-----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, O1sS1n8lJAK2yKWPrlV2GgsrlByBbc2lmtsgVyx32q6V4oWUzurCuilWF1NY/HAv 0Eno9esqJ2RA1g6HmrKodg== 0000950144-02-008525.txt : 20020814 0000950144-02-008525.hdr.sgml : 20020814 20020814083902 ACCESSION NUMBER: 0000950144-02-008525 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANKATLANTIC BANCORP INC CENTRAL INDEX KEY: 0000921768 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 650507804 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13133 FILM NUMBER: 02731698 BUSINESS ADDRESS: STREET 1: 1750 E SUNRISE BLVD CITY: FORT LAUDERDALE STATE: FL ZIP: 33304 BUSINESS PHONE: 9547605000 MAIL ADDRESS: STREET 1: 1750 EAST SUNRISE BOULEVARD CITY: FORT LAUDERVALE STATE: FL ZIP: 33304 10-Q 1 g77714e10vq.txt ANKATLANTIC BANCORP, INC. FORM 10-Q 6-30-2002 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______ COMMISSION FILE NUMBER 34-027228 BankAtlantic Bancorp, Inc. (Exact name of registrant as specified in its charter) FLORIDA 65-0507804 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1750 EAST SUNRISE BOULEVARD FT. LAUDERDALE, FLORIDA 33304 (Address of principal executive offices) (Zip Code) (954) 760-5000 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of preferred and common stock as of the latest practicable date.
OUTSTANDING AT TITLE OF EACH CLASS AUGUST 2, 2002 ------------------- -------------- Class A Common Stock, par value $0.01 per share 53,409,559 Class B Common Stock, par value $0.01 per share 4,876,124
================================================================================ TABLE OF CONTENTS PART I. FINANCIAL INFORMATION
PAGE REFERENCE Item 1. Financial Statements 1-22 Consolidated Statements of Financial Condition - June 30, 2002 and 2001 and December 31, 2001 - Unaudited 4 Consolidated Statements of Operations - For the Three and Six Months Ended June 30, 2002 and 2001 - Unaudited 5-6 Consolidated Statements of Stockholders' Equity and Comprehensive Income - For the Six Months Ended June 30, 2002 and 2001 - Unaudited 7 Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 2002 and 2001 - Unaudited 8-9 Notes to Consolidated Financial Statements - Unaudited 10-22 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 23-39 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 40-41 Signatures 42
[THIS PAGE INTENTIONALLY LEFT BLANK] BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - UNAUDITED
JUNE 30, DECEMBER 31, JUNE 30, (In thousands, except share data) 2002 2001 2001 ----------- ----------- ----------- ASSETS Cash and due from depository institutions $ 150,468 $ 120,049 $ 98,254 Securities purchased under resell agreements 149 156 1,018 Investment securities and tax certificates (approximate fair value: $461,020 $434,470 and $362,616) 453,778 428,718 356,179 Loans receivable, net 3,564,143 2,774,238 2,972,548 Securities available for sale (at fair value) 801,516 843,867 866,097 Trading securities (at fair value) 210,132 68,296 31,113 Accrued interest receivable 36,687 33,706 37,087 Real estate held for development and sale and joint ventures 232,765 178,273 154,546 Equity method investment 58,205 -- -- Office properties and equipment, net 92,740 61,685 61,649 Federal Home Loan Bank stock, at cost which approximates fair value 60,732 56,428 56,428 Deferred tax asset, net 38,857 17,879 17,495 Goodwill 98,633 39,859 48,463 Core deposit intangible asset 14,664 -- -- Other assets 97,030 31,332 55,220 ----------- ----------- ----------- Total assets $ 5,910,499 $ 4,654,486 $ 4,756,097 =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 2,980,098 $ 2,276,567 $ 2,370,505 Advances from FHLB 1,218,926 1,106,030 1,128,555 Securities sold under agreements to repurchase 491,735 406,070 107,000 Federal funds purchased 80,000 61,000 438,714 Subordinated debentures, notes and bonds payable 195,243 131,428 220,508 Guaranteed preferred beneficial interests in Company's Junior Subordinated Debentures 155,125 74,750 74,750 Securities sold not yet purchased 68,325 38,431 40,250 Due to clearing agent 94,312 9,962 -- Other liabilities 165,300 114,575 101,402 ----------- ----------- ----------- Total liabilities 5,449,064 4,218,813 4,481,684 ----------- ----------- ----------- Stockholders' equity: Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued and outstanding -- -- -- Class A common stock, $.01 par value, authorized 80,000,000 shares; issued and outstanding 53,392,502, 53,203,159 and 31,794,761 shares 534 532 318 Class B common stock, $.01 par value, authorized 45,000,000 shares; issued and outstanding 4,876,124, 4,876,124 and 4,876,124 shares 49 49 49 Additional paid-in capital 253,127 251,202 104,237 Unearned compensation - restricted stock grants (1,285) (1,359) (290) Retained earnings 201,129 170,349 157,910 ----------- ----------- ----------- Total stockholders' equity before accumulated other comprehensive income 453,554 420,773 262,224 Accumulated other comprehensive income 7,881 14,900 12,189 ----------- ----------- ----------- Total stockholders' equity 461,435 435,673 274,413 ----------- ----------- ----------- Total liabilities and stockholders' equity $ 5,910,499 $ 4,654,486 $ 4,756,097 =========== =========== ===========
See Notes to Consolidated Financial Statements - Unaudited BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
FOR THE THREE MONTHS FOR THE SIX MONTHS (In thousands, except share and per share data) ENDED JUNE 30, ENDED JUNE 30, ------------------------- ------------------------- Interest income: 2002 2001 2002 2001 --------- --------- --------- --------- Interest and fees on loans and leases $ 59,325 $ 61,580 $ 106,396 $ 125,431 Interest and dividends on securities available for sale 11,804 13,284 23,870 26,649 Interest and dividends on other investment and trading securities 11,578 8,792 20,279 17,828 --------- --------- --------- --------- Total interest income 82,707 83,656 150,545 169,908 --------- --------- --------- --------- INTEREST EXPENSE: Interest on deposits 17,106 23,089 32,432 47,533 Interest on advances from FHLB 15,676 14,660 30,596 29,361 Interest on securities sold under agreements to repurchase and federal funds purchased 2,113 7,142 3,497 16,774 Interest on subordinated debentures, notes and bonds payable and guaranteed beneficial interests in Company's Junior Subordinated Debentures 6,473 6,579 11,081 13,327 Capitalized interest on real estate developments and joint ventures (1,613) (1,447) (2,831) (3,018) --------- --------- --------- --------- Total interest expense 39,755 50,023 74,775 103,977 --------- --------- --------- --------- NET INTEREST INCOME 42,952 33,633 75,770 65,931 Provision for loan losses 6,139 4,040 8,704 6,801 --------- --------- --------- --------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 36,813 29,593 67,066 59,130 --------- --------- --------- --------- NON-INTEREST INCOME: Investment banking income 37,862 10,202 50,910 19,055 Net revenues from sales of real estate 12,466 7,398 24,443 13,341 Income from equity method investment 1,741 -- 1,741 -- Service charges on deposits 5,688 3,890 10,550 7,770 Other service charges and fees 3,550 3,811 6,655 7,372 Gains on trading securities and securities available for sale 3,083 1,695 6,122 2,051 Impairment of securities (18,157) (474) (18,157) (695) Other 4,990 1,947 6,859 4,262 --------- --------- --------- --------- Total non-interest income 51,223 28,469 89,123 53,156 --------- --------- --------- --------- NON-INTEREST EXPENSE: Employee compensation and benefits 54,215 23,152 81,228 46,751 Occupancy and equipment 11,348 6,953 18,492 13,836 Advertising and promotion 3,680 2,407 5,879 3,919 Amortization of intangible assets 454 1,049 454 2,074 Restructuring charges and impairment writedowns 1,007 (219) 1,007 (219) Acquisition related charges and impairments 3,922 -- 4,996 -- Other 18,857 11,483 30,241 21,657 --------- --------- --------- --------- Total non-interest expense 93,483 44,825 142,297 88,018 --------- --------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (5,447) 13,237 13,892 24,268 Provision (benefit) for income taxes (3,214) 4,632 3,545 8,838 --------- --------- --------- --------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (2,233) 8,605 10,347 15,430 Extraordinary item (less applicable income taxes of $2,711) 23,810 -- 23,810 -- Cumulative effect of a change in accounting principle (less applicable income taxes of $683) -- -- -- 1,138 --------- --------- --------- --------- NET INCOME 21,577 8,605 34,157 16,568 Amortization of goodwill, net of tax -- 978 -- 1,969 --------- --------- --------- --------- NET INCOME ADJUSTED TO EXCLUDE GOODWILL AMORTIZATION $ 21,577 $ 9,583 $ 34,157 $ 18,537 ========= ========= ========= =========
(CONTINUED) See Notes to Consolidated Financial Statements - Unaudited BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ----------------------------- ---------------------------- 2002 2001 2002 2001 ------------ ------------ ------------ ------------ EARNINGS PER SHARE Basic earnings (loss) per share before extraordinary item and cumulative effect of a change in accounting principle $ (0.04) $ 0.24 $ 0.18 $ 0.42 Basic earnings per share from extraordinary item 0.41 -- 0.41 -- Basic earnings per share from cumulative effect of a change in accounting principle -- -- -- 0.03 ------------ ------------ ------------ ------------ Basic earnings per share 0.37 0.24 0.59 0.45 Basic earnings per share from amortization of goodwill -- 0.03 -- 0.05 ------------ ------------ ------------ ------------ Basic earnings per share adjusted for goodwill amortization $ 0.37 $ 0.27 $ 0.59 $ 0.50 ============ ============ ============ ============ Diluted earnings (loss) per share before extraordinary item and cumulative effect of a change in accounting principle $ (0.04) $ 0.19 $ 0.17 $ 0.34 Diluted earnings per share from extraordinary item 0.41 -- 0.39 -- Diluted earnings per share from cumulative effect of a change in accounting principle -- -- -- 0.03 ------------ ------------ ------------ ------------ Diluted earnings per share 0.37 0.19 0.56 0.37 Diluted earnings per share from amortization of goodwill -- 0.02 -- 0.04 ------------ ------------ ------------ ------------ Diluted earnings per share adjusted for goodwill amortization $ 0.37 $ 0.21 $ 0.56 $ 0.41 ============ ============ ============ ============ Basic weighted average number of common shares outstanding 57,973,880 36,535,810 57,918,382 36,519,091 ============ ============ ============ ============ Diluted weighted average number of common and common equivalent shares outstanding 57,973,880 51,275,621 60,887,362 50,909,002 ============ ============ ============ ============
See Notes to Consolidated Financial Statements - Unaudited 6 BANKATLANTIC BANCORP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2002 - UNAUDITED
Unearned Accumul- Compen- ated Addi- sation Other Compre- tional Restricted Compre- hensive Common Paid-in Retained Stock hensive (In thousands) Income Stock Capital Earnings Grants Income Total --------- ------- ----------- ------------ ---------- --------- ---------- BALANCE, DECEMBER 31, 2000 $ 366 $ 103,745 $ 143,471 $ (391) $ 1,630 $ 248,821 Net income $ 16,568 -- -- 16,568 -- -- 16,568 --------- Other comprehensive income, net of tax: Unrealized gain on securities available for sale 10,515 Accumulated gains associated with cash flow hedge 301 Reclassification adjustment for net gain included in net income (257) --------- Other comprehensive income 10,559 --------- Comprehensive income $ 27,127 ========= Dividends on Class A Common Stock -- -- (1,876) -- -- (1,876) Dividends on Class B Common Stock -- -- (253) -- -- (253) Exercise of Class A common stock options 1 404 -- -- -- 405 Tax effect relating to the exercise of stock options -- 63 -- -- -- 63 Issuance of Class A common stock upon conversion of subordinated debentures -- 25 -- -- -- 25 Amortization of unearned compensation - restricted stock grants -- -- -- 101 -- 101 Net change in accumulated other comprehensive income, net of income taxes -- -- -- 10,559 10,559 ------- ----------- ------------ ---------- --------- ---------- BALANCE, JUNE 30, 2001 $ 367 $ 104,237 $ 157,910 $ (290) $ 12,189 $ 274,413 ======= =========== ============ ========== ========= ========== BALANCE, DECEMBER 31, 2001 $ 581 $ 251,202 $ 170,349 $ (1,359) $ 14,900 $ 435,673 Net income $ 34,157 -- -- 34,157 -- -- 34,157 --------- Other comprehensive income, net of tax: Unrealized loss on securities available for sale (2,142) Accumulated loss associated with cash flow hedges (836) Reclassification adjustment for cash flow hedges 264 Reclassification adjustment for net gain included in net income (4,305) --------- Other comprehensive loss (7,019) --------- Comprehensive income $ 27,138 ========= Dividends on Class A Common Stock -- -- (3,095) -- -- (3,095) Dividends on Class B Common Stock -- -- (282) -- -- (282) Issuance of Class A common stock 2 870 -- -- -- 872 Tax effect relating to the exercise of stock options -- 365 -- -- -- 365 Issuance of Class A common stock upon conversion of subordinated debentures -- 25 -- -- -- 25 Issuance of equity method investment common stock -- (105) -- -- -- (105) Issuance of subsidiary stock options -- 770 -- -- -- 770 Amortization of unearned compensation - restricted stock grants -- -- -- 74 -- 74 Net change in accumulated other comprehensive income, net of income taxes -- -- -- -- (7,019) (7,019) ------- ----------- ------------ ---------- --------- ---------- BALANCE, JUNE 30, 2002 $ 583 $ 253,127 $ 201,129 $ (1,285) $ 7,881 $ 461,435 ======= =========== ============ ========== ========= ==========
See Notes to Consolidated Financial Statements - Unaudited 7 BANKATLANTIC BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
FOR THE SIX MONTHS (In thousands) ENDED JUNE 30, --------------------------- 2002 2001 --------- --------- OPERATING ACTIVITIES: Income before cumulative effect of a change in accounting principle $ 10,347 $ 15,430 Cumulative effect of a change in accounting principle, net of tax -- 1,138 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH (USED) PROVIDED IN OPERATING ACTIVITIES: Provision for credit losses * 9,698 7,573 Change in real estate inventory (39,572) (1,131) Equity in joint venture earnings (1,939) (1,196) Equity in earnings from equity method investment (1,741) -- Net collections (originations) of loans held for sale activity 14,714 (17,813) Proceeds from sales of loans classified as held for sale 2,070 13,002 Gains on securities activities (6,122) (2,051) Impairment of securities 18,157 695 Losses (gains) on sales of property and equipment 336 (367) Gains on sales of in-store branches (384) -- Property and equipment impairment 205 -- Acquisition related impairment 515 -- Depreciation, amortization and accretion, net 2,221 3,298 Amortization of intangible assets 454 2,074 (Increase) decrease in deferred tax asset, net (15,451) 2,667 Issuance of subsidiary stock options 770 -- Trading activities, net (23,073) 12,444 (Increase) decrease in accrued interest receivable (161) 6,959 Increase in other assets (28,250) (25,335) Decrease in due to clearing agent (17,355) -- Increase in securities sold not yet purchased 28,616 1,819 Increase in other liabilities 21,951 13,013 --------- --------- Net cash (used) provided in operating activities (23,994) 32,219 --------- --------- INVESTING ACTIVITIES: Proceeds from redemption and maturities of investment securities and tax certificates 100,071 129,813 Purchase of investment securities and tax certificates (142,246) (102,085) Purchases of securities available for sale (212,650) (237,894) Proceeds from sales and maturities of securities available for sale 361,415 229,391 Proceeds from sales of FHLB stock 6,509 512 FHLB stock acquired (2,750) (5,000) Purchases and net (originations) collections of loans and leases (204,512) (123,899) Proceeds from sales of real estate owned 3,002 3,490 Net additions to office property and equipment (16,265) (5,586) Increase in equity method investment (53,736) -- Repayments of and (investments in) joint ventures 3,143 (4,464) Acquisitions, net of cash acquired (52,783) (655) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (210,802) (116,377) --------- --------- FINANCING ACTIVITIES: Net increase in deposits 87,045 136,020 Reduction in deposits from sale of in-store branches (22,241) -- Repayments of FHLB advances (99,450) (275,246) Proceeds from FHLB advances 75,000 365,000 Net increase (decrease) in securities sold under agreements to repurchase 85,665 (220,788) Net increase in federal funds purchased 19,000 97,300 Repayment of notes and bonds payable (33,891) (27,333) Proceeds from notes and bonds payable 76,315 23,508 Issuance of common stock 872 405 Issuance of equity method investment common stock (105) -- Issuance of trust preferred securities 80,375 -- Common stock dividends paid (3,377) (2,129) --------- --------- NET CASH PROVIDED IN FINANCING ACTIVITIES 265,208 96,737 --------- --------- INCREASE IN CASH AND CASH EQUIVALENTS 30,412 12,579 Cash and cash equivalents at beginning of period 120,205 86,693 --------- --------- Cash and cash equivalents at end of period $ 150,617 $ 99,272 ========= =========
See Notes to Consolidated Financial Statements - Unaudited (Continued) 8 BANKATLANTIC BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
FOR THE SIX MONTHS (In thousands) ENDED JUNE 30, ------------------------- 2002 2001 -------- -------- Interest paid $ 76,827 $108,908 Income taxes paid 14,013 10,875 Loans transferred to real estate owned 10,822 2,375 Loan net charge-offs 15,349 10,113 Tax certificate net charge-offs (recoveries) 1,178 1,327 Increase in equity for the tax effect related to the exercise of employee stock options 365 63 Transfer of securities available for sale to equity method investment 2,728 -- Issuance of notes payable under the Ryan Beck deferred compensation plan 3,675 -- Change in other comprehensive income (7,019) 10,559 Change in deferred taxes on other comprehensive income (3,136) 5,811 Issuance of Class A Common Stock upon conversion of subordinated debentures 25 --
* Provision for credit losses represents provision for loan losses, REO and tax certificates. See Notes to Consolidated Financial Statements - Unaudited 9 BANKATLANTIC BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED 1. PRESENTATION OF INTERIM FINANCIAL STATEMENTS BankAtlantic Bancorp, Inc. (the "Company") is a Florida-based diversified financial services holding company. The Company's principal assets include the capital stock of BankAtlantic and its subsidiaries, Levitt Companies, LLC ("Levitt Companies") and its subsidiaries and Ryan, Beck & Co. LLC ("Ryan Beck") and its subsidiaries. BankAtlantic is a federal savings bank headquartered in Fort Lauderdale, Florida which provides traditional retail banking services and a wide range of commercial banking products and related financial services. Levitt Companies' principal activities include residential construction, real estate development and real estate joint venture investments in Florida. Levitt Companies' principal assets include Core Communities, LLC, Levitt and Sons, LLC and its investment in Bluegreen Corporation ("Bluegreen"). Core Communities develops land for master planned communities located in Florida. Levitt and Sons is a developer of single-family home communities and condominium and rental apartment complexes primarily in Florida. Bluegreen, a New York Stock Exchange listed company in which we own 40% of the outstanding common stock, is a developer of drive-to vacation interval resorts, golf communities and residential land. Ryan Beck is an investment banking firm which provides a wide range of investment banking, brokerage and investment management services. All significant inter-company balances and transactions have been eliminated in consolidation, including $27.8 million of loans from BankAtlantic to Levitt Companies, $30 million of loans from the Company to Levitt Companies and $5.0 million of loans from the Company to Ryan Beck. In management's opinion, the accompanying consolidated financial statements contain such adjustments necessary to present fairly the Company's consolidated financial condition at June 30, 2002, December 31, 2001 and June 30, 2001, the consolidated results of operations for the three and six months ended June 30, 2002 and 2001, the consolidated stockholders' equity and comprehensive income for the six months ended June 30, 2002 and 2001 and the consolidated cash flows for the six months ended June 30, 2002 and 2001. Such adjustments consisted only of normal recurring items except for the extraordinary item and cumulative effect of a change in accounting principle discussed in Note 4 and Note 10, respectively. The consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the notes to the consolidated financial statements appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2001 and our Form 10-Q for the three months ended March 31, 2002. 2. COMMON UNIT OPTIONS AND RETENTION POOL Ryan Beck's Board of Directors adopted the Ryan, Beck & Co., LLC Common Unit Option Plan (the "Plan") effective March 29, 2002. The Plan provides for the grant of not more than an aggregate 500,000 Common Units representing limited liability interests of Ryan Beck. As of June 30, 2002, 8,125,000 units of Ryan Beck were outstanding, all of which are owned by the Company. During the second quarter, 2002, Ryan Beck's Board of Directors granted, pursuant to the Plan, common unit options to acquire an aggregate of 470,000 common units of Ryan Beck. The fair value of the common unit options was determined based on an independent appraisal. A second quarter compensation charge of $770,000 associated with these options was based on a fair value estimate from the independent appraiser. Upon exercise of the common unit options, the Company or Ryan Beck have the right under certain defined circumstances, starting six months plus one day after the exercise date, to repurchase the common units at fair value as determined by an independent appraiser. The Company and Ryan Beck also have the right of first refusal on any sale of common units, and the Company has the right to require any common unit holder to sell its units along with the Company in the event that the Company sells its interest in Ryan Beck. In connection with the acquisition of Ryan Beck in June 1998, the Company established a retention pool covering certain key employees of Ryan Beck, under which 785,866 shares of restricted Class A common stock were issued to these employees. The retention pool was valued at $8.1 million at the acquisition date, and the shares, which vested four years from the date of acquisition, were treated as compensation expense. In January 2000, each participant in the retention pool was provided the opportunity to exchange the restricted shares that were allocated to such participant for a cash-based deferred compensation award in an amount equal to the aggregate value of the restricted shares at the date of the Ryan Beck acquisition. The deferred compensation awards were granted under the BankAtlantic Bancorp, Inc. Deferred Compensation Plan. All participant accounts under the plan vested on June 28, 2002 and the remaining 10 BANKATLANTIC BANCORP, INC. participants received in the aggregate 5,941 shares of Class A Common Stock, $3.8 million in cash and notes payable for an aggregate principal amount of $3.7 million. The notes payable mature on June 28, 2003 and bear interest at 5.75%. 3. TRUST PREFERRED SECURITIES In June 2002, the Company formed BBC Capital Statutory Trust III ("BBC Capital III"), a statutory business trust, for the purpose of issuing Trust Preferred Securities. In June 2002, the Company participated in a pooled trust preferred securities offering in which BBC Capital III issued 25,000 Trust Preferred Securities at a price of $1,000 per security. The Trust Preferred Securities pay interest quarterly at a floating rate equal to 3-month LIBOR plus 345 basis points, with an initial coupon rate of 5.34%. The gross proceeds from the offering of $25.0 million were invested in an identical principal amount of the Company's Junior Subordinated Debentures which bear interest at the same floating rate as the Trust Preferred Securities and have a stated maturity of 30 years. In addition, the Company contributed $774,000 to BBC Capital III in exchange for BBC Capital III's Common Securities and such proceeds were also invested in an identical principal amount of floating rate Junior Subordinated Debentures. BBC Capital III's Common Securities are owned entirely by the Company. BBC Capital III's sole asset is $25.8 million in aggregate principal amount of floating rate Junior Subordinated Debentures. Holders of BBC Capital III's Trust Preferred Securities and the Trust Common Securities are entitled to receive a cumulative cash distribution at a floating rate equal to 3-month LIBOR plus 345 basis points of the $1,000 liquidation amount of each security. The Trust Preferred Securities will have a preference under certain circumstances with respect to cash distributions and amounts payable on liquidation, redemption or otherwise over the Trust Common Securities held by the Company. The Trust Preferred Securities are considered debt for financial accounting and tax purposes. The net proceeds to the Company from the Trust Preferred Securities offering after underwriting discounts and expenses were approximately $24.2 million. The Company used the proceeds from the above sale of trust preferred securities for general corporate purposes, including to augment the capital of Ryan Beck in conjunction with its acquisition of certain assets and the assumption of certain liabilities of Gruntal & Co., LLC, and to repay a portion of outstanding borrowings under the Company's revolving bank line of credit. 4. ACQUISITIONS On April 26, 2002 Ryan Beck acquired certain of the assets and assumed certain of the liabilities of Gruntal & Co., LLC ("Gruntal") and acquired all of the membership interests in The GMS Group, LLC. ("GMS"), a wholly-owned subsidiary of Gruntal. Gruntal provides securities brokerage and investment banking services to individual and institutional investors. GMS is primarily engaged in the business of buying, selling and underwriting municipal securities. The assets that were acquired from Gruntal include all of Gruntal's customer accounts, furniture, leasehold improvements and equipment owned by Gruntal at the offices where Gruntal's investment consultants are located, assets related to Gruntal's deferred compensation plan and forgivable loans. The consideration provided by Ryan Beck for this transaction was the assumption of a note payable related to furniture and equipment in the Gruntal offices, assumption of non-cancelable leases associated with the Gruntal offices acquired, obligations owed to investment consultants participating in Gruntal's deferred compensation plan that accepted employment with Ryan Beck, and the payment of $6.0 million in cash. Ryan Beck performed an evaluation of each retail branch office and institutional sales office of Gruntal and put back to Gruntal the lease obligations and related assets of certain individual offices with contractual terms it deemed unfavorable. The deferred compensation plan assumed by Ryan Beck was a nonqualified plan covering select employees that provided participants the opportunity to defer up to 20 percent of cash compensation. Gruntal provided an annual matching contribution and in some cases special allocations both of which would vest if the employee remains employed for ten years from the plan year for which contributions were made. The obligations were not required to be funded and were unsecured general obligations to pay in the future the value of the deferred compensation, adjusted to reflect the performance of selected investment measurement options chosen by each participant during the deferral period. On April 26, 2002 Ryan Beck froze the plan, whereby, the participants could no longer make future contributions and related matches ceased. The obligation at April 26, 2002 was $21 million, of which $18.3 million was vested. Ryan Beck is subject to future expense based on future actuarial values of the plan obligations. Subsequently, Ryan Beck put in place a retention plan for certain Gruntal investment consultants, key employees and others during July 2002. Pursuant to the retention plan, the participants received a length of service award and a retention award in forgivable notes in the aggregate amounts of $900,000 and $9.5 million, respectively. The participants received the length of service award and 50% of the retention award in forgivable notes in the aggregate amount of $5.7 million in July 2002. The participants can elect to receive their remaining 50% of the retention award in forgivable notes in February 2003, or the participants can elect to receive an enhanced award based on 11 BANKATLANTIC BANCORP, INC. production goals which will be paid out in the form of forgivable notes in January 2004. The award based on production goals can be no less than the amount they would have received on February 2003 assuming all participants remained employed through the retention award date. Each forgivable note will have a term of five years. A pro-rata portion of the principal amount of the note is forgiven each month over the five year term. If a participant terminates employment with Ryan Beck prior to the end of the term of the Note, the outstanding balance becomes immediately due to Ryan Beck. The Gruntal transaction was accounted for by the purchase method of accounting. Under this method of accounting, the acquired assets and assumed liabilities of Gruntal are recorded at their estimated fair value, and the amount of estimated fair value of net assets in excess of the purchase price is used to write down non-financial assets and the remaining balance is recorded as an extraordinary income item. The operations of the Gruntal transaction were included in the Company's statement of operations and the assets acquired and liabilities assumed from Gruntal were included in the Company's statement of financial condition since April 26, 2002. On March 22, 2002 BankAtlantic acquired Community Savings Bankshares Inc., the parent company of Community Savings, F.A. ("Community"), for $170.3 million in cash and immediately merged Community into BankAtlantic. The fair value of Community's assets acquired and liabilities assumed was included in the Company's statement of financial condition and Community's results of operations have been included in the Company's consolidated financial statements since March 22, 2002. The following table summarizes the fair value of assets acquired and liabilities assumed in connection with the acquisition of Community and the Gruntal transaction effective March 22, 2002 and April 26, 2002, respectively. The Company is in the process of obtaining third party valuations; therefore, the allocation of the purchase price is subject to change.
(in thousands) COMMUNITY GRUNTAL TOTAL ----------- ----------- ----------- Cash and interest earning deposits $ 124,977 $ 886 $ 125,863 Securities available for sale 79,768 33,146 112,914 Trading securities -- 118,763 118,763 Loans receivable, net 621,964 -- 621,964 FHLB Stock 8,063 -- 8,063 Investments and advances to joint ventures 16,122 -- 16,122 Goodwill 58,775 -- 58,775 Core deposit intangible asset 15,117 -- 15,117 Other assets 45,070 12,597 57,667 ----------- ----------- ----------- Fair value of assets acquired 969,856 165,392 1,135,248 ----------- ----------- ----------- Deposits 639,111 -- 639,111 FHLB advances 138,981 -- 138,981 Other borrowings 14,291 3,427 17,718 Securities sold not yet purchased -- 1,201 1,201 Payable to clearing broker -- 101,705 101,705 Other liabilities 6,674 27,402(1) 34,076 ----------- ----------- ----------- Fair value of liabilities assumed 799,057 133,735 932,792 Fair value of net assets acquired over cost -- (23,810)(2) (23,810) ----------- ----------- ----------- Purchase price 170,799 7,847 178,646 Cash acquired (124,977) (886) (125,863) ----------- ----------- ----------- Purchase price net of cash acquired $ 45,822 $ 6,961 $ 52,783 =========== =========== ===========
The purchase price of Community consisted of $170.3 million in cash and $500,000 of acquisition professional fees. The cost of the Gruntal transaction consisted of a $6.0 million cash payment to Gruntal, $750,000 of acquisition professional fees and an estimated $1.05 million of contingent consideration payable to Gruntal. The $1.05 million contingent consideration to Gruntal relates to possible deferred compensation plan participant forfeitures and represents the maximum amount of additional consideration. Pursuant to the terms of the Acquisition Agreement, during each of the three years beginning October 27, 2002 Ryan Beck is obligated to 12 BANKATLANTIC BANCORP, INC. pay Gruntal & Co. LLC up to $350,000 of forfeitures each year under the Amended and Restated Gruntal & Co. LLC Deferred Compensation Plan for each of the years in the three year period ended October 26, 2005. 1. Included in Gruntal's other liabilities were $675,000 of termination costs for contract obligations related to leased equipment and $654,000 of contract termination obligations associated with closing certain Gruntal branches. 2. The Company recognized an extraordinary gain of $23.8 million, net of income taxes of $2.7 million, and reduced the carrying amount of non-financial assets by $11.2 million as a result of the fair value of the assets acquired exceeding the cost of the transaction. The Company did not establish a deferred tax liability for the extraordinary gain associated with the GMS membership interest acquisition based on the fact that the Company acquired the membership interest in GMS instead of the net assets. Any change in the purchase accounting adjustments as a result of third party valuations will be reflected as an adjustment to the extraordinary gain. The following is pro forma information for the three and six months ended June 30, 2002 and 2001 and is presented as if the Gruntal and Community transactions had been consummated on January 1, 2002 and 2001, respectively. The pro forma information is not necessarily indicative of the combined financial position or results of operations which would have been realized had the transaction been consummated during the period or as of the dates for which the pro forma financial information is presented. (in thousands, except for share data).
