Securities Act Regulations) is hereinafter called the "Registration Statement," except that, if the Trust and the Company file a post-effective amendment to such registration statement which becomes effective prior to the Closing Time (as defined below), "Registration Statement" shall refer to such registration statement as so amended. Any registration statement filed pursuant to Rule 462(b) of the Securities Act Regulations is hereinafter called the "Rule 462(b) Registration Statement," and after such filing the term "Registration Statement" shall include the 462(b) Registration Statement. Each prospectus included in the registration statement, or amendments thereof or supplements thereto, before it became effective under the Securities Act and any prospectus filed with the Commission by the Trust and the Company with the consent of the Underwriters pursuant to Rule 424(a) of the Securities Act Regulations is hereinafter called the "Preliminary Prospectus." The term "Prospectus" means the final prospectus, as first filed with the Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Securities Act Regulations, and any amendments thereof or supplements thereto. The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus. The Trust and the Company understand that the Underwriters propose to make a public offering of the Capital Securities as soon as the Underwriters deem advisable after this Agreement has been executed and delivered. The Trust and the Company hereby confirm that the Underwriters and dealers have been authorized to distribute or cause to be distributed each Preliminary Prospectus and are authorized to distribute the Prospectus (as from time to time 2 amended or supplemented if the Trust and the Company furnish amendments or supplements to the Underwriters). The Trust, the Company and the Underwriters agree as follows: 1. SALE AND PURCHASE: (a) INITIAL SECURITIES. Upon the basis of the warranties and representations and other terms and conditions herein set forth, the Trust and the Company agree to sell to the Underwriters the number of Initial Securities set forth opposite the name of each such Underwriter on Schedule I to this Agreement and each of the Underwriters agrees, severally and not jointly, to purchase from the Trust and the Company the respective number of Initial Securities set forth opposite the name of such Underwriter on Schedule I, plus any additional number of Initial Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 8 hereof, at a purchase price of 100% of the liquidation amount thereof (the "Initial Purchase Price"). (b) OPTION SECURITIES. In addition, upon the basis of the warranties and representations and other terms and conditions herein set forth, the Trust and the Company hereby grant to the Underwriters, acting severally and not jointly, an option to purchase the respective number of Option Securities set forth opposite the names of such Underwriters in Schedule I hereto, plus any additional number of Option Securities which each such Underwriter may become obligated to purchase pursuant to the provisions of Section 8 hereof, at the Initial Purchase Price. The option hereby granted will expire 30 days after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial Securities upon notice by the Representatives to the Trust and the Company setting forth the number of Option Securities as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Securities. Any such time and date of delivery (a "Date of Delivery") shall be determined by the Representatives, but shall not be later than three full business days (or earlier, without the consent of the Trust and the Company, than two full business days) after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined. 2. PAYMENT AND DELIVERY: (a) INITIAL SECURITIES. Payment of the purchase price for the Initial Securities shall be made to the Trust by wire transfer of immediately available funds or certified or official bank check payable in federal (same-day) funds at the offices of Greenberg Traurig, P.A., located at 200 Park Avenue, New York, New York 10166 (unless another place shall be agreed upon by the Representatives, the Trust and the Company) against delivery of the certificates for the Initial Securities to the Representatives for the respective accounts of the Underwriters. Such payment and delivery shall be made at 9:30 a.m., New York City time, on the third (fourth, if pricing occurs after 4:30 p.m., New York City time) business day after the date hereof (unless another 3 time, not later than ten business days after such date, shall be agreed to by the Representatives, the Trust and the Company). The time at which such payment and delivery are actually made is hereinafter sometimes called the "Closing Time." Certificates for the Initial Securities shall be delivered to the Representatives in definitive form registered in such names and in such denominations as the Representatives shall specify. For the purpose of expediting the checking of the certificates for the Initial Securities by the Representatives, the Trust agrees to make such certificates available to the Representatives for such purpose at least one full business day preceding the Closing Time. (b) OPTION SECURITIES. In addition, payment of the purchase price for the Option Securities shall be made to the Trust by wire transfer of immediately available funds or certified or official bank check payable in federal (same-day) funds at the offices of Greenberg Traurig, P.A., located at 200 Park Avenue, New York, New York 10166 (unless another place shall be agreed upon by the Representatives, the Trust and the Company), against delivery of the certificates for the Option Securities to the Representatives for the respective accounts of the Underwriters. Such payment and delivery shall be made at 9:30 a.m., New York City time, on each Date of Delivery determined pursuant to Section 1(b) above. Certificates for the Option Securities shall be delivered to the Representatives in definitive form registered in such names and in such denominations as the Representatives shall specify. For the purpose of expediting the checking of the certificates for the Option Securities by the Representatives, the Trust agrees to make such certificates available to the Representatives for such purpose at least one full business day preceding the relevant Date of Delivery. (c) COMPENSATION. As compensation for the Underwriters' commitment and in view of the fact that proceeds from the sale of the Capital Securities to the Underwriters will be used to purchase the Debentures, the Company shall pay a fee equal to a percentage of the gross proceeds received by the Trust from the sale of the Capital Securities (the "Fee"). The Fee will be determined on each Closing Date by a sliding scale based on the spread over the 30-year Benchmark U.S. Treasury rate in accordance with the table set forth on Schedule II attached hereto; PROVIDED, HOWEVER, that the Fee shall not be greater than 3.5% or less than 3.0% of the gross proceeds received by the Trust on each Closing Date from the sale of the Capital Securities; PROVIDED FURTHER, HOWEVER, that notwithstanding the foregoing, the Fee payable with respect to Capital Securities sold to any investor identified on Schedule III attached hereto shall be equal to 40% of the Fee which would otherwise be due and payable with respect to such Capital Securities. The Fee shall be paid by means of a discount from the offering price of the Capital Securities or, at the option of the Representatives, by wire transfer of immediately available (same day) funds, net of the $25,000 retainer fee paid by the Company to the Representatives, on such Closing Date to a bank account designated by the Representatives. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE TRUST. The Company and the Trust, jointly and severally, hereby represent and warrant to, and agree with, each Underwriter as follows: 4 (a) Each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the Securities Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company or the Trust, are threatened by the Commission, and any request on the part of the Commission for additional information has been complied with. (b) The Preliminary Prospectus and the Registration Statement comply and the Prospectus and any further amendments or supplements thereto will, when they have become effective or are filed with the Commission, as the case may be, comply in all material respects with the requirements of the Securities Act and the Securities Act Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder; the Registration Statement did not, and any amendment thereto will not, in each case as of the applicable effective date, contain an 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, in the light of the circumstances under which they were made, not misleading; and the Preliminary Prospectus does not, and the Prospectus or any amendment or supplement thereto will not, as of the applicable filing date and at the Closing Time and on each Date of Delivery (if any), contain an 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, in the light of the circumstances under which they were made, not misleading; PROVIDED, HOWEVER, that the Company and the Trust make no warranty or representation with respect to any statement contained in the Registration Statement or the Prospectus in reliance upon and in conformity with the information concerning the Underwriters and furnished in writing by or on behalf of the Underwriters through the Representatives to the Company expressly for use in the Registration Statement or the Prospectus (that information being limited to that described in the last sentence of the first paragraph of Section 9(c) hereof). (c) The Preliminary Prospectus was and the Prospectus delivered to the Underwriters for use in connection with this offering will be identical to the versions of the Preliminary Prospectus and Prospectus created to be transmitted to the Commission for filing via the Electronic Data Gathering Analysis and Retrieval System ("EDGAR"), except to the extent permitted by Regulation S-T. (d) The documents incorporated by reference in the Registration Statement and the Prospectus, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein not misleading. (e) The financial statements, including the notes thereto, incorporated by reference in the Registration Statement and the Prospectus present fairly the consolidated 5 financial position of the entities to which such financial statements relate (the "Covered Entities") as of the dates indicated and the consolidated results of operations and changes in financial position and cash flows of the Covered Entities for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis during the periods involved and in accordance with Regulation S-X promulgated by the Commission; the financial statement schedules incorporated by reference in the Registration Statement and the amounts in the Prospectus under the captions "Summary Selected Financial Data" fairly present the information shown therein and have been compiled on a basis consistent with the financial statements incorporated by reference in the Registration Statement and the Prospectus (f) KPMG LLP, whose reports are filed with the Commission as a part of the Registration Statement, are and, during the periods covered by their reports, were independent public accountants as required by the Securities Act and the Securities Act Regulations. (g) The Company is duly registered with the Office of Thrift Supervision as a savings and loan holding company under the Home Owners' Loan Act of 1933, as amended (the "HOLA"); the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware; the Bank has been duly organized and is validly existing as a federally-chartered stock savings bank with the Office of Thrift Supervision and each of the Company's other direct and indirect subsidiaries (together with the Bank, the "Subsidiaries" and each a "Subsidiary"), which Subsidiaries are set forth on Schedule IV attached hereto, has been duly incorporated and is validly existing as a corporation in good standing in their respective jurisdictions of incorporation, as identified on Schedule IV hereto. The Company does not control, directly or indirectly, any corporation (other than the Subsidiaries), partnership, joint venture, association or other business organization. The Company and each of the Subsidiaries are duly qualified to do business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of properties or the conduct of their respective businesses requires such qualification, except where the failure to so qualify will not have a material adverse effect on the assets or properties, business, results of operations, prospects or financial condition of the Company and the Subsidiaries, taken as a whole, and have all corporate power necessary to own or hold their respective properties and to conduct the businesses in which they are engaged. The deposit accounts of the Bank are insured by the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation (the "FDIC") to the fullest extent permitted by law and the rules and regulations of the FDIC, and no proceedings for the termination of such insurance are pending or threatened. (h) Each of the Company and the Subsidiaries owns, possesses or has obtained all governmental licenses, permits, certificates, consents, orders, approvals and other authorizations (collectively, the "Authorizations") and has made all requisite declarations, registrations and filings (collectively, the "Filings") of, from and with all governmental or regulatory bodies and any other person or entity, required under the laws of the States of New York, New Jersey, Connecticut and Delaware, the United States and any other jurisdiction in 6 which the Company or any of the Subsidiaries transacts business in order to own or lease, as the case may be, and to operate its respective properties and to conduct its respective business as presently conducted and as described in the Prospectus, except where the failure to own, possess, obtain or make such Authorization or Filing would not have a material adverse effect on the assets or properties, business, results of operations, prospects or financial condition of the Company and the Subsidiaries, taken as a whole; all of such Authorizations are in full force and effect, and neither the Company nor the Subsidiaries has received any notice of proceedings relating to any revocation or modification thereof. (i) Each of the Company and the Subsidiaries is in compliance in all material respects with all applicable laws and the regulations, orders and policies of the Office of Thrift Supervision, the FDIC, the Commission and any other federal or state governmental authority with jurisdiction over the Company or any of the Subsidiaries, as the case may be (each, a "Governmental Authority"), the failure to comply with which would have a material adverse effect upon the assets or properties, business, results of operations, prospects or financial condition of the Company and the Subsidiaries, taken as a whole. Neither the Company nor any of the Subsidiaries is a party to any written agreement or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or is a recipient of any extraordinary supervisory letter from, or has adopted any board resolutions at the request of, any Governmental Authority which materially restricts the conduct of its business, or in any manner relates to its capital adequacy, its credit policies or its management, nor have any of them been advised by any Governmental Authority that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, extraordinary supervisory letter, commitment letter or similar submission, or any such board resolutions. (j) To the best of the Company's knowledge, each of the Company's and the Bank's directors, officers, employees and other "institution-affiliated parties" (as that term is defined in Section 3(u) of the Federal Deposit Insurance Act of 1933, as amended), is in compliance in all material respects with all applicable laws and the regulations, orders and policies of the Office of Thrift Supervision, the FDIC, the Commission and any other Governmental Authority, the failure to comply with which would have a material adverse effect upon the assets or properties, business, results of operations, prospects or financial condition of the Company and the Bank, taken as a whole. To the best of the Company's knowledge, none of the Company's or the Bank's directors, officers, employees and other institution-affiliated parties is a party to any written agreement or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or is a recipient of any extraordinary supervisory letter from, or has adopted any board resolutions at the request of, any Governmental Authority, or, to the best of the Company's knowledge, have any of them been advised by any Governmental Authority that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, extraordinary supervisory letter, commitment letter or similar submission, or any such board resolutions. 7 (k) The Company and each Subsidiary owns or possesses adequate license or other rights to use all patents, trademarks and trademark applications, service marks, trade names, copyrights, software and design licenses, trade secrets, other intangible property rights and know-how (collectively "Intangibles") necessary to entitle the Company and each Subsidiary to conduct its business as described in the Prospectus, and neither the Company, nor any Subsidiary, has received notice of infringement of or conflict with (and the Company knows of no such infringement of or conflict with) asserted rights of others with respect to any Intangibles which could materially and adversely affect the business, prospects, properties, assets, results of operations or condition (financial or otherwise) of the Company or any Subsidiary. (l) Each of the Company and the Subsidiaries has good and marketable title in fee simple to all real property and good title to all personal property owned by it, in each case free and clear of all liens, encumbrances and defects except such as do not materially affect the value of such property or do not materially interfere with the use made of such property by the Company or any Subsidiary; and all real property and buildings held under lease by the Company or any Subsidiary are held by them under valid, subsisting and enforceable leases, with such exceptions as are not material and do not interfere with the use made of such property and buildings by the Company or any such Subsidiary. (m) There are no actions, suits, proceedings, inquiries or investigations pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or any of their respective officers and directors or to which the properties, assets or rights of any such entity are subject, at law or in equity, before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority, arbitral panel or agency which could result in a judgment, decree, award or order having a material adverse effect on the assets, business, operations, earnings, prospects, properties or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole, or which is required to be disclosed in the Prospectus and is not so disclosed. (n) Except as disclosed in or contemplated by the Registration Statement and the Prospectus, subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, and except as may be otherwise stated in the Registration Statement or Prospectus, there has not been (i) any material adverse change in the assets, business, operations, earnings, prospects, properties or condition (financial or otherwise), present or prospective, of the Company and its Subsidiaries taken as a whole, whether or not arising in the ordinary course of business, (ii) any transaction, which is material to the Company and its Subsidiaries taken as a whole, contemplated or entered into by the Company or any of its Subsidiaries, or (iii) any obligation, contingent or otherwise, directly or indirectly incurred by the Company or any of its Subsidiaries, which is material to the Company and its Subsidiaries taken as a whole. (o) Neither the Company nor any Subsidiary is in violation of any term or provision of its (i) charter, by-laws or other governing documents or (ii) any franchise, license, permit, judgment, decree, order, statute, rule, regulation, directive, policy or guideline to which it 8 or its property may be subject, except, in the case of clause (ii), for such violations which would not, individually or in the aggregate, have a material adverse effect on the assets or properties, business, results of operations, prospects or financial condition of Company and the Subsidiaries, taken as a whole. (p) No default exists, and no event has occurred which with notice or lapse of time or both would constitute a default in the due performance and observance of any term, covenant or condition by the Company or any Subsidiary of any agreement, indenture, mortgage, deed of trust, note or any other agreement or material instrument to which the Company or Subsidiary is a party or by which any of them or their respective properties or businesses may be bound, except for such defaults or events which would not have a material adverse effect on the assets or properties, business, results of operations, prospects or financial condition of the Company and the Subsidiaries, taken as a whole. (q) Neither the execution, delivery and performance of the Operative Documents by the Company and the Trust nor the consummation of any of the transactions contemplated hereby or thereby will (i) conflict with or result in the breach or violation of any term or provision of, or give rise to a right to terminate or accelerate the due date of any payment due under, or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or require any consent or waiver under, or result in the creation or imposition of any lien, charge, claim, encumbrance or security interest on any properties or assets of the Company or of any Subsidiary pursuant to the terms of any indenture, mortgage or other material agreement or material instrument to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound or to which any of the properties or assets of the Company or any Subsidiary is subject, nor (ii) violate the charter or by-laws or other governing document of the Company or any Subsidiary or any applicable law, rule, regulation, decision, order or decree of any court or governmental agency or governmental authority having jurisdiction over the Company or any Subsidiary or any of their properties, except in the case of clause (i), for such violations which would not have a material adverse effect on the assets or properties, business, results of operations, prospects or financial condition of the Company and the Subsidiaries, taken as a whole. (r) No approval, authorization, consent or order of or filing with any federal, state or local governmental or regulatory commission, board, body, authority or agency is required in connection with the execution, delivery and performance by the Company and the Trust of the Operative Documents or the consummation of the transactions contemplated hereby and thereby, other than (i) such as have been obtained, or will have been obtained at the Closing Time or the relevant Date of Delivery, as the case may be, under the Securities Act, (ii) such approvals as have been obtained in connection with the approval of the quotation of the Capital Securities on the National Market of the National Association of Securities Dealers Automated Quotation ("NASDAQ") system and (iii) any necessary qualification under the securities or blue sky laws of the various jurisdictions in which the Capital Securities are being offered by the Underwriters 9 (s) The descriptions in the Registration Statement and the Prospectus of the contracts, leases and other legal documents therein described present fairly the information required to be shown and there are no contracts or other documents which are required to be described in the Prospectus or filed as exhibits to the Registration Statement by the Securities Act or by the Securities Act Regulations which have not been described in the Prospectus or filed as exhibits to the Registration Statement or incorporated therein by reference as permitted by the Securities Act Regulations. (t) The Company's capitalization is as set forth in the Prospectus; all of the issued shares of capital stock of each of the Subsidiaries have been duly and validly authorized and issued and are fully paid and non-assessable, and all of such shares are owned either by the Company or the Bank, directly or indirectly, free and clear of all liens, encumbrances, equities or claims of any third parties; and no holder of any security of the Company has the right to have any security owned by such holder included in the Registration Statement. (u) Since the date of the latest balance sheet incorporated by reference in the Registration Statement and the Prospectus, except as reflected therein, neither the Company nor any Subsidiary has (i) issued or granted any securities (other than shares of the Company's common stock issued under the Company's Stock Option Plan, pursuant to the exercise of outstanding stock options or to employees or directors under bonus or other compensation plans or arrangements) or incurred any material liability or obligation, whether fixed or contingent, except for liabilities or obligations incurred in the ordinary course of its business, (ii) entered into any transaction not in the ordinary course of its business, or (iii) declared or paid any dividend or made any distribution on any shares of its capital stock or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or otherwise acquire any shares of its capital stock. (v) Neither the Company nor any Subsidiary is involved in any labor dispute nor, to the knowledge of the Company, is any such dispute threatened, which dispute would have a material adverse effect on the assets or properties, business, results of operations, prospects or financial condition of the Company and the Subsidiaries, taken as a whole. (w) No transaction has occurred between or among the Company or any of its affiliates, officers or directors or any affiliate or affiliates of any such officer or director that is required to be described in and is not described in the Registration Statement and the Prospectus. (x) The Company and each Subsidiary has filed all Federal, state, local and foreign tax returns which are required to be filed by them, either on an individual or consolidated basis, through the date hereof, or has received extensions thereof; all taxes shown on such returns and all assessments received by them have been paid, to the extent that the same have become due, except where the failure to so file or pay would not have a material adverse effect on the assets or properties, business, results of operations, prospects or financial condition of the Company and the Subsidiaries, taken as a whole. 10 (y) Each of the Company and its Subsidiaries maintain insurance (issued by insurers of recognized financial responsibility) of the types and in the amounts generally deemed adequate for their respective businesses and consistent with insurance coverage maintained by similar companies in similar businesses, including, but not limited to, insurance covering real and personal property owned or leased by the Company and its Subsidiaries against theft, damage, destruction, acts of vandalism and all other risks customarily insured against, all of which insurance is in full force and effect. (z) Neither the Company nor any of its Subsidiaries has violated, or received notice of any violation with respect to, any applicable environmental, safety or similar law applicable to the business of the Company or any of its Subsidiaries, nor any federal or state law relating to discrimination in the hiring, promotion or pay of employees, nor any applicable federal or state wages and hours law, nor any provisions of the Employee Retirement Income Security Act or the rules and regulations promulgated thereunder, nor any state law precluding the denial of credit due to the neighborhood in which a property is situated, the violation of any of which could have a material adverse effect on the business, operations, earnings, prospects, properties or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole. (aa) The Company and the Trust will comply with all of the requirements and file the required forms as specified in Florida Statutes Section 517.075 if qualification of the Capital Securities in the State of Florida becomes necessary. Neither the Company nor any of its Subsidiaries or affiliates does business with the government of Cuba or with any person or affiliate located in Cuba. (bb) The Capital Securities have been duly authorized for quotation on the NASDAQ National Market, subject to official notice of issuance, and a registration statement has been filed on Form 8-A pursuant to Section 12 of the Exchange Act for the Capital Securities, which registration statement complies in all material respects with the Exchange Act. (cc) The Capital Securities and the Common Securities have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued, fully paid and non-assessable; and the Capital Securities and the Common Securities, when issued and delivered, will conform in all material respects to the descriptions thereof contained in the Prospectus. (dd) The Indenture has been duly authorized, and when duly executed by the proper officers of the Company (assuming due execution and delivery by the Debenture Trustee) and delivered by the Company will constitute a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law); and the Debentures have been duly authorized and, when duly executed, authenticated, issued and delivered as contemplated in the Indenture, 11 will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture and enforceable in accordance with their terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law); and the Debentures, when issued and delivered, will conform in all material respects to the description thereof contained in the Prospectus. (ee) The Trust has been duly created and is validly existing as a statutory business trust in good standing under the Delaware Act with the trust power and authority to own property and conduct its business as described in the Prospectus, and has conducted and will conduct no business other than the transactions contemplated by this Agreement as described in the Prospectus; the Trust is not a party to or bound by any agreement or instrument other than this Agreement, the Amended and Restated Declaration of Trust (the "Declaration") among the Company, The Chase Manhattan Bank, as property trustee (the "Property Trustee"), The Chase Manhattan Bank Delaware, as Delaware trustee (the "Delaware Trustee"), and the individuals named therein as the Administrative Trustees (the "Administrative Trustees," and, together with the Property Trustee and the Delaware Trustee, the "Trustees"), and the agreements and instruments contemplated by the Declaration and described in the Prospectus; the Trust has no liabilities or obligations other than those arising out of the transactions contemplated by this Agreement and the agreements and instruments contemplated by the Declaration and described in the Prospectus; and the Trust is not a party to or subject to any action, suit or proceeding of any nature. (ff) The Declaration has been duly authorized by the Company and, when duly executed and delivered by the Company and the Trustees, will be a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the rights of creditors generally and general equitable principles (whether considered in a proceeding in equity or at law), and will conform in all material respects to the description thereof contained in the Prospectus. Each of the Administrative Trustees is an employee of the Company and has been duly authorized by the Company to serve in such capacity and to execute and deliver the Declaration. (gg) The Guarantee Agreement has been duly authorized and, when duly executed and delivered by the proper officers of the Company and the Guarantee Trustee, will constitute a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law); and the Guarantee Agreement, when executed and delivered, will conform in all material respects to the description thereof contained in the Prospectus. (hh) This Agreement has been duly authorized, executed and delivered by each of the Company and the Trust and constitutes a valid and legally binding agreement of the 12 Company and the Trust enforceable against the Company and the Trust in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law) and except to the extent that the indemnification and contribution provisions of Section 9 hereof may be limited by federal or state securities laws and public policy considerations in respect thereof. (ii) Neither the Trust nor the Company nor any of the Subsidiaries is and, after giving effect to the transactions contemplated by the Operative Documents, will be an "investment company" or an entity "controlled" by and "investment company," as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"). (jj) The conditions for use of Form S-3 by the Company and the Trust, as set forth in the General Instructions thereto, have been satisfied. (kk) All computer software (including, without limitation software which forms a part of any hardware) owned or used by the Company or any Subsidiary, or licensed by the Company or any Subsidiary, as licensor or as licensee, is "Year 2000 Compliant" (as hereinafter defined). For purposes of this Agreement, "Year 2000 Compliant" shall mean (i) all such software shall operate in 4-digit year format and, in all material respects, without errors in the recognition, calculation and processing of date data relating to century recognition, leap years, single and multi-century formulae, date values and interfaces of date-related functionalities; (ii) all date processing shall be conducted in a four-digit year format and all date sorting that includes a "year field" or "year category" shall be based upon a four-digit year format; and (iii) any date arithmetic programs or calculators in the software shall operate in all material respects in accordance with the related user documentation in the Year 2000, and the years following, without degrading functionality or performance. (ll) The Company has not incurred any liability for any finder's fees or similar payments in connection with the transactions herein contemplated. (mm) Neither the Company nor the Trust has relied upon the Representatives or legal counsel for the Underwriters for any legal, tax or accounting advice in connection with the offering and sale of the Capital Securities. (nn) Any certificate signed by any officer of the Company or any Subsidiary delivered to the Representatives or to counsel for the Underwriters pursuant to or in connection with this Agreement shall be deemed a representation and warranty by the Company to each Underwriter as to the matters covered thereby. 4. CERTAIN COVENANTS. The Trust and the Company hereby covenant and agree with each Underwriter as follows: 13 (a) to furnish such information as may be required and otherwise to cooperate in qualifying the Capital Securities for offering and sale under the securities or blue sky laws of such states as the Representatives may designate and to maintain such qualifications in effect so long as required for the distribution of the Capital Securities; (b) to prepare the Prospectus in a form approved by the Underwriters and file such Prospectus with the Commission pursuant to Rule 424(b) not later than 10:00 a.m. (New York City time), on the day following the execution and delivery of this Agreement and to furnish promptly (and with respect to the initial delivery of such Prospectus, not later than 10:00 a.m. (New York City time) on the day following the execution and delivery of this Agreement) to the Underwriters as many copies of the Prospectus (or of the Prospectus as amended or supplemented if the Trust and the Company shall have made any amendments or supplements thereto after the effective date of the Registration Statement) as the Underwriters may reasonably request for the purposes contemplated by the Securities Act Regulations, which Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the version created to be transmitted to the Commission for filing via EDGAR, except to the extent permitted by Regulation S-T; (c) to advise the Representatives promptly and (if requested by the Representatives) to confirm such advice in writing, when the Registration Statement has become effective and when any post-effective amendment thereto becomes effective under the Securities Act Regulations; (d) to advise the Representatives immediately, confirming such advice in writing, of (i) the receipt of any comments from, or any request by, the Commission for amendments or supplements to the Registration Statement or Prospectus or for additional information with respect thereto, or (ii) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, or of the suspension of the qualification of the Capital Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes and, if the Commission or any other government agency or authority should issue any such order, to make every reasonable effort to obtain the lifting or removal of such order as soon as possible; to advise the Representatives promptly of any proposal to amend or supplement the Registration Statement or Prospectus and to file no such amendment or supplement to which the Representatives shall reasonably object in writing; (e) to furnish to the Underwriters for a period of five years from the date of this Agreement (i) as soon as available, copies of all annual, quarterly and current reports or other communications supplied to holders of shares of any class of its capital stock, (ii) as soon as practicable after the filing thereof, copies of all reports filed by the Company or the Trust with the Commission, the NASD or any securities exchange and (iii) such other information as the Underwriters may reasonably request regarding the Trust, the Company and/or the Subsidiaries; 14 (f) to advise the Underwriters promptly of the happening of any event known to the Trust and/or the Company within the time during which a Prospectus relating to the Capital Securities is required to be delivered under the Securities Act Regulations which, in the judgment of the Trust and the Company, would require the making of any change in the Prospectus then being used so that the Prospectus would not include an 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, in the light of the circumstances under which they were made, not misleading, and, during such time, to prepare and promptly furnish to the Underwriter, at the Trust's and the Company's expense, such amendments or supplements to such Prospectus as may be necessary to reflect any such change and to furnish to the Underwriters a copy of such proposed amendment or supplement before filing any such amendment or supplement with the Commission; (g) to furnish the Representatives and counsel for the Underwriters, without charge, (i) signed copies of the Registration Statement, as initially filed with the Commission, and of all amendments or supplements thereto (including all exhibits filed therewith or incorporated by reference therein), (ii) copies of any document incorporated by reference in the Prospectus (including exhibits thereto) and (iii) so long as delivery of a prospectus by an Underwriter or dealer may be required by the Securities Act or the Securities Act Regulations, as many copies of any Preliminary Prospectus and the Prospectus and any amendments thereof and supplements thereto as the Representatives may reasonably request. (h) to apply the net proceeds of the sale of the Capital Securities and the Debentures in accordance with the statements under the caption "Use of Proceeds" in the Prospectus; (i) to make generally available to its security holders and to the Representatives as soon as practicable, but in any event not later than the end of the fiscal quarter first occurring after the first anniversary of the effective date of the Registration Statement (or 90 days if such 12-month period coincides with the Company's fiscal year), an earnings statement complying with the provisions of Section 11(a) of the Securities Act (in form, at the option of the Company, complying with the provisions of Rule 158 of the Securities Act Regulations) covering a period of 12 months beginning after the effective date of the Registration Statement; (j) to use its best efforts to effect and maintain the quotation of the Capital Securities on the NASDAQ National Market and to file with the NASDAQ National Market all documents and notices required by the NASDAQ National Market of companies that have securities that are traded in the over-the-counter market and quotations for which are reported by the NASDAQ National Market; (k) to engage and maintain, at its expense, a registrar and transfer agent for the Capital Securities; (l) without the prior written consent of the Representatives, for a period of 180 days after the date of this Agreement, not to offer, issue, sell, contract to sell or otherwise 15 dispose of any additional securities of the Trust or the Company substantially similar to the Capital Securities or any securities convertible into or exchangeable for or that represent the right to receive any such similar securities; (m) to use its best efforts to cause its officers, directors and affiliates not to (i) take, directly or indirectly prior to termination of the underwriting syndicate contemplated by this Agreement, any action designed to stabilize or manipulate the price of the Capital Securities or any security of the Company, or which may cause or result in, or which might in the future reasonably be expected to cause or result in, the stabilization or manipulation of the price of the Capital Securities or any security of the Company, to facilitate the sale or resale of any of the Capital Securities, (ii) sell, bid for, purchase or pay anyone any compensation for soliciting purchases of the Capital Securities or (iii) pay or agree to pay to any person any compensation for soliciting any order to purchase any other securities of the Company; and (n) that the provisions of the engagement letter agreement dated March 5, 1999, between the Company and Friedman, Billings, Ramsey & Co., Inc. shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 5. PAYMENT OF EXPENSES: (a) Each of the Trust and the Company agrees to pay, or reimburse if paid by the Representatives, all costs and expenses incident to the purchase, sale and delivery of the Capital Securities in the public offering and the performance of the obligations of the Trust and the Company under this Agreement, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, including expenses, fees and taxes in connection with (i) the preparation and filing of the Registration Statement, each Preliminary Prospectus, the Prospectus, and any amendments or supplements thereto, and the printing, furnishing and distribution of copies of each thereof to the Underwriters, dealers and others (including costs of mailing and shipment), (ii) the preparation, issuance and delivery of the certificates for the Capital Securities to the Underwriters, including any transfer taxes or duties payable upon the sale of the Capital Securities to the Underwriters, (iii) the printing of this Agreement and any dealer agreements and furnishing of copies of each to the Underwriters and to dealers (including costs of mailing and shipment), (iv) the registration and qualification of the Capital Securities for offering and sale under state laws that the Company and the Representatives have mutually agreed are appropriate and the determination of their eligibility for investment under state law as aforesaid (including the legal fees and filing fees and other disbursements of counsel for the Underwriters) and the printing, distribution and distribution of copies of any blue sky surveys or legal investment surveys to the Underwriters and to dealers, (v) filing for review of the public offering of the Capital Securities by the NASD (including the legal fees and filing fees and other disbursements of counsel for the Underwriters relating thereto), (vi) the fees and expenses of any transfer agent or registrar for the Capital Securities and miscellaneous expenses referred to in the Registration Statement, (vii) the fees and expenses incurred in connection with the inclusion of the Capital Securities in the NASDAQ National Market, (viii) making road show presentations 16 with respect to the offering of the Capital Securities, (ix) preparing and distributing bound volumes of transaction documents for the Representatives and their legal counsel and (x) the performance of the Company's other obligations hereunder. Upon the request of the Representatives, the Company will provide funds in advance for filing fees. (b) Each of the Trust and the Company agrees to reimburse the Representatives for their reasonable out-of-pocket expenses in connection with the performance of its activities under this Agreement, including, but not limited to, costs such as printing, facsimile, courier service, direct computer expenses, accommodations and travel, and the fees and expenses of the Underwriters' outside legal counsel and any other advisors, accountants, appraisers, etc. (other than the fees and expenses of counsel with respect to state securities or blue sky laws and obtaining the filing for review of the public offering of the Capital Securities by the NASD, all of which shall be reimbursed by the Company pursuant to the provisions of subsection (a) above); PROVIDED, HOWEVER, that the Trust and the Company shall not be required to reimburse the Representatives for out-of-pocket expenses in excess of $150,000 without the Company's prior approval. 6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS: The obligations of the Underwriters hereunder to purchase the Capital Securities at the Closing Time or on the Date of Delivery, as applicable, are subject to the accuracy of the representations and warranties on the part of the Trust and the Company in all material respects on the date hereof and at the Closing Time and on each Date of Delivery, as applicable, the performance by the Trust and the Company of their respective obligations hereunder in all material respects and to the satisfaction of the following further conditions at the Closing Time or on the Date of Delivery, as applicable: (a) The Representatives shall have received on each Closing Date from Thacher Proffitt & Wood, counsel to the Company and the Trust, an opinion or opinions, addressed to the Representatives and dated such Closing Date, in form and substance satisfactory to the Underwriters and stating in effect that: (i) The Company is duly registered with the Office of Thrift Supervision as a savings and loan holding company under the HOLA and has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware. The Bank has been duly organized and is validly existing as a federally-chartered stock savings bank with the Office of Thrift Supervision. Each of the Subsidiaries (other than the Bank) has been duly organized and is validly existing as a corporation in good standing under the laws of its respective state of incorporation. The Company and each Subsidiary is duly qualified and in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, except where the failure to so qualify would not have a material adverse effect on the assets or properties, business, results of operations or financial condition of the Company and the Subsidiaries, taken as a whole, and have all corporate power necessary to own or hold their respective properties and to conduct the business in which they are engaged as 17 described in the Prospectus. The deposit accounts of the Bank are insured by the Bank Insurance Fund of the FDIC to the fullest extent permitted by law and the rules and regulations of the FDIC, and no proceedings for the termination of such insurance are pending or threatened. (ii) The Company's capitalization is as set forth in the Prospectus; all of the issued and outstanding shares of capital stock of each of the Subsidiaries have been duly and validly authorized and issued and are fully paid and non-assessable; and no holder of any security of the Company has the right, under the Company's certificate of incorporation or by-laws or any agreement or instrument known to such counsel, to have any security owned by such holder included in the Registration Statement. To the best knowledge of such counsel, all of the issued and outstanding capital stock of the Subsidiaries is owned directly or indirectly by the Company or the Bank, free and clear of all liens, encumbrances, equities or claims. (iii) The Registration Statement was declared effective under the Securities Act at the time and on the date specified in such counsel's opinion, and to the best knowledge of such counsel, no stop order or other order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending before the Commission under the Securities Act. (iv) The Registration Statement and the Prospectus and any further amendments or supplements thereto made by the Company prior to such Closing Date (other than the financial statements and related notes and schedules therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Securities Act and the Securities Act Regulations; and the documents incorporated by reference in the Prospectus (other than the financial statements and related schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder. (v) All the conditions necessary for the use of Form S-3 in connection with the issuance and sale of the Capital Securities, the Guarantee and the Debentures have been satisfied by the Company and the Trust. (vi) No consent, approval, authorization or order of or filing, registration, or qualification with any governmental agency or authority is required in connection with the execution and delivery by the Company and the Trust of the Operative Documents and the consummation of the transactions contemplated thereby except (A) as may be required under the Exchange Act or the Blue Sky laws of the various states of the United States in connection with any sales of Capital Securities therein or (B) as have already been obtained or made. 18 (vii) This Agreement has been duly authorized, executed and delivered by the Company and the Trust and constitutes a valid and binding agreement of the Company and the Trust enforceable against each of them in accordance with its terms, except as enforceability thereof may be limited by (A) the application of bankruptcy, reorganization, insolvency and other laws affecting creditors' rights generally, and (B) equitable principles being applied at the discretion of a court before which any proceeding may be brought. (viii) To the best knowledge of such counsel, neither the Company nor any Subsidiary is in violation of or conflict with any term or provision of its charter or bylaws or other governing documents and neither the Company nor any Subsidiary is in violation of any franchise, license, permit, judgment, decree, order, statute, rule, regulation, directive, policy or guideline to which it or its property may be subject, except for such violations which could not individually or in the aggregate, have a material adverse effect on the Company and the Subsidiaries, taken as a whole. (ix) To the best knowledge of such counsel, no default exists, and no event has occurred which with notice or lapse of time or both would constitute a default, in the due performance and observance of any term, covenant or condition by the Company or any Subsidiary of any material agreement, indenture, mortgage, deed of trust, note or any other material agreement or material instrument to which the Company or any Subsidiary is a party or by which it or its respective properties or businesses may be bound. (x) The execution, delivery and performance of the Operative Documents by the Company and the Trust and the consummation of the transactions contemplated hereby and thereby will not conflict with or result in the breach or violation of any term or provision of, or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or require any consent or waiver under, or result in the creation or imposition of any lien, charge, claim, encumbrance or security interest on any properties or assets of the Company or any Subsidiary pursuant to the terms of, any material agreement, indenture, mortgage or other material agreement or material instrument known to such counsel to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound or to which any of the property or assets of the Company or the Subsidiaries is subject, nor will such actions violate the charter or bylaws or other governing document of the Company or any Subsidiary or any applicable law, rule or administrative regulation of any court or governmental agency or governmental authority having jurisdiction over the Company or any Subsidiary or any of their respective properties, except for such violations which could not have, individually or in the aggregate, a material adverse effect on the Company and the Subsidiaries, taken as a whole.. (xi) To the best knowledge of such counsel, there are no contracts or other documents which are required to be described in the Prospectus or filed as exhibits 19 to the Registration Statement by the Securities Act or by the Securities Act Regulations which have not been so described or filed as required. (xii) To the best knowledge of such counsel, there is no action, suit, investigation or proceeding, governmental or otherwise, pending, threatened or contemplated to which the Company or any Subsidiary is or may be a party or of which the business or property of the Company or any Subsidiary is or may be subject in either case that is required to be disclosed in the Prospectus. (xiii) The Declaration has been duly authorized, executed and delivered by the Company. (xiv) The Indenture has been duly authorized, executed and delivered by the Company and (assuming due authorization, execution and delivery thereof by the Debenture Trustee) constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law); and the Debentures have been duly authorized, executed, issued and delivered by the Company as contemplated in the Indenture and (assuming due authentication by the Debenture Trustee) constitute valid and binding obligations of the Company entitled to the benefits of the Indenture and enforceable in accordance with their term, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law). (xv) The Guarantee Agreement has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery by the Guarantee Trustee, constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law). (xvi) The statements contained in the Prospectus under the caption "Certain United States Federal Income Tax Consequences" are accurate in all material respects and constitute a fair summary of the matters set forth therein. (xvii) Each of the Company and the Subsidiaries owns, possesses or has obtained all Authorizations and has made all Filings of, from and with all governmental or regulatory bodies and any other person or entity, required under the laws of the States of New York, New Jersey, Connecticut and Delaware, the United States and any other jurisdiction in which the Company or any of the Subsidiaries transacts business in order 20 to own or lease, as the case may be, and to operate its respective properties and to conduct its respective business as presently conducted and as described in the Prospectus, except where the failure to own, possess, obtain or make such Authorization or Filing would not have a material adverse effect on the assets or properties, business, results of operations, prospects or financial condition of the Company and the Subsidiaries, taken as a whole; to the best of knowledge of such counsel, all of such Authorizations are in full force and effect, and neither the Company nor the Subsidiaries has received any notice of proceedings relating to any revocation or modification thereof. (xviii) To the best knowledge of such counsel, the businesses of the Company and the Subsidiaries has been conducted in compliance in all material respects with all applicable laws and the regulations, orders and policies of the Office of Thrift Supervision, the FDIC, the Commission and each other Governmental Authority, which laws are material to the operations of the Company and the Subsidiaries taken as a whole. (xix) The statements in the Prospectus under the captions "Description of Capital Securities," "Description of Subordinated Debentures," "Description of Guarantee" and "Relationship Among the Capital Securities, the Subordinated Debentures and the Guarantee," insofar as such statements constitute a summary of documents referred to therein or matters of law, are fair summaries in all material respects and accurately present the information called for with respect to such documents and matters. (xx) Except as set forth (or referred to) in the Prospectus, or incorporated by reference therein, to the best knowledge of such counsel, there are no contractual encumbrances or restrictions, or material legal restrictions on the ability of any of the Subsidiaries (i) to pay dividends or make any other distributions on its capital stock or to pay indebtedness owed to the Company, (ii) to make any loans or advances to, or investments in, the Company, or (iii) to transfer any of its properties or assets to the Company. (xxi) Neither the Trust nor the Company nor any Subsidiary is required to register as an investment company under the Investment Company Act as a result of the transactions contemplated by the Operative Documents. To the extent deemed advisable by such counsel, they may rely as to matters of fact on certificates of responsible officers of the Company, the Subsidiaries and public officials and on the opinions of other counsel satisfactory to the Representatives as to matters which are governed by laws other than the laws of the States of New York and Delaware and the Federal laws of the United States; provided that such counsel shall state that in their opinion the Underwriters and they are justified in relying on such other opinions. Copies of such certificates and other opinions shall be furnished to the Representatives and counsel for the Underwriters. 