-----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, TOUrlfHUWbt1qrYtzUel9l8Tqn+GDEHitf7wfLpbTPfk5QXzANthgJhuod8mUx81 j0x1+0B2NFxleZqA0jZOCg== 0000950170-97-000302.txt : 19970325 0000950170-97-000302.hdr.sgml : 19970325 ACCESSION NUMBER: 0000950170-97-000302 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19970321 SROS: NASD 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: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-23771 FILM NUMBER: 97560684 BUSINESS ADDRESS: STREET 1: 1750 E SUNRISE BLVD CITY: FORT LAUDERDALE STATE: FL ZIP: 33304 BUSINESS PHONE: 9547605000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BBC CAPITAL TRUST I CENTRAL INDEX KEY: 0001035746 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-23771-01 FILM NUMBER: 97560685 BUSINESS ADDRESS: STREET 1: 1750 SUNRISE BLVD CITY: FT LAUDERDALE STATE: FL ZIP: 33305 BUSINESS PHONE: 7547605015 MAIL ADDRESS: STREET 1: 1750 SUNRISE BLVD CITY: FT LAUDERDALE STATE: FL ZIP: 33305 S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 1997 REGISTRATION STATEMENT NO. 333- REGISTRATION STATEMENT NO. 333- -01 - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 - ----------------------------------------------------------------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 - -----------------------------------------------------------------------------
BANKATLANTIC BANCORP, INC. BBC CAPITAL TRUST I - -------------------------------------------------------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) (Exact name of co-registrant as specified in its charter) Florida Delaware - -------------------------------------------------------------------------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) (State or other jurisdiction of incorporation or organization) 65-0507804 Applied For - -------------------------------------------------------------------------------------------------------------------------------- (I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number) ALAN B. LEVAN BANKATLANTIC BANCORP, INC. 1750 EAST SUNRISE BOULEVARD 1750 EAST SUNRISE BOULEVARD FORT LAUDERDALE, FLORIDA 33304 FORT LAUDERDALE, FLORIDA 33304 TELEPHONE (954) 760-5000 TELEPHONE (954) 760-5000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE OF REGISTRANT'S AND CO-REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
- ----------------------------------------------------------------------------- PLEASE SEND COPIES OF ALL COMMUNICATIONS TO:
ALISON W. MILLER, ESQ. STEARNS WEAVER MILLER WEISSLER JOHN J. SPIDI, ESQ. ALHADEFF & SITTERSON, P.A. MALIZIA, SPIDI, SLOANE & FISCH, P.C. 150 WEST FLAGLER STREET, SUITE 2400 1301 K STREET, N.W., SUITE 700 EAST MIAMI, FLORIDA 33130 WASHINGTON, D.C. 20005
- ----------------------------------------------------------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box [ ]. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering [ ]. If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering [ ]. If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box [ ]. CALCULATION OF REGISTRATION FEE
PROPOSED AMOUNT PROPOSED MAXIMUM TITLE OF EACH CLASS TO BE MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE OFFERING PRICE REGISTRATION FEE % Cumulative Trust Preferred Securities of BBC Capital Trust I 2,300,000(1) $25 $57,500,000 $17,424.25 % Junior Subordinated Debentures of BankAtlantic Bancorp, Inc.(2) (2) -- -- -- Guarantee of BankAtlantic Bancorp, Inc. of certain obligations under the Preferred Securities(3) (3) -- -- --
(1) Includes up to 300,000 additional Cumulative Trust Preferred Securities which may be acquired by the Underwriters to cover over-allotments, if any. (2) The Junior Subordinated Debentures will be purchased by BBC Capital Trust I with the proceeds of the sale of the Cumulative Trust Preferred Securities. Such securities may later be distributed for no additional consideration to the holders of the Cumulative Trust Preferred Securities of BBC Capital Trust I upon its dissolution and the distribution of its assets. (3) This Registration Statement is deemed to cover the Guarantee. No separate consideration will be received for the Guarantee and pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no separate registration fee is payable for the Guarantee. ------------------------------------------------------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION PROSPECTUS DATED , 1997 2,000,000 PREFERRED SECURITIES [PU LOGO] BBC CAPITAL TRUST I % CUMULATIVE TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY) GUARANTEED, AS DESCRIBED HEREIN, BY BANKATLANTIC BANCORP, INC. - ----------------------------------------------------------------------------- $50,000,000 OF % JUNIOR SUBORDINATED