FOR THE THREE MONTHS ENDED ----------------------------------------------------------- JUNE 30, 2002 JUNE 30, 2001 -------------------------- ------------------------- (in thousands) HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------- --------- ---------- --------- Interest income $ 82,707 $ 84,156 $ 83,656 $105,141 Interest expense 39,755 44,172 50,023 61,736 Provision for loan losses 6,139 6,139 4,040 4,130 -------- -------- -------- -------- Net interest income after provision for loan losses 36,813 33,845 29,593 39,275 -------- -------- -------- -------- Income (loss) before extraordinary item $ (2,233) $ (2,361) $ 8,605 $ 7,449 ======== ======== ======== ======== Basic earnings (loss) per share before extraordinary item $ (0.04) $ (0.04) $ 0.24 $ 0.20 ======== ======== ======== ======== Diluted earnings (loss) per share before extraordinary item $ (0.04) $ (0.04) $ 0.19 $ 0.17 ======== ======== ======== ========
FOR THE SIX MONTHS ENDED --------------------------------------------------------- JUNE 30, 2002 JUNE 30, 2001 ------------------------- ------------------------- (in thousands) HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------- --------- ---------- --------- Interest income $150,545 $169,007 $169,908 $213,851 Interest expense 74,775 82,085 103,977 128,231 Provision for loan losses 8,704 10,748 6,801 6,981 -------- -------- -------- -------- Net interest income after provision for loan losses 67,066 76,174 59,130 78,639 -------- -------- -------- -------- Income before extraordinary item and cumulative effect of a change in accounting principles $ 10,347 $ 7,131 $ 15,430 $ 10,572 ======== ======== ======== ======== Basic earnings per share before extraordinary item and cumulative effect of a change in accounting principle $ 0.18 $ 0.12 $ 0.42 $ 0.29 ======== ======== ======== ======== Diluted earnings per share before extraordinary item and cumulative effect of a change in accounting principle $ 0.17 $ 0.12 $ 0.34 $ 0.25 ======== ======== ======== ========
During April 2002, the Company and Levitt Companies ownership in Bluegreen Corporation ("Bluegreen"), a New York Stock Exchange-listed company engaged in the acquisition, development, marketing and sale of drive-to vacation interval resorts, golf communities and residential land increased from approximately 5% to 40%. This interest in 13 BANKATLANTIC BANCORP, INC. Bluegreen was acquired for an aggregate purchase price of approximately $56 million. The Company acquired approximately 5% of Bluegreen common stock during the first quarter of 2001 and Levitt Companies acquired approximately 35% of Bluegreen common stock in April 2002. As a consequence of the acquisition of this interest in Bluegreen at various acquisition dates, it is accounted for as a step acquisition under the equity method of accounting. In a step acquisition the purchase price allocation is performed at each acquisition date and goodwill is recognized with each step purchase. Additionally, prior period financial statements should be restated to reflect the results of applying the equity method of accounting to the initial acquisition; however, the Company did not restate its prior year financial statements due to lack of significance. Under the equity method of accounting the investment in Bluegreen was recorded at cost and the carrying amount of the investment is adjusted to recognize our 40% interest in the earnings or loss of Bluegreen after the acquisition date. The Company is in the process of determining the Bluegreen purchase price allocation. The funds for the investment in Bluegreen were obtained from $29.9 million of borrowings from the Company's existing bank line of credit, proceeds of its trust preferred securities offering, proceeds from the sale of equity securities from the Company's portfolio and Levitt Companies' working capital. 5. IMPAIRMENT OF SECURITIES During 1999, the Company entered into a strategic relationship and invested $10 million in cash and issued 848,364 shares of Class A common stock to acquire an investment in Seisint, Inc., a privately held technology company. The Company anticipated benefits from this strategic relationship through the exchange of ideas and cooperation in the development by Seisint of technology and support systems for use by financial institutions. Additionally, both Alan B. Levan and John E. Abdo were directors of Seisint and each acquired direct and indirect interests in Seisint common stock. However, because Seisint has not been able to meet the objectives of its business plan or its financial performance goals, the Company performed an evaluation of its investment in Seisint to determine if there was an other than temporary decline in value associated with this investment. As a consequence of this evaluation, the Company wrote off its entire $15 million investment in Seisint during the three months ended June 30, 2002. The Company also recognized an impairment charge of $3.2 million during the three months ended June 30, 2002 on other equity securities resulting from significant declines in their value that were considered other than temporary due to the financial condition and near term prospects of the issuers of the equity securities. The Company recognized a $474,000 and $695,000 impairment charge associated with equity securities during the three and six-month periods ended June 30, 2001. As a result of these losses, the Company has revised its policy for holding company equity investments. Any future equity investments will be limited to liquid securities and will be subject to significant concentration restrictions. At June 30, 2002 equity investments totaled $8.7 million. 6. TRADING SECURITIES AND SECURITIES SOLD NOT YET PURCHASED The Ryan Beck gains on trading securities were associated with sales and trading activities conducted both as principal and as agent on behalf of individual and institutional investor clients of Ryan Beck. Transactions as principal involve making markets in securities which are held in inventory to facilitate sales to and purchases from customers. Included in investment banking income during the three and six months ended June 30, 2002, respectively, was realized net revenues from Ryan Beck's principal transactions of $17.3 million and $24.8 million compared to net revenues of $3.9 million and $8.4 million during the same 2001 periods. Ryan Beck's trading securities consisted of the following (in thousands):
JUNE 30, DECEMBER 31, JUNE 30, 2002 2001 2001 -------- ------------ -------- States and municipalities $133,448 $ 7,593 $ 9,791 Corporate debt securities 19,535 20,989 290 U.S. Government and agencies 46,306 32,308 16,640 Corporate equities 10,843 7,406 4,094 Certificates of deposit -- -- 298 -------- -------- -------- $210,132 $ 68,296 $ 31,113 ======== ======== ========
14 BANKATLANTIC BANCORP, INC. Ryan Beck's securities sold not yet purchased consisted of the following (in thousands):
JUNE 30, DECEMBER 31, JUNE 30, 2002 2001 2001 -------- ------------ -------- States and municipalities $16,367 $ -- $18,734 Corporate debt securities 11,728 21,305 -- U.S. Government and agencies 33,487 15,244 16,880 Corporate equities 6,743 1,882 4,636 ------- ------- ------- $68,325 $38,431 $40,250 ======= ======= =======
7. LOANS HELD FOR SALE The Company currently originates CRA residential loans for resale and refers its residential loan customers to an unaffiliated lender. During June 2000, the Company discontinued its commercial non-mortgage syndication lending activities and transferred the entire portfolio to loans held for sale. Loans held for sale consisted of the following (in thousands):
JUNE 30, DECEMBER 31, JUNE 30, 2002 2001 2001 -------- ------------ -------- Residential $ 9,241 $ 4,757 $ 4,904 Commercial real estate -- -- 22,713 Commercial syndication 19,506 40,774 79,901 -------- -------- -------- Total loans held for sale $ 28,747 $ 45,531 $107,518 ======== ======== ========
8. REAL ESTATE HELD FOR DEVELOPMENT AND SALE AND JOINT VENTURE ACTIVITIES Real estate held for development and sale and joint venture activities consisted of the combined activities of Core Communities and Levitt and Sons as well as Levitt Companies' joint venture activities and a joint venture acquired in connection with the Community Savings acquisition. Core Communities is a developer of master planned residential commercial and industrial communities in Florida. Levitt and Sons is a developer of single-family home communities and condominium and rental apartment complexes primarily in Florida. The Company's investment and advances to the joint venture development acquired in connection with the Community Savings acquisition was $17.8 million at June 30, 2002. This development of single family homes, condominium units and duplexes is located on 117 acres of land in Indian River County, Florida. Real estate held for development and sale and joint ventures consisted of the following:
(in thousands) JUNE 30, DECEMBER 31, JUNE 30, 2002 2001 2001 -------- ------------ -------- Land and land development costs $148,802 $114,499 $ 86,907 Construction costs 23,399 17,949 19,657 Other costs 9,804 9,985 8,022 Equity investments in joint venture 1,598 7,127 6,151 Loans to joint ventures 49,162 28,713 33,809 -------- -------- -------- $232,765 $178,273 $154,546 ======== ======== ========
15 BANKATLANTIC BANCORP, INC. The components of net revenues from sales of real estate were as follows:
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ---------------------- ---------------------- (IN THOUSANDS) 2002 2001 2002 2001 ------- ------- ------- ------- Sales of real estate $46,864 $33,176 $84,717 $57,954 Cost of sales 35,438 26,234 62,213 45,809 ------- ------- ------- ------- Gains on sales of real estate 11,426 6,942 22,504 12,145 Gains on joint venture activities 1,040 456 1,939 1,196 ------- ------- ------- ------- Gains on sales of real estate held for sale and joint venture activities $12,466 $ 7,398 $24,443 $13,341 ======= ======= ======= =======
9. COMPREHENSIVE INCOME The income tax provision relating to the comprehensive income reclassification adjustment in the Consolidated Statements of Stockholders' Equity and Comprehensive Income for the six months ended June 30, 2002 and 2001 was $2.4 million and $145,000, respectively. Comprehensive income for the three months ended June 30, 2002 and 2001 was $18.6 million and $11.0 million, respectively. 10. DERIVATIVES The Company adopted Financial Accounting Standards Board Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133") on January 1, 2001. At the adoption date we recognized all derivative instruments as defined by FAS 133 in the statement of financial position as either assets or liabilities and measured them at fair value resulting in a $1.1 million gain associated with the cumulative effect of a change in accounting principle, net of tax. The derivatives utilized by the Company during the six months ended June 30, 2002 were interest rate swaps. During the six months ended June 30, 2002, the Company created fair value hedges by entering into various interest rate swap contracts with a notional amount of $33 million to convert $33 million of designated fixed rate time deposits to a three-month LIBOR interest rate. The Company funds LIBOR based assets such as commercial real estate loans with fixed rate time deposits. During the year ended December 31, 2000, the Company entered into forward contracts to purchase the underlying collateral from a government agency pool of securities in May 2005. Included in securities gains in the Statement of Operations for the three and six months ended June 30, 2002 were $48,000 and $27,000 of unrealized losses associated with the forward contracts compared to unrealized gains of $21,000 and $34,000 during the same 2001 periods. 16 BANKATLANTIC BANCORP, INC. The following table outlines the notional amount and fair value of the Company's derivatives outstanding at June 30, 2002:
PAYING RECEIVING NOTIONAL INDEX/FIXED INDEX/FIXED TERMINATION AMOUNT FAIR VALUE AMOUNT AMOUNT DATE --------- ------------ ------------- -------------- -------------- Fifteen year callable receive fixed swaps $ 10,000 $ (136) 3mo. LIBOR 6.15% 11/13/2016 Ten year callable receive fixed swaps 30,000 33 3mo. LIBOR 6.03% 12/20/2011 Ten year callable receive fixed swaps 20,000 441 3mo. LIBOR 6.08% 2/14/2012 Seven year callable receive fixed swaps 13,000 224 3mo. LIBOR 5.60% 9/19/2009 Five year pay fixed swaps 25,000 (1,393) 5.73% 3 mo. LIBOR 1/5/2006 Three year pay fixed swaps $ 50,000 $ (2,242) 5.81% 3 mo. LIBOR 12/28/2003 ========= ============ ============ ============ ============ Forward contract to purchase adjustable rate mortgages $ 95,324 $ 103 ========= ============
The net amount of existing losses on the swaps included in other liabilities that are projected to be reclassified into earnings within the next 12 months is $526,862. The hedging relationships are expected to last over the term of the swaps. 11. RESTRUCTURING CHARGE AND IMPAIRMENT WRITE-DOWN During June 2002, we adopted a plan to discontinue certain ATM relationships, resulting in a $801,000 restructuring charge and a $206,000 impairment write-down. These relationships were primarily with convenience stores and gas stations and did not currently meet our performance expectations and were unlikely to meet our future profitability goals. The remaining ATM machines (approximately 150 machines) are primarily located in our branch network and on cruise ships. The restructuring plan is scheduled to be completed during the fourth quarter of 2002. Restructuring charges at June 30, 2002 included in other liabilities consisted of (in thousands)
INITIAL AMOUNT PAID ENDING TYPE OF RESTRUCTURING CHARGE AMOUNT DURING PERIOD BALANCE - ---------------------------- --------------- -------------- --------------- Lease contract termination costs $ 664 $ (31) $ 633 De-installation costs 87 - 87 Other 50 - 50 --------------- -------------- --------------- Total restructuring charge $ 801 $ (31) $ 770 =============== ============== ===============
12. TRANSITIONAL GOODWILL IMPAIRMENT EVALUATION In connection with the transitional goodwill impairment evaluation under FASB Statement 142, the Company performed an assessment of whether there is an indication that goodwill is impaired as of January 1, 2002, the date of adoption. During the six months ended June 30, 2002, the Company identified its reporting units and determined the carrying value of each of its reporting units by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company then determined the fair value of each reporting unit and compared it to the reporting unit's carrying amount. If the fair value of the reportable unit exceeded the carrying amount, no further evaluation needed to be performed, and the goodwill in the reporting unit is not impaired. The fair values of all reporting units, except for the Ryan Beck reportable segment, exceeded its carrying amount at the adoption date. As a consequence, the Company may have to recognize an impairment loss relating to the Ryan Beck reportable segment. The Company has contracted with an independent appraiser to measure the loss and anticipates recognizing the goodwill impairment charge during the 2002 third quarter. Any transitional impairment loss associated with the Ryan Beck reportable segment will be recognized as the cumulative effect of a change in accounting principle in the statement of operations and this non-cash charge will be recorded effective as of January 1, 2002. The charge will have no impact on operating earnings or tangible capital. 17 BANKATLANTIC BANCORP, INC. 13. SEGMENT REPORTING Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Reportable segments consist of one or more operating segments with similar economic characteristics, products and services, production processes, type of customer, distribution system and regulatory environment. The information provided for Segment Reporting is based on internal reports utilized by management. Interest expense and certain revenue and expense items are allocated to the various segments as interest expense and overhead. The presentation and allocation of interest expense and overhead and the net income calculated under the management approach may not reflect the actual economic costs, contribution or results of operations of the unit as a stand alone business. If a different basis of allocation were utilized, the relative contributions of the segments might differ but the relative trends in the segments would, in management's view, likely not be impacted. 18 BANKATLANTIC BANCORP, INC. The following summarizes the aggregation of the Company's operating segments into reportable segments:
REPORTABLE SEGMENT OPERATING SEGMENTS AGGREGATED ------------------ ----------------------------- Bank Investments Investments, tax certificates, residential loans purchased, CRA lending and real estate capital services Commercial Banking Commercial lending, syndications, international, lease finance, trade finance and a real estate joint venture development Community Banking Indirect and direct consumer lending, small business lending and ATM operations Levitt Companies Real estate and joint venture operations Ryan Beck Investment banking and brokerage operations Parent Company Costs of acquisitions, financing of acquisitions, and equity investments
The accounting policies of the segments are generally the same as those described in the summary of significant accounting policies. Intersegment transactions consist of borrowings by real estate operations and investment banking operations which are recorded based upon the terms of the underlying loan agreements and are effectively eliminated in the interest expense and overhead allocations. 19 BANKATLANTIC BANCORP, INC. The Company evaluates segment performance based on net income after tax. The table below is segment information for income before extraordinary item and cumulative effect of a change in accounting principle for the three months ended June 30, 2002 and 2001:
BANK OPERATIONS --------------------------------------- BANK COMMERCIAL COMMUNITY LEVITT PARENT SEGMENT (IN THOUSANDS) INVESTMENTS BANKING BANKING COMPANIES RYAN, BECK COMPANY TOTALS ----------- ----------- --------- --------- ---------- --------- ---------- 2002 Interest income $ 46,354 $ 26,906 $ 6,514 $ 477 $ 3,125 $ 454 $ 83,830 Interest expense and overhead (31,477) (15,767) (3,963) (312) (313) (4,522) (56,354) Provision for loan losses 59 (5,933) (265) 0 0 0 (6,139) Non-interest income 3,101 752 2,538 11,490 41,528 (17,845) 41,564 Segment profits and losses before taxes 14,107 2,571 (1,092) 5,805 (2,487) (24,351) (5,447) Provision for income taxes 3,753 684 (290) 2,032 (870) (8,523) (3,214) ---------- ----------- --------- --------- --------- --------- ---------- Segment net income (loss) $ 10,354 $ 1,887 $ (802) $ 3,773 $ (1,617) $ (15,828) $ (2,233) ========== =========== ========= ========= ========= ========= ========== Segment average assets $2,891,958 $ 1,616,326 $ 406,204 $ 273,357 $ 218,784 $ 98,436 $5,505,065 ========== =========== ========= ========= ========= ========= ========== 2001 Interest income $ 46,487 $ 30,178 $ 7,016 $ 344 $ 580 $ (34) $ 84,571 Interest expense and overhead (35,687) (17,761) (4,225) (60) (206) (5,118) (63,057) Provision for loan losses 43 (5,404) 1,321 0 0 0 (4,040) Non-interest income 589 868 2,868 8,106 10,338 758 23,527 Segment profits and losses before taxes 9,856 6,234 1,837 2,078 (915) (5,853) 13,237 Provision for income taxes 3,621 2,291 675 421 (327) (2,049) 4,632 ---------- ----------- --------- --------- --------- --------- ---------- Segment net income (loss) $ 6,235 $ 3,943 $ 1,162 $ 1,657 $ (588) $ (3,804) $ 8,605 ========== =========== ========= ========= ========= ========= ========== Segment average assets $2,654,965 $ 1,360,428 $ 323,421 $ 166,661 $ 76,306 $ 108,570 $4,690,351 ========== =========== ========= ========= ========= ========= ==========
20 BANKATLANTIC BANCORP, INC. The table below is segment information for income before extraordinary item and cumulative effect of a change in accounting principle for the six months ended June 30, 2002 and 2001:
BANK OPERATIONS ---------------------------------------- BANK COMMERCIAL COMMUNITY LEVITT PARENT SEGMENT (IN THOUSANDS) INVESTMENTS BANKING BANKING COMPANIES RYAN, BECK COMPANY TOTAL ----------- ----------- ---------- ---------- ----------- ----------- ----------- 2002 Interest income $ 84,073 $ 50,837 $ 12,010 $ 891 $ 3,823 $ 764 $ 152,398 Interest expense and overhead (58,362) (29,745) (7,179) (313) (641) (7,845) (104,085) Provision for loan losses (141) (8,148) (415) 0 0 0 (8,704) Non-interest income 3,289 1,380 4,727 23,831 55,126 (14,827) 73,526 Segment profits and losses before taxes 22,343 8,354 (1,363) 12,093 (2,254) (25,281) 13,892 Provision for income taxes 6,631 2,704 (385) 4,233 (788) (8,850) 3,545 ----------- ----------- ---------- ---------- ----------- ----------- ----------- Segment net income (loss) $ 15,712 $ 5,650 $ (978) $ 7,860 $ (1,466) $ (16,431) $ 10,347 =========== =========== ========== ========== =========== =========== =========== Segment average assets $ 2,615,383 $ 1,565,515 $ 371,653 $ 168,502 $ 66,836 $ 102,944 $ 4,890,833 =========== =========== ========== ========== =========== =========== =========== 2001 Interest income $ 93,106 $ 62,153 $ 14,613 $ 795 $ 1,156 $ 9 $ 171,832 Interest expense and overhead (71,332) (36,954) (8,927) (150) (309) (10,734) (128,406) Provision for loan losses (120) (9,650) 2,969 0 0 0 (6,801) Non-interest income 711 1,595 5,625 14,775 19,471 1,080 43,257 Segment profits and losses before taxes 18,636 14,201 3,277 3,629 (2,753) (12,722) 24,268 Provision for income taxes 6,923 5,287 1,217 844 (980) (4,453) 8,838 ----------- ----------- ---------- ---------- ----------- ----------- ----------- Segment net income (loss) $ 11,713 $ 8,914 $ 2,060 $ 2,785 $ (1,773) $ (8,269) $ 15,430 =========== =========== ========== ========== =========== =========== =========== Segment average assets $ 2,624,098 $ 1,308,896 $ 364,290 $ 166,210 $ 68,064 $ 97,882 $ 4,629,440 =========== =========== ========== ========== =========== =========== ===========
21 BANKATLANTIC BANCORP, INC. The difference between total segment average assets and consolidated average assets, segment non-interest income and total consolidated non-interest income, and segment interest income and total consolidated interest income is as follows:
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED (IN THOUSANDS) JUNE 30, JUNE 30, ----------------------------- ----------------------------- TOTAL AVERAGE ASSETS 2002 2001 2002 2001 ----------- ----------- ----------- ----------- Total average assets for reportable segments $ 5,505,065 $ 4,690,351 $ 4,890,833 $ 4,629,440 Average assets in overhead 130,176 110,451 265,329 120,707 ----------- ----------- ----------- ----------- Total average consolidated assets $ 5,635,241 $ 4,800,802 $ 5,156,162 $ 4,750,147 =========== =========== =========== =========== NON-INTEREST INCOME Total non-interest income for reportable segments $ 41,564 $ 23,527 $ 73,526 $ 43,257 Items included in interest expense and overhead: Transaction fee income 5,688 3,890 10,550 7,770 Gains on sales of assets (319) 20 49 367 Other fees 4,290 1,032 4,998 1,762 ----------- ----------- ----------- ----------- Total consolidated non-interest income $ 51,223 $ 28,469 $ 89,123 $ 53,156 =========== =========== =========== =========== INTEREST INCOME Total interest income for reportable segments $ 83,830 $ 84,571 $ 152,398 $ 171,832 Deferred interest income on real estate activities (505) (107) (875) (282) Elimination entries (618) (808) (978) (1,642) ----------- ----------- ----------- ----------- Total consolidated interest income $ 82,707 $ 83,656 $ 150,545 $ 169,908 =========== =========== =========== ===========
14. NEW ACCOUNTING PRONOUNCEMENTS In April 2002, the Financial Accounting Standards Board ("FASB") issued Statement No. 145 ("Rescission of FASB Statement No. 4,44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections.") This Statement rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, and FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. Any gain or loss on the extinguishment of debt that was classified as an extraordinary item in prior periods will be reclassified into continuing operations. In June 2002, the FASB issued Statement No. 146 ("Accounting for Costs Associated with Exit or Disposal Activities.") This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred compared to current literature, which recognized a liability when the entity committed to an exit plan. Management believes that this Statement will not have a material impact on the Company's financial statements; however, the Statement will result in a change in accounting policy associated with the recognition of liabilities in connection with future restructuring charges. 15. RECLASSIFICATIONS Certain amounts for prior periods have been reclassified to conform with the statement presentation for 2002. 22 BANKATLANTIC BANCORP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The objective of the following discussion is to provide an understanding of the financial condition and results of operations of BankAtlantic Bancorp, Inc. ("the Company", which may also be referred to as "we", "us", or "our") and its wholly owned subsidiaries for the three and six months ended June 30, 2002 and 2001, respectively. The principal assets of the Company consist of its ownership of these subsidiaries which include BankAtlantic, Levitt Companies, LLC ("Levitt Companies"), a real estate development company, and Ryan, Beck & Co., LLC ("Ryan Beck"), an investment banking firm. Except for historical information contained herein, the matters discussed in this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve substantial risks and uncertainties. When used in this report and in the documents incorporated by reference herein, the words "anticipate", "believe", "estimate", "may", "intend", "expect" and similar expressions identify certain of such forward-looking statements. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. These forward-looking statements are based largely on the expectations of BankAtlantic Bancorp, Inc. ("the Company") and are subject to a number of risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the Company's control. These include, but are not limited to, the risks and uncertainties associated with: the impact of economic, competitive and other factors affecting the Company and its operations, markets, products and services; credit risks and loan losses, and the related sufficiency of the allowance for loan losses; the effects of, and changes in, trade, monetary and fiscal policies and laws, including but not limited to interest rate policies of the Board of Governors of the Federal Reserve System; adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on our activities; the impact of changes in financial services' laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes; the impact of changes in accounting policies by the Securities and Exchange Commission; the impact of periodic testing of goodwill and other intangible assets for impairment; and with respect to the operations of Levitt Companies and its real estate subsidiaries: the market for real estate generally and in the areas where Levitt Companies has developments, the availability and price of land suitable for development, materials prices, labor costs, interest rates, environmental factors and governmental regulations; and the Company's success at managing the risks involved in the foregoing. Further, this report contains forward-looking statements with respect to recent acquisitions, each of which are subject to risks and uncertainties, including the risk that the acquisitions could involve additional costs or that the future financial and operating performance of these acquisitions will not be advantageous. In addition to the risks and factors identified above, reference is also made to other risks and factors detailed in reports filed by the Company with the Securities and Exchange Commission ("SEC"). The Company cautions that the foregoing factors are not exclusive. 23 RESULTS OF OPERATIONS
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ------------------------- ------------------------- (IN THOUSANDS) 2002 2001 2002 2001 --------- --------- --------- --------- INCOME STATEMENT Total interest income $ 82,707 $ 83,656 $ 150,545 $ 169,908 Total interest expense 39,755 50,023 74,775 103,977 --------- --------- --------- --------- Net interest income 42,952 33,633 75,770 65,931 Provision for loan losses 6,139 4,040 8,704 6,801 Gains on sales of securities 3,083 1,695 6,122 2,051 Impairment of securities (18,157) (474) (18,157) (695) Other non-interest income 66,297 27,248 101,158 51,800 Non-interest expense 93,483 44,825 142,297 88,018 --------- --------- --------- --------- Income (loss) before income taxes, extraordinary item and cumulative effect of a change in accounting principle (5,447) 13,237 13,892 24,268 Provision (benefit) for income taxes (3,214) 4,632 3,545 8,838 --------- --------- --------- --------- Income (loss) before extraordinary item and cumulative effect of a change in accounting principle (2,233) 8,605 10,347 15,430 Extraordinary item, net of tax 23,810 -- 23,810 -- Cumulative effect of a change in accounting principle, net of tax -- -- -- 1,138 --------- --------- --------- --------- Net income $ 21,577 $ 8,605 $ 34,157 $ 16,568 ========= ========= ========= ========= RECONCILIATION OF NET INCOME TO OPERATING NET INCOME Net income $ 21,577 $ 8,605 $ 34,157 $ 16,568 Amortization of goodwill -- 1,049 -- 2,074 Restructuring charges and impairment write-downs 655 (140) 655 (140) Acquisition and conversion related charges 4,350 -- 5,037 -- Impairment of securities 11,801 308 11,802 452 Extraordinary item and cumulative accounting change (23,810) -- (23,810) (1,138) --------- --------- --------- --------- Operating net income $ 14,573 $ 9,822 $ 27,841 $ 17,816 ========= ========= ========= =========
FOR THE THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SAME 2001 PERIOD: Net income was significantly affected by non-recurring items during the current quarter. The Company recognized an extraordinary gain associated with the acquisition of certain assets and the assumption of certain liabilities of Gruntal and the acquisition of all of the membership interest in The GMS Group, LLC. ("GMS"). The extraordinary gain was recognized because the fair value of the assets acquired, after reducing the carrying value of non-financial assets to zero, exceeded the cost of the transaction by $23.8 million, net of income taxes of $2.7 million. The Company did not establish a deferred tax liability for the extraordinary gain associated with the GMS membership interest acquisition because the Company acquired the membership interest in GMS instead of the net assets. The extraordinary gain was partially offset by a restructuring charge and an impairment write-down associated with our ATM network, acquisition-related charges and impairments associated with the Community and Gruntal transactions and an other than temporary decline in the fair value of equity securities. The equity securities impairment reflected the write-off of three equity investments which had experienced poor financial performance. As a consequence, we have revised our policy for equity investments, and any future equity investments will be limited to liquid securities subject to certain stringent concentration restrictions. The acquisition-related expenses were integration expenses, long-lived asset impairments and professional fees associated with the Gruntal and Community transactions. The ATM network 24 BANKATLANTIC BANCORP, INC. restructuring charge and impairment write down resulted from the termination of convenience store and gas station relationships which did not meet our performance expectations. The non-recurring items during the 2001 second quarter were the amortization of goodwill, an adjustment to the estimated restructuring charge recorded in a prior period and an other than temporary decline in the fair value of equity securities. During the current quarter, the Company also experienced a significant increase in non-interest expenses associated with the Gruntal and Community transactions and higher provision for loan losses and operating expenses related to banking operations. The increased provision for loan losses primarily related to two commercial real estate loans. The higher banking operations expenses were associated with the Community acquisition and BankAtlantic's "Seven Day Banking" initiative as well as advertising for related new deposit products. The above non-recurring charges and higher non-interest expenses were partially offset by a significant improvement in our net interest income, increased earnings at Levitt Companies, higher banking operations transaction fee income, a large increase in investment banking income as a result of the Gruntal transaction and gains on the sale of securities. The improvement in net interest income reflects earning asset growth from loan originations and the Community acquisition as well as an improvement in the net interest margin caused by declining interest rates and a change in the deposit mix from higher yielding time deposits to lower yielding transaction accounts. Income from Levitt Companies increased significantly, reflecting increased sales of real estate by Core Communities and Levitt and Sons, as well as equity in earnings associated with Levitt Companies' investment in Bluegreen. The improvement on gains on securities sales reflected the sale of mortgage-backed securities during the 2002 quarter in response to declining interest rates. The gains on securities sales during the 2001 quarter were primarily gains associated with the sale of equity securities. The substantial increase in investment banking income related to the increase in investment consultants as a result of the Gruntal transaction and the higher banking operation transaction fees were linked to our new deposit products and the Community acquisition. Included in the benefit for income taxes during the 2002 quarter was a $930,000 reduction in the deferred tax asset valuation allowance primarily associated with Levitt Companies' election to be taxed as a corporation and the utilization of tax benefits from real estate sales. Additionally, the Company acquired, as part of the Community transaction, low income housing tax credit investments which reduced the Company's tax liability by $140,000 during the three months ended June 30, 2002. FOR THE SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SAME 2001 PERIOD: Net Income increased by 106% from the prior 2001 period. The increase in earnings primarily resulted from the items discussed above as well as a non-recurring gain in the 2001 period recognized as a cumulative effect of a change in accounting principle. The Company adopted Financial Accounting Standards Board Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133") on January 1, 2001. At the adoption date, we recognized all derivative instruments as defined by FAS 133 in the statement of financial position as either assets or liabilities and measured them at fair value, resulting in a $1.1 million gain recognized during the first quarter of 2001. This was accounted for as a cumulative effect of a change in accounting principle, net of tax. 25 BANKATLANTIC BANCORP, INC. NET INTEREST INCOME
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ----------------------------------- ----------------------------------- (IN THOUSANDS) 2002 2001 CHANGE 2002 2001 CHANGE --------- --------- --------- --------- --------- --------- Interest and fees on loans and leases $ 59,325 $ 61,580 $ (2,255) $ 106,396 $ 125,431 $ (19,035) Interest on securities available for sale 11,804 13,284 (1,480) 23,870 26,649 (2,779) Interest and dividends on other investment and trading securities 11,578 8,792 2,786 20,279 17,828 2,451 Interest on deposits (17,106) (23,089) 5,983 (32,432) (47,533) 15,101 Interest on advances from FHLB (15,676) (14,660) (1,016) (30,596) (29,361) (1,235) Interest on securities sold under agreements to repurchase (2,113) (7,142) 5,029 (3,497) (16,774) 13,277 Interest on subordinated debentures, notes and bonds payable and guaranteed preferred interests in the Company's Junior Subordinated Debentures (6,473) (6,579) 106 (11,081) (13,327) 2,246 Capitalized interest on real estate developments and joint ventures 1,613 1,447 166 2,831 3,018 (187) --------- --------- --------- --------- --------- --------- Net interest income $ 42,952 $ 33,633 $ 9,319 $ 75,770 $ 65,931 $ 9,839 ========= ========= ========= ========= ========= ========= Net interest margin 3.32 3.03 0.29 3.14 2.97 0.17 ========= ========= ========= ========= ========= =========
FOR THE THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SAME 2001 PERIOD: The substantial improvement in net interest income primarily resulted from significant asset growth, increased income from trading securities and an improvement in the net interest margin. The growth in earning assets primarily resulted from the Community acquisition, which added $709 million of earning assets, and continued growth in our commercial real estate and home equity loan portfolios. The above increases in earning assets were partially offset by accelerated repayments of residential loans due to declining mortgage rates during the period and lower average balances related to several discontinued or curtailed lines of business, including our lease finance business, indirect consumer loans, syndication loans, international loans to correspondence banks and small business loans originated under previous policies prior to January 1, 2000. Interest income on loans and securities available for sale declined during 2002 compared to the same 2001 period. The decline in interest income reflects the rapid decline in interest rates during the latter half of 2001 which resulted in the refinancing of residential loans and the downward repricing of floating rate loans. These significant declines in yields on earning assets were substantially offset by the growth in earning assets mentioned above. The increased interest income from trading securities resulted from the Gruntal transaction. Trading securities interest income increased from $580,000 during the 2001 period to $3.1 million during the same 2002 period. Trading securities balances increased from $31.1 million at June 30, 2001 to $210.1 million at June 30, 2002. The net interest margin was impacted by a rapid decline in interest rates during 2001, a change in the composition of our loan portfolio and a change in the mix of our deposit portfolio. The prime interest rate declined from 9.00% at January 1, 2001 to 4.75% at December 31, 2001, which resulted in the yield on our interest earning assets declining from 7.66% during 2001 to 6.67% during 2002 and the rates on our interest paying liabilities declining from 4.99% to 3.63% during the same period. During the 2002 quarter, we continued to increase our transaction accounts, which contributed to the reduction in our cost of funds. Our deposit mix changed from 53% time deposits and 47% transaction accounts at June 30, 2001 to 44% time deposits and 56% transaction accounts during the same 2002 period. The composition of our loan portfolio changed from higher yielding loans associated with discontinued lines of business to lower yielding residential loans acquired in connection with the acquisition of Community and lower yielding floating rate commercial and home equity loans. The decline in interest expense on deposits was partially offset by average interest bearing deposits increasing by $474 million from the same 2001 period. The increase was primarily due to the Community acquisition. Interest expense on short term borrowings was substantially lower during 2002. The significant decline in short term borrowings 26 BANKATLANTIC BANCORP, INC. interest expense reflected lower short term interest rates and a decline in short term borrowings linked to an increase in deposit balances. The rates on short term borrowings declined from 4.40% during the 2001 period to 1.79% during the same 2002 period. Interest on subordinated debentures, notes and bonds payable remained at 2001 levels. During 2001, we retired our subordinated investment notes and our 6-3/4% convertible subordinated debentures. The interest rates on these borrowings were higher than the average rates on other borrowings. The above reduction in borrowings was substantially offset by additional borrowings by Levitt Companies to fund real estate purchases and the Company's issuance of $80.4 million of trust preferred securities during the 2002 period. FOR THE SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SAME 2001 PERIOD: Net interest income increased by 15% from 2001. Total interest income decreased by $19.4 million and total interest expense decreased by $29.2 million. The decrease in interest income primarily resulted from rapidly declining interest rates which impacted the repricing of floating rate loans and securities and contributed to refinancings of residential loans. The yield on interest earning assets declined from 7.86% during 2001 to 6.55% during 2002. The decline in yields on earnings assets was partially offset by $277 million of average earning asset growth associated with the Community acquisition. The decline in interest expense primarily resulted from the items discussed above. The rates on our interest paying liabilities declined from 5.25% during 2001 to 3.77% during the same 2002 period, and the rates on our short term borrowings declined from 5.10% during 2001 to 1.80% during the same 2002 period. PROVISION FOR LOAN LOSSES
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------------------- -------------------------- (in thousands) 2002 2001 2002 2001 -------- -------- -------- -------- Balance, beginning of period $ 48,927 $ 47,128 $ 44,585 $ 47,000 Charge-offs: Syndication loans -- -- (8,000) -- Commercial real estate loans (4,309) -- (4,309) -- Small business - real estate -- -- -- (12) Small business - non-mortgage (1,261) (840) (2,192) (2,184) Lease financing (1,972) (3,397) (4,184) (5,382) Consumer loans - indirect (299) (669) (737) (1,692) Consumer loans - direct (237) (314) (649) (691) Residential real estate loans (3) -- (142) (152) -------- -------- -------- -------- (8,081) (5,220) (20,213) (10,113) -------- -------- -------- -------- Recoveries: Syndication loans -- -- 683 -- Small business - non-mortgage 698 637 1,089 1,478 Lease financing 963 705 1,898 989 Commercial business loans 19 18 37 229 Commercial real estate loans 3 7 17 7 Residential real estate loans 60 91 63 156 Consumer loans - indirect 382 480 843 1,248 Consumer loans - direct 116 132 233 223 -------- -------- -------- -------- 2,241 2,070 4,863 4,330 -------- -------- -------- -------- Net charge-offs (5,840) (3,150) (15,350) (5,783) Allowance for loan losses acquired (639) -- 10,648 -- Provision for loan losses 6,139 4,040 8,704 6,801 -------- -------- -------- -------- Balance, end of period $ 48,587 $ 48,018 $ 48,587 $ 48,018 ======== ======== ======== ========
27 BANKATLANTIC BANCORP, INC. Annualized net charge-offs to average loans were 0.65% for the 2002 second quarter and 0.41% for the 2001 second quarter. Included in charge-offs for the second quarter of 2002 was a $4.3 million partial charge-off of a commercial real estate residential construction loan for which a $1.8 million specific valuation allowance was established in late 2001. This loan was transferred to real estate owned effective June 30, 2002. Excluding this one loan, net charge-offs would have equaled 0.17% of average loans on an annualized basis for the second quarter of 2002. Annualized net charge-offs to average loans were 0.94% for 2002 year to date and 0.38% for the corresponding 2001 period. Included in charge-offs for the year was an $8 million partial charge-off of a syndication loan to a company in the commercial aviation repair parts and maintenance industry for which a specific valuation allowance was established for the entire amount of the charge-off in late 2001 as well as the $4.3 million partial charge-off mentioned above. Excluding these two loans, net charge-offs would have equaled 0.19% of average loans for 2002. The allowance for loan losses was 1.34% and 1.59% of total loans at June 30, 2002 and 2001, respectively. Included in the allowance for loan losses was a $10.6 million allowance acquired in connection with the Community acquisition. This allowance was reduced by $639,000 in the second quarter of 2002 as a result of loan payoffs in the acquired portfolio. Also included in the allowance for loan losses was a valuation allowance of $4.1 million established on a $17.1 million commercial real estate loan to a company in the hospitality industry and a $670,000 valuation allowance established on a $2.1 million airplane lease. These allowances were established as a result of the deteriorating financial condition of the borrowers and the estimated value of the collateral. Net charge-offs associated with our discontinued or curtailed lines of business were 16% of total net charge-offs during the second quarter of 2002 compared to 91% during the same 2001 period. Year to date, these charge-offs represented 62% of total net charge-offs compared to 84% during 2001. At the indicated dates, the Company's non-performing assets and potential problem loans were (in thousands):
JUNE 30, DECEMBER 31, 2002 2001 -------- ------------ NONPERFORMING ASSETS NON-ACCRUAL: Tax certificates $ 1,431 $ 1,727 Loans and leases 39,497 37,255 -------- -------- Total non-accrual 40,928 38,982 -------- -------- REPOSSESSED ASSETS: Real estate owned, net of allowance 11,603 3,904 Vehicles and equipment -- 17 -------- -------- Total repossessed assets 11,603 3,921 -------- -------- Total non-performing assets 52,531 42,903 Specific valuation allowances (4,890) (9,936) -------- -------- TOTAL NON-PERFORMING ASSETS, NET $ 47,641 $ 32,967 ======== ======== POTENTIAL PROBLEM LOANS Contractually past due 90 days or more 12 -- Restructured loans 698 743 Delinquent residential loans purchased 1,562 1,705 -------- -------- TOTAL POTENTIAL PROBLEM LOANS $ 2,272 $ 2,448 ======== ========
Non-performing assets represented 1.38% of total loans, tax certificates and repossessed assets at June 30, 2002. This compares to 1.45% at December 31, 2001. The reduction in the percentage of non-performing assets to total loans tax certificates and repossessed assets during the six-month period reflects a significant increase in total loans and tax certificate balances at June 30, 2002 compared to December 31, 2001. The increase in non-performing assets was primarily attributable to the $17 million commercial real estate loan and the $2.1 million lease referred to above, and secondarily to $3.1 million of non-performing loans acquired in connection with the Community acquisition. The above increases in non-accrual loans were partially offset by an $8.0 28 BANKATLANTIC BANCORP, INC. million charge-off on a syndication loan described above. Included in real estate owned at June 30, 2002 was repossessed property associated with the residential construction loan discussed above. The property was transferred to REO at $8.0 million, its estimated fair value less anticipated cost to sell. NON-INTEREST INCOME
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------------------------------- -------------------------------------- 2002 2001 CHANGE 2002 2001 CHANGE -------- -------- -------- -------- -------- -------- (IN THOUSANDS) BANKING OPERATIONS Other service charges and fees $ 3,550 $ 3,811 $ (261) $ 6,655 $ 7,372 $ (717) Service charges on deposits 5,688 3,890 1,798 10,550 7,770 2,780 Gains on securities available for sale 3,083 1,695 1,388 6,122 2,051 4,071 Impairment of securities (18,157) (474) (17,683) (18,157) (695) (17,462) Income from equity method investment 219 -- 219 219 -- 219 Other 973 1,128 (155) 2,338 2,437 (99) -------- -------- -------- -------- -------- -------- Non-interest income (4,644) 10,050 (14,694) 7,727 18,935 (11,208) -------- -------- -------- -------- -------- -------- LEVITT COMPANIES OPERATIONS Net revenues from sales of real estate 12,466 7,398 5,068 24,443 13,341 11,102 Income from equity method investment 1,522 -- 1,522 1,522 -- 1,522 Other 351 681 (330) 715 1,407 (692) -------- -------- -------- -------- -------- -------- Non-interest income 14,339 8,079 6,260 26,680 14,748 11,932 -------- -------- -------- -------- -------- -------- RYAN BECK OPERATIONS Principal transactions 17,299 3,935 13,364 24,806 8,405 16,401 Investment banking 4,097 3,078 1,019 6,606 4,038 2,568 Commissions 16,466 3,189 13,277 19,498 6,612 12,886 Other 3,666 138 3,528 3,806 418 3,388 -------- -------- -------- -------- -------- -------- Non-interest income 41,528 10,340 31,188 54,716 19,473 35,243 -------- -------- -------- -------- -------- -------- Total non-interest income $ 51,223 $ 28,469 $ 22,754 $ 89,123 $ 53,156 $ 35,967 ======== ======== ======== ======== ======== ========
NON-INTEREST INCOME - BANKING OPERATIONS The decline in other service charges and fees during the quarter and year to date resulted from a 26% and 32% decrease in ATM fee income related to the termination of our ATM relationship with Wal*Mart in September 2001. The decline in ATM fee income associated with the removal of our ATM machines from Wal*Mart stores was partially offset by higher fees earned on check cards. Check card fees increased by 163% during the second quarter compared to the same 2001 period and 143% during 2002 year to date compared to the same 2001 period. The increase in check card fees was linked to a significant increase in transaction accounts associated with our high performance checking products and our "Seven Day Banking" initiative. During the 2002 period, service charges on deposits increased by over 46% during the second quarter, and 36% year to date, from the comparable 2001 periods. The increase in service charges primarily resulted from an increase in overdraft fees from transaction accounts and deposit fees associated with the Community acquisition. The increase in overdraft fees was associated with our new high performance checking product. Since the inception of this product, we have opened 44,000 accounts with total deposit balances of $90.2 million as of June 30, 2002. Additionally, the rapid decline in interest rates decreased the earnings credit for commercial accounts which have analysis charges, which further increased service charges on deposits during the 2002 periods. Gains on securities available for sale during the three months ended June 30, 2002 resulted primarily from the sale of REMIC securities, corporate bonds and equity securities for a $2.4 million, $367,000 and $341,000 gain, respectively. Additionally, we also recorded a $48,000 unrealized loss on derivative instruments during the second quarter. Gains on 29 BANKATLANTIC BANCORP, INC. securities available for sale during the six months ended June 30, 2002 included sales discussed above as well as the sale of equity securities for a $3.0 million gain and a $27,000 unrealized gain on derivative instruments. Gains on securities available for sale during the three months ended June 30, 2001 consisted of the sale of equity securities for a gain of $1.2 million and the sale of fixed rate mortgage backed securities for a $497,000 gain. Gains on securities available for sale during the six months ended June 30, 2001 also included the sale of a mutual fund investment for a $322,000 gain and a $34,000 unrealized gain on derivative instruments. During 1999, the Company entered into a strategic relationship with Seisint Inc. and invested $10 million in cash and issued 848,364 shares of Class A common stock for $15 million of Seisint, Inc. common stock. Seisint is a privately held technology company, which provides marketing information, application solutions and customer relationship management applications. The Company anticipated benefits from this strategic relationship through the exchange of ideas and cooperation in the development by Seisint of technology and support systems for use by financial institutions. Additionally, both Alan B. Levan and John E. Abdo were directors of Seisint and each acquired direct and indirect interests in Seisint common stock. However, because Seisint has not been able to meet the objectives of its business plan or financial performance goals, the Company performed an evaluation of its investment in Seisint to determine if there was an other than temporary decline in value associated with this investment. As a consequence of this evaluation, the Company wrote off its entire $15 million investment in Seisint during the three months ended June 30, 2002. The Company also recognized an impairment charge of $3.2 million during the three months ended June 30, 2002 on equity securities resulting from significant declines in their value that were considered other than temporary due to the financial condition and near term prospects of the issuers of the equity securities. The Company recognized a $474,000 and $695,000 impairment charge associated with equity securities during the three and six-month period ended June 30, 2001. As a result of these losses, the Company has revised its policy for holding company equity investments. Any future equity investments will be limited to liquid securities and will be subject to significant concentration restrictions. At June 30, 2002 equity investments totaled $8.7 million. Income from equity method investment represents BankAtlantic Bancorp's 4.9% ownership interest in the earnings of Bluegreen Corporation during the three and six months ended June 30, 2002. In April 2002, Levitt Companies acquired an additional 34% of Bluegreen Corporation's common stock. See the discussion below concerning the investment in Bluegreen Corporation by Levitt Companies. Included in other income during the 2002 quarter was a $294,000 loss from the sale of the servicing rights associated with the residential loans acquired in connection with the Community acquisition. Included in other income during the six months ended June 30, 2001 was the sale of a branch facility for a $386,000 gain. NON-INTEREST INCOME - LEVITT COMPANIES OPERATIONS Net revenues from sales of real estate represented the net profits on sales of real estate by Levitt and Sons and Core Communities as well as equity in earnings from real estate joint venture activities. The significant increase in net revenues from sales of real estate during the 2002 quarter compared to the same 2001 quarter primarily resulted from Core Communities' land sales as well as an increase in Levitt and Sons' home sales. Gains on land sales for the quarter ended June 30, 2002 was $4.6 million as compared to $1.3 million for the same period in 2001. The 2002 land sales included the sale of one commercial property for a $3.6 million gain. Gains on home sales for the quarter ended June 30, 2002 was $6.8 million as compared to $5.0 million for the same period in 2001. Gains on joint venture activities were $1.0 million during the 2002 quarter and $456,000 during the 2001 quarter. The 2001 revenues from sales of real estate include a net gain of $680,000 on the sale of a marine rental property. During the six months ended June 30, 2002, net revenues from the sales of real estate and joint venture activities was $24.4 million as compared to $13.3 million during the same 2001 period. During the six months ended June 30, 2002, Core Communities' net gain on land sales was $10.6 million as compared to $2.8 million in 2001. The 2002 land sales included the sale of two commercial properties for a $9.3 million gain. During the six months ended June 30, 2002, gains on homes sales were $11.9 million as compared to $8.6 million during the same 2001 period. During the six months ended June 30, 2002 gains on joint venture activities were $1.9 million as compared to $1.2 million during the same period in 2001. In 2001, Levitt Companies sold a marine rental property for a $680,000 gain. 30 BANKATLANTIC BANCORP, INC. In April 2002, Levitt Companies acquired 34% of Bluegreen Corporation's common stock. Bluegreen Corporation is a developer of drive-to vacation interval resorts, golf communities and residential land. Levitt Companies' investment in Bluegreen Corporation is accounted for under the equity method. Accordingly, Levitt Companies recorded in income its ownership interest in the earnings of Bluegreen Corporation of approximately $1.5 million during the three months ended June 30, 2002. The increase in non-interest income was partially offset by a decline in rental income associated with a marine property sold during the second quarter of 2001. NON-INTEREST INCOME - RYAN BECK OPERATIONS During the second quarter of 2002 compared to the same 2001 period, revenues increased by 302%. The increase was primarily the result of increased agency commissions and principal transaction revenues. The increase resulted from the additional investment consultants and trading personnel hired in connection with the Gruntal transaction. During the six months ended June 30, 2002 compared to the same 2001 period, revenues increased by 181%. Principal transactions and commission revenues increased by 195% and 195%, respectively, from the corresponding 2001 period. The substantial increase in revenues was attributed to the additional investment consultants and trading personnel hired in connection with the Gruntal transaction. NON-INTEREST EXPENSES