21 In addition, such counsel shall state that such counsel has participated in conferences with officers and other representatives of the Company, representatives of the Representatives, including Underwriters' counsel, and representatives of the independent certified public accountants of the Company, at which conferences the contents of the Registration Statement and the Prospectus and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and the Prospectus (relying as to materiality to a large extent upon the opinions and representations of officers and other representatives of the Company), on the basis of the foregoing, no facts have come to the attention of such counsel which lead such counsel to believe that the Registration Statement at the time the Registration Statement became effective (except with respect to the financial statements and notes thereto and other financial and statistical data contained therein, as to which such counsel need express no opinion or belief) contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus as amended or supplemented (except with respect to the financial statements and notes thereto and other financial and statistical data contained therein, as to which such counsel need make no statement or express any opinion or belief) on the date thereof and on such Closing Date contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (b) The Representatives shall have received on each Closing Date from ______________, as special Delaware counsel to the Trust and the Company, an opinion or opinions, addressed to the Representatives and dated such Closing Date, in form and substance satisfactory to counsel for the Underwriters, and stating in effect that: (i) The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Act, and all filings required under the laws of the State of Delaware with respect to the creation and valid existence of the Trust as a business trust have been made; (ii) Under the Delaware Act and the Declaration, the Trust has the trust power and authority to own its property and conduct its business as set forth in the Declaration; (iii) The Declaration constitutes a valid and binding obligation of the Company and the Trustees, and is enforceable against the Company and the Trustees in accordance with its terms, subject, as to enforcement, to the effect upon the Declaration of (A) bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent transfer and other similar laws relating to the rights and remedies of creditors generally, (B) principles of equity, including applicable law relating to fiduciary duties (regardless of whether considered and applied in a proceeding in equity or at law), and (C) the effect of applicable public policy on the enforceability of provisions relating to indemnification or contribution; 22 (iv) Under the Delaware Act and the Declaration, the Trust has the trust power and authority (i) to execute and deliver, and to perform its obligations under, this Agreement, (ii) to issue and perform its obligations under the Capital Securities and the Common Securities and (iii) to purchase and hold the Debentures; (v) Under the Delaware Act and the Declaration, the execution and delivery by the Trust of this Agreement, and the performance by the Trust of its obligations hereunder, have been duly authorized by all necessary trust action on the part of the Trust; (vi) The Capital Securities have been duly authorized by the Declaration and are duly and validly issued and, subject to the qualifications set forth herein, fully paid and nonassessable undivided beneficial interests in the assets of the Trust and are entitled to the benefits of the Declaration. The holders of the Capital Securities, as beneficial owners of the Trust, will 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. Such counsel may note that the holders of Capital Securities may be obligated, pursuant to the Declaration, (A) to provide indemnity and/or security in connection with and pay taxes or governmental charges arising from transfers or exchanges of certificates of Capital Securities and the issuance of replacement certificates of Capital Securities, and (B) to provide security or indemnity in connection with requests of or directions to the Property Trustee to exercise its rights and powers under the Declaration; (vii) The Common Securities have been duly authorized by the Declaration and are validly issued undivided beneficial interests in the assets of the Trust and are entitled to the benefits of the Declaration. (viii) Under the Delaware Act and the Declaration, the issuance of the Capital Securities and Common Securities is not subject to preemptive rights; (ix) The issuance and sale by the Trust of the Capital Securities and Common Securities, the execution, delivery and performance by the Trust of this Agreement, the consummation by the Trust of the transactions contemplated hereby and compliance by the Trust with its obligations hereunder, and the performance by the Company, as depositor, of its obligations under the Declaration (A) do not violate (i) any of the provisions of the certificate of trust of the Trust or the Declaration or (ii) any applicable Delaware law or administrative regulation (except that such counsel need express no opinion with respect to the securities laws of the State of Delaware) and (B) do not require any consent, approval, license, authorization or validation of, or filing or registration with, any Delaware legislative, administrative or regulatory body under the laws or administrative regulations of the State of Delaware (except that such counsel need express no opinion with respect to the securities laws of the state of Delaware); and 23 (x) Assuming that the Trust derives no income from or in connection with sources within the State of Delaware and has no assets, activities (other than maintaining the Delaware Trustee and the filing of documents with the Secretary of State of the State of Delaware) or employees in the State of Delaware, the holders of the Capital Securities (other than those holders of Capital Securities who reside or are domiciled in the State of Delaware) will have no liability for income taxes imposed by the State of Delaware solely as a result of their participation in the Trust, and the Trust will not be liable for any income tax imposed by the State of Delaware. (c) On each Closing Date there shall have been furnished to the Representatives the opinion (addressed to the Underwriters) of Greenberg Traurig, P.A., counsel for the Underwriters, with respect to, as applicable, the incorporation of the Company, the Registration Statement, the Prospectus (other than financial statements and other financial data included therein) and other related matters as the Representatives may reasonably request, and such counsel shall have received such documents and information as they may reasonably request to enable them to pass upon such matters. (d) The Representatives shall have received from KPMG LLP letters dated, respectively, as of the date of this Agreement, the Closing Time and each Date of Delivery, as the case may be, addressed to the Representatives, in form and substance reasonably satisfactory to the Representatives, confirming that they are independent accountants within the meaning of the Securities Act and the Securities Act Regulations and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission and stating in effect that: (i) in their opinion the audited financial statements and financial statement schedules included or incorporated by reference in the Registration Statement and the Prospectus and reported on by them comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Securities Act Regulations; (ii) on the basis of a reading of the financial statements and amounts included or incorporated by reference in the Registration Statement and the Prospectus, carrying out certain procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to comments set forth in such letter, a reading of the minutes of the meetings of the shareholders and board of directors of the Company and the Subsidiaries and inquiries of certain officials of the Company and the Subsidiaries who have responsibility for financial and accounting matters of the Company and the Subsidiaries, nothing came to their attention which caused them to believe that there were any changes, increases or decreases, as of the date of the letter, in consolidated net interest income, net income, long-term debt or capital stock compared to the same period in the prior year or as of December 31, 1998, as the case may be, except in all instances for changes, increases or 24 decreases set forth or contemplated in the Registration Statement or as otherwise set forth in this letter; and (iii) they have performed certain other procedures as a result of which they determined that certain information of an accounting, financial or statistical nature set forth in the Registration Statement and the Prospectus agrees with the financial statements or accounting or other records of the Company and is arithmetically correct; and including and addressing such other matters customarily covered by comfort letters issued in connection with registered public offerings. (e) The Prospectus shall have been timely filed with the Commission in accordance with Section 4(b) of this Agreement. (f) No amendment or supplement to the Registration Statement or Prospectus shall have been filed to which the Underwriters shall have objected in writing. (g) Prior to the Closing Time and each Date of Delivery (i) no stop order suspending the effectiveness of the Registration Statement or any order preventing or suspending the use of any Preliminary Prospectus or Prospectus has been issued, and no proceedings for such purpose shall have been initiated or threatened, by the Commission, and no suspension of the qualification of the Capital Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes, has occurred; and (ii) the Registration Statement and the Prospectus shall not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (h) Between the time of execution of this Agreement and the Closing Time or the relevant Date of Delivery (i) no material and unfavorable change in the assets, business, operations, earnings, prospects, properties or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole shall occur or become known (whether or not arising in the ordinary course of business), and (ii) no transaction which is material and unfavorable to the Company and/or the Subsidiaries shall have been entered into by the Company or any Subsidiary. (i) The Capital Securities shall have been approved for inclusion in the NASDAQ National Market. (j) The NASD shall not have raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements. (k) The representations and warranties of the Trust and the Company contained in this Agreement and in the certificates delivered pursuant to Section 5(l) shall be true and correct when made and on and as of each Closing Date as if made on such date and each of the Trust and the Company shall have performed all covenants and agreements and satisfied all 25 the conditions contained in this Agreement required to be performed or satisfied by it at or before such Closing Date. (l) The Representatives shall have received on each Closing Date a certificate, addressed to the Representatives and dated such Closing Date, of the chief executive or chief operating officer and the chief financial officer of the Company, to the effect that the signers of such certificate have reviewed the Registration Statement, the Prospectus and this Agreement and that (i) to the best of their knowledge after due inquiry, the representations and warranties of the Company contained in this Agreement are true and correct as if made on and as of such Closing Date with the same effect as if made on such Closing Date, and the Company has performed all covenants and agreements and satisfied all conditions contained in this Agreement required to be performed or satisfied by it at or prior to such Closing Date and (ii) they have reviewed the Registration Statement and the Prospectus and, in their opinion (A) as of the Effective Date, the Registration Statement and the Prospectus did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (B) since the Effective Date no event has occurred which should have been set forth in a supplement to the Prospectus or an amendment to the Registration Statement. (m) All corporate proceedings and other legal matters incident to the authorization, form and validity of the Operative Documents, the Registration Statement and the Prospectus shall be satisfactory in all respects to counsel for the Underwriters, and the Representatives shall have been furnished with such additional documents and certificates as the Representatives or counsel for the Underwriters may reasonably request related to this Agreement, the Prospectus or the transactions contemplated hereby. (n) [If the Capital Securities have been qualified for sale in the State of Florida, the Representatives shall have received on each Closing Date certificates, addressed to the Representatives, and dated such Closing Date, of an executive officer of the Company, stating solely in his capacity as an executive officer of the Company, to the effect that the signer of such certificate has reviewed and understands the provisions of Section 517.075 of the Florida Statutes, and represents that, to his knowledge after due inquiry, the Company has complied, and at all times will comply, with all provisions of Section 517.075 and further, that as of such Closing Date, neither the Company nor any of its affiliates does business with the government of Cuba or with any person or affiliate located in Cuba.] 7. TERMINATION. The obligations of the several Underwriters hereunder shall be subject to termination in the absolute discretion of the Representatives, at any time prior to the Closing Time or any Date of Delivery, (i) if any of the conditions specified in Section 5 shall not have been fulfilled when and as required by this Agreement to be fulfilled, or (ii) if there has been since the respective dates as of which information is given in the Registration Statement, any material adverse change, or any development involving a prospective material adverse change, in or affecting the assets, business, operations, earnings, prospects, properties, condition (financial or otherwise) or management of the Company or any Subsidiary, whether or not 26 arising in the ordinary course of business, or (iii) if there has occurred outbreak or escalation of hostilities or other national or international calamity or crisis or change in economic, political or other conditions the effect of which on the financial markets of the United States is such as to make it, in the judgment of the Representatives, impracticable to market the Capital Securities or enforce contracts for the sale of the Capital Securities, or (iv) if trading in any securities of the Company has been suspended by the Commission or by NASDAQ, or if trading generally on the New York Stock Exchange or in the NASDAQ over-the-counter market has been suspended (including automatic halt in trading pursuant to market-decline triggers other than those in which solely program trading is temporarily halted), or limitations on prices for trading (other than limitations on hours or numbers of days of trading) have been fixed, or maximum ranges for prices for securities have been required, by such exchange or the NASD or NASDAQ or by order of the Commission or any other governmental authority, or (v) any federal or state statute, regulation, rule or order of any court or other governmental authority has been enacted, published, decreed or otherwise promulgated which in the reasonable opinion of the Representatives materially adversely affects or will materially adversely affect the business or operations of the Company or the Subsidiaries, or (vi) any action has been taken by any federal, state or local government or agency in respect of its monetary or fiscal affairs, including the declaration of a banking moratorium, which in the reasonable opinion of the Representatives, has a material adverse effect on the securities markets in the United States. If the Representatives elect to terminate this Agreement as provided in this Section 7, the Trust, the Company and the Underwriters shall be notified promptly by telephone, promptly confirmed by facsimile. If the sale to the Underwriters of the Capital Securities, as contemplated by this Agreement, is not carried out by the Underwriters for any reason permitted under this Agreement or if such sale is not carried out because the Company and the Trust shall be unable to comply in all material respects with any of the terms of this Agreement, the Company and the Trust shall not be under any obligation or liability under this Agreement (except to the extent provided in Sections 5 and 9 hereof) and the Underwriters shall be under no obligation or liability to the Company under this Agreement (except to the extent provided in Section 9 hereof) or to one another hereunder. 8. INCREASE IN UNDERWRITERS' COMMITMENTS: If any Underwriter shall default at the Closing Time or on a Date of Delivery in its obligation to take up and pay for the Capital Securities to be purchased by it under this Agreement on such date, the Representatives shall have the right, within 36 hours after such default, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Capital Securities which such Underwriter shall have agreed but failed to take up and pay for (the "Defaulted Capital Securities"). Absent the completion of such arrangements within such 36 hour period, (i) if the total number of Defaulted Capital Securities does not exceed 10% of the total number of Capital Securities to be purchased on such date, each non-defaulting Underwriter shall take up and pay for (in addition to the number of Capital Securities which it is otherwise obligated to purchase on such date pursuant to this Agreement) the portion of the total number of 27 Capital Securities agreed to be purchased by the defaulting Underwriter on such date in the proportion that its underwriting obligations hereunder bears to the underwriting obligations of all non-defaulting Underwriters; and (ii) if the total number of Defaulted Capital Securities exceeds 10% of such total, the Representatives may terminate this Agreement by notice to the Company and the Trust, without liability to any non-defaulting Underwriter. Without relieving any defaulting Underwriter from its obligations hereunder, the Company and the Trust agree with the non-defaulting Underwriters that it will not sell any Capital Securities hereunder on such date unless all of the Capital Securities to be purchased on such date are purchased on such date by the Underwriters (or by substituted Underwriters selected by the Representatives with the approval of the Company and the Trust or selected by the Company and/or the Trust with the approval of the Representatives). If a new Underwriter or Underwriters are substituted for a defaulting Underwriter in accordance with the foregoing provision, the Company, the Trust or the non-defaulting Underwriters shall have the right to postpone the Closing Time or the relevant Date of Delivery for a period not exceeding five business days in order that any necessary changes in the Registration Statement and Prospectus and other documents may be effected. The term Underwriter as used in this Agreement shall refer to and include any Underwriter substituted under this Section 8 with the like effect as, if such substituted Underwriter had originally been named in this Agreement. 9. INDEMNITY AND CONTRIBUTION BY THE COMPANY, THE TRUST AND THE UNDERWRITERS. (a) The Trust and the Company agree, jointly and severally, to indemnify, defend and hold harmless each Underwriter and any person who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, expense, liability, damage or claim (including the reasonable cost of investigation) which, jointly or severally, any such Underwriter or controlling person may incur under the Securities Act, the Exchange Act or otherwise, insofar as such loss, expense, liability, damage or claim arises out of or is based upon (i) any breach of any representation, warranty or covenant of the Trust and/or the Company contained herein, (ii) any failure on the part of the Trust and/or the Company to comply with any applicable law, rule or regulation relating to the offering of securities being made pursuant to the Prospectus, or (iii) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or in the Registration Statement as amended by any post-effective amendment thereof by the Trust and the Company) or in a Prospectus (the term Prospectus for the purpose of this Section 9 being deemed to include any Preliminary Prospectus, the Prospectus and the Prospectus as amended or supplemented by the Trust and the Company), or arises out of or is based upon any omission or alleged omission to state a material fact required to be stated in either such Registration Statement or Prospectus or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, except insofar as any such loss, expense, liability, damage or claim arises out of or is based upon any untrue statement or alleged 28 untrue statement or omission or alleged omission of a material fact contained in and in conformity with information furnished in writing by the Underwriters through the Representatives to the Trust and the Company expressly for use in such Registration Statement or such Prospectus; provided, however, that the indemnity agreement contained in this subsection (a) with respect to the Preliminary Prospectus or the Prospectus shall not inure to the benefit of an Underwriter (or to the benefit of any person controlling such Underwriter) with respect to any person asserting any such loss, expense, liability, damage or claim which is the subject thereof if the Prospectus or any supplement thereto prepared with the consent of the Representatives and furnished to the Underwriters prior to the Closing Time corrected any such alleged untrue statement or omission and if such Underwriter failed to send or give a copy of the Prospectus or supplement thereto to such person at or prior to the written confirmation of the sale of Capital Securities to such person, unless such failure resulted from noncompliance by the Company with Section 4(b) above). (b) If any action is brought against an Underwriter or controlling person in respect of which indemnity may be sought against the Trust and/or the Company pursuant to subsection (a) above, such Underwriter shall promptly notify the Trust and the Company in writing of the institution of such action, and the Trust and the Company shall assume the defense of such action, including the employment of counsel, reasonably acceptable to such Underwriter, and the payment of expenses; PROVIDED, HOWEVER, that any failure or delay to so notify the Trust and the Company will not relieve the Trust and the Company of any obligation hereunder, except to the extent that its ability to defend is actually impaired by such failure or delay. Such Underwriter or controlling person shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person unless the employment of such counsel shall have been authorized in writing by the Trust and the Company in connection with the defense of such action, or the Trust and/or the Company shall not have employed counsel to have charge of the defense of such action within a reasonable time or such indemnified party or parties shall have reasonably concluded (based on the advice of counsel) that there may be defenses available to it or them which are different from or additional to those available to the Trust and the Company (in which case neither the Trust nor the Company shall have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by the Trust and the Company and paid as incurred (it being understood, however, that neither the Trust nor the Company shall be liable for the expenses of more than one separate firm of attorneys for the Underwriters or controlling persons in any one action or series of related actions in the same jurisdiction (other than local counsel in any such jurisdiction) representing the indemnified parties who are parties to such action). Anything in this paragraph to the contrary notwithstanding, neither the Trust nor the Company shall be liable for any settlement of any such claim or action effected without its written consent. (c) Each Underwriter agrees, severally and not jointly, to indemnify, defend and hold harmless the Trust and the Company, each director of the Company, each officer of the Trust or of the Company that signed the Registration Statement, and any person who controls the 29 Trust or the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, expense, liability, damage or claim (including the reasonable cost of investigation) which, jointly or severally, the Trust, the Company, or any such person may incur under the Securities Act, the Exchange Act or otherwise, but only insofar as such loss, expense, liability, damage or claim arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in and in conformity with information furnished in writing by such Underwriter through the Representatives to the Trust or the Company expressly for use in the Registration Statement (or in the Registration Statement as amended by any post-effective amendment thereof by the Trust and the Company) or in a Prospectus, or arises out of or is based upon any omission or alleged omission to state a material fact in connection with such information required to be stated either in such Registration Statement or Prospectus or necessary to make such information, in the light of the circumstances under which made, not misleading. The statements set forth (i) in ____________ and (ii) under the caption "Underwriting" in the Preliminary Prospectus and the Prospectus (to the extent such statements relate to the Underwriters) constitute the only information furnished by or on behalf of any Underwriter through the Representatives to the Trust and the Company for purposes of Section 3(b) and this Section 9. If any action is brought against the Trust, the Company or any such person in respect of which indemnity may be sought against any Underwriter pursuant to the foregoing paragraph, the Trust, the Company or such person shall promptly notify the Representatives in writing of the institution of such action and the Representatives, on behalf of the Underwriters, shall assume the defense of such action, including the employment of counsel, reasonably acceptable to the Trust and the Company, and the payment of expenses. The Trust, Company, or such person shall have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of the Trust, the Company or such person unless the employment of such counsel shall have been authorized in writing by the Representatives in connection with the defense of such action or the Representatives shall not have employed counsel to have charge of the defense of such action within a reasonable time or such indemnified party or parties shall have reasonably concluded (based on the advice of counsel) that there may be defenses available to it or them which are different from or additional to those available to the Underwriters (in which case the Representatives shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by such Underwriter and paid as incurred (it being understood, however, that the Underwriters shall not be liable for the expenses of more than one separate firm of attorneys in any one action or series of related actions in the same jurisdiction (other than local counsel in any such jurisdiction) representing the indemnified parties who are parties to such action). Anything in this paragraph to the contrary notwithstanding, no Underwriter shall be liable for any settlement of any such claim or action effected without the written consent of the Representatives. (d) If the indemnification provided for in this Section 9 is unavailable to an indemnified party under subsections (a), (b) and (c) of this Section 9 in respect of any losses, 30 expenses, liabilities, damages or claims referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, expenses, liabilities, damages or claims (i) in such proportion as is appropriate to reflect the relative benefits received by the Trust and the Company on the one hand and the Underwriters on the other from the offering of the Capital Securities or (ii) if (but only if) the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Trust and the Company on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such losses, expenses, liabilities, damages or claims, as well as any other relevant equitable considerations. The relative benefits received by the Trust, the Company and the Underwriters shall be deemed to be in the same proportion as, (x) the total proceeds from the offering before deducting expenses received by the Trust and the Company, as set forth in the table on the cover page of the Prospectus, bear to (y) the underwriting discounts received by the Underwriters, as set forth in the table on the cover page of the Prospectus. The relative fault of the Trust and the Company on the one hand and the Underwriters on the other shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material fact or omission or alleged omission relates to information supplied by the Trust and the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages and liabilities referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any claim or action. (e) The Trust, the Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in subsection (d)(i) and, if applicable (ii), above. Notwithstanding the provisions of this Section 9, no Underwriter shall be required to contribute any amount in excess of the underwriting discounts applicable to the Capital Securities purchased by such Underwriter hereunder, and (ii) the Trust and the Company shall be liable and responsible for any amount in excess of such underwriting discount; provided, however, that no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 9, each person, if any, who controls an Underwriter within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as such Underwriter, and each person, if any, who controls the Trust or the Company within the meaning of the Section 15 of the Securities Act or Section 20(a) of the Exchange Act, each officer of the Trust or of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Trust and the Company, subject in each case to clauses (i) and (ii) in the immediately preceding sentence of this Section 9. Any party entitled to contribution will, promptly after receipt of notice of 31 commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section 9, notify such party or parties from whom contribution may be sought, but the omission so to notify such party or parties from whom contribution may be sought shall not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have hereunder or otherwise than under this Section. No party shall be liable for contribution with respect to any action, suit, proceeding or claim settled without its written consent. The Underwriters' obligations to contribute pursuant to this Section 9 are several in proportion to their respective underwriting commitments and not joint. 10. SURVIVAL: The indemnity and contribution agreements and the covenants, warranties and representations of the Trust and the Company contained in this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of any Underwriter, or any person who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, or by or on behalf of the Trust, the Company, its directors and officers, or any person who controls the Trust or the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and shall survive any termination of this Agreement or the sale and delivery of the Capital Securities. The Trust, the Company and each Underwriter agree promptly to notify the others of the commencement of any litigation or proceeding against it and, in the case of the Trust, against any of its trustees, and in the case of the Company, against any of the Company's officers and directors, in connection with the sale and delivery of the Capital Securities, or in connection with the Registration Statement or Prospectus. 11. NOTICES: Except as otherwise herein provided, all statements, requests, notices and agreements shall be in writing or by telegram and, if to the Underwriters, shall be sufficient in all respects if delivered to Friedman, Billings, Ramsey & Co., Inc., 1001 19th Street North, Arlington, Virginia 22209, Attention: Syndicate Department; if to the Trust or the Company, shall be sufficient in all respects if delivered to the Company at the offices of the Company at 615 Merrick Avenue, Westbury, New York 11590, Attention: Secretary. 12. GOVERNING LAW; HEADINGS: THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. The section headings in this Agreement have been inserted as a matter of convenience of reference and are not a part of this Agreement. 13. PARTIES AT INTEREST: The Agreement herein set forth has been and is made solely for the benefit of the Underwriters, the Trust, the Company, and the controlling persons, directors and officers referred to in Sections 9 and 10 hereof, and their respective successors, assigns, executors and administrators. No other person, partnership, association or corporation (including a purchaser, as such purchaser, from any of the Underwriters) shall acquire or have any right under or by virtue of this Agreement. 32 14. COUNTERPARTS AND FACSIMILE SIGNATURES: This Agreement may be signed by the parties in counterparts which together shall constitute one and the same agreement among the parties. A facsimile signature shall constitute an original signature for all purposes. 33 If the foregoing correctly sets forth the understanding among the Trust, the Company and the Underwriters, please so indicate in the space provided below for the purpose, whereupon this Agreement shall constitute a binding agreement among the Trust, the Company and the Underwriters. Very truly yours, HAVEN CAPITAL TRUST II By:___________________________ Name:_____________________ Title:____________________ HAVEN BANCORP INC. By:___________________________ Name:_____________________ Title:____________________ ACCEPTED AND AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN: FRIEDMAN, BILLINGS, RAMSEY & CO., INC. FIRST ALBANY CORPORATION LADENBURG THALMANN & CO. INC. Acting severally on behalf of themselves and as representatives of the several Underwriters named in Schedule I annexed hereto. By: FRIEDMAN, BILLINGS, RAMSEY & CO., INC. By:___________________________________ Name:____________________________ Title:___________________________ 34 SCHEDULE I
NUMBER OF INITIAL NUMBER OF OPTION CAPITAL SECURITIES TO SECURITIES TO BE UNDERWRITER BE PURCHASED PURCHASED - ----------------------------------------------------- --------------------- ---------------- Friedman, Billings, Ramsey & Co., Inc................ First Albany Corporation............................. Ladenburg Thalmann & Co. Inc......................... Total 0,000,000 --------- ---------
SCHEDULE II Fee payable pursuant to Section 2(c) of Underwriting Agreement: - ----------------------------------------------------------------------------------------------------------------- Spread between dividend rate and --% --% --% --% --% --% --% --% --% 30 Year Benchmark ----------------------------------------------------------------------------- Underwriter's Discount 3.50% 3.50% 3.50% 3.38% 3.25% 3.13% 3.00% 3.00% 3.00% ----------------------------------------------------------------------------- Implied Dividend Rate --% --% --% --% --% --% --% --% --% ----------------------------------------------------------------------------- 30 Year Benchmark on 2/18/99 5.37%
SCHEDULE III Pursuant to Section 2(c), sales of Capital Securities for the following eight institutional investors will be subject to a 60% reduction in the fee payable to the Representatives. [To be provided by Haven Bancorp] SCHEDULE IV Direct and Indirect Subsidiaries of Haven Bancorp Inc.
Place of Parent Percentage Name Incorporation Company Owned by Parent - ---- ------------- ------- --------------- CFS Bank Federally chartered stock Haven 100% savings bank Bancorp Columbia Preferred Capital Corp. Delaware N/A 80% CFS Bank 20% CFS Bank Employees CFS Investments, Inc. New York CFS Bank 100% CFS Insurance Agency, Inc. New York Haven 100% Bancorp CFS Travel, Inc. New York Haven 100% Bancorp Columbia Resources Corp. New York CFS Bank 100%
EX-4.1 3 EXHIBIT 4.1 Exhibit 4.1 CERTIFICATE OF TRUST OF HAVEN CAPITAL TRUST II THIS CERTIFICATE OF TRUST of Haven Capital Trust II (the "Trust"), dated as of March ___, 1999, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. ss. 3801, et. seq.). (i) Name. The name of the business trust being formed hereby is Haven Capital Trust II. (ii) Delaware Trustee. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware are Chase Manhattan Bank Delaware, 1201 North Market Street, Wilmington, Delaware 19801. (iii) Effective Date. This Certificate of Trust shall be effective as of its filing. IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have executed this Certificate of Trust as of the date first above written. THE CHASE MANHATTAN BANK not in its individual capacity but solely as trustee By: /s/ James P. Freedman ------------------------------------------------------ Name: James P. Freedman Title: Vice President CHASE MANHATTAN BANK DELAWARE not in its individual capacity but solely as trustee By: /s/ Denis Kelly ------------------------------------------------------ Name: Denis Kelly Title: Trust Officer /s/ Catherine Califano ---------------------------------------------------------- Catherine Califano not in her individual capacity but solely as trustee /s/ Robert B. Lunt ---------------------------------------------------------- Robert B. Lunt not in his individual capacity but solely as trustee /s/ Mark A. Ricca ---------------------------------------------------------- Mark A. Ricca not in his individual capacity but solely as trustee EX-4.2 4 EXHIBIT 4.2 Exhibit 4.2 DECLARATION OF TRUST OF HAVEN CAPITAL TRUST II THIS DECLARATION OF TRUST, dated as of March 26, 1999 (this "Declaration"), is by and among Haven Bancorp, Inc., a Delaware corporation, as sponsor (the "Sponsor"), The Chase Manhattan Bank, a New York banking corporation, as trustee, Chase Manhattan Bank Delaware, a Delaware banking corporation, as trustee, and Catherine Califano, Robert B. Lunt and Mark A. Ricca each as trustees (collectively, the "Trustees"). The Sponsor and the Trustees hereby agree as follows: 1. The trust created hereby shall be known as "Haven Capital Trust II" (the "Trust"), in which name the Trustees or the Sponsor, to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. The Sponsor hereby assigns, transfers, conveys and sets over to the Trust the sum of $10. Such amount shall constitute the initial trust estate. It is the intention of the parties hereto that the Trust created hereby constitute a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.ss. 3801, et seq. (the "Business Trust Act"), and that this document constitute the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State in such form as the Trustees may approve. 3. The Sponsor and the Trustees will enter into an amended and restated Declaration of Trust, satisfactory to each such party and having substantially the same terms described in the Registration Statement (as defined below), to provide for the contemplated operation of the Trust created hereby and the issuance by the Trust of the Capital Securities and Common Securities referred to therein. Prior to the execution and delivery of such amended and restated Declaration of Trust, the Trustees shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise required by applicable law or as may be necessary to obtain prior to such execution and delivery any licenses, consents or approvals required by applicable law or otherwise. Notwithstanding the foregoing, the Trustees may take all actions deemed proper as are necessary to effect the transactions contemplated herein. 4. The Sponsor, as the sponsor of the Trust, is hereby authorized (i) to prepare and distribute one or more registration statements, including a prospectus and prospectus supplements and any amendment thereto, in preliminary and final form (each a "Registration Statement"), relating to the offering and sale by the Trust of its Capital Securities under the Securities Act of 1933, as amended (the "Securities Act") and such forms or filings as may be required by the Securities Act, the Securities Exchange Act of 1934, as amended, or the Trust Indenture Act of 1939, as amended, in each case relating to the Capital Securities and the Common Securities of the Trust and certain other securities; (ii) to execute and file on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as the Sponsor, on behalf of the Trust, may deem necessary or desirable to register the Capital Securities under, or obtain for the Capital Securities and Common Securities and certain other securities an exemption from, the securities or "Blue Sky" laws of such jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or desirable; (iii) to execute, deliver and perform on behalf of the Trust such underwriting or purchase agreements with one or more underwriters, purchasers or agents relating to the offering of the Capital Securities as the Sponsor, on behalf of the Trust, may deem necessary or desirable; (iv) to execute and file on behalf of the Trust with the Private Offering, Resales and Trading through Automatic Linkages (PORTAL) Market ("PORTAL") or a national securities exchange or an automated securities quotation system, a listing application or applications and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Trust's Capital Securities to be listed on PORTAL or such exchange or automated securities quotation system; (v) to execute and deliver letters or documents to, or instruments for filing with, a depository relating to the Capital Securities and Common Securities of the Trust and certain other securities; and (vi) to execute and deliver on behalf of the Trust any and all documents, papers and instruments as may be desirable in connection with any of the foregoing. If any filing referred to in clauses (i), (ii), (iv) or (v) above is required by law or by the rules and regulations of any applicable governmental agency, self-regulatory organization or other person or organization to be executed on behalf of the Trust by the Trustees, the Trustees, in their capacities as trustees of the Trust, are hereby authorized to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that the Trustees, in their capacities as trustees of the Trust, shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by law or by the rules and regulations of any applicable governmental agency, self-regulatory organization or other person or organization. 5. This Declaration may be executed in one or more counterparts. 6. The number of trustees of the Trust initially shall be five, and thereafter the number of trustees of the Trust shall be such number as shall be fixed from time to time by a written instrument signed by the Sponsor which may increase or decrease the number of trustees of the Trust; provided, however, that to the extent required by the Business Trust Act, one trustee of the Trust shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware. Subject to the foregoing, the Sponsor is entitled to appoint or remove without cause any trustee of the Trust at any time. Any trustee of the Trust may resign upon 30 days' prior written notice to the Sponsor. 7. This Declaration shall be governed by, and construed in accordance with, the laws of the State of Delaware (without regard to conflict of laws principles). -2- IN WITNESS WHEREOF, the parties hereto have caused this Declaration to be duly executed as of the day and year first above written. HAVEN BANCORP, INC. as Sponsor By: /s/ Mark A. Ricca --------------------------------------------- Name: Mark A. Ricca Title: Senior Vice President, General Counsel and Secretary THE CHASE MANHATTAN BANK not in its individual capacity but solely as trustee of the Trust By: /s/ James P. Freeman --------------------------------------------- Name: James P. Freeman Title: Vice President CHASE MANHATTAN BANK DELAWARE not in its individual capacity but solely as trustee of the Trust By: /s/ Denis Kelly --------------------------------------------- Name: Denis Kelly Title: Trust Officer /s/ Catherine Califano ------------------------------------------------- Catherine Califano not in her individual capacity but solely as trustee of the Trust /s/ Robert B. Lunt ------------------------------------------------- Robert B. Lunt not in his individual capacity but solely as trustee of the Trust /s/ Mark A. Ricca ------------------------------------------------- Mark A. Ricca not in his individual capacity but solely as trustee of the Trust -3- EX-4.3 5 EXHIBIT 4.3 Exhibit 4.3 ================================================================================ AMENDED AND RESTATED DECLARATION OF TRUST OF HAVEN CAPITAL TRUST II Dated as of [_______], 1999 ================================================================================ TABLE OF CONTENTS Page ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions......................................................2 ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application.................................9 SECTION 2.2 Lists of Holders of Securities..................................10 SECTION 2.3 Reports by the Property Trustee.................................10 SECTION 2.4 Periodic Reports................................................10 SECTION 2.5 Evidence of Compliance with Conditions Precedent................10 SECTION 2.6 Events of Default; Waiver.......................................11 SECTION 2.7 Default; Notice.................................................12 ARTICLE III ORGANIZATION SECTION 3.1 Name............................................................13 SECTION 3.2 Office..........................................................13 SECTION 3.3 Purpose.........................................................13 SECTION 3.4 Authority.......................................................13 SECTION 3.5 Title to Property of the Trust..................................14 SECTION 3.6 Powers and Duties of the Administrative Trustees................14 SECTION 3.7 Prohibition of Actions by the Trust and the Trustees............17 SECTION 3.8 Powers and Duties of the Property Trustee.......................18 SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.....20 SECTION 3.10 Certain Rights of Property Trustee..............................22 SECTION 3.11 Delaware Trustee................................................24 SECTION 3.12 Execution of Documents..........................................24 SECTION 3.13 Not Responsible for Recitals or Issuance of Securities..........24 SECTION 3.14 Duration of Trust...............................................25 SECTION 3.15 Mergers.........................................................25 ARTICLE IV SPONSOR SECTION 4.1 Sponsor's Purchase of Common Securities.........................27 SECTION 4.2 Responsibilities of the Sponsor.................................27 SECTION 4.3 Right to Proceed................................................27 i SECTION 4.4 Right to Dissolve Trust.........................................28 ARTICLE V TRUSTEES SECTION 5.1 Number of Trustees; Appointment of Co-Trustee...................28 SECTION 5.2 Delaware Trustee................................................29 SECTION 5.3 Property Trustee; Eligibility...................................29 SECTION 5.4 Certain Qualifications of Administrative Trustees and Delaware Trustee Generally......................................30 SECTION 5.5 Administrative Trustees.........................................30 SECTION 5.6 Appointment, Removal and Resignation of Trustees................31 SECTION 5.7 Vacancies among Trustees........................................32 SECTION 5.8 Effect of Vacancies.............................................33 SECTION 5.9 Meetings........................................................33 SECTION 5.10 Delegation of Power.............................................33 SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business.....34 ARTICLE VI DISTRIBUTIONS SECTION 6.1 Distributions...................................................34 ARTICLE VII ISSUANCE OF SECURITIES SECTION 7.1 General Provisions Regarding Securities.........................34 SECTION 7.2 Issuance of Capital Securities and Common Securities............35 SECTION 7.3 The Trust Security Certificates.................................36 SECTION 7.4 Execution and Delivery of Trust Security Certificates...........36 SECTION 7.5 Registrar, Paying Agent and Exchange Agent......................36 SECTION 7.6 Registration of Transfer and Exchange of Capital Security Certificates...................................37 SECTION 7.7 Book-Entry Capital Security Certificates; Common Security Certificate.....................................37 SECTION 7.8 Paying Agent to Hold Money in Trust.............................38 SECTION 7.9 Replacement Securities..........................................39 SECTION 7.10 Outstanding Capital Securities..................................39 SECTION 7.11 Capital Securities in Treasury..................................39 SECTION 7.12 Cancellation....................................................39 SECTION 7.13 CUSIP Numbers...................................................40 ii ARTICLE VIII DISSOLUTION OF TRUST SECTION 8.1 Dissolution of Trust............................................40 ARTICLE IX TRANSFER OF INTERESTS SECTION 9.1 Transfer of Securities..........................................41 SECTION 9.2 Definitive Capital Security Certificates........................42 SECTION 9.3 Temporary Securities............................................44 SECTION 9.4 Deemed Security Holders.........................................45 SECTION 9.5 Notices to Clearing Agency......................................45 SECTION 9.6 Appointment of Successor Clearing Agency........................45 ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 10.1 Liability.......................................................45 SECTION 10.2 Exculpation.....................................................46 SECTION 10.3 Fiduciary Duty..................................................46 SECTION 10.4 Indemnification.................................................47 SECTION 10.5 Outside Businesses..............................................50 ARTICLE XI ACCOUNTING SECTION 11.1 Fiscal Year.....................................................50 SECTION 11.2 Certain Accounting Matters......................................50 SECTION 11.3 Banking.........................................................51 SECTION 11.4 Withholding.....................................................51 ARTICLE XII AMENDMENTS AND MEETINGS SECTION 12.1 Amendments......................................................52 SECTION 12.2 Meetings of the Holders; Action by Written Consent..............54 ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE SECTION 13.1 Representations and Warranties of Property Trustee..............55 SECTION 13.2 Representations and Warranties of Delaware Trustee..............56 iii ARTICLE XIV MISCELLANEOUS SECTION 14.1 Notices.........................................................56 SECTION 14.2 Governing Law...................................................58 SECTION 14.3 Intention of the Parties........................................58 SECTION 14.4 Headings........................................................58 SECTION 14.5 Successors and Assigns..........................................58 SECTION 14.6 Partial Enforceability..........................................58 SECTION 14.7 Counterparts....................................................58 TERMS OF [____]% CAPITAL SECURITIES, [____]% COMMON SECURITIES...............I-1 EXHIBIT A-1 FORM OF CAPITAL SECURITY CERTIFICATE..........................A1-1 EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE...........................A2-1 iv CROSS-REFERENCE TABLE* Section of Trust Indenture Act of 1939, as Section of amended Declaration - --------------- -------------- 310(a) ........................................ 5.3 310(b) ........................................5.3(c), 5.3(d) 311(a) ........................................ 2.2(b) 311(b) ........................................ 2.2(b) 312(a) ........................................ 2.2(a) 312(b) ........................................ 2.2(b) 313 ........................................ 2.3 314(a) ........................................ 2.4; 3.6(j) 314(c) ........................................ 2.5 315(a) ........................................ 3.9 315(b) ........................................ 2.7(a) 315(c) ........................................ 3.9(a) 315(d) ........................................ 3.9(b) 316(a) ........................................ 2.6 316(c) ........................................ 3.6(e) 317(a) ........................................3.8(e); 3.8(h) 317(b) ........................................ 3.8(i); 7.5 318 ........................................ 2.1 - ---------- * This Cross-Reference Table does not constitute part of this Declaration and shall not affect the interpretation of any of its terms or provisions. v AMENDED AND RESTATED DECLARATION OF TRUST OF HAVEN CAPITAL TRUST II Dated as of [______], 1999 AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of [______], 1999, by and among the Trustees (as defined herein), the Sponsor (as defined herein) and the Holders (as defined herein), from time to time, of undivided beneficial interests in the assets of the Trust to be issued pursuant to this Declaration; WHEREAS, the Trustees and the Sponsor established Haven Capital Trust II (the "Trust"), a trust created under the Delaware Business Trust Act pursuant to a Declaration dated as of [______], 1999 (the "Original Declaration"), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on [______], 1999, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust, investing the proceeds thereof solely in certain Debentures of the Debenture Issuer (each as hereinafter defined) with no power to vary that investment, and engaging in only those activities necessary, advisable or incidental thereto; and WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration; and WHEREAS, all of the Trustees and the Sponsor, by this Declaration, ratify the actions of each Trustee taken prior to the date hereof; NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration and, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties, intending to be legally bound hereby, agree as follows: ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions. Unless the context otherwise requires: (a) capitalized terms used in this Declaration but not defined in the preamble above or elsewhere herein have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration and each Annex and Exhibit hereto, as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; (f) a term defined in the Indenture (as defined herein) has the same meaning when used in this Declaration unless otherwise defined in this Declaration or the context otherwise requires; and (g) a reference to the singular includes the plural and vice versa. "Administrative Trustee" has the meaning set forth in Section 5.1. "Affiliate" has the same meaning as given to that term in Rule 405 under the Securities Act or any successor rule thereunder. "Agent" means any Paying Agent, Registrar or Exchange Agent. "Authorized Officer" of a Person means any other Person that is authorized to legally bind such former Person. "Book-Entry Interest" means a beneficial interest in the Global Capital Security registered in the name of a Clearing Agency or its nominee, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as described in Section 9.4. 2 "Business Day" means any day other than a Saturday or a Sunday or a day on which banking institutions in Wilmington, Delaware or New York, New York are authorized or required by law or executive order to remain closed. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code ss. 3801 et seq., as it may be amended from time to time, or any successor legislation. "Capital Securities" has the meaning specified in Section 7.1(a). "Capital Securities Guarantee" means the Capital Securities Guarantee Agreement, dated as of the Closing Date, by Haven Bancorp, Inc. in respect of the Capital Securities. "Capital Security Beneficial Owner" means, with respect to a Book-Entry Interest, a Person who is the beneficial owner of such Book-Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Capital Security Certificate" means a certificate evidencing ownership of Capital Securities, substantially in the form attached as Exhibit A-1. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary for the Capital Securities and in whose name or in the name of a nominee of that organization shall be registered a global certificate and which shall undertake to effect book-entry transfers and pledges of the Capital Securities. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" has the meaning specified in the Underwriting Agreement. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. "Commission" means the United States Securities and Exchange Commission as from time to time constituted, or if at any time after the execution of this Declaration such Commission is not existing and performing the duties now assigned to it under applicable federal securities laws, then the body performing such duties at such time. "Common Securities" has the meaning specified in Section 7.1(a). 3 "Common Securities Guarantee" means the Common Securities Guarantee Agreement, dated as of the Closing Date, entered into by Haven Bancorp, Inc., with respect to the Common Securities. "Common Securities Subscription Agreement" means the Common Securities Subscription Agreement, dated as of the Closing Date, between the Trust and Haven Bancorp, Inc. relating to the Common Securities. "Common Security Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit A-2. "Company Indemnified Person" means (a) any Administrative Trustee; (b) any Affiliate of any Administrative Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Administrative Trustee; or (d) any officer, employee or agent of the Trust or its Affiliates. "Corporate Trust Office" means the office of the Property Trustee at which the corporate trust business of the Property Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Declaration is located at 450 West 33rd Street, 15th Floor, New York, New York 10001-2697, Attention: Capital Markets Fiduciary Services, or at any other time at such other address as the Property Trustee may designate from time to time by notice to the Holders. "Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Debenture Issuer" means Haven Bancorp, Inc., a Delaware corporation, or any successor entity resulting from any consolidation, amalgamation, merger or other business combination, in its capacity as issuer of the Debentures under the Indenture. "Debenture Subscription Agreement" means the Debenture Subscription Agreement, dated as of the Closing Date, between the Debenture Issuer and the Trust in respect of the Debentures. "Debenture Trustee" means The Chase Manhattan Bank, a New York banking corporation, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Debentures" means the [____]% Junior Subordinated Deferrable Interest Debentures due [_____], 2029, of the Debenture Issuer issued pursuant to the Indenture. "Default" means an event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default. 4 "Definitive Capital Securities" has the meaning set forth in Section 9.2. "Delaware Trustee" has the meaning set forth in Section 5.1. "Direct Action" has the meaning set forth in Section 3.8(e). "Distribution" means a distribution payable to Holders in accordance with Section 6.1. "DTC" means The Depository Trust Company, the initial Clearing Agency. "Event of Default" with respect to the Securities means an Event of Default (as defined in the Indenture) that has occurred and is continuing with respect to the Debentures. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Exchange Agent" has the meaning set forth in Section 7.5. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System. "Fiduciary Indemnified Person" has the meaning set forth in Section 10.4(b). "Firm Securities Closing Date" has the meaning specified in the Underwriting Agreement. "Fiscal Year" has the meaning set forth in Section 11.1. "Global Capital Security" means the Capital Security Certificate issued to the Clearing Agency at Closing. "Holder" means a Person in whose name a Security or Successor Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means a Company Indemnified Person or a Fiduciary Indemnified Person. "Indenture" means the Indenture, dated as of the Closing Date, between the Debenture Issuer and the Debenture Trustee, as amended from time to time. "Initial Optional Redemption Date" has the meaning set forth in Section 4(b) of Annex I hereto. 5 "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Investment Company Event" has the meaning set forth in Section 4(c) of Annex I hereto. "Legal Action" has the meaning set forth in Section 3.6(g). "Like Amount" has the meaning set forth in Section 3 of Annex I hereto. "List of Holders" has the meaning set forth in Section 2.2(a). "Majority in Liquidation Amount " means, with respect to the Trust Securities, except as provided in the terms of the Capital Securities or by the Trust Indenture Act, Holders of outstanding Trust Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "Officers" shall mean any of the Chairman of the Board, a Vice Chairman, the Chief Executive Officer, the President, an Executive or Senior Vice President, a Vice President, the Chief Financial Officer, the Group Director, the Secretary or an Assistant Secretary of the Corporation. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Officers and delivered to the Delaware Trustee. Any Officers' Certificate delivered by the Trust shall be signed by at least one Administrative Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Certificate has read the covenants or conditions and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and 6 (d) a statement as to whether or not, in the opinion of each such officer, such condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who may be an employee of the Sponsor, and who shall be acceptable to the Property Trustee. "Option Securities Closing Date" has the meaning specified in the Underwriting Agreement. "Participants" has the meaning specified in Section 7.7(a). "Paying Agent" has the meaning specified in Section 7.5. "Payment Amount" has the meaning specified in Section 6.1. "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. "PORTAL" has the meaning set forth in Section 3.6(b) (iii). "Property Trustee" has the meaning set forth in Section 5.3(a). "Property Trustee Account" has the meaning set forth in Section 3.8(c)(i). "Quorum" means a majority of the Administrative Trustees or, if there are only two Administrative Trustees, both of them. "Redemption Price" has the meaning set forth in Section 4(a) of Annex I hereto. "Registrar" has the meaning set forth in Section 7.5. "Registration Statement" has the meaning set forth in Section 3.6(b). "Regulatory Capital Event" has the meaning set forth in Section 4(c) of Annex I hereto. "Related Party" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means any officer within the Corporate Trust Office of the Property Trustee with direct responsibility for the administration of this Declaration and also means, with respect to a particular corporate trust matter, any other officer of the Property Trustee to whom 7 such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Rule 3a-5" means Rule 3a-5 under the Investment Company Act, or any successor rule or regulation. "Securities" or "Trust Securities" means the Common Securities and the Capital Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. "Securities Guarantees" means the Common Securities Guarantee and the Capital Securities Guarantee. "Special Event" has the meaning set forth in Section 4(c) of Annex I hereto. "Special Event Redemption Price" has the meaning set forth in Section 4(c) of Annex I hereto. "Sponsor" means Haven Bancorp, Inc., a Delaware corporation, or any successor entity resulting from any merger, consolidation, amalgamation or other business combination, in its capacity as sponsor of the Trust. "Successor Delaware Trustee" has the meaning set forth in Section 5.6(b)(ii). "Successor Entity" has the meaning set forth in Section 3.15(b)(i). "Successor Property Trustee" has the meaning set forth in Section 3.8(f)(ii). "Successor Securities" has the meaning set forth in Section 3.15(b)(i). "Super Majority" has the meaning set forth in Section 2.6(a)(ii). "Tax Event" has the meaning set forth in Section 4(c) of Annex I hereto. "10% in Liquidation Amount" means, with respect to the Trust Securities, except as provided in the terms of the Capital Securities or by the Trust Indenture Act, Holders of outstanding Trust Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount (including the amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. 8 "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury Department, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. "Trust Property" means (a) the Debentures, (b) any cash on deposit in or owing to the Property Trustee Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Property Trustee pursuant to this Declaration. "Trust Security Certificate" means any one of the Common Security Certificates or the Capital Security Certificates. "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue as a trustee of the Trust in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Underwriting Agreement" means the Underwriting Agreement, dated [____ __], 1999, by and among the Trust, the Debenture Issuer and the Underwriters named therein, relating to the Capital Securities. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration in order for this Declaration to be qualified under the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Trustee that is a trustee for the purposes of the Trust Indenture Act. (c) If and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by ss.ss. 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. (d) The application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. 9 SECTION 2.2 Lists of Holders of Securities. (a) Each of the Sponsor and the Administrative Trustees on behalf of the Trust shall provide the Property Trustee, unless the Property Trustee is Registrar for the Securities, (i) within 14 days after each record date for payment of Distributions, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of such record date, provided that, neither the Sponsor nor the Administrative Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time that the List of Holders does not differ from the most recent List of Holders given to the Property Trustee by the Sponsor and the Administrative Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Property Trustee. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity), provided that the Property Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Property Trustee shall comply with its obligations under ss.ss. 311(a), 311(b) and 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Property Trustee. Within 60 days after the date hereof, and no later than the anniversary date hereof in each succeeding year, the Property Trustee shall provide to the Holders of the Capital Securities such reports as are required by ss. 313 of the Trust Indenture Act, if any, in the form and in the manner provided by ss. 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of ss. 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports. Each of the Sponsor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee, the Commission and the Holders, such documents, reports and information as are required by ss. 314 (if any) of the Trust Indenture Act and the compliance certificate required by ss. 314 of the Trust Indenture Act in the form, in the manner and at the times required by ss. 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent. Each of the Sponsor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent provided for in this Declaration that relate to any of the matters set forth in ss. 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to ss. 314(c)(1) of the Trust Indenture Act may be given in the form of an Officers' Certificate. 10 SECTION 2.6 Events of Default; Waiver. (a) The Holders of a Majority in Liquidation Amount of Capital Securities may, by vote, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default in respect of the Capital Securities and its consequences, provided that, if the underlying Event of Default under the Indenture: (i) is not waivable under the Indenture, the Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of greater than a majority in aggregate principal amount of the holders of the Debentures (a "Super Majority") to be waived under the Indenture, the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in aggregate liquidation amount of the Capital Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. The foregoing provisions of this Section 2.6(a) shall be in lieu of ss. 316(a)(1)(B) of the Trust Indenture Act, and such ss. 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default with respect to the Capital Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other Default or an Event of Default with respect to the Capital Securities or impair any right consequent thereon. Any waiver by the Holders of the Capital Securities of an Event of Default with respect to the Capital Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote or consent of the Holders of the Common Securities. (b) The Holders of a Majority in Liquidation Amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that, if the underlying Event of Default under the Indenture: (i) is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of a Super Majority to be waived, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in aggregate liquidation amount of the Common Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding; 11 provided further, each Holder of Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Common Securities and their consequences if all Events of Default with respect to the Capital Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Capital Securities, and only the Holders of the Capital Securities will have the right to direct the Property Trustee in accordance with the terms of the Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu of ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act, and such ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Subject to the foregoing provisions of this Section 2.6(b), upon such waiver, any such Default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other Default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of an Event of Default under the Indenture by the Property Trustee, at the direction of the Holders of the Capital Securities, constitutes a waiver of the corresponding Event of Default under this Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of ss. 316(a)(1)(B) of the Trust Indenture Act, and such ss. 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. SECTION 2.7 Default; Notice. (a) The Property Trustee shall, within 90 days after a Responsible Officer obtains actual knowledge of the occurrence of a Default with respect to the Securities, transmit by mail, first class postage prepaid, to the Holders, notices of all such Defaults, unless such Defaults have been cured before the giving of such notice or previously waived; provided, however, that except in the case of a Default arising from the nonpayment of principal of (or premium, if any) or interest (including Compounded Interest and Additional Sums (as such terms are defined in the Indenture), if any) on any of the Debentures, the Property Trustee shall be protected in withholding such notice if and so long as a Responsible Officer in good faith determines that the withholding of such notice is in the interests of the Holders. (b) The Property Trustee shall not be deemed to have knowledge of any Default or Event of Default except: (i) a Default or Event of Default under Sections 5.01(a) (other than the payment of Compounded Interest and Additional Sums) and 5.01(b) of the Indenture; or 12 (ii) any Default or Event of Default as to which the Property Trustee shall have received written notice or of which a Responsible Officer charged with the administration of the Declaration shall have actual knowledge. (c) Within five Business Days after a Responsible Officer obtains actual knowledge of the occurrence of any Event of Default, the Property Trustee shall transmit notice of such Event of Default to the Holders of the Capital Securities, the Administrative Trustees and the Sponsor, unless such Event of Default shall have been cured or waived. The Sponsor and the Administrative Trustees shall file annually with the Property Trustee a certification as to whether or not they are in compliance with all the conditions and covenants applicable to them under this Declaration. ARTICLE III ORGANIZATION SECTION 3.1 Name. The Trust is named Haven Capital Trust II as such name may be modified from time to time by the Administrative Trustees following written notice to the Delaware Trustee, the Property Trustee and the Holders. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Administrative Trustees. SECTION 3.2 Office. The address of the principal office of the Trust is c/o Haven Bancorp, Inc., 615 Merrick Avenue, Westbury, New York 11590. On ten Business Days' prior written notice to the Delaware Trustee, the Property Trustee and the Holders of Securities, the Administrative Trustees may designate another principal office. SECTION 3.3 Purpose. The exclusive purposes and functions of the Trust are (a) to issue and sell the Securities, (b) use the proceeds from the sale of the Securities to acquire the Debentures, and (c) except as otherwise limited herein, to engage in only those other activities necessary, advisable or incidental thereto, including without limitation, those activities specified in Sections 3.6, 3.8, 3.9, 3.10, 3.11 and/or 3.12. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, mortgage or pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust. SECTION 3.4 Authority. Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Administrative Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by one or more of the Administrative Trustees 13 in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee on behalf of the Trust in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION 3.5 Title to Property of the Trust. Except as provided in Section 3.8 with respect to the Debentures and the Property Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 3.6 Powers and Duties of the Administrative Trustees. The Administrative Trustees acting individually or together shall have the power, duty and authority, and are hereby authorized and directed, to cause the Trust to engage in the following activities: (a) to execute, enter into and deliver the Common Securities Subscription Agreement and to execute, deliver, issue and sell the Securities in accordance with this Declaration; provided, however, that (i) the Trust may issue no more than one series of Capital Securities and no more than one series of Common Securities, (ii) there shall be no interests in the Trust other than the Securities, and (iii) the issuance of Securities shall be limited to a simultaneous issuance of both Capital Securities and Common Securities on each Closing Date; (b) in connection with the issue and sale of the Capital Securities at the direction of the Sponsor, to: (i) prepare and execute, if necessary, one or more registration statements including a prospectus and prospectus supplements and any amendment thereto, in preliminary and final form, relating to the offering and sale of the Capital Securities of the Trust under the Securities Act, and such forms or filings as may be required under the Securities Act, the Exchange Act or the Trust Indenture Act (each a "Registration Statement") prepared by the Sponsor; (ii) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary in order to qualify or register all or part of the Capital Securities in any State in which the Sponsor has determined to qualify or register such Capital Securities for sale; (iii) execute and file an application, prepared by the Sponsor, to permit the Capital Securities to trade or be quoted or listed in or on the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market or any 14 other securities exchange, quotation system or the Nasdaq Stock Market's National Market; and (iv) execute and deliver the letters, documents, or instruments with DTC and other Clearing Agencies relating to the Capital Securities, and if required, execute and file with the Commission a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor, relating to the registration of the Capital Securities under Section 12(b) or 12(g) of the Exchange Act, as the case may be. (c) to execute, enter into and deliver the Debenture Subscription Agreement and to acquire the Debentures with the proceeds of the sale of the Capital Securities and the Common Securities; provided, however, that the Administrative Trustees shall cause legal title to the Debentures to be held of record in the name of the Property Trustee for the benefit of the Holders; (d) to give the Sponsor and the Property Trustee prompt written notice of the occurrence of a Special Event; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date to be established, including and with respect to, for the purposes of ss. 316(c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders with respect to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Administrative Trustees pursuant to the terms of the Securities; (g) to the fullest extent permitted by law, to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees, agents (who may be designated as officers with titles), managers, contractors, advisors and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (j) to give the certificate required by ss. 314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate may be executed by any Administrative Trustee; (k) to incur expenses that are necessary or incidental to carry out any of the purposes of the Trust; 15 (l) to act as, or appoint another Person to act as, Registrar and Exchange Agent for the Securities or to appoint a Paying Agent for the Securities as provided in Section 7.5 except for such time as such power to appoint a Paying Agent is vested in the Property Trustee; (m) to give prompt written notice to the Property Trustee and to the Holders of any notice received from the Debenture Issuer of its election to defer payments of interest on the Debentures by extending the interest payment period under the Indenture; (n) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders or to enable the Trust to effect the purposes for which the Trust was created; (o) to take any action, not inconsistent with this Declaration or with applicable law, that the Administrative Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.6, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust to continue not to be classified as an association taxable as a corporation or causing the Trust to be classified as a grantor trust, in each case for United States federal income tax purposes; and (iii) cooperating with the Debenture Issuer to ensure that the Debentures will be treated as indebtedness of the Debenture Issuer for United States federal income tax purposes; (p) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Administrative Trustees, on behalf of the Trust; and (q) to execute and deliver all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary, advisable or incidental to the foregoing. The Administrative Trustees must exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Administrative Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Administrative Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 3.8. 16 Any expenses incurred by the Administrative Trustees pursuant to this Section 3.6 shall be reimbursed by the Debenture Issuer. SECTION 3.7 Prohibition of Actions by the Trust and the Trustees. The Trust shall not, and the Trustees (including the Property Trustee and the Delaware Trustee) shall not, and the Administrative Trustees shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. Notwithstanding any provision in this Declaration to the contrary, the Trust shall not: (i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust Property for other than a Trust purpose or execute any mortgage in respect of, or pledge, any Trust Property; (iv) make any loans or incur any indebtedness other than loans represented by the Debentures; (v) possess any power or otherwise act in such a way as to vary the Trust Property or the terms of the Securities in any way whatsoever; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; (vii) other than as provided in this Declaration or Annex I hereto, (A) direct the time, method and place of conducting any proceeding with respect to any remedy available to the Debenture Trustee, or exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under the Indenture, or (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable; or (viii) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received an opinion of independent tax counsel experienced in such matters to the effect that such amendment, modification or termination will not cause more than an insubstantial risk that the Trust will not be classified as a grantor trust for United States federal income tax purposes. 17 SECTION 3.8 Powers and Duties of the Property Trustee. (a) The legal title to the Debentures shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Trust and the Holders. The right, title and interest of the Property Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Section 5.6. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered. (b) The Property Trustee shall not transfer its right, title and interest in the Debentures to the Administrative Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee). (c) The Property Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Property Trustee Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders and, upon the receipt of payments of funds made in respect of the Debentures held by the Property Trustee, deposit such funds into the Property Trustee Account and make payments or cause the Paying Agent to make payments to the Holders from the Property Trustee Account in accordance with Section 6.1; funds in the Property Trustee Account shall be held uninvested until disbursed in accordance with this Declaration; and the Property Trustee Account shall be an account that is maintained with a banking institution the rating on whose long-term unsecured indebtedness by a "nationally recognized statistical rating organization," as that term is defined for purposes of Rule 436(g)(2) under the Securities Act, is at least equal to the rating assigned to the Capital Securities; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Securities to the extent the Debentures are redeemed or mature; and (iii) upon written notice of distribution issued by the Administrative Trustees in accordance with the terms of the Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures to Holders upon the occurrence of certain events. (d) The Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of this Declaration and the Securities. (e) Subject to Section 3.9(a), the Property Trustee shall take any Legal Action which arises out of or in connection with an Event of Default of which (other than in the case of Events of Default under Sections 5.01(a) and 5.01(b) of the Indenture) a Responsible Officer has 18 actual knowledge or the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act may so require; and if the Property Trustee shall have failed to take such Legal Action following a written request from the Holders, the Holders of the Capital Securities may, to the fullest extent permitted by law, take such Legal Action, to the same extent as if such Holders of Capital Securities held an aggregate principal amount of Debentures equal to the aggregate liquidation amount of such Capital Securities, without first proceeding against the Property Trustee or the Trust; provided, however, that if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay the principal of or premium, if any, or interest (including Compounded Interest and Additional Sums, if any) on the Debentures on the date such principal, premium, if any, or interest (including Compounded Interest and Additional Sums, if any) is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of Capital Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of, premium, if any, or interest (including Compounded Interest and Additional Sums, if any) on the Debentures having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such Holder (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the Holders of the Common Securities will be subrogated to the rights of such Holder of Capital Securities to the extent of any payment made by the Debenture Issuer to such Holder of Capital Securities in such Direct Action. Except as provided in the preceding sentences, the Holders of Capital Securities will not be able to exercise directly any other remedy available to the holders of the Debentures. (f) The Property Trustee shall continue to serve as a Trustee until either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders pursuant to the terms of the Securities and this Declaration; or (ii) a successor Property Trustee has been appointed and has accepted that appointment in accordance with Section 5.6 (a "Successor Property Trustee"). (g) The Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures under the Indenture, and, if an Event of Default actually known to a Responsible Officer (other than in the case of Events of Default under Sections 5.01(a) and 5.01(b) of the Indenture) occurs and is continuing, the Property Trustee shall, for the benefit of Holders, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to the terms of this Declaration and the Securities. (h) The Property Trustee shall be authorized to undertake any actions set forth in ss. 317(a) of the Trust Indenture Act. (i) For such time as the Property Trustee is the Paying Agent, the Property Trustee may authorize one or more Persons to act as additional Paying Agents and to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to all Securities, and any such Paying Agent shall comply with ss. 317(b) of the Trust Indenture Act. Any such additional Paying Agent may be removed by the Property Trustee at any time the Property 19 Trustee remains as Paying Agent, and a successor Paying Agent or additional Paying Agents may be (but are not required to be) appointed at any time by the Property Trustee while the Property Trustee is acting as Paying Agent. (j) Subject to this Section 3.8, the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Administrative Trustees set forth in Section 3.6. Notwithstanding anything expressed or implied to the contrary in this Declaration or any Annex or Exhibit hereto, (i) the Property Trustee must exercise the powers set forth in this Section 3.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and (ii) the Property Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee. (a) The Property Trustee, before the occurrence of any Event of Default (of which, other than in the case of Events of Default under Sections 5.01(a) and 5.01(b) of the Indenture, a Responsible Officer of the Property Trustee has actual knowledge) and after the curing or waiving of all such Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and in the Securities, and no implied covenants shall be read into this Declaration against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) of which a Responsible Officer has actual knowledge (other than in the case of Events of Default under Sections 5.01(a) and 5.01(b) of the Indenture), the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) No provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default (of which, other than in the case of Events of Default under Sections 5.01(a) and 5.01(b) of the Indenture, a Responsible Officer of the Property Trustee has actual knowledge) and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration and in the Securities, and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration and in the Securities, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and 20 (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; provided, however, that in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not on their face they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a Majority in Liquidation Amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration; (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers; (v) the Property Trustee's sole duty with respect to the custody, safekeeping and physical preservation of the Debentures and the Property Trustee Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Declaration and the Trust Indenture Act; (vi) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Debentures or the payment of any taxes or assessments levied thereon or in connection therewith; (vii) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor. Money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Trustee Account maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; and (viii) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Sponsor with their respective 21 duties under this Declaration, nor shall the Property Trustee be liable for any default or misconduct of the Administrative Trustees or the Sponsor. SECTION 3.10 Certain Rights of Property Trustee. (a) Subject to the provisions of Section 3.9: (i) the Property Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Administrative Trustees contemplated by this Declaration may be sufficiently evidenced by an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Administrative Trustees; (iv) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or registration thereof; (v) the Property Trustee may consult with counsel or other experts of its selection, and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion; such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees; and the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Property Trustee security and indemnity, reasonably satisfactory to the Property Trustee, against 22 the costs, expenses (including reasonable attorneys' fees and expenses and the expenses of the Property Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Property Trustee; provided, however, that, nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the Property Trustee, upon the occurrence of an Event of Default (of which, other than in the case of Events of Default under Sections 5.01(a) and 5.01(b) of the Indenture, a Responsible Officer of the Property Trustee has actual knowledge), of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys, and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any authorized or required action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders, and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action, and no third party shall be required to inquire as to the authority of the Property Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Property Trustee (i) may request instructions from the Holders, which instructions may only be given by the Holders of the same proportion in liquidation amount of the Securities as would be entitled to direct the Property Trustee under the terms of the Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions; 23 (xi) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration; and (xii) the Property Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence or willful misconduct, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Declaration. (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 3.11 Delaware Trustee. Notwithstanding any other provision of this Declaration other than Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Trustees described in this Declaration (except as required under the Business Trust Act). Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of ss. 3807 of the Business Trust Act. In the event the Delaware Trustee shall at any time be required to take any action or perform any duty hereunder, the Delaware Trustee shall be entitled to the benefits of Section 3.9(b)(ii) to (viii), inclusive, and Section 3.10. No implied covenants or obligations shall be read into this Declaration against the Delaware Trustee. SECTION 3.12 Execution of Documents. Unless otherwise required by applicable law, each Administrative Trustee, individually, is authorized to execute and deliver on behalf of the Trust any documents, agreements, instruments or certificates that the Administrative Trustees have the power and authority to execute pursuant to Section 3.6. SECTION 3.13 Not Responsible for Recitals or Issuance of Securities. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the Trust Property or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. 24 SECTION 3.14 Duration of Trust. The Trust, unless dissolved pursuant to the provisions of Article VIII hereof, shall have existence up to [_____], 2054. SECTION 3.15 Mergers. (a) The Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to any Person, except as described in Section 3.15(b) and (c) and except with respect to the distribution of Debentures to Holders pursuant to Section 8.1(a)(iii) of this Declaration or Section 3 of Annex I. (b) The Trust may, at the request of the Sponsor, with the consent of the Administrative Trustees or, if there are more than two, a majority of the Administrative Trustees and without the consent of the Holders, the Delaware Trustee or the Property Trustee, merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to, a trust organized as such under the laws of any State; provided that: (i) such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Securities; or (B) substitutes for the Securities other securities having substantially the same terms as the Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Securities rank in priority with respect to Distributions and payments upon liquidation, redemption and otherwise; (ii) the Sponsor expressly appoints a trustee of the Successor Entity that possesses the same powers and duties as the Property Trustee with respect to the Debentures; (iii) the Successor Securities (excluding any securities substituted for the Common Securities) are listed, quoted or included for trading, or any Successor Securities will be listed, quoted or included for trading upon notification of issuance, on any national securities exchange or with any other organization on which the Capital Securities are then listed, quoted or included; (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Capital Securities (including any Successor Securities) or the Debentures to be downgraded by any nationally recognized 25 statistical rating organization that publishes a rating on the Capital Securities or the Debentures; (v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders (including the holders of any Successor Securities) in any material respect (other than with respect to any dilution of the interests of such Holders or holders, as the case may be, in the Successor Entity); (vi) the Successor Entity has a purpose substantially identical to that of the Trust; (vii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Sponsor has received an opinion of independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders (including the holders of any Successor Securities) in any material respect (other than with respect to any dilution of the interests of such Holders or holders, as the case may be, in the Successor Entity); (B) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (C) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Trust (or the Successor Entity) will continue not to be classified as an association taxable as a corporation and will not be less likely to be classified as a grantor trust for United States federal income tax purposes; (viii) the Sponsor or any permitted successor or assignee owns all of the common securities of the Successor Entity and guarantees the obligations of the Successor Entity under the Successor Securities at least to the extent provided by the Securities Guarantees; and (ix) there shall have been furnished to the Property Trustee an Officers' Certificate and an Opinion of Counsel, each to the effect that all conditions precedent in this Declaration to such transaction have been satisfied. (c) Notwithstanding Section 3.15(b), the Trust shall not, except with the consent of Holders of 100% in aggregate liquidation amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets as an 26 entirety or substantially as an entirety to, any other Person or permit any other Person to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the Successor Entity not to be classified as a grantor trust for United States federal income tax purposes. ARTICLE IV SPONSOR SECTION 4.1 Sponsor's Purchase of Common Securities. On each Closing Date, pursuant to the Common Securities Subscription Agreement, the Sponsor will purchase all of the Common Securities then issued by the Trust, in an amount equal to at least 3% of the total capital of the Trust, at the same time as the Capital Securities are issued and sold. SECTION 4.2 Responsibilities of the Sponsor. In connection with the issue and sale of the Capital Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a) to prepare and file with the Commission the Registration Statements and any amendments thereto, and the prospectus to be included therein, in preliminary and final form, and to prepare for filing by the Trust with the Commission any other necessary documents, including any amendments thereto; (b) 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; (c) if deemed necessary or advisable by the Sponsor, to prepare for filing by the Trust an application to permit the Capital Securities to trade or be quoted or listed in or on the PORTAL market, or any other securities exchange, quotation system or the Nasdaq Stock Market's National Market to prepare for filing by the Trust with the Commission a registration statement on Form 8-A, including any amendments thereto, relating to the registration of the Capital Securities under Section 12(b) or 12(g) of the Exchange Act, as the case may be, including any amendments thereto; and to negotiate the terms of, execute, enter into and deliver the Underwriting Agreement. SECTION 4.3 Right to Proceed. The Sponsor acknowledges the rights of the Holders of Capital Securities, in the event that a failure of the Trust to pay Distributions on the Capital Securities is attributable to the failure of the Debenture Issuer to pay the principal of or premium (if any) or interest on the 27 Debentures, to institute a proceeding directly against the Debenture Issuer for enforcement of its payment obligations in respect of the Debentures. SECTION 4.4 Right to Dissolve Trust. The Sponsor will have the right at any time to dissolve the Trust and, after satisfaction of liabilities to creditors of the Trust as required by applicable law, to cause the Debentures to be distributed to the Holders in liquidation of the Trust. Such right is subject to the Sponsor's having received (i) an Opinion of Counsel to the effect that such distribution will not cause the Holders of Capital Securities to recognize gain or loss for United States federal income tax purposes and (ii) all required regulatory approvals. ARTICLE V TRUSTEES SECTION 5.1 Number of Trustees; Appointment of Co-Trustee. The number of Trustees initially shall be five (5), and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the Holders of a Majority in Liquidation Amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; provided, however, that, the number of Trustees shall in no event be less than two (2); provided further that (1) one Trustee, in the case of a natural person, shall be a person who is a resident of the State of Delaware or that, if not a natural person, is an entity which has its principal place of business in the State of Delaware (the "Delaware Trustee"); (2) there shall be at least one Trustee who is an employee or officer of, or is affiliated with, the Sponsor (an "Administrative Trustee"); and (3) one Trustee shall be the Property Trustee for so long as this Declaration is required to qualify as an indenture under the Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if it meets the applicable requirements. Notwithstanding the above, unless an Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Holders of a Majority in Liquidation Amount of the Common Securities acting as a class at a meeting of the Holders of the Common Securities, and the Administrative Trustees shall have power to appoint one or more Persons either to act as a co-trustee, jointly with the Property Trustee, of all or any part of the Trust Property, or to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in such capacity any property, title, right or power deemed necessary or desirable, subject to the provisions of this Declaration. In case an Event of Default has occurred and is continuing, the Property Trustee alone shall have power to make any such appointment of a co-trustee. 28 SECTION 5.2 Delaware Trustee. For so long as required by the Business Trust Act, the Delaware Trustee shall be: (a) a natural person who is a resident of the State of Delaware; or (b) if not a natural person, an entity which has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, provided, however, that, if the Property Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Property Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. The initial Delaware Trustee shall be: Chase Manhattan Bank Delaware 1201 Market Street Wilmington, Delaware 19801 Attn.: [ ] Telephone: (302) ___-____ Telecopier: (302) ___-____ SECTION 5.3 Property Trustee; Eligibility. (a) There shall at all times be one Trustee (the "Property Trustee") which shall act as Property Trustee and which shall: (i) not be an Affiliate of the Sponsor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an indenture trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least fifty million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Property Trustee shall cease to be eligible to so act under Section 5.3(a), the Property Trustee shall immediately resign in the manner and with the effect set forth in Section 5.6(c). 29 (c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of ss. 310(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Common Securities (as if it were the obligor referred to in ss. 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of ss. 310(b) of the Trust Indenture Act. (d) The Capital Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first proviso contained in ss. 310(b) of the Trust Indenture Act. (e) The initial Property Trustee shall be: The Chase Manhattan Bank 450 West 33rd Street 15th Floor New York, New York 10001 Attn.: Capital Markets Fiduciary Services Telephone: (212) ___-____ Telecopier: (212) ___-____ SECTION 5.4 Certain Qualifications of Administrative Trustees and Delaware Trustee Generally. Each Administrative Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. SECTION 5.5 Administrative Trustees. The initial Administrative Trustees shall be: Catherine Califano Robert B. Lunt Mark A. Ricca c/o Haven Bancorp, Inc. 615 Merrick Avenue Westbury, New York 11590 Telephone: (516) 683-4483 Telecopier: (516) 683-8385 Except as expressly set forth in this Declaration and except if a meeting of the Administrative Trustees is called with respect to any matter over which the Administrative Trustees have power to act, any power of the Administrative Trustees may be exercised by, or with the consent of, any one such Administrative Trustee. 30 SECTION 5.6 Appointment, Removal and Resignation of Trustees. (a) Subject to Section 5.6(b) hereof and to Section 6(b) of Annex I hereto, Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; (ii) unless an Event of Default shall have occurred and be continuing after the issuance of any Securities, by vote of the Holders of a Majority in Liquidation Amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; and (iii) if an Event of Default shall have occurred and be continuing after the issuance of the Securities, with respect to the Property Trustee or the Delaware Trustee, by vote of Holders of a Majority in Liquidation Amount of the Capital Securities voting as a class at a meeting of Holders of the Capital Securities, and with respect to the Administrative Trustees, in the manner set forth in Section 5.6(a)(ii) hereof. (b) (i) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.6(a) until a Successor Property Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Property Trustee and delivered to the removed Property Trustee, the Administrative Trustees and the Sponsor; and (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with Section 5.6(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the removed Delaware Trustee, the Property Trustee (if the removed Delaware Trustee is not also the Property Trustee), the Administrative Trustees and the Sponsor. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, removal or resignation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the other Trustees, the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: (i) No such resignation of the Trustee that acts as the Property Trustee shall be effective: (A) until a Successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Sponsor, the Delaware 31 Trustee (if the resigning Property Trustee is not also the Delaware Trustee) and the resigning Property Trustee; or (B) until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Property Trustee (if the resigning Delaware Trustee is not also the Property Trustee), the Sponsor and the resigning Delaware Trustee. (d) The Holders of the Common Securities or, if an Event of Default shall have occurred and be continuing after the issuance of the Securities, the Holders of the Capital Securities shall use their best efforts to promptly appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be, if the Property Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with this Section 5.6. (e) If no Successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.6 within 60 days after delivery of an instrument of resignation or removal, the Property Trustee or Delaware Trustee resigning or being removed, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper to prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be. (f) No Property Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Property Trustee or Successor Delaware Trustee, as the case may be. (g) At the time of resignation or removal of the Property Trustee or the Delaware Trustee, the Sponsor shall pay to such Trustee any amounts that may be owed to such Trustee pursuant to Section 10.4. (h) Any successor Delaware Trustee shall file an amendment to the Certificate of Trust with the Secretary of State of the State of Delaware identifying the name and principal place of business of such Successor Delaware Trustee in the State of Delaware. SECTION 5.7 Vacancies among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.l, or if the number of Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Administrative 32 Trustees or, if there are more than two, a majority of the Administrative Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.6. SECTION 5.8 Effect of Vacancies. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to dissolve, liquidate or annul the Trust or to terminate this Declaration. Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with Section 5.6, the Administrative Trustees in office, regardless of their number, shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Declaration. SECTION 5.9 Meetings. If there is more than one Administrative Trustee, meetings of the Administrative Trustees shall be held from time to time upon the call of any Administrative Trustee. Regular meetings of the Administrative Trustees may be held at a time and place fixed by resolution of the Administrative Trustees. Notice of any in-person meetings of the Administrative Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before such meeting. Notice of any telephonic meetings of the Administrative Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of an Administrative Trustee at a meeting shall constitute a waiver of notice of such meeting except where an Administrative Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Administrative Trustees may be taken at a meeting by vote of a majority of the Administrative Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that, a Quorum is present, or without a meeting by the unanimous written consent of the Administrative Trustees. In the event there is only one Administrative Trustee, any and all action of such Administrative Trustee shall be evidenced by a written consent of such Administrative Trustee. SECTION 5.10 Delegation of Power. (a) Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 3.6, including any Registration Statement or amendment thereto filed with the Commission, or making any other governmental filing. 33 (b) The Administrative Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of this Declaration. SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Property Trustee or the Delaware Trustee or any Administrative Trustee that is not a natural person, as the case may be, may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Property Trustee or the Delaware Trustee, as the case may be, shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Property Trustee or the Delaware Trustee, as the case may be, shall be the successor of the Property Trustee or the Delaware Trustee, as the case may be, hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided such Person shall be otherwise qualified and eligible under this Article and provided further that, in the case of the Delaware Trustee, such Person shall file an amendment to the Certificate of Trust with the Delaware Secretary of State as contemplated in Section 5.6(h). ARTICLE VI DISTRIBUTIONS SECTION 6.1 Distributions. Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder's Securities. If and to the extent that the Debenture Issuer makes a payment of interest (including Compounded Interest and Additional Sums), premium and/or principal on the Debentures held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a "Distribution") of the Payment Amount to Holders in accordance with the terms of the Securities. ARTICLE VII ISSUANCE OF SECURITIES SECTION 7.1 General Provisions Regarding Securities. (a) The Administrative Trustees shall, on behalf of the Trust, issue one class of capital securities representing preferred undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I (the "Capital Securities") and one class of common securities representing common undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I (the "Common Securities"). The Trust shall issue no securities or other interests in the assets of the Trust other than the Capital Securities and the Common Securities. 34 (b) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (c) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and nonassessable. (d) Every Person, by virtue of having become a Holder or a Capital Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration. SECTION 7.2 Issuance of Capital Securities and Common Securities. (a) As of [____], 1999, the Sponsor, on behalf of the Trust and pursuant to the Original Declaration, executed and delivered the Underwriting Agreement. Contemporaneously with the execution and delivery of this Declaration, an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 7.3 and deliver to the Underwriters named in the Underwriting Agreement, Capital Security Certificates, registered in the name of the nominee of the initial Clearing Agency, in an aggregate amount of [___________] Capital Securities having an aggregate Liquidation Amount of $[__________], against receipt of an aggregate purchase price of $[__________], which amount such Administrative Trustee shall promptly deliver to the Property Trustee. If the Underwriters exercise their Option and there is an Option Securities Closing Date, then an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 7.3 and deliver to the Underwriters named in the Underwriting Agreement, additional Capital Security Certificates, registered in the name of the nominee of the initial Clearing Agency, in an aggregate amount of up to [__________] Capital Securities having an aggregate Liquidation Amount of up to $[__________] against receipt of the aggregate purchase price of up to $[__________], which amount such Administrative Trustee shall promptly deliver to the Property Trustee. (b) Contemporaneously with the execution and delivery of this Declaration, an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 7.3 and deliver to the Sponsor Common Security Certificates, registered in the name of the Sponsor, in an aggregate amount of [__________] Common Securities having an aggregate Liquidation Amount of $[__________] against payment by the Sponsor of an aggregate purchase price of $[__________], which amount such Administrative Trustee shall promptly deliver to the Property Trustee. Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase from the Sponsor Subordinated Debentures, registered in the name of the Property Trustee and having an aggregate principal amount equal to $[__________], and, in satisfaction of the purchase price, the Property Trustee, on behalf of the Trust, shall deliver to the Sponsor the sum of $[__________] (being the sum of the amounts delivered to the Property Trustee pursuant to (i) the second sentence of Section 7.2(a) and (ii) the first sentence of this Section 7.2(b)). (c) If the Underwriters exercise the Option and there is an Option Securities Closing Date, then an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 7.3 and deliver to the Sponsor, Common Securities Certificates, registered in the name of the Sponsor, in an aggregate amount of up to [__________] Common Securities having an 35 aggregate Liquidation Amount of up to $[__________] against Payment by the Sponsor of an aggregate purchase price of up to $[__________], which amount such Administrative Trustee shall promptly deliver to the Property Trustee. Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase from the Sponsor Subordinated Debentures, registered in the name of the Property Trustee and having an aggregate principal amount of up to $[__________], and, in satisfaction of the purchase price of such Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the Sponsor the sum of up to $[__________] (being the sum of the amounts delivered to the Property Trustee pursuant to (i) the third sentence of Section 7.2(a) and (ii) the first sentence of this Section 7.2(c). SECTION 7.3 The Trust Security Certificates The Capital Security Certificates shall be issued in minimum denominations of $25 Liquidation Amount and integral multiples of $25 in excess thereof, and the Common Security Certificates shall be issued in denominations of $25 Liquidation Amount and integral multiples thereof. The Trust Security Certificates shall be executed on behalf of the Trust by manual or facsimile signature of at least one Administrative Trustee. The Capital Security Certificates shall be authenticated by the Property Trustee by manual signature of an authorized signatory thereof. Trust Security Certificates bearing the signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust or the Property Trustee, shall be validly issued and entitled to the benefits of this Declaration, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Security Certificates or did not hold such offices at the date of delivery of such Trust Security Certificates. A transferee of a Trust Security Certificate shall become a Holder, and shall be entitled to the rights and subject to the obligations of a Holder hereunder, upon due registration of such Trust Security Certificate in such transferee's name pursuant to Sections 7.5, 7.7 and 9.2. SECTION 7.4 Execution and Delivery of Trust Security Certificates On each Closing Date, the Administrative Trustees shall cause Trust Security Certificates, in an aggregate Liquidation Amount as provided in Section 7.2, to be executed on behalf of the Trust, authenticated by the Property Trustee and delivered to or upon the written order of the Sponsor, signed by its chairman of the board, its president, any executive or senior vice president, any managing director or any vice president, treasurer, assistant treasurer or controller without further corporate action by the Sponsor, in authorized denominations. SECTION 7.5 Registrar, Paying Agent and Exchange Agent. The Trust shall maintain in New York, New York (i) an office or agency where Capital Securities may be presented for registration of transfer ("Registrar"), (ii) an office or agency where Capital Securities may be presented for payment ("Paying Agent") and (iii) an office or agency where Securities may be presented for exchange ("Exchange Agent"). The Registrar shall keep a register of the Capital Securities and of their transfer. The Trust may appoint the Registrar, the Paying Agent and the Exchange Agent and may appoint one or more co-registrars, one or more additional paying agents and one or more additional Exchange Agents in such other locations as it 36 shall determine. The term "Registrar" includes any additional registrar, the term "Paying Agent" includes any additional paying agent and the term "Exchange Agent" includes any additional Exchange Agent. The Trust may change any Paying Agent, Registrar, co-registrar or Exchange Agent without prior notice to any Holder. The Paying Agent, Registrar and Exchange Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Property Trustee, the Administrative Trustees and the Sponsor. The Trust shall notify the Property Trustee of the name and address of any Agent not a party to this Declaration. If the Trust fails to appoint or maintain another entity as Registrar, Paying Agent or Exchange Agent, the Property Trustee shall act as such. The Trust or any of its Affiliates may act as Paying Agent, Registrar, or Exchange Agent. The Trust shall act as Paying Agent, Registrar and Exchange Agent for the Common Securities. The Trust initially appoints the Property Trustee as Registrar, Paying Agent and Exchange Agent for the Capital Securities. SECTION 7.6 Registration of Transfer and Exchange of Capital Security Certificates Upon surrender for registration of transfer of any Capital Security Certificate at the office or agency maintained pursuant to Section 7.5, the Administrative Trustee, or any one of them shall execute on behalf of the Trust, cause to be authenticated by the Property Trustee and deliver, in the name of the designated transferee or transferees, one or more new Capital Security Certificates in authorized denominations of a like aggregate Liquidation Amount dated the date of execution by such Administrative Trustee or Trustees in accordance with the requirements of Section 9.2(b). At the option of a Holder, Capital Security Certificates may be exchanged for other Capital Security Certificates in authorized denominations of the same class and of a like aggregate Liquidation Amount upon surrender of the Capital Security Certificates to be exchanged at the office or agency maintained pursuant to Section 7.5. Every Capital Security Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to an Administrative Trustee and the Securities Registrar duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Capital Security Certificate surrendered for registration of transfer or exchange shall be canceled and subsequently disposed of by an Administrative Trustee or the Securities Registrar in accordance with such Person's customary practice. SECTION 7.7 Book-Entry Capital Security Certificates; Common Security Certificate (a) The Capital Security Certificates, upon original issuance, will be issued in the form of a typewritten Capital Security Certificate or Certificates representing Book-Entry Capital Security Certificates, to be delivered to The Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the Trust. Such Capital Security Certificate or Certificates shall initially be registered on the Securities Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Capital Securities Beneficial Owner will receive a Definitive Capital Security 37 Certificate representing such Capital Securities Beneficial Owner's interest in such Capital Securities, except as provided in Section 9.2. Unless and until Definitive Capital Security Certificates have been issued to Capital Securities Beneficial Owners pursuant to Section 9.2: (i) the provisions of this Section 7.7(a) shall be in full force and effect; (ii) the Securities Registrar and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration relating to the Book-Entry Capital Security Certificates (including the payment of the Liquidation Amount of and Distributions on the Capital Securities evidenced by Book-Entry Capital Security Certificates and the giving of instructions or directions to Capital Securities Beneficial Owners of Capital Securities evidenced by Book-Entry Capital Security Certificates) as the sole Holder of Capital Securities evidenced by Book-Entry Capital Security Certificates and shall have no obligations to the Capital Securities Beneficial Owners thereof; (iii) to the extent that the provisions of this Section 7.7 conflict with any other provisions of this Declaration, the provisions of this Section 7.7 shall control; and (iv) the rights of the Capital Securities Beneficial Owners of the Book-Entry Capital Security Certificates shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Capital Securities Beneficial Owners and the Clearing Agency and/or members of, or participants in, the Clearing Agency ("Participants"). Unless and until Definitive Capital Security Certificates are issued pursuant to Section 9.2, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit payments on the Capital Securities to such Clearing Agency Participants. (b) A Common Security Certificate representing the Common Securities shall be issued to the Sponsor on each Closing Date in the form of a definitive Common Security Certificate. SECTION 7.8 Paying Agent to Hold Money in Trust. The Trust shall require each Paying Agent other than the Property Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Property Trustee all money held by the Paying Agent for the payment of liquidation amounts or Distributions, and will notify the Property Trustee if there are insufficient funds for such purpose. While any such insufficiency continues, the Property Trustee may require a Paying Agent to pay all money held by it to the Property Trustee. The Trust at any time may require a Paying Agent to pay all money held by it to the Property Trustee and to account for any money disbursed by it. Upon payment over to the Property Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust) shall have 38 no further liability for the money. If the Trust or the Sponsor or an Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. SECTION 7.9 Replacement Securities. If a Holder claims that a Security owned by it has been lost, destroyed or wrongfully taken or if such Security is mutilated and is surrendered to the Trust or in the case of the Capital Securities to the Property Trustee, an Administrative Trustee shall execute and the Property Trustee shall authenticate and make available for delivery a replacement Security if the Property Trustee's requirements are met. An indemnity bond must be provided by the Holder which, in the judgment of the Property Trustee, is sufficient to protect the Trustees, the Sponsor, the Trust or any authenticating agent from any loss which any of them may suffer if a Security is replaced. The Trust may charge such Holder for its expenses in replacing a Security. SECTION 7.10 Outstanding Capital Securities. The Capital Securities outstanding at any time are all the Capital Securities authenticated by the Property Trustee except for those canceled by it, those delivered to it for cancellation, and those described in this Section as not outstanding. If a Capital Security is replaced, paid or purchased pursuant to Section 7.9 hereof, it ceases to be outstanding unless the Property Trustee receives proof satisfactory to it that the replaced, paid or purchased Capital Security is held by a bona fide purchaser. If Capital Securities are considered paid in accordance with the terms of this Declaration, they cease to be outstanding and Distributions on them shall cease to accumulate. A Capital Security does not cease to be outstanding because one of the Trust, the Sponsor or an Affiliate of the Sponsor holds the Security. SECTION 7.11 Capital Securities in Treasury. In determining whether the Holders of the required amount of Securities have concurred in any direction, waiver or consent, Capital Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as the case may be, shall be disregarded and deemed not to be outstanding, except that for the purposes of determining whether the Property Trustee shall be fully protected in relying on any such direction, waiver or consent, only Securities which the Property Trustee actually knows are so owned shall be so disregarded. SECTION 7.12 Cancellation. The Trust at any time may deliver Capital Securities to the Property Trustee for cancellation. The Registrar, Paying Agent and Exchange Agent shall forward to the Property Trustee any Capital Securities surrendered to them for registration of transfer, redemption, exchange or 39 payment. The Property Trustee shall promptly cancel all Capital Securities surrendered for registration of transfer, redemption, exchange, payment, replacement or cancellation and shall dispose of canceled Capital Securities in accordance with its customary procedures unless the Trust otherwise directs in writing. The Trust may not issue new Capital Securities to replace Capital Securities that it has paid or that have been delivered to the Property Trustee for cancellation or that any Holder has exchanged. SECTION 7.13 CUSIP Numbers. The Trust in issuing the Capital Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Property Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders of Capital Securities; provided that, any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Capital Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Capital Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Sponsor will promptly notify the Property Trustee of any change in the CUSIP numbers. ARTICLE VIII DISSOLUTION OF TRUST SECTION 8.1 Dissolution of Trust. (a) The Trust shall automatically dissolve: (i) upon the bankruptcy of the Sponsor; (ii) upon the filing of a certificate of dissolution or liquidation or its equivalent with respect to the Sponsor; or the revocation of the Sponsor's charter and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) following the distribution of a Like Amount of the Debentures to the Holders, provided that, the Property Trustee has received written notice from the Sponsor directing the Property Trustee to dissolve the Trust (which direction is optional, and except as otherwise expressly provided below, within the discretion of the Sponsor), and provided, further, that such direction and such distribution is conditioned on (a) the receipt by the Sponsor of any and all required regulatory approvals, and (b) the Sponsor's receipt and delivery to the Administrative Trustees of an opinion of independent tax counsel experienced in such matters to the effect that the Holders of the Capital Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the dissolution of the Trust and the distribution of Debentures; 40 (iv) upon the entry of a decree of judicial dissolution of the Trust by a court of competent jurisdiction; (v) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; (vi) upon the redemption or repayment of the Debentures or at such time as no Debentures are outstanding; or (vii) the expiration of the term of the Trust provided in Section 3.14. (b) As soon as is practicable upon completion of winding up of the Trust following the occurrence of an event referred to in Section 8.1(a) and the satisfaction of creditors of the Trust in accordance with applicable law, the Administrative Trustees shall terminate the Trust by filing a certificate of cancellation with the Secretary of State of the State of Delaware in accordance with the Business Trust Act. (c) The provisions of Section 3.9 and Article X shall survive the dissolution of the Trust. ARTICLE IX TRANSFER OF INTERESTS SECTION 9.1 Transfer of Securities. (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. To the fullest extent permitted by law, any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. (b) Subject to this Article IX, Capital Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration. To the fullest extent permitted by law, any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. (c) For so long as the Securities remain outstanding, the Sponsor agrees (i) not to transfer ownership of the Common Securities of the Trust, provided that any permitted successor of the Sponsor under the Indenture may succeed to the Sponsor's ownership of the Common Securities, (ii) not to cause, as Sponsor of the Trust, or to permit, as Holder of the Common Securities, the dissolution, winding-up or liquidation of the Trust, except as provided in this Declaration and (iii) to use its best efforts to cause the Trust (a) to remain a business trust, except in connection with the distribution of Debentures to the Holders in liquidation of the Trust, the redemption of all of the Securities, or certain mergers, consolidations or amalgamations, each as 41 permitted by this Declaration, and (b) not to be classified as an association taxable as a corporation and to be classified as a grantor trust for United States federal income tax purposes. SECTION 9.2 Definitive Capital Security Certificates (a) If (i) the Sponsor advises the Trustees in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Capital Security Certificates, and the Sponsor is unable to locate a qualified successor, (ii) the Sponsor at its option advises the Trustees in writing that it elects to terminate the book-entry system through the Clearing Agency or (iii) after the occurrence of an Event of Default, Capital Securities Beneficial Owners representing beneficial interests aggregating at least a majority of the Liquidation Amount advise the Administrative Trustees in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interest of the Capital Securities Beneficial Owners, then the Administrative Trustees shall notify the other Trustees and the Clearing Agency, and the Clearing Agency, in accordance with its customary rules and procedures, shall notify all Clearing Agency Participants for whom it holds Capital Securities of the occurrence of any such event and of the availability of the Definitive Capital Security Certificates to Capital Securities Beneficial Owners of such class or classes, as applicable, requesting the same. Upon surrender to the Administrative Trustees of the typewritten Capital Security Certificate or Certificates representing the Book-Entry Capital Security Certificates by the Clearing Agency, accompanied by registration instructions, the Administrative Trustees, or any one of them, shall execute the Definitive Capital Security Certificates in accordance with the instructions of the Clearing Agency or, if executed on behalf of the Trust by facsimile, countersigned by a transfer agent or its agent. Neither the Registrar nor the Trustees 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. Upon the issuance of Definitive Capital Security Certificates, the Trustees shall recognize the Holders of the Definitive Capital Security Certificates as Holders. The Definitive Capital Security Certificates shall be typewritten, printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrative Trustees that meets the requirements of any stock exchange or automated quotation system on which the Capital Securities are then listed or approved for trading, as evidenced by the execution thereof by the Administrative Trustees or any one of them. (b) Obligations with Respect to Transfers and Exchanges of Capital Securities. (i) To permit registrations of transfers and exchanges, the Trust shall execute and the Property Trustee shall authenticate Definitive Capital Securities and the Global Capital Security at the Registrar's or co-registrar's request in accordance with the terms of this Declaration. (ii) Registrations of transfers or exchanges will be effected without charge, but only upon payment (with such indemnity as the Trust or the Sponsor may require) in respect of any tax or other governmental charge that may be imposed in relation to it. 42 (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of (a) Capital Securities during a period beginning at the opening of business 15 days before the day of mailing of a notice of redemption or any notice of selection of Capital Securities for redemption and ending at the close of business on the day of such mailing or (b) any Capital Security so selected for redemption in whole or in part, except the unredeemed portion of any Capital Security being redeemed in part. (iv) Prior to the due presentation for registration of transfer of any Capital Security, the Trust, the Property Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the Person in whose name a Capital Security is registered as the absolute owner of such Capital Security for the purpose of receiving Distributions on such Capital Security and for all other purposes whatsoever, and none of the Trust, the Property Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) All Capital Securities issued upon any registration of transfer or exchange pursuant to the terms of this Declaration shall evidence the same security and shall be entitled to the same benefits under this Declaration as the Capital Securities surrendered upon such registration of transfer or exchange. (c) No Obligation of the Property Trustee. (i) The Property Trustee shall have no responsibility or obligation to any Capital Security Beneficial Owner, a Participant in the Clearing Agency or other Person with respect to the accuracy of the records of the Clearing Agency or its nominee or of any Participant thereof, with respect to any ownership interest in the Capital Securities or with respect to the delivery to any Participant, beneficial owner or other Person (other than the Clearing Agency) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Capital Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Capital Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Clearing Agency or its nominee in the case of the Global Capital Security). The rights of Capital Security Beneficial Owners shall be exercised only through the Clearing Agency subject to the applicable rules and procedures of the Clearing Agency. The Property Trustee may conclusively rely and shall be fully protected in relying upon information furnished by the Clearing Agency or any agent thereof with respect to its Participants and any Capital Security Beneficial Owners. (ii) The Property Trustee and the Registrar shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Declaration or under applicable law with respect to any transfer of any interest in any Capital Security (including any transfers 43 between or among Clearing Agency Participants or Capital Security Beneficial Owners) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Declaration, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 9.3 Temporary Securities. (a) Until Definitive Capital Securities are ready for delivery, the Trust may prepare and, in the case of the Capital Securities, the Property Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Capital Securities, but may have variations that the Trust considers appropriate for temporary Securities. Without unreasonable delay, the Trust shall prepare and, in the case of the Capital Securities, the Property Trustee shall authenticate Definitive Capital Securities in exchange for temporary Securities. (b) The Global Capital Security deposited with the Clearing Agency or with the Property Trustee as custodian for the Clearing Agency shall be transferred to the beneficial owners thereof in the form of Definitive Capital Securities only if such transfer complies with Section 9.2 and (i) the Clearing Agency notifies the Sponsor that it is unwilling or unable to continue as Clearing Agency for such Global Capital Security or if at any time such Clearing Agency ceases to be a "clearing agency" registered under the Exchange Act, and, in each case, a clearing agency is not appointed by the Sponsor within 90 days of receipt of such notice or of becoming aware of such condition, (ii) a Default or an Event of Default has occurred and is continuing or (iii) the Trust at its sole discretion elects to cause the issuance of Definitive Capital Securities. (c) Any Global Capital Security that is transferable to the beneficial owners thereof in the form of Definitive Capital Securities shall be surrendered by the Clearing Agency to the Property Trustee to be so transferred, in whole or from time to time in part, without charge, and the Property Trustee shall authenticate and make available for delivery, upon such transfer of each portion of such Global Capital Security, an equal aggregate liquidation amount of Securities of authorized denominations in the form of Definitive Capital Securities. Any portion of the Global Capital Security transferred pursuant to this Section shall be registered in such names as the Clearing Agency shall direct. (d) Subject to the provisions of Section 9.3(c), the Holder of the Global Capital Security may grant proxies and otherwise authorize any Person, including Participants and Persons that may hold interests through Participants, to take any action which such Holder is entitled to take under this Declaration or the Securities. (e) In the event of the occurrence of any of the events specified in Section 7.9(b), the Trust will promptly make available to the Property Trustee a reasonable supply of certificated Capital Securities in fully registered form without distribution coupons. 44 SECTION 9.4 Deemed Security Holders. The Trustees may treat the Person in whose name any Security shall be registered on the books and records of the Trust as the sole owner and Holder of such Security for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Security on the part of any Person, whether or not the Trust shall have actual or other notice thereof. SECTION 9.5 Notices to Clearing Agency. Whenever a notice or other communication to the Capital Security Holders is required to be given by a Trustee under this Declaration, such Trustee shall give all such notices and communications specified herein to be given to the Holder of the Global Capital Security to the Clearing Agency and shall have no notice obligations to the Capital Security Beneficial Owners. SECTION 9.6 Appointment of Successor Clearing Agency. If any Clearing Agency elects to discontinue its services as securities depositary with respect to the Capital Securities, the Administrative Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Capital Securities. ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 10.1 Liability. (a) Except as expressly set forth in this Declaration, the Securities Guarantees and the terms of the Securities, the Sponsor shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders which shall be made solely from assets of the Trust; and (ii) required to pay to the Trust or to any Holder any deficit upon dissolution of the Trust or otherwise. (b) The Sponsor shall be liable for all of the debts and obligations of the Trust (other than in respect of the Securities) to the extent not satisfied out of the Trust's assets. (c) Pursuant to ss. 3803(a) of the Business Trust Act, the Holders shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. 