DEBENTURES WILL BE ISSUED BY BANKATLANTIC BANCORP, INC. TO BBC CAPITAL TRUST I - ----------------------------------------------------------------------------- The % Cumulative Trust Preferred Securities (the "Preferred Securities") offered hereby represent preferred undivided beneficial interests in the assets of BBC Capital Trust I, a statutory business trust created under the laws of the State of Delaware ("BBC Capital"). BankAtlantic Bancorp, Inc., a Florida corporation (the "Company" or "BBC"), will own all the common securities representing undivided beneficial interests in the assets of BBC Capital (the "Common Securities" and, together with the Preferred Securities will be referred to herein as the "Trust Securities"). (CONTINUED ON FOLLOWING PAGE) Application has been made to list the Preferred Securities on The Nasdaq Stock Market's National Market under the symbol "BANCP." See "Risk Factors--Absence of Prior Public Market for the Preferred Securities; Trading Price and Tax Considerations." - ----------------------------------------------------------------------------- SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. - ----------------------------------------------------------------------------- THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. - ----------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Proceeds to Public Commission(1) BBC Capital(2)(3) Per Preferred Security $25.00 (2) $25.00 Total(4) $50,000,000 (2) $50,000,000
(1) BBC Capital and the Company have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting". (2) In view of the fact that the proceeds of the sale of the Preferred Securities will be invested in the Junior Subordinated Debentures of the Company, the Company has agreed to pay the Underwriters as compensation for their arranging the investment of such proceeds in the Junior Subordinated Debentures, $ per Preferred Security, or $ in the aggregate ($ in the aggregate if the over-allotment option is exercised in full). See "Underwriting." (3) Before deducting expenses payable by the Company, estimated to be approximately $ . (4) BBC Capital and the Company have granted the Underwriters a 30-day option to purchase up to 300,000 additional Preferred Securities on the same terms and conditions set forth above solely to cover over-allotments, if any. If this option is exercised in full, the total Price to Public and Proceeds to BBC Capital will be $57,500,000. See "Underwriting." The Preferred Securities are offered by the Underwriters subject to receipt and acceptance by them, prior sale and the Underwriters' right to reject any order in whole or in part and to withdraw, cancel or modify the offer without notice. It is expected that delivery of the Preferred Securities will be made in book-entry form through the facilities of The Depository Trust Company on or about , 1997 against payment therefor in immediately available funds. RYAN, BECK & CO. TUCKER ANTHONY INCORPORATED The date of this Prospectus is , 1997 (CONTINUED FROM PREVIOUS PAGE) Wilmington Trust Company is the Property Trustee (as defined herein) of BBC Capital. BBC Capital exists for the purpose of issuing the Trust Securities and investing the proceeds thereof in an equivalent amount of % Junior Subordinated Debentures (the "Junior Subordinated Debentures") of the Company. The Junior Subordinated Debentures will mature on , 2027, which date may be shortened to a date not earlier than , 2002, if certain conditions are met (including the Company having received prior regulatory approval to do so if then required under applicable capital guidelines or regulatory policies). The Common Securities will represent an aggregate liquidation amount equal to at least 3% of the total capital of BBC Capital. The Common Securities will rank pari passu, and cash distributions will be made thereon pro rata, with the Preferred Securities, however, the Preferred Securities will have a preference under certain circumstances with respect to cash distributions and amounts payable on liquidation, redemption or otherwise over the Common Securities. See "Description of the Preferred Securities--Subordination of Common Securities." Holders of Preferred Securities are entitled to receive preferential cumulative cash distributions, at the annual rate of __% of the liquidation amount of $25 per Preferred Security (the "Liquidation Amount"), accruing from the date of original issuance and payable quarterly in arrears on the last day of March, June, September and December of each year, commencing , 1997 (the "Distributions"). Such distributions are considered under current law to be interest income for United States federal income tax purposes. The