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ----------------------------------- ----------------------------------- 2002 2001 CHANGE 2002 2001 CHANGE -------- -------- -------- -------- -------- -------- (IN THOUSANDS) BANKING OPERATIONS Employee compensation and benefits $ 17,167 $ 12,562 $ 4,605 $ 31,327 $ 25,749 $ 5,578 Occupancy and equipment 7,555 6,172 1,383 13,876 12,191 1,685 Advertising and promotion 2,034 970 1,064 3,036 1,557 1,479 Amortization of cost over fair value of net assets acquired 454 711 (257) 454 1,419 (965) Restructuring charges and impairment write-downs 1,007 (219) 1,226 1,007 (219) 1,226 Acquisition related charges and impairments 731 -- 731 1,805 -- 1,805 Other 7,450 6,447 1,003 13,274 11,702 1,572 -------- -------- -------- -------- -------- -------- Non-interest expense 36,398 26,643 9,755 64,779 52,399 12,380 -------- -------- -------- -------- -------- -------- LEVITT OPERATIONS Employee compensation and benefits 3,538 2,133 1,405 6,158 4,269 1,889 Advertising and promotion 818 779 39 1,566 1,579 (13) Selling, general and administrative 3,383 2,951 432 6,194 5,325 869 -------- -------- -------- -------- -------- -------- Non-interest expense 7,739 5,863 1,876 13,918 11,173 2,745 -------- -------- -------- -------- -------- -------- RYAN BECK OPERATIONS Employee compensation and benefits 33,510 8,457 25,053 43,743 16,733 27,010 Occupancy and equipment 3,793 781 3,012 4,616 1,645 2,971 Advertising and promotion 828 658 170 1,277 783 494 Amortization of cost over fair value of net assets acquired -- 338 (338) -- 655 (655) Acquisition related charges and impairments 3,191 -- 3,191 3,191 -- 3,191 Other 8,024 2,085 5,939 10,773 4,630 6,143 -------- -------- -------- -------- -------- -------- Non-interest expense 49,346 12,319 37,027 63,600 24,446 39,154 -------- -------- -------- -------- -------- -------- Total non-interest expenses $ 93,483 $ 44,825 $ 48,658 $142,297 $ 88,018 $ 54,279 ======== ======== ======== ======== ======== ========
31 BANKATLANTIC BANCORP, INC. NON-INTEREST EXPENSES - BANKING OPERATIONS Compensation expenses increased 37% and 22% from the comparable 2001 quarter and six-month periods, respectively. The increase in compensation expenses was the result of the implementation of seven day banking on April 1, 2002 and the addition of 172 employees following the Community acquisition. Total full time equivalent employees increased from 894 at June 30, 2001 to 1,330 at June 30, 2002. Occupancy and equipment expenses increased 22% and 14% from the comparable 2001 quarter and six-month periods, respectively. The increase was primarily due to the Community acquisition which added 21 branches to our community banking division. Additionally, we recognized approximately $500,000 of accelerated depreciation expense during the second quarter on equipment associated with our on-line banking delivery system. This equipment will be replaced as we upgrade the technology with new equipment and software during the fourth quarter of 2002. The increase in advertising expense during the 2002 quarter and year to date reflect marketing initiatives to increase our transaction accounts and to promote our "Seven Day Banking" initiative. Amortization of intangible assets during the three and six months ended June 30, 2002 consisted of the amortization of core deposits intangible assets acquired in connection with the Community acquisition. The core deposits intangible asset is being amortized over its estimated life of seven years. Amortization of intangible assets during the three and six months ended June 30, 2001 consisted of the amortization of goodwill. Upon the implementation of Financial Accounting Standard Number 142 on January 1, 2002, we discontinued the amortization of goodwill. We will evaluate goodwill for impairment in subsequent periods in accordance with FASB Statement 142. In connection with the transitional goodwill impairment evaluation under FASB Statement 142, the Company performed an assessment of whether there is an indication that any goodwill is impaired as of January 1, 2002, the date of adoption. As a result of this analysis, the Company determined that goodwill associated with bank operations reportable segments was not impaired at the adoption date. Acquisition related charges and impairments during the three and six months ended June 30, 2002 include various data conversion and system integration expenses as well as facilities impairment write-downs associated with the Community acquisition. As a consequence of the acquisition, BankAtlantic closed two of its Palm Beach county branches during the second quarter of 2002. During June 2002, we adopted a plan to discontinue certain ATM relationships. This resulted in an $801,000 restructuring charge and a $206,000 impairment write-down. These relationships were primarily with convenience stores and gas stations and did not currently meet our performance expectations and were unlikely to meet our future profitability goals. The remaining ATM machines (approximately 150 machines) are primarily located in our branch network and on cruise ships. Other expenses increased by 16% and 13% from the comparable 2001 quarter and six-month periods, respectively. Included in other expenses during the three months ended June 30, 2002 was a $400,000 increase in check losses and $275,000 of additional loss provisions associated with tax certificates. The additional check losses reflects a substantial increase in the number of checking accounts during the 2002 quarter compared to the same 2001 period due to the "high performance checking" campaign. The higher tax certificate provision primarily resulted from lower tax certificate repayments than projected. The remaining increase in other expenses during the quarter represents additional general operating expenses associated with the Community acquisition. During the six months ended June 30, 2001 we recognized $1.1 million of gains on the sales of REO property compared to an $128,000 net loss from REO property sales during the same 2002 period. 32 BANKATLANTIC BANCORP, INC. NON-INTEREST EXPENSES - LEVITT COMPANIES OPERATIONS The significant increase in compensation and benefits during the three and six months ended June 30, 2002 compared to the same 2001 period primarily resulted from Core Communities increase in incentive accruals and Levitt and Sons increase in personnel resulting from the addition of several new development projects. These new projects and an increase in home deliveries resulted in an increase in selling and other general and administrative expenses during the three and six months ended June 30, 2002 compared to the same 2001 periods. NON-INTEREST EXPENSES - RYAN BECK OPERATIONS The increase in employee compensation and benefits during the three and six months ended June 30, 2002 compared to the same 2001 periods was primarily due to 500 former Gruntal investment consultants and 80 trading personnel hired in connection with the Gruntal transaction. In connection with the transitional goodwill impairment evaluation under FASB Statement 142, the Company performed an assessment of whether there is an indication that any goodwill is impaired as of January 1, 2002, the date of adoption. As a result of this analysis, the Company determined that the carrying amount of the Ryan Beck reportable segment exceeded its fair value at the adoption date. As a consequence, the Company may have to recognize an impairment loss relating to the Ryan Beck reportable segment. The Company has retained an independent appraiser to measure the loss and the goodwill impairment charge should be recognized during the 2002 third quarter. Any transitional impairment loss associated with the Ryan Beck reportable segment will be recognized as the cumulative effect of a change in accounting principle in the statement of operations and this non-cash charge will be recorded effective as of January 1, 2002. There will be no operating earnings or tangible capital impact of this charge. The increase in other expenses during the three and six months ended June 30, 2002 compared to the same 2001 period related to increased floor brokerage and clearing fees attributed to a significant increase in commission revenues. Increased rent, occupancy and communication expenses were associated with the additional offices acquired in connection with the Gruntal transaction. During the second quarter of 2002, in response to the Gruntal transaction, the management of Ryan Beck initiated measures to reduce staff in departments with overlapping responsibilities. SEGMENT REPORTING The table below provides segment information for income before extraordinary item and cumulative effect of a change in accounting principle for the three and six-month periods ended June 30, 2002 and 2001:
FOR THE THREE MONTHS FOR THE SIX MONTHS (IN THOUSANDS) ENDED JUNE 30, ENDED JUNE 30, -------------------------- -------------------------- SEGMENT NET INCOME 2002 2001 2002 2001 -------- -------- -------- -------- Bank Investments $ 10,354 $ 6,235 $ 15,712 $ 11,713 Commercial banking 1,887 3,943 5,650 8,914 Community banking (802) 1,162 (978) 2,060 Levitt Companies 3,773 1,657 7,860 2,785 Ryan Beck (1,617) (588) (1,466) (1,773) Parent Company (15,828) (3,804) (16,431) (8,269) -------- -------- -------- -------- Segment net income (loss) $ (2,233) $ 8,605 $ 10,347 $ 15,430 ======== ======== ======== ========
BANK INVESTMENTS The increase in segment net income for the three and six months ended June 30, 2002 compared to the same 2001 periods reflect lower interest expense and overhead resulting from the general decline in interest rates. Additionally, approximately $3 million in segment non-interest income was realized from the gain on sale of securities available for sale during the three and six months ended June 30, 2002. This compares to gains of $518,000 and $553,000 for the three and six months ended June 30, 2001, respectively. 33 BANKATLANTIC BANCORP, INC. COMMERCIAL BANKING Segment net income declined for the three and six month periods ended June 30, 2002 from the comparable 2001 periods. The lower earnings primarily resulted from a significant decrease in interest income. The majority of the loans in our commercial banking loan portfolio have floating interest rates. The rapid decline in interest rates during 2001 resulted in yields on interest earning assets declining faster than the segment's interest expense and overhead. The increase in the provision for loan losses resulted from two commercial real estate non-performing loans and a non-performing lease in the aviation industry. Direct expenses in this segment increased due to start up expenses related to the opening of new commercial lending offices in central and north Florida. COMMUNITY BANKING Segment net income declined by $1.96 million from the comparable 2001 quarter, and by $3.04 million from the comparable six-month period. During the three and six month periods ended June 30, 2002, the provision for loan losses increased by $1.6 million and $3.4 million, respectively, over the comparable 2001 periods. The 2001 provision reflects a net recovery, which can be attributed to declining small business and consumer indirect loan average balances. In 2001, management dramatically reduced originations and changed the underwriting criteria of small business loans. In December 1998, management discontinued the origination of indirect consumer loans. Also contributing to the decline in segment net income was lower interest income from the community banking loan portfolio primarily resulting from a decline in interest rates during the period. LEVITT COMPANIES The increase in segment net income for the three and six-month periods ended June 30, 2002 compared to the same 2001 period resulted from higher net revenues from real estate sales and earnings from Levitt's investment in Bluegreen Corporation. RYAN BECK Segment net income declined from a net loss of $588,000 during the second quarter of 2001 to a segment net loss of $1.6 million during the same 2002 period. During the most recent quarter, Ryan Beck incurred approximately $4.0 million in transaction related expenses associated with the Gruntal transaction. Excluding these non-recurring expenses, segment net income would have been approximately $0.9 million. The substantial increase in revenues resulted from a higher volume of business associated with the addition of approximately 500 former Gruntal investment consultants and approximately $14.4 billion in customers' portfolio assets. Segment net income increased from a net loss of $1.8 million during the first six months of 2001 to a segment net loss of $1.5 million during the same 2002 period. Excluding the non-recurring expenses, segment net income in 2002 would have been $1.1 million for the six-month period ended June 30, 2002. PARENT COMPANY The parent company loss increased during the three and six-month periods ending June 30, 2002 compared to the same 2001 periods. The decline in earnings primarily resulted from the impairment of equity securities available for sale in the amount of approximately $18 million during the second quarter of 2002. FINANCIAL CONDITION Our total assets at June 30, 2002 were $5.9 billion compared to $4.7 billion at December 31, 2001. The increase in total assets primarily resulted from: - The acquisition of Community Savings, which added approximately $969 million in assets. - The Gruntal transaction which added $165 million in assets. 34 BANKATLANTIC BANCORP, INC. - A $58.2 million investment in Bluegreen Corporation, a New York Stock Exchange company which engages in the acquisition, development, marketing and sale of drive-to vacation resorts, golf communities and residential land. - The purchase of a $14.3 million office facility to consolidate BankAtlantic's headquarters and back office operations into a centralized facility. - The acquisition of tax certificates during the 2002 second quarter. - The origination of commercial real estate and home equity loans. - Increases in real estate held for development and sale and joint venture activities due to an increase in Levitt and Sons real estate inventory and the purchase of land for development by Core Communities. - Increases in deferred tax assets related to the impairment of securities. - Increases in cash and due from depository institutions due to higher in-transit cash letter balances. - Higher other assets balances associated with the sale of mortgage-backed securities that settled in July 2002. The above increases in total assets were partially offset by: - Decreased balances of residential loans due to accelerated loan repayments. - Continued run-off in the syndications, leasing, small business, international and indirect lending areas, which were discontinued or curtailed activities. - Reduction in securities available for sale related to the sale of $78 million of mortgage backed securities. The Company's total liabilities at June 30, 2002 were $5.4 billion compared to $4.2 billion at December 31, 2001. The increase in total liabilities primarily resulted from: - The acquisition of Community Savings, which added approximately $799 million in liabilities. - The Gruntal transaction, which added approximately $134 million in liabilities. - The issuance in the aggregate of $80.4 million of trust preferred securities in March 2002 and June 2002. - Additional borrowings from the Company's bank line of credit and at Levitt Companies to fund land purchases and its investment in Bluegreen. - Higher securities sold not yet purchased and due to clearing agent balances associated with Ryan Beck's trading activities. - Increased short term borrowings to fund asset growth. - Increased other liabilities related to a higher accrued expenses and compensation associated with the Gruntal acquisition. MARKET RISK Market risk is defined as the risk of loss arising from adverse changes in market valuations that arise from interest rate risk, foreign currency exchange rate risk, commodity price risk and equity price risk. Our primary market risk is interest rate risk and our secondary market risk is equity price risk. INTEREST RATE RISK The majority of our assets and liabilities are monetary in nature, subjecting us to significant interest rate risk which would arise if the relative values of each of our assets and liabilities changed in conjunction with a general rise or decline in interest rates. We have developed a model using standard industry software to quantify our interest rate risk. A sensitivity analysis was performed measuring our potential gains and losses in net portfolio fair values of interest rate sensitive instruments at June 30, 2002 resulting from a change in interest rates. Interest rate sensitive instruments included in the model were our: - Loan portfolio, - Debt securities available for sale, - Investment securities, - FHLB stock, - Federal Funds sold, - Deposits, - Advances from FHLB, - Securities sold under agreements to repurchase, 35 BANKATLANTIC BANCORP, INC. - Federal Funds purchased, - Notes and Bonds payable - Subordinated Debentures, - Trust Preferred Securities, - Forward contracts, - Interest rate swaps, and - Off-balance sheet loan commitments. The model calculates the net potential gains and losses in net portfolio fair value by: (i) discounting anticipated cash flows from existing assets, liabilities and off-balance sheet contracts at market rates to determine fair values at June 30, 2002, and (ii) discounting the above expected cash flows based on instantaneous and parallel shifts in the yield curve to determine fair values (iii) The difference between the fair value calculated in (i) and (ii) is the potential gain or loss in net portfolio fair values. Management has made estimates of fair value discount rates that it believes to be reasonable. However, because there is no quoted market for many of these financial instruments, management has no basis to determine whether the fair value presented would be indicative of the value negotiated in an actual sale. BankAtlantic's fair value estimates do not consider the tax effect that would be associated with the disposition of the assets or liabilities at their fair value estimates. Presented below is an analysis of the Company's interest rate risk at June 30, 2002 as calculated utilizing the Company's model. The table measures changes in net portfolio value for instantaneous and parallel shifts in the yield curve in 100 basis point increments up or down.
NET PORTFOLIO CHANGES VALUE DOLLAR IN RATE AMOUNT CHANGE - --------------- -------------- --------------- (DOLLARS IN THOUSANDS) +200 bp $ 552,772 $ (14,725) +100 bp $ 580,347 $ 12,850 0 $ 567,497 $ 0 -100 bp $ 527,990 $ (39,507) -200 bp $ 464,576 $ (102,921)
In preparing the above table, the Company makes various assumptions to determine the net portfolio value at the assumed changes in interest rate. These assumptions include: - loan prepayment rates, - deposit decay rates, - market values of certain assets under the representative interest rate scenarios, and - repricing of certain deposits and borrowings It was also assumed that delinquency rates would not change as a result of changes in interest rates although there can be no assurance that this would be the case. Even if interest rates change in the designated increments, there can be no assurance that our assets and liabilities would be impacted as indicated in the table above. In addition, a change in U.S. Treasury rates in the designated amounts, accompanied by a change in the shape of the yield curve, could cause significantly different changes to the fair values than indicated above. Furthermore, the result of the calculations in the preceding table are subject to significant deviations based upon actual future events, including anticipatory or reactive measures which we may take in the future. 36 BANKATLANTIC BANCORP, INC. EQUITY PRICE RISK The Company maintains a portfolio of trading and available for sale securities which subjects the Company to equity pricing risks. The change in fair values of equity securities represents instantaneous changes in all equity prices segregated by trading securities, securities sold not yet purchased and available for sale securities. The following are hypothetical changes in the fair value of our securities sold, not yet purchased, trading and available for sale securities at June 30, 2002 based on percentage changes in fair value. Actual future price appreciation or depreciation may be different from the changes identified in the table below.
AVAILABLE SECURITIES PERCENT TRADING FOR SALE SOLD NOT CHANGE IN SECURITIES SECURITIES YET DOLLAR FAIR VALUE FAIR VALUE FAIR VALUE PURCHASED CHANGE - --------------- -------------- --------------- --------------- ------------- (DOLLARS IN THOUSANDS) 20 % $ 252,158 $ 6,326 $ 81,990 $ 56,746 10 % $ 231,145 $ 5,799 $ 75,158 $ 28,373 0 % $ 210,132 $ 5,272 $ 68,325 $ - (10) % $ 189,119 $ 4,745 $ 61,493 $ (28,373) (20) % $ 168,106 $ 4,218 $ 54,660 $ (56,746)
Excluded from the above table are $3.4 million of investments in private companies for which no current market exists. The ability to realize on or liquidate our investments will depend on future market conditions and is subject to significant risk. Ryan Beck, in its capacity as a market-maker and dealer in corporate and municipal fixed-income and equity securities, may enter into transactions in a variety of cash and derivative financial instruments in order to facilitate customer order flow and hedge market risk exposures. These financial instruments include securities sold, not yet purchased and futures contracts. Securities sold, not yet purchased represent obligations of the Company to deliver specified financial instruments at contracted prices, thereby creating a liability to purchase the financial instrument in the market at prevailing prices. Accordingly, these transactions result in off-balance-sheet risk as the Company's ultimate obligation may exceed the amount recognized in the Consolidated Statement of Financial Condition. LIQUIDITY AND CAPITAL RESOURCES The Company's principal source of liquidity is dividends from BankAtlantic. The Company also obtains funds through the issuance of equity securities, sales of securities available for sale, borrowings from financial institutions and issuance of debt securities. The Company's annual debt service at June 30, 2002 associated with its subordinated debentures, Trust Preferred Securities, and financial institution borrowings was $18.7 million. The Company's estimated current annual dividends to common shareholders are approximately $6.8 million, of which $3.4 million has been declared and paid during 2002. The declaration and payment of dividends and the ability of the Company to meet its debt service obligations will depend upon, among other things, the results of operations, financial condition and cash requirements of the Company as well as indenture restrictions and loan covenants and on the ability of BankAtlantic to pay dividends to the Company, which payments are subject to OTS approval and regulations and based upon BankAtlantic's regulatory capital levels and net income. During 2001, the Company received $22.2 million of dividends from BankAtlantic. Certain covenants contained in a Levitt Companies loan agreement prohibit it from paying dividends to the Company. Ryan Beck has not paid dividends to the Company and it is not anticipated that Ryan Beck will pay dividends to the Company during 2002. In connection with the acquisition of Ryan Beck in June 1998, the Company established a retention pool covering certain employees of Ryan Beck, under which 785,866 shares of restricted Class A common stock were issued to these employees. The retention pool was valued at $8.1 million at the acquisition date, and the shares, which vested four years from the date of acquisition, were treated as compensation expense. In January 2000, each participant in the retention pool was provided the opportunity to exchange the restricted shares that were allocated to such participant for a cash-based deferred compensation award in an amount equal to the aggregate value of the restricted shares at the date of the Ryan Beck acquisition. The deferred compensation awards were granted under the BankAtlantic Bancorp, Inc. Deferred 37 BANKATLANTIC BANCORP, INC. Compensation Plan. All participant accounts under the plan vested on June 28, 2002 and the remaining participants received in the aggregate 5,941 shares of Class A Common Stock, $3.8 million in cash and notes payable for an aggregate principal amount of $3.7 million. The notes payable mature on June 28, 2003 and bear interest at 5.75%. The Company maintains a revolving credit facility of $30 million with an independent financial institution. The credit facility contains customary covenants, including financial covenants relating to regulatory capital and maintenance of certain loan loss reserves and is secured by the common stock of BankAtlantic. In April 2002 the Company borrowed $29.9 million under this credit facility to fund Levitt Companies' investment in Bluegreen Corporation. In June 2002 the Company used a portion of the proceeds from its participation in a pooled trust preferred offering to reduce outstanding borrowings under this credit facility to $16 million. As a consequence of the Community acquisition, the Company requested and received from the lender under the credit facility certain waivers of financial covenants through December 31, 2002. The Company does not believe that it will need additional waivers beyond December 31, 2002. Amounts outstanding accrue interest at the prime rate minus 50 basis points and the facility matures on September 1, 2004. In June 2002, the Company participated in a pooled trust preferred securities offering in which $25 million of trust preferred securities were issued. The net proceeds to the Company from the Trust Preferred Securities offering after underwriting discounts and expenses were approximately $24.2 million. The Company used the proceeds from the trust preferred securities offering for general corporate purposes, including to augment the capital of Ryan Beck in conjunction with its acquisition of certain assets and the assumption of certain liabilities of Gruntal & Co., LLC, and to pay down the revolving credit facility discussed above. In October 2001, the Company filed a shelf registration statement with the Securities and Exchange Commission to offer from time to time up to an aggregate of $150 million of debt securities, shares of Class A Common Stock and trust preferred securities. During December 2001, the Company sold 6.9 million shares of its Class A Common Stock under this registration statement in an underwritten public offering at a price of $8.25 per share. The net proceeds after underwriting discounts and expenses were approximately $53.5 million. In March 2002, $55.4 million of trust preferred securities were issued under this registration statement for net proceeds of $53.5 million. The proceeds from the above equity and trust preferred securities offerings were used to fund a portion of BankAtlantic's purchase of Community Savings, Levitt Companies' investment in Bluegreen Corporation and Ryan Beck's purchase of certain assets and the assumption of certain liabilities from Gruntal & Co. In connection with Gruntal transaction, the Company contributed $15 million to the capital of Ryan Beck. BankAtlantic's primary sources of funds during the first six months of 2002 were from principal collected on loans, securities available for sale and investment securities held to maturity, sales of securities available for sale, borrowings from FHLB advances, securities sold under agreements to repurchase, sales of property and equipment and REO, capital contributions from BankAtlantic Bancorp and deposit inflows. These funds were primarily utilized to fund operating expenses and deposit outflows, and to fund or purchase loans, FHLB stock, tax certificates, trading securities, and securities available for sale and to acquire Community. At June 30, 2002, BankAtlantic met all applicable liquidity and regulatory capital requirements. BankAtlantic's commitments to originate and purchase loans at June 30, 2002 were $394.8 million and $87.7 million compared to $174.5 million and $20.4 million at June 30, 2001. Additionally, BankAtlantic had commitments to purchase mortgage-backed securities of $77.6 million at June 30, 2002 compared to $138.0 million at June 30, 2001. At June 30, 2002, loan commitments represented approximately 13.5% of net loans receivable, net. 38 BANKATLANTIC BANCORP, INC. At the indicated date BankAtlantic's capital amounts and ratios were (dollars in thousands):
MINIMUM RATIOS ---------------------------------- ACTUAL ADEQUATELY WELL ------------------------- CAPITALIZED CAPITALIZED AMOUNT RATIO RATIO RATIO ------------ --------- ---------------- ---------------- AT JUNE 30, 2002: Total risk-based capital $ 387,513 10.55% 8.00% 10.00% Tier 1 risk-based capital $ 341,552 9.30% 4.00% 6.00% Tangible capital $ 341,552 6.55% 1.50% 1.50% Core capital $ 341,552 6.55% 4.00% 5.00% AT DECEMBER 31, 2001: Total risk-based capital $ 383,295 12.90% 8.00% 10.00% Tier 1 risk-based capital $ 346,057 11.65% 4.00% 6.00% Tangible capital $ 346,057 8.02% 1.50% 1.50% Core capital $ 346,057 8.02% 4.00% 5.00%
Savings institutions are also subject to the provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). Regulations implementing the prompt corrective action provisions of FDICIA define specific capital categories based on FDICIA's defined capital ratios, as discussed more fully in our Annual Report on Form 10-K for the year ended December 31, 2001. Our wholly owned subsidiary, Ryan Beck, is subject to the net capital provision of Rule 15c3-1 under the Securities Exchange Act of 1934 which requires that Ryan Beck's aggregate indebtedness shall not exceed 15 times net capital as defined under such provision. Additionally, Ryan Beck, as a market maker, is subject to supplemental requirements of Rule 15c3-1(a)4, which provides for the computation of net capital to be based on the number and price of issues in which markets are made by Ryan Beck, not to exceed $1,000,000. At June 30, 2002, Ryan Beck's regulatory net capital was approximately $13.9 million, which exceeded minimum net capital rule requirements by $12.9 million. Ryan Beck operates under the provisions of paragraph (K)(2)(ii) of Rule 15c3-3 of the Securities and Exchange Commission as a fully-disclosed broker and, accordingly, customer accounts are carried on the books of the clearing broker; However, Ryan Beck safekeeps and redeems municipal bond coupons for the benefit of its customers. Accordingly, Ryan Beck is subject to the provisions of SEC Rule 15c3-3 relating to possession or control and customer reserve requirements and was in compliance with such provisions at June 30, 2002. Levitt Companies' primary source of funds during the six months ended June 30, 2002 were proceeds from the sale of real estate inventory, capital contributions from BankAtlantic Bancorp and borrowings from financial institutions. These funds were primarily utilized to purchase real estate inventory, repay borrowings and invest in Bluegreen Corporation. In April 2002, Levitt Companies received an $18.6 million capital contribution and borrowed $30 million. Levitt Companies utilized these funds plus $5.1 million of working capital to purchase a 34% interest in Bluegreen Corporation's common stock. Levitt Companies' borrowings with financial institutions require Levitt Companies to comply with certain financial covenants during the term of the agreements. At June 30, 2002 Levitt Companies was in compliance with all loan agreement financial covenants. 39 BANKATLANTIC BANCORP, INC. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Shareholders on May 14, 2002. At the meeting the holders of the Company's Class A and Class B Common Stock voting together as a single class elected the following three Directors to a three year term by the following votes:
DIRECTOR FOR WITHHELD - -------------------------- ------------------ ----------------- Bruno L. DiGiulian 93,132,509 1,499,794 Alan B. Levan 86,902,767 7,729,536 Ben A. Plotkin 86,878,254 7,754,049
The holders of the Company's Class A and Class B Common Stock voting together as a single class elected the following Director to a one year term by the following votes:
DIRECTOR FOR WITHHELD - ----------------------------- ------------------ ---------------- Jonathon D. Mariner 93,827,515 1,499,219
Additionally, holders of the Company's Class A and Class B Common Stock voting together as a single class adopted the Company's Amended and Restated 2001 Stock Option Plan with 87,827,515 votes for, 6,699,281 votes against and 105,502 abstained. EXHIBITS AND REPORTS ON FORM 8K (a) EXHIBITS Exhibit 10.1 Amended and restated Declaration of Trust of BBC Capital Statutory Trust III, dated June 26, 2002. Exhibit 10.2 Indenture for the Company's Floating Rate Junior Subordinated Deferrable Interest Debentures Due 2032 Exhibit 10.3 Amended and restated BankAtlantic Bancorp 2001 stock option plan incorporated by reference to Appendix B to the Registrant's Definitive Proxy Statement filed on April 18, 2002. Exhibit 10.4 Ryan, Beck & Co., LLC Common Unit Option program filed with this report. Exhibit 11 Statement re: Computation of Per Share Earnings Exhibit 99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adapted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adapted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) REPORTS ON FORM 8-K Form 8-K/A filed on July 10, 2002 for the filing of required financial statements and financial information associated with the acquisition by Ryan Beck of certain of the assets and the assumption of certain of the liabilities of Gruntal Financial, LLC. Form 8-K filed on July 1, 2002 for the purpose of reporting the private sale of $25 million of trust preferred securities. Form 8-K/A filed on May 30, 2002 for the filing of required financial information relating to the Community Savings Bankshare, Inc. acquisition. 40 BANKATLANTIC BANCORP, INC. Form 8-K/A filed on May 17, 2002 to file exhibits for certain financial information associated with the Community Savings Bankshares, Inc. acquisition on March 22, 2002. Form 8-K filed on May 8, 2002 in connection with the completion of Ryan Beck's acquisition of certain assets and assumption of certain liabilities of Gruntal & Co. on April 26, 2002. 41 BANKATLANTIC BANCORP, INC. SIGNATURES Pursuant to the requirements 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. BANKATLANTIC BANCORP, INC. August 14, 2002 By: /s/Alan B. Levan - ------------------ -------------------------- Date Alan B. Levan Chief Executive Officer/ Chairman/President August 14, 2002 By: /s/James A. White - ------------------ -------------------------- Date James A. White Executive Vice President, Chief Financial Officer 42 EX-10.1 3 g77714exv10w1.txt AMENDED AND RESTATED DECLARATION OF TRUST EXHIBIT 10.1 AMENDED AND RESTATED DECLARATION OF TRUST BY AND AMONG STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS INSTITUTIONAL TRUSTEE, BANKATLANTIC BANCORP, INC., AS SPONSOR, AND MARK WENDEL, DAVID FRIEDMAN AND PAMELA WEINER AS ADMINISTRATORS, DATED AS OF JUNE 26, 2002 TABLE OF CONTENTS
Page ARTICLE I INTERPRETATION AND DEFINITIONS..................................................................................1 Section 1.1. Definitions................................................................................1 ARTICLE II ORGANIZATION...................................................................................................7 Section 2.1. Name.......................................................................................7 Section 2.2. Office.....................................................................................7 Section 2.3. Purpose....................................................................................7 Section 2.4. Authority..................................................................................7 Section 2.5. Title to Property of the Trust.............................................................7 Section 2.6. Powers and Duties of the Institutional Trustee and the Administrators......................8 Section 2.7. Prohibition of Actions by the Trust and the Institutional Trustee.........................11 Section 2.8. Powers and Duties of the Institutional Trustee............................................12 Section 2.9. Certain Duties and Responsibilities of the Institutional Trustee and Administrators.......13 Section 2.10. Certain Rights of Institutional Trustee...................................................14 Section 2.11. Execution of Documents....................................................................16 Section 2.12. Not Responsible for Recitals or Issuance of Securities....................................16 Section 2.13. Duration of Trust.........................................................................16 Section 2.14. Mergers...................................................................................16 ARTICLE III SPONSOR..................................................................................................... 18 Section 3.1. Sponsor's Purchase of Common Securities...................................................18 Section 3.2. Responsibilities of the Sponsor...........................................................18 Section 3.3. Expenses..................................................................................18 Section 3.4. Right to Proceed..........................................................................19 ARTICLE IV INSTITUTIONAL TRUSTEE AND ADMINISTRATORS......................................................................19 Section 4.1. Institutional Trustee; Eligibility........................................................19 Section 4.2. Administrators............................................................................20 Section 4.3. Appointment, Removal and Resignation of Institutional Trustee and Administrators..........20 Section 4.4. Institutional Trustee Vacancies...........................................................21 Section 4.5. Effect of Vacancies.......................................................................21 Section 4.6. Meetings of the Institutional Trustee and the Administrators..............................21 Section 4.7. Delegation of Power.......................................................................22 Section 4.8. Conversion, Consolidation or Succession to Business.......................................22 ARTICLE V DISTRIBUTIONS..................................................................................................22 Section 5.1. Distributions.............................................................................22 ARTICLE VI ISSUANCE OF SECURITIES........................................................................................22 Section 6.1. General Provisions Regarding Securities...................................................22 Section 6.2. Paying Agent, Transfer Agent and Registrar................................................23 Section 6.3. Form and Dating...........................................................................23 Section 6.4. Mutilated, Destroyed, Lost or Stolen Certificates.........................................24 Section 6.5. Temporary Securities......................................................................24 Section 6.6. Cancellation..............................................................................24
i Section 6.7. Rights of Holders; Waivers of Past Defaults...............................................24 ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST.........................................................................26 Section 7.1. Dissolution and Termination of Trust......................................................26 ARTICLE VIII TRANSFER OF INTERESTS.......................................................................................27 Section 8.1. General...................................................................................27 Section 8.2. Transfer Procedures and Restrictions......................................................28 Section 8.3. Deemed Security Holders...................................................................30 ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS.............................30 Section 9.1. Liability.................................................................................30 Section 9.2. Exculpation...............................................................................30 Section 9.3. Fiduciary Duty............................................................................31 Section 9.4. Indemnification...........................................................................31 Section 9.5. Outside Businesses........................................................................33 Section 9.6. Compensation; Fee.........................................................................33 ARTICLE X ACCOUNTING 34 Section 10.1. Fiscal Year...............................................................................34 Section 10.2. Certain Accounting Matters................................................................34 Section 10.3. Banking...................................................................................34 Section 10.4. Withholding...............................................................................34 ARTICLE XI AMENDMENTS AND MEETINGS.......................................................................................35 Section 11.1. Amendments................................................................................35 Section 11.2. Meetings of the Holders of Securities; Action by Written Consent..........................36 ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE.....................................................................37 Section 12.1. Representations and Warranties of Institutional Trustee...................................37 ARTICLE XIII MISCELLANEOUS...............................................................................................38 Section 13.1. Notices...................................................................................38 Section 13.2. Governing Law.............................................................................39 Section 13.3. Intention of the Parties..................................................................39 Section 13.4. Headings..................................................................................39 Section 13.5. Successors and Assigns....................................................................39 Section 13.6. Partial Enforceability....................................................................39 Section 13.7. Counterparts..............................................................................39
Annex I........................Terms of Securities Exhibit A-1....................Form of Capital Security Certificate Exhibit A-2....................Form of Common Security Certificate Exhibit B......................Specimen of Initial Debenture Exhibit C......................Placement Agreement ii AMENDED AND RESTATED DECLARATION OF TRUST OF BBC CAPITAL STATUTORY TRUST III JUNE 26, 2002 AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of June 26, 2002, by the Institutional Trustee (as defined herein), the Administrators (as defined herein), the Sponsor (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the Trust (as defined herein) to be issued pursuant to this Declaration; WHEREAS, the Institutional Trustee, the Administrators and the Sponsor established BBC Capital Statutory Trust III (the "Trust"), a statutory trust under the Statutory Trust Act (as defined herein) pursuant to a Declaration of Trust dated as of May 29, 2002 (the "Original Declaration"), and a Certificate of Trust filed with the Secretary of State of the State of Connecticut on May 29, 2002, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain debentures of the Debenture Issuer (as defined herein); WHEREAS, as of the date hereof, no interests in the Trust have been issued; and WHEREAS, the Institutional Trustee, the Administrators and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration; NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a statutory trust under the Statutory Trust Act and that this Declaration constitutes the governing instrument of such statutory trust, the Institutional Trustee declares that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. The parties hereto hereby agree as follows: ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1. DEFINITIONS. Unless the context otherwise requires: (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Declaration unless otherwise specified; and 1 (e) a reference to the singular includes the plural and vice versa. "Additional Interest" has the meaning set forth in the Indenture. "Administrative Action" has the meaning set forth in paragraph 4(a) of Annex I. "Administrators" means each of Mark Wendel, David Friedman and Pamela Weiner, solely in such Person's capacity as Administrator of the Trust created and continued hereunder and not in such Person's individual capacity, or such Administrator's successor in interest in such capacity, or any successor appointed as herein provided. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "Authorized Officer" of a Person means any Person that is authorized to bind such Person. "Bankruptcy Event" means, with respect to any Person: (a) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or (b) such Person shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of such Person of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due. "Business Day" means any day other than Saturday, Sunday or any other day on which banking institutions in New York City or Hartford, Connecticut are permitted or required by any applicable law to close. "Capital Securities" has the meaning set forth in paragraph 1(a) of Annex I. "Capital Security Certificate" means a definitive Certificate in fully registered form representing a Capital Security substantially in the form of Exhibit A-1. "Capital Treatment Event" has the meaning set forth in paragraph 4(a) of Annex I. "Certificate" means any certificate evidencing Securities. "Closing Date" has the meaning set forth in the Placement Agreement. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. "Common Securities" has the meaning set forth in paragraph 1(b) of Annex I. 2 "Common Security Certificate" means a definitive Certificate in fully registered form representing a Common Security substantially in the form of Exhibit A-2. "Company Indemnified Person" means (a) any Administrator; (b) any Affiliate of any Administrator; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Administrator; or (d) any officer, employee or agent of the Trust or its Affiliates. "Corporate Trust Office" means the office of the Institutional Trustee at which the corporate trust business of the Institutional Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Declaration is located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103. "Coupon Rate" has the meaning set forth in paragraph 2(a) of Annex I. "Covered Person" means: (a) any Administrator, officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) any of the Trust's Affiliates; and (b) any Holder of Securities. "Creditor" has the meaning set forth in Section 3.3. "Debenture Issuer" means BankAtlantic Bancorp, Inc., a Florida corporation, in its capacity as issuer of the Debentures under the Indenture. "Debenture Trustee" means State Street Bank and Trust Company of Connecticut, National Association, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Debentures" means the Floating Rate Junior Subordinated Deferrable Interest Debentures due 2032 to be issued by the Debenture Issuer under the Indenture. "Defaulted Interest" has the meaning set forth in the Indenture. "Determination Date" has the meaning set forth in paragraph 4(a) of Annex I. "Direct Action" has the meaning set forth in Section 2.8(d). "Distribution" means a distribution payable to Holders of Securities in accordance with Section 5.1. "Distribution Payment Date" has the meaning set forth in paragraph 2(b) of Annex I. "Distribution Period" has the meaning set forth in paragraph 2(a) of Annex I. "Distribution Rate" means, for the period beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2002, 5.3369%, and for the period beginning on (and including) September 26, 2002 and thereafter, the Coupon Rate. "Event of Default" means any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) the occurrence of an Indenture Event of Default; or 3 (b) default by the Trust in the payment of any Redemption Price of any Security when it becomes due and payable; or (c) default in the performance, or breach, in any material respect, of any covenant or warranty of the Institutional Trustee in this Declaration (other than those specified in clause (a) or (b) above) and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail to the Institutional Trustee and to the Sponsor by the Holders of at least 25% in aggregate liquidation amount of the outstanding Capital Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (d) the occurrence of a Bankruptcy Event with respect to the Institutional Trustee if a successor Institutional Trustee has not been appointed within 90 days thereof. "Extension Period" has the meaning set forth in paragraph 2(b) of Annex I. "Federal Reserve" has the meaning set forth in paragraph 3 of Annex I. "Fiduciary Indemnified Person" shall mean the Institutional Trustee, any Affiliate of the Institutional Trustee and any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Institutional Trustee. "Fiscal Year" has the meaning set forth in Section 10.1. "Guarantee" means the guarantee agreement to be dated as of the Closing Date, of the Sponsor in respect of the Capital Securities. "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Statutory Trust Act. "Indemnified Person" means a Company Indemnified Person or a Fiduciary Indemnified Person. "Indenture" means the Indenture dated as of the Closing Date, between the Debenture Issuer and the Debenture Trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued, as such Indenture and any supplemental indenture may be amended, supplemented or otherwise modified from time to time. "Indenture Event of Default" means an "Event of Default" as defined in the Indenture. "Institutional Trustee" means the Trustee meeting the eligibility requirements set forth in Section 4.1. "Interest" means any interest due on the Debentures including any Additional Interest and Defaulted Interest. "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Investment Company Event" has the meaning set forth in paragraph 4(a) of Annex I. 4 "Liquidation" has the meaning set forth in paragraph 3 of Annex I. "Liquidation Distribution" has the meaning set forth in paragraph 3 of Annex I. "Majority in liquidation amount of the Securities" means Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "Maturity Date" has the meaning set forth in paragraph 4(a) of Annex I. "Officers' Certificates" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant providing for it in this Declaration shall include: (a) a statement that each officer signing the Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "OTS" has the meaning set forth in paragraph 3 of Annex I. "Paying Agent" has the meaning specified in Section 6.2. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Placement Agreement" means the Placement Agreement relating to the offering and sale of Capital Securities in the form of Exhibit C. "Property Account" has the meaning set forth in Section 2.8(c). "Pro Rata" has the meaning set forth in paragraph 8 of Annex I. "Quorum" means a majority of the Administrators or, if there are only two Administrators, both of them. "Redemption Date" has the meaning set forth in paragraph 4(a) of Annex I. "Redemption/Distribution Notice" has the meaning set forth in paragraph 4(e) of Annex I. "Redemption Price" has the meaning set forth in paragraph 4(a) of Annex I. 5 "Registrar" has the meaning set forth in Section 6.2. "Responsible Officer" means, with respect to the Institutional Trustee, any officer within the Corporate Trust Office of the Institutional Trustee, including any vice-president, any assistant vice-president, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Corporate Trust Office of the Institutional Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Restricted Securities Legend" has the meaning set forth in Section 8.2(b). "Rule 3a-5" means Rule 3a-5 under the Investment Company Act. "Rule 3a-7" means Rule 3a-7 under the Investment Company Act. "Securities" means the Common Securities and the Capital Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. "Special Event" has the meaning set forth in paragraph 4(a) of Annex I. "Special Redemption Date" has the meaning set forth in paragraph 4(a) of Annex I. "Special Redemption Price" has the meaning set forth in paragraph 4(a) of Annex I. "Sponsor" means BankAtlantic Bancorp, Inc., a Florida corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust. "Statutory Trust Act" means Chapter 615 of Title 34 of the Connecticut General Statutes, Sections 500, et seq. as may be amended from time to time. "Successor Entity" has the meaning set forth in Section 2.14(b). "Successor Institutional Trustee" has the meaning set forth in Section 4.3(a). "Successor Securities" has the meaning set forth in Section 2.14(b). "Super Majority" has the meaning set forth in paragraph 5(b) of Annex I. "Tax Event" has the meaning set forth in paragraph 4(a) of Annex I. "10% in liquidation amount of the Securities" means Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "3-Month LIBOR" has the meaning set forth in paragraph 4(a) of Annex I. "Transfer Agent" has the meaning set forth in Section 6.2. 