45 SECTION 10.2 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or in the case of the Property Trustee or the Delaware Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders might properly be paid. SECTION 10.3 Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between any Covered Person and any Indemnified Person, or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action 46 or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 10.4 Indemnification. (a) (i) The Sponsor shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) by reason of the fact that he is or was a Company Indemnified Person, against expenses (including attorneys' fees and expenses), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Company Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (ii) The Sponsor shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees and expenses) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such Company Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the 47 circumstances of the case, such Person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. (iii) To the extent that a Company Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 10.4(a), or in defense of any claim, issue or matter therein, he shall be indemnified, to the full extent permitted by law, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (iv) Any indemnification under paragraphs (i) and (ii) of this Section 10.4(a) (unless ordered by a court) shall be made by the Sponsor only as authorized in the specific case upon a determination that indemnification of the Company Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (i) and (ii). Such determination shall be made (1) by the Administrative Trustees by a majority vote of a Quorum consisting of such Administrative Trustees who were not parties to such action, suit or proceeding, (2) if such a Quorum is not obtainable, or, even if obtainable, if a Quorum of disinterested Administrative Trustees so directs, by independent legal counsel in a written opinion, or (3) by the Common Security Holder of the Trust. (v) Expenses (including attorneys' fees and expenses) incurred by a Company Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by the Sponsor in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Company Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Sponsor as authorized in this Section 10.4(a). Notwithstanding the foregoing, no advance shall be made by the Sponsor if a determination is reasonably and promptly made (i) by the Administrative Trustees by a majority vote of a Quorum of disinterested Administrative Trustees, (ii) if such a Quorum is not obtainable, or, even if obtainable, if a Quorum of disinterested Administrative Trustees so directs, by independent legal counsel in a written opinion or (iii) by the Common Security Holder of the Trust, that, based upon the facts known to the Administrative Trustees, counsel or the Common Security Holder at the time such determination is made, such Company Indemnified Person acted in bad faith or in a manner that the Common Security Holder did not believe to be in or not opposed to the best interests of the Trust, or, with respect to any criminal proceeding, that such Company Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Administrative Trustees, independent legal counsel or Common Security Holder reasonably determine that a Company Indemnified Person deliberately breached his duty to the Trust or its Common or Capital Security Holders. (vi) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 10.4(a) shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Sponsor or Capital Security Holders of the Trust or otherwise, both as to action in his official capacity and as 48 to action in another capacity while holding such office. All rights to indemnification under this Section 10.4(a) shall be deemed to be provided by a contract between the Sponsor and each Company Indemnified Person who serves in such capacity at any time while this Section 10.4(a) is in effect. Any repeal or modification of this Section 10.4(a) shall not affect any rights or obligations then existing. (vii) The Sponsor or the Trust may purchase and maintain insurance on behalf of any person who is or was a Company Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Debenture Issuer would have the power to indemnify him against such liability under the provisions of this Section 10.4(a). (viii) For purposes of this Section 10.4(a), references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 10.4(a) with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued. (ix) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 10.4(a) shall, unless otherwise provided when authorized or ratified, continue as to a Person who has ceased to be a Company Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a Person. (b) The Sponsor agrees to indemnify the (i) Property Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee or the Delaware Trustee, and (iv) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Property Trustee or the Delaware Trustee (each of the Persons in (i) through (iv), including the Property Trustee and the Delaware Trustee in their respective individual capacities, being referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified Person harmless against, any and all loss, liability, damage, action, suit, claim or expense including taxes (other than taxes based on the income of such Fiduciary Indemnified Person) of any kind and nature whatsoever incurred without negligence or bad faith on the part of such Fiduciary Indemnified Person, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending against or investigating any claim or liability in connection with the exercise or performance of any of the powers or duties of such Fiduciary Indemnified Person hereunder. The obligation to indemnify as set forth in this Section 10.4(b) shall survive the resignation or removal of the Property Trustee or the Delaware Trustee and the satisfaction and discharge of this Declaration. (c) The Sponsor agrees to pay the Property Trustee and the Delaware Trustee, from time to time, such compensation for all services rendered by the Property Trustee and the 49 Delaware Trustee hereunder as may be mutually agreed upon in writing by the Sponsor and the Property Trustee or the Delaware Trustee, as the case may be, and, except as otherwise expressly provided herein, to reimburse the Property Trustee and the Delaware Trustee upon its or their request for all reasonable expenses (including legal fees and expenses), disbursements and advances incurred or made by the Property Trustee or the Delaware Trustee, as the case may be, in accordance with the provisions of this Declaration, except any such expense, disbursement or advance as may be attributable to its or their negligence or bad faith. SECTION 10.5 Outside Businesses. Any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee (subject to Section 5.3(c)) may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware Trustee, or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE XI ACCOUNTING SECTION 11.1 Fiscal Year. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 11.2 Certain Accounting Matters. (a) At all times during the existence of the Trust, the Administrative Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Administrative Trustees. 50 (b) The Administrative Trustees shall cause to be duly prepared and delivered to each of the Holders any annual United States federal income tax information statements required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Administrative Trustees shall endeavor to deliver all such information statements within 30 days after the end of each Fiscal Year of the Trust. (c) The Administrative Trustees shall cause to be duly prepared and filed with the appropriate taxing authority, an annual United States federal income tax return, on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Administrative Trustees on behalf of the Trust with any state or local taxing authority. SECTION 11.3 Banking. The Trust may maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Property Trustee shall be made directly to the Property Trustee Account and no other funds of the Trust shall be deposited in the Property Trustee Account. The sole signatories for such accounts shall be designated by the Administrative Trustees; provided, however, that the Property Trustee shall designate the signatories for the Property Trustee Account. SECTION 11.4 Withholding. The Trust and the Administrative Trustees shall comply with all withholding requirements under United States federal, state and local law and under foreign law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Administrative Trustees shall cause to be filed required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to Distributions or allocations to any Holder, the amount withheld shall be deemed to be a Distribution in the amount of the withholding to the Holder. In the event of any claim of excess withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. 51 ARTICLE XII AMENDMENTS AND MEETINGS SECTION 12.1 Amendments. (a) Except as otherwise provided in this Declaration (including Section 7 of Annex I hereto) or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed by: (i) the Sponsor and the Administrative Trustees (or, if there are more than two Administrative Trustees, a majority of the Administrative Trustees); (ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee; and (iii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, the Delaware Trustee. (b) No amendment shall be made, and any such purported amendment shall be void and ineffective: (i) unless, in the case of any proposed amendment, the Property Trustee shall have first received an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); (ii) unless, in the case of any proposed amendment which affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee shall have first received: (A) an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (B) an Opinion of Counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities) and that all conditions precedent to the execution and delivery of such amendment have been satisfied; provided, however, that the Property Trustee and the Delaware Trustee shall not be required to sign any such amendment which affects its own rights, duties, warranties or indemnification; and (iii) to the extent the result of such amendment would be to: 52 (A) cause the Trust to fail to continue not to be classified as an association taxable as a corporation or to be less likely to be classified as a grantor trust, in each case for purposes of United States federal income taxation; (B) reduce or otherwise adversely affect the powers of the Property Trustee in contravention of the Trust Indenture Act; or (C) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act. (c) At such time after the Trust has issued any Securities that remain outstanding, any amendment that would adversely affect the rights, privileges or preferences of any Holder (other than an amendment pursuant to (g)(ii) below) may be effected only with such additional requirements as may be set forth in the terms of such Securities; (d) Section 10.1(c) and this Section 12.1 shall not be amended without the consent of all of the Holders; (e) Article Four shall not be amended without the consent of the Holders of a Majority in Liquidation Amount of the Common Securities; (f) The rights of the Holders of the Common Securities under Article V to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in Liquidation Amount of the Common Securities; and (g) Notwithstanding Section 12.1(c), this Declaration may be amended without the consent of the Holders to: (i) cure any ambiguity, correct or supplement any provision in this Declaration that may be inconsistent with any other provision of this Declaration or to make any other provisions with respect to matters or questions arising under this Declaration which shall not be inconsistent with the other provisions of the Declaration; and (ii) to modify, eliminate or add to any provisions of the Declaration to such extent as shall be necessary to ensure that the Trust will be classified for United States federal income tax purposes as a grantor trust at all times that any Securities are outstanding or to ensure that the Trust will not be required to register as an Investment Company under the Investment Company Act. provided, however, that in the case of clause (i) above, such action shall not adversely affect in any material respect the interests of the Holders, and any such amendments of this Declaration shall become effective when notice thereof is given to the Holders. 53 SECTION 12.2 Meetings of the Holders; Action by Written Consent. (a) Meetings of the Holders of any class of Securities may be called at any time by the Administrative Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Capital Securities are listed or admitted for trading. The Administrative Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in Liquidation Amount of such class of Securities. Such direction shall be given by delivering to the Administrative Trustees one or more notices in writing stating that the signing Holders wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders calling a meeting shall specify in writing the Capital Security or Common Security Certificates held by the Holders exercising the right to call a meeting and only those Securities specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders: (i) notice of any such meeting shall be given to all the Holders having a right to vote thereat at least seven days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders is permitted or required under this Declaration or the rules of any stock exchange on which the Capital Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders; any action that may be taken at a meeting of the Holders may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders having a right to vote thereon were present and voting; prompt notice of the taking of action without a meeting shall be given to the Holders entitled to vote who have not consented in writing; and the Administrative Trustees may specify that any written ballot submitted to the Security Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Administrative Trustees; (ii) each Holder may authorize any Person to act for it by proxy on all matters in which a Holder is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting; no proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy; every proxy shall be revocable at the pleasure of the Holder executing it; and, except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial 54 interpretations thereunder, as if the Trust were a Delaware corporation and the Holders were stockholders of a Delaware corporation; (iii) each meeting of the Holders shall be conducted by the Administrative Trustees or by such other Person that the Administrative Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Securities, the Trust Indenture Act or the listing rules of any stock exchange on which the Capital Securities are then listed or trading, otherwise provides, the Administrative Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE SECTION 13.1 Representations and Warranties of Property Trustee. The Trustee that acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (a) the Property Trustee is a banking corporation, a national banking association or a bank or trust company, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration; (b) the execution, delivery and performance by the Property Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee; and this Declaration has been duly executed and delivered by the Property Trustee and under Delaware law (excluding any securities laws) constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (c) the execution, delivery and performance of this Declaration by the Property Trustee does not conflict with or constitute a breach of the charter or by-laws of the Property Trustee; and 55 (d) no consent, approval or authorization of, or registration with or notice to, any federal or Delaware banking authority governing the trust powers of the Property Trustee is required for the execution, delivery or performance by the Property Trustee of this Declaration. SECTION 13.2 Representations and Warranties of Delaware Trustee. The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee that: (a) the Delaware Trustee is a banking corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, with corporate power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration; (b) the execution, delivery and performance by the Delaware Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Delaware Trustee; and this Declaration has been duly executed and delivered by the Delaware Trustee and under Delaware law (excluding any securities laws) constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (c) the execution, delivery and performance of this Declaration by the Delaware Trustee does not conflict with or constitute a breach of the charter or by-laws of the Delaware Trustee; and (d) no consent, approval or authorization of, or registration with or notice to, any federal or Delaware banking authority governing the trust powers of the Delaware Trustee is required for the execution, delivery or performance by the Delaware Trustee of this Declaration; and (e) the Delaware Trustee is a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware, and is a Person that satisfies for the Trust Section 3807(a) of the Business Trust Act. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, overnight courier service or confirmed telecopy, as follows: 56 (a) if given to the Trust, in care of the Administrative Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Property Trustee, the Delaware Trustee and the Holders): Haven Capital Trust II c/o Haven Bancorp, Inc. 615 Merrick Avenue Westbury, New York 11590 Attn.: Catherine Califano Telephone: (516) 683-4483 Telecopier: (516) 683-8385 (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 Property Trustee and the Holders): Chase Manhattan Bank Delaware 1201 Market Street Wilmington, Delaware 19801 Attn.: [_____________] Telephone: (302) ___-____ Telecopier: (302) ___-____ (c) if given to the Property Trustee, at the Property Trustee's mailing address set forth below (or such other address as the Property Trustee may give notice of to the Delaware Trustee and the Holders): The Chase Manhattan Bank 450 West 33rd Street 15th Floor New York, New York 10001 Attn.: Capital Markets Fiduciary Services Telephone: (212) ___-____ Telecopier: (212) ___-____ (d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust): Haven Bancorp, Inc. 615 Merrick Avenue Westbury, New York 11590 Attn.: Catherine Califano Telephone: (516) 683-4483 Telecopier: (516) 683-8385 57 (e) if given to any other Holder, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 14.2 Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflict of laws principles thereof. SECTION 14.3 Intention of the Parties. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust and that no election be made to have the Trust classified as an association taxable as a corporation for United States federal income tax purposes. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 14.4 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 14.5 Successors and Assigns. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether or not so expressed. SECTION 14.6 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 14.7 Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one or 58 more of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 59 IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. ------------------------------- Catherine Califano as Administrative Trustee ------------------------------- Robert B. Lunt as Administrative Trustee ------------------------------- Mark A. Ricca as Administrative Trustee CHASE MANHATTAN BANK DELAWARE as Delaware Trustee By: --------------------------- Name: Title: THE CHASE MANHATTAN BANK as Property Trustee By: --------------------------- Name: Title: HAVEN BANCORP, INC., as Sponsor and Debenture Issuer By: --------------------------- Name: Title: ANNEX I TERMS OF [____]% CAPITAL SECURITIES [____]% COMMON SECURITIES Pursuant to Section 7.1 of the Amended and Restated Declaration, dated as of [____], 1999 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration or, if not defined in such Declaration, as defined in the Registration Statement referred to below): 1. Designation and Number. (a) Capital Securities. [___________] Capital Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of [___________________] Dollars ($__________) and with a liquidation amount with respect to the assets of the Trust of Twenty-Five Dollars ($25) (the "Liquidation Amount") per security, are hereby designated for the purposes of identification only as "[____]% Capital Securities, " (the "Capital Securities"). The certificates evidencing the Capital Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any exchange or quotation system on or in which the Capital Securities are listed, traded or quoted. (b) Common Securities. [______] Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of [_________________] Dollars ($_______) and a Liquidation Amount with respect to the assets of the Trust of Twenty-Five Dollars ($25) per security, are hereby designated for the purposes of identification only as "[____]% Common Securities" (the "Common Securities"). The certificates evidencing the Common Securities shall be substantially in the form of Exhibit A-2 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. Distributions. (a) Distributions on each Security will be payable at a fixed rate per annum of [____]% (the "Coupon Rate") of the liquidation amount of $25 per Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarterly period will bear additional Distributions thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions," as used herein, includes distributions of any and all such interest, if any, payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds legally available therefor. I-1 (b) Distributions on the Securities will be cumulative, will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from [_____], 1999 and will be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 1999 (each, a "Distribution Date"), except as otherwise described below. Distributions will be computed on the basis of a 360-day year consisting of twelve 30-day months. As long as no Event of Default has occurred and is continuing under the Indenture, the Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period at any time and from time to time on the Debentures for a period not exceeding 20 consecutive quarterly periods, including the first such quarterly period during such period (each an "Extension Period"), during which Extension Period no interest shall be due and payable on the Debentures, provided that no Extension Period shall end on a date other than an Interest Payment Date for the Debentures or extend beyond the Maturity Date of the Debentures. As a consequence of such deferral, Distributions will also be deferred. Notwithstanding such deferral, Distributions will continue to accumulate with additional Distributions thereon (to the extent permitted by applicable law but not at a rate greater than the rate at which interest is then accruing on the Debentures) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further defer payments of interest by further extending such Extension Period, provided that such extension does not cause such Extension Period, together with all such previous and further extensions within such Extension Period, to exceed 20 consecutive quarterly periods, including the first quarterly period during such Extension Period, end on a date other than an Interest Payment Date for the Debentures or extend beyond the Maturity Date of the Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the close of business one Business Day prior to the relevant Distribution Date for Capital Securities in book-entry form and the 15th day of the month in which the relevant Distribution Date occurs for Capital Securities not in book-entry form, which Distribution Dates correspond to the Interest Payment Dates for the Debentures. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment in respect of the Capital Securities will be made as described in the Prospectus, dated [____], 1999 of the Debenture Issuer and the Trust relating to the Securities and the Debentures. The relevant record dates for the Common Securities shall be the same as the record dates for the Capital Securities. Distributions payable on any Securities that are not punctually paid on any Distribution Date, as a result of the Debenture Issuer having failed to make a payment under the Debentures, will cease to be payable to the Holder on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distributions payable on such date will be made on the next succeeding day that is a Business Day, unless it would thereby fall in the next calendar year, in which event such date will be the immediately preceding Business Day (and without any interest or other payment in respect of any such delay) with the same force and effect as if made on such date. I-2 (d) Payments of Distributions (including Additional Amounts, if applicable) in respect of the Capital Securities shall be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register or, if the Capital Securities are held by a Clearing Agency, such Distributions shall be made to the Clearing Agency in immediately available funds, which shall credit the relevant Persons' accounts at such Clearing Agency on the applicable Distribution Dates. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed in writing between the Property Trustee and the Common Security Holder. (e) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders. 3. Liquidation Distribution Upon Dissolution. In the event of any dissolution of the Trust, the Trust shall be liquidated by the Trustees as expeditiously as the Trustees determine to be possible by distributing to the Holders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, a Like Amount (as defined below) of the Debentures, unless such distribution is determined by the Property Trustee not to be practicable, in which event such Holders will be entitled to receive out of the assets of the Trust legally available for distribution to Holders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the aggregate of the liquidation amount of $25 per Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). "Like Amount" means (i) with respect to a redemption of the Securities, Securities having a Liquidation Amount equal to the principal amount of Debentures to be paid in accordance with their terms and (ii) with respect to a distribution of Debentures upon the liquidation of the Trust, Debentures having a principal amount equal to the Liquidation Amount of the Securities of the Holder to whom such Debentures are distributed. If, upon any such liquidation, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets legally available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. 4. Redemption and Distribution. (a) Upon the repayment of the Debentures in whole or in part, at maturity or otherwise (either at the option of the Debenture Issuer or pursuant to a Special Event, as described below), the proceeds from such repayment shall be simultaneously applied by the Property Trustee (subject to the Property Trustee having received written notice no later than 45 days prior to such repayment) to redeem a Like Amount of the Securities at a redemption price equal to (i) in the case of the repayment of the Debentures on the Maturity Date, the Maturity Redemption Price (as defined below), (ii) in the case of the optional prepayment of the Debentures prior to the Initial Optional I-3 Redemption Date and upon the occurrence and continuation of a Special Event, the Special Event Redemption Price (as defined below) and (iii) in the case of the optional prepayment of the Debentures on or after the Initial Optional Redemption Date, the Optional Redemption Price (as defined below). The Maturity Redemption Price, the Special Event Redemption Price and the Optional Redemption Price are referred to collectively as the "Redemption Price". Holders will be given not less than 30 nor more than 60 days prior written notice of such redemption. (b) (i) The "Maturity Redemption Price" shall mean an amount equal to 100% of the principal of and accrued and unpaid interest (including Compounded Interest and Additional Sums, if any, thereon to the date of redemption) on the Debentures as of the Maturity Date thereof. (ii) The Debenture Issuer shall have the right (subject to the conditions in the Indenture) to elect to redeem the Debentures, in whole or in part, at any time on or after [______], 2009 (the "Initial Optional Redemption Date"), and, simultaneous with such redemption, to cause a Like Amount of the Securities to be redeemed by the Trust at the Optional Redemption Price on a Pro Rata basis. "Optional Redemption Price" shall mean a price equal sum of (i) to the percentage of the liquidation amount of Securities to be redeemed plus (ii) accumulated and unpaid Distributions thereon, if any, to the date of such redemption if redeemed during the 12-month period beginning [___], of the years indicated below: Percentage of Year Principal ------------------- ------------------------- 2009 [_______]% 2010 [_______]% 2011 [_______]% 2012 [_______]% 2013 [_______]% 2014 [_______]% 2015 [_______]% 2016 [_______]% 2017 [_______]% 2018 [_______]% 2019 and thereafter 100.000% In the case of an optional redemption, if fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Capital Securities shall be redeemed Pro Rata, and the Capital Securities to be redeemed will be determined as described in Section 4(f)(ii) below. Upon the entry of an order for the dissolution of the Trust by a court of competent jurisdiction, the I-4 Debentures thereafter will be subject to optional redemption, in whole, but not in part, on or after the Initial Optional Redemption Date. (c) If at any time an Investment Company Event, a Regulatory Capital Event and a Tax Event (each as defined below, and each a "Special Event") occurs, the Debenture Issuer shall have the right (subject to the conditions set forth in the Indenture) at any time prior to the Initial Optional Redemption Date, upon not less than 30 days' nor more than 60 days' notice, to redeem the Debentures in whole, but not in part, within the 90 days following the occurrence of such Special Event (the "90 Day Period"), and, simultaneous with such redemption, to cause a Like Amount of the Securities to be redeemed by the Trust at the Special Event Redemption Price on a Pro Rata basis. "Investment Company Event" shall mean the receipt by the Debenture Issuer and the Trust of any opinion of independent securities counsel experienced in such matters to the effect that as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any rules, guidelines or policies of any applicable regulatory authority for the Debenture Issuer or (b) any official administrative pronouncement or judicial decision interpreting or apply such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of original issuance of the Securities, the Trust is, or within 90 days of the date of such opinion will be, considered an Investment Company that is required to be registered under the Investment Company Act. A "Tax Event" shall occur upon receipt by the Debenture Issuer and the Trust of an opinion of independent tax counsel experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of original issuance of the Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures, (ii) the interest payable by the Debenture Issuer on the Debentures is not, or within 90 days of the date of such opinion will not be, deductible by the Debenture Issuer, in whole or in part, for United States federal income tax purposes, or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Regulatory Capital Event" shall mean the receipt by the Debenture Issuer and the Trust of an opinion of independent bank regulatory counsel experienced in such matters to the effect that as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any rules, guidelines or policies of an applicable regulatory authority for the Debenture Issuer or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after I-5 [______], 1999, the Capital Securities do not constitute, or within 180 days of the date of such opinion will not constitute, Tier 1 Capital (or its then equivalent if the Corporation were subject to such capital requirement) applied as if the Debenture Issuer (or its successors) were a bank holding company for purposes of capital adequacy guidelines of the Federal Reserve Board (or any successor regulatory authority with jurisdiction over bank holding companies), or any capital adequacy guidelines as then in effect and applicable to the Debenture Issuer; provided, however, that the distribution of the Debentures in connection with the liquidation of the Trust by the Debenture Issuer shall not in and of itself constitute a Regulatory Capital Event. "Special Event Redemption Price" shall mean, with respect to any redemption of Securities following a Special Event, the prepayment price of the Debentures equal to 100% of the principal amount of the Debentures to be prepaid plus any accrued and unpaid interest (including Compounded Interest and Additional Sums, if any, thereon) to the date of prepayment. (d) On and from the date fixed by the Trustees for any distribution of Debentures and liquidation of the Trust: (i) the Securities will no longer be deemed to be outstanding, (ii) the Clearing Agency or its nominee (or any successor Clearing Agency or its nominee), as the Holder of the Capital Securities, will receive a registered global certificate or certificates representing the Debentures to be delivered upon such distribution, and (iii) any certificates representing Securities not held by the Clearing Agency or its nominee (or any successor Clearing Agency or its nominee) will be deemed to represent beneficial interests in a Like Amount of Debentures until such certificates are presented to the Debenture Issuer or its agent for transfer or reissue. (e) The Trust may not redeem fewer than all the outstanding Securities unless all accumulated and unpaid Distributions have been paid on all Securities for all quarterly Distribution periods terminating on or before the date of redemption. (f) The procedure with respect to redemptions or distributions of Securities shall be as follows: (i) Notice of any redemption of, or notice of distribution of Debentures in exchange for, the Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder 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(f)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders. Each Redemption/Distribution Notice shall be addressed to the Holders at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Securities are to be redeemed, the particular Securities to be redeemed shall be selected on a Pro Rata basis or by such other method (including, without limitation, by lot) deemed fair and appropriate by the Property Trustee (based I-6 upon Liquidation Amounts) not more than 60 nor less than 30 days prior to the date fixed for redemption from the outstanding Securities not previously called for redemption; provided, however, that any such redemption may be made on the basis of the aggregate Liquidation Amount of Securities held by each Holder thereof and may be made by making such adjustments as the Trust deems fair and appropriate in order that fractional Securities shall not thereafter remain outstanding. With respect to Capital Securities registered in the name of and held of record by the Clearing Agency or its nominee (or any successor Clearing Agency or its nominee) or any nominee, the distribution of the proceeds of such redemption will be made to the Clearing Agency and disbursed by such Clearing Agency in accordance with the procedures applied by such agency or nominee. (iii) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice (which notice will be irrevocable), then (A) with respect to Capital Securities issued in book-entry form, by 12:00 noon, New York City time, on the redemption date, provided that the Debenture Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures by 10:00 a.m., New York City time, on the Maturity Date or the date of redemption, as the case requires, the Property Trustee will deposit irrevocably with the Clearing Agency or its nominee (or successor Clearing Agency or its nominee) immediately available funds sufficient to pay the applicable Redemption Price with respect to such Capital Securities and will give the Clearing Agency irrevocable instructions and authority to pay the Redemption Price to the relevant Clearing Agency Participants, and (B) with respect to Capital Securities issued in certificated form and Common Securities, provided that the Debenture Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will irrevocably deposit with the paying agent for the Capital Securities (if other than the Property Trustee) funds sufficient to pay the applicable Redemption Price to the Holders by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date, and provided, further, that any such payment shall become due only upon surrender by the Holder of the related certificated Capital Securities. If a Redemption/ Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the date of such deposit, or on the redemption date, as applicable, Distributions will cease to accumulate on the Securities so called for redemption and all rights of Holders so called for redemption will cease, except the right of the Holders of such Securities to receive the Redemption Price, but without interest on such Redemption Price, and such Securities shall cease to be outstanding. (iv) Payment of accumulated and unpaid Distributions on the Redemption Date of the Securities will be subject to the rights of Holders at the close of business on a regular record date in respect of a Distribution Date occurring on or prior to such Redemption Date. Neither the Administrative Trustees nor the Trust shall be required to register or cause to be registered the transfer of (i) any Securities beginning at the opening of business 15 days before the day of mailing of a notice of redemption or any notice of selection of Securities for redemption or (ii) any Securities selected for redemption except the unredeemed portion of any Security being redeemed. If any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment with respect to any such delay), unless it would I-7 thereby fall in the next calendar year, in which event such date will be the immediately preceding Business Day with the same force and effect as if made on such date. If payment of the Redemption Price with respect to any Securities is improperly withheld or refused and not paid either by the Property Trustee or by the Sponsor as guarantor pursuant to the relevant Securities Guarantee, Distributions on such Securities will continue to accumulate from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. (v) Redemption/Distribution Notices shall be sent by the Property Trustee on behalf of the Trust to (A) with respect to Capital Securities issued in book-entry form, the Clearing Agency or its nominee (or any successor Clearing Agency or its nominee), (B) with respect to Capital Securities issued in certificated form, to the Holders thereof, and (C) with respect to the Common Securities, to the Holders thereof. (vi) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws and banking laws), the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Capital Securities by tender, in the open market or by private agreement. 5. Voting Rights - Capital Securities. (a) Except as provided under Sections 5(b), 6(b) and 7 and as otherwise required by law and the Declaration, the Holders of the Capital Securities will have no voting rights. (b) So long as any Debentures are held by the Property Trustee, the Trustees shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee or executing any trust or power conferred on such Debenture Trustee with respect to the Debentures, (ii) waive any past default that is waivable under Section 5.07 of the Indenture, (iii) exercise any right to rescind or annul a declaration of acceleration of the maturity of the principal of the Debentures or (iv) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of a Majority in Liquidation Amount of all outstanding Capital Securities; provided, however, that where a consent under the Indenture would require the consent of each holder of Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior approval of each Holder of the Capital Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of the Capital Securities except by subsequent vote of such Holders. The Property Trustee shall notify each Holder of Capital Securities of any notice of default with respect to the Debentures. In addition to obtaining the foregoing approvals of such Holders of the Capital Securities, prior to taking any of the foregoing actions, the Trustees shall obtain an opinion of counsel experienced in such matters to the effect that the Trust will continue not to be classified as an association taxable as a corporation or be less likely to be classified as a grantor trust, in each case for United States federal income tax purposes, after taking any such action into account. I-8 If an Event of Default under the Declaration has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay principal of or premium, if any, or interest on the Debentures on the due date (or, in the case of redemption, on the redemption date), then a Holder of Capital Securities may institute a proceeding directly against the Debenture Issuer for enforcement of payment to such Holder of the principal of or interest on a Like Amount of Debentures (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the Common Securities Holder will be subordinated to the rights of the Holders of Capital Securities to the extent of any payment made by the Debenture Issuer to such Holder of Capital Securities in such Direct Action. Except as provided in the second preceding sentence, and, except as set forth in the first sentence of Section 3.8(e) of the Declaration, the Holders of Capital Securities will not be able to exercise directly any other remedy available to the holders of the Debentures. Any approval or direction of Holders of Capital Securities may be given at a separate meeting of Holders of Capital Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Property Trustee will cause a notice of any meeting at which Holders of Capital Securities are entitled to vote to be mailed to each Holder of record of Capital Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consent. No vote or consent of the Holders of the Capital Securities will be required for the Trust to redeem and cancel Capital Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. Notwithstanding that Holders of Capital Securities are entitled to vote or consent under any of the circumstances described above, any of the Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. 6. Voting Rights - Common Securities. (a) Except as provided under Sections 6(b), 6(c) and 7 or as otherwise required by law and the Declaration, the Holders of the Common Securities will have no voting rights. (b) Unless a Debenture Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by the Holder of the Common Securities. If a Debenture Event of Default has occurred and is continuing, the Property Trustee and the Delaware Trustee may be removed at such time by the Holders of a Majority in Liquidation Amount of the outstanding Capital Securities. In no event will the Holders of the Capital Securities have the right to vote to appoint, remove or replace the Administrative Trustees, which voting rights are vested exclusively in the Sponsor as the Holder of the Common Securities. No resignation or removal of a Trustee and I-9 no appointment of a successor trustee shall be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the Declaration. (c) So long as any Debentures are held by the Property Trustee, the Trustees shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or executing any trust or power conferred on such Debenture Trustee with respect to the Debentures, (ii) waive any past default that is waivable under Section 5.07 of the Indenture, (iii) exercise any right to rescind or annul a declaration of acceleration of the maturity of the principal of the Debentures or (iv) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of a Majority in Liquidation Amount of all outstanding Common Securities; provided, however, that where a consent under the Indenture would require the consent of each holder of Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior approval of each Holder of the Common Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of the Common Securities except by subsequent vote of such Holders. The Property Trustee shall notify each Holder of Common Securities of any notice of default with respect to the Debentures. In addition to obtaining the foregoing approvals of such Holders of the Common Securities, prior to taking any of the foregoing actions, the Trustees shall obtain an opinion of counsel experienced in such matters to the effect that the Trust will continue not to be classified as an association taxable as a corporation or to be less likely to be classified as a grantor trust, in each case for United States federal income tax purposes, after taking any such action into account. If an Event of Default under the Declaration has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay principal of or premium, if any, or interest on the Debentures on the due date (or in the case of redemption, on the redemption date), then a Holder of Common Securities may institute a Direct Action directly against the Debenture Issuer for enforcement of payment to such Holder of the principal of or premium, if any, or interest on a Like Amount of Debentures on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the Common Securities Holder will be subordinated to the rights of the Holders of Capital Securities in respect of any payment from the Debenture Issuer in such Direct Action. Except as provided in the second preceding sentence, the Holders of Common Securities will not be able to exercise directly any other remedy available to the holders of the Debentures. Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Administrative Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. I-10 No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. 7. Amendments to Declaration. In addition to the requirements set forth in Section 12.1 of the Declaration, the Declaration may be amended from time to time by the Sponsor, the Property Trustee and the Administrative Trustees without the consent of the Holders (i) to cure any ambiguity, correct or supplement any provisions in the Declaration that may be inconsistent with any other provisions, or to make any other provisions with respect to matters or questions arising under the Declaration which shall not be inconsistent with the other provisions of the Declaration or (ii) to modify, eliminate or add to any provisions of the Declaration to such extent as shall be necessary to ensure that the Trust will not be classified as an association taxable as a corporation and will not be less likely to be classified as a grantor trust, in each case for United States federal income tax purposes, at all times that any Securities are outstanding or to ensure that the Trust will not be required to register as an Investment Company under the Investment Company Act; provided, however, that in the case of an amendment pursuant to clause (i) above, such action shall not adversely affect in any material respect the interests of any Holder, and any such amendments of the Declaration shall become effective when notice thereof is given to the Holders. The Declaration may also be amended by the Trustees and the Sponsor with (i) the consent of Holders representing a Majority in Liquidation Amount of all outstanding Securities, and (ii) receipt by the Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not affect the Trust's status as not an association taxable as a corporation or as a grantor trust for United States federal income tax purposes or the Trust's exemption from status as an Investment Company under the Investment Company Act; provided, however, that, without the consent of each Holder of Trust Securities, the Declaration may not be amended to (i) change the amount or timing of any Distribution on, or the payment required to be made in respect of, the Trust Securities as of a specified date or (ii) restrict the right of a Holder of Trust Securities to institute suit for the enforcement of any such payment on or after such date. 8. Pro Rata. A reference in these terms of the Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder according to the aggregate liquidation amount of the Securities held by such Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default under the Declaration has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Capital Securities pro rata according to the aggregate liquidation amount of Capital Securities held by such Holder relative to the aggregate liquidation amount of all Capital Securities outstanding and then, only after satisfaction of all amounts owed to the Holders of the Capital Securities, to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by such Holder relative to the aggregate liquidation amount of all Common Securities outstanding. I-11 9. Ranking. The Capital Securities rank pari passu with the Common Securities and payment thereon shall be made Pro Rata with the Common Securities, except that, if an Event of Default under the Declaration occurs and is continuing, no payments in respect of Distributions on, or payments upon liquidation, redemption or otherwise with respect to, the Common Securities shall be made until the Holders of the Capital Securities shall be paid in full the Distributions, Redemption Price, Liquidation Distribution and any other payments to which they are entitled at such time. 10. Acceptance of Capital Securities Guarantee, Common Securities Guarantee Indenture and Debentures. Each Holder of Capital Securities and Common Securities, by the acceptance thereof, agrees to the provisions of the Capital Securities Guarantee, the Common Securities Guarantee, the Indenture and the Debentures, as applicable, including the subordination provisions therein. 11. No Preemptive Rights. Neither the issuance of Capital Securities nor the issuance of Common Securities is subject to preemptive or other similar rights. The Holders shall have no preemptive or similar rights to subscribe for any additional securities. 12. Miscellaneous. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Capital Securities Guarantee or the Common Securities Guarantee, as applicable, and the Indenture (including any supplemental indenture) to a Holder without charge upon written request to the Trust at its principal place of business. I-12 EXHIBIT A-1 FORM OF CAPITAL SECURITY CERTIFICATE [FORM OF FACE OF SECURITY] [IF THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY, INSERT: 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 (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING AGENCY. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY 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 THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE CLEARING AGENCY TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE CLEARING AGENCY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] A1-1 Certificate Number: [_______________] Aggregate Liquidation Amount: $[_______________] CUSIP Number:[_________] Certificate Evidencing Capital Securities of Haven Capital Trust II [____]% Capital Securities (liquidation amount $25 per Capital Security) Haven Capital Trust II, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that [ ] (the "Holder") is the registered owner of [_________] Capital Securities of the Trust](1) [the aggregate number of Capital Securities of the Trust specified in Schedule A hereto](2) representing undivided preferred beneficial interests in the assets of the Trust designated the [____]% Capital Securities, (liquidation amount $25 per Capital Security) (the "Capital Securities"). The Capital Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of the Trust, dated as of [_____], 1999, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Capital Securities as set forth in Annex I to the Declaration. Capitalized terms used but not defined herein shall have the meaning given them in the Declaration. The Sponsor will provide a copy of the Declaration, the Capital Securities Guarantee and the Indenture (including any supplemental indenture) to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this Certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder and to the benefits of the Capital Securities Guarantee to the extent provided therein. By acceptance hereof, the Holder agrees, for United States federal income tax purposes, to treat the Debentures as indebtedness and the Capital Securities as evidence of indirect beneficial ownership in the Debentures. - ---------- (1) Insert in Definitive Capital Securities only. (2) Insert in Global Capital Securities only. A1-2 IN WITNESS WHEREOF, the Trust has executed this certificate this [_______] day of [_______________ ____]. HAVEN CAPITAL TRUST II By: ------------------------------------ Name: Administrative Trustee PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the [____]% Capital Securities of Haven Capital Trust II referred to in the within-mentioned Declaration. Dated: [ _____________, _____] THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Property Trustee By: ------------------------------------ Authorized Signatory A1-3 [FORM OF REVERSE OF SECURITY] Distributions on each Capital Security will be payable at a fixed rate per annum of [____]% (the "Coupon Rate") of the liquidation amount of $25 per Capital Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarterly period will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions," as used herein, includes such cash distributions and any and all such interest, if any, payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds legally available therefor. Distributions on the Capital Securities will be cumulative, will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from [______], 1999 and will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 1999, except as otherwise described below. Distributions will be computed on the basis of a 360-day year consisting of twelve 30-day months. As long as no Event of Default has occurred and is continuing under the Indenture, the Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period at any time and from time to time on the Debentures for a period not exceeding 20 consecutive calendar quarterly periods, including the first such quarterly period during such extension period (each an "Extension Period"), provided that no Extension Period shall end on a date other than an Interest Payment Date for the Debentures or extend beyond the Maturity Date of the Debentures. As a consequence of such deferral, Distributions will also be deferred. Notwithstanding such deferral, quarterly Distributions will continue to accumulate with interest thereon (to the extent permitted by applicable law, but not at a rate exceeding the rate of interest then accruing on the Debentures) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any Extension Period, the Debenture Issuer may further defer payments of interest by further extending such Extension Period; provided that such Extension Period, together with all such previous and further extensions within such Extension Period, may not (i) exceed 20 consecutive quarterly periods, including the first quarterly period during such Extension Period, (ii) end on a date other than an Interest Payment Date for the Debentures or (iii) extend beyond the Maturity Date of the Debentures. Payments of accumulated Distributions will be payable to Holders as they appear on the books and records of the Trust on the record date immediately preceding the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. A1-4 Subject to receipt by the Sponsor of any and all required regulatory approvals and to certain other conditions set forth in the Declaration and the Indenture, the Property Trustee may, at the direction of the Sponsor, at any time dissolve the Trust and, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, cause the Debentures to be distributed to the Holders of the Securities in liquidation of the Trust or, simultaneously with any redemption of the Debentures, cause a Like Amount of the Securities to be redeemed by the Trust. The Capital Securities shall be redeemable as provided in the Declaration. A1-5 -------------------- ASSIGNMENT -------------------- FOR VALUE RECEIVED, the undersigned hereby assigns and transfers this Capital Security Certificate to: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Assignee's social security or tax identification number) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (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. Date:_____________ Signature:______________________________________________________________________ (Sign exactly as your name appears on the other side of this Capital Security Certificate) Signature Guarantee:____________________________________________________________ - ---------- Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A1-6 EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS COMMON SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS COMMON SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS COMMON SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH HAVEN BANCORP, INC. (THE "CORPORATION") OR ANY "AFFILIATE" OF THE CORPORATION WAS THE OWNER OF THIS COMMON SECURITY (OR ANY PREDECESSOR OF THIS COMMON SECURITY) ONLY (A) TO THE CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (C) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF HAVEN CAPITAL TRUST II (THE "TRUST") AND THE CORPORATION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND TO REQUIRE THAT THE TRANSFEROR DELIVER TO THE TRUST A LETTER FROM THE TRANSFEREE. SUBSTANTIALLY TO THE EFFECT THAT SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS COMMON SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. A2-1 Certificate Evidencing Common Securities of Haven Capital Trust II [____]% Common Securities (liquidation amount $25 per Common Security) Haven Capital Trust II, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Haven Bancorp, Inc. (the "Holder") is the registered owner of [__________] Common Securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the [____]% Common Securities, (liquidation amount $25 per Common Security) (the "Common Securities"). Subject to the terms of the Declaration (as defined below), the Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this Certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of the Trust dated as of [______], 1999, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Common Securities as set forth in Annex I to the Declaration. Capitalized terms used but not defined herein shall have the meaning given them in the Declaration. The Sponsor will provide a copy of the Declaration, the Common Securities Guarantee and the Indenture (including any supplemental indenture) to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this Certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder and to the benefits of the Common Securities Guarantee to the extent provided therein. By acceptance hereof, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this [ ] day of [_____________] 1999. HAVEN CAPITAL TRUST II By: ---------------------- Name: Administrative Trustee A2-2 [FORM OF REVERSE OF SECURITY] Distributions on each Common Security will be payable at a fixed rate per annum of [____]% (the "Coupon Rate") of the liquidation amount of $25 per Common Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarterly period will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions," as used herein, includes such cash distributions and any and all such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds legally available therefor. Distributions on the Common Securities will be cumulative, will accrue from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from [________], 1999 and will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 1999, except as otherwise described below. Distributions will be computed on the basis of a 360-day year with twelve months of 30 days each. As long as no Event of Default has occurred and is continuing under the Indenture, the Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period at any time and from time to time on the Debentures for a period not exceeding 20 consecutive calendar quarterly periods, including the first such quarterly period during such extension period (each an "Extension Period"), provided that no Extension Period shall end on a date other than an Interest Payment Date for the Debentures or extend beyond the Maturity Date of the Debentures. As a consequence of such deferral, Distributions will also be deferred. Notwithstanding such deferral, quarterly Distributions will continue to accumulate with interest thereon (to the extent permitted by applicable law, but not at a rate exceeding the rate of interest then accruing on the Debentures) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any Extension Period, the Debenture Issuer may further defer payments of interest by further extending such Extension Period; provided that such Extension Period, together with all such previous and further extensions within such Extension Period, may not (i) exceed 20 consecutive quarterly periods, including the first quarterly period during such Extension Period, (ii) end on a date other than an Interest Payment Date for the Debentures or (iii) extend beyond the Maturity Date of the Debentures. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the record date immediately preceding the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. Subject to the receipt by the Sponsor of any and all required regulatory approvals and to certain other conditions set forth in the Declaration and the Indenture, the Property Trustee may, at the direction of the Sponsor, at any time dissolve the Trust and cause the Debentures to be distributed to the Holders of the Securities in liquidation of the Trust or, simultaneously with any redemption of the Debentures, cause a Like Amount of the Securities to be redeemed by the Trust. The Common Securities shall be redeemable as provided in the Declaration. Under certain circumstances, the rights of the holders of the Common Securities shall be subordinate to the rights of the holders of the Capital Securities, as provided in the Declaration. A2-3 EX-4.4 6 EXHIBIT 4.4 Exhibit 4.4 (FORM OF FACE OF SECURITY) [IF THIS SECURITY IS A GLOBAL SECURITY INSERT: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS 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 SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] HAVEN BANCORP, INC. CUSIP No.: [_____________] $[_________________] Certificate No. [__] [____]% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE DUE[_____], 2029 Haven Bancorp, Inc., a Delaware corporation (the "Corporation," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to [___________________] or its registered assigns, the principal sum of $[_____________] Dollars on [_____], 2029 (the "Maturity Date"), unless previously prepaid, and to pay interest on the outstanding principal amount hereof from [_____], 1999, 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 31, June 30, September 30 and December 31 of each year, commencing June 30, 1999 at the rate of [____]% per annum until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum compounded quarterly ("Compounded Interest"). The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year consisting of twelve 30-day months. In the event that any date on which the principal of (or premium, if any) or interest on this Security is payable is not a Business Day (as defined in the Indenture), then the payment payable on such date will be made on the next succeeding day that is a Business Day, except that if such next succeeding Business Day falls in the next succeeding calendar year such payment shall be made on the immediately preceding Business Day (and without any interest or other payment in respect of any such delay), with the same force and effect as if made on such date. Pursuant to the Indenture, in certain circumstances the Corporation will be required to pay Additional Sums (as defined in the Indenture) with respect to this Security. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment, which shall be one Business Day prior to the relevant Interest Payment Date for Global Securities and the 15th day of the month in which the relevant Interest Payment Date falls for Definitive Securities. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the holders on such regular record date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a special record date to be fixed by the Debenture Trustee for the payment of such defaulted interest, notice whereof shall be given to the holders of Securities not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities -2- exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of (and premium, if any) and interest (including Compounded Interest and Additional Sums, if any) on this Security shall be payable at the office or agency of the Debenture Trustee 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 the option of the Corporation by (i) check mailed to the holder at such address as shall appear in the Security Register or (ii) transfer to an account maintained by the Person entitled thereto, provided that proper written transfer instructions have been received by the relevant record date. Notwithstanding the foregoing, so long as the holder of this Security is the Property Trustee of Haven Capital Trust II, the payment of the principal of (and premium, if any) and interest (including Compounded Interest and Additional Sums, if any) on this Security will be made at such place and to such account as may be designated by such Property Trustee. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Debenture Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Debenture Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. This Security shall not be entitled to any benefit under the Indenture or be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Debenture Trustee. The provisions of this Security are continued on the reverse side hereof and such provisions shall for all purposes have the same effect as though fully set forth at this place. -3- IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly executed and sealed this [___] day of [_________], 1999. HAVEN BANCORP, INC. By: ______________________________ Name: Title: Attest: By: __________________________ Name: Title: CERTIFICATE OF AUTHENTICATION This is one of the [____]% Junior Subordinated Deferrable Interest Debentures of HAVEN BANCORP, INC. referred to in the within-mentioned Indenture. THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Debenture Trustee Dated: ______________ By: ______________________________ Authorized Signatory -4- (FORM OF REVERSE OF SECURITY) This Security is one of the Securities of the Corporation (herein sometimes referred to as the "Securities"), specified in the Indenture, all issued or to be issued under and pursuant to an Indenture, dated as of [____], 1999 (the "Indenture"), duly executed and delivered between the Corporation and The Chase Manhattan Bank, as Debenture Trustee (the "Debenture Trustee"), to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Debenture Trustee, the Corporation and the holders of the Securities. Upon the occurrence and continuation of a Special Event (as defined in the Indenture), the Corporation shall have the right, at any time within 90 days following the occurrence of such Special Event, to prepay this Security in whole (but not in part) at the Special Event Prepayment Price. "Special Event Prepayment Price" shall mean, with respect to any prepayment of the Securities following a Special Event, the prepayment price of the Debentures equal to 100% of the principal amount of the Debentures to be prepaid plus any accrued and unpaid interest thereon (including Compounded Interest and Additional Sums, if any) to the date of such prepayment. In addition, the Corporation shall have the right to prepay this Security, in whole or in part, at any time on or after the Initial Optional Redemption Date (an "Optional Prepayment"), at the prepayment prices set forth below plus, in each case, accrued and unpaid interest thereon (including Compounded Interest and Additional Sums, if any) to the applicable date of prepayment (the "Optional Prepayment Price"), if prepaid during the 12-month period beginning [____], of the years indicated below. Percentage Year of Principal ---- ------------ 2009 [_____]% 2010 [_____]% 2011 [_____]% 2012 [_____]% 2013 [_____]% 2014 [_____]% 2015 [_____]% 2016 [_____]% 2017 [_____]% 2018 [_____]% 2019 and thereafter 100.000% The Prepayment Price shall be paid prior to 12:00 noon, New York City time, on the date of such prepayment or at such earlier time as the Corporation determines, provided, that the Corporation shall deposit with the Debenture Trustee an amount sufficient to pay the applicable Prepayment Price by 10:00 a.m., New York City time, on the date such Prepayment Price is to be -5- paid. Any prepayment pursuant to this paragraph will be made upon not less than 30 days nor more than 60 days' prior written notice. If the Securities are only partially prepaid by the Corporation pursuant to an Optional Prepayment, the particular Securities to be prepaid shall be selected on a pro rata basis from the outstanding Securities not previously called for prepayment; provided, however, that with respect to Securityholders that would be required to hold Securities with an aggregate principal amount of less than $25 but more than an aggregate principal amount of zero as a result of such pro rata prepayment, the Corporation shall prepay Securities of each such Securityholder so that after such prepayment such Securityholder shall hold Securities either with an aggregate principal amount of at least $25 or such Securityholder no longer holds any Securities and shall use such method (including, without limitation, by lot) as the Corporation shall deem fair and appropriate; provided, further, that any such proration may be made on the basis of the aggregate principal amount of Securities held by each Securityholder thereof and may be made by making such adjustments as the Corporation deems fair and appropriate in order that only Securities in denominations of $25 or integral multiples thereof shall be prepaid. In the event of prepayment of this Security in part only, a new Security or Securities for the portion hereof that has not been prepaid will be issued in the name of the holder hereof upon the cancellation hereof. Notwithstanding the foregoing, any prepayment of Securities by the Corporation shall be subject to the receipt of any and all required regulatory approvals. In case an Event of Default (as defined in the Indenture) shall have occurred and be continuing, the principal of all of the Securities may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Corporation and the Debenture Trustee, with the consent of the holders of a majority in aggregate principal amount of the Securities at the time outstanding (as defined in the Indenture), to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any manner the rights of the holders of the Securities; provided, however, that no such supplemental indenture shall, without the consent of each holder of Securities then outstanding and affected thereby, (i) change the Maturity Date of any Security, or reduce the rate or extend the time of payment of interest thereon (subject to Article XVI of the Indenture), or reduce the principal amount thereof, or change any of the prepayment provisions or make the principal thereof or any interest or premium thereon payable in any coin or currency other than U.S. dollars, or impair or affect the right of any holder of Securities to institute suit for payment thereof, or (ii) reduce the aforesaid percentage of Securities the holders of which are required to consent to any such supplemental indenture. The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Securities at the time outstanding affected thereby, on behalf of all of the holders of the Securities, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any of the Securities or a default in respect of any covenant or provision under which the Indenture cannot be modified or amended without the consent of each holder of Securities then outstanding. -6- Any such consent or waiver by the holder of this Security (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Security and of any Security issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest (including Compounded Interest and Additional Sums, if any) on this Security at the time and place and at the rate and in the money herein prescribed. So long as no Event of Default shall have occurred and be continuing, the Corporation shall have the right, at any time and from time to time during the term of the Securities, to defer payments of interest by extending the interest payment period (an "Extended Interest Payment Period") of such Securities for a period not (i) exceeding 20 consecutive quarterly periods, including the first such quarterly period during such extension period, (ii) extending beyond the Maturity Date of the Securities or (iii) ending on a date other than an Interest Payment Date, at the end of which period the Corporation shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Securities to the extent that payment of such interest is enforceable under applicable law). Before the termination of any such Extended Interest Payment Period, the Corporation may further defer payments of interest by further extending such Extended Interest Payment Period, provided that such Extended Interest Payment Period, together with all such previous and further extensions within such Extended Interest Payment Period, (i) shall not exceed 20 consecutive quarterly periods including the first quarterly period during such Extended Interest Payment Period, (ii) shall not end on any date other than an Interest Payment Date, and (iii) shall not extend beyond the Maturity Date of the Securities. Upon the termination of any such Extended Interest Payment Period and the payment of all accrued and unpaid interest and any additional amounts then due, the Corporation may commence a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof, but the Corporation may prepay at any time all or any portion of the interest accrued during an Extended Interest Payment Period. The Corporation has agreed that if (1) there shall have occurred any event of which the Corporation has actual knowledge that (a) is, or with the giving of notice or the lapse of time, or both, would constitute, an Event of Default and (b) in respect of which the Corporation shall not have taken reasonable steps to cure, (2) if the Securities are held by the Property Trustee of Haven Capital Trust II, the Corporation shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee or (3) the Corporation shall have given notice of its election to exercise its right to commence an Extended Interest Payment Period, and shall not have rescinded such Notice, and such Extended Interest Payment Period or any extension thereof shall have commenced and be continuing, it will not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Corporation's capital stock, (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities (including other Debentures) of the Corporation that rank pari passu with or junior in right of payment to the Securities or (iii) make any guarantee payments -7- with respect to any guarantee by the Corporation of the debt securities of any Subsidiary of the Corporation (including Other Guarantees) if such guarantee ranks pari passu with or junior in right of payment to the Securities (other than (a) dividends or distributions of Corporation's capital stock (which includes Common Stock and preferred stock), (b) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) payments under the Capital Securities Guarantee, as defined in the Indenture, (d) as a result of a reclassification of the Corporation's capital stock or the exchange or conversion of one class or series of the Corporation's capital stock for another class or series of the Corporation's capital stock, (e) the purchase of fractional interests in shares of the Corporation's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, and (f) purchases of Common Stock related to the issuance of Common Stock or rights under any of the Corporation's benefit or compensation plans for its directors, officers or employees or any of the Corporation's dividend reinvestment plans). Subject to (i) the Corporation having received any required regulatory approvals and (ii) the Administrative Trustees of Haven Capital Trust II having received an opinion of counsel to the effect that such distribution will not cause the holders of Capital Securities to recognize gain or loss for federal income tax purposes, the Corporation will have the right at any time to liquidate the Trust and, after satisfaction of liabilities of creditors of the Trust as required by applicable law, to cause the Securities to be distributed to the holders of the Trust Securities in liquidation of the Trust. The Securities are issuable only in registered form without coupons in minimum denominations of $25 and multiples of $25 in excess thereof. As provided in the Indenture and subject to the transfer restrictions limitations as may be contained herein and therein from time to time, this Security is transferable by the holder hereof on the Security Register of the Corporation, upon surrender of this Security for registration of transfer at the office or agency of the Corporation in the New York, New York accompanied by a written instrument or instruments of transfer in form satisfactory to the Corporation or the Debenture Trustee duly executed by the holder hereof or his or her attorney duly authorized in writing, and thereupon one or more new Securities of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be made for any such registration of transfer, but the Corporation may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Security, the Corporation, the Debenture Trustee, any authenticating agent, any paying agent, any transfer agent and the security registrar may deem and treat the holder hereof as the absolute owner hereof (whether or not this Security shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the security registrar for the Securities) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and (subject to the Indenture) interest due hereon and for all other purposes, and neither the Corporation nor the Debenture Trustee nor any authenticating agent nor any paying agent nor any transfer agent nor any security registrar shall be affected by any notice to the contrary. -8- No recourse shall be had for the payment of the principal of or premium, if any, or interest (including Compounded Interest and Additional Sums, if any) on this Security, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, employee, officer or director, past, present or future, as such, of the Corporation or of any predecessor or successor Person, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture. THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF. -9- EX-4.5 7 EXHIBIT 4.5 Exhibit 4.5 FORM OF CAPITAL SECURITY CERTIFICATE [FORM OF FACE OF SECURITY] [IF THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY, INSERT: 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 (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING AGENCY. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY 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 THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE CLEARING AGENCY TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE CLEARING AGENCY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] Certificate Number: [______________________] Aggregate Liquidation Amount: $[_____________________] CUSIP Number:[__________________] Certificate Evidencing Capital Securities of Haven Capital Trust II [____]% Capital Securities (liquidation amount $25 per Capital Security) Haven Capital Trust II, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that [______________ ] (the "Holder") is the registered owner of [_________] Capital Securities of the Trust](1) [the aggregate number of Capital Securities of the Trust specified in Schedule A hereto](2) representing undivided preferred beneficial interests in the assets of the Trust designated the [____]% Capital Securities, (liquidation amount $25 per Capital Security) (the "Capital Securities"). The Capital Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of the Trust, dated as of [_____], 1999, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Capital Securities as set forth in Annex I to the Declaration. Capitalized terms used but not defined herein shall have the meaning given them in the Declaration. The Sponsor will provide a copy of the Declaration, the Capital Securities Guarantee and the Indenture (including any supplemental indenture) to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this Certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder and to the benefits of the Capital Securities Guarantee to the extent provided therein. By acceptance hereof, the Holder agrees, for United States federal income tax purposes, to treat the Debentures as indebtedness and the Capital Securities as evidence of indirect beneficial ownership in the Debentures. - -------- (1) Insert in Definitive Capital Securities only. (2) Insert in Global Capital Securities only. -2- IN WITNESS WHEREOF, the Trust has executed this certificate this [_______] day of [_______________ ____]. HAVEN CAPITAL TRUST II By: ----------------------------------- Name: Administrative Trustee PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the [____]% Capital Securities of Haven Capital Trust II referred to in the within-mentioned Declaration. Dated: [ _____________, _____] THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Property Trustee By: ----------------------------------- Authorized Signatory -3- [FORM OF REVERSE OF SECURITY] Distributions on each Capital Security will be payable at a fixed rate per annum of [____]% (the "Coupon Rate") of the liquidation amount of $25 per Capital Security, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. Distributions in arrears for more than one quarterly period will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions," as used herein, includes such cash distributions and any and all such interest, if any, payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Property Trustee and to the extent the Property Trustee has funds legally available therefor. Distributions on the Capital Securities will be cumulative, will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from [______], 1999 and will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 1999, except as otherwise described below. Distributions will be computed on the basis of a 360-day year consisting of twelve 30-day months. As long as no Event of Default has occurred and is continuing under the Indenture, the Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period at any time and from time to time on the Debentures for a period not exceeding 20 consecutive calendar quarterly periods, including the first such quarterly period during such extension period (each an "Extension Period"), provided that no Extension Period shall end on a date other than an Interest Payment Date for the Debentures or extend beyond the Maturity Date of the Debentures. As a consequence of such deferral, Distributions will also be deferred. Notwithstanding such deferral, quarterly Distributions will continue to accumulate with interest thereon (to the extent permitted by applicable law, but not at a rate exceeding the rate of interest then accruing on the Debentures) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any Extension Period, the Debenture Issuer may further defer payments of interest by further extending such Extension Period; provided that such Extension Period, together with all such previous and further extensions within such Extension Period, may not (i) exceed 20 consecutive quarterly periods, including the first quarterly period during such Extension Period, (ii) end on a date other than an Interest Payment Date for the Debentures or (iii) extend beyond the Maturity Date of the Debentures. Payments of accumulated Distributions will be payable to Holders as they appear on the books and records of the Trust on the record date immediately preceding the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. -4- Subject to receipt by the Sponsor of any and all required regulatory approvals and to certain other conditions set forth in the Declaration and the Indenture, the Property Trustee may, at the direction of the Sponsor, at any time dissolve the Trust and, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, cause the Debentures to be distributed to the Holders of the Securities in liquidation of the Trust or, simultaneously with any redemption of the Debentures, cause a Like Amount of the Securities to be redeemed by the Trust. The Capital Securities shall be redeemable as provided in the Declaration. -5- -------------- ASSIGNMENT -------------- FOR VALUE RECEIVED, the undersigned hereby assigns and transfers this Capital Security Certificate to: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Assignee's social security or tax identification number) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (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. Date: _____________ Signature:______________________________________________________________________ (Sign exactly as your name appears on the other side of this Capital Security Certificate) Signature Guarantee:____________________________________________________________ - ---------- Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. -6- EX-4.6 8 EXHIBIT 4.6 Exhibit 4.6 ================================================ CAPITAL SECURITIES GUARANTEE AGREEMENT HAVEN BANCORP, INC. Dated as of [ _________ ____ ], 1999 ================================================ TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation ................................2 ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application ..............................5 SECTION 2.2 Lists of Holders of Securities ................................5 SECTION 2.3 Reports by the Capital Securities Guarantee Trustee ...........6 SECTION 2.4 Periodic Reports to the Capital Securities Guarantee Trustee .............................................6 SECTION 2.5 Evidence of Compliance with Conditions Precedent ..............6 SECTION 2.6 Waiver of Events of Default ...................................6 SECTION 2.7 Notice of Events of Default ...................................6 SECTION 2.8 Conflicting Interests .........................................7 ARTICLE III POWERS, DUTIES AND RIGHTS OF CAPITAL SECURITIES GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee .......................................................7 SECTION 3.2 Certain Rights of the Capital Securities Guarantee Trustee ....9 SECTION 3.3 Not Responsible for Recitals or Issuance of the Capital Securities Guarantee .................................10 ARTICLE IV CAPITAL SECURITIES GUARANTEE TRUSTEE SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility ............11 SECTION 4.2 Appointment, Removal and Resignation of the Capital Securities Guarantee Trustee .................................11 ARTICLE V GUARANTEE SECTION 5.1 Guarantee ....................................................12 SECTION 5.2 Waiver of Notice and Demand ..................................12 SECTION 5.3 Obligations Not Affected .....................................13 SECTION 5.4 Rights of Holders ............................................13 (i) Page ---- SECTION 5.5 Guarantee of Payment .........................................14 SECTION 5.6 Subrogation ..................................................14 SECTION 5.7 Independent Obligations ......................................14 ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 Limitation of Transactions ...................................14 SECTION 6.2 Ranking ......................................................15 ARTICLE VII TERMINATION SECTION 7.1 Termination ..................................................15 ARTICLE VIII INDEMNIFICATION SECTION 8.1 Exculpation ..................................................16 SECTION 8.2 Compensation and Indemnification .............................16 ARTICLE IX MISCELLANEOUS SECTION 9.1 Successors and Assigns .......................................17 SECTION 9.2 Amendments ...................................................17 SECTION 9.3 Notices ......................................................17 SECTION 9.4 Benefit ......................................................18 SECTION 9.5 Governing Law ................................................18 (ii) CROSS REFERENCE TABLE Section of Trust Indenture Act of Section of Guarantee 1939, as amended Agreement - ---------------- --------- 310(a) ............................................ 4.1(a) 310(b) ............................................ 4.1(c), 2.8 310(c) ............................................ Inapplicable 311(a) ............................................ 2.2(b) 311(b) ............................................ 2.2(b) 311(c) ............................................ Inapplicable 312(a) ............................................ 2.2(a) 312(b) ............................................ 2.2(b) 313 ............................................ 2.3 314(a) ............................................ 2.4 314(b) ............................................ Inapplicable 314(c) ............................................ 2.5 314(d) ............................................ Inapplicable 314(e) ............................................ 1.1, 2.5, 3.2 314(f) ............................................ 2.1, 3.2 315(a) ............................................ 3.1(d) 315(b) ............................................ 2.7 315(c) ............................................ 3.1(c) 315(d) ............................................ 3.1(d) 316(a) ............................................ 1.1, 2.6, 5.4 316(b) ............................................ 5.3 316(c) ............................................ 9.2 317(a) ............................................ Inapplicable 317(b) ............................................ Inapplicable 318(a) ............................................ 2.1(a) 318(c) ............................................ 2.1(b) - ---------- * This Cross-Reference Table does not constitute part of this Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. (iii) CAPITAL SECURITIES GUARANTEE AGREEMENT This CAPITAL SECURITIES GUARANTEE AGREEMENT (the "Capital Securities Guarantee"), dated as of [ _________ ___ ], 1999, is executed and delivered by HAVEN BANCORP, INC., a Delaware corporation (the "Guarantor"), and THE CHASE MANHATTAN BANK, a New York banking corporation, as trustee (the "Capital Securities Guarantee Trustee" or "Trustee"), for the benefit of the Holders (as defined herein), from time to time, of the Capital Securities (as defined herein) of HAVEN CAPITAL TRUST II, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of [ _________ ___ ], 1999, by and among the trustees of the Issuer named therein, the Guarantor, as sponsor, and the Holders, from time to time, of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing capital securities, having a liquidation amount of $25 per capital security, such capital securities being designated the [ _____ ]% Capital Securities (the "Capital Securities"). WHEREAS, as incentive for the Holders to purchase the Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Capital Securities Guarantee, to pay the Guarantee Payments (as defined herein) to the Holders of the Capital Securities, and the Guarantor agrees to make certain other payments on the terms and conditions set forth herein. WHEREAS, the Guarantor is also executing and delivering the Common Securities Guarantee Agreement, dated as of [ _________ ___ ], 1999 (the "Common Securities Guarantee"), for the benefit of the holders of the Common Securities (as defined herein), the terms of which provide that if an Event of Default (as defined in the Declaration) has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinated, to the extent and in the manner set forth in the Common Securities Guarantee, to the rights of Holders of the Capital Securities to receive Guarantee Payments under this Capital Securities Guarantee. NOW, THEREFORE, in consideration of the purchase by each Holder of the Capital Securities, which purchase the Guarantor hereby acknowledges shall benefit the Guarantor, the Guarantor executes and delivers this Capital Securities Guarantee for the benefit of such Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation In this Capital Securities Guarantee, unless the context otherwise requires: (a) capitalized terms used in this Capital Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) terms defined in the Declaration as at the date of execution of this Capital Securities Guarantee have the same meaning when used in this Capital Securities Guarantee unless otherwise defined in this Capital Securities Guarantee, (c) a term defined anywhere in this Capital Securities Guarantee has the same meaning throughout; (d) all references to "the Capital Securities Guarantee" or "this Capital Securities Guarantee" are references to this Capital Securities Guarantee as modified, supplemented or amended from time to time; (e) all references in this Capital Securities Guarantee to Articles and Sections references are to Articles and Sections of this Capital Securities Guarantee, unless otherwise specified; (f) a term defined in the Trust Indenture Act has the same meaning when used in this Capital Securities Guarantee, unless otherwise defined in this Capital Securities Guarantee or unless the context otherwise requires; and (g) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 under the Securities Act of 1933, as amended, or any successor rule thereunder. "Business Day" shall mean any day other than a Saturday or a Sunday, or a day on which banking institutions in Wilmington, Delaware or New York, New York are authorized or required by law or executive order to remain closed. "Capital Securities Guarantee Trustee" shall mean The Chase Manhattan Bank as Trustee under the Capital Securities Guarantee, until a Successor Capital Securities Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Capital Securities Guarantee, and thereafter means each such Successor Capital Securities Guarantee Trustee. "Common Securities" shall mean the securities representing common undivided beneficial interests in the assets of the Issuer. "Corporate Trust Office" shall mean the office of the Capital Securities Guarantee Trustee at which the corporate trust business of the Capital Securities Guarantee Trustee shall, at any - 2 - particular time, be principally administered, which office at the date of execution of this Agreement is located at 450 West 33rd Street, 15th Floor, New York, New York 10001-2697, Attention:Capital Markets Fiduciary Services, or at any other time at such other address as the Capital Securities Guarantee Trustee may designate from time to time by notice to the Issuer. "Covered Person" shall mean any Holder or beneficial owner of the Capital Securities. "Debentures" shall mean the series of subordinated debt securities of the Guarantor designated the [ _____ ]% Junior Subordinated Deferrable Interest Debentures due [ __________ ____ ], 2029, held by the Property Trustee (as defined in the Declaration) of the Issuer. "Event of Default" shall mean a default by the Guarantor on any of its payment or other obligations under this Capital Securities Guarantee; provided, however, that, except with respect to default in respect of any Guarantee Payment, no default by the Guarantor hereunder shall constitute an Event of Default unless the Guarantor shall have received written notice of the default and shall not have cured such default within 60 days after receipt thereof. "Guarantee Payments" shall mean the following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by or on behalf of the Issuer: (i) any accumulated and unpaid Distributions (as defined in the Declaration) that are required to be paid on such Capital Securities, to the extent the Issuer has funds legally available therefor at such time, (ii) the redemption price, including all accumulated and unpaid Distributions to the date of redemption (the "Redemption Price"), to the extent the Issuer has funds legally available therefor at such time, with respect to any Capital Securities called for redemption, and (iii) upon a voluntary or involuntary dissolution, winding up or liquidation of the Issuer (other than in connection with the distribution of Debentures to the Holders in exchange for Capital Securities or in connection with the redemption of the Capital Securities, in each case as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accumulated and unpaid Distributions on the Capital Securities to the date of payment, to the extent the Issuer has funds legally available therefor at such time, and (b) the amount of assets of the Issuer remaining available for distribution to Holders after satisfaction of liabilities to creditors of the Issuer as required by applicable law (in either case, the "Liquidation Distribution"). If an Event of Default has occurred and is continuing, no Guarantee Payments under the Common Securities Guarantee with respect to the Common Securities or any guarantee payment under any Other Common Securities Guarantee shall be made until the Holders of the Capital Securities shall be paid in full the Guarantee Payments to which they are entitled under this Capital Securities Guarantee. "Holder" shall mean any holder, as registered on the books and records of the Issuer, of any Capital Securities; provided, however, that, in determining whether the holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Person actually known to a Responsible Officer of the Capital Securities Guarantee Trustee to be an Affiliate of the Guarantor. "Indemnified Person" shall mean the Capital Securities Guarantee Trustee (including in its individual capacity), any Affiliate of the Capital Securities Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Capital Securities Guarantee Trustee. - 3 - "Indenture" shall mean the Indenture, dated as of [ ________ ___ ], 1999, between Haven Bancorp, Inc., as issuer of Debentures (the "Debenture Issuer"), and The Chase Manhattan Bank, as trustee, pursuant to which the Debentures are to be issued to the Property Trustee of the Issuer. "Majority in Liquidation Amount of the Capital Securities" shall mean, except as provided by the Trust Indenture Act, a vote by Holder(s) of the Capital Securities, voting separately as a class, of more than 50% of the aggregate liquidation amount (including the amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Capital Securities. "Officers' Certificate" shall mean, with respect to any Person, a certificate signed by the Chairman of the Board, the Chief Executive Officer, the President, an Executive or Senior Vice President, a Vice President or the Chief Financial Officer and the Secretary or an Assistant Secretary. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Capital Securities Guarantee shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenants or conditions and the definitions relating thereto; (b) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (c) a statement as to whether or not, in the opinion of each such officer, such condition or covenant has been complied with. "Other Common Securities Guarantees" shall have the same meaning as "Other Guarantees" in the Common Securities Guarantee. "Other Debentures" shall mean all junior subordinated debentures, other than the Debentures, issued by the Guarantor, from time to time, and sold to trusts other than the Issuer to be established by the Guarantor (if any), in each case similar to the Issuer, including, without limitation, the Guarantor's 10.46% Junior Subordinated Deferrable Interest Debentures due February 1, 2027. "Other Guarantees" shall mean all guarantees, other than this Capital Securities Guarantee, issued or to be issued by the Guarantor with respect to capital securities (if any) similar to the Capital Securities, issued by trusts other than the Issuer established or to be established by the Guarantor (if any), in each case similar to the Issuer, including, without limitation, the Capital Securities Guarantee Agreement, dated February 12, 1997, issued by the Guarantor with respect to the capital securities issued by Haven Capital Trust I. "Person" shall mean a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Responsible Officer" shall mean, with respect to a Person, any officer with direct responsibility for the administration of any matters relating to this Capital Securities Guarantee. - 4 - "Successor Capital Securities Guarantee Trustee" shall mean a successor Capital Securities Guarantee Trustee possessing the qualifications to act as Capital Securities Guarantee Trustee under Section 4.1. "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as amended. "Trust Securities" shall mean the Common Securities and the Capital Securities. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application (a) This Capital Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Capital Securities Guarantee and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Capital Securities Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. If any provision of this Capital Securities Guarantee modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the modified or excluded provision of the Trust Indenture Act shall be deemed to apply to this Capital Securities Guarantee as so modified or excluded, as the case may be. SECTION 2.2 Lists of Holders of Securities (a) The Guarantor shall provide the Capital Securities Guarantee Trustee (unless the Capital Securities Guarantee Trustee is otherwise the registrar of the Capital Securities) with a list, in such form as the Capital Securities Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Capital Securities ("List of Holders") as of such date, (i) within fourteen (14) days after each record date for payment of Distributions (as defined in the Declaration), and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Capital Securities Guarantee Trustee; provided, however, that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Capital Securities Guarantee Trustee by the Guarantor. The Capital Securities Guarantee Trustee may destroy any List of Holders previously given to it upon receipt of a new List of Holders. (b) The Capital Securities Guarantee Trustee shall comply with its obligations under Sections 31l(a), 31l(b) and Section 312(b) of the Trust Indenture Act. - 5 - SECTION 2.3 Reports by the Capital Securities Guarantee Trustee Within 60 days after May 15 and December 15 of each year, commencing December 15, 1999, the Capital Securities Guarantee Trustee shall provide to the Holders of the Capital Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Capital Securities Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to the Capital Securities Guarantee Trustee The Guarantor shall provide to the Capital Securities Guarantee Trustee, the Securities and Exchange Commission and the Holders such documents, reports and information as are required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Delivery of such reports, information and documents to the Capital Securities Guarantee Trustee is for informational purposes only, and the Capital Securities Guarantee Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Guarantor's compliance with any of its covenants hereunder (as to which the Capital Securities Guarantee Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 2.5 Evidence of Compliance with Conditions Precedent The Guarantor shall provide to the Capital Securities Guarantee Trustee such evidence of compliance with the conditions precedent, if any, provided for in this Capital Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Waiver of Events of Default The Holders of a Majority in Liquidation Amount of the Capital Securities may, by vote, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Capital Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.7 Notice of Events of Default (a) The Capital Securities Guarantee Trustee shall, within 10 Business Days after the occurrence of an Event of Default with respect to this Capital Securities Guarantee actually known to a Responsible Officer of the Capital Securities Guarantee Trustee, transmit by mail, first class postage prepaid, to all Holders of the Capital Securities, notices of all such Events of Default, unless such Events of Default have been cured before the giving of such notice; provided, however, that, except in the case of an Event of Default arising from the non-payment of any Guarantee Payment, the Capital Securities Guarantee Trustee shall be protected in withholding such notice if and so long - 6 - as a Responsible Officer of the Capital Securities Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Capital Securities. (b) The Capital Securities Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Capital Securities Guarantee Trustee shall have received written notice, or a Responsible Officer of the Capital Securities Guarantee Trustee charged with the administration of the Declaration shall have obtained actual knowledge, of such Event of Default. SECTION 2.8 Conflicting Interests The Declaration shall be deemed to be specifically described in this Capital Securities Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF CAPITAL SECURITIES GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee (a) This Capital Securities Guarantee shall be held by the Capital Securities Guarantee Trustee for the benefit of the Holders of the Capital Securities, and the Capital Securities Guarantee Trustee shall not transfer this Capital Securities Guarantee to any Person except a Holder of the Capital Securities exercising his or her rights pursuant to Section 5.4(b) or to a Successor Capital Securities Guarantee Trustee on acceptance by such Successor Capital Securities Guarantee Trustee of its appointment to act as Successor Capital Securities Guarantee Trustee. The right, title and interest of the Capital Securities Guarantee Trustee shall automatically vest in any Successor Capital Securities Guarantee Trustee, and such vesting and succession of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Capital Securities Guarantee Trustee. (b) If an Event of Default actually known to a Responsible Officer of the Capital Securities Guarantee Trustee has occurred and is continuing, the Capital Securities Guarantee Trustee shall enforce this Capital Securities Guarantee for the benefit of the Holders of the Capital Securities. (c) The Capital Securities Guarantee Trustee, before the occurrence of any Event of Default (of which, other than a default in respect of any Guarantee Payment, a Responsible Officer of the Property Trustee has actual knowledge) and after the curing of all such Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Capital Securities Guarantee, and no implied covenants or obligations shall be read into this Capital Securities Guarantee against the Capital Securities Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Capital Securities Guarantee Trustee, the Capital Securities Guarantee Trustee shall exercise such of the rights and powers vested in it by this Capital Securities Guarantee, - 7 - and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Capital Securities Guarantee shall be construed to relieve the Capital Securities Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default (of which, other than a default in respect of any Guarantee Payment, a Responsible Officer of the Property Trustee has actual knowledge) and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Capital Securities Guarantee Trustee shall be determined solely by the express provisions of this Capital Securities Guarantee, and the Capital Securities Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Capital Securities Guarantee, and no implied covenants or obligations shall be read into this Capital Securities Guarantee against the Capital Securities Guarantee Trustee; and (B) in the absence of bad faith on the part of the Capital Securities Guarantee Trustee, the Capital Securities Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Capital Securities Guarantee Trustee and conforming to the requirements of this Capital Securities Guarantee; provided, however, that in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Capital Securities Guarantee Trustee, the Capital Securities Guarantee Trustee shall be under a duty to examine the same to determine whether or not on their face they conform to the requirements of this Capital Securities Guarantee; (ii) the Capital Securities Guarantee Trustee shall not be liable for any errors of judgment made in good faith by a Responsible Officer of the Capital Securities Guarantee Trustee, unless it shall be proved that the Capital Securities Guarantee Trustee or such Responsible Officer was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Capital Securities Guarantee Trustee shall not be liable with respect to any actions taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a Majority in Liquidation Amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Capital Securities Guarantee Trustee, or exercising any trust or power conferred upon the Capital Securities Guarantee Trustee under this Capital Securities Guarantee; and (iv) no provision of this Capital Securities Guarantee shall require the Capital Securities Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Capital Securities Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Capital Securities Guarantee or indemnity, reasonably satisfactory to the - 8 - Capital Securities Guarantee Trustee, against such risk or liability is not reasonably assured to it. SECTION 3.2 Certain Rights of the Capital Securities Guarantee Trustee (a) Subject to the provisions of Section 3.1: (i) the Capital Securities Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Guarantor contemplated by this Capital Securities Guarantee may be sufficiently evidenced by an Officers' Certificate; (iii) whenever, in the administration of this Capital Securities Guarantee, the Capital Securities Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Capital Securities Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate, which, upon receipt of such request, shall be promptly delivered by the Guarantor; (iv) the Capital Securities Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument or other document (or any rerecording, refiling or registration thereof); (v) the Capital Securities Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion; and such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees; the Capital Securities Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Capital Securities Guarantee from any court of competent jurisdiction; (vi) the Capital Securities Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Capital Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Capital Securities Guarantee Trustee such security and indemnity, reasonably satisfactory to the Capital Securities Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Capital Securities Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Capital Securities Guarantee Trustee, provided, however, that nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Capital Securities Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Capital Securities Guarantee; - 9 - (vii) the Capital Securities Guarantee Trustee shall have no obligation to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Capital Securities Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Capital Securities Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Capital Securities Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such person appointed with due care by it hereunder; (ix) any action taken by the Capital Securities Guarantee Trustee or its agents hereunder shall bind the Holders of the Capital Securities, and the signature of the Capital Securities Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Capital Securities Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Capital Securities Guarantee, both of which shall be conclusively evidenced by the Capital Securities Guarantee Trustee's or its agent's taking such action; (x) whenever in the administration of this Capital Securities Guarantee the Capital Securities Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Capital Securities Guarantee Trustee (i) may request instructions from the Holders of a Majority in Liquidation Amount of the Capital Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions; and (xi) the Capital Securities Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Capital Securities Guarantee. (b) No provision of this Capital Securities Guarantee shall be deemed to impose any duty or obligation on the Capital Securities Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Capital Securities Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Capital Securities Guarantee Trustee shall be construed to be a duty. SECTION 3.3 Not Responsible for Recitals or Issuance of the Capital Securities Guarantee The recitals contained in this Capital Securities Guarantee shall be taken as the statements of the Guarantor, and the Capital Securities Guarantee Trustee does not assume any responsibility - 10 - for their correctness. The Capital Securities Guarantee Trustee makes no representation as to the validity or sufficiency of this Capital Securities Guarantee. ARTICLE IV CAPITAL SECURITIES GUARANTEE TRUSTEE SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility (a) There shall at all times be a Capital Securities Guarantee Trustee that shall (i) not be an Affiliate of the Guarantor; and (ii) be a corporation or other Person organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia, or a corporation or other Person permitted by the Securities and Exchange Commission to act as an indenture trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least fifty million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority; it being understood that if such corporation or other Person publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii) and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Capital Securities Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Capital Securities Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Capital Securities Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Capital Securities Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 Appointment, Removal and Resignation of the Capital Securities Guarantee Trustee (a) Subject to Section 4.2(b), the Capital Securities Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default. (b) The Capital Securities Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Capital Securities Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Capital Securities Guarantee Trustee and delivered to the Guarantor. - 11 - (c) The Capital Securities Guarantee Trustee shall hold office until a Successor Capital Securities Guarantee Trustee shall have been appointed or until its removal or resignation. The Capital Securities Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Capital Securities Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Capital Securities Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Capital Securities Guarantee Trustee and delivered to the Guarantor and the resigning Capital Securities Guarantee Trustee. (d) If no Successor Capital Securities Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery of an instrument of removal or resignation, the Capital Securities Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Capital Securities Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Capital Securities Guarantee Trustee. (e) No Capital Securities Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Capital Securities Guarantee Trustee. (f) Upon termination of this Capital Securities Guarantee or removal or resignation of the Capital Securities Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Capital Securities Guarantee Trustee all amounts due to the Capital Securities Guarantee Trustee accrued to the date of such termination, removal or resignation. ARTICLE V GUARANTEE SECTION 5.1 Guarantee The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 5.2 Waiver of Notice and Demand The Guarantor hereby waives notice of acceptance of this Capital Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. - 12 - SECTION 5.3 Obligations Not Affected The obligations, covenants, agreements and duties of the Guarantor under this Capital Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Capital Securities; (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Capital Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Capital Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor; it being the intent of this Section 5.3 that the obligations of the Guarantor with respect to the Guarantee Payments shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4 Rights of Holders (a) The Holders of a Majority in Liquidation Amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Capital Securities Guarantee Trustee in respect of this Capital Securities Guarantee or exercising any trust or power conferred upon the Capital Securities Guarantee Trustee under this Capital Securities Guarantee. (b) If the Capital Securities Guarantee Trustee fails to enforce this Capital Securities Guarantee, any Holder of the Capital Securities may institute a legal proceeding directly against the - 13 - Guarantor to enforce the Capital Securities Guarantee Trustee's rights under this Capital Securities Guarantee, without first instituting a legal proceeding against the Issuer, the Capital Securities Guarantee Trustee or any other person or entity. The Guarantor waives any right or remedy to require that any action be brought first against the Issuer or any other person or entity before proceeding directly against the Guarantor. SECTION 5.5 Guarantee of Payment This Capital Securities Guarantee creates a guarantee of payment and not of collection. SECTION 5.6 Subrogation The Guarantor shall be subrogated to all (if any) rights of the Holders of Capital Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Capital Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Capital Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Capital Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7 Independent Obligations The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Capital Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Capital Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 Limitation of Transactions So long as any Capital Securities remain outstanding, if (l) there shall have occurred any event of which the Guarantor has actual knowledge that (A) is a Default or Event of Default (each as defined in the Indenture) and (B) in respect of which the Guarantor shall not have taken reasonable steps to cure, (2) if the Debentures are held by the Property Trustee, the Guarantor shall be in default with respect to its payment of any obligations under this Capital Securities Guarantee or (3) the Guarantor shall have given notice of its election of the exercise of its right to commence an Extended Interest Payment Period as provided in the Indenture and shall not have rescinded such notice, and such Extended Interest Payment Period, or an extension thereof, shall have commenced and be continuing, the Guarantor shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Guarantor's capital stock, (ii) make any payment of principal of, or interest or premium, if any, on or repay, - 14 - repurchase or redeem any debt securities of the Guarantor (including Other Debentures) that rank pari passu with or junior in right of payment to the Debentures or (iii) make any guarantee payments with respect to any guarantee by the Guarantor of the debt securities of any subsidiary of the Guarantor (including Other Guarantees) if such guarantee ranks pari passu with or junior in right of payment to the Debentures (other than (a) dividends or distributions in shares of, or options, warrants, rights to subscribe for or purchase shares of, common stock of the Guarantor, (b) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) payments under this Capital Securities Guarantee, (d) as a result of a reclassification of the Guarantor's capital stock or the exchange or the conversion of one class or series of the Guarantor's capital stock for another class or series of the Guarantor's capital stock, (e) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, and (f) purchases of common stock related to the issuance of common stock or rights under any of the Guarantor's benefit or compensation plans for its directors, officers or employees or any of the Guarantor's dividend reinvestment plans). SECTION 6.2 Ranking This Capital Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to Senior Indebtedness (as defined in the Indenture), to the same extent and in the same manner that the Debentures are subordinated to Senior Indebtedness pursuant to the Indenture, it being understood that the terms of Article XV of the Indenture shall apply to the obligations of the Guarantor under this Capital Securities Guarantee as if such Article XV were set forth herein in full, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Guarantor, any Other Guarantee and, except to the extent set forth therein, the Common Securities Guarantee, any Other Common Securities Guarantee, and any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock. ARTICLE VII TERMINATION SECTION 7.1 Termination This Capital Securities Guarantee shall terminate and be of no further force or effect upon (i) full payment of the Redemption Price of all Capital Securities or (ii) the dissolution, winding up or liquidation of the Issuer, immediately following the full payment of the amounts payable in accordance with the Declaration or the distribution of all of the Debentures to the holders of the Trust Securities (as defined in the Declaration). Notwithstanding the foregoing, this Capital Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of the Capital Securities must restore payment of any sums paid under the Capital Securities or under this Capital Securities Guarantee. - 15 - ARTICLE VIII INDEMNIFICATION SECTION 8.1 Exculpation (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Capital Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Capital Securities Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of the Capital Securities might properly be paid. SECTION 8.2 Compensation and Indemnification The Guarantor agrees to pay to the Capital Securities Guarantee Trustee such compensation for its services as shall be mutually agreed upon by the Guarantor and the Capital Securities Guarantee Trustee. The Guarantor shall reimburse the Capital Securities Guarantee Trustee upon request for all reasonable out-of-pocket expenses incurred by it, including the reasonable compensation and expenses of the Capital Securities Guarantee Trustee's agents and counsel, except any expense as may be attributable to the negligence or bad faith of the Capital Securities Guarantee Trustee. The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, liability, damage, action, suit, claim or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The provisions of this Section 8.2 shall survive the termination of this Capital Securities Guarantee and shall survive the resignation or removal of the Capital Securities Guarantee Trustee. - 16 - ARTICLE IX MISCELLANEOUS SECTION 9.1 Successors and Assigns All guarantees and agreements contained in this Capital Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding. SECTION 9.2 Amendments Except with respect to any changes that do not materially adversely affect the rights of Holders of the Capital Securities (in which case no consent of such Holders will be required), this Capital Securities Guarantee may only be amended with the prior approval of the Holders of a Majority in Liquidation Amount of the Capital Securities. The provisions of Section 12.2 of the Declaration with respect to meetings of Holders of the Trust Securities apply to the giving of such approval. This Capital Securities Guarantee may not be amended, and no amendment hereof that affects the Capital Securities Guarantee Trustee's rights, duties or immunities hereunder or otherwise, shall be effective, unless such amendment is executed by the Capital Securities Guarantee Trustee (which shall have no obligation to execute any such amendment, but may do so in its sole discretion). SECTION 9.3 Notices All notices provided for in this Capital Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) If given to the Issuer, in care of the Administrative Trustees at the Issuer's mailing address set forth below (or such other address as the Issuer may give notice of to the Capital Securities Guarantee Trustee and the Holders of the Capital Securities): HAVEN CAPITAL TRUST II c/o Haven Bancorp, Inc. 615 Merrick Avenue Westbury, New York 11590 Attention: Catherine Califano Telecopier: (516) 683-8385 Telephone: (516) 683-4483 - 17 - (b) If given to the Capital Securities Guarantee Trustee, at the Capital Securities Guarantee Trustee's mailing address set forth below (or such other address as the Capital Securities Guarantee Trustee may give notice of to the Holders of the Capital Securities): The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001 Attention: Capital Markets Fiduciary Services Telecopier: (212) ____-_____ Telephone: (212) ____-_____ (c) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Capital Securities Guarantee Trustee and the Holders of the Capital Securities): HAVEN BANCORP, INC. 615 Merrick Avenue Westbury, New York 11590 Attention: Catherine Califano Telecopier: (516) 683-8385 Telephone: (516) 683-4483 (d) If given to any Holder of the Capital Securities, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4 Benefit This Capital Securities Guarantee is solely for the benefit of the Holders of the Capital Securities and, subject to Section 3.1(a), is not separately transferable from the Capital Securities. SECTION 9.5 Governing Law THIS CAPITAL SECURITIES GUARANTEE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF. - 18 - This Capital Securities Guarantee is executed as of the day and year first above written. HAVEN BANCORP, INC. as Guarantor By: ----------------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Capital Securities Guarantee Trustee By: ----------------------------------------- Name: Title: - 19 - EX-4.7 9 EXHIBIT 4.7 Exhibit 4.7 ================================================================================ HAVEN BANCORP, INC. ------------------------------ ------------------------------ INDENTURE Dated as of [______], 1999 ------------------------------ THE CHASE MANHATTAN BANK, as Debenture Trustee ------------------------------ JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS SECTION 1.01 Definitions.....................................................1 SECTION 1.02 Business Day Certificate........................................9 ARTICLE II SECURITIES SECTION 2.01 Forms Generally.................................................9 SECTION 2.02 Execution and Authentication....................................9 SECTION 2.03 Form and Payment...............................................10 SECTION 2.04 Global Security................................................10 SECTION 2.05 Interest.......................................................11 SECTION 2.06 Transfer and Exchange..........................................12 SECTION 2.07 Replacement Securities.........................................13 SECTION 2.08 Temporary Securities...........................................13 SECTION 2.09 Cancellation...................................................14 SECTION 2.10 Defaulted Interest.............................................14 SECTION 2.11 CUSIP Numbers..................................................15 ARTICLE III PARTICULAR COVENANTS OF THE CORPORATION SECTION 3.01 Payment of Principal, Premium and Interest.....................15 SECTION 3.02 Offices for Notices and Payments, etc..........................15 SECTION 3.03 Appointments to Fill Vacancies in Debenture Trustee's Office.............................................16 SECTION 3.04 Provision as to Paying Agent...................................16 SECTION 3.05 Certificate to Debenture Trustee...............................17 SECTION 3.06 Compliance with Consolidation Provisions.......................17 SECTION 3.07 Limitation on Dividends........................................17 SECTION 3.08 Covenants as to Haven Capital Trust II.........................18 SECTION 3.09 Payment of Expenses............................................18 SECTION 3.10 Payment Upon Resignation or Removal............................19 -i- ARTICLE IV LIST OF SECURITYHOLDERS AND REPORTS BY THE CORPORATION AND THE DEBENTURE TRUSTEE SECTION 4.01 List of Securityholders........................................19 SECTION 4.02 Preservation and Disclosure of Lists...........................19 SECTION 4.03 Reports by the Corporation.....................................21 SECTION 4.04 Reports by the Debenture Trustee...............................21 ARTICLE V REMEDIES OF THE DEBENTURE TRUSTEE AND SECURITYHOLDERS UPON EVENT OF DEFAULT SECTION 5.01 Events of Default..............................................22 SECTION 5.02 Payment of Securities on Default; Suit Therefor................24 SECTION 5.03 Application of Moneys Collected by Debenture Trustee...........25 SECTION 5.04 Proceedings by Securityholders.................................26 SECTION 5.05 Proceedings by Debenture Trustee...............................27 SECTION 5.06 Remedies Cumulative and Continuing.............................27 SECTION 5.07 Direction of Proceedings and Waiver of Defaults by Majority of Securityholders....................................27 SECTION 5.08 Notice of Defaults.............................................28 SECTION 5.09 Undertaking to Pay Costs.......................................28 ARTICLE VI CONCERNING THE DEBENTURE TRUSTEE SECTION 6.01 Duties and Responsibilities of Debenture Trustee...............29 SECTION 6.02 Reliance on Documents, Opinions, etc...........................30 SECTION 6.03 No Responsibility for Recitals, etc............................32 SECTION 6.04 Debenture Trustee, Authenticating Agent, Paying Agents, Transfer Agents and Registrar May Own Securities...............32 SECTION 6.05 Moneys to be Held in Trust.....................................32 SECTION 6.06 Compensation and Expenses of Debenture Trustee.................32 SECTION 6.07 Officers' Certificate as Evidence..............................33 SECTION 6.08 Conflicting Interest of Debenture Trustee......................33 SECTION 6.09 Eligibility of Debenture Trustee...............................33 SECTION 6.10 Resignation or Removal of Debenture Trustee....................34 SECTION 6.11 Acceptance by Successor Debenture Trustee......................35 SECTION 6.12 Succession by Merger, etc......................................36 SECTION 6.13 Limitation on Rights of Debenture Trustee as a Creditor........36 SECTION 6.14 Authenticating Agents..........................................36 -ii- ARTICLE VII CONCERNING THE SECURITYHOLDERS SECTION 7.01 Action by Securityholders......................................37 SECTION 7.02 Proof of Execution by Securityholders..........................38 SECTION 7.03 Who Are Deemed Absolute Owners.................................38 SECTION 7.04 Securities Owned by Corporation Deemed Not Outstanding.........39 SECTION 7.05 Revocation of Consents; Future Holders Bound...................39 ARTICLE VIII MEETINGS OF SECURITYHOLDERS SECTION 8.01 Purposes of Meetings...........................................39 SECTION 8.02 Call of Meetings by Debenture Trustee..........................40 SECTION 8.03 Call of Meetings by Corporation or Securityholders.............40 SECTION 8.04 Qualifications for Voting......................................40 SECTION 8.05 Regulations....................................................41 SECTION 8.06 Voting.........................................................41 ARTICLE IX AMENDMENTS SECTION 9.01 Without Consent of Securityholders.............................42 SECTION 9.02 With Consent of Securityholders................................43 SECTION 9.03 Compliance with Trust Indenture Act; Effect of Supplemental Indentures......................................44 SECTION 9.04 Notation on Securities.........................................44 SECTION 9.05 Evidence of Compliance of Supplemental Indenture to be Furnished to Debenture Trustee.........................44 ARTICLE X CONSOLIDATION, MERGER, SALE, CONVEYANCE, TRANSFER AND LEASE SECTION 10.01 Corporation May Consolidate, etc., on Certain Terms............45 SECTION 10.02 Successor Person to be Substituted for Corporation.............45 SECTION 10.03 Opinion of Counsel to be Given Debenture Trustee...............46 ARTICLE XI SATISFACTION AND DISCHARGE OF INDENTURE SECTION 11.01 Discharge of Indenture.........................................46 SECTION 11.02 Deposited Moneys and U.S. Government Obligations to be Held in Trust by Debenture Trustee....................47 -iii- SECTION 11.03 Paying Agent to Repay Moneys Held..............................47 SECTION 11.04 Return of Unclaimed Moneys.....................................47 SECTION 11.05 Defeasance Upon Deposit of Moneys or U.S. Government Obligations....................................................47 ARTICLE XII IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS SECTION 12.01 Indenture and Securities Solely Corporate Obligations..........49 ARTICLE XIII MISCELLANEOUS PROVISIONS SECTION 13.01 Successors.....................................................49 SECTION 13.02 Official Acts by Successor Corporation.........................49 SECTION 13.03 Surrender of Corporation Powers................................49 SECTION 13.04 Addresses for Notices, etc.....................................49 SECTION 13.05 Governing Law..................................................50 SECTION 13.06 Evidence of Compliance with Conditions Precedent...............50 SECTION 13.07 Business Days..................................................50 SECTION 13.08 Trust Indenture Act to Control.................................51 SECTION 13.09 Table of Contents, Headings, etc...............................51 SECTION 13.10 Execution in Counterparts......................................51 SECTION 13.11 Separability...................................................51 SECTION 13.12 Assignment.....................................................51 SECTION 13.13 Acknowledgment of Rights.......................................51 ARTICLE XIV PREPAYMENT OF SECURITIES; NO SINKING FUND SECTION 14.01 Special Event Prepayment.......................................52 SECTION 14.02 Optional Prepayment by Corporation.............................52 SECTION 14.03 No Sinking Fund................................................53 SECTION 14.04 Notice of Prepayment; Selection of Securities..................53 SECTION 14.05 Payment of Securities Called for Prepayment....................54 ARTICLE XV SUBORDINATION OF SECURITIES SECTION 15.01 Agreement to Subordinate.......................................54 SECTION 15.02 Default on Senior Indebtedness.................................55 -iv- SECTION 15.03 Liquidation; Dissolution; Bankruptcy...........................55 SECTION 15.04 Subrogation....................................................57 SECTION 15.05 Debenture Trustee to Effectuate Subordination..................57 SECTION 15.06 Notice by the Corporation......................................57 SECTION 15.07 Rights of the Debenture Trustee; Holders of Senior Indebtedness...................................................58 SECTION 15.08 Subordination May Not Be Impaired..............................59 ARTICLE XVI EXTENSION OF INTEREST PAYMENT PERIOD SECTION 16.01 Extension of Interest Payment Period...........................60 SECTION 16.02 Notice of Extension............................................60 TESTIMONIUM SIGNATURES EXHIBIT A -v- Tie Sheet of provisions of Trust Indenture Act of 1939 with Indenture dated as of [_____], 1999 between Haven Bancorp, Inc. and The Chase Manhattan Bank, as Debenture Trustee: ACT SECTION INDENTURE SECTION - ----------- ----------------- 310(a)(1) ................................................ 