Company has the right, so long as no Debenture Event of Default (as defined herein) has occurred and is continuing, to defer payment of interest on the Junior Subordinated Debentures at any time or from time to time for a period not to exceed 20 consecutive quarters with respect to each deferral period (each, an "Extended Interest Payment Period"); provided that no Extended Interest Payment Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the termination of any such Extended Interest Payment Period and the payment of all amounts then due, the Company may elect to begin a new Extended Interest Payment Period subject to the requirements set forth herein. If interest payments on the Junior Subordinated Debentures are so deferred, Distributions on the Preferred Securities will also be deferred, and the Company will not be permitted, subject to certain exceptions described herein, to declare or pay any cash distributions with respect to debt securities that rank pari passu with or junior to the Junior Subordinated Debentures or with respect to its capital stock. DURING AN EXTENDED INTEREST PAYMENT PERIOD, INTEREST ON THE JUNIOR SUBORDINATED DEBENTURES WILL CONTINUE TO ACCRUE (AND THE AMOUNT OF DISTRIBUTIONS TO WHICH HOLDERS OF THE PREFERRED SECURITIES ARE ENTITLED WILL ACCUMULATE) AT THE RATE OF % PER ANNUM, COMPOUNDED QUARTERLY, AND HOLDERS OF THE PREFERRED SECURITIES WILL BE REQUIRED TO INCLUDE INTEREST INCOME IN THEIR GROSS INCOME FOR UNITED STATES FEDERAL INCOME TAX PURPOSES IN ADVANCE OF RECEIPT OF THE CASH DISTRIBUTIONS WITH RESPECT TO SUCH DEFERRED INTEREST PAYMENTS. See "Description of the Junior Subordinated Debentures--Option to Extend Interest Payment Period," "Certain Federal Income Tax Consequences-- Interest Income and Original Issue Discount" and "--Sales of Preferred Securities." The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Junior Subordinated Debentures. The Company and BBC Capital believe that, taken together, the obligations of the Company under the Guarantee, the Trust Agreement, the Junior Subordinated Debentures, the Indenture and the Expense Agreement (each as defined herein) provide, in the aggregate, a full, irrevocable and unconditional guaranty, on a subordinated basis, of all of the obligations of BBC Capital under the Preferred Securities. See "Relationship Among the Preferred Securities, the Junior Subordinated Debentures and the Guarantee-- Full and Unconditional Guarantee." The Guarantee of the Company guarantees the payment of Distributions and payments on liquidation or redemption of the Preferred Securities but only in each case to the extent of funds held by BBC Capital, as described herein. See "Description of the Guarantee--General." If the Company does not make interest payments on the Junior Subordinated Debentures held by BBC Capital, BBC Capital will have insufficient funds to pay Distributions on the Preferred Securities. The Guarantee does not cover payments of Distributions when BBC Capital does not have sufficient funds to pay such Distributions. In such event, a holder of Preferred Securities may in certain circumstances institute a legal proceeding directly against the Company pursuant to the terms of the Indenture to enforce payments of amounts equal to such Distributions to such holder. See "Description of the Junior Subordinated 2 Debentures--Enforcement of Certain Rights by Holders of the Preferred Securities." The obligations of the Company under the Guarantee and the Preferred Securities are subordinate and junior in right of payment to all Senior Debt and Subordinated Debt (each as defined herein) of the Company. The Junior Subordinated Debentures are unsecured obligations of the Company and are subordinated to all Senior Debt and Subordinated Debt of the Company, currently comprised of $78.5 million of outstanding Subordinated Debt. See "Description of the Junior Subordinated Debentures--Subordination." The Preferred Securities are subject to mandatory redemption, in whole or in part, upon repayment of the Junior Subordinated Debentures at maturity or their earlier redemption. Subject to regulatory approval, if then required under applicable capital guidelines or regulatory policies, the Junior Subordinated Debentures are redeemable prior to maturity at the option of the Company (i) on or after , 2002, in whole at any time or in part from time to time, or (ii) at any time, in whole (but not in part), within 180 days following the occurrence of a Tax Event, an Investment Company Event, or a Capital Treatment Event (each as defined herein), in each case at a redemption price equal to the accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof. See "Description of the Preferred