6 "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trust Property" means (a) the Debentures, (b) any cash on deposit in, or owing to, the Property Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Institutional Trustee pursuant to the trusts of this Declaration. "U.S. Person" means a United States Person as defined in Section 7701(a)(30) of the Code. ARTICLE II ORGANIZATION SECTION 2.1. NAME. The Trust is named "BBC Capital Statutory Trust III," as such name may be modified from time to time by the Administrators following written notice to the Holders of the Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Administrators. SECTION 2.2. OFFICE. The address of the principal office of the Trust is c/o State Street Bank and Trust Company of Connecticut, National Association, 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103. On at least 10 Business Days written notice to the Holders of the Securities, the Administrators may designate another principal office, which shall be in a state of the United States or in the District of Columbia. SECTION 2.3. PURPOSE. The exclusive purposes and functions of the Trust are (a) to issue and sell the Securities representing undivided beneficial interests in the assets of the Trust, (b) to invest the gross proceeds from such sale to acquire the Debentures, (c) to facilitate direct investment in the assets of the Trust through issuance of the Common Securities and the Capital Securities and (d) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust. SECTION 2.4. AUTHORITY. Except as specifically provided in this Declaration, the Institutional Trustee shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Institutional Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Institutional Trustee acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Institutional Trustee to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Institutional Trustee as set forth in this Declaration. The Administrators shall have only those ministerial duties set forth herein with respect to accomplishing the purposes of the Trust and are not intended to be trustees or fiduciaries with respect to the Trust or the Holders. The Institutional Trustee shall have the right, but shall not be obligated except as provided in Section 2.6, to perform those duties assigned to the Administrators. SECTION 2.5. TITLE TO PROPERTY OF THE TRUST. Except as provided in Section 2.8 with respect to the Debentures and the Property Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. 7 SECTION 2.6. POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE AND THE ADMINISTRATORS. (a) The Institutional Trustee and the Administrators shall conduct the affairs of the Trust in accordance with the terms of this Declaration. Subject to the limitations set forth in paragraph (b) of this Section, and in accordance with the following provisions (i) and (ii), the Institutional Trustee and the Administrators shall have the authority to enter into all transactions and agreements determined by the Institutional Trustee to be appropriate in exercising the authority, express or implied, otherwise granted to the Institutional Trustee or the Administrators, as the case may be, under this Declaration, and to perform all acts in furtherance thereof, including without limitation, the following: (i) Each Administrator shall have the power and authority to act on behalf of the Trust with respect to the following matters: (A) the issuance and sale of the Securities; (B) to cause the Trust to enter into, and to execute and deliver on behalf of the Trust, such agreements as may be necessary or desirable in connection with the purposes and function of the Trust, including agreements with the Paying Agent; (C) ensuring compliance with the Securities Act, applicable state securities or blue sky laws; (D) the sending of notices (other than notices of default), and other information regarding the Securities and the Debentures to the Holders in accordance with this Declaration; (E) the consent to the appointment of a Paying Agent, Transfer Agent and Registrar in accordance with this Declaration, which consent shall not be unreasonably withheld or delayed; (F) execution and delivery of the Securities in accordance with this Declaration; (G) execution and delivery of closing certificates pursuant to the Placement Agreement and the application for a taxpayer identification number; (H) unless otherwise determined by the Holders of a Majority in liquidation amount of the Securities or as otherwise required by the Statutory Trust Act, to execute on behalf of the Trust (either acting alone or together with any or all of the Administrators) any documents that the Administrators have the power to execute pursuant to this Declaration; (I) the taking of any action incidental to the foregoing as the Institutional Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Declaration for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder); (J) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Capital Securities and Holders of Common Securities as to such actions and applicable record dates; and 8 (K) to duly prepare and file all applicable tax returns and tax information reports that are required to be filed with respect to the Trust on behalf of the Trust. (ii) As among the Institutional Trustee and the Administrators, the Institutional Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following matters: (A) the establishment of the Property Account; (B) the receipt of the Debentures; (C) the collection of interest, principal and any other payments made in respect of the Debentures in the Property Account; (D) the distribution through the Paying Agent of amounts owed to the Holders in respect of the Securities; (E) the exercise of all of the rights, powers and privileges of a holder of the Debentures; (F) the sending of notices of default and other information regarding the Securities and the Debentures to the Holders in accordance with this Declaration; (G) the distribution of the Trust Property in accordance with the terms of this Declaration; (H) to the extent provided in this Declaration, the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Connecticut; (I) after any Event of Default (provided that such Event of Default is not by or with respect to the Institutional Trustee) the taking of any action incidental to the foregoing as the Institutional Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Declaration and protect and conserve the Trust Property for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder); and (J) to take all action that may be necessary for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory trust under the laws of the State of Connecticut and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Capital Securities or to enable the Trust to effect the purposes for which the Trust was created. (iii) The Institutional Trustee shall have the power and authority to act on behalf of the Trust with respect to any of the duties, liabilities, powers or the authority of the Administrators set forth in Section 2.6(a)(i)(D), (E) and (F) herein but shall not have a duty to do any such act unless specifically requested to do so in writing by the Sponsor, and shall then be fully protected in acting pursuant to such written request; and in the event of a conflict between the action of the Administrators and the action of the Institutional Trustee, the action of the Institutional Trustee shall prevail. 9 (b) So long as this Declaration remains in effect, the Trust (or the Institutional Trustee or Administrators acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, neither the Institutional Trustee nor the Administrators may cause the Trust to (i) acquire any investments or engage in any activities not authorized by this Declaration, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Holders, except as expressly provided herein, (iii) take any action that would reasonably be expected (x) to cause the Trust to fail or cease to qualify as a "grantor trust" for United States federal income tax purposes or (y) to require the trust to register as an Investment Company under the Investment Company Act, (iv) incur any indebtedness for borrowed money or issue any other debt or (v) take or consent to any action that would result in the placement of a lien on any of the Trust Property. The Institutional Trustee shall, at the sole cost and expense of the Trust, defend all claims and demands of all Persons at any time claiming any lien on any of the Trust Property adverse to the interest of the Trust or the Holders in their capacity as Holders. (c) In connection with the issuance and sale of the Capital Securities, the Sponsor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Sponsor in furtherance of the following prior to the date of this Declaration are hereby ratified and confirmed in all respects): (i) the taking of any action necessary to obtain an exemption from the Securities Act; (ii) the determination of the States in which to take appropriate action to qualify or register for sale all or part of the Capital Securities and the determination of any and all such acts, other than actions which must be taken by or on behalf of the Trust, and the advice to the Administrators of actions they must take on behalf of the Trust, and the preparation for execution and filing of any documents to be executed and filed by the Trust or on behalf of the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States in connection with the sale of the Capital Securities; (iii) the negotiation of the terms of, and the execution and delivery of, the Placement Agreement providing for the sale of the Capital Securities; and (iv) the taking of any other actions necessary or desirable to carry out any of the foregoing activities. (d) Notwithstanding anything herein to the contrary, the Administrators and the Holders of a Majority in liquidation amount of the Common Securities are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust will not (i) be deemed to be an Investment Company required to be registered under the Investment Company Act, and (ii) fail to be classified as a "grantor trust" for United States federal income tax purposes. The Administrators and the Holders of a Majority in liquidation amount of the Common Securities shall not take any action inconsistent with the treatment of the Debentures as indebtedness of the Debenture Issuer for United States federal income tax purposes. In this connection, the Administrators and the Holders of a Majority in liquidation amount of the Common Securities are authorized to take any action, not inconsistent with applicable laws, the Certificate of Trust or this Declaration, as amended from time to time, that each of the Administrators and the Holders of a Majority in liquidation amount of the Common Securities determines in their discretion to be necessary or desirable for such purposes. 10 (e) All expenses incurred by the Administrators or the Institutional Trustee pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the Institutional Trustee and the Administrators shall have no obligations with respect to such expenses. (f) The assets of the Trust shall consist of the Trust Property. (g) Legal title to all Trust Property shall be vested at all times in the Institutional Trustee (in its capacity as such) and shall be held and administered by the Institutional Trustee and the Administrators for the benefit of the Trust in accordance with this Declaration. (h) If the Institutional Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Declaration and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Institutional Trustee or to such Holder, then and in every such case the Sponsor, the Institutional Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Institutional Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 2.7. PROHIBITION OF ACTIONS BY THE TRUST AND THE INSTITUTIONAL TRUSTEE. (a) The Trust shall not, and the Institutional Trustee shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Institutional Trustee shall cause the Trust not to: (i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of the Securities pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust Property for other than a Trust purpose; (iv) make any loans or incur any indebtedness other than loans represented by the Debentures; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever other than as expressly provided herein; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; (vii) carry on any "trade or business" as that phrase is used in the Code; or (viii) other than as provided in this Declaration (including Annex I), (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable, or (D) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received a written opinion of counsel to the effect that such modification will not cause the Trust to cease to be classified as a "grantor trust" for United States federal income tax purposes. 11 SECTION 2.8. POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE. (a) The legal title to the Debentures shall be owned by and held of record in the name of the Institutional Trustee in trust for the benefit of the Trust and the Holders of the Securities. The right, title and interest of the Institutional Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Institutional Trustee in accordance with Section 4.3. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered. (b) The Institutional Trustee shall not transfer its right, title and interest in the Debentures to the Administrators. (c) The Institutional Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Property Account") in the name of and under the exclusive control of the Institutional Trustee, and maintained in the Institutional Trustee's trust department, on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Institutional Trustee, deposit such funds into the Property Account and make payments, or cause the Paying Agent to make payments, to the Holders of the Capital Securities and Holders of the Common Securities from the Property Account in accordance with Section 5.1. Funds in the Property Account shall be held uninvested until disbursed in accordance with this Declaration; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Capital Securities and the Common Securities to the extent the Debentures are redeemed or mature; and (iii) upon written notice of distribution issued by the Administrators in accordance with the terms of the Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures to Holders of Securities upon the occurrence of certain circumstances pursuant to the terms of the Securities. (d) The Institutional Trustee may bring or defend, pay, collect, compromise, arbitrate, resort to legal action with respect to, or otherwise adjust claims or demands of or against, the Trust which arises out of or in connection with an Event of Default of which a Responsible Officer of the Institutional Trustee has actual knowledge or arises out of the Institutional Trustee's duties and obligations under this Declaration; provided, however, that if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of the Capital Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such Holder (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the Holders of the Common Securities will be subrogated to the rights of such Holder of the Capital Securities to the extent of any payment made by the Debenture Issuer to such Holder of the Capital Securities in such Direct Action; provided, however, that no Holder of the Common Securities may exercise such right of subrogation so long as an Event of Default with respect to the Capital Securities has occurred and is continuing. (e) The Institutional Trustee shall continue to serve as a Trustee until either: 12 (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of the Securities pursuant to the terms of the Securities and this Declaration; or (ii) a Successor Institutional Trustee has been appointed and has accepted that appointment in accordance with Section 4.3. (f) The Institutional Trustee shall have the legal power to exercise all of the rights, powers and privileges of a Holder of the Debentures under the Indenture and, if an Event of Default occurs and is continuing, the Institutional Trustee may, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to this Declaration (including Annex I) and the terms of the Securities. The Institutional Trustee must exercise the powers set forth in this Section 2.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 2.3, and the Institutional Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 2.3. SECTION 2.9. CERTAIN DUTIES AND RESPONSIBILITIES OF THE INSTITUTIONAL TRUSTEE AND ADMINISTRATORS. (a) The Institutional Trustee, before the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Institutional Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 6.7), the Institutional Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) The duties and responsibilities of the Institutional Trustee and the Administrators shall be as provided by this Declaration. Notwithstanding the foregoing, no provision of this Declaration shall require the Institutional Trustee or Administrators to expend or risk their own funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers if it shall have reasonable grounds to believe that repayment of such funds or adequate protection against such risk of liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Declaration relating to the conduct or affecting the liability of or affording protection to the Institutional Trustee or Administrators shall be subject to the provisions of this Article. Nothing in this Declaration shall be construed to relieve an Administrator or the Institutional Trustee from liability for its own negligent act, its own negligent failure to act, or its own willful misconduct. To the extent that, at law or in equity, the Institutional Trustee or an Administrator has duties and liabilities relating to the Trust or to the Holders, the Institutional Trustee or such Administrator shall not be liable to the Trust or to any Holder for the Institutional Trustee's or such Administrator's good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of the Administrators or the Institutional Trustee otherwise existing at law or in equity, are agreed by the Sponsor and the Holders to replace such other duties and liabilities of the Administrators or the Institutional Trustee. (c) All payments made by the Institutional Trustee or a Paying Agent in respect of the Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Institutional Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Holder, by its acceptance of a Security, agrees that it will look solely to the revenue and proceeds from the Trust 13 Property to the extent legally available for distribution to it as herein provided and that the Institutional Trustee and the Administrators are not personally liable to it for any amount distributable in respect of any Security or for any other liability in respect of any Security. This Section 2.9(c) does not limit the liability of the Institutional Trustee expressly set forth elsewhere in this Declaration. (d) The Institutional Trustee shall not be liable for its own acts or omissions hereunder except as a result of its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) the Institutional Trustee shall not be liable for any error of judgment made in good faith by an Authorized Officer of the Institutional Trustee, unless it shall be proved that the Institutional Trustee was negligent in ascertaining the pertinent facts; (ii) the Institutional Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Capital Securities or the Common Securities, as applicable, relating to the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under this Declaration; (iii) the Institutional Trustee's sole duty with respect to the custody, safekeeping and physical preservation of the Debentures and the Property Account shall be to deal with such property in a similar manner as the Institutional Trustee deals with similar property for its fiduciary accounts generally, subject to the protections and limitations on liability afforded to the Institutional Trustee under this Declaration; (iv) the Institutional Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor; and money held by the Institutional Trustee need not be segregated from other funds held by it except in relation to the Property Account maintained by the Institutional Trustee pursuant to Section 2.8(c)(i) and except to the extent otherwise required by law; and (v) the Institutional Trustee shall not be responsible for monitoring the compliance by the Administrators or the Sponsor with their respective duties under this Declaration, nor shall the Institutional Trustee be liable for any default or misconduct of the Administrators or the Sponsor. SECTION 2.10. CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE. Subject to the provisions of Section 2.9: (a) the Institutional Trustee may conclusively rely and shall fully be protected in acting or refraining from acting in good faith upon any resolution, opinion of counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (b) if (i) in performing its duties under this Declaration, the Institutional Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Declaration, the Institutional Trustee finds the same ambiguous or inconsistent with any other provisions contained herein, or (iii) the Institutional Trustee is unsure of the application of any provision of this Declaration, then, except as to any matter as to which the Holders of Capital Securities are entitled to vote under the 14 terms of this Declaration, the Institutional Trustee may deliver a notice to the Sponsor requesting the Sponsor's written instructions as to the course of action to be taken and the Institutional Trustee shall take such action, or refrain from taking such action, as the Institutional Trustee shall be instructed in writing, in which event the Institutional Trustee shall have no liability except for its own negligence or willful misconduct; (c) any direction or act of the Sponsor or the Administrators contemplated by this Declaration shall be sufficiently evidenced by an Officers' Certificate; (d) whenever in the administration of this Declaration, the Institutional Trustee shall deem it desirable that a matter be proved or established before undertaking, suffering or omitting any action hereunder, the Institutional Trustee (unless other evidence is herein specifically prescribed) may request and conclusively rely upon an Officers' Certificate as to factual matters which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Administrators; (e) the Institutional Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or reregistration thereof; (f) the Institutional Trustee may consult with counsel of its selection (which counsel may be counsel to the Sponsor or any of its Affiliates) and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice; the Institutional Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (g) the Institutional Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any of the Holders pursuant to this Declaration, unless such Holders shall have offered to the Institutional Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; provided, that nothing contained in this Section 2.10(g) shall be taken to relieve the Institutional Trustee, subject to Section 2.9(b), upon the occurrence of an Event of Default, to exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; (h) the Institutional Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Holders, but the Institutional Trustee may make such further inquiry or investigation into such facts or matters as it may see fit; (i) the Institutional Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys and the Institutional Trustee shall not be responsible for any misconduct or negligence on the part of or for the supervision of, any such agent or attorney appointed with due care by it hereunder; (j) whenever in the administration of this Declaration the Institutional Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Institutional Trustee (i) may request instructions from the Holders of the Capital Securities which instructions may only be given by the Holders of the same proportion in liquidation amount of the Capital Securities as would be entitled to direct the Institutional Trustee under the terms of the Capital 15 Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be fully protected in acting in accordance with such instructions; (k) except as otherwise expressly provided in this Declaration, the Institutional Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration; (l) when the Institutional Trustee incurs expenses or renders services in connection with a Bankruptcy Event, such expenses (including the fees and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy law or law relating to creditors rights generally; (m) the Institutional Trustee shall not be charged with knowledge of an Event of Default unless a Responsible Officer of the Institutional Trustee obtains actual knowledge of such event or the Institutional Trustee receives written notice of such event from any Holder, the Sponsor or the Debenture Trustee; (n) any action taken by the Institutional Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Institutional Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Institutional Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Institutional Trustee's or its agent's taking such action; and (o) no provision of this Declaration shall be deemed to impose any duty or obligation on the Institutional Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Institutional Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Institutional Trustee shall be construed to be a duty. SECTION 2.11. EXECUTION OF DOCUMENTS. Unless otherwise determined in writing by the Institutional Trustee, and except as otherwise required by the Statutory Trust Act, the Institutional Trustee, or any one or more of the Administrators, as the case may be, is authorized to execute on behalf of the Trust any documents that the Institutional Trustee or the Administrators, as the case may be, have the power and authority to execute pursuant to Section 2.6. SECTION 2.12. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Institutional Trustee does not assume any responsibility for their correctness. The Institutional Trustee makes no representations as to the value or condition of the property of the Trust or any part thereof. The Institutional Trustee makes no representations as to the validity or sufficiency of this Declaration, the Debentures or the Securities. SECTION 2.13. DURATION OF TRUST. The Trust, unless earlier dissolved pursuant to the provisions of Article VII hereof, shall be in existence for 35 years from the Closing Date. SECTION 2.14. MERGERS. (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other 16 body, except as described in this Section 2.14(b) and (c) and except in connection with the liquidation of the Trust and the distribution of the Debentures to Holders of Securities pursuant to Section 7.1(a)(iv) of the Declaration or Section 4 of Annex I. (b) The Trust may, with the consent of the Institutional Trustee and without the consent of the Holders of the Capital Securities, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any state; provided that: (i) if the Trust is not the surviving entity, such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Securities; or (B) substitutes for the Securities other securities having substantially the same terms as the Securities (the "Successor Securities") so that the Successor Securities rank the same as the Securities rank with respect to Distributions and payments upon Liquidation, redemption and otherwise; (ii) the Sponsor expressly appoints a trustee of the Successor Entity that possesses substantially the same powers and duties as the Institutional Trustee as the Holder of the Debentures; (iii) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect; (iv) the Institutional Trustee receives written confirmation from Moody's Investor Services, Inc. and any other nationally recognized statistical rating organization that rates securities issued by the initial purchaser of the Capital Securities that it will not reduce or withdraw the rating of any such securities because of such merger, conversion, consolidation, amalgamation or replacement; (v) such Successor Entity has a purpose substantially identical to that of the Trust; (vi) prior to such merger, consolidation, amalgamation or replacement, the Trust has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect; (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (C) following such merger, consolidation, amalgamation or replacement, the Trust (or the Successor Entity) will continue to be classified as a "grantor trust" for United States federal income tax purposes; (vii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Guarantee; 17 (viii) the Sponsor owns 100% of the common securities of any Successor Entity; and (ix) prior to such merger, consolidation, amalgamation or replacement, the Institutional Trustee shall have received an Officers' Certificate of the Administrators and an opinion of counsel, each to the effect that all conditions precedent under this Section 2.14(b) to such transaction have been satisfied. (c) Notwithstanding Section 2.14(b), the Trust shall not, except with the consent of Holders of 100% in aggregate liquidation amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes. ARTICLE III SPONSOR SECTION 3.1. SPONSOR'S PURCHASE OF COMMON SECURITIES. On the Closing Date, the Sponsor will purchase all of the Common Securities issued by the Trust in an amount at least equal to 3% of the capital of the Trust, at the same time as the Capital Securities are sold. SECTION 3.2. RESPONSIBILITIES OF THE SPONSOR. In connection with the issue and sale of the Capital Securities, the Sponsor shall have the exclusive right and responsibility to engage in, or direct the Administrators to engage in, the following activities: (a) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Capital Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; and (b) to negotiate the terms of and/or execute on behalf of the Trust, the Placement Agreement and other related agreements providing for the sale of the Capital Securities. SECTION 3.3. EXPENSES. In connection with the offering, sale and issuance of the Debentures to the Trust and in connection with the sale of the Securities by the Trust, the Sponsor, in its capacity as Debenture Issuer, shall: (a) pay all reasonable costs and expenses relating to the offering, sale and issuance of the Debentures, including compensation of the Debenture Trustee under the Indenture in accordance with the provisions of the Indenture; (b) be responsible for and shall pay all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization, maintenance and dissolution of the Trust), the offering, sale and issuance of the Securities (including fees to the placement agents in connection therewith), the fees and expenses (including reasonable counsel fees and expenses) of the Institutional Trustee and the Administrators, the costs and expenses relating to the operation of the Trust, including, without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, Paying Agents, Registrars, Transfer Agents, duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the 18 acquisition, financing, and disposition of Trust assets and the enforcement by the Institutional Trustee of the rights of the Holders; and (c) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. The Sponsor's obligations under this Section 3.3 shall be for the benefit of, and shall be enforceable by, any Person to whom such debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor has received notice hereof. Any such Creditor may enforce the Sponsor's obligations under this Section 3.3 directly against the Sponsor and the Sponsor irrevocably waives any right or remedy to require that any such Creditor take any action against the Trust or any other Person before proceeding against the Sponsor. The Sponsor agrees to execute such additional agreements as may be necessary or desirable in order to give full effect to the provisions of this Section 3.3. SECTION 3.4. RIGHT TO PROCEED. The Sponsor acknowledges the rights of Holders to institute a Direct Action as set forth in Section 2.8(d) hereto. ARTICLE IV INSTITUTIONAL TRUSTEE AND ADMINISTRATORS SECTION 4.1. INSTITUTIONAL TRUSTEE; ELIGIBILITY. (a) There shall at all times be one Institutional Trustee which shall: (i) not be an Affiliate of the Sponsor; (ii) not offer or provide credit or credit enhancement to the Trust; and (iii) be a banking corporation or trust company organized and doing business under the laws of the United States of America or any state thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00), and subject to supervision or examination by Federal, state, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 4.1(a)(iii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Institutional Trustee shall cease to be eligible to so act under Section 4.1(a), the Institutional Trustee shall immediately resign in the manner and with the effect set forth in Section 4.3(a). (c) If the Institutional Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act of 1939, as amended, the Institutional Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to this Declaration. (d) The initial Institutional Trustee shall be State Street Bank and Trust Company of Connecticut, National Association. 19 SECTION 4.2. ADMINISTRATORS. Each Administrator shall be a U.S. Person, 21 years of age or older. The initial Administrators shall be Mark Wendel, David Friedman and Pamela Weiner. There shall at all times be at least one Administrator. Except where a requirement for action by a specific number of Administrators is expressly set forth in this Declaration and except with respect to any action the taking of which is the subject of a meeting of the Administrators, any action required or permitted to be taken by the Administrators may be taken by, and any power of the Administrators may be exercised by, or with the consent of, any one such Administrator. SECTION 4.3. APPOINTMENT, REMOVAL AND RESIGNATION OF INSTITUTIONAL TRUSTEE AND ADMINISTRATORS. (a) Notwithstanding anything to the contrary in this Declaration, no resignation or removal of the Institutional Trustee and no appointment of a Successor Institutional Trustee pursuant to this Article shall become effective until the acceptance of appointment by the Successor Institutional Trustee in accordance with the applicable requirements of this Section 4.3. Subject to the immediately preceding paragraph, the Institutional Trustee may resign at any time by giving written notice thereof to the Holders of the Securities and by appointing a Successor Institutional Trustee. Upon the resignation of the Institutional Trustee, the Institutional Trustee shall appoint a successor by requesting from at least three Persons meeting the eligibility requirements, its expenses and charges to serve as the successor Institutional Trustee on a form provided by the Administrators, and selecting the Person who agrees to the lowest expense and charges (the "Successor Institutional Trustee"). If the instrument of acceptance by the Successor Institutional Trustee required by this Section 4.3 shall not have been delivered to the Institutional Trustee within 60 days after the giving of such notice of resignation or delivery of the instrument of removal, the Institutional Trustee may petition, at the expense of the Trust, any Federal, state or District of Columbia court of competent jurisdiction for the appointment of a Successor Institutional Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Institutional Trustee. The Institutional Trustee shall have no liability for the selection of such successor pursuant to this Section 4.3. The Institutional Trustee may be removed by the act of the Holders of a Majority in liquidation amount of the Capital Securities, delivered to the Institutional Trustee (in its individual capacity and on behalf of the Trust) if an Event of Default shall have occurred and be continuing. If the Institutional Trustee shall be so removed, the Holders of Capital Securities, by act of the Holders of a Majority in liquidation amount of the Capital Securities then outstanding delivered to the Institutional Trustee, shall promptly appoint a Successor Institutional Trustee, and such Successor Institutional Trustee shall comply with the applicable requirements of this Section 4.3. If no Successor Institutional Trustee shall have been so appointed by the Holders of a Majority in liquidation amount of the Capital Securities and accepted appointment in the manner required by this Section 4.3, within 30 days after delivery of an instrument of removal, any Holder who has been a Holder of the Securities for at least 6 months may, on behalf of himself and all others similarly situated, petition any Federal, state or District of Columbia court of competent jurisdiction for the appointment of the Successor Institutional Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Institutional Trustee. The Institutional Trustee shall give notice of its resignation and removal and each appointment of a Successor Institutional Trustee to all Holders in the manner provided in Section 13.1(d) and shall give notice to the Sponsor. Each notice shall include the name of the Successor Institutional Trustee and the address of its Corporate Trust Office. (b) In case of the appointment hereunder of a Successor Institutional Trustee, the retiring Institutional Trustee and the Successor Institutional Trustee shall execute and deliver an amendment 20 hereto wherein the Successor Institutional Trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, the Successor Institutional Trustee all the rights, powers, trusts and duties of the retiring Institutional Trustee with respect to the Securities and the Trust and (ii) shall add to or change any of the provisions of this Declaration as shall be necessary to provide for or facilitate the administration of the Trust by more than one Institutional Trustee, it being understood that nothing herein or in such amendment shall constitute such Institutional Trustees co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Institutional Trustee shall become effective to the extent provided therein and each Successor Institutional Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Institutional Trustee; but, on request of the Trust or any Successor Institutional Trustee such retiring Institutional Trustee shall duly assign, transfer and deliver to such Successor Institutional Trustee all Trust Property, all proceeds thereof and money held by such retiring Institutional Trustee hereunder with respect to the Securities and the Trust. (c) No Institutional Trustee shall be liable for the acts or omissions to act of any Successor Institutional Trustee. (d) The Holders of the Capital Securities will have no right to vote to appoint, remove or replace the Administrators, which voting rights are vested exclusively in the Holder of the Common Securities. SECTION 4.4. INSTITUTIONAL TRUSTEE VACANCIES. If the Institutional Trustee ceases to hold office for any reason a vacancy shall occur. A resolution certifying the existence of such vacancy by the Institutional Trustee shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a trustee appointed in accordance with Section 4.3. SECTION 4.5. EFFECT OF VACANCIES. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of the Institutional Trustee shall not operate to dissolve, terminate or annul the Trust or terminate this Declaration. SECTION 4.6. MEETINGS OF THE INSTITUTIONAL TRUSTEE AND THE ADMINISTRATORS. Meetings of the Administrators shall be held from time to time upon the call of an Administrator. Regular meetings of the Administrators may be held in person in the United States or by telephone, at a place (if applicable) and time fixed by resolution of the Administrators. Notice of any in-person meetings of the Institutional Trustee with the Administrators or meetings of the Administrators shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Institutional Trustee with the Administrators or meetings of the Administrators or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of the Institutional Trustee or an Administrator, as the case may be, at a meeting shall constitute a waiver of notice of such meeting except where the Institutional Trustee or an Administrator, as the case may be, attends a meeting for the express purpose of objecting to the transaction of any activity on the grounds that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Institutional Trustee or the Administrators, as the case may be, may be taken at a meeting by vote of the Institutional Trustee or a majority vote of the Administrators present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Institutional Trustee or the Administrators. Meetings of the 21 Institutional Trustee and the Administrators together shall be held from time to time upon the call of the Institutional Trustee or an Administrator. SECTION 4.7. DELEGATION OF POWER. (a) Any Administrator may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 that is a U.S. Person his or her power for the purpose of executing any documents contemplated in Section 2.6; and (b) the Administrators shall have power to delegate from time to time to such of their number the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrators or otherwise as the Administrators may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. SECTION 4.8. CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any Person into which the Institutional Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Institutional Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Institutional Trustee shall be the successor of the Institutional Trustee hereunder, provided such Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. ARTICLE V DISTRIBUTIONS SECTION 5.1. DISTRIBUTIONS. Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Capital Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Debenture Issuer makes a payment of Interest or any principal on the Debentures held by the Institutional Trustee, the Institutional Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a "Distribution") of such amounts to Holders. ARTICLE VI ISSUANCE OF SECURITIES SECTION 6.1. GENERAL PROVISIONS REGARDING SECURITIES. (a) The Administrators shall, on behalf of the Trust, issue one series of capital securities substantially in the form of Exhibit A-1 representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I and one series of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I. The Trust shall issue no securities or other interests in the assets of the Trust other than the Capital Securities and the Common Securities. The Capital Securities rank pari passu to, and payment thereon shall be made Pro Rata with, the Common Securities except that, where an Event of Default has occurred and is continuing, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Capital Securities as set forth in Annex I. 22 (b) The Certificates shall be signed on behalf of the Trust by one or more Administrators. Such signature shall be the facsimile or manual signature of any Administrator. In case any Administrator of the Trust who shall have signed any of the Securities shall cease to be such Administrator before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Administrator, and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Security, shall be an Administrator of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such an Administrator. A Capital Security shall not be valid until authenticated by the facsimile or manual signature of an Authorized Officer of the Institutional Trustee. Such signature shall be conclusive evidence that the Capital Security has been authenticated under this Declaration. Upon written order of the Trust signed by one Administrator, the Institutional Trustee shall authenticate the Capital Securities for original issue. The Institutional Trustee may appoint an authenticating agent that is a U.S. Person acceptable to the Trust to authenticate the Capital Securities. A Common Security need not be so authenticated. (c) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (d) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and, except as provided in Section 9.1(b) with respect to the Common Securities, non-assessable. (e) Every Person, by virtue of having become a Holder in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration and the Guarantee. SECTION 6.2. PAYING AGENT, TRANSFER AGENT AND REGISTRAR. The Trust shall maintain in Hartford, Connecticut, an office or agency where the Capital Securities may be presented for payment ("Paying Agent"), and an office or agency where Securities may be presented for registration of transfer or exchange (the "Transfer Agent"). The Trust shall keep or cause to be kept at such office or agency a register for the purpose of registering Securities, transfers and exchanges of Securities, such register to be held by a registrar (the "Registrar"). The Administrators may appoint the Paying Agent, the Registrar and the Transfer Agent and may appoint one or more additional Paying Agents or one or more co-Registrars, or one or more co-Transfer Agents in such other locations as it shall determine. The term "Paying Agent" includes any additional paying agent, the term "Registrar" includes any additional registrar or co-Registrar and the term "Transfer Agent" includes any additional transfer agent. The Administrators may change any Paying Agent, Transfer Agent or Registrar at any time without prior notice to any Holder. The Administrators shall notify the Institutional Trustee of the name and address of any Paying Agent, Transfer Agent and Registrar not a party to this Declaration. The Administrators hereby initially appoint the Institutional Trustee to act as Paying Agent, Transfer Agent and Registrar for the Capital Securities and the Common Securities. The Institutional Trustee or any of its Affiliates in the United States may act as Paying Agent, Transfer Agent or Registrar. SECTION 6.3. FORM AND DATING. The Capital Securities and the Institutional Trustee's certificate of authentication thereon shall be substantially in the form of Exhibit A-1, and the Common Securities shall be substantially in the form of Exhibit A-2, each of which is hereby incorporated in and expressly made a part of this Declaration. Certificates may be typed, printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrators, as conclusively evidenced by their execution thereof. The Securities may have letters, numbers, notations or other marks of identification or designation and such legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject if any, or usage (provided that any such notation, legend or 23 endorsement is in a form acceptable to the Sponsor). The Trust at the direction of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the Institutional Trustee in writing. Each Capital Security shall be dated on or before the date of its authentication. The terms and provisions of the Securities set forth in Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent applicable, the Institutional Trustee, the Administrators and the Sponsor, by their execution and delivery of this Declaration, expressly agree to such terms and provisions and to be bound thereby. Capital Securities will be issued only in blocks having a stated liquidation amount of not less than $500,000.00 and any multiple of $1,000.00 in excess thereof. The Capital Securities are being offered and sold by the Trust pursuant to the Placement Agreement in definitive, registered form without coupons and with the Restricted Securities Legend. SECTION 6.4. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If: (a) any mutilated Certificates should be surrendered to the Registrar, or if the Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Registrar, the Administrators and the Institutional Trustee such security or indemnity as may be required by them to keep each of them harmless; then, in the absence of notice that such Certificate shall have been acquired by a protected purchaser, an Administrator on behalf of the Trust shall execute (and in the case of a Capital Security Certificate, the Institutional Trustee shall authenticate) and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 6.4, the Registrar or the Administrators may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. SECTION 6.5. TEMPORARY SECURITIES. Until definitive Securities are ready for delivery, the Administrators may prepare and, in the case of the Capital Securities, the Institutional Trustee shall authenticate, temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Administrators consider appropriate for temporary Securities. Without unreasonable delay, the Administrators shall prepare and, in the case of the Capital Securities, the Institutional Trustee shall authenticate, definitive Securities in exchange for temporary Securities. SECTION 6.6. CANCELLATION. The Administrators at any time may deliver Securities to the Institutional Trustee for cancellation. The Registrar shall forward to the Institutional Trustee any Securities surrendered to it for registration of transfer, redemption or payment. The Institutional Trustee shall promptly cancel all Securities surrendered for registration of transfer, payment, replacement or cancellation and shall dispose of such canceled Securities as the Administrators direct. The Administrators may not issue new Securities to replace Securities that have been paid or that have been delivered to the Institutional Trustee for cancellation. SECTION 6.7. RIGHTS OF HOLDERS; WAIVERS OF PAST DEFAULTS. (a) The legal title to the Trust Property is vested exclusively in the Institutional Trustee (in its capacity as such) in accordance with Section 2.5, and the Holders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their Securities 24 and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Securities shall be personal property giving only the rights specifically set forth therein and in this Declaration. The Securities shall have no preemptive or similar rights. (b) For so long as any Capital Securities remain outstanding, if upon an Indenture Event of Default, the Debenture Trustee fails or the holders of not less than 25% in principal amount of the outstanding Debentures fail to declare the principal of all of the Debentures to be immediately due and payable, the Holders of a Majority in liquidation amount of the Capital Securities then outstanding shall have the right to make such declaration by a notice in writing to the Institutional Trustee, the Sponsor and the Debenture Trustee. At any time after a declaration of acceleration with respect to the Debentures has been made and before a judgment or decree for payment of the money due has been obtained by the Debenture Trustee as provided in the Indenture, if the Institutional Trustee fails to annul any such declaration and waive such default, the Holders of a Majority in liquidation amount of the Capital Securities, by written notice to the Institutional Trustee, the Sponsor and the Debenture Trustee, may rescind and annul such declaration and its consequences if: (i) the Debenture Issuer has paid or deposited with the Debenture Trustee a sum sufficient to pay (A) all overdue installments of interest on all of the Debentures, (B) any accrued Additional Interest on all of the Debentures, (C) the principal of (and premium, if any, on) any Debentures that have become due otherwise than by such declaration of acceleration and interest and Additional Interest thereon at the rate borne by the Debentures, and (D) all sums paid or advanced by the Debenture Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee and the Institutional Trustee, their agents and counsel; and (ii) all Events of Default with respect to the Debentures, other than the non-payment of the principal of the Debentures that has become due solely by such acceleration, have been cured or waived as provided in Section 5.7 of the Indenture. The Holders of at least a Majority in liquidation amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default or Event of Default, except a default or Event of Default in the payment of principal or interest (unless such default or Event of Default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee) or a default or Event of Default in respect of a covenant or provision that under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Debenture. No such rescission shall affect any subsequent default or impair any right consequent thereon. Upon receipt by the Institutional Trustee of written notice declaring such an acceleration, or rescission and annulment thereof, by Holders of any part of the Capital Securities, a record date shall be established for determining Holders of outstanding Capital Securities entitled to join in such notice, which record date shall be at the close of business on the day the Institutional Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that 25 unless such declaration of acceleration, or rescission and annulment, as the case may be, shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day that is 90 days after such record date, such notice of declaration of acceleration, or rescission and annulment, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new written notice of declaration of acceleration, or rescission and annulment thereof, as the case may be, that is identical to a written notice that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 6.7. (c) Except as otherwise provided in paragraphs (a) and (b) of this Section 6.7, the Holders of at least a Majority in liquidation amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default or Event of Default and its consequences. Upon such waiver, any such default or Event of Default shall cease to exist, and any default or Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST SECTION 7.1. DISSOLUTION AND TERMINATION OF TRUST. (a) The Trust shall dissolve on the first to occur of: (i) unless earlier dissolved, on June 26, 2037, the expiration of the term of the Trust; (ii) upon a Bankruptcy Event with respect to the Sponsor, the Trust or the Debenture Issuer; (iii) (other than in connection with a merger, consolidation or similar transaction not prohibited by the Indenture, this Declaration or the Guarantee, as the case may be) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor, upon the consent of Holders of a Majority in liquidation amount of the Securities voting together as a single class to file a certificate of cancellation with respect to the Trust or upon the revocation of the charter of the Sponsor and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iv) upon the distribution of the Debentures to the Holders of the Securities in accordance with Section 3 of Annex I; (v) upon exercise of the right of the Holder of all of the outstanding Common Securities to dissolve the Trust as provided in Annex I hereto; (vi) upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor, the Trust or the Debenture Issuer; (vii) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; or 26 (viii) before the issuance of any Securities, with the consent of the Institutional Trustee and the Sponsor. (b) As soon as is practicable after the occurrence of an event referred to in Section 7.1(a), and after satisfaction of liabilities to creditors of the Trust as required by applicable law, including of the Statutory Trust Act, and subject to the terms set forth in Annex I, the Institutional Trustee shall terminate the Trust by filing a certificate of cancellation with the Secretary of State of the State of Connecticut. (c) The provisions of Section 2.9 and Article IX shall survive the termination of the Trust. ARTICLE VIII TRANSFER OF INTERESTS SECTION 8.1. GENERAL. (a) Subject to Section 8.1(c), where Capital Securities are presented to the Registrar or a co-registrar with a request to register a transfer or to exchange them for an equal number of Capital Securities represented by different certificates, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met. To permit registrations of transfer and exchanges, the Trust shall issue and the Institutional Trustee shall authenticate Capital Securities at the Registrar's request. (b) Upon issuance of the Common Securities, the Sponsor shall acquire and retain beneficial and record ownership of the Common Securities and for so long as the Securities remain outstanding, the Sponsor shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Sponsor, in its capacity as Debenture Issuer, under the Indenture that is a U.S. Person may succeed to the Sponsor's ownership of the Common Securities. (c) Capital Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. To the fullest extent permitted by applicable law, any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void and will be deemed to be of no legal effect whatsoever and any such transferee shall be deemed not to be the holder of such Capital Securities for any purpose, including but not limited to the receipt of Distributions on such Capital Securities, and such transferee shall be deemed to have no interest whatsoever in such Capital Securities. (d) The Registrar shall provide for the registration of Securities and of transfers of Securities, which will be effected without charge but only upon payment (with such indemnity as the Registrar may require) in respect of any tax or other governmental charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Securities, the Registrar shall cause one or more new Securities of the same tenor to be issued in the name of the designated transferee or transferees. Every Security surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Security surrendered for registration of transfer shall be canceled by the Institutional Trustee pursuant to Section 6.6. A transferee of a Security shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Security. By acceptance of a Security, each transferee shall be deemed to have agreed to be bound by this Declaration. (e) The Trust shall not be required (i) to issue, register the transfer of, or exchange any Securities during a period beginning at the opening of business 15 days before the day of any selection of Securities for redemption and ending at the close of business on the earliest date on which the relevant 27 notice of redemption is deemed to have been given to all Holders of the Securities to be redeemed, or (ii) to register the transfer or exchange of any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. SECTION 8.2. TRANSFER PROCEDURES AND RESTRICTIONS. (a) The Capital Securities shall bear the Restricted Securities Legend, which shall not be removed unless there is delivered to the Trust such satisfactory evidence, which may include an opinion of counsel satisfactory to the Trustee, as may be reasonably required by the Trust, that neither the legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of the Securities Act. Upon provision of such satisfactory evidence, the Institutional Trustee, at the written direction of the Trust, shall authenticate and deliver Capital Securities that do not bear the legend. (b) Except as permitted by Section 8.2(a), each Capital Security shall bear a legend (the "Restricted Securities Legend") in substantially the following form and a Capital Security shall not be transferred except in compliance with such legend, unless otherwise determined by the Sponsor, upon the advice of counsel expert in securities law, in accordance with applicable law: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH 28 MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION. THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $500,000.00 (500 SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $500,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. (c) To permit registrations of transfers and exchanges, the Trust shall execute and the Institutional Trustee shall authenticate Capital Securities at the Registrar's request. (d) Registrations of transfers or exchanges will be effected without charge, but only upon payment (with such indemnity as the Registrar or the Sponsor may require) in respect of any tax or other governmental charge that may be imposed in relation to it. (e) All Capital Securities issued upon any registration of transfer or exchange pursuant to the terms of this Declaration shall evidence the same security and shall be entitled to the same benefits 29 under this Declaration as the Capital Securities surrendered upon such registration of transfer or exchange. SECTION 8.3. DEEMED SECURITY HOLDERS. The Trust, the Administrators, the Institutional Trustee, the Paying Agent, the Transfer Agent or the Registrar may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust, the Administrators, the Institutional Trustee, the Paying Agent, the Transfer Agent or the Registrar shall have actual or other notice thereof ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS SECTION 9.1. LIABILITY. (a) Except as expressly set forth in this Declaration, the Guarantee and the terms of the Securities, the Sponsor shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; or (ii) required to pay to the Trust or to any Holder of the Securities any deficit upon dissolution of the Trust or otherwise. (b) The Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trust's assets. (c) Pursuant to the Statutory Trust Act, the Holders of the Capital Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Connecticut. SECTION 9.2. EXCULPATION. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and, if selected by such Indemnified Person, has been selected by such Indemnified Person with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts 30 pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. SECTION 9.3. FIDUCIARY DUTY. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of the Indemnified Person. (b) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 9.4. INDEMNIFICATION. (a) The Sponsor shall indemnify, to the full extent permitted by law, any Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) arising out of or in connection with the acceptance or administration of this Declaration by reason of the fact that he is or was an Indemnified Person against expenses (including reasonable attorneys' fees and expenses), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The Sponsor shall indemnify, to the full extent permitted by law, any Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor arising out of or in connection with the acceptance or administration of this Declaration by reason of the fact that he is or was an Indemnified Person against expenses (including reasonable attorneys' fees and expenses) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust; provided, however, that no such indemnification shall be made in respect of any claim, issue or matter as to which such Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the court in which such action or suit was brought shall determine upon application 31 that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. (c) To the extent that an Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (a) and (b) of this Section 9.4, or in defense of any claim, issue or matter therein, he shall be indemnified, to the full extent permitted by law, against expenses (including attorneys' fees and expenses) actually and reasonably incurred by him in connection therewith. (d) Any indemnification of an Administrator under paragraphs (a) and (b) of this Section 9.4 (unless ordered by a court) shall be made by the Sponsor only as authorized in the specific case upon a determination that indemnification of the Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (a) and (b). Such determination shall be made (i) by the Administrators by a majority vote of a Quorum consisting of such Administrators who were not parties to such action, suit or proceeding, (ii) if such a Quorum is not obtainable, or, even if obtainable, if a Quorum of disinterested Administrators so directs, by independent legal counsel in a written opinion, or (iii) by the Common Security Holder of the Trust. (e) To the fullest extent permitted by law, expenses (including reasonable attorneys' fees and expenses) incurred by an Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in paragraphs (a) and (b) of this Section 9.4 shall be paid by the Sponsor in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Sponsor as authorized in this Section 9.4. Notwithstanding the foregoing, no advance shall be made by the Sponsor if a determination is reasonably and promptly made (i) by the Administrators by a majority vote of a Quorum of disinterested Administrators, (ii) if such a Quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Administrators so directs, by independent legal counsel in a written opinion or (iii) by the Common Security Holder of the Trust, that, based upon the facts known to the Administrators, counsel or the Common Security Holder at the time such determination is made, such Indemnified Person acted in bad faith or in a manner that such Indemnified Person did not believe to be in the best interests of the Trust, or, with respect to any criminal proceeding, that such Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Administrators, independent legal counsel or the Common Security Holder reasonably determine that such Indemnified Person deliberately breached his duty to the Trust or its Common or Capital Security Holders. (f) The Institutional Trustee, at the sole cost and expense of the Sponsor, retains the right to representation by counsel of its own choosing in any action, suit or any other proceeding for which it is indemnified under paragraphs (a) and (b) of this Section 9.4, without affecting its right to indemnification hereunder or waiving any rights afforded to it under this Declaration or applicable law. (g) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 9.4 shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Sponsor or Capital Security Holders of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 9.4 shall be deemed to be provided by a contract between the Sponsor and each Indemnified Person who serves in such capacity at any time while this 32 Section 9.4 is in effect. Any repeal or modification of this Section 9.4 shall not affect any rights or obligations then existing. (h) The Sponsor or the Trust may purchase and maintain insurance on behalf of any Person who is or was an Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Sponsor would have the power to indemnify him against such liability under the provisions of this Section 9.4. (i) For purposes of this Section 9.4, references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any Person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 9.4 with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued. (j) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 9.4 shall, unless otherwise provided when authorized or ratified, (i) continue as to a Person who has ceased to be an Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a Person; and (ii) survive the termination or expiration of this Declaration or the earlier removal or resignation of an Indemnified Person. SECTION 9.5. OUTSIDE BUSINESSES. Any Covered Person, the Sponsor and the Institutional Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. None of any Covered Person, the Sponsor or the Institutional Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor and the Institutional Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person and the Institutional Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. SECTION 9.6. COMPENSATION; FEE. The Sponsor agrees: (a) to pay to the Institutional Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and (b) except as otherwise expressly provided herein, to reimburse the Institutional Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by the Institutional Trustee in accordance with any provision of this Declaration (including the reasonable compensation and the expenses and disbursements of their respective agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, bad faith or willful misconduct. The provisions of this Section 9.6 shall survive the dissolution of the Trust and the termination of this Declaration and the removal or resignation of the Institutional Trustee. 33 No Trustee may claim any lien or charge on any property of the Trust as a result of any amount due pursuant to this Section 9.6. ARTICLE X ACCOUNTING SECTION 10.1. FISCAL YEAR. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 10.2. CERTAIN ACCOUNTING MATTERS. (a) At all times during the existence of the Trust, the Administrators shall keep, or cause to be kept at the principal office of the Trust in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, full books of account, records and supporting documents, which shall reflect in reasonable detail each transaction of the Trust. The books of account shall be maintained, at the Sponsor's expense, in accordance with generally accepted accounting principles, consistently applied. The books of account and the records of the Trust shall be examined by and reported upon (either separately or as part of the Sponsor's regularly prepared consolidated financial report) as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Administrators. (b) The Administrators shall cause to be duly prepared and delivered to each of the Holders of Securities Form 1099 or such other annual United States federal income tax information statement required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Administrators shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. (c) The Administrators, at the Sponsor's expense, shall cause to be duly prepared at the principal office of the Trust in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, and filed an annual United States federal income tax return on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Administrators on behalf of the Trust with any state or local taxing authority. SECTION 10.3. BANKING. The Trust shall maintain in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Institutional Trustee shall be made directly to the Property Account and no other funds of the Trust shall be deposited in the Property Account. The sole signatories for such accounts (including the Property Account) shall be designated by the Institutional Trustee. SECTION 10.4. WITHHOLDING. The Institutional Trustee or any Paying Agent and the Administrators shall comply with all withholding requirements under United States federal, state and local law. The Institutional Trustee or any Paying Agent shall request, and each Holder shall provide to the Institutional Trustee or any Paying Agent, such forms or certificates as are necessary to establish an exemption from withholding with respect to the Holder, and any representations and forms as shall reasonably be requested by the Institutional Trustee or any Paying Agent to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Administrators shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Institutional Trustee or any Paying Agent is required to withhold and pay over any amounts to any 34 authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a Distribution in the amount of the withholding to the Holder. In the event of any claimed overwithholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Institutional Trustee or any Paying Agent may reduce subsequent Distributions by the amount of such withholding. ARTICLE XI AMENDMENTS AND MEETINGS SECTION 11.1. AMENDMENTS. (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed by the Institutional Trustee. (b) Notwithstanding any other provision of this Article XI, an amendment may be made, and any such purported amendment shall be valid and effective only if: (i) the Institutional Trustee shall have first received (A) an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (B) an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (ii) the result of such amendment would not be to (A) cause the Trust to cease to be classified for purposes of United States federal income taxation as a grantor trust; or (B) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act. (c) Except as provided in Section 11.1(d), (e) or (h), no amendment shall be made, and any such purported amendment shall be void and ineffective unless the Holders of a Majority in liquidation amount of the Capital Securities shall have consented to such amendment. (d) In addition to and notwithstanding any other provision in this Declaration, without the consent of each affected Holder, this Declaration may not be amended to (i) change the amount or timing of any Distribution on the Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Securities as of a specified date or change any conversion or exchange provisions or (ii) restrict the right of a Holder to institute suit for the enforcement of any such payment on or after such date. (e) Section 8.1 (b) and 8.1(c) and this Section 11.1 shall not be amended without the consent of all of the Holders of the Securities. (f) Article III shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities. 35 (g) The rights of the Holders of the Capital Securities under Article IV to appoint and remove the Institutional Trustee shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Capital Securities. (h) This Declaration may be amended by the Institutional Trustee and the Holders of a Majority in liquidation amount of the Common Securities without the consent of the Holders of the Capital Securities to: (i) cure any ambiguity; (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; (iii) add to the covenants, restrictions or obligations of the Sponsor; or (iv) modify, eliminate or add to any provision of this Declaration to such extent as may be necessary to ensure that the Trust will be classified for United States federal income tax purposes at all times as a grantor trust and will not be required to register as an "investment company" under the Investment Company Act (including without limitation to conform to any change in Rule 3a-5, Rule 3a-7 or any other applicable rule under the Investment Company Act or written change in interpretation or application thereof by any legislative body, court, government agency or regulatory authority) which amendment does not have a material adverse effect on the rights, preferences or privileges of the Holders of Securities; provided, however, that no such modification, elimination or addition referred to in clauses (i), (ii) or (iii) shall adversely affect in any material respect the powers, preferences or special rights of Holders of Capital Securities. SECTION 11.2. MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN CONSENT. (a) Meetings of the Holders of any class of Securities may be called at any time by the Administrators (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration or the terms of the Securities. The Administrators shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Administrators one or more calls in a writing stating that the signing Holders of the Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of the Securities calling a meeting shall specify in writing the Certificates held by the Holders of the Securities exercising the right to call a meeting and only those Securities represented by such Certificates shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of the Securities: (i) notice of any such meeting shall be given to all the Holders of the Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of the Securities is permitted or required under this Declaration, such vote, consent or approval may be given at a meeting of the Holders of the Securities. Any action that may be taken at a meeting of the Holders of the Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of the Securities owning not less than the minimum amount of Securities 36 in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of the Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of the Securities entitled to vote who have not consented in writing. The Administrators may specify that any written ballot submitted to the Holders of the Securities for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Administrators; (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of the Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Connecticut relating to proxies, and judicial interpretations thereunder, as if the Trust were a Connecticut corporation and the Holders of the Securities were stockholders of a Connecticut corporation; each meeting of the Holders of the Securities shall be conducted by the Administrators or by such other Person that the Administrators may designate; and (iii) unless the Statutory Trust Act, this Declaration, or the terms of the Securities otherwise provides, the Administrators, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of the Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote; provided, however, that each meeting shall be conducted in the United States (as that term is defined in Treasury Regulations section 301.7701-7). ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE SECTION 12.1. REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL TRUSTEE. The initial Institutional Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Institutional Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Institutional Trustee's acceptance of its appointment as Institutional Trustee, that: (a) the Institutional Trustee is a national banking association with trust powers, duly organized and validly existing under the laws of the United States of America with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration; (b) the execution, delivery and performance by the Institutional Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Institutional Trustee. This Declaration has been duly executed and delivered by the Institutional Trustee, and it constitutes a legal, valid and binding obligation of the Institutional Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law); 37 (c) the execution, delivery and performance of this Declaration by the Institutional Trustee does not conflict with or constitute a breach of the charter or by-laws of the Institutional Trustee; and (d) no consent, approval or authorization of, or registration with or notice to, any state or federal banking authority is required for the execution, delivery or performance by the Institutional Trustee of this Declaration. ARTICLE XIII MISCELLANEOUS SECTION 13.1. NOTICES. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied (which telecopy shall be followed by notice delivered or mailed by first class mail) or mailed by first class mail, as follows: (a) if given to the Trust in care of the Administrators at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities): BBC Capital Statutory Trust III c/o BankAtlantic Bancorp, Inc. 1750 East Sunrise Boulevard Ft. Lauderdale, Florida 33304 Attention: James A. White Telecopy: 954-763-4764 (b) if given to the Institutional Trustee, at the Institutional Trustee's mailing address set forth below (or such other address as the Institutional Trustee may give notice of to the Holders of the Securities): State Street Bank and Trust Company of Connecticut, National Association 225 Asylum Street, Goodwin Square Hartford, Connecticut 06103 Attention: Vice President, Corporate Trust Department Telecopy: 860-244-1889 With a copy to: State Street Bank and Trust Company P.O. Box 778 Boston, Massachusetts 02102-0778 Attention: Paul D. Allen, Corporate Trust Department Telecopy: 617-662-1462 (c) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice of to the Trust): BankAtlantic Bancorp, Inc. 1750 East Sunrise Boulevard Ft. Lauderdale, Florida 33304 Attention: James A. White Telecopy: 954-763-4764 38 (d) if given to any other Holder, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 13.2. GOVERNING LAW. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the law of the State of Connecticut and all rights and remedies shall be governed by such laws without regard to the principles of conflict of laws of the State of Connecticut or any other jurisdiction that would call for the application of the law of any jurisdiction other than the State of Connecticut; provided, however, that there shall not be applicable to the Trust, the Institutional Trustee or this Declaration any provision of the laws (statutory or common) of the State of Connecticut pertaining to trusts that relate to or regulate, in a manner inconsistent with the terms hereof (a) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (b) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (c) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (d) fees or other sums payable to trustees, officers, agents or employees of a trust, (e) the allocation of receipts and expenditures to income or principal, or (f) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding or investing trust assets. SECTION 13.3. INTENTION OF THE PARTIES. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 13.4. HEADINGS. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 13.5. SUCCESSORS AND ASSIGNS. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Institutional Trustee shall bind and inure to the benefit of their respective successors and assigns, whether or not so expressed. SECTION 13.6. PARTIAL ENFORCEABILITY. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 13.7. COUNTERPARTS. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Institutional Trustee and Administrators to any of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. Signatures appear on the following page 39 IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, as Institutional Trustee By. ------------------------------------- Name: Title: BANKATLANTIC BANCORP, INC., as Sponsor By. ------------------------------------- Name: Title: BBC CAPITAL STATUTORY TRUST III By: ------------------------------------- Administrator By: ------------------------------------- Administrator By: ------------------------------------- Administrator 40 ANNEX I TERMS OF SECURITIES Pursuant to Section 6.1 of the Amended and Restated Declaration of Trust, dated as of June 26, 2002 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration): 1. Designation and Number. (a) 25,000 Floating Rate Capital Securities of BBC Capital Statutory Trust III (the "Trust"), with an aggregate stated liquidation amount with respect to the assets of the Trust of twenty-five million dollars ($25,000,000.00) and a stated liquidation amount with respect to the assets of the Trust of $1,000.00 per Capital Security, are hereby designated for the purposes of identification only as the "Capital Securities". The Capital Security Certificates evidencing the Capital Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. (b) 774 Floating Rate Common Securities of the Trust (the "Common Securities") will be evidenced by Common Security Certificates substantially in the form of Exhibit A-2 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. Distributions. (a) Distributions will be payable on each Security for the period beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2002 at a rate per annum of 5.3369% and shall bear interest for each successive period beginning on (and including) September 26, 2002, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each, a "Distribution Period") at a rate per annum equal to the 3-Month LIBOR, determined as described below, plus 3.45% (the "Coupon Rate"); provided, however, that prior to June 26, 2007, the Coupon Rate shall not exceed 11.95%, applied to the stated liquidation amount thereof, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one quarterly period will bear interest thereon compounded quarterly at the applicable Distribution Rate (to the extent permitted by law). A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. In the event that any date on which a Distribution is payable on the Securities is not a Business Day, then payment of interest payable on such date shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable. The amount of interest payable for any Distribution Period will be calculated by applying the Coupon Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360. All percentages resulting from any calculations on the Capital Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar I-1 amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)). (b) Distributions on the Securities will be cumulative, will accrue from the date of original issuance, and will be payable, subject to extension of distribution payment periods as described herein, quarterly in arrears on March 26, June 26, September 26 and December 26 of each year, commencing on September 26, 2002 (each a "Distribution Payment Date") when, as and if available for payment. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures, so long as no Indenture Event of Default has occurred and is continuing, by deferring the payment of interest on the Debentures for up to 20 consecutive quarterly periods (each an "Extension Period") at any time and from time to time, subject to the conditions described below, although such interest would continue to accrue on the Debentures at the Distribution Rate compounded quarterly (to the extent permitted by law) during any Extension Period. No Extension Period may end on a date other than a Distribution Payment Date. At the end of any such Extension Period the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date and provided further, however, during any such Extension Period, the Debenture Issuer and its Affiliates shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Debenture Issuer's or its Affiliates' capital stock (other than payments of dividends or distributions to the Debenture Issuer) or make any guarantee payments with respect to the foregoing, or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Debenture Issuer or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) and (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Debenture Issuer in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Debenture Issuer (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange, reclassification, combination or conversion of any class or series of the Debenture Issuer's capital stock (or any capital stock of a subsidiary of the Debenture Issuer) for any class or series of the Debenture Issuer's capital stock or of any class or series of the Debenture Issuer's indebtedness for any class or series of the Debenture Issuer's capital stock, (c) the purchase of fractional interests in shares of the Debenture Issuer's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Capital Securities Guarantee). Notwithstanding the foregoing, the limitation described in this Section shall apply only to the Company and its subsidiaries, as such term is defined in Rule 1-02, Regulation S-X of the 1933 Act. Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. If Distributions are deferred, the Distributions due shall be paid on the date I-2 that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trust's funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee. For purposes of this Section 3(b) only, the term Affiliate shall not include Bluegreen Corporation, a publicly traded company in which the Company owns directly and indirectly through a wholly owned subsidiary approximately 40% of the outstanding shares of common stock, so long as the Sponsor owns less than 50% of the voting securities of Bluegreen Corporation. (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates. The relevant record dates shall be 15 days before the relevant Distribution Payment Date. Distributions payable on any Securities that are not punctually paid on any Distribution Payment Date, as a result of the Debenture Issuer having failed to make a payment under the Debentures, as the case may be, when due (taking into account any Extension Period), will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such payment date. (d) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities. 3. Liquidation Distribution Upon Dissolution. In the event of the voluntary or involuntary liquidation, dissolution, winding-up or termination of the Trust (each a "Liquidation") other than in connection with a redemption of the Debentures, the Holders of the Securities will be entitled to receive out of the assets of the Trust available for distribution to Holders of the Securities, after satisfaction of liabilities to creditors of the Trust (to the extent not satisfied by the Debenture Issuer), distributions equal to the lesser of (i) the aggregate of the stated liquidation amount of $1,000.00 per Security plus accrued and unpaid Distributions thereon to the date of payment, to the extent the Trust shall have funds available therefor, and (ii) the amount of assets of the Trust remaining available for distribution to Holders in liquidation of the Trust (such amount being, in either case, the "Liquidation Distribution"), unless in connection with such Liquidation, the Debentures in aggregate stated principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the Distribution Rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, and having the same record date as, such Securities, after paying or making reasonable provision to pay all claims and obligations of the Trust in accordance with the Statutory Trust Act, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities. The Sponsor, as the Holder of all of the Common Securities, has the right at any time to dissolve the Trust (including, without limitation, upon the occurrence of a Special Event), subject to the receipt by the Debenture Issuer of prior approval from the Board of Governors of the Federal Reserve System and any successor federal agency that is primarily responsible for regulating the activities of the Sponsor (the I-3 "Federal Reserve"), if the Sponsor is a bank holding company, or from the Office of Thrift Supervision and any successor federal agency that is primarily responsible for regulating the activities of Sponsor, (the "OTS") if the Sponsor is a savings and loan holding company, in either case if then required under applicable capital guidelines or policies of the Federal Reserve or OTS, as applicable, and, after satisfaction of liabilities to creditors of the Trust, cause the Debentures to be distributed to the Holders of the Securities on a Pro Rata basis in accordance with the aggregate stated liquidation amount thereof. If a Liquidation of the Trust occurs as described in clause (i), (ii), (iii) or (v) in Section 7.1(a) of the Declaration, the Trust shall be liquidated by the Institutional Trustee as expeditiously as it determines to be possible by distributing, after satisfaction of liabilities to creditors of the Trust, to the Holders of the Securities, the Debentures on a Pro Rata basis to the extent not satisfied by the Debenture Issuer, unless such distribution is determined by the Institutional Trustee not to be practical, in which event such Holders will be entitled to receive out of the assets of the Trust available for distribution to the Holders, after satisfaction of liabilities of creditors of the Trust to the extent not satisfied by the Debenture Issuer, an amount equal to the Liquidation Distribution. An early Liquidation of the Trust pursuant to clause (iv) of Section 7.1(a) of the Declaration shall occur if the Institutional Trustee determines that such Liquidation is possible by distributing, after satisfaction of liabilities to creditors of Trust, to the Holders of the Securities on a Pro Rata basis, the Debentures, and such distribution occurs. If, upon any such Liquidation the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on such Capital Securities shall be paid to the Holders of the Trust Securities on a Pro Rata basis, except that if an Event of Default has occurred and is continuing, the Capital Securities shall have a preference over the Common Securities with regard to such distributions. After the date for any distribution of the Debentures upon dissolution of the Trust (i) the Securities of the Trust will be deemed to be no longer outstanding, (ii) upon surrender of a Holder's Securities certificate, such Holder of the Securities will receive a certificate representing the Debentures to be delivered upon such distribution, and (iii) any certificates representing the Securities still outstanding will be deemed to represent undivided beneficial interests in such of the Debentures as have an aggregate principal amount equal to the aggregate stated liquidation amount with an interest rate identical to the Distribution Rate of, and bearing accrued and unpaid interest equal to accrued and unpaid distributions on, the Securities until such certificates are presented to the Debenture Issuer or its agent for transfer or reissuance (and until such certificates are so surrendered, no payments of interest or principal shall be made to Holders of Securities in respect of any payments due and payable under the Debentures; provided, however that such failure to pay shall not be deemed to be an Event of Default and shall not entitle the Holder to the benefits of the Guarantee), and (iv) all rights of Holders of Securities under the Declaration shall cease, except the right of such Holders to receive Debentures upon surrender of certificates representing such Securities. 4. Redemption and Distribution. (a) The Debentures will mature on June 26, 2032. The Debentures may be redeemed by the Debenture Issuer, in whole or in part at any time and from time to time on or after June 26, 2007, at the Redemption Price. In addition, the Debentures may be redeemed by the Debenture Issuer at the Special Redemption Price, in whole but not in part, at any Distribution Payment Date, upon the occurrence and continuation of a Special Event within 120 days following the occurrence of such Special Event at the Special Redemption Price, upon not less than 30 nor more than 60 days' notice to holders of such Debentures so long as such Special Event is continuing. In each case, the right of the Debenture Issuer to redeem the Debentures is subject to the Debenture Issuer having received prior approval from the Federal Reserve (if the Debenture Issuer is a bank holding company) or prior approval from the OTS I-4 (if the Debenture Issuer is a savings and loan holding company), in each case if then required under applicable capital guidelines or policies of the applicable federal agency. "3-Month LIBOR" means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Debenture Trustee in the following order of priority: (1) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (as defined below). "Telerate Page 3750" means the display designated as "Page 3750" on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits; (2) if such rate cannot be identified on the related Determination Date, the Debenture Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks' offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (3) if fewer than two such quotations are provided as requested in clause (2) above, the Debenture Trustee will request four major New York City banks to provide such banks' offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (4) if fewer than two such quotations are provided as requested in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date. The Coupon Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law. "Capital Treatment Event" means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of any amendment to, or change (including any announced prospective change) in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that the Sponsor will not, within 90 days of the date of such opinion, be entitled to treat an amount equal to the aggregate liquidation amount of the Debentures as "Tier 1 Capital" (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Sponsor (or if the Sponsor is not a bank holding company, such guidelines applied to the Sponsor as if the Sponsor were subject to such guidelines); provided, however, that the inability of the Sponsor to treat all I-5 or any portion of the liquidation amount of the Debentures as Tier l Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Sponsor having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1 Capital treatment in excess of the amount which may now or hereafter qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines; provided further, however, that the distribution of Debentures in connection with the Liquidation of the Trust shall not in and of itself constitute a Capital Treatment Event unless such Liquidation shall have occurred in connection with a Tax Event or an Investment Company Event. "Determination Date" means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the particular Distribution Period for which a Coupon Rate is being determined. "Investment Company Event" means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion, will be considered an Investment Company that is required to be registered under the Investment Company Act which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures. "Maturity Date" means June 26, 2032. "Redemption Date" shall mean the date fixed for the redemption of Capital Securities, which shall be March 26, June 26, September 26 or December 26 commencing June 26, 2007. "Redemption Price" means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest on such Debentures to the Redemption Date. "Special Event" means a Tax Event, an Investment Company Event or a Capital Treatment Event. "Special Redemption Date" means a date on which a Special Event redemption occurs, which shall be March 26, June 26, September 26 or December 26. "Special Redemption Price" means (i) 107.5% of the principal amount of the Debentures being redeemed on a Special Redemption Date that occurs before June 26, 2007 and (ii) 100% of the principal amount of the Debentures being redeemed on a Special Redemption Date that occurs on June 26, 2007 or after, plus, in each case, accrued and unpaid interest on such Debentures to the Special Redemption Date. "Tax Event" means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action")) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Debenture Issuer or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the I-6 date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Debenture Issuer on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Debenture Issuer, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. (b) Upon the repayment in full at maturity or redemption in whole or in part of the Debentures (other than following the distribution of the Debentures to the Holders of the Securities), the proceeds from such repayment or payment shall concurrently be applied to redeem Pro Rata at the applicable Redemption Price or Special Redemption Price, as applicable, Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed; provided, however, that holders of such Securities shall be given not less than 30 nor more than 60 days' notice of such redemption (other than at the scheduled maturity of the Debentures). (c) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Capital Securities will be redeemed Pro Rata and the Capital Securities to be redeemed will be redeemed Pro Rata from each Holder of Capital Securities. (d) The Trust may not redeem fewer than all the outstanding Capital Securities unless all accrued and unpaid Distributions have been paid on all Capital Securities for all quarterly Distribution periods terminating on or before the date of redemption. (e) Redemption or Distribution Procedures. (i) Notice of any redemption of or notice of distribution of the Debentures in exchange for, the Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph 4(e)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of such Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of such Securities at the address of each such Holder appearing on the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) If the Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice, which notice may only be issued if the Debentures are redeemed as set out in this paragraph 4 (which notice will be irrevocable), then, provided that the Institutional Trustee has a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Institutional Trustee will pay the relevant Redemption Price or Special Redemption Price, as applicable, to the Holders of such Securities by check mailed to the address of each such Holder appearing on the books and records of the Trust on the Redemption Date. If a Redemption/Distribution Notice shall have been given and funds deposited as required then immediately prior to the close of business on the date of such deposit Distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the applicable Redemption Price or Special Redemption Price specified in paragraph 4(a), but without interest on such Redemption Price or Special Redemption Price. If any date fixed for I-7 redemption of Securities is not a Business Day, then payment of any such Redemption Price or Special Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price or Special Redemption Price in respect of any Securities is improperly withheld or refused and not paid either by the Trust or by the Debenture Issuer as guarantor pursuant to the Guarantee, Distributions on such Securities will continue to accrue at the Distribution Rate from the original Redemption Date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price or Special Redemption Price. In the event of any redemption of the Capital Securities issued by the Trust in part, the Trust shall not be required to (i) issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before any selection for redemption of the Capital Securities and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of the Capital Securities to be so redeemed or (ii) register the transfer of or exchange any Capital Securities so selected for redemption, in whole or in part, except for the unredeemed portion of any Capital Securities being redeemed in part. (iii) Redemption/Distribution Notices shall be sent by the Administrators on behalf of the Trust to (A) in respect of the Capital Securities, the Holders thereof and (B) in respect of the Common Securities, the Holder thereof. (iv) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), and provided that the acquiror is not the Holder of the Common Securities or the obligor under the Indenture, the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Capital Securities by tender, in the open market or by private agreement. 5. Voting Rights - Capital Securities. (a) Except as provided under paragraphs 5(b) and 7 and as otherwise required by law and the Declaration, the Holders of the Capital Securities will have no voting rights. The Administrators are required to call a meeting of the Holders of the Capital Securities if directed to do so by Holders of at least 10% in liquidation amount of the Capital Securities. (b) Subject to the requirements of obtaining a tax opinion by the Institutional Trustee in certain circumstances set forth in the last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Capital Securities, voting separately as a class, have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies available under the Indenture as the holder of the Debentures, (ii) waive any past default that is waivable under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable or (iv) consent on behalf of all the Holders of the Capital Securities to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required; provided, however, that, where a consent or action under the Indenture would require the consent or act of the holders of greater than a simple majority in aggregate principal amount of Debentures (a "Super Majority") affected thereby, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Capital Securities outstanding which the relevant Super Majority represents of the aggregate principal I-8 amount of the Debentures outstanding. If the Institutional Trustee fails to enforce its rights under the Debentures after the Holders of a Majority in liquidation amount of such Capital Securities have so directed the Institutional Trustee, to the fullest extent permitted by law, a Holder of the Capital Securities may institute a legal proceeding directly against the Debenture Issuer to enforce the Institutional Trustee's rights under the Debentures without first instituting any legal proceeding against the Institutional Trustee or any other person or entity. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date the interest or principal is payable (or in the case of redemption, the Redemption Date or the Special Redemption Date, as applicable), then a Holder of record of the Capital Securities may directly institute a proceeding for enforcement of payment on or after the respective due dates specified in the Debentures, to such Holder directly of the principal of or interest on the Debentures having an aggregate principal amount equal to the aggregate liquidation amount of the Capital Securities of such Holder. The Institutional Trustee shall notify all Holders of the Capital Securities of any default actually known to the Institutional Trustee with respect to the Debentures unless (x) such default has been cured prior to the giving of such notice or (y) the Institutional Trustee determines in good faith that the withholding of such notice is in the interest of the Holders of such Capital Securities, except where the default relates to the payment of principal of or interest on any of the Debentures. Such notice shall state that such Indenture Event of Default also constitutes an Event of Default hereunder. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the Institutional Trustee shall not take any of the actions described in clauses (i), (ii) or (iii) above unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes. In the event the consent of the Institutional Trustee, as the holder of the Debentures is required under the Indenture with respect to any amendment, modification or termination of the Indenture, the Institutional Trustee shall request the direction of the Holders of the Securities with respect to such amendment modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of a Super-Majority, the Institutional Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities outstanding which the relevant Super-Majority represents of the aggregate principal amount of the Debentures outstanding. The Institutional Trustee shall not take any such action in accordance with the directions of the Holders of the Securities unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes. A waiver of an Indenture Event of Default will constitute a waiver of the corresponding Event of Default hereunder. Any required approval or direction of Holders of the Capital Securities may be given at a separate meeting of Holders of the Capital Securities convened for such purpose, at a meeting of all of the Holders of the Securities in the Trust or pursuant to written consent. The Institutional Trustee will cause a notice of any meeting at which Holders of the Capital Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of the Capital Securities. Each such notice will include a statement setting forth the following information (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Capital Securities will be required for the Trust to redeem and cancel Capital Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. I-9 Notwithstanding that Holders of the Capital Securities are entitled to vote or consent under any of the circumstances described above, any of the Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not entitle the Holder thereof to vote or consent and shall, for purposes of such vote or consent, be treated as if such Capital Securities were not outstanding. In no event will Holders of the Capital Securities have the right to vote to appoint, remove or replace the Administrators, which voting rights are vested exclusively in the Sponsor as the Holder of all of the Common Securities of the Trust. Under certain circumstances as more fully described in the Declaration, Holders of Capital Securities have the right to vote to appoint, remove or replace the Institutional Trustee. 6. Voting Rights - Common Securities. (a) Except as provided under paragraphs 6(b), 6(c) and 7 and as otherwise required by law and the Declaration, the Common Securities will have no voting rights. (b) The Holders of the Common Securities are entitled, in accordance with Article IV of the Declaration, to vote to appoint, remove or replace any Administrators. (c) Subject to Section 6.7 of the Declaration and only after each Event of Default (if any) with respect to the Capital Securities has been cured, waived, or otherwise eliminated and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under the Declaration, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided, however, that, where a consent or action under the Indenture would require a Super Majority, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Common Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. Notwithstanding this paragraph 6(c), the Institutional Trustee shall not revoke any action previously authorized or approved by a vote or consent of the Holders of the Capital Securities. Other than with respect to directing the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee or the Debenture Trustee as set forth above, the Institutional Trustee shall not take any action described in (i), (ii) or (iii) above, unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. If the Institutional Trustee fails to enforce its rights under the Declaration to the fullest extent permitted by law, any Holder of the Common Securities may institute a legal proceeding directly against any Person to enforce the Institutional Trustee's rights under the Declaration, without first instituting a legal proceeding against the Institutional Trustee or any other Person. Any approval or direction of Holders of the Common Securities may be given at a separate meeting of Holders of the Common Securities convened for such purpose, at a meeting of all of the Holders of the Securities in the Trust or pursuant to written consent. The Administrators will cause a notice of any meeting at which Holders of the Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of the Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at I-10 such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities. 7. Amendments to Declaration and Indenture. (a) In addition to any requirements under Section 11.1 of the Declaration, if any proposed amendment to the Declaration provides for, or the Institutional Trustee, Sponsor or Administrators otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the Liquidation of the Trust, other than as described in Section 7.1 of the Declaration, then the Holders of outstanding Securities, voting together as a single class, will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in liquidation amount of the Securities, affected thereby; provided, however, if any amendment or proposal referred to in clause (i) above would adversely affect only the Capital Securities or only the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a Majority in liquidation amount of such class of Securities. (b) In the event the consent of the Institutional Trustee as the holder of the Debentures is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Debentures, the Institutional Trustee shall request the written direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification, or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require a Super Majority, the Institutional Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. (c) Notwithstanding the foregoing, no amendment or modification may be made to the Declaration if such amendment or modification would (i) cause the Trust to be classified for purposes of United States federal income taxation as other than a grantor trust, (ii) reduce or otherwise adversely affect the powers of the Institutional Trustee or (iii) cause the Trust to be deemed an Investment Company which is required to be registered under the Investment Company Act. (d) Notwithstanding any provision of the Declaration, the right of any Holder of the Capital Securities to receive payment of distributions and other payments upon redemption or otherwise, on or after their respective due dates, or to institute a suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. For the protection and enforcement of the foregoing provision, each and every Holder of the Capital Securities shall be entitled to such relief as can be given either at law or equity. 