6.09 (a)(2) ................................................ 6.09 310(a)(3) ................................................ N/A (a)(4) ................................................ N/A 310(a)(5) ..........................................6.09, 6.10, 6.11 310(b) ................................................ N/A 310(c) ................................................ 6.13 311(a) and (b) ................................................ N/A 311(c) ................................................ N/A 312(a) ..........................................4.01(a), 4.02(a) 312(b) and (c) ..........................................4.02(b), 4.04(c) 313(a) ................................................ 4.04(a) 313(b) ................................................ 4.04(a) 313(b)(2) ................................................ 4.04(a) 313(c) ................................................ 4.04(a) 313(d) ................................................ 4.04(b) 314(a) ................................................ 4.03 314(b) ................................................ N/A 314(c)(1) and (2)..................................... 6.07, 13.06, 13.06 314(c)(3) ................................................ N/A 314(d) ................................................ N/A 314(e) ...............................................6.07, 13.06 314(f) ... ............................................ N/A 315(a)(c) and (d).............................................. 6.01 315(b) ................................................ 5.08 315(e) ................................................ 5.09 316(a)(1) ................................................ 5.07 316(a)(2) ................................................ N/A 316(a) last sentence........................................... 9.02 316(b) ................................................ 9.02 317(a) ................................................ 5.05 317(b) ................................................ 6.05 318 ................................................ 13.08 - ---------- THIS TIE-SHEET IS NOT PART OF THE INDENTURE AS EXECUTED. -vi- THIS INDENTURE, dated as of [_____], 1999, between Haven Bancorp, Inc., a Delaware corporation (hereinafter called the "Corporation"), and The Chase Manhattan Bank, a New York banking corporation, as debenture trustee (hereinafter sometimes called the "Debenture Trustee"). W I T N E S S E T H : In consideration of the premises, and the purchase of the Securities (as defined below) by the holders thereof, the Corporation covenants and agrees with the Debenture Trustee for the equal and proportionate benefit of the respective holders from time to time of the Securities, as follows: ARTICLE I DEFINITIONS SECTION 1.01 Definitions. The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture shall have the respective meanings specified in this Section 1.01. All other terms used in this Indenture which are defined in the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), or which are by reference therein defined in the Securities Act of 1933, as amended (the "Securities Act"), shall (except as herein otherwise expressly provided or unless the context otherwise requires) have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of this Indenture as originally executed. The following terms have the meanings given to them in the Declaration: (i) Clearing Agency; (ii) Delaware Trustee; (iii) Property Trustee; (iv) Administrative Trustees; (v) Capital Securities; (vi) Direct Action; (vii) Capital Securities Guarantee; (viii) Distributions; and (ix) Underwriters. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" means such accounting principles as are generally accepted at the time of any computation. The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Headings are used for convenience of reference only and do not affect interpretation. The singular includes the plural and vice versa. "Additional Sums" shall have the meaning set forth in Section 2.05(c). "Affiliate" shall have the meaning given to that term in Rule 405 under the Securities Act or any successor rule thereunder. "Authenticating Agent" shall mean any agent or agents of the Debenture Trustee which at the time shall be appointed and acting pursuant to Section 6.14. "Bankruptcy Law" shall mean Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. "Board of Directors " shall mean either the Board of Directors of the Corporation or any duly authorized committee of that board. -1- "Board Resolution" shall mean a copy of a resolution certified by the Secretary or an Assistant Secretary of the Corporation to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Debenture Trustee. "Book-Entry Capital Securities" shall have the meaning set forth in Section 2.04(a)(i). "Business Day" shall mean, with respect to any series of Securities, any day other than a Saturday or a Sunday or a day on which banking institutions in Wilmington, Delaware or New York, New York, are authorized or required by law or executive order to remain closed. "Capital Securities" shall mean undivided beneficial interests in the assets of the Trust which are designated as "[__]% Capital Securities" and rank pari passu with the Common Securities issued by the Trust; provided, however, that if an Event of Default has occurred and is continuing, no payments in respect of Distributions on, or payments upon liquidation, redemption or otherwise with respect to, the Common Securities shall be made until the holders of the Capital Securities shall be paid in full the Distributions and the liquidation, redemption and other payments to which they are entitled. "Capital Securities Guarantee" shall mean any guarantee agreement that the Corporation may enter into with The Chase Manhattan Bank or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities of Haven Capital Trust II and shall include the Capital Securities Guarantee with respect to the Capital Securities. "Commission" shall mean the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Securities" shall mean undivided beneficial interests in the assets of the Trust which are designated as "[___]% Common Securities," and rank pari passu with Capital Securities issued by the Trust; provided, however, that if an Event of Default has occurred and is continuing, no payments in respect of Distributions on, or payments upon liquidation, redemption or otherwise with respect to, the Common Securities shall be made until the holders of the Capital Securities shall be paid in full the Distributions and the liquidation, redemption and other payments to which they are then entitled. "Common Securities Guarantee" shall mean any guarantee that the Corporation may enter into that operates directly or indirectly for the benefit of holders of Common Securities. "Common Stock" shall mean the Common Stock, par value $0.01 per share, of the Corporation or any other class of stock resulting from changes or reclassifications of such Common Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. "Compounded Interest" shall have the meaning set forth in Section 16.01. -2- "Corporation" shall mean the person identified as the "Corporation" in the preamble to this Indenture and, subject to the provisions of Article X, shall also include its successors and assigns. "Corporation Request" or "Corporation Order" shall mean a written request or order signed in the name of the Corporation by an Officer and delivered to the Debenture Trustee. "Custodian" shall mean any receiver, trustee, assignee, liquidator, or similar official under any Bankruptcy Law. "Debenture Trustee" shall mean the Person identified as "Debenture Trustee" in the preamble to this Indenture and, subject to the provisions of Article VI hereof, shall also include its successors and assigns. "Declaration" shall mean the Amended and Restated Declaration of Trust of the Trust, dated as of [_____], 1999, by and among the Trustees (as defined therein), the Corporation, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Trust, as amended from time to time. "Default" shall mean any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default. "Defaulted Interest" shall have the meaning set forth in Section 2.10. "Deferred Interest" shall have the meaning set forth in Section 16.01. "Definitive Securities" shall mean those securities issued in fully registered certificated form not otherwise in global form. "Depositary" shall mean, with respect to the Securities for which the Corporation shall determine that such Securities will be issued as a Global Security, The Depository Trust Company, New York, New York, or another clearing agency, or any successor registered as a clearing agency pursuant to Section 17A of the Exchange Act or other applicable statute or regulation, which, in each case, shall be designated by the Corporation pursuant to Section 2.05(d). "Dissolution Event" shall mean any event resulting in the dissolution of the Trust pursuant to the Declaration, and the distribution of the Securities held by the Property Trustee to the holders of the Trust Securities issued by the Trust pro rata in accordance with the Declaration. "Event of Default" shall mean any event specified in Section 5.01, continued for the period of time, if any, and after the giving of the notice, if any, therein designated. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Extended Interest Payment Period" shall have the meaning set forth in Section 16.01. "Federal Reserve" shall mean the Board of Governors of the Federal Reserve System. -3- "Global Security" shall mean, with respect to the Securities, a Security executed by the Corporation and delivered by the Debenture Trustee to the Depositary or pursuant to the Depositary's instruction, or if no instructions are received then held by the Property Trustee, all in accordance with this Indenture, which Security shall be registered in the name of the Depositary or its nominee. "Indebtedness for Money Borrowed" shall mean any obligation of, or any obligation guaranteed by, the Corporation for the repayment of borrowed money, whether or not evidenced by bonds, debentures, notes or other written instruments; provided, however, that Indebtedness for Money Borrowed shall not include trade accounts payable or accrued liabilities arising in the ordinary course of business. "Indebtedness Ranking on a Parity with the Securities" shall mean (i) Indebtedness, whether outstanding on the date of execution of this Indenture or hereafter created, assumed or incurred, to the extent such Indebtedness by its terms ranks pari passu with and not prior to the Securities in the right of payment upon the happening of the dissolution, winding-up, liquidation or reorganization of the Corporation and (ii) all other debt securities, and guarantees in respect of those debt securities, issued to any trust other than the Trust, or a trustee of such trust, partnership or other entity affiliated with the Corporation, that is a financing vehicle of the Corporation (a "financing entity") in connection with the issuance by such financing entity of equity securities or other securities guaranteed by the Corporation pursuant to an instrument that ranks pari passu with or junior in right of payment to the Capital Securities Guarantee, including, without limitation, the Corporation's 10.46% Junior Subordinated Deferrable Interest Debentures due February 1, 2027 and guarantee in respect thereof issued to Haven Capital Trust I. The securing of any Indebtedness otherwise constituting Indebtedness Ranking on a Parity with the Securities shall not be deemed to prevent such Indebtedness from constituting Indebtedness Ranking on a Parity with the Securities. "Indebtedness Ranking Junior to the Securities" shall mean any Indebtedness, whether outstanding on the date of execution of this Indenture or hereafter created, assumed or incurred, to the extent such Indebtedness by its terms ranks junior to and not pari passu with or prior to the Securities (and any other Indebtedness Ranking on a Parity with the Securities) in right of payment upon the happening of the dissolution or winding-up or liquidation or reorganization of the Corporation. The securing of any Indebtedness otherwise constituting Indebtedness Ranking Junior to the Securities shall not be deemed to prevent such Indebtedness from constituting Indebtedness Ranking Junior to the Securities. "Indenture" shall mean this instrument as originally executed or, if amended as herein provided, as so amended. "Initial Optional Redemption Date" shall mean [_____], 2009. "Interest Payment Date" shall have the meaning set forth in Section 2.06(a). "Investment Company" shall mean an investment company as defined in the Investment Company Act. -4- "Investment Company Act" shall mean the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Investment Company Event" shall mean the receipt by the Debenture Issuer and the Trust of an opinion of independent securities counsel experienced in such matters to the effect that as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any rules, guidelines or policies of any applicable regulatory authority for the Debenture Issuer or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of original issuance of the Securities, the Trust is, or within 90 days of the date of such opinion will be, considered an investment company that is required to be registered under the Investment Company Act. "Like Amount" shall mean (i) with respect to a redemption of the Trust Securities, Trust Securities having a liquidation amount equal to the principal amount of Securities to be paid in accordance with their terms and (ii) with respect to a distribution of Securities upon the liquidation of the Trust, Securities having a principal amount equal to the liquidation amount of the Trust Securities of the holder to whom Securities are distributed. "Maturity Date" shall mean [ ], 2029. "Non Book-Entry Capital Securities" shall have the meaning set forth in Section 2.05(a)(ii). "Officers" shall mean any of the Chairman of the Board, a Vice Chairman, the Chief Executive Officer, the President, an Executive or Senior Vice President, a Vice President, the Chief Financial Officer, the Group Director, the Secretary or an Assistant Secretary of the Corporation. "Officers' Certificate" shall mean a certificate signed by two Officers and delivered to the Debenture Trustee. "Opinion of Counsel" shall mean a written opinion of counsel, who may be an employee of the Corporation, and who shall be reasonably acceptable to the Debenture Trustee. "Optional Prepayment Price" shall have the meaning set forth in Section 14.02(a). "Other Debentures" shall mean all junior subordinated debentures other than the Securities issued by the Corporation from time to time and sold to trusts other than the Trust to be established by the Corporation (if any), in each case similar to the Trust, including, without limitation, the Corporation's 10.46% Junior Subordinated Deferrable Interest Debentures due February 1, 2027 and guarantee in respect thereof issued to Haven Capital Trust I. "Other Guarantees" shall mean all guarantees other than the Capital Securities Guarantee and the Common Securities Guarantee issued by the Corporation with respect to preferred beneficial interests (if any) issued by trusts to be established by the Corporation (if any), other than the Trust, in each case similar to the Trust, including, without limitation the Capital Securities Guarantee -5- Agreement, dated February 12, 1997, and the Common Securities Guarantee Agreement, dated February 12, 1997, issued by the Corporation with respect to the capital securities and common securities, respectively, issued by Haven Capital Trust I. The term "outstanding" when used with reference to the Securities, shall mean, subject to the provisions of Section 7.04, as of any particular time, all Securities authenticated and delivered by the Debenture Trustee or the Authenticating Agent under this Indenture, except (a) Securities theretofore canceled by the Debenture Trustee or the Authenticating Agent or delivered to the Debenture Trustee for cancellation; (b) Securities, or portions thereof, for the payment or prepayment of which moneys in the necessary amount shall have been deposited in trust with the Debenture Trustee or with any paying agent (other than the Corporation) or shall have been set aside and segregated in trust by the Corporation (if the Corporation shall act as its own paying agent); provided that, if such Securities, or portions thereof, are to be prepaid prior to maturity thereof, notice of such prepayment shall have been given as set forth in Article XIV or provision satisfactory to the Debenture Trustee shall have been made for giving such notice; and (c) Securities in lieu of or in substitution for which other Securities shall have been authenticated and delivered pursuant to the terms of Section 2.08 unless proof satisfactory to the Corporation and the Debenture Trustee is presented that any such Securities are held by bona fide holders in due course. "Person" shall mean any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security shall mean every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 2.08 in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Security. "Prepayment Price" shall mean the Special Event Prepayment Price or the Optional Prepayment Price, as the context requires. "Principal Office of the Debenture Trustee," or other similar term, shall mean the principal office of the Debenture Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of the execution of this Indenture is located at 450 West 33rd Street, 15th Floor, New York, New York 10001-2697, Attention: Capital Markets Fiduciary Services, or at any other time at such other address as the Debenture Trustee may designate from time to time by notice to the Issuer. -6- "Regulatory Capital Event" shall mean the receipt by the Corporation and the Trust of an opinion of independent bank regulatory counsel experienced in such matters to the effect that as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any rules, guidelines or policies of an applicable regulatory authority for the Debenture Issuer or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of original issuance of the Securities, the Capital Securities do not constitute, or within 180 days of the date of such opinion will not constitute, Tier 1 Capital (or its then equivalent if the Debenture Issuer were subject to such capital requirement) applied as if the Debenture Issuer (or its successors) were a bank holding company for purposes of capital adequacy guidelines of the Federal Reserve Board (or any successor regulatory authority with jurisdiction over bank holding companies), or any capital adequacy guidelines as then in effect and applicable to the Debenture Issuer; provided, however, that the distribution of the Securities in connection with the liquidation of the Trust by the Corporation shall not in and of itself constitute a Regulatory Capital Event. "Responsible Officer" shall mean, when used with respect to the Trustee, any officer within the Principal Office of the Debenture Trustee, including any Vice President, Managing Director, Assistant Vice President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer or any other officer of the Debenture Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "Securities" shall mean the Corporation's [____]% Junior Subordinated Deferrable Interest Debentures due [_____], 2029, as authenticated and issued under this Indenture. "Securityholder," "holder of Securities," or other similar terms, shall mean any Person in whose name at the time a particular Security is registered in the Security Register kept by the Corporation or the Debenture Trustee for that purpose in accordance with the terms of this Indenture. "Security Register" shall mean (i) prior to a Dissolution Event, the list of holders provided to the Debenture Trustee pursuant to Section 4.01, and (ii) following a Dissolution Event, any security register maintained by a security registrar for the Securities appointed by the Corporation following the execution of a supplemental indenture providing for transfer procedures as provided for in Section 2.07(a). "Senior Indebtedness" shall mean all Indebtedness for Money Borrowed, whether outstanding on the date of execution of this Indenture or hereafter created, assumed or incurred, except Indebtedness Ranking on a Parity with the Securities or Indebtedness Ranking Junior to the Securities, and any deferrals, renewals or extensions of such Senior Indebtedness. "Special Event" shall mean an Investment Company Event, a Regulatory Capital Event or a Tax Event, as the context requires. -7- "Special Event Prepayment Price" shall mean, with respect to any prepayment of the Securities following a Special Event, the prepayment price of the Debentures equal to 100% of the principal amount of the Debentures to be prepaid plus any accrued and unpaid interest thereon (including Compounded Interest and Additional Sums, if any, to the date of such prepayment). "Subsidiary" shall mean with respect to any Person, (i) any corporation at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture, limited liability company or similar entity, at least a majority of whose outstanding partnership, membership or similar interests shall at the time be owned by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, "voting stock" means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency. "Tax Event" shall mean the receipt by the Trust and the Corporation of an opinion of independent tax counsel experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of original issuance of the Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Securities, (ii) the interest payable by the Corporation on the Securities is not, or within 90 days of the date of such opinion will not be, deductible by the Corporation, in whole or in part, for United States federal income tax purposes or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Trust" shall mean Haven Capital Trust II, a Delaware business trust created for the purpose of issuing its undivided beneficial interests in connection with the issuance of Securities under this Indenture. "Trust Indenture Act" shall mean the Trust Indenture Act of 1939 as in force and effect at the date of execution of the Indenture, except as provided in Section 9.03. "Trust Securities" shall mean, collectively, the Capital Securities and the Common Securities. "Underwriting Agreement" shall mean the Underwriting Agreement, dated as of [_____], 1999, by and among the Corporation, the Trust and the Underwriters named therein. "U.S. Government Obligations" shall mean securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or -8- (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case under clauses (i) or (ii), are not callable or prepayable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction with respect to the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. SECTION 1.02 Business Day Certificate. On the date of execution and delivery of this Indenture (with respect to the remainder of calendar year 1999) and within 15 days prior to the end of each calendar year while this Indenture remains in effect (with respect to succeeding calendar years), the Corporation shall deliver to the Debenture Trustee an Officers' Certificate specifying the days on which banking institutions or trust companies in Wilmington, Delaware or New York, New York are then authorized or obligated by law or executive order to remain closed. ARTICLE II SECURITIES SECTION 2.01 Forms Generally. The Securities and the Debenture Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, the terms of which are incorporated in and made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Corporation is subject or usage. Each Security shall be dated the date of its authentication. SECTION 2.02 Execution and Authentication. An Officer shall sign the Securities for the Corporation by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Security is authenticated, the Security shall nevertheless be valid. A Security shall not be valid until authenticated by the manual signature of the Debenture Trustee. The signature of the Debenture Trustee shall be conclusive evidence that the Security has been authenticated under this Indenture. The Debenture Trustee shall, upon a Corporation Order, authenticate for original issue up to, and the aggregate principal amount of Securities outstanding at any time may not exceed, -9- $[__________] aggregate principal amount of the Securities, except as provided in Sections 2.07, 2.08, 2.09 and 14.05. SECTION 2.03 Form and Payment. Except as provided in Section 2.04, the Securities shall be issued in fully registered certificated form without interest coupons. Principal of and premium, if any, and interest on the Securities issued in certificated form will be payable, the transfer of such Securities will be registrable and such Securities will be exchangeable for Securities bearing identical terms and provisions, at the office or agency of the Corporation maintained for such purpose under Section 3.02; provided, however, that payments of interest may be made at the option of the Corporation (i) by check mailed to the holder at such address as shall appear in the Security Register, or (ii) by transfer to an account maintained by the Person entitled thereto, provided that proper transfer instructions have been received in writing by the relevant record date. Notwithstanding the foregoing, so long as the holder of any Securities is the Property Trustee, the payment of the principal of and premium, if any, and interest (including Compounded Interest and Additional Sums, if any) on such Securities held by the Property Trustee will be made at such place and to such account as may be designated by the Property Trustee. SECTION 2.04 Global Security. (a) In connection with a Dissolution Event, (i) if any Capital Securities are held in book-entry form ("Book-Entry Capital Securities"), a Like Amount of Definitive Securities shall be presented to the Debenture Trustee (if an arrangement with the Depositary has been maintained) by the Property Trustee in exchange for one or more Global Securities (as may be required pursuant to Section 2.07), to be registered in the name of the Depositary, or its nominee, and delivered by the Debenture Trustee to the Depositary for crediting to the accounts of its participants pursuant to the instructions of the Administrative Trustees; the Corporation upon any such presentation shall execute one or more Global Securities in such aggregate principal amount and deliver the same to the Debenture Trustee for authentication and delivery in accordance with this Indenture; and payments on the Securities issued as a Global Security will be made to the Depositary; and (ii) if any Capital Securities are held in certificated form, the related Definitive Securities may be presented to the Debenture Trustee by the Property Trustee, and any Capital Security certificates which represent Capital Securities other than Book-Entry Capital Securities ("Non Book-Entry Capital Securities") will be deemed to represent beneficial interests in Securities presented to the Debenture Trustee by the Property Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non Book-Entry Capital Securities until such Capital Security certificates are presented to the security registrar for the Securities for transfer or reissuance, at which time such Capital Security certificates will be canceled, and a Security in a Like Amount, registered in the name of the holder of the Capital Security certificate or the transferee of the holder of such Capital Security certificate, as the case may be, will be executed by the Corporation and delivered to the Debenture Trustee for authentication and delivery in accordance with this Indenture; and upon the issuance of such Securities, Securities with an equivalent aggregate -10- principal amount that were presented by the Property Trustee to the Debenture Trustee will be canceled. (b) The Global Securities shall represent the aggregate amount of outstanding Securities from time to time endorsed thereon; provided, however, that the aggregate principal amount of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and prepayments. Any endorsement of a Global Security to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Securities represented thereby shall be made by the Debenture Trustee, in accordance with instructions given by the Corporation as required by this Section 2.04. (c) The Global Securities may be transferred, in whole but not in part, only to the Depositary, to another nominee of the Depositary, or to a successor Depositary selected or approved by the Corporation or to a nominee of such successor Depositary. (d) If at any time the Depositary notifies the Corporation that it is unwilling or unable to continue as Depositary or the Depositary has ceased to be a Clearing Agency registered under the Exchange Act, and, in each case, a successor Depositary is not appointed by the Corporation within 90 days after the Corporation receives such notice or becomes aware of such condition, as the case may be, the Corporation will execute, and the Debenture Trustee, upon receipt of a Corporation Order, will authenticate and make available for delivery the Definitive Securities, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Security, in exchange for such Global Security. If there is a Default or an Event of Default, the Depositary shall have the right to exchange the Global Securities for Definitive Securities. In addition, the Corporation may at any time determine that the Securities shall no longer be represented by a Global Security. In the event of such an Event of Default or such a determination, the Corporation shall execute, and subject to Section 2.07, the Debenture Trustee, upon receipt of an Officers' Certificate evidencing such determination by the Corporation and a Corporation Order, will authenticate and make available for delivery the Definitive Securities, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Security, in exchange for such Global Security. Upon the exchange of the Global Security for such Definitive Securities, in authorized denominations, the Global Security shall be canceled by the Debenture Trustee. Such Definitive Securities issued in exchange for the Global Security shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Debenture Trustee. The Debenture Trustee shall deliver such Definitive Securities to the Depositary for delivery to the Persons in whose names such Definitive Securities are so registered. SECTION 2.05 Interest. (a) Each Security will bear interest, at the rate of [____]% per annum (the "Coupon Rate"), from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from [____], 1999, until the principal thereof becomes due and payable, and at the Coupon Rate on any overdue principal (and premium, if any) and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest, compounded quarterly, payable (subject to the provisions of Article XVI) quarterly in -11- arrears on March 31, June 30, September 30 and December 31, of each year (each, an "Interest Payment Date"), commencing June 30, 1999, to the Person in whose name such Security or any predecessor Security is registered at the close of business on the regular record date for such interest installment, which shall be one Business Day prior to the relevant Interest Payment Date for Global Securities and the 15th day of the month in which the relevant Interest Payment Date falls for Definitive Securities. (b) The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year consisting of twelve 30-day months. (c) During such time as the Property Trustee is the holder of any Securities, the Corporation shall pay any additional amounts on the Securities as may be necessary in order that the amount of Distributions then due and payable by the Trust on the outstanding Trust Securities shall not be reduced as a result of any additional taxes, duties and other governmental charges to which the Trust has become subject as a result of a Tax Event ("Additional Sums"). SECTION 2.06 Transfer and Exchange. (a) Transfer Restrictions. (i) The Securities may not be transferred except in compliance with the legend contained in Exhibit A unless otherwise determined by the Corporation in accordance with applicable law. Upon any distribution of the Securities following a Dissolution Event, the Corporation and the Debenture Trustee shall enter into a supplemental indenture pursuant to Section 9.01 to provide for the transfer procedures with respect to the Securities substantially similar to those contained in the Declaration to the extent applicable in the circumstances existing at such time. (ii) The Securities will be issued and may be transferred only in blocks having an aggregate principal amount of not less than $25 and in multiples of $25 in excess thereof. Any attempted transfer of the Securities in a block having an aggregate principal amount of less than $25 shall be deemed to be voided and of no legal effect whatsoever. Any such purported transferee shall be deemed not to be a holder of such Securities for any purpose, including, but not limited to the receipt of payments on such Securities, and such purported transferee shall be deemed to have no interest whatsoever in such Securities. (b) General Provisions Relating to Transfers and Exchanges. To permit registrations of transfers and exchanges, the Corporation shall execute and the Debenture Trustee shall authenticate Definitive Securities and Global Securities at the request of the security registrar for the Securities. All Definitive Securities and Global Securities issued upon any registration of transfer or exchange of Definitive Securities or Global Securities shall be the valid obligations of the Corporation, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Definitive Securities or Global Securities surrendered upon such registration of transfer or exchange. No service charge shall be made to a holder for any registration of transfer or exchange, but the Corporation may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith. -12- The Corporation shall not be required to: (i) issue, register the transfer of or exchange Securities during a period beginning at the opening of business 15 days before the day of mailing of a notice of prepayment or any notice of selection of Securities for prepayment under Article XIV hereof and ending at the close of business on the day of such mailing; or (ii) register the transfer of or exchange any Security so selected for prepayment in whole or in part, except the nonprepaid portion of any Security being prepaid in part. Prior to due presentment for the registration of a transfer of any Security, the Debenture Trustee, the Corporation and any agent of the Debenture Trustee or the Corporation may deem and treat the Person in whose name any Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and premium, if any and interest on such Securities, and none of the Debenture Trustee, the Corporation or any agents of the Debenture Trustee or the Corporation shall be affected by notice to the contrary. SECTION 2.07 Replacement Securities. If any mutilated Security is surrendered to the Debenture Trustee, or the Corporation and the Debenture Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, the Corporation shall issue and the Debenture Trustee shall authenticate a replacement Security if the Debenture Trustee's requirements for replacements of Securities are met. An indemnity bond must be supplied by the holder that is sufficient in the judgment of the Debenture Trustee and the Corporation to protect the Corporation, the Debenture Trustee, any agent thereof or any authenticating agent from any loss that any of them may suffer if a Security is replaced. The Corporation or the Debenture Trustee may charge for its expenses in replacing a Security. Every replacement Security is an obligation of the Corporation and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Securities duly issued hereunder. SECTION 2.08 Temporary Securities. Pending the preparation of Definitive Securities, the Corporation may execute, and upon Corporation Order the Debenture Trustee shall authenticate and make available for delivery, temporary Securities that are printed, lithographed, typewritten, mimeographed or otherwise reproduced, in any authorized denomination, substantially of the tenor of the Definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the Officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Corporation shall cause Definitive Securities to be prepared without unreasonable delay. The Definitive Securities shall be printed, lithographed or engraved, or provided by any combination thereof, or in any other manner permitted by the rules and regulations of any applicable securities exchange, all as determined by the Officers executing such Definitive Securities. After the preparation of Definitive Securities, the temporary Securities shall be exchangeable for Definitive Securities upon surrender of the temporary Securities at the office or agency maintained by the Corporation for such purpose pursuant to Section 3.02 hereof, without -13- charge to the holder thereof. Upon surrender for cancellation of any one or more temporary Securities, the Corporation shall execute, and the Debenture Trustee shall authenticate and make available for delivery, in exchange therefor the same aggregate principal amount of Definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as Definitive Securities. SECTION 2.09 Cancellation. The Corporation at any time may deliver Securities to the Debenture Trustee for cancellation. The Debenture Trustee and no one else shall cancel all Securities surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall return such canceled Securities to the Corporation. The Corporation may not issue new Securities to replace Securities that have been prepaid or paid or that have been delivered to the Debenture Trustee for cancellation. SECTION 2.10 Defaulted Interest. Any interest on any Security that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the holder on the relevant regular record date by virtue of having been such holder; and such Defaulted Interest shall be paid by the Corporation, at its election, as provided in clause (a) or clause (b) below: (a) The Corporation may make payment of any Defaulted Interest on Securities to the Persons in whose names such Securities (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Corporation shall notify the Debenture Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Security and the date of the proposed payment, and at the same time the Corporation shall deposit with the Debenture Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Debenture Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon, the Debenture Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Debenture Trustee of the notice of the proposed payment. The Debenture Trustee shall promptly notify the Corporation of such special record date and, in the name and at the expense of the Corporation, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at his or her address as it appears in the Security Register, not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Securities (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable pursuant to the following clause (b). -14- (b) The Corporation may make payment of any Defaulted Interest on any Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Corporation to the Debenture Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Debenture Trustee. SECTION 2.11 CUSIP Numbers. The Corporation in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Debenture Trustee shall use "CUSIP" numbers in notices of prepayment as a convenience to Securityholders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a prepayment and that reliance may be placed only on the other identification numbers printed on the Securities, and any such prepayment shall not be affected by any defect in or omission of such numbers. The Corporation will promptly notify the Debenture Trustee of any change in the CUSIP numbers. ARTICLE III PARTICULAR COVENANTS OF THE CORPORATION SECTION 3.01 Payment of Principal, Premium and Interest. The Corporation covenants and agrees for the benefit of the holders of the Securities that it will duly and punctually pay or cause to be paid the principal of (and premium, if any) and interest on the Securities at the place, at the respective times and in the manner provided herein. The Corporation further covenants to pay any and all amounts due in respect of the Securities, including, without limitation, Additional Sums, as may be required pursuant to Section 2.06(c) and Compounded Interest, as may be required pursuant to Section 16.01. SECTION 3.02 Offices for Notices and Payments, etc. So long as any of the Securities remain outstanding, the Corporation will maintain in New York, New York, an office or agency where the Securities may be presented for payment, an office or agency where the Securities may be presented for registration of transfer and for exchange as in this Indenture provided and an office or agency where notices and demands to or upon the Corporation in respect of the Securities or this Indenture may be served. The Corporation will give to the Debenture Trustee written notice of the location of any such office or agency and of any change of location thereof. Until otherwise designated from time to time by the Corporation in a notice to the Debenture Trustee, any such office or agency for all of the above purposes shall be the Principal Office of the Debenture Trustee. In case the Corporation shall fail to maintain any such office or agency 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 Debenture Trustee. -15- In addition to any such office or agency, the Corporation may from time to time designate one or more offices or agencies outside New York, New York, where the Securities may be presented for payment, for registration of transfer and for exchange and where notices and demands to or upon the Corporation in respect of the Securities or this Indenture may be served in the manner provided in this Indenture, and the Corporation may from time to time rescind such designation, as the Corporation may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Corporation of its obligation to maintain any such office or agency in New York, New York, for the purposes above mentioned. The Corporation will give to the Debenture Trustee prompt written notice of any such designation or rescission thereof. SECTION 3.03 Appointments to Fill Vacancies in Debenture Trustee's Office. The Corporation, whenever necessary to avoid or fill a vacancy in the office of Debenture Trustee, will appoint, in the manner provided in Section 6.10, a Debenture Trustee, so that there shall at all times be a Debenture Trustee hereunder. SECTION 3.04 Provision as to Paying Agent. (a) If the Corporation shall appoint a paying agent other than the Debenture Trustee with respect to the Securities, it will cause such paying agent to execute and deliver to the Debenture Trustee an instrument in which such agent shall agree with the Debenture Trustee, subject to the provisions of this Section 3.04, (1) that it will hold all sums held by it as such agent for the payment of the principal of and premium, if any, or interest on the Securities (whether such sums have been paid to it by the Corporation or by any other obligor on the Securities) in trust for the benefit of the holders of the Securities; and (2) that it will give the Debenture Trustee notice of any failure by the Corporation (or by any other obligor on the Securities) to make any payment of the principal of or premium, if any, or interest (including Additional Sums and Compounded Interest, if any) on the Securities when the same shall be due and payable. (b) If the Corporation shall act as its own paying agent, it will, on or before each due date of the principal of and premium, if any, or interest on the Securities, set aside, segregate and hold in trust for the benefit of the holders of the Securities a sum sufficient to pay such principal, premium or interest so becoming due and will notify the Debenture Trustee of any failure to take such action and of any failure by the Corporation (or by any other obligor under the Securities) to make any payment of the principal of or premium, if any, or interest on the Securities when the same shall become due and payable. (c) Anything in this Section 3.04 to the contrary notwithstanding, the Corporation may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Securities hereunder, or for any other reason, pay or cause to be paid to the Debenture Trustee all sums payable with respect to the Securities, such sums to be held by the Debenture Trustee upon the trusts herein contained. -16- (d) Anything in this Section 3.04 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.04 is subject to Sections 11.03 and 11.04. SECTION 3.05 Certificate to Debenture Trustee. The Corporation will deliver to the Debenture Trustee on or before 120 days after the end of each fiscal year of the Corporation, commencing with the first fiscal year ending after the date hereof, so long as Securities are outstanding hereunder, an Officers' Certificate, one of the signers of which shall be the principal executive, principal financial or principal accounting officer of the Corporation, stating that in the course of the performance by the signers of their duties as officers of the Corporation they would normally have knowledge of any Default by the Corporation in the performance of any covenants contained herein, stating whether or not they have knowledge of any such Default and, if so, specifying each such Default of which the signers have knowledge, the nature thereof and the action, if any, the Corporation intends to undertake as a result of such Default. SECTION 3.06 Compliance with Consolidation Provisions. The Corporation will not, while any of the Securities remain outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article X hereof are complied with. SECTION 3.07 Limitation on Dividends. If (1) there shall have occurred any event of which the Corporation has actual knowledge that (a) is a Default or an Event of Default and (b) in respect of which the Corporation shall not have taken reasonable steps to cure, (2) if the Securities are held by the Property Trustee, the Corporation shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee or (3) the Corporation shall have given notice of its election to exercise its right to commence an Extended Interest Payment Period and shall not have rescinded such notice, and such Extended Interest Payment Period or any extension thereof shall have commenced and be continuing, the Corporation will not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Corporation's capital stock, (ii) make any payment of principal of or premium, if any, or interest on or repay, repurchase or redeem any debt securities of the Corporation (including Other Debentures) that rank pari passu with or junior in right of payment to the Securities or (iii) make any guarantee payments with respect to any guarantee (other than the Capital Securities Guarantee) by the Corporation of the debt securities of any Subsidiary of the Corporation (including Other Guarantees) if such guarantee ranks pari passu with or junior in right of payment to the Securities (other than (a) dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, Common Stock), (b) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) as a result of a reclassification of the Corporation's capital stock or the exchange or conversion of one class or series of the Corporation's capital stock for another class or series of the Corporation's capital stock, (d) the purchase of fractional interests in shares of the Corporation's capital stock pursuant to the conversion or exchange provisions of such capital stock -17- or the security being converted or exchanged and (e) purchases of Common Stock related to the issuance of Common Stock or rights under any of the Corporation's benefit or compensation plans for its directors, officers or employees or any of the Corporation's dividend reinvestment plans). SECTION 3.08 Covenants as to Haven Capital Trust II In the event Securities are issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust, for so long as such Trust Securities remain outstanding, the Corporation (i) will maintain 100% direct or indirect ownership of the Common Securities of the Trust; provided, however, that any successor of the Corporation, permitted pursuant to Article X, may succeed to the Corporation's ownership of such Common Securities, (ii) will use commercially reasonable efforts to cause the Trust (a) to remain a business trust, except in connection with a distribution of Securities to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities of the Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, and (b) not to be classified as an association taxable as a corporation and to be classified as a grantor trust, in each case for United States federal income tax purposes, (iii) will use commercially reasonable efforts to cause each holder of the Trust Securities to be treated as owning an undivided beneficial interest in the Securities and (iv) will not cause, as sponsor of the Trust, or permit, as holder of the Common Securities, the dissolution, winding-up or liquidation of the Trust, except as provided in the Declaration. SECTION 3.09 Payment of Expenses. In connection with the offering, sale and issuance of the Securities to the Trust and in connection with the sale of the Trust Securities by the Trust, the Corporation, in its capacity as borrower with respect to the Securities, shall: (a) pay all costs and expenses relating to the offering, sale and issuance of the Securities and compensation of the Debenture Trustee in accordance with the provisions of Section 6.06; (b) pay all costs and expenses of the Trust, including, but not limited to, costs and expenses relating to the organization of the Trust, the registration, offering, sale and issuance of the Trust Securities (including commissions payable to the Underwriters pursuant to the Underwriting Agreement in connection therewith), the fees and expenses of the Property Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of assets of the Trust; (c) be primarily and fully liable for any indemnification obligations arising with respect to the Declaration; -18- (d) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust; and (e) pay all other fees, expenses, debts and obligations (other than in respect of the Trust Securities) related to the Trust. SECTION 3.10 Payment Upon Resignation or Removal. Upon termination of this Indenture or the removal or resignation of the Debenture Trustee, unless otherwise stated, the Corporation shall pay to the Debenture Trustee all amounts accrued and owing to the Debenture Trustee to the date of such termination, removal or resignation. Upon termination of the Declaration or the removal or resignation of the Delaware Trustee or the Property Trustee, as the case may be, pursuant to Section 5.7 of the Declaration, the Corporation shall pay to the Delaware Trustee or the Property Trustee, as the case may be, all amounts accrued and owing to such trustee(s) to the date of such termination, removal or resignation. ARTICLE IV LIST OF SECURITYHOLDERS AND REPORTS BY THE CORPORATION AND THE DEBENTURE TRUSTEE SECTION 4.01 List of Securityholders. The Corporation covenants and agrees that it will furnish or cause to be furnished to the Debenture Trustee: (a) on a quarterly basis on each regular record date for the Securities, a list, in such form as the Debenture Trustee may reasonably require, of the names and addresses of the Securityholders as of such record date; and (b) at such other times as the Debenture Trustee may request in writing, within 30 days after the receipt by the Corporation, of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished, except that, no such lists need be furnished so long as the Debenture Trustee is in possession thereof by reason of its acting as security registrar for the Securities. SECTION 4.02 Preservation and Disclosure of Lists. (a) The Debenture Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of the Securities (1) contained in the most recent list furnished to it as provided in Section 4.01 or (2) received by it in the capacity of security registrar (if so acting) hereunder. The Debenture Trustee may destroy any list furnished to it as provided in Section 4.01 upon receipt of a new list so furnished. -19- (b) In case three or more holders of Securities (hereinafter referred to as "applicants") apply in writing to the Debenture Trustee and furnish to the Debenture Trustee reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of Securities or with holders of all Securities with respect to their rights under this Indenture and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Debenture Trustee shall within five Business Days after the receipt of such application, at its election, either: (1) afford such applicants access to the information preserved at the time by the Debenture Trustee in accordance with the provisions of subsection (a) of this Section 4.02, or (2) inform such applicants as to the approximate number of holders of all Securities whose names and addresses appear in the information preserved at the time by the Debenture Trustee in accordance with the provisions of subsection (a) of this Section 4.02, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application. If the Debenture Trustee shall elect not to afford such applicants access to such information, the Debenture Trustee shall, upon the written request of such applicants, mail to each Securityholder whose name and address appear in the information preserved at the time by the Debenture Trustee in accordance with the provisions of subsection (a) of this Section 4.02 a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the Debenture Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five Business Days after such tender, the Debenture Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Debenture Trustee, such mailing would be contrary to the best interests of the holders of Securities or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Debenture Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Debenture Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Each and every holder of Securities, by receiving and holding the same, agrees with the Corporation and the Debenture Trustee that neither the Corporation nor the Debenture Trustee nor any paying agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Securities in accordance with the provisions of subsection (b) of this Section 4.02, regardless of the source from which such information was derived, and that the Debenture Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b). -20- SECTION 4.03 Reports by the Corporation. (a) The Corporation covenants and agrees to file with the Debenture Trustee, within 15 days after the date on which the Corporation is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as said Commission may from time to time by rules and regulations prescribe) which the Corporation may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Corporation is not required to file information, documents or reports pursuant to either of such sections, then to provide to the Debenture Trustee, such of the supplementary and periodic information, documents and reports which would have been required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations. The Corporation also covenants and agrees to comply with the provisions of Section 314(a) of the Trust Indenture Act. (b) The Corporation covenants and agrees to file with the Debenture Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by said Commission, such additional information, documents and reports with respect to compliance by the Corporation with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations. (c) The Corporation covenants and agrees to transmit by mail to all holders of Securities, as the names and addresses of such holders appear upon the Security Register, within 30 days after the filing thereof with the Debenture Trustee, such summaries of any information, documents and reports required to be filed by the Corporation pursuant to subsections (a) and (b) of this Section 4.03 as may be required by rules and regulations prescribed from time to time by the Commission. (d) Delivery of such reports, information and documents to the Debenture Trustee is for informational purposes only and the Debenture Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Corporation's compliance with any of its covenants hereunder (as to which the Debenture Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 4.04 Reports by the Debenture Trustee. (a) The Debenture Trustee shall transmit to Securityholders such reports concerning the Debenture Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the Debenture Trustee shall, within 60 days after December 15, 1999, and no later than December 15 in each succeeding year, deliver to Securityholders a brief report, dated as of each such date which complies with the provisions of such Section 313(a). (b) A copy of each such report shall, at the time of such transmission to Securityholders, be filed by the Debenture Trustee with each stock exchange, if any, upon which the Securities are -21- listed, with the Commission and with the Corporation. The Corporation will promptly notify the Debenture Trustee when the Securities are listed on any stock exchange. ARTICLE V REMEDIES OF THE DEBENTURE TRUSTEE AND SECURITYHOLDERS UPON EVENT OF DEFAULT SECTION 5.01 Events of Default. One or more of the following events of default shall constitute an Event of Default hereunder (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of any interest (including Compounded Interest and Additional Sums, if any) on the Securities or any Other Debentures (about which a Responsible Officer of the Debenture Trustee has actual knowledge) when due, and continuance of such default for a period of 30 days; provided, however, that a valid extension of an interest payment period by the Corporation in accordance with the terms hereof or thereof shall not constitute a default in the payment of interest for this purpose; or (b) default in the payment of any principal of (or premium, if any, on) the Securities or any Other Debentures (about which a Responsible Officer of the Debenture Trustee has actual knowledge) when due, whether at maturity, upon prepayment, by declaration of acceleration of maturity or otherwise; or (c) default in the performance, or breach in any material respect, of any covenant or warranty of the Corporation in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Corporation by the Debenture Trustee or to the Corporation and the Debenture Trustee by the holders of at least 25% in aggregate principal amount of the outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (d) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Corporation in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Corporation or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or -22- (e) the Corporation shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due. If an Event of Default with respect to Securities at the time outstanding occurs and is continuing, then in every such case the Debenture Trustee or the holders of not less than 25% in aggregate principal amount of the Securities then outstanding may declare the principal amount of all Securities to be due and payable immediately, by a notice in writing to the Corporation (and to the Debenture Trustee if given by the holders of the outstanding Securities), and upon any such declaration the same shall become immediately due and payable. The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Securities shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, (i) the Corporation shall pay or shall deposit with the Debenture Trustee a sum sufficient to pay (A) all matured installments of interest (including Compounded Interest and Additional Sums, if any) on all the Securities and the principal of and premium, if any, on any and all Securities which shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest, at the same rate as the rate of interest specified in the Securities to the date of such payment or deposit) and (B) such amount as shall be sufficient to cover compensation and expenses due to the Debenture Trustee and each predecessor Debenture Trustee, their respective agents, attorneys and counsel, pursuant to Section 6.06, and (ii) any and all Events of Default under the Indenture, other than the non-payment of the principal of the Securities which shall have become due solely by such declaration of acceleration, shall have been cured, waived or otherwise remedied as provided herein, then, in every such case, the holders of a majority in aggregate principal amount of the Securities then outstanding, by written notice to the Corporation and to the Debenture Trustee, may rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. In case the Debenture Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Debenture Trustee, then and in every such case the Corporation, the Debenture Trustee and the holders of the Securities shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Corporation, the Debenture Trustee and the holders of the Securities shall continue as though no such proceeding had been taken. -23- SECTION 5.02 Payment of Securities on Default; Suit Therefor. The Corporation covenants that (a) in case default shall be made in the payment of any installment of interest (including Compounded Interest and Additional Sums, if any) on any of the Securities as and when the same shall become due and payable, and such default shall have continued for a period of 30 days, or (b) in case default shall be made in the payment of the principal of or premium, if any, on any of the Securities as and when the same shall have become due and payable, whether at maturity of the Securities or upon prepayment or by declaration or otherwise, then, upon demand of the Debenture Trustee, the Corporation will pay to the Debenture Trustee, for the benefit of the holders of the Securities, the whole amount that then shall have become due and payable on all such Securities for principal and premium, if any, or interest (including Compounded Interest and Additional Sums, if any) or both, as the case may be, with interest upon the overdue principal and premium, if any, and (to the extent that payment of such interest is enforceable under applicable law and, if the Securities are held by the Trust or a trustee of such Trust, without duplication of any other amounts paid by the Trust or a trustee in respect thereof) upon the overdue installments of interest (including Compounded Interest and Additional Sums, if any) at the rate borne by the Securities; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to the Debenture Trustee, its agents, attorneys and counsel, and any other amount due to the Debenture Trustee pursuant to Section 6.06. In case the Corporation shall fail forthwith to pay such amounts upon such demand, the Debenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Corporation or any other obligor on the Securities and collect in the manner provided by law out of the property of the Corporation or any other obligor on the Securities, wherever situated, the moneys adjudged or decreed to be payable. In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Corporation or any other obligor on the Securities under Title 11, United States Code, or any other applicable law, or in case a receiver or trustee shall have been appointed for the property of the Corporation or such other obligor, or in the case of any other similar judicial proceedings relative to the Corporation or other obligor upon the Securities, or to the creditors or property of the Corporation or such other obligor, the Debenture Trustee, irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Debenture Trustee shall have made any demand pursuant to the provisions of this Section 5.02, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Securities and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Debenture Trustee (including any claim for amounts due to the Debenture Trustee pursuant to Section 6.06) and of the Securityholders allowed in such judicial proceedings relative to the Corporation or any other obligor on the Securities, or to the creditors or property of the Corporation or such other obligor, unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Securities in any election of a trustee or a standby trustee in arrangement, -24- reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute the same after the deduction of its charges and expenses; and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Debenture Trustee, and, in the event that the Debenture Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Debenture Trustee such amounts as shall be sufficient to cover reasonable compensation to, and expenses of, the Debenture Trustee, each predecessor Debenture Trustee and their respective agents, attorneys and counsel, and all other amounts due to the Debenture Trustee pursuant to Section 6.06. Nothing herein contained shall be construed to authorize the Debenture Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any holder thereof or to authorize the Debenture Trustee to vote in respect of the claim of any Securityholder in any such proceeding. All rights of action and of asserting claims under this Indenture, or under any of the Securities, may be enforced by the Debenture Trustee without the possession of any of the Securities, or the production thereof on any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Debenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the holders of the Securities. In any proceedings brought by the Debenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Debenture Trustee shall be a party), the Debenture Trustee shall be held to represent all the holders of the Securities, and it shall not be necessary to make any holders of the Securities parties to any such proceedings. SECTION 5.03 Application of Moneys Collected by Debenture Trustee. Any moneys collected by the Debenture Trustee shall be applied in the following order, at the date or dates fixed by the Debenture Trustee for the distribution of such moneys, upon presentation of the Securities in respect of which moneys have been collected, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid: First: To the payment of costs and expenses of collection applicable to the Securities and all other amounts due to the Debenture Trustee under Section 6.06; Second: To the payment of all Senior Indebtedness of the Corporation if and to the extent required by Article XV; Third: To the payment of the amounts then due and unpaid upon Securities for principal of (and premium, if any) and interest (including Compounded Interest and Additional Sums, if any) on the Securities, in respect of which or for the benefit of which money has been collected, ratably, -25- without preference of priority of any kind, according to the amounts due on such Securities for principal (and premium, if any) and interest, respectively; and Fourth: To the Corporation. SECTION 5.04 Proceedings by Securityholders. No holder of any Security shall have any right by virtue of or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless such holder previously shall have given to the Debenture Trustee written notice of an Event of Default and of the continuance thereof with respect to the Securities specifying such Event of Default, as hereinbefore provided, and unless also the holders of not less than 25% in aggregate principal amount of the Securities then outstanding shall have made written request upon the Debenture Trustee to institute such action, suit or proceeding in its own name as Debenture Trustee hereunder and shall have offered to the Debenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Debenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding, it being understood and intended, and being expressly covenanted by the taker and holder of every Security with every other taker and holder and the Debenture Trustee, that no one or more holders of Securities shall have any right in any manner whatever by virtue of or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other holder of Securities, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Securities. Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Security to receive payment of the principal of (and premium, if any) and interest on (including Compounded Interest and Additional Sums, if any) on such Security, on or after the same shall have become due and payable, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder, and by accepting a Security hereunder it is expressly understood, intended and covenanted by the taker and holder of every Security with every other such taker and holder and the Debenture Trustee, that no one or more holders of Securities shall have any right in any manner whatsoever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other Securities, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Securities. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Debenture Trustee shall be entitled to such relief as can be given either at law or in equity. The Corporation and the Debenture Trustee acknowledge that pursuant to the Declaration, the holders of Capital Securities are entitled, in the circumstances and subject to the limitations set forth therein, to commence a Direct Action with respect to any Event of Default referred to in clause (a) or (b) of Section 5.01. -26- SECTION 5.05 Proceedings by Debenture Trustee. In case an Event of Default occurs with respect to Securities and is continuing, the Debenture Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Debenture Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Debenture Trustee by this Indenture or by law. SECTION 5.06 Remedies Cumulative and Continuing. All powers and remedies given by this Article V to the Debenture Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Debenture Trustee or the holders of the Securities, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to the Securities, and no delay or omission of the Debenture Trustee or of any holder of any of the Securities to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.04, every power and remedy given by this Article V or by law to the Debenture Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Debenture Trustee or by the Securityholders. SECTION 5.07 Direction of Proceedings and Waiver of Defaults by Majority of Securityholders. The holders of a majority in aggregate principal amount of the Securities at the time outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee; provided, however, that (subject to the provisions of Section 6.01) the Debenture Trustee shall have the right to decline to follow any such direction if the Debenture Trustee shall determine that the action so directed would be unjustly prejudicial to the holders not taking part in such direction or if the Debenture Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if the Debenture Trustee in good faith by one of its Responsible Officers shall determine that the action or proceedings so directed would involve the Debenture Trustee in personal liability. Prior to any declaration accelerating the maturity of the Securities, the holders of a majority in aggregate principal amount of the Securities at the time outstanding may on behalf of the holders of all of the Securities waive any past Default or Event of Default and its consequences except a Default (a) in the payment of principal of (or premium, if any) or interest on (including Compounded Interest and Additional Sums, if any) any of the Securities (unless such default has been cured and a sum sufficient to pay all matured installments of interest (including Compounded Interest and Additional Sums, if any) and premium, if any, and principal due otherwise than by acceleration has been deposited with the Debenture Trustee) or (b) in respect of covenants or provisions hereof which cannot be modified or amended without the consent of the -27- holder of each Security affected; provided, however, that if the Securities are held by the Property Trustee, such waiver or modification to such waiver shall not be effective until the holders of a majority in aggregate liquidation amount of Trust Securities shall have consented to such waiver or modification to such waiver; provided, further, that if the consent of the holder of each outstanding Security is required, such waiver shall not be effective until each holder of the Trust Securities shall have consented to such waiver. Upon any such waiver, the Default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Corporation, the Debenture Trustee and the holders of the Securities shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Whenever any Default or Event of Default hereunder shall have been waived as permitted by this Section 5.07, said Default or Event of Default shall for all purposes of the Securities and this Indenture be deemed to have been cured and to be not continuing. SECTION 5.08 Notice of Defaults (a) The Debenture Trustee shall, within 90 days after the occurrence of a Default with respect to the Securities actually known to a Responsible Officer of the Debenture Trustee, mail to all Securityholders, as the names and addresses of such holders appear upon the Security Register, notice of all such Defaults, unless such Default shall have been cured before the giving of such notice (the term "Default" for the purpose of this Section 5.08 being hereby defined to be any of the events specified in clauses (a), (b), (c), (d) and (e) of Section 5.01, not including periods of grace, if any, provided for therein, and irrespective of the giving of written notice specified in clause (c) of Section 5.01); provided, however, that, except in the case of Default in the payment of the principal of (or premium, if any) or interest (including Compounded Interest or Additional Sums, if any) on any of the Securities, the Debenture Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Debenture Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders; provided, further, that in the case of any Default of the character specified in Section 5.01(c), no such notice to Securityholders shall be given until at least 60 days after the occurrence thereof, but shall be given within 90 days after such occurrence. (b) Within five Business Days of a Responsible Officer of the Debenture Trustee receiving actual knowledge of an Event of Default, the Debenture Trustee shall transmit notice of such Event of Default to all Securityholders as their names and addresses appear on the Security Register, unless such Event of Default shall have been cured or waived. SECTION 5.09 Undertaking to Pay Costs. All parties to this Indenture agree, and each holder of any Security by its acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Debenture Trustee for any action taken or omitted by it as Debenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.09 shall not apply to any suit instituted by the Debenture -28- Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in aggregate principal amount of the Securities outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest (including Compounded Interest and Additional Sums, if any) on any Security against the Corporation on or after the same shall have become due and payable. ARTICLE VI CONCERNING THE DEBENTURE TRUSTEE SECTION 6.01 Duties and Responsibilities of Debenture Trustee. With respect to the holders of the Securities issued hereunder, the Debenture Trustee, prior to the occurrence of an Event of Default (which, other than in the case of Sections 5.01(a) and 5.01(b) hereof, is actually known to a Responsible Officer of the Debenture Trustee) and after the curing or waiving of all such Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default (which, other than in the case of Sections 5.01(a) and 5.01(b) hereof, is actually known to a Responsible Officer of the Debenture Trustee) has occurred (which has not been cured or waived), the Debenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. No provision of this Indenture shall be construed to relieve the Debenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (a) prior to the occurrence of an Event of Default (which, other than in the case of Sections 5.01(a) and 5.01(b) hereof, is actually known to a Responsible Officer of the Debenture Trustee) and after the curing or waiving of all such Events of Default which may have occurred, (1) the duties and obligations of the Debenture Trustee shall be determined solely by the express provisions of this Indenture, and the Debenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Debenture Trustee; and (2) in the absence of bad faith on the part of the Debenture Trustee, the Debenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Debenture 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 Debenture Trustee, the Debenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; -29- (b) the Debenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers, unless it shall be proved that the Debenture Trustee was negligent in ascertaining the pertinent facts; and (c) the Debenture Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Securityholders pursuant to Section 5.07, relating to the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred upon the Debenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Debenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it reasonably believes that the repayment of such funds or liability is not reasonably assured to it under the terms of this Indenture or adequate indemnity against such risk is not reasonably assured to it. SECTION 6.02 Reliance on Documents, Opinions, etc. Except as otherwise provided in Section 6.01: (a) the Debenture Trustee may conclusively rely and shall be 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 Corporation mentioned herein may be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be evidenced to the Debenture Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Corporation; (c) the Debenture Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Debenture Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Debenture Trustee reasonable and sufficient security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; -30- (e) the Debenture Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; nothing contained herein shall, however, relieve the Debenture Trustee of the obligation, upon the occurrence of an Event of Default (which, other than in the case of Sections 5.01(a) and 5.01(b) hereof, is actually known to a Responsible Officer of the Debenture Trustee) (that has not been cured or waived), to exercise such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; (f) the Debenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, coupon or other paper or document, unless requested in writing to do so by the holders of a majority in aggregate principal amount of the outstanding Securities; provided, however, that if the payment within a reasonable time to the Debenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Debenture Trustee, not reasonably assured to the Debenture Trustee by the security afforded to it by the terms of this Indenture, the Debenture Trustee may require reasonable indemnity against such expense or liability as a condition to so proceeding; (g) the Debenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents (including any Authenticating Agent) or attorneys, and the Debenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care; (h) the Debenture Trustee shall not be charged with knowledge of any Default or Event of Default unless (1) such Default or Event of Default falls within Section 5.01(a) (other than a default with respect to the payment of Compounded Interest or Additional Sums) or Section 5.01(b) of the Indenture, (2) a Responsible Officer shall have actual knowledge of such Default or Event of Default or (3) written notice of such Default or Event of Default shall have been given to the Debenture Trustee by the Corporation or any other obligor on the Securities or by any holder of the Securities; and (i) the Debenture Trustee shall not be liable for any action taken, suffered or omitted by it in good faith, without negligence or willful misconduct and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. -31- SECTION 6.03 No Responsibility for Recitals, etc. The recitals contained herein and in the Securities (except in the certificate of authentication of the Debenture Trustee or the Authenticating Agent) shall be taken as the statements of the Corporation, and the Debenture Trustee and the Authenticating Agent assume no responsibility for the correctness of the same. The Debenture Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of the Securities. The Debenture Trustee and the Authenticating Agent shall not be accountable for the use or application by the Corporation of any Securities or the proceeds of any Securities authenticated and delivered by the Debenture Trustee or the Authenticating Agent in conformity with the provisions of this Indenture. SECTION 6.04 Debenture Trustee, Authenticating Agent, Paying Agents, Transfer Agents and Registrar May Own Securities. The Debenture Trustee or any Authenticating Agent or any paying agent or any transfer agent or any security registrar for the Securities, in its individual or any other capacity, may become the owner or pledgee of Securities with the same rights it would have if it were not Debenture Trustee, Authenticating Agent, paying agent, transfer agent or security registrar for the Securities. SECTION 6.05 Moneys to be Held in Trust. Subject to the provisions of Section 11.04, all moneys received by the Debenture Trustee or any paying agent shall, until used or applied as herein provided, be held in trust for the purpose for which they were received, but need not be segregated from other funds except to the extent required by law. The Debenture Trustee and any paying agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Corporation. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the written order of the Corporation, signed by an Officer thereof. SECTION 6.06 Compensation and Expenses of Debenture Trustee. The Corporation, as issuer of Securities under this Indenture, covenants and agrees to pay to the Debenture Trustee from time to time, and the Debenture Trustee shall be entitled to, such compensation as shall be agreed to in writing between the Corporation and the Debenture Trustee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), and the Corporation will pay or reimburse the Debenture Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Debenture Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ), except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Corporation also covenants to indemnify each of the Debenture Trustee (including in its individual capacity) and any predecessor Debenture Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense including taxes (other than taxes based on the income of the Debenture Trustee) incurred without negligence or bad faith on the part of the Debenture Trustee and arising out of or in connection with the -32- acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability. The obligations of the Corporation under this Section 6.06 to compensate and indemnify the Debenture Trustee and to pay or reimburse the Debenture Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Securities upon all property and funds held or collected by the Debenture Trustee as such, except funds held in trust for the benefit of the holders of particular Securities. When the Debenture Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.01(d) or Section 5.01(e), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for its services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law. The provisions of this Section shall survive the resignation or removal of the Debenture Trustee and the defeasance or other termination of this Indenture. SECTION 6.07 Officers' Certificate as Evidence. Except as otherwise provided in Sections 6.01 and 6.02, whenever in the administration of the provisions of this Indenture the Debenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof is herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Debenture Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Debenture Trustee, and such Officers' Certificate, in the absence of negligence or bad faith on the part of the Debenture Trustee, shall be full warrant to the Debenture Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof. SECTION 6.08 Conflicting Interest of Debenture Trustee. If the Debenture Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Debenture Trustee and the Corporation shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 6.09 Eligibility of Debenture Trustee. The Debenture Trustee hereunder shall at all times be a 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 permitted to act as trustee by the Commission authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least fifty million U.S. dollars ($50,000,000) and subject to supervision or examination by federal, state, territorial, or District of Columbia authority. If such 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 6.09 the combined capital and surplus of -33- such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Corporation may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Corporation, serve as Debenture Trustee. In case at any time the Debenture Trustee shall cease to be eligible in accordance with the provisions of this Section 6.09, the Debenture Trustee shall resign immediately in the manner and with the effect specified in Section 6.10. SECTION 6.10 Resignation or Removal of Debenture Trustee. (a) The Debenture Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice of such resignation to the Corporation and by mailing notice thereof to the holders of the Securities at their addresses as they shall appear on the Security Register. Upon receiving such notice of resignation, the Corporation shall promptly appoint a successor trustee or trustees by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Debenture Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 60 days after the mailing of such notice of resignation to the affected Securityholders, the resigning Debenture Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Securityholder who has been a bona fide holder of a Security for at least six months may, subject to the provisions of Section 5.09, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) In case at any time any of the following shall occur: (1) the Debenture Trustee shall fail to comply with the provisions of Section 6.08 after written request therefor by the Corporation or by any Securityholder who has been a bona fide holder of a Security or Securities for at least six months, or (2) the Debenture Trustee shall cease to be eligible in accordance with the provisions of Section 6.09 and shall fail to resign after written request therefor by the Corporation or by any such Securityholder, or (3) the Debenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Debenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Debenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, the Corporation may remove the Debenture Trustee and appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Debenture Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 5.09, any Securityholder who has been a bona fide holder of a Security for at least six -34- months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Debenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Debenture Trustee and appoint a successor trustee. (c) The holders of a majority in aggregate principal amount of the Securities at the time outstanding may at any time remove the Debenture Trustee and nominate a successor trustee, which shall be deemed appointed as successor trustee unless within 10 days after written notification of such nomination the Corporation objects thereto, or if no successor trustee shall have been so appointed and shall have accepted appointment within 30 days after such removal, in which case the Debenture Trustee so removed or any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this Section 6.10 provided, may petition any court of competent jurisdiction for an appointment of a successor trustee. (d) Any resignation or removal of the Debenture Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section 6.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 6.11. (e) The Corporation shall pay the Debenture Trustee all amounts owed to such Debenture Trustee pursuant to this Indenture upon the resignation or removal of the Debenture Trustee. SECTION 6.11 Acceptance by Successor Debenture Trustee. Any successor trustee appointed as provided in Section 6.10 shall execute, acknowledge and deliver to the Corporation and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the retiring trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Corporation or of the successor trustee, the trustee ceasing to act shall, upon payment of all amounts then due it pursuant to the provisions of Section 6.06, execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act and shall duly assign, transfer and deliver to such successor trustee all property and money held by such retiring trustee thereunder. Upon request of any such successor trustee, the Corporation shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Section 6.06. No successor trustee shall accept appointment as provided in this Section 6.11 unless at the time of such acceptance such successor trustee shall be qualified under the provisions of Section 6.08 and eligible under the provisions of Section 6.09. Upon acceptance of appointment by a successor trustee as provided in this Section 6.11, the Corporation shall mail notice of the succession of such trustee hereunder to the holders of Securities at their addresses as they shall appear on the Security Register. If the Corporation fails to mail such -35- notice within 10 days after the acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Corporation. SECTION 6.12 Succession by Merger, etc. Any corporation into which the Debenture 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 Debenture Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Debenture Trustee, shall be the successor of the Debenture Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated but not delivered at the time such successor to the Debenture Trustee shall succeed to the trusts created by this Indenture, any such successor to the Debenture Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Debenture Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor trustee; and in all such cases such certificates shall have the full force which the Securities or this Indenture elsewhere provides that the certificate of the Debenture Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Debenture Trustee or authenticate Securities in the name of any predecessor Debenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 6.13 Limitation on Rights of Debenture Trustee as a Creditor. The Debenture Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship described in Section 311(b) of the Trust Indenture Act. A Debenture Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent included therein. SECTION 6.14 Authenticating Agents. There may be one or more Authenticating Agents appointed by the Debenture Trustee upon the request of the Corporation with power to act on its behalf and subject to its direction in the authentication and delivery of Securities issued upon exchange or transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver Securities; provided, however, that the Debenture Trustee shall have no liability to the Corporation for any acts or omissions of the Authenticating Agent with respect to the authentication and delivery of Securities. Any such Authenticating Agent shall at all times be a 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 $5,000,000 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 6.14 the combined capital and surplus of such corporation shall -36- 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 with which it may be consolidated, or any corporation resulting from any merger or consolidation to which any Authenticating Agent shall be a party, or any corporation succeeding to 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 6.14 without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Debenture Trustee and to the Corporation. The Debenture Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Corporation. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 6.14, the Debenture Trustee may, and upon the request of the Corporation shall, promptly appoint a successor Authenticating Agent eligible under this Section 6.14, shall give written notice of such appointment to the Corporation and shall mail notice of such appointment to all Securityholders as the names and addresses of such holders appear on the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein. The Corporation, as issuer of the Securities, agrees to pay to any Authenticating Agent from time to time reasonable compensation for its services. Any Authenticating Agent shall have no responsibility or liability for any action taken by it as such in accordance with the directions of the Debenture Trustee. ARTICLE VII CONCERNING THE SECURITYHOLDERS SECTION 7.01 Action by Securityholders. Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Securities may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action the holders of such specified percentage have joined therein may be evidenced (a) by any instrument (including by way of electronic transmission) or any number of instruments of similar tenor executed by such Securityholders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Securities voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Securityholders. -37- If the Corporation shall solicit from the Securityholders any request, demand, authorization, direction, notice, consent, waiver or other action, the Corporation may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action, but the Corporation shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action, and for that purpose the outstanding Securities shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. SECTION 7.02 Proof of Execution by Securityholders. Subject to the provisions of Sections 6.01, 6.02 and 8.05, proof of the execution of any instrument by a Securityholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Debenture Trustee or in such manner as shall be satisfactory to the Debenture Trustee. The ownership of Securities shall be proved by the Security Register or by a certificate of the security registrar for the Securities. The Debenture Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary. The record of any Securityholders' meeting shall be proved in the manner provided in Section 8.06. SECTION 7.03 Who Are Deemed Absolute Owners. Prior to due presentment for registration of transfer of any Security, the Corporation, the Debenture Trustee, any Authenticating Agent, any paying agent, any transfer agent and any security registrar for the Securities may deem the person in whose name such Security shall be registered upon the Security Register to be, and may treat him as, the absolute owner of such Security (whether or not such Security shall be overdue) for the purpose of receiving payment of or on account of the principal of and premium, if any, and (subject to Section 2.06) interest on such Security and for all other purposes; and neither the Corporation nor the Debenture Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any security registrar for the Securities shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Security. -38- SECTION 7.04 Securities Owned by Corporation Deemed Not Outstanding. In determining whether the holders of the requisite aggregate principal amount of Securities have concurred in any direction, consent or waiver under this Indenture, Securities that are owned by the Corporation or any other obligor on the Securities or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Corporation or any other obligor on the Securities shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided, however, that for the purposes of determining whether the Debenture Trustee shall be protected in relying on any such direction, consent or waiver, only Securities which a Responsible Officer of the Debenture Trustee actually knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.04 if the pledgee shall establish to the satisfaction of the Debenture Trustee the pledgee's right to vote such Securities and that the pledgee is not the Corporation or any such other obligor or Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Corporation or any such other obligor. In the case of a dispute as to such right, any decision by the Debenture Trustee taken upon the advice of counsel shall be full protection to the Debenture Trustee. SECTION 7.05 Revocation of Consents; Future Holders Bound. At any time prior to (but not after) the evidencing to the Debenture Trustee, as provided in Section 7.01, of the taking of any action by the holders of the percentage in aggregate principal amount of the Securities specified in this Indenture in connection with such action, any holder of a Security (or any Security issued in whole or in part in exchange or substitution therefor), subject to Section 7.01, the serial number of which is shown by the evidence to be included in the group of Securities the holders of which have consented to such action, may, by filing written notice with the Debenture Trustee at its principal office and upon proof of holding as provided in Section 7.02, revoke such action so far as concerns such Security (or so far as concerns the principal amount represented by any exchanged or substituted Security). Except as aforesaid, any such action taken by the holder of any Security shall be conclusive and binding upon such holder and upon all future holders and owners of such Security, and of any Security issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon such Security or any Security issued in exchange or substitution therefor. ARTICLE VIII MEETINGS OF SECURITYHOLDERS SECTION 8.01 Purposes of Meetings. A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes: (a) to give any notice to the Corporation or to the Debenture Trustee, or to give any directions to the Debenture Trustee, or to consent to the waiving of any Default -39- hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article V; (b) to remove the Debenture Trustee and nominate a successor trustee pursuant to the provisions of Article VI; (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.02; or (d) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of such Securities under any other provision of this Indenture or under applicable law. SECTION 8.02 Call of Meetings by Debenture Trustee. The Debenture Trustee may at any time call a meeting of Securityholders to take any action specified in Section 8.01, to be held at such time and at such place in New York, New York, as the Debenture Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Securities at their addresses as they shall appear on the Security Register. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting. SECTION 8.03 Call of Meetings by Corporation or Securityholders. In case at any time the Corporation, pursuant to a resolution of the Board of Directors, or the holders of at least 10% in aggregate principal amount of the Securities then outstanding, shall have requested the Debenture Trustee to call a meeting of Securityholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Debenture Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Corporation or such Securityholders may determine the time and the place in New York, New York for such meeting and may call such meeting to take any action authorized in Section 8.01, by mailing notice thereof as provided in Section 8.02. SECTION 8.04 Qualifications for Voting. To be entitled to vote at any meeting of Securityholders, a Person shall be (a) a holder of one or more Securities or (b) a Person appointed by an instrument in writing as proxy by a holder of one or more Securities. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Debenture Trustee and its counsel and any representatives of the Corporation and its counsel. -40- SECTION 8.05 Regulations. Notwithstanding any other provisions of this Indenture, the Debenture Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Securities and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit. The Debenture Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Corporation or by Securityholders as provided in Section 8.03, in which case the Corporation or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting. Subject to the provisions of Section 8.04, at any meeting each holder of Securities or proxy therefor shall be entitled to one vote for each $25 principal amount of Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Securities held by him or instruments in writing as aforesaid duly designating him as the person to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 8.02 or 8.03 may be adjourned from time to time by a majority of those present, and the meeting may be held as so adjourned without further notice. SECTION 8.06 Voting. The vote upon any resolution submitted to any meeting of holders of Securities shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or numbers of the Securities held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.02. The record shall show the serial numbers of the Securities voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Corporation and the other to the Debenture Trustee to be preserved by the Debenture Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. -41- ARTICLE IX AMENDMENTS SECTION 9.01 Without Consent of Securityholders. The Corporation and the Debenture Trustee may from time to time and at any time amend this Indenture, without the consent of the Securityholders, for one or more of the following purposes: (a) to evidence the succession of another Person to the Corporation, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Corporation pursuant to Article X hereof; (b) to add to the covenants of the Corporation such further covenants, restrictions or conditions for the protection of the Securityholders as the Board of Directors and the Debenture Trustee shall consider to be for the protection of the Securityholders, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a Default or an Event of Default permitting the enforcement of all or any of the remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant, restriction or condition such amendment may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Debenture Trustee upon such default; (c) to provide for the issuance under this Indenture of Securities in coupon form (including Securities registrable as to principal only) and to provide for exchangeability of such Securities with the Securities issued hereunder in fully registered form and to make all appropriate changes for such purpose; (d) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture, provided that any such action shall not materially adversely affect the interests of the holders of the Securities; (e) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to the Securities; (f) to make provision for transfer procedures, certification, book-entry provisions, the form of restricted securities legends, if any, to be placed on Securities, and all other matters required pursuant to Section 2.07 or otherwise necessary, desirable or appropriate in connection with the issuance of Securities to holders of Capital Securities in the event of a distribution of Securities by the Trust following a -42- Dissolution Event, provided that any such action shall not materially adversely affect the interests of the holders of the Securities; (g) to qualify or maintain qualification of this Indenture under the Trust Indenture Act; or (h) to make any change that does not adversely affect the rights of any Securityholder in any material respect. The Debenture Trustee is hereby authorized to join with the Corporation in the execution of any supplemental indenture to effect such amendment, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Debenture Trustee shall not be obligated to, but may in its discretion, enter into any such supplemental indenture which affects the Debenture Trustee's own rights, duties or immunities under this Indenture or otherwise. Any amendment to this Indenture authorized by the provisions of this Section 9.01 may be executed by the Corporation and the Debenture Trustee without the consent of the holders of any of the Securities at the time outstanding, notwithstanding any of the provisions of Section 9.02. SECTION 9.02 With Consent of Securityholders. With the consent (evidenced as provided in Section 7.01) of the holders of a majority in aggregate principal amount of the Securities at the time outstanding, the Corporation, when authorized by a Board Resolution, and the Debenture Trustee may from time to time and at any time amend this Indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the holders of the Securities; provided, however, that no such amendment shall, without the consent of the holders of each Security then outstanding and affected thereby (i) change the Maturity Date of any Security, or reduce the rate or extend the time of payment of interest thereon (except as contemplated by Article XVI), or reduce the principal amount thereof, or change any prepayment provisions, or make the principal thereof or any interest or premium thereon payable in any coin or currency other than U.S. dollars, or impair or affect the right of any Securityholder to institute suit for payment thereof, or (ii) reduce the aforesaid percentage of Securities, the holders of which are required to consent to any such amendment to the Indenture; provided, however, that if the Securities are held by the Trust, such amendment shall not be effective until the holders of a majority in liquidation amount of Trust Securities shall have consented to such amendment; provided, further, that if the consent of the holder of each outstanding Security is required, such amendment shall not be effective until each holder of the Trust Securities shall have consented to such amendment. Upon the request of the Corporation accompanied by a copy of a resolution of the Board of Directors certified by its Secretary or Assistant Secretary authorizing the execution of any supplemental indenture effecting such amendment, and upon the filing with the Debenture Trustee of evidence of the consent of Securityholders as aforesaid, the Debenture Trustee shall join with the Corporation in the execution of such supplemental indenture unless such supplemental indenture affects the Debenture Trustee's own rights, duties or immunities under this Indenture or otherwise, -43- in which case the Debenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. Promptly after the execution by the Corporation and the Debenture Trustee of any supplemental indenture pursuant to the provisions of this Section, the Debenture Trustee shall transmit by mail, first class postage prepaid, a notice, prepared by the Corporation, setting forth in general terms the substance of such supplemental indenture, to the Securityholders as their names and addresses appear upon the Security Register. Any failure of the Debenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. It shall not be necessary for the consent of the Securityholders under this Section 9.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. SECTION 9.03 Compliance with Trust Indenture Act; Effect of Supplemental Indentures. Any supplemental indenture executed pursuant to the provisions of this Article IX shall comply with the Trust Indenture Act. Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Debenture Trustee, the Corporation and the holders of Securities shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.04 Notation on Securities. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a notation in form approved by the Debenture Trustee as to any matter provided for in such supplemental indenture. If the Corporation or the Debenture Trustee shall so determine, new Securities so modified as to conform, in the opinion of the Debenture Trustee and the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Corporation, authenticated by the Debenture Trustee or the Authenticating Agent and delivered in exchange for the Securities then outstanding. SECTION 9.05 Evidence of Compliance of Supplemental Indenture to be Furnished to Debenture Trustee. The Debenture Trustee, subject to the provisions of Sections 6.01 and 6.02, may receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto is authorized by and complies with the requirements of this Article IX and this Indenture. -44- ARTICLE X CONSOLIDATION, MERGER, SALE, CONVEYANCE, TRANSFER AND LEASE SECTION 10.01 Corporation May Consolidate, etc., on Certain Terms. Nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of the Corporation with or into any other Person (whether or not affiliated with the Corporation, as the case may be), or successive consolidations or mergers in which the Corporation or its successor or successors, as the case may be, shall be a party or parties, or shall prevent any sale, conveyance, transfer or lease of the property of the Corporation, or its successor or successors as the case may be, as an entirety, or substantially as an entirety, to any other Person (whether or not affiliated with the Corporation, or its successor or successors, as the case may be) authorized to acquire and operate the same, provided that (a) the Corporation is the surviving Person, or the Person formed by or surviving any such consolidation or merger (if other than the Corporation) or to which such sale, conveyance, transfer or lease of property is made is a Person organized and existing under the laws of the United States or any State thereof or the District of Columbia, and (b) if the Corporation is not the surviving Person, upon any such consolidation, merger, sale, conveyance, transfer or lease, the due and punctual payment of the principal of (and premium, if any) and interest on the Securities according to their tenor and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Corporation shall be expressly assumed by the surviving Person, by supplemental indenture (which shall conform to the provisions of the Trust Indenture Act as then in effect) satisfactory in form to the Debenture Trustee executed and delivered to the Debenture Trustee by the Person formed by such consolidation, or into which the Corporation shall have been merged, or by the Person which shall have acquired such property, as the case may be, and (c) after giving effect to such consolidation, merger, sale, conveyance, transfer or lease, no Default or Event of Default shall have occurred and be continuing. SECTION 10.02 Successor Person to be Substituted for Corporation. In case of any such consolidation, merger, sale, conveyance, transfer or lease, and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Debenture Trustee and satisfactory in form to the Debenture Trustee, of the obligation of due and punctual payment of the principal of (and premium, if any) and interest on all of the Securities and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Corporation, such successor Person shall succeed to and be substituted for the Corporation, with the same effect as if it had been named herein as a party hereto, and the Corporation thereupon shall be relieved of any further liability or obligation hereunder or upon the Securities. Such successor Person thereupon may cause to be signed, and may issue either in its own name or in the name of the Corporation, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Corporation and delivered to the Debenture Trustee or the Authenticating Agent; and, upon the order of such successor Person instead of the Corporation and subject to all the terms, conditions and limitations in this Indenture prescribed, the Debenture Trustee or the Authenticating Agent shall authenticate and deliver any Securities which previously shall have been signed and delivered by any Officer of the Corporation to the Debenture Trustee or the Authenticating Agent for authentication, and any Securities which -45- such successor Person thereafter shall cause to be signed and delivered to the Debenture Trustee or the Authenticating Agent for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. SECTION 10.03 Opinion of Counsel to be Given Debenture Trustee. The Debenture Trustee, subject to the provisions of Sections 6.01 and 6.02, may receive an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale, conveyance, transfer or lease, and any assumption, permitted or required by the terms of this Article X is authorized by and complies with the provisions of this Article X and this Indenture. ARTICLE XI SATISFACTION AND DISCHARGE OF INDENTURE SECTION 11.01 Discharge of Indenture. When (a) the Corporation shall deliver to the Debenture Trustee for cancellation all Securities theretofore authenticated (other than any Securities which shall have been destroyed, lost or stolen and which shall have been replaced as provided in Section 2.08) and not theretofore canceled, or (b) all the Securities not theretofore canceled or delivered to the Debenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for prepayment within one year under arrangements satisfactory to the Debenture Trustee for the giving of notice of prepayment, and the Corporation shall deposit with the Debenture Trustee, in trust, funds sufficient to pay on the Maturity Date or upon prepayment all of the Securities (other than any Securities which shall have been destroyed, lost or stolen and which shall have been replaced as provided in Section 2.08) not theretofore canceled or delivered to the Debenture Trustee for cancellation, including principal (and premium, if any) and interest (including Compounded Interest and Additional Sums, if any) due or to become due to the Maturity Date or prepayment date, as the case may be, but excluding, however, the amount of any moneys for the payment of principal of (or premium, if any) or interest (including Compounded Interest and Additional Sums, if any) on the Securities (1) theretofore repaid to the Corporation in accordance with the provisions of Section 11.04, or (2) paid to any State or to the District of Columbia pursuant to its unclaimed property or similar laws, and if, in either case the Corporation shall also pay or cause to be paid all other sums payable hereunder by the Corporation, then this Indenture shall cease to be of further effect except for the provisions of Sections 2.02, 2.07, 2.08, 3.01, 3.02, 3.04, 6.06, 6.10 and 11.04 hereof, which shall survive until such Securities shall mature and be paid. Thereafter, Sections 6.06, 6.10 and 11.04 shall survive, and the Debenture Trustee, on demand of the Corporation accompanied by any Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Corporation, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture; the Corporation, however, hereby agrees to reimburse the Debenture Trustee for any costs or expenses thereafter reasonably and properly incurred by the Debenture Trustee in connection with this Indenture or the Securities. -46- SECTION 11.02 Deposited Moneys and U.S. Government Obligations to be Held in Trust by Debenture Trustee. Subject to the provisions of Section 11.04, all moneys and U.S. Government Obligations deposited with the Debenture Trustee pursuant to Sections 11.01 or 11.05 shall be held in trust and applied by it to the payment, either directly or through any paying agent (including the Corporation if acting as its own paying agent), to the holders of the particular Securities for the payment of which such moneys or U.S. Government Obligations have been deposited with the Debenture Trustee, of all sums due and to become due thereon for principal, premium, if any, and interest. The Corporation shall pay and indemnify the Debenture Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Governmental Obligations deposited pursuant to Section 11.05 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the holders of outstanding Securities. SECTION 11.03 Paying Agent to Repay Moneys Held. Upon the satisfaction and discharge of this Indenture all moneys then held by any paying agent of the Securities (other than the Debenture Trustee) shall, upon written demand of the Corporation, be repaid to it or paid to the Debenture Trustee, and thereupon such paying agent shall be released from all further liability with respect to such moneys. SECTION 11.04 Return of Unclaimed Moneys. Any moneys deposited with or paid to the Debenture Trustee or any paying agent for payment of the principal of (or premium, if any) or interest (including Compounded Interest and Additional Sums, if any) on Securities and not applied but remaining unclaimed by the holders of Securities for two years after the date upon which the principal of (or premium, if any) or interest (including Compounded Interest and Additional Sums, if any) on such Securities, as the case may be, shall have become due and payable, shall be repaid to the Corporation by the Debenture Trustee or such paying agent; and the holder of any of the Securities shall thereafter look only to the Corporation for any payment which such holder may be entitled to collect and all liability of the Debenture Trustee or such paying agent with respect to such moneys shall thereupon cease. SECTION 11.05 Defeasance Upon Deposit of Moneys or U.S. Government Obligations. The Corporation shall be deemed to have been Discharged (as defined below) from its obligations with respect to the Securities on the 91st day after the applicable conditions set forth below have been satisfied: (a) the Corporation shall have deposited or caused to be deposited irrevocably with the Debenture Trustee or the Defeasance Agent (as defined below) as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the holders of the Securities (i) money in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with -47- their terms will provide, not later than one day before the due date of any payment, money in an amount, or (iii) a combination of (i) and (ii), sufficient, in the opinion (with respect to (ii) and (iii)) of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Debenture Trustee and the Defeasance Agent, if any, to pay and discharge each installment of principal of and interest and premium, if any, on the outstanding Securities on the dates such installments of principal and interest (and premium, if any) are due; (b) if the Securities are then listed on any national securities exchange, the Corporation shall have delivered to the Debenture Trustee and the Defeasance Agent, if any, an Opinion of Counsel to the effect that the exercise of the option under this Section 11.05 would not cause such Securities to be delisted from such exchange; (c) no Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit; and (d) the Corporation shall have delivered to the Debenture Trustee and the Defeasance Agent, if any, an Opinion of Counsel to the effect that holders of the Securities will not recognize income, gain or loss for United States federal income tax purposes as a result of the exercise of the option under this Section 11.05 and will be subject to United States federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised. "Discharged" means that the Corporation shall be deemed to have paid and discharged the entire indebtedness represented by, and obligations under, the Securities and to have satisfied all the obligations under this Indenture relating to the Securities (and the Debenture Trustee, at the expense of the Corporation, shall execute proper instruments acknowledging the same), except (1) the rights of holders of Securities to receive, from the trust fund described in clause (a) above, payment of the principal of and the interest and premium, if any, on the Securities when such payments are due; (2) the Corporation's obligations with respect to the Securities under Sections 2.07, 2.08, 5.02 and 11.04; and (3) the rights, powers, trusts, duties and immunities of the Debenture Trustee hereunder. "Defeasance Agent" means another financial institution which is eligible to act as Debenture Trustee hereunder and which assumes all of the obligations of the Debenture Trustee necessary to enable the Debenture Trustee to act hereunder. In the event such a Defeasance Agent is appointed pursuant to this Section, the following conditions shall apply: (1) the Debenture Trustee shall have approval rights over the document appointing such Defeasance Agent and the document setting forth such Defeasance Agent's rights and responsibilities; and (2) the Defeasance Agent shall provide verification to the Debenture Trustee acknowledging receipt of sufficient money and/or U.S. Government Obligations to meet the applicable conditions set forth in this Section 11.05. -48- ARTICLE XII IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS SECTION 12.01 Indenture and Securities Solely Corporate Obligations. No recourse for the payment of the principal of or premium, if any, or interest (including Compounded Interest and Additional Sums, if any) on any Security, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Corporation in this Indenture, or in any Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Corporation or of any successor Person to the Corporation, either directly or through the Corporation or any successor Person to the Corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of the Securities. ARTICLE XIII MISCELLANEOUS PROVISIONS SECTION 13.01 Successors. All of the covenants, stipulations, promises and agreements of the Corporation contained in this Indenture shall also bind the Corporation's successors and assigns whether so expressed or not. SECTION 13.02 Official Acts by Successor Corporation. Any act or proceeding that, by any provision of this Indenture, is authorized or required to be done or performed by any board, committee or officer of the Corporation shall and may be done and performed with like force and effect by the like board, committee or officer of any corporation that shall at the time be the lawful sole successor of the Corporation. SECTION 13.03 Surrender of Corporation Powers. The Corporation by instrument in writing executed by authority of 2/3 (two-thirds) of its Board of Directors and delivered to the Debenture Trustee may surrender any of the powers reserved to the Corporation hereunder, and thereupon such power so surrendered shall terminate both as to the Corporation, as the case may be, and as to any successor Person. SECTION 13.04 Addresses for Notices, etc. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Debenture Trustee or by the holders of Securities on the Corporation may be given or served by being deposited postage prepaid by first class mail, registered or certified mail, -49- overnight courier service or conformed telecopy addressed (until another address is filed by the Corporation with the Debenture Trustee for the purpose) to Haven Bancorp, Inc. at 615 Merrick Avenue, Westbury, New York, 11590, (516) 683-4483, Attention: Catherine Califano. Any notice, direction, request or demand by any Securityholder to or upon the Debenture Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the office of The Chase Manhattan Bank, 450 West 33rd Street , 15th Floor, New York, New York 10001, Attention: Capital Markets Fiduciary Services (unless another address is provided by the Debenture Trustee to the Corporation for such purpose). Any notice or communication to a Securityholder shall be mailed by first class mail to his or her address shown on the Security Register kept by the security registrar for the Securities. SECTION 13.05 Governing Law. This Indenture and each Security shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be governed by and construed in accordance with the laws of said State without regard to conflict of law principles thereof. SECTION 13.06 Evidence of Compliance with Conditions Precedent. Upon any application or demand by the Corporation to the Debenture Trustee to take any action under any of the provisions of this Indenture, the Corporation shall furnish to the Debenture Trustee an Officers' Certificate stating that in the opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Each certificate or opinion provided for in this Indenture and delivered to the Debenture Trustee with respect to compliance with a condition or covenant provided for in this Indenture (except certificates delivered pursuant to Section 3.05) shall include (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. SECTION 13.07 Business Days. In any case where the date of payment of principal of (or premium, if any) or interest on the Securities is not a Business Day, the payment of such principal of (or premium, if any) or interest on the Securities will not be made on such date but will be made on the next succeeding Business Day, except if such Business Day is in the next succeeding calendar year, such payment will be made on the immediately preceding Business Day, with the same force and effect as if made on the original date of payment, and no interest shall accrue for the period from and after such date. -50- SECTION 13.08 Trust Indenture Act to Control. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 318, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 13.09 Table of Contents, Headings, etc. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 13.10 Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. SECTION 13.11 Separability. In case any one or more of the provisions contained in this Indenture or in the Securities shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of the Securities, but this Indenture and the Securities shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. SECTION 13.12 Assignment. The Corporation will have the right at all times to assign any of its respective rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Corporation, provided that, in the event of any such assignment, the Corporation will remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties thereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties thereto. SECTION 13.13 Acknowledgment of Rights. The Corporation acknowledges that, with respect to any Securities held by the Trust or a trustee of such Trust, if the Property Trustee of such Trust fails to enforce its rights under this Indenture as the holder of the Securities held as the assets of the Trust, any holder of Capital Securities may institute legal proceedings directly against the Corporation to enforce such Property Trustee's rights under this Indenture without first instituting any legal proceedings against such Property Trustee or any other person or entity. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Corporation to pay principal of (or premium, if any) or interest on the Securities when due, the Corporation acknowledges that a holder of Capital Securities may directly institute a proceeding for enforcement of payment to such holder of the principal of (or premium, if any) or interest on the Securities having -51- an aggregate principal amount equal to the aggregate liquidation amount of the Capital Securities of such holder on or after the respective due date specified in the Securities. ARTICLE XIV PREPAYMENT OF SECURITIES; NO SINKING FUND SECTION 14.01 Special Event Prepayment. If, prior to the Maturity Date, a Special Event has occurred and is continuing, then notwithstanding Section 14.02(a) but subject to Section 14.02(c), the Corporation shall have the right, at any time within 90 days following the occurrence of such Special Event, upon (i) not less than 45 days written notice to the Debenture Trustee and (ii) not less than 30 days nor more than 60 days' written notice to the Securityholders, to prepay the Securities, in whole (but not in part), at the Special Event Prepayment Price. The Special Event Prepayment Price shall be paid prior to 12:00 noon, New York City time, on the date of such prepayment or such earlier time as the Corporation determines, provided that the Corporation shall deposit with the Debenture Trustee an amount sufficient to pay the Special Event Prepayment Price by 10:00 a.m., New York City time, on the date such Special Event Prepayment Price is to be paid. SECTION 14.02 Optional Prepayment by Corporation. (a) Subject to Sections 14.02(b) and (c), the Corporation shall have the right to prepay the Securities, in whole or in part, at any time on or after the Initial Optional Redemption Date, upon not less than 30 days and not more than 60 days' written notice to the Debenture Trustee, at the prepayment prices set forth below plus, in each case, accrued and unpaid interest thereon (including Compounded Interest and Additional Sums, if any) to the applicable date of prepayment (the "Optional Prepayment Price"), if prepaid during the 12-month period beginning [_____] of the years indicated below. Percentage Year of Principal ---- ------------ 2009 [_____]% 2010 [_____]% 2011 [_____]% 2012 [_____]% 2013 [_____]% 2014 [_____]% 2015 [_____]% 2016 [_____]% 2017 [_____]% 2018 [_____]% 2019 and thereafter 100.000% -52- If the Securities are only partially prepaid pursuant to this Section 14.02, the Securities to be prepaid shall be selected on a pro rata basis not more than 60 days prior to the date fixed for prepayment from the outstanding Securities not previously called for prepayment; provided, however, that with respect to Securityholders that would be required to hold Securities with an aggregate principal amount of less than $25 but more than an aggregate principal amount of zero as a result of such pro rata prepayment, the Corporation shall prepay Securities of each such Securityholder so that after such prepayment such Securityholder shall hold Securities either with an aggregate principal amount of at least $25 or such Securityholder no longer holds any Securities, and shall use such method (including, without limitation, by lot) as the Corporation shall deem fair and appropriate; provided, further, that any such proration may be made on the basis of the aggregate principal amount of Securities held by each Securityholder and may be made by making such adjustments as the Corporation deems fair and appropriate in order that only Securities in denominations of $25 or integral multiples thereof shall be prepaid. The Optional Prepayment Price shall be paid prior to 12:00 noon, New York City time, on the date of such prepayment or at such earlier time as the Corporation determines, provided that the Corporation shall deposit with the Debenture Trustee an amount sufficient to pay the Optional Prepayment Price by 10:00 a.m., New York City time, on the date such Optional Prepayment Price is to be paid. (b) Notwithstanding the first sentence of Section 14.02(a), upon the entry of an order for dissolution of the Trust by a court of competent jurisdiction, the Securities thereafter will be subject to optional prepayment, in whole only, but not in part, on or after the Initial Optional Redemption Date, at the Optional Prepayment Price and otherwise in accordance with this Article XIV. (c) Any prepayment of Securities pursuant to Section 14.01 or Section 14.02 shall be subject to the Corporation obtaining any and all required regulatory approvals. SECTION 14.03 No Sinking Fund. The Securities are not entitled to the benefit of any sinking fund. SECTION 14.04 Notice of Prepayment; Selection of Securities. In case the Corporation shall desire to exercise the right to prepay all, or, as the case may be, any part of the Securities in accordance with their terms, it shall fix a date for prepayment and shall mail a notice of such prepayment at least 30 and not more than 60 days prior to the date fixed for prepayment to the holders of Securities to be so prepaid as a whole or in part at their last addresses as the same appear on the Security Register. Such mailing shall be by first class mail. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the holder of any Security designated for prepayment as a whole or in part shall not affect the validity of the proceedings for the prepayment of any other Security. Each such notice of prepayment shall specify the CUSIP number of the Securities to be prepaid, the date fixed for prepayment, the Prepayment Price at which the Securities are to be prepaid (or the method by which such Prepayment Price is to be calculated), the place or places of payment where payment will be made upon presentation and surrender of the Securities, that interest accrued -53- to the date fixed for prepayment will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be prepaid will cease to accrue. If less than all the Securities are to be prepaid, the notice of prepayment shall specify the numbers of the Securities to be prepaid. In case any Security is to be prepaid in part only, the notice of prepayment shall state the portion of the principal amount thereof to be prepaid and shall state that on and after the date fixed for prepayment, upon surrender of such Security, a new Security or Securities in principal amount equal to the portion thereof that has not been prepaid will be issued. By 10:00 a.m., New York City time, on the prepayment date specified in the notice of prepayment given as provided in this Section, the Corporation will deposit with the Debenture Trustee or with one or more paying agents an amount of money sufficient to prepay on the prepayment date all the Securities so called for prepayment at the Prepayment Price. SECTION 14.05 Payment of Securities Called for Prepayment. If notice of prepayment has been given as provided in Section 14.04, the Securities or portions of Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the Prepayment Price, (subject to the rights of holders of Securities at the close of business on a regular record date in respect of an Interest Payment Date occurring on or prior to the prepayment date) and on and after said date (unless the Corporation shall default in the payment of such Securities at the Prepayment Price, interest (including Compounded Interest and Additional Sums, if any) on the Securities or portions of Securities so called for prepayment shall cease to accrue. On presentation and surrender of such Securities at a place of payment specified in said notice, the said Securities or the specified portions thereof shall be paid and prepaid by the Corporation at the applicable Prepayment Price (subject to the rights of holders of Securities on the close of business on a regular record date in respect of an Interest Payment Date occurring on or prior to the prepayment date). Upon presentation of any Security prepaid in part only, the Corporation shall execute and the Debenture Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Corporation, a new Security or Securities of authorized denominations, in principal amount equal to the portion of the Security so presented that has not been prepaid. ARTICLE XV SUBORDINATION OF SECURITIES SECTION 15.01 Agreement to Subordinate The Corporation covenants and agrees, and each holder of Securities issued hereunder likewise covenants and agrees, that the Securities shall be issued subject to the provisions of this Article XV; and each holder of a Security, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Corporation of the principal of, premium, if any, and interest (including Compounded Interest and Additional Sums, if any) on all Securities issued hereunder shall, to the -54- extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to all Senior Indebtedness, whether outstanding at the date of this Indenture or thereafter incurred. No provision of this Article XV shall prevent the occurrence of any Default or Event of Default hereunder. SECTION 15.02 Default on Senior Indebtedness. In the event and during the continuation of any default by the Corporation in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness, or in the event that the maturity of any Senior Indebtedness has been accelerated because of a default, then, in either case, no payment shall be made by the Corporation with respect to the principal (including prepayment payments) of (or premium, if any) or interest on the Securities (including Compounded Interest and Additional Sums, if any, or any other amounts which may be due on the Securities pursuant to the terms hereof or thereof). In the event of the acceleration of the maturity of the Securities, then no payment shall be made by the Corporation with respect to the principal (including prepayment payments) of (or premium, if any) or interest on the Securities (including Compounded Interest and Additional Sums, if any, or any other amounts which may be due on the Securities pursuant to the terms hereof or thereof) until the holders of all Senior Indebtedness outstanding at the time of such acceleration shall receive payment, in full, of such Senior Indebtedness (including any amounts due upon acceleration). In the event that, notwithstanding the foregoing, any payment is received by the Debenture Trustee, or any Securityholder, when such payment is prohibited by the preceding paragraphs of this Section 15.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered by the Debenture Trustee (if the Notice requested by Section 15.06 has been received by the Debenture Trustee) or by any Securityholder, to the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Debenture Trustee in writing within 90 days of such payment of the amounts then due and owing on such Senior Indebtedness, and only the amounts specified in such notice to the Debenture Trustee shall be paid to the holders of such Senior Indebtedness. SECTION 15.03 Liquidation; Dissolution; Bankruptcy. Upon any payment by the Corporation or distribution of assets of the Corporation of any kind or character, whether in cash, property or securities, to creditors upon any dissolution, winding-up, liquidation or reorganization of the Corporation, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, the holders of all Senior Indebtedness of the Corporation will first be entitled to receive payment in full of such Senior Indebtedness, before any payment is made by the Corporation on account of the principal of (or premium, if any) or interest on the Securities (including Compounded Interest and Additional Sums (if any) or any other amounts which may be due on the Securities pursuant to the terms hereof or thereof); and upon any such dissolution, winding-up, liquidation or reorganization, any payment by the Corporation, or -55- distribution of assets of the Corporation of any kind or character, whether in cash, property or securities, which the Securityholders or the Debenture Trustee would be entitled to receive from the Corporation, except for the provisions of this Article XV, shall be paid by the Corporation or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders or by the Debenture Trustee under the Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Corporation (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Corporation) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all such Senior Indebtedness in full, in money or moneys worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders or to the Debenture Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Corporation of any kind or character prohibited by the foregoing, whether in cash, property or securities, shall be received by the Debenture Trustee, or any Securityholder, before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered by the Debenture Trustee (if the Notice requested by Section 15.06 has been received by the Debenture Trustee) or by any Securityholder, to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Corporation, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness. For purposes of this Article XV, the words "cash, property or securities" shall not be deemed to include shares of stock of the Corporation as reorganized or readjusted, or securities of the Corporation or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XV with respect to the Securities to the payment of Senior Indebtedness that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Corporation with, or the merger of the Corporation into, another Person or the liquidation or dissolution of the Corporation following the sale, conveyance, transfer or lease of its property as an entirety, or substantially as an entirety, to another Person upon the terms and conditions provided for in Article X of this Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 15.03 if such other Person shall, as a part of such consolidation, merger, sale, conveyance, transfer or lease, comply with the conditions stated in Article X of this Indenture. Nothing in Section 15.02 or in this Section 15.03 shall apply to claims of, or payments to, the Debenture Trustee under or pursuant to Section 6.06 of this Indenture. -56- SECTION 15.04 Subrogation. Subject to the payment in full of all Senior Indebtedness, the rights of the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Corporation, as the case may be, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Securityholders or the Debenture Trustee would be entitled except for the provisions of this Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit of the holders of such Senior Indebtedness by Securityholders or the Debenture Trustee, shall, as between the Corporation, its creditors other than holders of Senior Indebtedness of the Corporation, and the holders of the Securities, be deemed to be a payment by the Corporation to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XV are and are intended solely for the purposes of defining the relative rights of the holders of the Securities, on the one hand, and the holders of such Senior Indebtedness on the other hand. Nothing contained in this Article XV or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Corporation, its creditors other than the holders of Senior Indebtedness of the Corporation, and the holders of the Securities, the obligation of the Corporation, which is absolute and unconditional, to pay to the holders of the Securities the principal of (and premium, if any) and interest (including Compounded Interest and Additional Sums, if any) on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Securities and creditors of the Corporation, as the case may be, other than the holders of Senior Indebtedness of the Corporation, as the case may be, nor shall anything herein or therein prevent the Debenture Trustee or the holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property or securities of the Corporation, as the case may be, received upon the exercise of any such remedy. SECTION 15.05 Debenture Trustee to Effectuate Subordination. Each Securityholder, by such Securityholder's acceptance thereof, authorizes and directs the Debenture Trustee on such Securityholder's behalf to take such action (as the Debenture Trustee, in its discretion, deems necessary or appropriate, upon instruction or otherwise) to effectuate the subordination provided in this Article XV and appoints the Debenture Trustee such Securityholder's attorney-in-fact for any and all such purposes. SECTION 15.06 Notice by the Corporation. The Corporation shall give prompt written notice to a Responsible Officer of the Debenture Trustee of any fact known to the Corporation that would prohibit the making of any payment of monies to or by the Debenture Trustee in respect of the Securities pursuant to the provisions of this Article XV. Notwithstanding the provisions of this Article XV or any other provision of this Indenture, the Debenture Trustee shall not be charged with knowledge of the existence of any facts -57- that would prohibit the making of any payment of monies to or by the Debenture Trustee in respect of the Securities pursuant to the provisions of this Article XV, unless and until a Responsible Officer of the Debenture Trustee shall have received written notice thereof from the Corporation or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Debenture Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Debenture Trustee shall not have received the notice provided for in this Section 15.06 at least two Business Days prior to the date upon which, by the terms hereof, any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest (including Compounded Interest and Additional Sums, if any) on any Security), then, anything herein contained to the contrary notwithstanding, the Debenture Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. The Debenture Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled to conclusively rely on a written notice delivered to it by a Person representing himself to be a holder of Senior Indebtedness of the Corporation (or a trustee on behalf of such holder), as the case may be, to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee on behalf of any such holder or holders. In the event that the Debenture Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XV, the Debenture Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Debenture Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XV, and, if such evidence is not furnished, the Debenture Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Upon any payment or distribution of assets of the Corporation referred to in this Article XV, the Debenture Trustee, subject to the provisions of Article VI of this Indenture, and the Securityholders shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Debenture Trustee or to the Securityholders, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Corporation, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XV. SECTION 15.07 Rights of the Debenture Trustee; Holders of Senior Indebtedness. The Debenture Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time held by it, to the same extent as -58- any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Debenture Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness of the Corporation, the Debenture Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XV, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Debenture Trustee. The Debenture Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Article VI of this Indenture, the Debenture Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Securityholders, the Corporation or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise. Nothing in this Article XV shall apply to claims of, or payments to, the Debenture Trustee under or pursuant to Section 6.06. SECTION 15.08 Subordination May Not Be Impaired. No right of any present or future holder of any Senior Indebtedness of the Corporation to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Corporation, as the case may be, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Corporation, as the case may be, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of the Corporation may, at any time and from time to time, without the consent of or notice to the Debenture Trustee or the Securityholders, without incurring responsibility to the Securityholders and without impairing or releasing the subordination provided in this Article XV or the obligations hereunder of the holders of the Securities to the holders of such Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Corporation, as the case may be, and any other Person. -59- ARTICLE XVI EXTENSION OF INTEREST PAYMENT PERIOD SECTION 16.01 Extension of Interest Payment Period. So long as no Event of Default has occurred and is continuing, the Corporation shall have the right, at any time and from time to time during the term of the Securities, to defer payments of interest by extending the interest payment period of such Securities for a period not exceeding 20 consecutive quarterly periods, including the first such quarterly period during such extension period (the "Extended Interest Payment Period"), during which Extended Interest Payment Period no interest shall be due and payable, provided that no Extended Interest Payment Period shall end on a date other than an Interest Payment Date or extend beyond the Maturity Date. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 16.01, will bear interest thereon at the applicable periodic Coupon Rate compounded quarterly for each quarterly period during the Extended Interest Payment Period ("Compounded Interest"). At the end of the Extended Interest Payment Period, the Corporation shall pay all interest accrued and unpaid on the Securities, including any Additional Sums and Compounded Interest (together, "Deferred Interest"), that shall be payable to the holders of the Securities in whose names the Securities are registered in the Security Register on the record date immediately preceding the end of the Extended Interest Payment Period. Before the termination of any Extended Interest Payment Period, the Corporation may further defer payments of interest by further extending such Extended Interest Payment Period, provided that such Extended Interest Payment Period, together with all such previous and further extensions within such Extended Interest Payment Period, shall not (i) exceed 20 consecutive quarterly periods, including the first such quarterly period during such Extended Interest Payment Period, (ii) end on a date other than an Interest Payment Date or (iii) extend beyond the Maturity Date of the Securities. Upon the termination of any Extended Interest Payment Period and the payment of all amounts then due, the Corporation may commence a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof, but the Corporation may prepay at any time all or any portion of the interest accrued during an Extended Interest Payment Period. SECTION 16.02 Notice of Extension. (a) If the Property Trustee is the only holder of the Securities at the time the Corporation elects to commence an Extended Interest Payment Period, the Corporation shall give written notice to the Administrative Trustees, the Property Trustee and the Debenture Trustee of its election to commence such Extended Interest Payment Period at least five Business Days before the earlier of (i) the next succeeding date on which Distributions on the Trust Securities would have been payable, and (ii) the date the Property Trustee is required to give notice of the record date, or the date such Distributions are payable, to any national securities exchange or to holders of the Capital Securities, but in any event at least five Business Days before such record date. (b) If the Property Trustee is not the only holder of the Securities at the time the Corporation elects to commence an Extended Interest Payment Period, the Corporation shall give the holders of the Securities and the Debenture Trustee written notice of its election of such -60- Extended Interest Payment Period at least 10 Business Days before the earlier of (i) the next succeeding Interest Payment Date, and (ii) the date the Debenture Trustee is required to give notice of the record or payment date of such interest payment to any national securities exchange. (c) The quarterly period in which any notice is given pursuant to paragraphs (a) or (b) of this Section 16.02 shall be counted as one of the 20 quarterly periods permitted in the maximum Extended Interest Payment Period permitted under Section 16.01. The Chase Manhattan Bank hereby accepts the trusts in this Indenture declared and provided, upon the terms and conditions hereinabove 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. HAVEN BANCORP, INC. By: ----------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Debenture Trustee By: ----------------------------------- Name: Title: -62- EXHIBIT A (FORM OF FACE OF SECURITY) [IF THIS SECURITY IS A GLOBAL SECURITY INSERT: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS 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 SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] A-1 HAVEN BANCORP, INC. CUSIP No.: [_____________] $[_______________] Certificate No. [__] [____]% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE DUE[_____], 2029 Haven Bancorp, Inc., a Delaware corporation (the "Corporation," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to [ ] or its registered assigns, the principal sum of $[_____________] Dollars on [_____], 2029 (the "Maturity Date"), unless previously prepaid, and to pay interest on the outstanding principal amount hereof from [_____], 1999, 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 31, June 30, September 30 and December 31 of each year, commencing June 30, 1999 at the rate of [____]% per annum until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum compounded quarterly ("Compounded Interest"). The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year consisting of twelve 30-day months. In the event that any date on which the principal of (or premium, if any) or interest on this Security is payable is not a Business Day (as defined in the Indenture), then the payment payable on such date will be made on the next succeeding day that is a Business Day, except that if such next succeeding Business Day falls in the next succeeding calendar year such payment shall be made on the immediately preceding Business Day (and without any interest or other payment in respect of any such delay), with the same force and effect as if made on such date. Pursuant to the Indenture, in certain circumstances the Corporation will be required to pay Additional Sums (as defined in the Indenture) with respect to this Security. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment, which shall be one Business Day prior to the relevant Interest Payment Date for Global Securities and the 15th day of the month in which the relevant Interest Payment Date falls for Definitive Securities. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the holders on such regular record date and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a special record date to be fixed by the Debenture Trustee for the payment of such defaulted interest, notice whereof shall be given to the holders of Securities not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities A-2 exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of (and premium, if any) and interest (including Compounded Interest and Additional Sums, if any) on this Security shall be payable at the office or agency of the Debenture Trustee 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 the option of the Corporation by (i) check mailed to the holder at such address as shall appear in the Security Register or (ii) transfer to an account maintained by the Person entitled thereto, provided that proper written transfer instructions have been received by the relevant record date. Notwithstanding the foregoing, so long as the holder of this Security is the Property Trustee of Haven Capital Trust II, the payment of the principal of (and premium, if any) and interest (including Compounded Interest and Additional Sums, if any) on this Security will be made at such place and to such account as may be designated by such Property Trustee. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Debenture Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Debenture Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. This Security shall not be entitled to any benefit under the Indenture or be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Debenture Trustee. The provisions of this Security are continued on the reverse side hereof and such provisions shall for all purposes have the same effect as though fully set forth at this place. A-3 IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly executed and sealed this [___] day of [_________], 1999. HAVEN BANCORP, INC. By: ----------------------------------- Name: Title: Attest: By: ----------------------------------- Name: Title: CERTIFICATE OF AUTHENTICATION This is one of the [____]% Junior Subordinated Deferrable Interest Debentures of HAVEN BANCORP, INC. referred to in the within-mentioned Indenture. THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Debenture Trustee Dated: By: ------------------ ---------------------------------------- Authorized Signatory A-4 (FORM OF REVERSE OF SECURITY) This Security is one of the Securities of the Corporation (herein sometimes referred to as the "Securities"), specified in the Indenture, all issued or to be issued under and pursuant to an Indenture, dated as of [____], 1999 (the "Indenture"), duly executed and delivered between the Corporation and The Chase Manhattan Bank, as Debenture Trustee (the "Debenture Trustee"), to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Debenture Trustee, the Corporation and the holders of the Securities. Upon the occurrence and continuation of a Special Event (as defined in the Indenture), the Corporation shall have the right, at any time within 90 days following the occurrence of such Special Event, to prepay this Security in whole (but not in part) at the Special Event Prepayment Price. "Special Event Prepayment Price" shall mean, with respect to any prepayment of the Securities following a Special Event, the prepayment price of the Debentures equal to 100% of the principal amount of the Debentures to be prepaid plus any accrued and unpaid interest thereon (including Compounded Interest and Additional Sums, if any) to the date of such prepayment. In addition, the Corporation shall have the right to prepay this Security, in whole or in part, at any time on or after the Initial Optional Redemption Date (an "Optional Prepayment"), at the prepayment prices set forth below plus, in each case, accrued and unpaid interest thereon (including Compounded Interest and Additional Sums, if any) to the applicable date of prepayment (the "Optional Prepayment Price"), if prepaid during the 12-month period beginning [____], of the years indicated below. Percentage Year of Principal ---- ------------ 2009 [_____]% 2010 [_____]% 2011 [_____]% 2012 [_____]% 2013 [_____]% 2014 [_____]% 2015 [_____]% 2016 [_____]% 2017 [_____]% 2018 [_____]% 2019 and thereafter 100.000% The Prepayment Price shall be paid prior to 12:00 noon, New York City time, on the date of such prepayment or at such earlier time as the Corporation determines, provided, that the Corporation shall deposit with the Debenture Trustee an amount sufficient to pay the applicable Prepayment Price by 10:00 a.m., New York City time, on the date such Prepayment Price is to be A-5 paid. Any prepayment pursuant to this paragraph will be made upon not less than 30 days nor more than 60 days' prior written notice. If the Securities are only partially prepaid by the Corporation pursuant to an Optional Prepayment, the particular Securities to be prepaid shall be selected on a pro rata basis from the outstanding Securities not previously called for prepayment; provided, however, that with respect to Securityholders that would be required to hold Securities with an aggregate principal amount of less than $25 but more than an aggregate principal amount of zero as a result of such pro rata prepayment, the Corporation shall prepay Securities of each such Securityholder so that after such prepayment such Securityholder shall hold Securities either with an aggregate principal amount of at least $25 or such Securityholder no longer holds any Securities and shall use such method (including, without limitation, by lot) as the Corporation shall deem fair and appropriate; provided, further, that any such proration may be made on the basis of the aggregate principal amount of Securities held by each Securityholder thereof and may be made by making such adjustments as the Corporation deems fair and appropriate in order that only Securities in denominations of $25 or integral multiples thereof shall be prepaid. In the event of prepayment of this Security in part only, a new Security or Securities for the portion hereof that has not been prepaid will be issued in the name of the holder hereof upon the cancellation hereof. Notwithstanding the foregoing, any prepayment of Securities by the Corporation shall be subject to the receipt of any and all required regulatory approvals. In case an Event of Default (as defined in the Indenture) shall have occurred and be continuing, the principal of all of the Securities may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Corporation and the Debenture Trustee, with the consent of the holders of a majority in aggregate principal amount of the Securities at the time outstanding (as defined in the Indenture), to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any manner the rights of the holders of the Securities; provided, however, that no such supplemental indenture shall, without the consent of each holder of Securities then outstanding and affected thereby, (i) change the Maturity Date of any Security, or reduce the rate or extend the time of payment of interest thereon (subject to Article XVI of the Indenture), or reduce the principal amount thereof, or change any of the prepayment provisions or make the principal thereof or any interest or premium thereon payable in any coin or currency other than U.S. dollars, or impair or affect the right of any holder of Securities to institute suit for payment thereof, or (ii) reduce the aforesaid percentage of Securities the holders of which are required to consent to any such supplemental indenture. The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Securities at the time outstanding affected thereby, on behalf of all of the holders of the Securities, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any of the Securities or a default in respect of any covenant or provision under which the Indenture cannot be modified or amended without the consent of each holder of Securities then outstanding. A-6 Any such consent or waiver by the holder of this Security (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Security and of any Security issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest (including Compounded Interest and Additional Sums, if any) on this Security at the time and place and at the rate and in the money herein prescribed. So long as no Event of Default shall have occurred and be continuing, the Corporation shall have the right, at any time and from time to time during the term of the Securities, to defer payments of interest by extending the interest payment period (an "Extended Interest Payment Period") of such Securities for a period not (i) exceeding 20 consecutive quarterly periods, including the first such quarterly period during such extension period, (ii) extending beyond the Maturity Date of the Securities or (iii) ending on a date other than an Interest Payment Date, at the end of which period the Corporation shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Securities to the extent that payment of such interest is enforceable under applicable law). Before the termination of any such Extended Interest Payment Period, the Corporation may further defer payments of interest by further extending such Extended Interest Payment Period, provided that such Extended Interest Payment Period, together with all such previous and further extensions within such Extended Interest Payment Period, (i) shall not exceed 20 consecutive quarterly periods including the first quarterly period during such Extended Interest Payment Period, (ii) shall not end on any date other than an Interest Payment Date, and (iii) shall not extend beyond the Maturity Date of the Securities. Upon the termination of any such Extended Interest Payment Period and the payment of all accrued and unpaid interest and any additional amounts then due, the Corporation may commence a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof, but the Corporation may prepay at any time all or any portion of the interest accrued during an Extended Interest Payment Period. The Corporation has agreed that if (1) there shall have occurred any event of which the Corporation has actual knowledge that (a) is, or with the giving of notice or the lapse of time, or both, would constitute, an Event of Default and (b) in respect of which the Corporation shall not have taken reasonable steps to cure, (2) if the Securities are held by the Property Trustee of Haven Capital Trust II, the Corporation shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee or (3) the Corporation shall have given notice of its election to exercise its right to commence an Extended Interest Payment Period, and shall not have rescinded such Notice, and such Extended Interest Payment Period or any extension thereof shall have commenced and be continuing, it will not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Corporation's capital stock, (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities (including other Debentures) of the Corporation that rank pari passu with or junior in right of payment to the Securities or (iii) make any guarantee payments A-7 with respect to any guarantee by the Corporation of the debt securities of any Subsidiary of the Corporation (including Other Guarantees) if such guarantee ranks pari passu with or junior in right of payment to the Securities (other than (a) dividends or distributions of Corporation's capital stock (which includes Common Stock and preferred stock), (b) any declaration of a dividend in connection with the implementation of a stockholders' rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (c) payments under the Capital Securities Guarantee, as defined in the Indenture, (d) as a result of a reclassification of the Corporation's capital stock or the exchange or conversion of one class or series of the Corporation's capital stock for another class or series of the Corporation's capital stock, (e) the purchase of fractional interests in shares of the Corporation's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, and (f) purchases of Common Stock related to the issuance of Common Stock or rights under any of the Corporation's benefit or compensation plans for its directors, officers or employees or any of the Corporation's dividend reinvestment plans). Subject to (i) the Corporation having received any required regulatory approvals and (ii) the Administrative Trustees of Haven Capital Trust II having received an opinion of counsel to the effect that such distribution will not cause the holders of Capital Securities to recognize gain or loss for federal income tax purposes, the Corporation will have the right at any time to liquidate the Trust and, after satisfaction of liabilities of creditors of the Trust as required by applicable law, to cause the Securities to be distributed to the holders of the Trust Securities in liquidation of the Trust. The Securities are issuable only in registered form without coupons in minimum denominations of $25 and multiples of $25 in excess thereof. As provided in the Indenture and subject to the transfer restrictions limitations as may be contained herein and therein from time to time, this Security is transferable by the holder hereof on the Security Register of the Corporation, upon surrender of this Security for registration of transfer at the office or agency of the Corporation in the New York, New York accompanied by a written instrument or instruments of transfer in form satisfactory to the Corporation or the Debenture Trustee duly executed by the holder hereof or his or her attorney duly authorized in writing, and thereupon one or more new Securities of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be made for any such registration of transfer, but the Corporation may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Security, the Corporation, the Debenture Trustee, any authenticating agent, any paying agent, any transfer agent and the security registrar may deem and treat the holder hereof as the absolute owner hereof (whether or not this Security shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the security registrar for the Securities) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and (subject to the Indenture) interest due hereon and for all other purposes, and neither the Corporation nor the Debenture Trustee nor any authenticating agent nor any paying agent nor any transfer agent nor any security registrar shall be affected by any notice to the contrary. A-8 No recourse shall be had for the payment of the principal of or premium, if any, or interest (including Compounded Interest and Additional Sums, if any) on this Security, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, employee, officer or director, past, present or future, as such, of the Corporation or of any predecessor or successor Person, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture. THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF. A-9 EX-5.1 10 EXHIBIT 5.1 Exhibit 5.1 April __, 1999 Haven Bancorp, Inc. Haven Capital Trust II 615 Merrick Avenue Westbury, New York 11590 Ladies and Gentlemen: We have acted as counsel to Haven Bancorp, Inc., a Delaware corporation (the "Company"), and Haven Capital Trust II, a Delaware business trust (the "Trust"), in connection with the preparation of the Registration Statement on Form S-3 (the "Registration Statement") filed by the Company and the Trust with respect to the registration under the Securities Act of 1933, as amended (the "Act"), of (i) up to [1,610,000] of the Trust's _____% Capital Securities, liquidation amount of $25 per capital security (the "Capital Securities"), (ii) the guarantee by the Company of the Capital Securities, with respect to distributions and payments upon liquidation, redemption and otherwise (the "Guarantee") and (iii) up to $[40,250,000] principal amount of _____% Junior Subordinated Deferrable Interest Debentures due __________, 2029 (the "Junior Subordinated Debentures") to be issued by the Company. In rendering the opinions set forth below, we do not express any opinion concerning law other than the federal law of the United States and the corporate law of the State of Delaware. In connection with these opinions, we have reviewed originals or copies, certified or otherwise identified to our satisfaction, of the following documents: (i) the Registration Statement, as filed by the Company and the Trust with the Securities and Exchange Commission (the "Commission") on April __, 1999; (ii) the certificate of trust of the Trust filed with the Secretary of State of the State of Delaware on March 26, 1999; (iii) the Amended and Restated Declaration of Trust, dated April __, 1999 (the "Declaration"), by and among The Chase Manhattan Bank, as property trustee (the "Property Haven Bancorp, Inc. Haven Capital Trust II April __, 1999 Page 2. Trustee"), Chase Manhattan Bank Delaware, as Delaware trustee, the Company, as sponsor, and Catherine Califano, Robert B. Lunt and Mark A. Ricca, as administrative trustees; (iv) the form of certificate evidencing the Capital Securities; (v) the Indenture, dated April __, 1999 (the "Indenture"), by and between The Chase Manhattan Bank, as indenture trustee, and the Company; (vi) the form of certificate evidencing the Junior Subordinated Debentures; (vii) the Guarantee; (viii) the Certificate of Incorporation, as amended, and the Bylaws, as amended, of the Company; and (ix) resolutions adopted by the Board of Directors of the Company on March 25, 1999. We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such other documents, corporate records and other instruments, and have examined such matters of law, as we have deemed necessary or advisable for purposes of rendering the opinions set forth herein. As to matters of fact, we have examined and relied upon the representations of the Company contained in the Underwriting Agreement filed as an exhibit to the Registration Statement and, where we have deemed appropriate, representations or certificates of officers or other representatives of the Company and the Trust, the trustees and public officials. We have assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures, the legal capacity of natural persons and the conformity to the originals of all documents submitted to us as copies. In making our examination of any documents, we have assumed that all parties other than the Company and the Trust had the corporate power and authority to enter into and perform all obligations thereunder, and, as to such parties, we have also assumed the due authorization by all requisite action, the due execution and delivery of such documents and the validity and binding effect and enforceability thereof. Based on the foregoing, and subject to the limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that: 1. The Capital Securities have been duly authorized, and, when (i) the Declaration and the Indenture have been qualified under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and (ii) the Capital Securities are issued and sold in accordance with the Registration Statement and the Declaration, the Capital Securities will be fully paid and non-assessable undivided beneficial interests in the assets of the Trust, subject to the qualifications set forth in this and in the following paragraph, and entitle the holders thereof to the benefits of the Declaration, except as rights to indemnity and contribution thereunder may be limited under applicable law, and subject to the qualifications that (a) enforcement thereof may be limited by bankruptcy, insolvency, receivership, reorganization, liquidation, voidable preference, moratorium Haven Bancorp, Inc. Haven Capital Trust II April __, 1999 Page 3. or other laws (including the laws of fraudulent conveyance and transfer) or judicial decisions affecting the enforcement of creditors' rights generally or the reorganization of financial institutions and (b) the enforceability of the Trust's obligations thereunder is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and to the effect of certain laws and judicial decisions upon the availability and enforceability of certain remedies, including the remedies of specific performance and self-help. The holders of the Capital Securities will 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. The holders of the Capital Securities may be obligated, pursuant to the Declaration, to (a) provide indemnity and/or security in connection with, and pay taxes or governmental charges arising from, transfers of Capital Securities and the issuance of replacement Capital Securities and (b) provide security and indemnity in connection with requests of or directions to the Property Trustee to exercise its rights and powers under the Declaration. 2. The Guarantee has been duly authorized, and, when (i) the Declaration and the Indenture have been qualified under the Trust Indenture Act and (ii) the Guarantee is issued by the Company as contemplated in the Registration Statement, the Guarantee will constitute a valid and binding agreement of the Company in favor of the holders of the Capital Securities, enforceable against the Company in accordance with its terms, except as rights to indemnity and contribution thereunder may be limited under applicable law, and subject to the qualifications that (a) enforcement thereof may be limited by bankruptcy, insolvency, receivership, reorganization, liquidation, voidable preference, moratorium or other laws (including the laws of fraudulent conveyance and transfer) or judicial decisions affecting the enforcement of creditors' rights generally or the reorganization of financial institutions, and (b) the enforceability of the Company's obligations thereunder is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and to the effect of certain laws and judicial decisions upon the availability and enforceability of certain remedies, including the remedies of specific performance and self-help. 3. The Junior Subordinated Debentures have been duly authorized, and, when (i) the Declaration and the Indenture have been qualified under the Trust Indenture Act and (ii) the Junior Subordinated Debentures are issued and sold in accordance with the Registration Statement and the Indenture, the Junior Subordinated Debentures will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as rights to indemnity and contribution thereunder may be limited under applicable law, and subject to the qualifications that (a) enforcement thereof may be limited by bankruptcy, insolvency, receivership, reorganization, liquidation, voidable preference, moratorium or other laws (including the laws of fraudulent conveyance and transfer) or judicial decisions affecting the enforcement of creditors' rights generally or the reorganization of financial institutions, and (b) the enforceability of the Company's obligations thereunder is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and to the effect of certain laws Haven Bancorp, Inc. Haven Capital Trust II April __, 1999 Page 4. and judicial decisions upon the availability and enforceability of certain remedies, including the remedies of specific performance and self-help. In rendering the opinions set forth above, we have not passed upon and do not purport to pass upon the application of securities or "blue-sky" laws of any jurisdiction (except federal securities laws). This opinion is given solely for the benefit of the Company, the Trust and investors who purchase the Capital Securities pursuant to the Registration Statement and may not be relied upon by any other person or entity, nor quoted in whole or in part, or otherwise referred to in any document without our express written consent. We consent to the filing of this opinion as an Exhibit to the Registration Statement. We also consent to the reference to our firm under the heading "Validity of Securities" in the Prospectus which forms a part of the Registration Statement. Very truly yours, THACHER PROFFITT & WOOD By: EX-12.1 11 EXHIBIT 12.1 Exhibit 12.1 HAVEN BANCORP, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollar amounts in thousands)
For the Years Ended ------------------------------------------------------ 1998 1997 1996 1995 1994 ------ ------ ------ ------ ------ Income (loss) before income tax expense (benefit) $11,076 $17,221 $15,859 $15,774 $(6,810) Fixed charges: Interest expense on deposits 65,785 51,600 44,678 42,055 31,997 Interest expense on borrowed funds 27,991 22,800 16,690 13,060 8,292 One-third of rents 1,389 581 135 126 103 ------ ------ ------ ------ ------ Total fixed charges $95,165 $74,981 $61,503 $55,241 $40,392 Ratio including interest on deposits 1.12x 1.23x 1.26x 1.29x 0.83x Ratio excluding interest on deposits 1.38x 1.74x 1.94x 2.20x 0.19x
EX-23.1 12 EXHIBIT 23.1 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT The Stockholders and the Board of Directors of Haven Bancorp, Inc.: We consent to incorporation by reference in the Registration Statement on Form S-3 of Haven Capital Trust II of our report dated January 28, 1999 relating to the consolidated statements of financial condition of Haven Bancorp, Inc. as of December 31, 1998 and 1997, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1998, which report is incorporated by reference to the December 31, 1998 Annual Report on Form 10-K of Haven Bancorp, Inc., and to the reference to our firm under the heading "Experts" in the prospectus which is a part of that Registration Statement. Melville, New York April 12, 1999 EX-25.1 13 EXHIBIT 25.1 Exhibit 25.1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ------------------------------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________ ---------------------------------------- THE CHASE MANHATTAN BANK (Exact name of trustee as specified in its charter) New York 13-4994650 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 270 Park Avenue New York, New York 10017 (Address of principal executive offices) (Zip Code) William H. McDavid General Counsel 270 Park Avenue New York, New York 10017 Tel: (212) 270-2611 (Name, address and telephone number of agent for service) --------------------------------------------- HAVEN CAPITAL TRUST II (Exact name of obligor as specified in its charter) Delaware Applied for (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) c/o Haven Bancorp, Inc. 615 Merrick Avenue Westbury, New York 11590 (Address of principal executive offices) (Zip Code) --------------------------------------------- Capital Securities (Title of the indenture securities) - -------------------------------------------------------------------------------- GENERAL Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, State House, Albany, New York 12110. Board of Governors of the Federal Reserve System, Washington, D.C., 20551. Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, N.Y. Federal Deposit Insurance Corporation, Washington, D.C., 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. Item 16. List of Exhibits List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the Articles of Association of the Trustee as now in effect, including the Organization Certificate and the Certificates of Amendment dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2. 4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, The Chase Manhattan Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 7th day of April, 1999. THE CHASE MANHATTAN BANK By /s/ James P. Freeman -------------------------- James P. Freeman Vice President Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF The Chase Manhattan Bank of 270 Park Avenue, New York, New York 10017 and Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business December 31, 1998, in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Millions Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin .......................................... $ 13,915 Interest-bearing balances .................................. 7,805 Securities: Held to maturity securities ..................................... 1,429 Available-for-sale securities ................................... 56,327 Federal funds sold and securities purchased under agreements to resell ....................................... 21,733 Loans and lease financing receivables: Loans and leases, net of unearned income .... $131,095 Less: Allowance for loan and lease losses ... 2,711 Less: Allocated transfer risk reserve ....... 0 -------- Loans and leases, net of unearned income, allowance, and reserve ..................................... 128,384 Trading Assets .................................................. 48,949 Premises and fixed assets (including capitalized leases) .................................................... 3,095 Other real estate owned ......................................... 239 Investments in unconsolidated subsidiaries and associated companies ....................................... 199 Customers' liability to this bank on acceptances outstanding ................................................ 1,209 Intangible assets ............................................... 2,081 Other assets .................................................... 11,352 -------- TOTAL ASSETS .................................................... $296,717 ======== - 4 - LIABILITIES Deposits In domestic offices ......................................... $105,879 Noninterest-bearing ........................ $ 39,175 Interest-bearing ........................... 66,704 -------- In foreign offices, Edge and Agreement, subsidiaries and IBF's ............................... 79,294 Noninterest-bearing ........................ $ 4,082 Interest-bearing ........................... 75,212 Federal funds purchased and securities sold under agree- ments to repurchase .............................................. 32,546 Demand notes issued to the U.S. Treasury ......................... 629 Trading liabilities .............................................. 36,807 Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): With a remaining maturity of one year or less ............... 4,478 With a remaining maturity of more than one year through three years .................................. 213 With a remaining maturity of more than three years .......... 115 Bank's liability on acceptances executed and outstanding ......... 1,209 Subordinated notes and debentures ................................ 5,408 Other liabilities ................................................ 10,855 TOTAL LIABILITIES ................................................ 277,433 -------- EQUITY CAPITAL Perpetual preferred stock and related surplus .................... 0 Common stock ..................................................... 1,211 Surplus (exclude all surplus related to preferred stock) ......... 11,016 Undivided profits and capital reserves ........................... 6,762 Net unrealized holding gains (losses) on available-for-sale securities ............................ 279 Cumulative foreign currency translation adjustments .............. 16 TOTAL EQUITY CAPITAL ............................................. 19,284 -------- TOTAL LIABILITIES AND EQUITY CAPITAL ............................. $296,717 ======== I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. JOSEPH L. SCLAFANI We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. WALTER V. SHIPLEY ) THOMAS G. LABRECQUE ) DIRECTORS WILLIAM B. HARRISON, JR. ) -5- EX-25.2 14 EXHIBIT 25.2 Exhibit 25.2 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ------------------------------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________ ---------------------------------------- THE CHASE MANHATTAN BANK (Exact name of trustee as specified in its charter) New York 13-4994650 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 270 Park Avenue New York, New York 10017 (Address of principal executive offices) (Zip Code) William H. McDavid General Counsel 270 Park Avenue New York, New York 10017 Tel: (212) 270-2611 (Name, address and telephone number of agent for service) --------------------------------------------- HAVEN BANCORP, INC. (Exact name of obligor as specified in its charter) Delaware 11-3153802 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 615 Merrick Avenue Westbury, New York 11590 (Address of principal executive offices) (Zip Code) --------------------------------------------- Junior Subordinated Deferrable Interest Debentures (Title of the indenture securities) GENERAL Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, State House, Albany, New York 12110. Board of Governors of the Federal Reserve System, Washington, D.C., 20551. Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, N.Y. Federal Deposit Insurance Corporation, Washington, D.C., 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. Item 16. List of Exhibits List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the Articles of Association of the Trustee as now in effect, including the Organization Certificate and the Certificates of Amendment dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2. 4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, The Chase Manhattan Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 7th day of April, 1999. THE CHASE MANHATTAN BANK By /s/ James P. Freeman ------------------------------ James P. Freeman Vice President -3- Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF The Chase Manhattan Bank of 270 Park Avenue, New York, New York 10017 and Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business December 31, 1998, in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Millions Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin .......................................... $ 13,915 Interest-bearing balances .................................. 7,805 Securities: Held to maturity securities ..................................... 1,429 Available-for-sale securities ................................... 56,327 Federal funds sold and securities purchased under agreements to resell ....................................... 21,733 Loans and lease financing receivables: Loans and leases, net of unearned income .... $131,095 Less: Allowance for loan and lease losses ... 2,711 Less: Allocated transfer risk reserve ....... 0 -------- Loans and leases, net of unearned income, allowance, and reserve ..................................... 128,384 Trading Assets .................................................. 48,949 Premises and fixed assets (including capitalized leases) .................................................... 3,095 Other real estate owned ......................................... 239 Investments in unconsolidated subsidiaries and associated companies ....................................... 199 Customers' liability to this bank on acceptances outstanding ................................................ 1,209 Intangible assets ............................................... 2,081 Other assets .................................................... 11,352 -------- TOTAL ASSETS .................................................... $296,717 ======== -4- LIABILITIES Deposits In domestic offices ......................................... $105,879 Noninterest-bearing ........................ $ 39,175 Interest-bearing ........................... 66,704 -------- In foreign offices, Edge and Agreement, subsidiaries and IBF's .................................. 79,294 Noninterest-bearing ........................ $ 4,082 Interest-bearing ........................... 75,212 Federal funds purchased and securities sold under agree- ments to repurchase .............................................. 32,546 Demand notes issued to the U.S. Treasury ......................... 629 Trading liabilities .............................................. 36,807 Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): With a remaining maturity of one year or less ............... 4,478 With a remaining maturity of more than one year through three years .................................. 213 With a remaining maturity of more than three years .......... 115 Bank's liability on acceptances executed and outstanding ......... 1,209 Subordinated notes and debentures ................................ 5,408 Other liabilities ................................................ 10,855 TOTAL LIABILITIES ................................................ 277,433 -------- EQUITY CAPITAL Perpetual preferred stock and related surplus .................... 0 Common stock ..................................................... 1,211 Surplus (exclude all surplus related to preferred stock) ......... 11,016 Undivided profits and capital reserves ........................... 6,762 Net unrealized holding gains (losses) on available-for-sale securities .................................................... 279 Cumulative foreign currency translation adjustments .............. 16 TOTAL EQUITY CAPITAL ............................................. 19,284 -------- TOTAL LIABILITIES AND EQUITY CAPITAL ............................. $296,717 ======== I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. JOSEPH L. SCLAFANI We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. WALTER V. SHIPLEY ) THOMAS G. LABRECQUE ) DIRECTORS WILLIAM B. HARRISON, JR. ) -5- EX-25.3 15 EXHIBIT 25.3 Exhibit 25.3 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ------------------------------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________ ---------------------------------------- THE CHASE MANHATTAN BANK (Exact name of trustee as specified in its charter) New York 13-4994650 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 270 Park Avenue New York, New York 10017 (Address of principal executive offices) (Zip Code) William H. McDavid General Counsel 270 Park Avenue New York, New York 10017 Tel: (212) 270-2611 (Name, address and telephone number of agent for service) --------------------------------------------- HAVEN BANCORP, INC. (Exact name of obligor as specified in its charter) Delaware 11-3153802 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 615 Merrick Avenue Westbury, New York 11590 (Address of principal executive offices) (Zip Code) --------------------------------------------- Guarantee with respect to Capital Securities (Haven Capital Trust II) (Title of the indenture securities) GENERAL Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, State House, Albany, New York 12110. Board of Governors of the Federal Reserve System, Washington, D.C., 20551. Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, N.Y. Federal Deposit Insurance Corporation, Washington, D.C., 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. -3- Item 16. List of Exhibits List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the Articles of Association of the Trustee as now in effect, including the Organization Certificate and the Certificates of Amendment dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2. 4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, The Chase Manhattan Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 7th day of April, 1999. THE CHASE MANHATTAN BANK By /s/ James P. Freeman ---------------------------------- James P. Freeman Vice President Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF The Chase Manhattan Bank of 270 Park Avenue, New York, New York 10017 and Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business December 31, 1998, in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Millions Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin .......................................... $ 13,915 Interest-bearing balances .................................. 7,805 Securities: Held to maturity securities ..................................... 1,429 Available-for-sale securities ................................... 56,327 Federal funds sold and securities purchased under agreements to resell ....................................... 21,733 Loans and lease financing receivables: Loans and leases, net of unearned income .... $131,095 Less: Allowance for loan and lease losses ... 2,711 Less: Allocated transfer risk reserve ....... 0 -------- Loans and leases, net of unearned income, allowance, and reserve ..................................... 128,384 Trading Assets .................................................. 48,949 Premises and fixed assets (including capitalized leases) .................................................... 3,095 Other real estate owned ......................................... 239 Investments in unconsolidated subsidiaries and associated companies ....................................... 199 Customers' liability to this bank on acceptances outstanding ................................................ 1,209 Intangible assets ............................................... 2,081 Other assets .................................................... 11,352 -------- TOTAL ASSETS .................................................... $296,717 ======== -4- LIABILITIES Deposits In domestic offices ......................................... $105,879 Noninterest-bearing ........................ $ 39,175 Interest-bearing ........................... 66,704 -------- In foreign offices, Edge and Agreement, subsidiaries and IBF's ...................................... 79,294 Noninterest-bearing ........................ $ 4,082 Interest-bearing ........................... 75,212 Federal funds purchased and securities sold under agree- ments to repurchase .............................................. 32,546 Demand notes issued to the U.S. Treasury ......................... 629 Trading liabilities .............................................. 36,807 Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): With a remaining maturity of one year or less ............... 4,478 With a remaining maturity of more than one year through three years .................................. 213 With a remaining maturity of more than three years ........ 115 Bank's liability on acceptances executed and outstanding ......... 1,209 Subordinated notes and debentures ................................ 5,408 Other liabilities ................................................ 10,855 TOTAL LIABILITIES ................................................ 277,433 -------- EQUITY CAPITAL Perpetual preferred stock and related surplus .................... 0 Common stock ..................................................... 1,211 Surplus (exclude all surplus related to preferred stock) ........ 11,016 Undivided profits and capital reserves ........................... 6,762 Net unrealized holding gains (losses)on available-for-sale securities ....................................................... 279 Cumulative foreign currency translation adjustments .............. 16 TOTAL EQUITY CAPITAL ............................................. 19,284 -------- TOTAL LIABILITIES AND EQUITY CAPITAL ............................. $296,717 ======== I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. JOSEPH L. SCLAFANI We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. WALTER V. SHIPLEY ) THOMAS G. LABRECQUE ) DIRECTORS WILLIAM B. HARRISON, JR. ) -5- -----END PRIVACY-ENHANCED MESSAGE-----