Securities--Redemption or Exchange." The Company intends to take the position that the Junior Subordinated Debentures will be classified under current law as indebtedness of the Company for United States federal income tax purposes and, accordingly, the Company intends to treat the interest payable by the Company on the Junior Subordinated Debentures as deductible for United States federal income tax purposes. There is no assurance that such position of the Company will not be challenged by the Internal Revenue Service or, if challenged, that such a challenge will not be successful. See "Risk Factors--Proposed Tax Legislation" and "Certain Federal Income Tax Consequences--Classification of the Junior Subordinated Debentures." The Company, as the holder of the Common Securities, has the right at any time to dissolve, wind-up or terminate BBC Capital subject to the Company having received prior regulatory approval if then required under applicable capital guidelines or regulatory policies. In the event of the voluntary or involuntary dissolution, winding up or termination of BBC Capital, after satisfaction of liabilities to creditors of BBC Capital as required by applicable law, the holders of Preferred Securities will be entitled to receive a Liquidation Amount of $25 per Preferred Security, plus accumulated and unpaid Distributions thereon to the date of payment, which may be in the form of a Junior Subordinated Debenture having an aggregate principal amount equal to the Liquidation Amount of such Preferred Securities subject to certain exceptions. See "Description of the Preferred Securities--Redemption or Exchange" and "--Liquidation Distribution Upon Termination." The Preferred Securities will be represented by one or more global certificates registered in the name of The Depository Trust Company ("DTC") or its nominee. Beneficial interests in the Preferred Securities will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its participants. Except as described herein, Preferred Securities in certificate form will not be issued in exchange for the global certificates. See "Description of the Preferred Securities--Book Entry, Delivery and Form." Settlement for the Preferred Securities will be made in immediately available funds. The Preferred Securities will trade in DTC's Same-Day Funds Settlement System, and secondary market trading activity for the Preferred Securities will therefore settle in immediately available funds. - ----------------------------------------------------------------------------- The Company will provide to the holders of the Preferred Securities quarterly reports containing unaudited financial statements and annual reports containing financial statements audited by the Company's independent auditors. The Company will also furnish annual reports on Form 10-K and quarterly reports on Form 10-Q free of charge to holders of the Preferred Securities who so request in writing addressed to the Secretary of the Company. - ----------------------------------------------------------------------------- IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE PREFERRED SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 3 [BANKATLANTIC MAP] 4 SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED. THE BOARD OF DIRECTORS PREVIOUSLY DECLARED FIVE FOR FOUR COMMON SHARE STOCK SPLITS OF THE COMPANY'S COMMON STOCK, PAR VALUE $.01 PER SHARE, EFFECTED IN THE FORM OF 25% STOCK DIVIDENDS ISSUED IN SHARES OF THE COMPANY'S CLASS A COMMON STOCK TO ALL OF THE COMPANY'S COMMON SHAREHOLDERS IN AUGUST 1996 AND MARCH 1997, RESPECTIVELY. WHERE APPROPRIATE, AMOUNTS THROUGHOUT THIS PROSPECTUS HAVE BEEN ADJUSTED TO REFLECT THE STOCK SPLITS. BANKATLANTIC BANCORP, INC. BankAtlantic Bancorp, Inc. (the "Company" or "BBC") is a unitary savings bank holding company organized in April 1994 under the laws of the State of Florida for the purpose of becoming the holding company for BankAtlantic, A Federal Savings Bank ("BankAtlantic"). At December 31, 1996, the Company had consolidated total assets of approximately $2.61 billion and total stockholders' equity of approximately $147.7 million. The Company owns all of the outstanding capital stock of BankAtlantic. BFC Financial Corporation ("BFC"), which is controlled by the Chairman and Vice Chairman of the Company, owned at December 31, 1996 4,876,124 shares or approximately 46% of the Company's issued and outstanding Class B Common Stock and 2,742,820 shares or approximately 35% of the Company's issued and outstanding Class A Common Stock. Holders of the Company's Class B Common Stock are entitled to one vote per share while the holders of the Company's Class A Common Stock have no voting rights