8. Pro Rata. A reference in these terms of the Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of the Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities then outstanding unless, in relation to a payment, an Event of Default has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Capital Securities Pro Rata according to the aggregate liquidation amount of the Capital Securities held by the relevant Holder relative to the aggregate liquidation amount of all I-11 Capital Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Capital Securities, to each Holder of the Common Securities Pro Rata according to the aggregate liquidation amount of the Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding. 9. Ranking. The Capital Securities rank pari passu with and payment thereon shall be made Pro Rata with the Common Securities except that, where an Event of Default has occurred and is continuing, the rights of Holders of the Common Securities to receive payment of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of the Holders of the Capital Securities with the result that no payment of any Distribution on, or Redemption Price (or Special Redemption Price) of, any Common Security, and no other payment on account of redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all outstanding Capital Securities for all distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price (or Special Redemption Price) the full amount of such Redemption Price (or Special Redemption Price) on all outstanding Capital Securities then called for redemption, shall have been made or provided for, and all funds immediately available to the Institutional Trustee shall first be applied to the payment in full in cash of all Distributions on, or the Redemption Price (or Special Redemption Price) of, the Capital Securities then due and payable. 10. Acceptance of Guarantee and Indenture. Each Holder of the Capital Securities and the Common Securities, by the acceptance of such Securities, agrees to the provisions of the Guarantee, including the subordination provisions therein and to the provisions of the Indenture. 11. No Preemptive Rights. The Holders of the Securities shall have no preemptive or similar rights to subscribe for any additional securities. 12. Miscellaneous. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture to a Holder without charge on written request to the Sponsor at its principal place of business. I-12 EXHIBIT A-1 FORM OF CAPITAL SECURITY CERTIFICATE [FORM OF FACE OF SECURITY] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE A-1-1 MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION. THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $500,000.00 (500 SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $500,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. Certificate Number P-1 25,000 Capital Securities June 26, 2002 Certificate Evidencing Floating Rate Capital Securities of BBC Capital Statutory Trust III (liquidation amount $1,000.00 per Capital Security) BBC Capital Statutory Trust III, a statutory trust created under the laws of the State of Connecticut (the "Trust"), hereby certifies that Hare & Co. (the "Holder"), as the nominee of The Bank of New York, indenture trustee under the Indenture dated as of June 26, 2002 among Preferred Term Securities VI, Ltd., Preferred Term Securities VI, Inc. and The Bank of New York is the registered owner of securities of the Trust representing undivided beneficial interests in the assets of the Trust, (liquidation amount $1,000.00 per capital security) (the "Capital Securities"). Subject to the Declaration (as defined below), the Capital Securities are transferable on the books and records of the Trust in person or by a duly authorized attorney, upon surrender of this Certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities represented hereby are issued pursuant to, and shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of June 26, 2002, among Mark Wendel, David Friedman and Pamela Weiner as Administrators, State Street Bank and Trust Company of Connecticut, National Association, as Institutional Trustee, BankAtlantic Bancorp, Inc., as Sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Trust, including the designation of the terms of the Capital Securities as set forth in Annex I to such amended and restated declaration as the same may be amended from time to time (the "Declaration"). Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture to the Holder without charge upon written request to the Trust at its principal place of business. A-1-2 Upon receipt of this Security, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance of this Security, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Capital Securities as evidence of beneficial ownership in the Debentures. This Capital Security is governed by, and construed in accordance with, the laws of the State of Connecticut, without regard to principles of conflict of laws. Signatures appear on following page A-1-3 IN WITNESS WHEREOF, the Trust has duly executed this certificate. BBC CAPITAL STATUTORY TRUST III By: ------------------------------------- Name: Title: Administrator CERTIFICATE OF AUTHENTICATION This is one of the Capital Securities referred to in the within-mentioned Declaration. STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, as the Institutional Trustee By: ------------------------------------- Authorized Officer A-1-4 [FORM OF REVERSE OF SECURITY] Distributions payable on each Capital Security will be payable at an annual rate equal to 5.3369% beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2002 and at an annual rate for each successive period beginning on (and including) September 26, 2002, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each a "Distribution Period"), equal to 3-Month LIBOR, determined as described below, plus 3.45% (the "Coupon Rate"); provided, however, that prior to June 26, 2007, the Coupon Rate shall not exceed 11.95%, applied to the stated liquidation amount of $1,000.00 per Capital Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than a quarterly period will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes payments of Interest and any principal on the Debentures held by the Institutional Trustee unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. As used herein, "Determination Date" means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period. In the event that any date on which a Distribution is payable on this Capital Security is not a Business Day, then a payment of the Distribution payable on such date will be made on the next succeeding day which is a Business Day (and without any Distribution or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. The amount of interest payable for any Distribution Period will be calculated by applying the Coupon Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360. "3-Month LIBOR" as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Debenture Trustee in the following order of priority: (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date ("Telerate Page 3750" means the display designated as "Page 3750" on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Debenture Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks' offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Debenture Trustee will request four major New York City banks to provide such banks' offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date. A-1-5 The Coupon Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law. All percentages resulting from any calculations on the Capital Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)). Except as otherwise described below, Distributions on the Capital Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears on March 26, June 26, September 26 and December 26 of each year, commencing on September 26, 2002. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures by extending the interest payment period for up to 20 consecutive quarterly periods (each an "Extension Period") on the Debentures, subject to the conditions described below, although such interest would continue to accrue on the Debentures at an annual rate equal to the Distribution Rate compounded quarterly to the extent permitted by law during any Extension Period. No Extension Period may end on a date other than a Distribution Payment Date. At the end of any such Extension Period the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date. Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trust's funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee. The Capital Securities shall be redeemable as provided in the Declaration. A-1-6 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security Certificate to: ________________________________________________________________________ (Insert assignee's social security or tax identification number)________ ________________________________________________________________________ ________________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints ________________________________________________________________________ agent to transfer this Capital Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ----------------------- Signature: ------------------ (Sign exactly as your name appears on the other side of this Capital Security Certificate) Signature Guarantee:(1) - -------- (1) Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Security registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-1-7 EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION. THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH SECTION 8.1 OF THE DECLARATION. Certificate Number C-1 774 Common Securities June 26, 2002 Certificate Evidencing Floating Rate Common Securities of BBC Capital Statutory Trust III BBC Capital Statutory Trust III, a statutory trust created under the laws of the State of Connecticut (the "Trust"), hereby certifies that BankAtlantic Bancorp, Inc. (the "Holder") is the registered owner of common securities of the Trust representing undivided beneficial interests in the assets of the Trust (the "Common Securities"). The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued pursuant to, and shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of June 26, 2002, among Mark Wendel, David Friedman and Pamela Weiner, as Administrators, State Street Bank and Trust Company of Connecticut, National Association, as Institutional Trustee, BankAtlantic Bancorp, Inc. as Sponsor, and the holders from time to time of undivided beneficial interest in the assets of the Trust including the designation of the terms of the Common Securities as set forth in Annex I to such amended and restated declaration, as the same may be amended from time to time (the "Declaration"). Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Guarantee and the Indenture to the Holder without charge upon written request to the Sponsor at its principal place of business. As set forth in the Declaration, where an Event of Default has occurred and is continuing, the rights of Holders of Common Securities to payment in respect of Distributions and payments upon Liquidation, redemption or otherwise are subordinated to the rights of payment of Holders of the Capital Securities. Upon receipt of this Certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance of this Certificate, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of undivided beneficial ownership in the Debentures. This Common Security is governed by, and construed in accordance with, the laws of the State of Connecticut, without regard to principles of conflict of laws. A-2-1 IN WITNESS WHEREOF, the Trust has duly executed this certificate. BBC CAPITAL STATUTORY TRUST III By: ------------------------------------- Name: Title: Administrator A-2-2 [FORM OF REVERSE OF SECURITY] Distributions payable on each Common Security will be identical in amount to the Distributions payable on each Capital Security, which is at an annual rate equal to 5.3369% beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2002 and at an annual rate for each successive period beginning on (and including) September 26, 2002, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each a "Distribution Period"), equal to 3-Month LIBOR, determined as described below, plus 3.45% (the "Coupon Rate"); provided, however, that prior to June 26, 2007, the Coupon Rate shall not exceed 11.95%, applied to the stated liquidation amount of $1,000.00 per Common Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears for more than one quarterly period will bear interest thereon compounded at the Distribution Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes payments of Interest and any principal on the Debentures held by the Institutional Trustee unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. As used herein, "Determination Date" means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period. In the event that any date on which a Distribution is payable on this Common Security is not a Business Day, then a payment of the Distribution payable on such date will be made on the next succeeding day which is a Business Day (and without any Distribution or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. The amount of interest payable for any Distribution Period will be calculated by applying the Coupon Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360. "3-Month LIBOR" as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Debenture Trustee in the following order of priority: (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date ("Telerate Page 3750" means the display designated as "Page 3750" on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Debenture Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks' offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Debenture Trustee will request four major New York City banks to provide such banks' offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date. A-2-3 The Coupon Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law. All percentages resulting from any calculations on the Common Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)). Except as otherwise described below, Distributions on the Common Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears on March 26, June 26, September 26 and December 26 of each year, commencing on September 26, 2002. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures by extending the interest payment period for up to 20 consecutive quarterly periods (each an "Extension Period") on the Debentures, subject to the conditions described below, although such interest would continue to accrue on the Debentures at an annual rate equal to the Distribution Rate compounded quarterly to the extent permitted by law during any Extension Period. No Extension Period may end on a date other than an Interest Payment Date. At the end of any such Extension Period the Sponsor shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date. Prior to the termination of any Extension Period, the Sponsor may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Sponsor may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trust's funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee. The Common Securities shall be redeemable as provided in the Declaration. A-2-4 EXHIBIT B SPECIMEN OF INITIAL DEBENTURE (See Tab No. 16) B-1 EXHIBIT C PLACEMENT AGREEMENT (See Tab No. 1) C-1 EX-10.2 4 g77714exv10w2.txt INDENTURE-DEFERRABLE INTEREST DEBENTURES DUE 2032 EXHIBIT 10.2 BANKATLANTIC BANCORP, INC., AS ISSUER INDENTURE DATED AS OF JUNE 26, 2002 STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS TRUSTEE FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE 2032 TABLE OF CONTENTS
Page ARTICLE I. DEFINITIONS.....................................................................................................1 Section 1.1. Definitions.................................................................................1 ARTICLE II. DEBENTURES.....................................................................................................7 Section 2.1. Authentication and Dating...................................................................7 Section 2.2. Form of Trustee's Certificate of Authentication.............................................7 Section 2.3. Form and Denomination of Debentures.........................................................8 Section 2.4. Execution of Debentures.....................................................................8 Section 2.5. Exchange and Registration of Transfer of Debentures.........................................8 Section 2.6. Mutilated, Destroyed, Lost or Stolen Debentures............................................10 Section 2.7. Temporary Debentures.......................................................................11 Section 2.8. Payment of Interest and Additional Interest................................................11 Section 2.9. Cancellation of Debentures Paid, etc.......................................................13 Section 2.10. Computation of Interest....................................................................13 Section 2.11. Extension of Interest Payment Period.......................................................14 Section 2.12. CUSIP Numbers..............................................................................15 ARTICLE III. PARTICULAR COVENANTS OF THE COMPANY..........................................................................16 Section 3.1. Payment of Principal, Premium and Interest; Agreed Treatment of the Debentures.............16 Section 3.2. Offices for Notices and Payments, etc......................................................16 Section 3.3. Appointments to Fill Vacancies in Trustee's Office.........................................17 Section 3.4. Provision as to Paying Agent...............................................................17 Section 3.5. Certificate to Trustee.....................................................................18 Section 3.6. Additional Sums............................................................................18 Section 3.7. Compliance with Consolidation Provisions...................................................18 Section 3.8. Limitation on Dividends....................................................................18 Section 3.9. Covenants as to the Trust..................................................................19 Section 3.10. Additional Junior Indebtedness.............................................................19 ARTICLE IV. SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE.............................................19 Section 4.1. Securityholders' Lists.....................................................................19 Section 4.2. Preservation and Disclosure of Lists.......................................................19 ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT...........................................21 Section 5.1. Events of Default..........................................................................21 Section 5.2. Payment of Debentures on Default; Suit Therefor............................................22 Section 5.3. Application of Moneys Collected by Trustee.................................................23 Section 5.4. Proceedings by Securityholders.............................................................24 Section 5.5. Proceedings by Trustee.....................................................................24 Section 5.6. Remedies Cumulative and Continuing; Delay or Omission Not a Waiver.........................24
i Section 5.7. Direction of Proceedings and Waiver of Defaults by Majority of Securityholders.............25 Section 5.8. Notice of Defaults.........................................................................25 Section 5.9. Undertaking to Pay Costs...................................................................26 ARTICLE VI. CONCERNING THE TRUSTEE........................................................................................26 Section 6.1. Duties and Responsibilities of Trustee.....................................................26 Section 6.2. Reliance on Documents, Opinions, etc.......................................................27 Section 6.3. No Responsibility for Recitals, etc........................................................28 Section 6.4. Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Debentures.................................................................................28 Section 6.5. Moneys to be Held in Trust.................................................................28 Section 6.6. Compensation and Expenses of Trustee.......................................................28 Section 6.7. Officers' Certificate as Evidence..........................................................29 Section 6.8. Eligibility of Trustee.....................................................................29 Section 6.9. Resignation or Removal of Trustee..........................................................29 Section 6.10. Acceptance by Successor Trustee............................................................30 Section 6.11. Succession by Merger, etc..................................................................31 Section 6.12. Authenticating Agents......................................................................31 ARTICLE VII. CONCERNING THE SECURITYHOLDERS...............................................................................32 Section 7.1. Action by Securityholders..................................................................32 Section 7.2. Proof of Execution by Securityholders......................................................33 Section 7.3. Who Are Deemed Absolute Owners.............................................................33 Section 7.4. Debentures Owned by Company Deemed Not Outstanding.........................................33 Section 7.5. Revocation of Consents; Future Holders Bound...............................................34 ARTICLE VIII. SECURITYHOLDERS' MEETINGS...................................................................................34 Section 8.1. Purposes of Meetings.......................................................................34 Section 8.2. Call of Meetings by Trustee................................................................34 Section 8.3. Call of Meetings by Company or Securityholders.............................................34 Section 8.4. Qualifications for Voting..................................................................35 Section 8.5. Regulations................................................................................35 Section 8.6. Voting.....................................................................................35 Section 8.7. Quorum; Actions............................................................................36 ARTICLE IX. SUPPLEMENTAL INDENTURES.......................................................................................36 Section 9.1. Supplemental Indentures without Consent of Securityholders.................................36 Section 9.2. Supplemental Indentures with Consent of Securityholders....................................37 Section 9.3. Effect of Supplemental Indentures..........................................................38 Section 9.4. Notation on Debentures.....................................................................38 Section 9.5. Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee................38 ARTICLE X. REDEMPTION OF SECURITIES.......................................................................................39 Section 10.1. Optional Redemption........................................................................39 Section 10.2. Special Event Redemption...................................................................39 Section 10.3. Notice of Redemption; Selection of Debentures..............................................39 Section 10.4. Payment of Debentures Called for Redemption................................................40
ii ARTICLE XI. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE.............................................................40 Section 11.1. Company May Consolidate, etc., on Certain Terms............................................40 Section 11.2. Successor Entity to be Substituted.........................................................40 Section 11.3. Opinion of Counsel to be Given to Trustee..................................................41 ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE......................................................................41 Section 12.1. Discharge of Indenture.....................................................................41 Section 12.2. Deposited Moneys to be Held in Trust by Trustee............................................42 Section 12.3. Paying Agent to Repay Moneys Held..........................................................42 Section 12.4. Return of Unclaimed Moneys.................................................................42 ARTICLE XIII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS.............................................42 Section 13.1. Indenture and Debentures Solely Corporate Obligations......................................42 ARTICLE XIV. MISCELLANEOUS PROVISIONS.....................................................................................42 Section 14.1. Successors.................................................................................42 Section 14.2. Official Acts by Successor Entity..........................................................42 Section 14.3. Surrender of Company Powers................................................................43 Section 14.4. Addresses for Notices, etc.................................................................43 Section 14.5. Governing Law..............................................................................43 Section 14.6. Evidence of Compliance with Conditions Precedent...........................................43 Section 14.7. Non-Business Days..........................................................................43 Section 14.8. Table of Contents, Headings, etc...........................................................43 Section 14.9. Execution in Counterparts..................................................................44 Section 14.10. Separability...............................................................................44 Section 14.11. Assignment.................................................................................44 Section 14.12. Acknowledgment of Rights...................................................................44 ARTICLE XV. SUBORDINATION OF DEBENTURES...................................................................................44 Section 15.1. Agreement to Subordinate...................................................................44 Section 15.2. Default on Senior Indebtedness.............................................................45 Section 15.3. Liquidation, Dissolution, Bankruptcy.......................................................45 Section 15.4. Subrogation................................................................................46 Section 15.5. Trustee to Effectuate Subordination........................................................47 Section 15.6. Notice by the Company......................................................................47 Section 15.7. Rights of the Trustee; Holders of Senior Indebtedness......................................47 Section 15.8. Subordination May Not Be Impaired..........................................................48
Exhibit A Form of Junior Subordinated Deferrable Interest Debenture iii THIS INDENTURE, dated as of June 26, 2002, between BankAtlantic Bancorp, Inc., a Florida corporation (the "Company"), and State Street Bank and Trust Company of Connecticut, National Association, a national banking association organized under the laws of the United States of America, as debenture trustee (the "Trustee"). WITNESSETH: WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its Floating Rate Junior Subordinated Deferrable Interest Debentures due 2032 (the "Debentures") under this Indenture to provide, among other things, for the execution and authentication, delivery and administration thereof, and the Company has duly authorized the execution of this Indenture; and WHEREAS, all acts and things necessary to make this Indenture a valid agreement according to its terms, have been done and performed; NOW, THEREFORE, This Indenture Witnesseth: In consideration of the premises, and the purchase of the Debentures by the holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Debentures as follows: ARTICLE I. DEFINITIONS SECTION 1.1. DEFINITIONS. The terms defined in this Section 1.1 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.1. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles and the term "generally accepted accounting principles" means such accounting principles as are generally accepted in the United States at the time of any computation. The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Additional Interest" means interest, if any, that shall accrue on any interest on the Debentures the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the Interest Rate, compounded quarterly (to the extent permitted by law). "Additional Junior Indebtedness" means, without duplication and other than the Debentures, any indebtedness, liabilities or obligations of the Company, or any Subsidiary of the Company, under debt securities (or guarantees in respect of debt securities) initially issued after the date of this Indenture to any trust, or a trustee of a trust, partnership or other entity affiliated with the Company that is, directly or indirectly, a finance subsidiary (as such term is defined in Rule 3a-5 under the Investment Company Act of 1940) or other financing vehicle of the Company or any Subsidiary of the Company in connection with the issuance by that entity of preferred securities or other securities that are eligible to qualify for Tier 1 capital treatment (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or, if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the Additional Junior Indebtedness as Tier 1 capital shall not disqualify it as Additional Junior Indebtedness if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve now or may hereafter 1 accord Tier 1 capital treatment (including the Debentures) in excess of the amount which may qualify for treatment as Tier 1 capital under applicable capital adequacy guidelines. "Additional Sums" has the meaning set forth in Section 3.6. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "Authenticating Agent" means any agent or agents of the Trustee which at the time shall be appointed and acting pursuant to Section 6.12. "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. "Board of Directors" means the board of directors or the executive committee or any other duly authorized designated officers of the Company. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee. "Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in New York City or Hartford, Connecticut are permitted or required by any applicable law to close. "Capital Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with Common Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities. "Capital Securities Guarantee" means the guarantee agreement that the Company enters into with State Street Bank and Trust Company of Connecticut, National Association, as guarantee trustee, or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities of the Trust. "Capital Treatment Event" means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of any amendment to, or change (including any announced prospective change) in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that the Company will not, within 90 days of the date of such opinion be entitled to treat an amount equal to the aggregate liquidation amount of the Debentures as "Tier 1 Capital" (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the liquidation amount of the Debentures as Tier l Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1 Capital treatment in excess of the amount which may now or hereafter qualify for treatment as Tier 1 Capital under applicable capital 2 adequacy guidelines; provided further, however, that the distribution of Debentures in connection with the liquidation of the Trust shall not in and of itself constitute a Capital Treatment Event unless such liquidation shall have occurred in connection with a Tax Event or an Investment Company Event. "Certificate" means a certificate signed by any one of the principal executive officer, the principal financial officer or the principal accounting officer of the Company. "Common Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with Capital Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities. "Company" means BankAtlantic Bancorp, Inc., a Florida corporation, and, subject to the provisions of Article XI, shall include its successors and assigns. "Coupon Rate" has the meaning set forth in Section 2.8. "Debenture" or "Debentures" has the meaning stated in the first recital of this Indenture. "Debenture Register" has the meaning specified in Section 2.5. "Declaration" means the Amended and Restated Declaration of Trust of the Trust, as amended or supplemented from time to time. "Default" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default. "Defaulted Interest" has the meaning set forth in Section 2.8. "Distribution Period" has the meaning set forth in Section 2.8. "Determination Date" has the meaning set forth in Section 2.10. "Event of Default" means any event specified in Section 5.1, continued for the period of time, if any, and after the giving of the notice, if any, therein designated. "Extension Period" has the meaning set forth in Section 2.11. "Federal Reserve" means the Board of Governors of the Federal Reserve System and any successor federal agency that is primarily responsible for regulating the activities of bank holding companies. "Indenture" means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented, or both. "Institutional Trustee" has the meaning set forth in the Declaration. "Interest Payment Date" means each March 26, June 26, September 26 and December 26 during the term of this Indenture. 3 "Interest Rate" means for the period beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2002 the rate per annum of 5.3369% and for each Distribution Period thereafter, the Coupon Rate. "Investment Company Event" means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures. "Liquidation Amount" means the stated amount of $1,000.00 per Trust Security. "Maturity Date" means June 26, 2032. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the Chief Executive Officer, the Vice Chairman, the President, any Managing Director or any Vice President, and by the Treasurer, an Assistant Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section. "Opinion of Counsel" means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, or may be other counsel reasonably satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section. "OTS" means the Office of Thrift Supervision and any successor federal agency that is primarily responsible for regulating the activities of savings and loan holding companies. The term "outstanding," when used with reference to Debentures, means, subject to the provisions of Section 7.4, as of any particular time, all Debentures authenticated and delivered by the Trustee or the Authenticating Agent under this Indenture, except: (a) Debentures theretofore canceled by the Trustee or the Authenticating Agent or delivered to the Trustee for cancellation; (b) Debentures, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent); provided, however, that, if such Debentures, or portions thereof, are to be redeemed prior to maturity thereof, notice of such redemption shall have been given as provided in Section 10.3 or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Debentures paid pursuant to Section 2.6 or in lieu of or in substitution for which other Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.6 unless proof satisfactory to the Company and the Trustee is presented that any such Debentures are held by bona fide holders in due course. 4 "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Principal Office of the Trustee," or other similar term, means the office of the Trustee, at which at any particular time its corporate trust business shall be principally administered, which at the time of the execution of this Indenture shall be 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103. "Redemption Date" has the meaning set forth in Section 10.1. "Redemption Price" means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest on such Debentures to the Redemption Date. "Responsible Officer" means, with respect to the Trustee, any officer within the Principal Office of the Trustee, including any vice-president, any assistant vice-president, any secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Principal Trust Office of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Securities Act" means the Securities Act of 1933, as amended from time to time or any successor legislation. "Securityholder," "holder of Debentures," or other similar terms, means any Person in whose name at the time a particular Debenture is registered on the register kept by the Company or the Trustee for that purpose in accordance with the terms hereof. "Senior Indebtedness" means, with respect to the Company, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of the Company for money borrowed and (B) indebtedness evidenced by securities, debentures, notes, bonds or other similar instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement; (iv) all obligations of the Company for the reimbursement of any letter of credit, any banker's acceptance, any security purchase facility, any repurchase agreement or similar arrangement, any interest rate swap, any other hedging arrangement, any obligation under options or any similar credit or other transaction; (v) all obligations of the type referred to in clauses (i) through (iv) above of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) above of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), whether incurred on or prior to the date of this Indenture or thereafter incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (1) any Additional Junior Indebtedness, (2) Debentures issued pursuant to this Indenture and guarantees in respect of such Debentures, (3) trade accounts payable of the Company arising in the ordinary course of business (such trade accounts payable being pari passu in right of payment to the Debentures), or (4) obligations with respect to which (a) in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are pari passu, junior or otherwise not superior in right of payment to the Debentures and (b) the Company, prior to the issuance thereof, has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve (if the Company is a bank holding company) or the OTS (if the Company is a savings and loan holding company). Senior Indebtedness shall continue to be Senior 5 Indebtedness and be entitled to the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. "Special Event" means any of a Capital Treatment Event, an Investment Company Event or a Tax Event. "Special Redemption Date" has the meaning set forth in Section 10.2. "Special Redemption Price" means (i) 107.5% of the principal amount of the Debentures being redeemed on a Special Redemption Date that occurs before June 26, 2007 and (ii) 100% of the principal amount of the Debentures being redeemed on a Special Redemption Date that occurs on June 26, 2007 or after, plus accrued and unpaid interest on such Debentures to the Special Redemption Date. "Subsidiary" means with respect to any Person, (i) any corporation at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture or similar entity, at least a majority of the outstanding partnership or similar interests of which shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, "voting stock" means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency. "Tax Event" means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action")) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Company or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Company on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "3-Month LIBOR" has the meaning set forth in Section 2.10. "Telerate Page 3750" has the meaning set forth in Section 2.10. "Trust" shall mean BBC Capital Statutory Trust III, a Connecticut statutory trust, or any other similar trust created for the purpose of issuing Capital Securities in connection with the issuance of Debentures under this Indenture, of which the Company is the sponsor. "Trust Securities" means Common Securities and Capital Securities of the Trust. 6 "Trustee" means State Street Bank and Trust Company of Connecticut, National Association, and, subject to the provisions of Article VI hereof, shall also include its successors and assigns as Trustee hereunder. ARTICLE II. DEBENTURES SECTION 2.1. AUTHENTICATION AND DATING. Upon the execution and delivery of this Indenture, or from time to time thereafter, Debentures in an aggregate principal amount not in excess of $25,774,000.00 may be executed and delivered by the Company to the Trustee for authentication, and the Trustee shall thereupon authenticate and make available for delivery said Debentures to or upon the written order of the Company, signed by its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, the President, one of its Managing Directors or one of its Vice Presidents without any further action by the Company hereunder. In authenticating such Debentures, and accepting the additional responsibilities under this Indenture in relation to such Debentures, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon: (a) a copy of any Board Resolution or Board Resolutions relating thereto and, if applicable, an appropriate record of any action taken pursuant to such resolution, in each case certified by the Secretary or an Assistant Secretary of the Company, as the case may be; and (b) an Opinion of Counsel prepared in accordance with Section 14.6 which shall also state: (1) that such Debentures, when authenticated and delivered by the Trustee and issued by the Company in each case in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, subject to or limited by applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium and other statutory or decisional laws relating to or affecting creditors' rights or the reorganization of financial institutions (including, without limitation, preference and fraudulent conveyance or transfer laws), heretofore or hereafter enacted or in effect, affecting the rights of creditors generally; and (2) that all laws and requirements in respect of the execution and delivery by the Company of the Debentures have been complied with and that authentication and delivery of the Debentures by the Trustee will not violate the terms of this Indenture. The Trustee shall have the right to decline to authenticate and deliver any Debentures under this Section if the Trustee, being advised in writing by counsel, determines that such action may not lawfully be taken or if a Responsible Officer of the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing holders. The definitive Debentures shall be typed, printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Debentures, as evidenced by their execution of such Debentures. SECTION 2.2. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The Trustee's certificate of authentication on all Debentures shall be in substantially the following form: 7 This is one of the Debentures referred to in the within-mentioned Indenture. State Street Bank and Trust Company of Connecticut, National Association, as Trustee By ------------------------ Authorized Signer SECTION 2.3. FORM AND DENOMINATION OF DEBENTURES. The Debentures shall be substantially in the form of Exhibit A attached hereto. The Debentures shall be in registered, certificated form without coupons and in minimum denominations of $500,000.00 and any multiple of $1,000.00 in excess thereof. Any attempted transfer of the Debentures in a block having an aggregate principal amount of less than $500,000.00 shall be deemed to be voided and of no legal effect whatsoever. Any such purported transferee shall be deemed not to be a holder of such Debentures for any purpose, including, but not limited to the receipt of payments on such Debentures, and such purported transferee shall be deemed to have no interest whatsoever in such Debentures. The Debentures shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the officers executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof. SECTION 2.4. EXECUTION OF DEBENTURES. The Debentures shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, President, one of its Managing Directors or one of its Executive Vice Presidents, Senior Vice Presidents or Vice Presidents. Only such Debentures as shall bear thereon a certificate of authentication substantially in the form herein before recited, executed by the Trustee or the Authenticating Agent by the manual signature of an authorized signer, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee or the Authenticating Agent upon any Debenture executed by the Company shall be conclusive evidence that the Debenture so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture. In case any officer of the Company who shall have signed any of the Debentures shall cease to be such officer before the Debentures so signed shall have been authenticated and delivered by the Trustee or the Authenticating Agent, or disposed of by the Company, such Debentures nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Debentures had not ceased to be such officer of the Company; and any Debenture may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Debenture, shall be the proper officers of the Company, although at the date of the execution of this Indenture any such person was not such an officer. Every Debenture shall be dated the date of its authentication. SECTION 2.5. EXCHANGE AND REGISTRATION OF TRANSFER OF DEBENTURES. The Company shall cause to be kept, at the office or agency maintained for the purpose of registration of transfer and for exchange as provided in Section 3.2, a register (the "Debenture Register") for the Debentures issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration and transfer of all Debentures as in this Article II provided. The Debenture Register shall be in written form or in any other form capable of being converted into written form within a reasonable time. Debentures to be exchanged may be surrendered at the Principal Office of the Trustee or at any office or agency to be maintained by the Company for such purpose as provided in Section 3.2, and the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating 8 Agent shall authenticate and make available for delivery in exchange therefor the Debenture or Debentures which the Securityholder making the exchange shall be entitled to receive. Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.2, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount. Registration or registration of transfer of any Debenture by the Trustee or by any agent of the Company appointed pursuant to Section 3.2, and delivery of such Debenture, shall be deemed to complete the registration or registration of transfer of such Debenture. All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing. No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith. The Company or the Trustee shall not be required to exchange or register a transfer of any Debenture for a period of 15 days next preceding the date of selection of Debentures for redemption. Notwithstanding anything herein to the contrary, Debentures may not be transferred except in compliance with the restricted securities legend set forth below, unless otherwise determined by the Company, upon the advice of counsel expert in securities law, in accordance with applicable law: THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION. THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE 9 SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION. THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $500,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $500,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. SECTION 2.6. MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES. In case any Debenture shall become mutilated or be destroyed, lost or stolen, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, a new Debenture bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debenture, or in lieu of and in substitution for the Debenture so destroyed, lost or stolen. In every case the applicant for a substituted Debenture shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of such Debenture and of the ownership thereof. 10 The Trustee may authenticate any such substituted Debenture and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Debenture, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Debenture which has matured or is about to mature or has been called for redemption in full shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debenture, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Debenture) if the applicant for such payment shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to the Company and to the Trustee of the destruction, loss or theft of such Debenture and of the ownership thereof. Every substituted Debenture issued pursuant to the provisions of this Section 2.6 by virtue of the fact that any such Debenture is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debenture shall be found at any time, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debentures duly issued hereunder. All Debentures shall be held and owned upon the express condition that, to the extent permitted by applicable law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. SECTION 2.7. TEMPORARY DEBENTURES. Pending the preparation of definitive Debentures, the Company may execute and the Trustee shall authenticate and make available for delivery temporary Debentures that are typed, printed or lithographed. Temporary Debentures shall be issuable in any authorized denomination, and substantially in the form of the definitive Debentures in lieu of which they are issued but with such omissions, insertions and variations as may be appropriate for temporary Debentures, all as may be determined by the Company. Every such temporary Debenture shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Debentures. Without unreasonable delay the Company will execute and deliver to the Trustee or the Authenticating Agent definitive Debentures and thereupon any or all temporary Debentures may be surrendered in exchange therefor, at the principal corporate trust office of the Trustee or at any office or agency maintained by the Company for such purpose as provided in Section 3.2, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange for such temporary Debentures a like aggregate principal amount of such definitive Debentures. Such exchange shall be made by the Company at its own expense and without any charge therefor except that in case of any such exchange involving a registration of transfer the Company may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Until so exchanged, the temporary Debentures shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures authenticated and delivered hereunder. SECTION 2.8. PAYMENT OF INTEREST AND ADDITIONAL INTEREST. Interest at the Interest Rate and any Additional Interest on any Debenture that is payable, and is punctually paid or duly provided for, on any Interest Payment Date for Debentures shall be paid to the Person in whose name said Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment except that interest and any Additional Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid. In the event that any Debenture or portion thereof is called for redemption and the redemption date is subsequent to a regular record date with respect to any 11 Interest Payment Date and prior to such Interest Payment Date, interest on such Debenture will be paid upon presentation and surrender of such Debenture. Each Debenture shall bear interest for the period beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2002 at a rate per annum of 5.3369%, and shall bear interest for each successive period beginning on (and including) September 26, 2002, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each, a "Distribution Period") at a rate per annum equal to the 3-Month LIBOR, determined as described in Section 2.10, plus 3.45% (the "Coupon Rate"); provided, however, that prior to June 26, 2007, the Coupon Rate shall not exceed 11.95%, applied to the principal amount thereof, until the principal thereof becomes due and payable, and on any overdue principal and to the extent that payment of such interest is enforceable under applicable law (without duplication) on any overdue installment of interest at the Interest Rate compounded quarterly. Interest shall be payable (subject to any relevant Extension Period) quarterly in arrears on each Interest Payment Date with the first installment of interest to be paid on September 26, 2002. Any interest on any Debenture, including Additional Interest, that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered holder on the relevant regular record date by virtue of having been such holder; and such Defaulted Interest shall be paid by the Company to the Persons in whose names such Debentures (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing at least 25 days prior to the date of the proposed payment of the amount of Defaulted Interest proposed to be paid on each such Debenture and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at its address as it appears in the Debenture Register, not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Debentures (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable. The Company may make payment of any Defaulted Interest on any Debentures in any other lawful manner after notice given by the Company to the Trustee of the proposed payment method; provided, however, the Trustee in its sole discretion deems such payment method to be practical. Any interest scheduled to become payable on an Interest Payment Date occurring during an Extension Period shall not be Defaulted Interest and shall be payable on such other date as may be specified in the terms of such Debentures. The term "regular record date" as used in this Section shall mean the close of business on the 15th day next preceding the applicable Interest Payment Date. 12 Subject to the foregoing provisions of this Section, each Debenture delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Debenture shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Debenture. SECTION 2.9. CANCELLATION OF DEBENTURES PAID, ETC. All Debentures surrendered for the purpose of payment, redemption, exchange or registration of transfer, shall, if surrendered to the Company or any paying agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee or any Authenticating Agent, shall be promptly canceled by it, and no Debentures shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. All Debentures canceled by any Authenticating Agent shall be delivered to the Trustee. The Trustee shall destroy all canceled Debentures unless the Company otherwise directs the Trustee in writing. If the Company shall acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the same are surrendered to the Trustee for cancellation. SECTION 2.10. COMPUTATION OF INTEREST. The amount of interest payable for the Distribution Period commencing on September 26, 2002 and each succeeding Distribution Period will be calculated by applying the Interest Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360. In the event that any date on which interest is payable on the Debentures is not a Business Day, then payment of interest payable on such date shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable. All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)). (a) "3-Month LIBOR" means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Trustee in the following order of priority: (1) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (as defined below). "Telerate Page 3750" means the display designated as "Page 3750" on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits; (2) if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks' offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (3) if fewer than two such quotations are provided as requested in clause (2) above, the Trustee will request four major New York City banks to provide such banks' offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. 13 dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (4) if fewer than two such quotations are provided as requested in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date. (b) The Coupon Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law. (c) "Determination Date" means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the particular Distribution Period for which a Coupon Rate is being determined. (d) The Trustee shall notify the Company, the Institutional Trustee and any securities exchange or interdealer quotation system on which the Capital Securities are listed, of the Coupon Rate and the Determination Date for each Distribution Period, in each case as soon as practicable after the determination thereof but in no event later than the thirtieth (30th) day of the relevant Distribution Period. Failure to notify the Company, the Institutional Trustee or any securities exchange or interdealer quotation system, or any defect in said notice, shall not affect the obligation of the Company to make payment on the Debentures at the applicable Coupon Rate. Any error in the calculation of the Coupon Rate by the Trustee may be corrected at any time by notice delivered as above provided. Upon the request of a holder of a Debenture, the Trustee shall provide the Coupon Rate then in effect and, if determined, the Coupon Rate for the next Distribution Period. (e) Subject to the corrective rights set forth above, all certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions relating to the payment and calculation of interest on the Debentures and distributions on the Capital Securities by the Trustee or the Institutional Trustee will (in the absence of willful default, bad faith and manifest error) be final, conclusive and binding on the Trust, the Company and all of the holders of the Debentures and the Capital Securities, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Trustee or the Institutional Trustee in connection with the exercise or non-exercise by either of them or their respective powers, duties and discretion. SECTION 2.11. EXTENSION OF INTEREST PAYMENT PERIOD. So long as no Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest (including Additional Interest) shall be due and payable. No Extension Period may end on a date other than an Interest Payment Date. At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's or such 14 Affiliate's capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) or (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange, reclassification, combination or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (c) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Capital Securities Guarantee). Notwithstanding the foregoing, the limitation described in this Section shall apply only to the Company and its subsidiaries, as such term is defined in Rule 1-02, Regulation S-X of the 1933 Act. Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest to the extent permitted by applicable law. The Company must give the Trustee notice of its election to begin or extend such Extension Period at least 5 Business Days prior to the earlier of (i) the date interest on the Debentures would have been payable except for the election to begin or extend such Extension Period or (ii) the date such interest is payable, but in any event not less than 5 Business Days prior to such record date. The Trustee shall give notice of the Company's election to begin a new Extension Period to the Securityholders. For purposes of this Section 2.11 and Section 3.8 below, the term Affiliate shall not include Bluegreen Corporation, a publicly traded company in which the Company owns directly and indirectly through a wholly owned subsidiary approximately 40% of the outstanding shares of common stock, so long as the Company owns less than 50% of the voting stock of Bluegreen Corporation. SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Debentures may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Securityholders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Debentures or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Debentures, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the CUSIP numbers. 15 ARTICLE III. PARTICULAR COVENANTS OF THE COMPANY SECTION 3.1. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST; AGREED TREATMENT OF THE DEBENTURES. (a) The Company covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and premium, if any, and interest and any Additional Interest on the Debentures at the place, at the respective times and in the manner provided in this Indenture and the Debentures. Each installment of interest on the Debentures may be paid (i) by mailing checks for such interest payable to the order of the holders of Debentures entitled thereto as they appear on the registry books of the Company if a request for a wire transfer has not been received by the Company or (ii) by wire transfer to any account with a banking institution located in the United States designated in writing by such Person to the paying agent no later than the related record date. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Institutional Trustee. (b) The Company will treat the Debentures as indebtedness, and the amounts payable in respect of the principal amount of such Debentures as interest, for all United States federal income tax purposes. All payments in respect of such Debentures will be made free and clear of United States withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W8 BEN (or any substitute or successor form) establishing its non-United States status for United States federal income tax purposes. (c) As of the date of this Indenture, the Company has no present intention to exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period. (d) As of the date of this Indenture, the Company believes that the likelihood that it would exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period at any time during which the Debentures are outstanding is remote because of the restrictions that would be imposed on the Company's ability to declare or pay dividends or distributions on, or to redeem, purchase or make a liquidation payment with respect to, any of its outstanding equity and on the Company's ability to make any payments of principal of or interest on, or repurchase or redeem, any of its debt securities that rank pari passu in all respects with (or junior in interest to) the Debentures. SECTION 3.2. OFFICES FOR NOTICES AND PAYMENTS, ETC. So long as any of the Debentures remain outstanding, the Company will maintain in Hartford, Connecticut, an office or agency where the Debentures may be presented for payment, an office or agency where the Debentures may be presented for registration of transfer and for exchange as in this Indenture provided and an office or agency where notices and demands to or upon the Company in respect of the Debentures or of this Indenture may be served. The Company will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof. Until otherwise designated from time to time by the Company in a notice to the Trustee, or specified as contemplated by Section 2.5, such office or agency for all of the above purposes shall be the office or agency of the Trustee. In case the Company shall fail to maintain any such office or agency in Hartford, Connecticut, or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Principal Office of the Trustee. In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside Hartford, Connecticut, where the Debentures may be presented for 16 registration of transfer and for exchange in the manner provided in this Indenture, and the Company may from time to time rescind such designation, as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain any such office or agency in Hartford, Connecticut, for the purposes above mentioned. The Company will give to the Trustee prompt written notice of any such designation or rescission thereof. SECTION 3.3. APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.9, a Trustee, so that there shall at all times be a Trustee hereunder. SECTION 3.4. PROVISION AS TO PAYING AGENT. (a) If the Company shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provision of this Section 3.4, (1) that it will hold all sums held by it as such agent for the payment of the principal of and premium, if any, or interest, if any, on the Debentures (whether such sums have been paid to it by the Company or by any other obligor on the Debentures) in trust for the benefit of the holders of the Debentures; (2) that it will give the Trustee prompt written notice of any failure by the Company (or by any other obligor on the Debentures) to make any payment of the principal of and premium, if any, or interest, if any, on the Debentures when the same shall be due and payable; and (3) that it will, at any time during the continuance of any Event of Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent. (b) If the Company shall act as its own paying agent, it will, on or before each due date of the principal of and premium, if any, or interest, if any, on the Debentures, set aside, segregate and hold in trust for the benefit of the holders of the Debentures a sum sufficient to pay such principal, premium or interest so becoming due and will notify the Trustee in writing of any failure to take such action and of any failure by the Company (or by any other obligor under the Debentures) to make any payment of the principal of and premium, if any, or interest, if any, on the Debentures when the same shall become due and payable. Whenever the Company shall have one or more paying agents for the Debentures, it will, on or prior to each due date of the principal of and premium, if any, or interest, if any, on the Debentures, deposit with a paying agent a sum sufficient to pay the principal, premium or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless such paying agent is the Trustee) the Company shall promptly notify the Trustee in writing of its action or failure to act. (c) Anything in this Section 3.4 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Debentures, or for any other reason, pay, or direct any paying agent to pay to the Trustee all sums held in trust by the Company or any such paying agent, such sums to be held by the Trustee upon the trusts herein contained. (d) Anything in this Section 3.4 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.4 is subject to Sections 12.3 and 12.4. 17 SECTION 3.5. CERTIFICATE TO TRUSTEE. The Company will deliver to the Trustee on or before 120 days after the end of each fiscal year, so long as Debentures are outstanding hereunder, a Certificate stating that in the course of the performance by the signers of their duties as officers of the Company they would normally have knowledge of any default during such fiscal year by the Company in the performance of any covenants contained herein, stating whether or not they have knowledge of any such default and, if so, specifying each such default of which the signers have knowledge and the nature and status thereof. SECTION 3.6. ADDITIONAL SUMS. If and for so long as the Trust is the holder of all Debentures and the Trust is required to pay any additional taxes, duties, assessments or other governmental charges as a result of a Tax Event, the Company will pay such additional amounts ("Additional Sums") on the Debentures as shall be required so that the net amounts received and retained by the Trust after paying taxes, duties, assessments or other governmental charges will be equal to the amounts the Trust would have received if no such taxes, duties, assessments or other governmental charges had been imposed. Whenever in this Indenture or the Debentures there is a reference in any context to the payment of principal of or interest on the Debentures, such mention shall be deemed to include mention of payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made; provided, however, that the deferral of the payment of interest during an Extension Period pursuant to Section 2.11 shall not defer the payment of any Additional Sums that may be due and payable. SECTION 3.7. COMPLIANCE WITH CONSOLIDATION PROVISIONS. The Company will not, while any of the Debentures remain outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article XI hereof are complied with. SECTION 3.8. LIMITATION ON DIVIDENDS. If Debentures are initially issued to the Trust or a trustee of such trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock or its Affiliates' capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange, reclassification, combination or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (3) the purchase of fractional interests in shares of the Company's capital stock 18 pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Capital Securities Guarantee). Notwithstanding the foregoing, the limitation described in this Section shall apply only to the Company and its subsidiaries, as such term is defined in Rule 1-02, Regulation S-X of the 1933 Act. SECTION 3.9. COVENANTS AS TO THE TRUST. For so long as the Trust Securities remain outstanding, the Company shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Company under this Indenture may succeed to the Company's ownership of such Common Securities. The Company, as owner of the Common Securities, shall, except in connection with a distribution of Debentures to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, cause the Trust (a) to remain a statutory trust, (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes, and (c) to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Debentures. SECTION 3.10. ADDITIONAL JUNIOR INDEBTEDNESS. The Company shall not, and it shall not cause or permit any Subsidiary of the Company to, incur, issue or be obligated on any Additional Junior Indebtedness, either directly or indirectly, by way of guarantee, suretyship or otherwise, other than: (i) Additional Junior Indebtedness that, by its terms, is expressly stated to be either junior and subordinate or pari passu in all respects to the Debentures, and (ii) Additional Junior Indebtedness of which the Company has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve, if the Company is a bank holding company, or the OTS, if the Company is a savings and loan holding company. ARTICLE IV. SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE SECTION 4.1. SECURITYHOLDERS' LISTS. The Company covenants and agrees that it will furnish or caused to be furnished to the Trustee: (a) on each regular record date for the Debentures, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Securityholders of the Debentures as of such record date; and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; except that no such lists need be furnished under this Section 4.1 so long as the Trustee is in possession thereof by reason of its acting as Debenture registrar. SECTION 4.2. PRESERVATION AND DISCLOSURE OF LISTS. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of Debentures (1) contained in the most recent 19 list furnished to it as provided in Section 4.1 or (2) received by it in the capacity of Debentures registrar (if so acting) hereunder. The Trustee may destroy any list furnished to it as provided in Section 4.1 upon receipt of a new list so furnished. (b) In case three or more holders of Debentures (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Debenture for a period of at least 6 months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of Debentures with respect to their rights under this Indenture or under such Debentures and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall within 5 Business Days after the receipt of such application, at its election, either: (1) afford such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, or (2) inform such applicants as to the approximate number of holders of Debentures whose names and addresses appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Securityholder whose name and address appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2 a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Securities and Exchange Commission, if permitted or required by applicable law, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the holders of all Debentures, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said Commission, as permitted or required by applicable law, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, said Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Each and every holder of Debentures, by receiving and holding the same, agrees with Company and the Trustee that neither the Company nor the Trustee nor any paying agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Debentures in accordance with the provisions of subsection (b) of this Section 4.2, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b). 20 ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT SECTION 5.1. EVENTS OF DEFAULT. "Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) the Company defaults in the payment of any interest upon any Debenture when it becomes due and payable, and fails to cure such default for a period of 30 days; provided, however, that a valid extension of an interest payment period by the Company in accordance with the terms of this Indenture shall not constitute a default in the payment of interest for this purpose; or (b) the Company defaults in the payment of all or any part of the principal of (or premium, if any, on) any Debentures as and when the same shall become due and payable either at maturity, upon redemption, by declaration of acceleration or otherwise; or (c) the Company defaults in the performance of, or breaches, any of its covenants or agreements in this Indenture or in the terms of the Debentures established as contemplated in this Indenture (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the outstanding Debentures, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (d) a court of competent jurisdiction shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or (e) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or (f) the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of the Debentures to holders of such Trust Securities in liquidation of their interests in the Trust, (ii) the redemption of all of the outstanding Trust Securities or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration. If an Event of Default occurs and is continuing with respect to the Debentures, then, and in each and every such case, unless the principal of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Securityholders), may declare the entire principal of the Debentures and the interest accrued thereon, if 21 any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Debentures shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Debentures and the principal of and premium, if any, on the Debentures which shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and Additional Interest) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and all other amounts due to the Trustee pursuant to Section 6.6, and if any and all Events of Default under this Indenture, other than the non-payment of the principal of or premium, if any, on Debentures which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein -- then and in every such case the holders of a majority in aggregate principal amount of the Debentures then outstanding, by written notice to the Company and to the Trustee, may waive all defaults and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the holders of the Debentures shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the holders of the Debentures shall continue as though no such proceeding had been taken. SECTION 5.2. PAYMENT OF DEBENTURES ON DEFAULT; SUIT THEREFOR. The Company covenants that upon the occurrence of an Event of Default pursuant to Section 5.1(a) or Section 5.1(b) then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Debentures the whole amount that then shall have become due and payable on all Debentures for principal and premium, if any, or interest, or both, as the case may be, with Additional Interest accrued on the Debentures (to the extent that payment of such interest is enforceable under applicable law and, if the Debentures are held by the Trust or a trustee of such Trust, without duplication of any other amounts paid by the Trust or a trustee in respect thereof); and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel, and any other amounts due to the Trustee under Section 6.6. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on such Debentures and collect in the manner provided by law out of the property of the Company or any other obligor on such Debentures wherever situated the moneys adjudged or decreed to be payable. In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Debentures under Bankruptcy Law, or in case a receiver or trustee shall have been appointed for the property of the Company or such other obligor, or in the case of any other similar judicial proceedings relative to the Company or other obligor upon the Debentures, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Debentures shall then be due and payable as therein expressed or by declaration of 22 acceleration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.2, shall be entitled and empowered, by intervention in such proceedings or otherwise, (i) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Debentures and, in case of any judicial proceedings, (ii) to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all other amounts due to the Trustee under Section 6.6), and of the Securityholders allowed in such judicial proceedings relative to the Company or any other obligor on the Debentures, or to the creditors or property of the Company or such other obligor, unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Debentures in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or Person performing similar functions in comparable proceedings, (iii) to collect and receive any moneys or other property payable or deliverable on any such claims, and (iv) to distribute the same after the deduction of its charges and expenses. Any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other amounts due to the Trustee under Section 6.6. Nothing herein contained shall be construed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any holder thereof or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding. All rights of action and of asserting claims under this Indenture, or under any of the Debentures, may be enforced by the Trustee without the possession of any of the Debentures, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the holders of the Debentures. In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the holders of the Debentures, and it shall not be necessary to make any holders of the Debentures parties to any such proceedings. SECTION 5.3. APPLICATION OF MONEYS COLLECTED BY TRUSTEE. Any moneys collected by the Trustee pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Debentures in respect of which moneys have been collected, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid: 23 First: To the payment of costs and expenses incurred by, and reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all other amounts due to the Trustee under Section 6.6; Second: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XV; Third: To the payment of the amounts then due and unpaid upon Debentures for principal (and premium, if any), and interest on the Debentures, in respect of which or for the benefit of which money has been collected, ratably, without preference or priority of any kind, according to the amounts due on such Debentures for principal (and premium, if any) and interest, respectively; and Fourth: The balance, if any, to the Company. SECTION 5.4. PROCEEDINGS BY SECURITYHOLDERS. No holder of any Debenture shall have any right to institute any suit, action or proceeding for any remedy hereunder, unless such holder previously shall have given to the Trustee written notice of an Event of Default with respect to the Debentures and unless the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding shall have given the Trustee a written request to institute such action, suit or proceeding and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding. Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Debenture to receive payment of the principal of, premium, if any, and interest, on such Debenture when due, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder and by accepting a Debenture hereunder it is expressly understood, intended and covenanted by the taker and holder of every Debenture with every other such taker and holder and the Trustee, that no one or more holders of Debentures shall have any right in any manner whatsoever by virtue or by availing itself of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other Debentures, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debentures. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. SECTION 5.5. PROCEEDINGS BY TRUSTEE. In case of an Event of Default hereunder the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. SECTION 5.6. REMEDIES CUMULATIVE AND CONTINUING; DELAY OR OMISSION NOT A WAIVER. Except as otherwise provided in Section 2.6, all powers and remedies given by this Article V to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to the Debentures, and no delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to 24 the provisions of Section 5.4, every power and remedy given by this Article V or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders. No delay or omission of the Trustee or any Securityholder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to any Securityholder may be exercised from time to time, and as often as may be deemed expedient, by the Trustee (in accordance with its duties under Section 6.1 hereof) or by such holder, as the case may be. SECTION 5.7. DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY MAJORITY OF SECURITYHOLDERS. The holders of a majority in aggregate principal amount of the Debentures affected (voting as one class) at the time outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such Debentures; provided, however, that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine that the action so directed would be unjustly prejudicial to the holders not taking part in such direction or if the Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if a Responsible Officer of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability. The holders of a majority in aggregate principal amount of the Debentures at the time outstanding may on behalf of the holders of all of the Debentures waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9; provided, however, that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided, further, that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section, said default or Event of Default shall for all purposes of the Debentures and this Indenture be deemed to have been cured and to be not continuing. SECTION 5.8. NOTICE OF DEFAULTS. The Trustee shall, within 90 days after the actual knowledge by a Responsible Officer of the Trustee of the occurrence of a default with respect to the Debentures, mail to all Securityholders, as the names and addresses of such holders appear upon the Debenture Register, notice of all defaults with respect to the Debentures known to the Trustee, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purpose of this Section 5.8 being hereby defined to be the events specified in clauses (a), (b), (c), (d), (e) and (f) of Section 5.1, not including periods of grace, if any, provided for therein); provided, however, that, except in the case of default in the payment of the principal of, premium, if any, or interest on any of the Debentures, the Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders. 25 SECTION 5.9. UNDERTAKING TO PAY COSTS. All parties to this Indenture agree, and each holder of any Debenture by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section 5.9 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in principal amount of the Debentures outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Debenture against the Company on or after the same shall have become due and payable. ARTICLE VI. CONCERNING THE TRUSTEE SECTION 6.1. DUTIES AND RESPONSIBILITIES OF TRUSTEE. With respect to the holders of Debentures issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Debentures and after the curing or waiving of all Events of Default which may have occurred, with respect to the Debentures, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default with respect to the Debentures has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (a) prior to the occurrence of an Event of Default with respect to Debentures and after the curing or waiving of all Events of Default which may have occurred (1) the duties and obligations of the Trustee with respect to Debentures shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations with respect to the Debentures as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee, and (2) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith, in accordance with the direction of the Securityholders pursuant to Section 5.7, relating to 26 the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is ground for believing that the repayment of such funds or liability is not assured to it under the terms of this Indenture or indemnity satisfactory to the Trustee against such risk is not reasonably assured to it. SECTION 6.2. RELIANCE ON DOCUMENTS, OPINIONS, ETC. Except as otherwise provided in Section 6.1: (a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company; (c) the Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default with respect to the Debentures (that has not been cured or waived) to exercise with respect to Debentures such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, coupon or other paper or document, unless requested in writing to do so by the holders of not less than a majority in aggregate principal amount of the outstanding Debentures affected thereby; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expense or liability as a condition to so proceeding; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents (including any Authenticating Agent) or attorneys, and 27 the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care; and (h) with the exceptions of defaults under Sections 5.1(a) or 5.1(b), the Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Debentures unless a written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any other obligor on the Debentures or by any holder of the Debentures. SECTION 6.3. NO RESPONSIBILITY FOR RECITALS, ETC. The recitals contained herein and in the Debentures (except in the certificate of authentication of the Trustee or the Authenticating Agent) shall be taken as the statements of the Company, and the Trustee and the Authenticating Agent assume no responsibility for the correctness of the same. The Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of the Debentures. The Trustee and the Authenticating Agent shall not be accountable for the use or application by the Company of any Debentures or the proceeds of any Debentures authenticated and delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this Indenture. SECTION 6.4. TRUSTEE, AUTHENTICATING AGENT, PAYING AGENTS, TRANSFER AGENTS OR REGISTRAR MAY OWN DEBENTURES. The Trustee or any Authenticating Agent or any paying agent or any transfer agent or any Debenture registrar, in its individual or any other capacity, may become the owner or pledgee of Debentures with the same rights it would have if it were not Trustee, Authenticating Agent, paying agent, transfer agent or Debenture registrar. SECTION 6.5. MONEYS TO BE HELD IN TRUST. Subject to the provisions of Section 12.4, all moneys received by the Trustee or any paying agent shall, until used or applied as herein provided, be held in trust for the purpose for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee and any paying agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the written order of the Company, signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President, a Managing Director, a Vice President the Treasurer or an Assistant Treasurer of the Company. SECTION 6.6. COMPENSATION AND EXPENSES OF TRUSTEE. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as shall be agreed to in writing between the Company and the Trustee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), and the Company will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or willful misconduct. The Company also covenants to indemnify each of the Trustee or any predecessor Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense including taxes (other than taxes based on the income of the Trustee) incurred without negligence or willful misconduct on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability. The obligations of the Company under this Section 6.6 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Debentures upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debentures. 28 Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1(d), Section 5.1(e) or Section 5.1(f), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law. The provisions of this Section shall survive the resignation or removal of the Trustee and the defeasance or other termination of this Indenture. Notwithstanding anything in this Indenture or any Debenture to the contrary, the Trustee shall have no obligation whatsoever to advance funds to pay any principal of or interest on or other amounts with respect to the Debentures or otherwise advance funds to or on behalf of the Company. SECTION 6.7. OFFICERS' CERTIFICATE AS EVIDENCE. Except as otherwise provided in Sections 6.1 and 6.2, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or willful misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof. SECTION 6.8. ELIGIBILITY OF TRUSTEE. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia or a corporation or other Person authorized under such laws to exercise corporate trust powers, having (or whose obligations under this Indenture are guaranteed by an affiliate having) a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00) and subject to supervision or examination by federal, state, territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.8 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent records of condition so published. The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.8, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.9. If the Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act of 1939, the Trustee shall either eliminate such interest or resign, to the extent and in the manner described by this Indenture. SECTION 6.9. RESIGNATION OR REMOVAL OF TRUSTEE (a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof, at the Company's expense, to the holders of the Debentures at their addresses as they shall appear on the Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee or trustees by written instrument, in duplicate, executed by order of its Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor 29 Trustee. If no successor Trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation to the affected Securityholders, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee. (b) In case at any time any of the following shall occur -- (1) the Trustee shall fail to comply with the provisions of Section 6.8 after written request therefor by the Company or by any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months, or (2) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.8 and shall fail to resign after written request therefor by the Company or by any such Securityholder, or (3) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, the Company may remove the Trustee and appoint a successor Trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, or, subject to the provisions of Section 5.9, any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint successor Trustee. (c) Upon prior written notice to the Company and the Trustee, the holders of a majority in aggregate principal amount of the Debentures at the time outstanding may at any time remove the Trustee and nominate a successor Trustee, which shall be deemed appointed as successor Trustee unless within 10 Business Days after such nomination the Company objects thereto, in which case, or in the case of a failure by such holders to nominate a successor Trustee, the Trustee so removed or any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this Section 6.9 provided, may petition any court of competent jurisdiction for an appointment of a successor. (d) Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor Trustee as provided in Section 6.10. SECTION 6.10. ACCEPTANCE BY SUCCESSOR TRUSTEE. Any successor Trustee appointed as provided in Section 6.9 shall execute, acknowledge and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or of the successor Trustee, the Trustee ceasing to act 30 shall, upon payment of any amounts then due it pursuant to the provisions of Section 6.6, execute and deliver an instrument transferring to such successor Trustee all the rights and powers of the Trustee so ceasing to act and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee thereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected by such Trustee to secure any amounts then due it pursuant to the provisions of Section 6.6. If a successor Trustee is appointed, the Company, the retiring Trustee and the successor Trustee shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the Trust hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee. No successor Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 6.8. In no event shall a retiring Trustee be liable for the acts or omissions of any successor Trustee hereunder. Upon acceptance of appointment by a successor Trustee as provided in this Section 6.10, the Company shall mail notice of the succession of such Trustee hereunder to the holders of Debentures at their addresses as they shall appear on the Debenture Register. If the Company fails to mail such notice within 10 Business Days after the acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Company. SECTION 6.11. SUCCESSION BY MERGER, ETC. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided such corporation shall be otherwise eligible and qualified under this Article. In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Debentures shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Debentures so authenticated; and in case at that time any of the Debentures shall not have been authenticated, any successor to the Trustee may authenticate such Debentures either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debentures or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Debentures in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 6.12. AUTHENTICATING AGENTS. There may be one or more Authenticating Agents appointed by the Trustee upon the request of the Company with power to act on its behalf and subject to its direction in the authentication and delivery of Debentures issued upon exchange or registration of 31 transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver Debentures; provided, however, that the Trustee shall have no liability to the Company for any acts or omissions of the Authenticating Agent with respect to the authentication and delivery of Debentures. Any such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States or of any state or territory thereof or of the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of at least $50,000,000.00 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 6.12 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect herein specified in this Section. Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section 6.12 without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any Authenticating Agent with respect to the Debentures by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 6.12, the Trustee may, and upon the request of the Company shall, promptly appoint a successor Authenticating Agent eligible under this Section 6.12, shall give written notice of such appointment to the Company and shall mail notice of such appointment to all holders of Debentures as the names and addresses of such holders appear on the Debenture Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein. The Company agrees to pay to any Authenticating Agent from time to time reasonable compensation for its services. Any Authenticating Agent shall have no responsibility or liability for any action taken by it as such in accordance with the directions of the Trustee. ARTICLE VII. CONCERNING THE SECURITYHOLDERS SECTION 7.1. ACTION BY SECURITYHOLDERS. Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Debentures may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action) the fact that at the time of taking any such action the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Securityholders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Debentures voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII, or (c) by a 32 combination of such instrument or instruments and any such record of such a meeting of such Securityholders or (d) by any other method the Trustee deems satisfactory. If the Company shall solicit from the Securityholders any request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, the Company may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for such Debentures for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of outstanding Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, and for that purpose the outstanding Debentures shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than 6 months after the record date. SECTION 7.2. PROOF OF EXECUTION BY SECURITYHOLDERS. Subject to the provisions of Section 6.1, 6.2 and 8.5, proof of the execution of any instrument by a Securityholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The ownership of Debentures shall be proved by the Debenture Register or by a certificate of the Debenture registrar. The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary. The record of any Securityholders' meeting shall be proved in the manner provided in Section 8.6. SECTION 7.3. WHO ARE DEEMED ABSOLUTE OWNERS. Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture. SECTION 7.4. DEBENTURES OWNED BY COMPANY DEEMED NOT OUTSTANDING. In determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent or waiver under this Indenture, Debentures which are owned by the Company or any other obligor on the Debentures or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Debentures shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided, however, that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.4 if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Debentures and that the pledgee is not the 33 Company or any such other obligor or Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. SECTION 7.5. REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the holders of the percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action, any holder (in cases where no record date has been set pursuant to Section 7.1) or any holder as of an applicable record date (in cases where a record date has been set pursuant to Section 7.1) of a Debenture (or any Debenture issued in whole or in part in exchange or substitution therefor) the serial number of which is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee at the Principal Office of the Trustee and upon proof of holding as provided in Section 7.2, revoke such action so far as concerns such Debenture (or so far as concerns the principal amount represented by any exchanged or substituted Debenture). Except as aforesaid any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture, and of any Debenture issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture or any Debenture issued in exchange or substitution therefor. ARTICLE VIII. SECURITYHOLDERS' MEETINGS SECTION 8.1. PURPOSES OF MEETINGS. A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes: (a) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article V; (b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article VI; (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.2; or (d) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of such Debentures under any other provision of this Indenture or under applicable law. SECTION 8.2. CALL OF MEETINGS BY TRUSTEE. The Trustee may at any time call a meeting of Securityholders to take any action specified in Section 8.1, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Debentures affected at their addresses as they shall appear on the Debentures Register and, if the Company is not a holder of Debentures, to the Company. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting. SECTION 8.3. CALL OF MEETINGS BY COMPANY OR SECURITYHOLDERS. In case at any time the Company pursuant to a Board Resolution, or the holders of at least 10% in aggregate principal amount of the Debentures, as the case may be, then outstanding, shall have requested the Trustee to call a meeting of 34 Securityholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or such Securityholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 8.1, by mailing notice thereof as provided in Section 8.2. SECTION 8.4. QUALIFICATIONS FOR VOTING. To be entitled to vote at any meeting of Securityholders a Person shall (a) be a holder of one or more Debentures with respect to which the meeting is being held or (b) a Person appointed by an instrument in writing as proxy by a holder of one or more such Debentures. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. SECTION 8.5. REGULATIONS. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Debentures and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit. The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders as provided in Section 8.3, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting. Subject to the provisions of Section 7.4, at any meeting each holder of Debentures with respect to which such meeting is being held or proxy therefor shall be entitled to one vote for each $1,000.00 principal amount of Debentures held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Debenture challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Debentures held by him or instruments in writing as aforesaid duly designating him as the Person to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 8.2 or 8.3 may be adjourned from time to time by a majority of those present, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice. SECTION 8.6. VOTING. The vote upon any resolution submitted to any meeting of holders of Debentures with respect to which such meeting is being held shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or numbers of the Debentures held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.2. The record shall show the serial numbers of the Debentures voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be 35 delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 8.7. QUORUM; ACTIONS. The Persons entitled to vote a majority in principal amount of the Debentures then outstanding shall constitute a quorum for a meeting of Securityholders; provided, however, that if any action is to be taken at such meeting with respect to a consent, waiver, request, demand, notice, authorization, direction or other action which may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding, the Persons holding or representing such specified percentage in principal amount of the Debentures then outstanding will constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Securityholders, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 8.2, except that such notice need be given only once not less than 5 days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Debentures then outstanding which shall constitute a quorum. Except as limited by the provisos in the first paragraph of Section 9.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the holders of a majority in principal amount of the Debentures then outstanding; provided, however, that, except as limited by the provisos in the first paragraph of Section 9.2, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action which this Indenture expressly provides may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid only by the affirmative vote of the holders of a not less than such specified percentage in principal amount of the Debentures then outstanding. Any resolution passed or decision taken at any meeting of holders of Debentures duly held in accordance with this Section shall be binding on all the Securityholders, whether or not present or represented at the meeting. ARTICLE IX. SUPPLEMENTAL INDENTURES SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF SECURITYHOLDERS. The Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto, without the consent of the Securityholders, for one or more of the following purposes: (a) to evidence the succession of another Person to the Company, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Company, pursuant to Article XI hereof; (b) to add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the holders of Debentures as the Board of Directors shall consider to be for the 36 protection of the holders of such Debentures, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant restriction or condition such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default; (c) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture; provided that any such action shall not materially adversely affect the interests of the holders of the Debentures; (d) to add to, delete from, or revise the terms of Debentures, including, without limitation, any terms relating to the issuance, exchange, registration or transfer of Debentures, including to provide for transfer procedures and restrictions substantially similar to those applicable to the Capital Securities as required by Section 2.5 (for purposes of assuring that no registration of Debentures is required under the Securities Act); provided, however, that any such action shall not adversely affect the interests of the holders of the Debentures then outstanding (it being understood, for purposes of this proviso, that transfer restrictions on Debentures substantially similar to those that were applicable to Capital Securities shall not be deemed to materially adversely affect the holders of the Debentures); (e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Debentures and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee; (f) to make any change (other than as elsewhere provided in this paragraph) that does not adversely affect the rights of any Securityholder in any material respect; or (g) to provide for the issuance of and establish the form and terms and conditions of the Debentures, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or the Debentures, or to add to the rights of the holders of Debentures. The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to, but may in its discretion, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section 9.1 may be executed by the Company and the Trustee without the consent of the holders of any of the Debentures at the time outstanding, notwithstanding any of the provisions of Section 9.2. SECTION 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS. With the consent (evidenced as provided in Section 7.1) of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding affected by such supplemental indenture (voting as a class), the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any 37 supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture; provided further, however, that if the Debentures are held by a trust or a trustee of such trust, such supplemental indenture shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities shall have consented to such supplemental indenture; provided further, however, that if the consent of the Securityholder of each outstanding Debenture is required, such supplemental indenture shall not be effective until each holder of the Trust Securities shall have consented to such supplemental indenture. Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage prepaid, a notice, prepared by the Company, setting forth in general terms the substance of such supplemental indenture, to the Securityholders as their names and addresses appear upon the Debenture Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. It shall not be necessary for the consent of the Securityholders under this Section 9.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. SECTION 9.3. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Debentures shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.4. NOTATION ON DEBENTURES. Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a notation as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Debentures so modified as to conform, in the opinion of the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company, authenticated by the Trustee or the Authenticating Agent and delivered in exchange for the Debentures then outstanding. SECTION 9.5. EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE FURNISHED TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall, in addition to the documents required by Section 14.6, receive an Officers' Certificate and an Opinion of Counsel as 38 conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article IX. The Trustee shall receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article IX is authorized or permitted by, and conforms to, the terms of this Article IX and that it is proper for the Trustee under the provisions of this Article IX to join in the execution thereof. ARTICLE X. REDEMPTION OF SECURITIES SECTION 10.1. OPTIONAL REDEMPTION. The Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve, if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS if then required under applicable capital guidelines or policies of the OTS), to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any March 26, June 26, September 26 or December 26 on or after June 26, 2007 (the "Redemption Date"), at the Redemption Price. SECTION 10.2. SPECIAL EVENT REDEMPTION. If a Special Event shall occur and be continuing, the Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS if then required under applicable capital guidelines or policies of the OTS) to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event (the "Special Redemption Date") at the Special Redemption Price. SECTION 10.3. NOTICE OF REDEMPTION; SELECTION OF DEBENTURES. In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Debentures, it shall cause to be mailed a notice of such redemption at least 30 and not more than 60 days prior to the Redemption Date or the Special Redemption Date to the holders of Debentures so to be redeemed as a whole or in part at their last addresses as the same appear on the Debenture Register. Such mailing shall be by first class mail. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the holder of any Debenture designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debenture. Each such notice of redemption shall specify the CUSIP number, if any, of the Debentures to be redeemed, the Redemption Date or the Special Redemption Date, as applicable, the Redemption Price or the Special Redemption Price, as applicable, at which Debentures are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Debentures are to be redeemed the notice of redemption shall specify the numbers of the Debentures to be redeemed. In case the Debentures are to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof will be issued. Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price, together with accrued interest to the Redemption Date or Special Redemption Date, as applicable. 39 If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed. SECTION 10.4. PAYMENT OF DEBENTURES CALLED FOR REDEMPTION. If notice of redemption has been given as provided in Section 10.3, the Debentures or portions of Debentures with respect to which such notice has been given shall become due and payable on the Redemption Date or Special Redemption Date, as applicable, and at the place or places stated in such notice at the applicable Redemption Price or Special Redemption Price, together with interest accrued to the Redemption Date or Special Redemption Date, as applicable, and on and after said date (unless the Company shall default in the payment of such Debentures at the Redemption Price or Special Redemption Price, as applicable, together with interest accrued to said date) interest on the Debentures or portions of Debentures so called for redemption shall cease to accrue. On presentation and surrender of such Debentures at a place of payment specified in said notice, such Debentures or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price or Special Redemption Price, together with interest accrued thereon to the Redemption Date or Special Redemption Date, as applicable. Upon presentation of any Debenture redeemed in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Company, a new Debenture or Debentures of authorized denominations, in principal amount equal to the unredeemed portion of the Debenture so presented. ARTICLE XI. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE SECTION 11.1. COMPANY MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. Nothing contained in this Indenture or in the Debentures shall prevent any consolidation or merger of the Company with or into any other Person (whether or not affiliated with the Company) or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property or capital stock of the Company or its successor or successors as an entirety, or substantially as an entirety, to any other Person (whether or not affiliated with the Company, or its successor or successors) authorized to acquire and operate the same; provided, however, that the Company hereby covenants and agrees that, upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other disposition, the due and punctual payment of the principal of (and premium, if any) and interest on all of the Debentures in accordance with their terms, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company, shall be expressly assumed by supplemental indenture satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company shall have been merged, or by the entity which shall have acquired such property or capital stock. SECTION 11.2. SUCCESSOR ENTITY TO BE SUBSTITUTED. In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor entity, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and premium, if any, and interest on all of the Debentures and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the Company, and thereupon the predecessor entity shall be relieved of any further liability or obligation hereunder or upon 40 the Debentures. Such successor entity thereupon may cause to be signed, and may issue in its own name, any or all of the Debentures issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee or the Authenticating Agent; and, upon the order of such successor entity instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate and deliver any Debentures which previously shall have been signed and delivered by the officers of the Company, to the Trustee or the Authenticating Agent for authentication, and any Debentures which such successor entity thereafter shall cause to be signed and delivered to the Trustee or the Authenticating Agent for that purpose. All the Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debentures theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debentures had been issued at the date of the execution hereof. SECTION 11.3. OPINION OF COUNSEL TO BE GIVEN TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall receive, in addition to the Opinion of Counsel required by Section 9.5, an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale, conveyance, transfer or other disposition, and any assumption, permitted or required by the terms of this Article XI complies with the provisions of this Article XI. ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE SECTION 12.1. DISCHARGE OF INDENTURE. When (a) the Company shall deliver to the Trustee for cancellation all Debentures theretofore authenticated (other than any Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) and not theretofore canceled, or (b) all the Debentures not theretofore canceled or delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within 1 year or are to be called for redemption within 1 year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee, in trust, funds, which shall be immediately due and payable, sufficient to pay at maturity or upon redemption all of the Debentures (other than any Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) not theretofore canceled or delivered to the Trustee for cancellation, including principal and premium, if any, and interest due or to become due to such date of maturity or redemption date, as the case may be, but excluding, however, the amount of any moneys for the payment of principal of, and premium, if any, or interest on the Debentures (1) theretofore repaid to the Company in accordance with the provisions of Section 12.4, or (2) paid to any state or to the District of Columbia pursuant to its unclaimed property or similar laws, and if in the case of either clause (a) or clause (b) the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect except for the provisions of Sections 2.5, 2.6, 2.8, 3.1, 3.2, 3.4, 6.6, 6.8, 6.9 and 12.4 hereof shall survive until such Debentures shall mature and be paid. Thereafter, Sections 6.6 and 12.4 shall survive, and the Trustee, on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with, and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. The Company agrees to reimburse the 41 Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with this Indenture or the Debentures. SECTION 12.2. DEPOSITED MONEYS TO BE HELD IN TRUST BY TRUSTEE. Subject to the provisions of Section 12.4, all moneys deposited with the Trustee pursuant to Section 12.1 shall be held in trust in a non-interest bearing account and applied by it to the payment, either directly or through any paying agent (including the Company if acting as its own paying agent), to the holders of the particular Debentures for the payment of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal, and premium, if any, and interest. SECTION 12.3. PAYING AGENT TO REPAY MONEYS HELD. Upon the satisfaction and discharge of this Indenture all moneys then held by any paying agent of the Debentures (other than the Trustee) shall, upon demand of the Company, be repaid to it or paid to the Trustee, and thereupon such paying agent shall be released from all further liability with respect to such moneys. SECTION 12.4. RETURN OF UNCLAIMED MONEYS. Any moneys deposited with or paid to the Trustee or any paying agent for payment of the principal of, and premium, if any, or interest on Debentures and not applied but remaining unclaimed by the holders of Debentures for 2 years after the date upon which the principal of, and premium, if any, or interest on such Debentures, as the case may be, shall have become due and payable, shall, subject to applicable escheatment laws, be repaid to the Company by the Trustee or such paying agent on written demand; and the holder of any of the Debentures shall thereafter look only to the Company for any payment which such holder may be entitled to collect, and all liability of the Trustee or such paying agent with respect to such moneys shall thereupon cease. ARTICLE XIII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS SECTION 13.1. INDENTURE AND DEBENTURES SOLELY CORPORATE OBLIGATIONS. No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Debentures. ARTICLE XIV. MISCELLANEOUS PROVISIONS SECTION 14.1. SUCCESSORS. All the covenants, stipulations, promises and agreements of the Company in this Indenture shall bind its successors and assigns whether so expressed or not. SECTION 14.2. OFFICIAL ACTS BY SUCCESSOR ENTITY. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee, officer or other authorized Person of any entity that shall at the time be the lawful successor of the Company. 42 SECTION 14.3. SURRENDER OF COMPANY POWERS. The Company by instrument in writing executed by authority of at least 2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company and thereupon such power so surrendered shall terminate both as to the Company, and as to any permitted successor. SECTION 14.4. ADDRESSES FOR NOTICES, ETC. Any notice, consent, direction, request, authorization, waiver or demand which by any provision of this Indenture is required or permitted to be given, made, furnished or served by the Trustee or by the Securityholders on or to the Company may be given or served in writing by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company, with the Trustee for the purpose) to the Company, 1750 East Sunrise Boulevard, Ft. Lauderdale, Florida 33304, Attention: James A. White. Any notice, consent, direction, request, authorization, waiver or demand by any Securityholder or the Company to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the office of the Trustee, addressed to the Trustee, 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103 Attention: Vice President, Corporate Trust Department, with a copy to State Street Bank and Trust Company, P.O. Box 778, Boston, Massachusetts 02102-0778, Attention: Paul D. Allen, Corporate Trust Department. Any notice, consent, direction, request, authorization, waiver or demand on or to any Securityholder shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the address set forth in the Debenture Register. SECTION 14.5. GOVERNING LAW. This Indenture and each Debenture shall be deemed to be a contract made under the law of the State of New York, and for all purposes shall be governed by and construed in accordance with the law of said State, without regard to conflict of laws principles thereof. SECTION 14.6. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that in the opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not in the opinion of such person, such condition or covenant has been complied with. SECTION 14.7. NON-BUSINESS DAYS. In any case where the date of payment of interest on or principal of the Debentures will be a day that is not a Business Day, the payment of such interest on or principal of the Debentures need not be made on such date but may be made on the next succeeding Business Day, except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the original date of payment, and no interest shall accrue for the period from and after such date. SECTION 14.8. TABLE OF CONTENTS, HEADINGS, ETC. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference 43 only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 14.9. EXECUTION IN COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. SECTION 14.10. SEPARABILITY. In case any one or more of the provisions contained in this Indenture or in the Debentures shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Debentures, but this Indenture and such Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. SECTION 14.11. ASSIGNMENT. The Company will have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company, provided that, in the event of any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties hereto. SECTION 14.12. ACKNOWLEDGMENT OF RIGHTS. The Company agrees that, with respect to any Debentures held by the Trust or the Institutional Trustee of the Trust, if the Institutional Trustee of the Trust fails to enforce its rights under this Indenture as the holder of Debentures held as the assets of such Trust after the holders of a majority in Liquidation Amount of the Capital Securities of such Trust have so directed such Institutional Trustee, a holder of record of such Capital Securities may, to the fullest extent permitted by law, institute legal proceedings directly against the Company to enforce such Institutional Trustee's rights under this Indenture without first instituting any legal proceedings against such trustee or any other Person. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest (or premium, if any) or principal on the Debentures on the date such interest (or premium, if any) or principal is otherwise payable (or in the case of redemption, on the redemption date), the Company agrees that a holder of record of Capital Securities of the Trust may directly institute a proceeding against the Company for enforcement of payment to such holder directly of the principal of (or premium, if any) or interest on the Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Capital Securities of such holder on or after the respective due date specified in the Debentures. ARTICLE XV. SUBORDINATION OF DEBENTURES SECTION 15.1. AGREEMENT TO SUBORDINATE. The Company covenants and agrees, and each holder of Debentures by such Securityholder's acceptance thereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article XV; and each holder of a Debenture, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of, and premium, if any, and interest on all Debentures shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred; provided, however, that the Debentures shall rank pari passu in right of payment with the Company's Fixed Rate Junior Subordinated Debentures due June 30, 2027 issued pursuant to an Indenture dated as of April 1997 by and between the Company and Wilmington Trust Company and the Company's Fixed Rate Junior Subordinated Debentures due 2032 44 issued pursuant to an Indenture dated as of March 2002 by and between the Company and Wilmington Trust Company. No provision of this Article XV shall prevent the occurrence of any default or Event of Default hereunder. SECTION 15.2. DEFAULT ON SENIOR INDEBTEDNESS. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company following any grace period, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default and such acceleration has not been rescinded or canceled, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption) of, or premium, if any, or interest on the Debentures. In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 15.2, such payment shall, subject to Section 15.7, be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee in writing within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness. SECTION 15.3. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company, on account of the principal (and premium, if any) or interest on the Debentures. Upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, which the Securityholders or the Trustee would be entitled to receive from the Company, except for the provisions of this Article XV, shall be paid by the Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may 45 appear, as calculated by the Company, for application to the payment of all Senior Indebtedness, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness. For purposes of this Article XV, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XV with respect to the Debentures to the payment of all Senior Indebtedness, that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article XI of this Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article XI of this Indenture. Nothing in Section 15.2 or in this Section shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6 of this Indenture. SECTION 15.4. SUBROGATION. Subject to the payment in full of all Senior Indebtedness, the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Debentures shall be paid in full. For the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Securityholders or the Trustee would be entitled except for the provisions of this Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit of the holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Debentures be deemed to be a payment or distribution by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XV are and are intended solely for the purposes of defining the relative rights of the holders of the Securities, on the one hand, and the holders of such Senior Indebtedness, on the other hand. Nothing contained in this Article XV or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debentures the principal of (and premium, if any) and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debentures and creditors of the Company, other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article XV, the Trustee, subject to the provisions of Article VI of this Indenture, and the Securityholders shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the 46 receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Securityholders, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XV. SECTION 15.5. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Securityholder by such Securityholder's acceptance thereof authorizes and directs the Trustee on such Securityholder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XV and appoints the Trustee such Securityholder's attorney-in-fact for any and all such purposes. SECTION 15.6. NOTICE BY THE COMPANY. The Company shall give prompt written notice to a Responsible Officer of the Trustee at the Principal Office of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV. Notwithstanding the provisions of this Article XV or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV, unless and until a Responsible Officer of the Trustee at the Principal Office of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least 2 Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debenture), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within 2 Business Days prior to such date. The Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee or representative on behalf of such holder), to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XV, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XV, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 15.7. RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XV, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into 47 this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Article VI of this Indenture, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Securityholders, the Company or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise. Nothing in this Article XV shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6. SECTION 15.8. SUBORDINATION MAY NOT BE IMPAIRED. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Securityholders, without incurring responsibility to the Securityholders and without impairing or releasing the subordination provided in this Article XV or the obligations hereunder of the holders of the Debentures to the holders of such Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company, and any other Person. Signatures appear on the following page 48 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. BANKATLANTIC BANCORP, INC. By ------------------------------------- Name: Title: STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, as Trustee By ------------------------------------- Name: Title: 49 EXHIBIT A FORM OF JUNIOR SUBORDINATED DEBENTURE [FORM OF FACE OF SECURITY] THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION. THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH A-1-1 PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION. THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $500,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $500,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. Floating Rate Junior Subordinated Deferrable Interest Debenture of BankAtlantic Bancorp, Inc. June 26, 2002 BankAtlantic Bancorp, Inc., a Florida corporation (the "Company" which term includes any successor Person under the Indenture hereinafter referred to), for value received promises to pay to State Street Bank and Trust Company of Connecticut, National Association, not in its individual capacity but solely as Institutional Trustee for BBC Capital Statutory Trust III (the "Holder") or registered assigns, the principal sum of twenty-five million seven hundred seventy-four thousand dollars ($25,774,000.00) on June 26, 2032, and to pay interest on said principal sum from June 26, 2002, or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 26, June 26, September 26 and December 26 of each year commencing September 26, 2002, at an annual rate equal to 5.3369% beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2002 and at an annual rate for each successive period beginning on (and including) September 26, 2002, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each a "Distribution Period"), equal to 3-Month LIBOR, determined as described below, plus 3.45% (the "Coupon Rate"); provided, however, that prior to June 26, 2007, the Coupon Rate shall not exceed 11.95%, applied to the principal amount hereof, until the principal hereof is paid or duly provided for or made available for payment, and on any overdue principal and (without duplication) on any overdue installment of interest at the same rate per annum, compounded quarterly, from the dates such amounts are due until they are paid or made available for payment. The amount of interest payable for any period will be computed on the basis of the actual number of days in the Distribution Period A-1-2 concerned divided by 360. In the event that any date on which interest is payable on this Debenture is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment, which shall be fifteen days prior to the day on which the relevant Interest Payment Date occurs. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date. "3-Month LIBOR" as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Trustee in the following order of priority: (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date ("Telerate Page 3750" means the display designated as "Page 3750" on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks' offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Trustee will request four major New York City banks to provide such banks' offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date. As used herein, "Determination Date" means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period. The Coupon Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law. All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)). A-1-3 The principal of and interest on this Debenture shall be payable at the office or agency of the Trustee (or other paying agent appointed by the Company) maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made by check mailed to the registered holder at such address as shall appear in the Debenture Register if a request for a wire transfer by such holder has not been received by the Company or by wire transfer to an account appropriately designated by the holder hereof. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Trustee. So long as no Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest (including Additional Interest) shall be due and payable. No Extension Period may end on a date other than an Interest Payment Date. At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's or such Affiliate's capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) and (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (c) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Capital Securities Guarantee). Notwithstanding the foregoing, the limitation described in this Section shall apply only to the Company and its subsidiaries, as such term is defined in Rule 1-02, Regulation S-X of the 1933 Act. For purpose of this paragraph only, Bluegreen Corporation, a publicly traded company in which the Company owns directly and indirectly through a wholly owned subsidiary approximately 40% of the outstanding shares of common stock, shall not be deemed a subsidiary of the Company. Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and A-1-4 unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. The Company must give the Trustee notice of its election to begin or extend such Extension Period at least 5 Business Days prior to the earlier of (i) the date interest on the Debentures would have been payable except for the election to begin such Extension Period or (ii) the date such interest is payable, but in any event not less than 5 Business Days prior to such record date. This Debenture is one of the floating rate junior subordinated deferrable interest debentures of the Company, all issued or to be issued under and pursuant to the Indenture dated as of June 26, 2002, duly executed and delivered between the Company and the Trustee, to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures. The Debentures are limited in aggregate principal amount as specified in the Indenture. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by or on behalf of the Trustee. Capitalized terms used and not defined in this Debenture shall have the meanings assigned in the Indenture dated as of the date of original issuance of this Debenture between the Trustee and the Company. Signatures appear on the following page A-1-5 IN WITNESS WHEREOF, the Company has duly executed this certificate. BANKATLANTIC BANCORP, INC. By ------------------------------------- Name: Title: CERTIFICATE OF AUTHENTICATION This is one of the Debentures referred to in the within-mentioned Indenture. State Street Bank and Trust Company of Connecticut, National Association, as Trustee By: ------------------------------------- Authorized Officer A-1-6 EX-10.4 5 g77714exv10w4.txt RYAN, BECK & CO., LLC COMMON UNIT OPTION PROGRAM EXHIBIT 10.4 RYAN, BECK & CO., LLC COMMON UNIT OPTION PROGRAM 1. PURPOSES OF THE PLAN. The general purpose of this Common Unit Option Program (the "Plan") is to promote the interests of Ryan, Beck & Co., LLC, a New Jersey limited liability company (the "LLC" or the "Company") and its current sole member, BankAtlantic Bancorp, Inc., a Florida corporation (the "Majority Member") by (i) providing certain managers, officers and employees of the LLC and subsidiaries of the LLC (the "Participants") with an option to purchase Common Units of the LLC (an "Option") and thereby provide an additional incentive to continue and increase their efforts aimed at furthering the growth and success of the LLC and its subsidiaries, (ii) providing a means for attracting and retaining the best available personnel to participate in the ongoing business operations of the LLC and its subsidiaries, and (iii) providing a means for rewarding outstanding performance by any of the persons described above. 2. DEFINITIONS. Capitalized terms used in this Plan that are not defined herein shall have the meanings given to such terms in the LLC's Limited Liability Company Amended and Restated Operating Agreement dated as of March 29, 2002, as amended from time to time thereafter (the "LLC Agreement"). 3. COMMON UNITS SUBJECT TO THIS PLAN. As of March 29, 2002, there were issued to the Majority Member 5,000,000 Common Units of the LLC. Not more than a total of ten percent of the units of the LLC as of March 29, 2002, or 500,000 Common Units in the aggregate, may be granted pursuant to Awards granted hereunder. Common Units issued under this Plan and later repurchased or otherwise reacquired by the LLC shall, unless this Plan shall have been terminated, become available for future grants under this Plan. In the event that any Option to purchase Common Units expires or is forfeited for any reason, the Common Units allocable to the unexercised or forfeited Option may again become available for future grants under this Plan. All Common Units issuable upon exercise of an Option granted under this Plan shall be issued pursuant to the LLC Agreement, this Plan and an Option Award Agreement between the LLC and the Participant (the "Option Award Agreement"). Options for more than 250,000 Common Units may not be issued to any single Participant during the term of the Plan. 4. ADMINISTRATION OF THE PLAN. (a) PROCEDURE. This Plan shall be administered by the Board of Directors of the LLC (the "Board"). Subject to the provisions of this Plan and the LLC Agreement including in each case subject to the rights of the Majority Member hereunder, the Board shall have all powers and discretion necessary or appropriate to administer the Plan and to control its operations, including without limitation, to do the following: (i) to grant Options for such period as the Board shall determine; (ii) to determine the cash consideration, if any, required to be paid by a Participant upon exercise of an Option, specifically subject to Section 6(a)(iv) hereof; (iii) to determine the Participants to whom, and the time or times at which, and the other terms upon which Options shall be granted specifically subject to Section 6(a); (iv) to interpret and resolve all questions arising under this Plan; (v) to prescribe, amend and rescind rules and regulations relating to this Plan and, in the exercise of this power, to correct any defect, omission or inconsistency in this Plan or in any agreement relating to an Option (including, without limitation, any Option Award Agreement or Grant Letter), in a manner and to the extent the Board shall deem necessary or expedient to make this Plan fully effective; (vi) with the consent of the Participant, modify or amend the terms of each Option; (vii) to authorize any person to execute on behalf of the LLC any instrument required to effectuate the grant of an Option previously granted by the Board, including, without limitation, the Option Award Agreement and Grant Letter related thereto; and (viii) to make all other determinations deemed necessary or advisable for the administration of this Plan. (b) DELEGATION BY THE BOARD. The Board, in its sole discretion and on such terms and conditions as it may provide, may delegate all or any part of its authority and powers under the Plan to the Compensation Committee of the Board (the "Compensation Committee"), which shall consist of a majority of outside directors. (c) BOARD'S DETERMINATIONS. Subject to Section 6(a), in making determinations under this Plan, the Board may take into account the nature of the services rendered by the respective Participants, their present and potential contributions to the success of the LLC, or its subsidiaries, as the case may be, and such other factors as the Board in the Board's discretion shall deem relevant. Subject to Section 6(a), all decisions, determinations and interpretations of the Board shall be final and binding on all persons, including without limitation Participants to whom Options are granted under this Plan and all holders of Common Units so purchased ("Unitholders"). 5. ELIGIBILITY. Options granted hereunder may be granted only to persons who are managers, officers or employees of the LLC or its subsidiaries. No person shall have the right to participate in the Plan except as the Board may determine. Any person selected by the Board for participation during any one period will not by virtue of such participation have the right to be selected as a participant for any other period. A Participant who has been granted an Option may, if such Participant is otherwise eligible, be granted additional Options. 6. TERMS OF GRANT. (a) RIGHTS TO PURCHASE. Options may be granted under the Plan at any time and from time to time prior to termination of the Plan pursuant to Section 8(b) hereof. Prior to granting Options hereunder to executive officers of the Company, the Chairman of the Board shall notify in writing via e-mail or other means, the President of the Majority Member (or in his absence or incapacity, its chief financial officer) of the names of the proposed Participants and the proposed terms, including vesting schedule, of their grant. The President (or in his absence or incapacity, the chief financial officer) shall have the right to approve or object in writing via e-mail or other means to such grants. If such grants are not approved, they shall not be made. Subject to the provisions of the Plan, the Board shall have authority and discretion to determine: (i) the Participant(s) to whom Options are to be granted hereunder; (ii) the time or times at which such Options shall be granted; (iii) the number of Common Units subject to each Option; 2 (iv) the per-unit cash purchase price (the "Purchase Price") for the Common Unit to be issued subject to the exercise of Options granted pursuant to the Plan and each applicable Option Award Agreement, which Purchase Price shall be determined at the time each Option is granted by the Board, and, unless otherwise approved in advance by both the Compensation Committee and the Majority Member, may not be less than the fair market value per-unit as of the date of grant as determined in good faith by the Compensation Committee, confirmed by an independent valuation service engaged by the Board, and approved by the Majority Member; (v) the time or times after grant when such Options may be exercised; (vi) any vesting schedule with respect to the Options; and (vii) such other terms and conditions applicable to any Option that are not inconsistent with this Plan, the LLC Agreement, the Grant Letter and the Option Award Agreement between the LLC and the Participant. The terms and conditions of any Option granted hereunder need not be identical to those of any other Option granted hereunder. (b) GRANT BY GRANT LETTER; METHOD OF EXERCISE - OPTION AWARD AGREEMENT. Each Option granted under the Plan shall be approved by the Board and evidenced by a letter executed by the LLC and addressed to the prospective Participant (the "Grant Letter"). To exercise the Option, the Participant first must deliver a written notice of a proposed exercise date to the Chief Executive Officer of the Company not less than 10 days prior to the Participant's proposed exercise date, giving the specific exercise date and amount of units being exercised. The Company may delay the exercise date by up to 25 business days by written notice to the Participant (and if the Company extends the exercise date, the Participant shall continue to have the right to exercise through such extended exercise date). Each exercise of such Option by the Participant shall be evidenced by (i) payment in full, in cash or other immediately available funds, of the Purchase Price for the Common Units (issuable upon exercise of the Option) within the Exercise Period (as defined in the Grant Letter), in each case as specified in the Grant Letter, (ii) payment of all applicable withholding taxes, and (iii) the execution and delivery by the Participant to the LLC of the Option Award Agreement attached to the Grant Letter with respect to such Option, the LLC Agreement as amended from time to time and the Right of First Refusal and Drag Along Agreement, as amended from time to time (the "Drag-Along Agreement"). Each Option Award Agreement shall contain such terms and conditions as the Board in its discretion shall determine, and shall be executed by each of the LLC and the Participant. In the case of any inconsistency between or among the LLC Agreement, the Plan, the Drag-Along Agreement, the Option Award Agreement or the Grant Letter, the provisions of the document earliest in this sentence shall govern. (c) TRANSFER. Options authorized hereunder and granted pursuant to a Grant Letter and an Option Award Agreement shall not be transferable otherwise than by testamentary will or by the laws of descent and distribution, and during a Participant's lifetime an Option shall be exercisable only by the Participant. Common Units purchased upon the exercise of an Option 3 pursuant to this Plan shall not be transferable except as permitted by the terms of the LLC Agreement and Option Award Agreement between the LLC and the transferor Participant. (d) EXECUTION OF LLC AGREEMENT ADDENDUM. Unless otherwise provided by the Board and the Majority Member, no Common Units shall be issued to a Participant upon the exercise of an Option until and unless such Participant executes an addendum to the LLC Agreement, pursuant to which the Participant agrees to be bound by all of the terms and conditions of such agreement. COMMON UNITS SHALL BE TRANSFERABLE ONLY IN ACCORDANCE WITH THE TERMS OF THE LLC AGREEMENT, THE AWARD AGREEMENT AND THE DRAG-ALONG AGREEMENT AND ANY APPLICABLE FEDERAL AND STATE LAW. ANY PURPORTED TRANSFER IN VIOLATION OF THE LLC AGREEMENT, THE AWARD AGREEMENT AND THE DRAG-ALONG AGREEMENT SHALL BE INVALID. (e) TAX WITHHOLDING. In the event that the LLC is required to withhold any Federal, state, local or employment taxes in respect of any compensation income realized by the Participant in respect of Options granted hereunder or in respect of any Common Units so purchased, the LLC shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state, local or employment taxes required to be so withheld or, if such payments are due or to become due to the LLC, then such Participant shall be required to pay to the LLC, or to make other arrangements satisfactory to the LLC regarding payment to the LLC of the aggregate amount of all such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Board in its sole discretion. Notwithstanding anything contained in the Plan, the Option Award Agreement or the Grant Letter to the contrary, the Participant's satisfaction of any tax-withholding requirements imposed by the Board shall be a condition precedent to the LLC's obligation as may otherwise be provided hereunder to provide Common Units to the Participant, and the failure of the Participant to satisfy such requirements with respect to the exercise of an Option shall cause such Option to be forfeited. (f) NO EVIDENCE OF EMPLOYMENT OR SERVICE. Nothing contained in the Plan or in any Grant Letter or Option Award Agreement shall confer upon any Participant any right with respect to the continuation of his or her employment by or service with the LLC or its subsidiaries or interfere in any way with the right of the LLC or its subsidiaries or any successor thereto to not employ the Participant or at any time to terminate the Participant's employment or service, for any reason or no reason, with or without cause, or to increase or decrease the compensation of the Participant from the rate in existence on the date an Option is granted, in each case subject to the provisions of applicable law and an employment agreement or services agreement, if any, then in effect with the Participant. 7. ADJUSTMENTS. (a) CAPITAL EVENTS. In the event that the outstanding number of the LLC's Common Units shall be increased or decreased or changed into or exchanged for a different number or kind of membership units or other securities of the LLC or of another legal entity through reorganization, merger, consolidation, recapitalization, reclassification, unit split, split-up, combination or exchange of units or declaration of any distributions payable in 4 Common Units, the Board with the concurrence of the Majority Member shall make appropriate adjustments, if any, to (i) the number of Common Units (and the Purchase Price per Common Unit established under the Option Award Agreement for such Common Units) subject to any unexercised Option hereunder, and (ii) the aggregate number of Common Units subject to Options granted under this Plan pursuant to Section 3 hereof. (b) CERTAIN DISTRIBUTIONS AND PURCHASES REQUIRING NO ADJUSTMENT. There shall be no adjustments to outstanding Options upon the issuance of additional Common Units for cash or other consideration upon a determination by the Board and the Majority Member in their sole and absolute discretion that the consideration is fair. Further, no adjustment shall be made to outstanding options upon distributions to holders of Common Units except in the case of extraordinary distributions of cash or property as determined by the Board and the Majority Member, in which case the Board with the concurrence of the Majority Member shall make such adjustments to the outstanding options as appropriate. (c) OTHER CHANGES. Notwithstanding the foregoing, in the event of (i) any offer generally to all of the holders of the LLC's Units (including without limitation the Common Units) relating to the acquisition of their Units, including without limitation, through purchases, merger or otherwise, or (ii) any transaction generally relating to the acquisition of substantially all of the assets of the LLC, the Board with the concurrence of the Majority Member may make such adjustment as it deems equitable in respect of any outstanding Options. Any such determination by the Board shall be effective and binding for all purposes of this Plan. (d) CONVERSION TO CORPORATE FORM. If the Board of Directors of the Company and the Majority Member determine to reorganize the Company as a corporation, the Company may be reorganized as a New Jersey (or other state) corporation and, in connection therewith, its Common Units may be reclassified as shares of stock in such corporation on such terms and conditions as are approved by both the Board of Directors and the Majority Member. In such event, the Board of Directors shall make appropriate provisions for the Units to represent equivalent options to purchase common stock in the corporation with substantially the same terms and conditions. In such event no consent or approval shall be required from Participant for the reorganization, the terms of the certificate of incorporation, revisions to the Drag Along Agreement or any other terms of the reorganization. (e) REFERENCES TO APPROVAL BY THE MAJORITY MEMBER. Any references in this Plan to approval by the Majority Member shall cease if and when the Majority Member owns less than fifty percent of the outstanding Units. However, at such time the approval of the holders of a majority of the units outstanding shall be required. 5 8. AMENDMENT AND TERMINATION. (a) AMENDMENT. Subject to the LLC Agreement, the Board may amend this Plan from time to time in such respects as the Board may deem advisable with the consent of the Majority Member. (b) SUSPENSION AND TERMINATION. The Board may suspend or terminate this Plan at any time. No Options may be granted while this Plan is suspended or after it is terminated. (c) EFFECT OF AMENDMENT, TERMINATION OR SUSPENSION. Any such amendment, termination or suspension of this Plan shall not affect any Options already granted nor any Common Units so purchased, unless mutually agreed otherwise between the Participant and the LLC, which agreement must be in writing and signed by the Participant and the LLC. Notwithstanding the foregoing or any other provision of this Plan, the LLC Agreement may be amended without the consent of any Participant, regardless of the effect on any Participant. 9. COMPLIANCE WITH LAW; LEGENDS. (a) COMPLIANCE WITH LAW. No Common Units shall be issued or sold with respect to Options granted under the Plan unless the issuance and delivery of such Common Units shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder and applicable state securities laws, and shall be further subject to the approval of counsel for the LLC with respect to such compliance. As a condition to the issuance of Common Units upon exercise of an Option, the LLC may require the person purchasing or accepting such Common Units to make such representations and warranties at the time of any such purchase as the LLC may at that time determine, including without limitation representations and warranties contained in the Option Award Agreement, to the effect that (i) the Common Units are being acquired only for investment and not with a view to sell or distribute such Common Units, and (ii) such person is knowledgeable and experienced in financial and business matters and is capable of evaluating the merits and the risks associated with purchasing or acquiring the Common Units. (b) LEGEND ON UNIT CERTIFICATES. Certificates, if any, representing Common Units purchased pursuant to this Plan shall contain a legend containing substantially the following: THE COMMON UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE TRANSFERRED, SOLD OR DISPOSED OF IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT. THESE COMMON UNITS ARE SUBJECT TO (i) CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THE OPERATING AGREEMENT OF RYAN, BECK & CO., LLC (THE "COMPANY"), DATED AS OF MARCH 29, 2002 AS AMENDED FROM TIME TO TIME, (ii) 6 CERTAIN RESTRICTIONS ON TRANSFER AND CERTAIN OBLIGATIONS AS SET FORTH IN THE DRAG-ALONG AGREEMENT, DATED MARCH 29, 2002, AS AMENDED FROM TIME TO TIME, AND (iii) CERTAIN RIGHTS OF REPURCHASE AS SET FORTH IN AN OPTION AWARD AGREEMENT DATED, 2002 BETWEEN THE COMPANY AND AS AMENDED FROM TIME TO TIME. A COPY OF SUCH AGREEMENTS ARE ON FILE AT THE COMPANY'S PRINCIPAL OFFICES. (c) LACK OF AUTHORITY. The inability of the LLC to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the LLC's counsel to be necessary to the lawful issuance of Options and sale of any Common Units under this Plan, shall relieve the LLC of any obligation to issue or sell (including any liability in respect of the failure to issue or sell) such Common Units as to which such requisite authority shall not have been obtained. 10. NON-EXCLUSIVITY OF THIS PLAN. The adoption of this Plan by the Board shall not be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as the Board may deem desirable, including, without limitation, the awarding of cash, and such arrangements may be either generally applicable or applicable only in specific cases. 11. GOVERNING LAW. THIS PLAN SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF. * * * * * * * * * * 7 EX-11 6 g77714exv11.txt COMPUTATION OF PER SHARE EARNINGS BANKATLANTIC BANCORP, INC. EXHIBIT 11 EARNINGS PER SHARE The following reconciles the numerators and denominators of the basic and diluted earnings per share.
FOR THE THREE MONTHS ENDED JUNE 30, ------------------------------- (In thousands, except share data ) 2002 2001 ------------ ------------ BASIC EARNINGS PER SHARE Income (loss) before extraordinary item $ (2,233) $ 8,605 Basic weighted average number of common shares outstanding 57,973,880 36,535,810 ------------ ------------ Basic earnings (loss) per share before extraordinary item $ (0.04) $ 0.24 ------------ ------------ Extraordinary item $ 23,810 $ 0 Basic weighted average number of common shares outstanding 57,973,880 36,535,810 ------------ ------------ Basic earnings per share from extraordinary item $ 0.41 $ 0.00 ------------ ------------ Net Income $ 21,577 $ 8,605 Basic weighted average number of common shares outstanding 57,973,880 36,535,810 ------------ ------------ BASIC EARNINGS PER SHARE $ 0.37 $ 0.24 ------------ ------------ Amortization of goodwill, net of tax $ 0.00 $ 978 Basic weighted average number of common shares outstanding 57,973,880 36,535,810 ------------ ------------ Basic earnings per share from amortization of goodwill $ 0.00 $ 0.03 ------------ ------------ Net income adjusted for goodwill amortization $ 21,577 $ 9,583 Basic weighted average number of common shares outstanding 57,973,880 36,535,810 ------------ ------------ BASIC EARNINGS PER SHARE ADJUSTED FOR GOODWILL AMORTIZATION $ 0.37 $ 0.27 ------------ ------------ DILUTED EARNINGS PER SHARE Income (loss) before extraordinary item $ (2,233) $ 8,605 Interest expense on convertible debentures 0.00 1,027 ------------ ------------ Income available after assumed conversion $ (2,233) $ 9,632 ------------ ------------ Basic weighted average shares outstanding 57,973,880 36,535,810 Common stock equivalents resulting from convertible debentures 0 13,064,312 Common stock equivalents resulting from restricted stock and options 0 1,675,449 ------------ ------------ Diluted weighted average shares outstanding 57,973,880 51,275,571 ------------ ------------ Diluted earnings per share before extraordinary item $ (0.04) $ 0.19 ------------ ------------ Extraordinary item $ 23,810 $ 0 Diluted weighted average shares outstanding 57,973,880 51,275,571 ------------ ------------ Diluted earnings per share from extraordinary item $ 0.41 0.00 ------------ ------------ Income available after assumed conversion $ 21,577 $ 9,632 Diluted weighted average shares outstanding 57,973,880 51,275,571 ------------ ------------ DILUTED EARNINGS PER SHARE $ 0.37 $ 0.19 ------------ ------------ Amortization of goodwill, net of tax $ 0 $ 978 Diluted weighted average shares outstanding 57,973,880 51,275,571 ------------ ------------ Diluted earnings per share from amortization of goodwill $ 0.00 $ 0.02 ------------ ------------ Income available after assumed conversion adjusted for goodwill amortization $ 21,577 $ 10,610 Diluted weighted average shares outstanding 57,973,880 51,275,571 ------------ ------------ DILUTED EARNINGS PER SHARE ADJUSTED FOR GOODWILL AMORTIZATION $ 0.37 $ 0.21 ------------ ------------
BANKATLANTIC BANCORP, INC.
FOR THE SIX MONTHS ENDED JUNE 30, ---------------------------- (In thousands, except share data ) 2002 2001 ----------- ----------- BASIC EARNINGS PER SHARE Income before extraordinary item and cumulative effect of a change in accounting principle $ 10,347 $ 15,430 Basic weighted average number of common shares outstanding 57,918,382 36,519,091 Basic earnings per share before extraordinary item and ----------- ----------- cumulative effect of a change in accounting principle $ 0.18 $ 0.42 ----------- ----------- Extraordinary item $ 23,810 $ 0 Basic weighted average number of common shares outstanding 57,918,382 36,519,091 ----------- ----------- Basic earnings per share from extraordinary item $ 0.41 $ 0.00 ----------- ----------- Cumulative effect of a change in accounting principle $ 0 $ 1,138 Basic weighted average number of common shares outstanding 57,918,382 36,519,091 Basic earnings per share from cumulative effect of a change ----------- ----------- in accounting principle $ 0.00 $ 0.03 ----------- ----------- Net Income $ 34,157 $ 16,568 Basic weighted average number of common shares outstanding 57,918,382 36,519,091 ----------- ----------- BASIC EARNINGS PER SHARE $ 0.59 $ 0.45 ----------- ----------- Amortization of goodwill, net of tax $ 0 $ 1,969 Basic weighted average number of common shares outstanding 57,918,382 36,519,091 ----------- ----------- Basic earnings per share from amortization of goodwill $ 0.00 $ 0.05 ----------- ----------- Net income adjusted for goodwill amortization $ 34,157 $ 18,537 Basic weighted average number of common shares outstanding 57,918,382 36,519,091 ----------- ----------- BASIC EARNINGS PER SHARE ADJUSTED FOR GOODWILL AMORTIZATION $ 0.59 $ 0.50 ----------- ----------- DILUTED EARNINGS PER SHARE Income before extraordinary item and cumulative effect of a change in accounting principle $ 10,347 $ 15,430 Interest expense on convertible debentures 0 2,052 ----------- ----------- Income available after assumed conversion $ 10,347 $ 17,482 ----------- ----------- Basic weighted average shares outstanding 57,918,382 36,519,091 Common stock equivalents resulting from convertible debentures 0 13,065,213 Common stock equivalents resulting from restricted stock and options 2,968,980 1,324,698 ----------- ----------- Diluted weighted average shares outstanding 60,887,362 50,909,002 ----------- ----------- Diluted earnings per share before extraordinary item and cumulative effect of a change in accounting principle $ 0.17 $ 0.34 ----------- ----------- Extraordinary item $ 23,810 $ 0 Diluted weighted average shares outstanding 60,887,362 50,909,002 ----------- ----------- Diluted earnings per share from extraordinary item 0.39 0.00 ----------- ----------- Cumulative effect of a change in accounting principle 0 $ 1,138 Diluted weighted average shares outstanding 60,887,362 50,909,002 Diluted earnings per share from cumulative effect of a change ----------- ----------- in accounting principle $ 0.00 $ 0.03 ----------- ----------- Income available after assumed conversion $ 34,157 $ 18,620 Diluted weighted average shares outstanding 60,887,362 50,909,002 ----------- ----------- DILUTED EARNINGS PER SHARE $ 0.56 $ 0.37 ----------- ----------- Amortization of goodwill, net of tax $ 0 $ 1,969 Diluted weighted average shares outstanding 60,887,362 50,909,002 ----------- ----------- Diluted earnings per share from amortization of goodwill $ 0.00 $ 0.04 ----------- ----------- Income available after assumed conversion adjusted for goodwill amortization $ 34,157 $ 20,589 Diluted weighted average shares outstanding 60,887,362 50,909,002 ----------- ----------- DILUTED EARNINGS PER SHARE ADJUSTED FOR GOODWILL AMORTIZATION $ 0.56 $ 0.41 ----------- -----------
EX-99.1 7 g77714exv99w1.txt CERTIFICATION OF CHIEF EXECUTIVE OFFICER EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of BankAtlantic Bancorp, Inc. (the "COMPANY") on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "REPORT"), I, Alan B. Levan, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Alan B. Levan - ------------------------------------- Name: Alan B. Levan Title: Chief Executive Officer Date: The foregoing certificate is provided solely for purposes of complying with Section 906 of the Sarbanes-Oxley Act of 2002 and for no other purpose whatsoever. Notwithstanding anything to the contrary set forth herein or in any of the Company's previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate the Company's future filings, including this Quarterly Report on Form 10-Q, in whole or in part, this Certificate shall not be incorporated by reference into any such filings. EX-99.2 8 g77714exv99w2.txt CERTIFICATION OF CHIEF FINANCIAL OFFICER EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of BankAtlantic Bancorp, Inc. (the "COMPANY") on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "REPORT"), I, James A. White, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ James A. White - ------------------------------------- Name: James A. White Title: Chief Financial Officer Date: The foregoing certificate is provided solely for purposes of complying with Section 906 of the Sarbanes-Oxley Act of 2002 and for no other purpose whatsoever. Notwithstanding anything to the contrary set forth herein or in any of the Company's previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate the Company's future filings, including this Quarterly Report on Form 10-Q, in whole or in part, this Certificate shall not be incorporated by reference into any such filings. -----END PRIVACY-ENHANCED MESSAGE-----