other than as may be required by Florida law. BankAtlantic is a federally-chartered, federally-insured savings bank organized in 1952, which provides traditional retail banking services and a full range of commercial banking products and related financial services. The principal business of BankAtlantic is attracting checking and savings deposits from the public and general business customers and using these deposits to originate commercial real estate and business loans, residential real estate loans and consumer loans, to purchase wholesale residential loans from third parties and to make other permitted investments including investments in mortgage-backed securities, tax certificates and other investment securities. BankAtlantic operates through 56 branch offices located primarily in Dade, Broward and Palm Beach Counties in South Florida. As reported by an independent statistical reporting service, BankAtlantic is currently the largest independent savings bank headquartered in the State of Florida and third in size among all independent financial institutions headquartered in the State of Florida based on deposits at September 30, 1996, the most recent date utilized by such reporting service. The rapid pace of consolidation among Florida's depository institutions has been reflected in the acquisition of many local competitors by out-of-state institutions. The result in many cases is remote decision making on larger loans. BankAtlantic considers itself to be a community bank, able to compete against regional and super regional institutions by offering personalized service and fast decision making. BankAtlantic's deposit accounts are insured by the Federal Deposit Insurance Corporation (the "FDIC") primarily through the Savings Association Insurance Fund (the "SAIF"), with a small portion insured through the Bank Insurance Fund ("BIF"), both of which are administered by the FDIC. BankAtlantic is regulated and examined by the Office of Thrift Supervision (the "OTS") and the FDIC. 5 OPERATING STRATEGY The Company's business strategy entails (i) emphasizing commercial real estate and business loan and consumer loan originations; (ii) focusing on non-interest income; (iii) promoting transaction, non-interest bearing and escrow accounts; (iv) improving market penetration through de novo branching and acquisitions; and (v) increasing the range of banking services. While pursuing this strategy, management remains committed to maintaining asset quality, managing interest rate risk and enhancing profitability. The Company's business strategy has produced the following results: /bullet/ PROFITABILITY--Implementation of the business strategy, complemented in recent periods by improving economic conditions and relatively lower market interest rates, has resulted in net income of $19.0 million, $18.4 million and $16.8 million for the years ended December 31, 1996, 1995 and 1994, respectively. Return on average assets, excluding a $7.2 million pre-tax charge in 1996 relating to the SAIF one-time special assessment, was 1.16%, 1.07% and 1.17% for the years ended December 31, 1996, 1995 and 1994, respectively. /bullet/ ENHANCED DELIVERY SYSTEM--BankAtlantic has enhanced its delivery system by establishing 30 drive-through facilities, 220 ATMs (including 10 located on cruise ships) and 56 full service branches with 11 located in Walmart Super Center Stores. In order to enhance its presence in Dade County, Florida, in February 1995, BankAtlantic acquired MegaBank, a Miami based commercial bank with five branches and approximately $120 million in deposits. In October 1996, in an effort to strengthen its market presence in Broward County, Florida, its primary market, BankAtlantic acquired Bank of North America ("BNA"). BNA had approximately $470 million of deposits and provided BankAtlantic with eight branches, six of which are located in Broward County. BankAtlantic plans to continue to expand its market presence through de novo branching, by increasing the number of its ATMs and drive-through facilities and, when available on attractive terms, through acquisitions. /bullet/ FEE INCOME--With the focus on reducing dependence on net interest income, BankAtlantic has expanded its sources and amounts of fee income, which is generated primarily through its commercial banking services, loan servicing function, on-going sales of servicing rights, ATM's and transaction accounts. Transaction account and ATM fees increased from $6.4 million in 1994 to $12.5 million during 1996. /bullet/ LOW COST ACCOUNTS--Management has focused on attracting transaction, non-interest bearing and escrow accounts, which carry a lower cost, generate service fee income and generally represent a more stable source of funds than higher rate certificate accounts. At December 31, 1996, these accounts represented 50% of total deposits. BankAtlantic emphasizes such accounts by maintaining its full service branch network and full range of accounts and services. The flow of deposits, however, is and will continue to be significantly influenced by economic conditions, prevailing market interest rates and competition. /bullet/ LOAN PORTFOLIO DIVERSIFICATION--BankAtlantic emphasizes the origination of shorter-term and variable interest rate consumer loans and commercial business and real estate loans (including commercial construction loans), which are generally higher yielding than residential loans, have shorter terms and typically have adjustable interest rates. Since December 31, 1992, such loans have increased from approximately $203 million to approximately $807 million at December 31, 1996. In addition, BankAtlantic commenced purchasing wholesale residential loans in late 1995 and purchased approximately $465.9 million of such loans during 1996, adding geographic diversity to its loan portfolio. The purchase of such wholesale loans, an incremental profit strategy, is an alternative to concentrating funds in investment securities. 6 /bullet/ ASSET QUALITY--The Company seeks to maintain asset quality and control and manage credit risk. While the loan portfolio has grown substantially, with substantial growth in commercial loans and consumer loans, which generally involve more credit risk than residential real estate loans, BankAtlantic's non-performing assets have decreased from 1992 levels. Non-performing assets decreased from $27.0 million, or 2.07% of total assets at December 31, 1992 to $24.1 million, or .93% of total assets at December 31, 1996. Total allowances for losses on loans and tax certificates as a percentage of non-performing assets was 112.79% at December 31, 1996. BBC CAPITAL BBC Capital is a statutory business trust formed under Delaware law pursuant to (i) a trust agreement, dated as of March 21, 1997, executed by the Company, as depositor and Wilmington Trust Company, as Property Trustee (the "Property Trustee") and as Delaware Trustee (the "Delaware Trustee"), and the administrative trustees (the "Administrative Trustees") named therein (the "Trustees"), and (ii) a certificate of trust filed with the Secretary of State of the State of Delaware on March 21, 1997. The initial trust agreement will be amended and restated in its entirety (as so amended and restated, the "Trust Agreement") substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The Trust Agreement will be qualified as an indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred Securities, the purchasers thereof will own all of the Preferred Securities, the Company will acquire all of the Common Securities which will represent an aggregate liquidation amount equal to at least 3% of the total capital of BBC Capital. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities, except that upon the occurrence and during the continuance of an Event of Default (as defined herein) under the Trust Agreement resulting from a Debenture Event of Default, the rights of the Company as holder of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption or otherwise will be subordinated to the rights of the holders of the Preferred Securities. See "Description of the Preferred Securities-Subordination of Common Securities." BBC Capital exists for the exclusive purposes of (i) issuing the Trust Securities representing undivided beneficial interests in the assets of BBC Capital, (ii) investing the gross proceeds of the Trust Securities in an equivalent amount of the Junior Subordinated Debentures issued by the Company, and (iii) engaging in only those other activities necessary, advisable, or incidental thereto. The Junior Subordinated Debentures and payments thereunder will be the only assets of BBC Capital and payments under the Junior Subordinated Debentures will be the only revenue of BBC Capital. BBC Capital has a term of 31 years, but may terminate earlier as provided in the Trust Agreement. The principal executive office of BBC Capital is located at 1750 East Sunrise Boulevard, Fort Lauderdale, Florida 33304, and its telephone number is (954) 760-5000. 7 THE OFFERING Securities Offered .............. 2,000,000 Preferred Securities having a Liquidation Amount of $25 per Preferred Security. The Preferred Securities represent preferred undivided beneficial interests in the assets of BBC Capital, which will consist solely of the Junior Subordinated Debentures and payments thereunder. BBC Capital has granted the Underwriters an option, exercisable within 30 days after the date of this Prospectus, to purchase up to an additional 300,000 Preferred Securities at the initial offering price, solely to cover over-allotments, if any. Offering Price ................. $25 per Preferred Security (Liquidation Amount $25). Distributions .................. The Distributions payable on each Preferred Security will be fixed at a rate per annum of % of the Liquidation Amount of $25 per Preferred Security, will be cumulative, will accrue from the date of issuance of the Preferred Securities, and will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing on the first payment date following the date of issuance. See "Description of the Preferred Securities--Distributions--Payment of Distributions." Junior Subordinated Debentures .. BBC Capital will invest the proceeds from the issuance of the Preferred Securities and Common Securities in an equivalent amount of % Junior Subordinated Debentures of the Company. The Junior Subordinated Debentures will mature on , 2027. The Junior Subordinated Debentures will rank subordinate and junior in right of payment to all Senior Debt and Subordinated Debt of the Company. In addition, the Company's obligations under the Junior Subordinated Debentures will be structurally subordinated to all existing and future liabilities and obligations of its subsidiaries. Option to Extend Interest Payment Period ....... The Company has the right, at any time, so long as no Debenture Event of Default has occurred and is continuing, to defer payments of interest on the Junior Subordinated Debentures for a period not exceeding 20 consecutive quarters; PROVIDED, that no Extended Interest Payment Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. In the event of an extension by the Company of the interest payment period, quarterly Distributions on the Preferred Securities will be deferred (though such Distributions would continue to accrue with interest thereon compounded quarterly just as interest will continue to accrue and compound on the Junior Subordinated Debentures) during any such Extended Interest Payment Period. During an Extended Interest Payment Period, the Company will be prohibited, subject to 8 certain exceptions described herein, from declaring or paying any cash distributions with respect to its debt securities that rank pari passu with or junior to the Junior Subordinated Debentures or with respect to its capital stock. Upon the termination of any Extended Interest Payment Period and the payment of all amounts then due, the Company may commence a new Extended Interest Payment Period, subject to the foregoing restrictions. See "Description of the Preferred Securities--Distributions--Extended Interest Payment Period" and "Description of the Junior Subordinated Debentures--Option to Extend Interest Payment Period." Should an Extended Interest Payment Period occur, holders of Preferred Securities will be required to include deferred interest income in their gross income for United States federal income tax purposes in advance of receipt of the cash distributions with respect to such deferred interest payments. See "Certain Federal Income Tax Consequences--Interest Income and Original Issue Discount." The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Junior Subordinated Debentures. Redemption ...................... The Preferred Securities are subject to mandatory redemption, in whole or in part, upon repayment of the Junior Subordinated Debentures at maturity or their earlier redemption. Subject to regulatory approval, if then required under applicable capital guidelines or regulatory policies, the Junior Subordinated Debentures are redeemable prior to maturity at the option of the Company (i) on or after , 2002, in whole at any time or in part from time to time, or (ii) at any time, in whole (but not in part), within 180 days following the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event, in each case at a redemption price equal to 100% of the principal amount of the Junior Subordinated Debentures so redeemed, together with any accrued but unpaid interest to the date fixed for redemption. See "Description of the Junior Subordinated Debentures--Redemption or Exchange." Distribution of Junior Subordinated Debentures . Subject to receipt of any required regulatory approvals, the Company, as the holder of the Common Securities, has the right at any time to terminate BBC Capital and cause the Junior Subordinated Debentures to be distributed to holders of Preferred Securities in liquidation of BBC Capital. See "Description of the Preferred Securities--Redemption or Exchange" and "Description of the Preferred Securities--Liquidation Distribution Upon Termination." 9 Guarantee........................ The Company has guaranteed the payment of Distributions and payments on liquidation or redemption of the Preferred Securities, but only in each case to the extent of funds held by BBC Capital, as described herein. The Company and BBC Capital believe that, taken together, the obligations of the Company under the Guarantee, the Trust Agreement, the Junior Subordinated Debentures, the Indenture and the Expense Agreement provide, in the aggregate, a full, irrevocable and unconditional guaranty, on a subordinated basis, of all of the obligations of BBC Capital relating to the Preferred Securities. The obligations of the Company under the Guarantee and the Preferred Securities are subordinate and junior in right of payment to all Senior Debt and Subordinated Debt of the Company. If the Company does not make principal or interest payments on the Junior Subordinated Debentures, BBC Capital will not have sufficient funds to make distributions on the Preferred Securities; in which event, the Guarantee will not apply to such Distributions until and unless BBC Capital has sufficient funds available therefor. See "Description of the Guarantee." Voting Rights .................. Except in limited circumstances, the holders of the Preferred Securities will have no voting rights in BBC Capital. See "Description of the Preferred Securities-- Voting Rights; Amendment of Trust Agreement." Use of Proceeds ................. The proceeds from the sale of the Preferred Securities offered hereby will be used by BBC Capital to purchase the Junior Subordinated Debentures issued by the Company. The Company intends to use the net proceeds from the sale of the Junior Subordinated Debentures for general corporate purposes, including repurchase of its common stock, for acquisitions by either the Company or BankAtlantic and contribution to BankAtlantic to support growth and for working capital. See "Use of Proceeds." Nasdaq National Market Symbol .... Application has been made to have the Preferred Securities approved for quotation on The Nasdaq Stock Market's National Market under the symbol BANCP. 10 RISK FACTORS Before making an investment decision, prospective investors should consider all of the information contained in this Prospectus. In particular, prospective investors should evaluate the factors discussed under "Risk Factors," including, but not limited to, the economic and business risks associated with economic conditions in South Florida and the Company's investment and loan portfolio in particular, the lack of voting rights and voting control, the integration of recent acquisitions, the potential adverse impact on the Company's operations and profitability of changes in interest rates and future legislation, the highly competitive nature of the Company's business, the limited sources of payments to holders of Preferred Securities and regulatory limitations on BankAtlantic's ability to pay dividends, the ranking of subordinated obligations under the Guarantee and the Junior Subordinated Debentures, the Company's ability to extend interest payment periods and related tax and market consequences, accelerated redemption rights upon certain events, the shortening of the stated maturity of the Junior Subordinated Debentures, the nature of the Guarantee, the potential exchange of Preferred Securities for Junior Subordinated Debentures and the limited covenants contained in the Indenture and the Trust Agreement. 11 SELECTED CONSOLIDATED FINANCIAL DATA OF BANKATLANTIC BANCORP, INC.
AT OR FOR THE YEARS ---------------------------------------------- 1996 1995 1994 -------------- -------------- -------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATING RESULTS: Net interest income .............................................. $ 75,600 $ 64,391 $ 57,118 Provision for loan losses ........................................ 5,844 4,182 2,299 -------------- -------------- -------------- Net interest income after provision for loan losses ........... 69,756 60,209 54,819 -------------- -------------- -------------- Total non-interest income ....................................... 33,737 19,388 13,763 -------------- -------------- -------------- NON-INTEREST EXPENSES ............................................ 72,241 (B) 51,160 42,085 -------------- -------------- -------------- Income before income taxes and extraordinary item ................ 31,252 28,437 26,497 Provision for income taxes ....................................... 12,241 10,018 9,662 -------------- -------------- -------------- Income before extraordinary item ................................. 19,011 18,419 16,835 Extraordinary item net of taxes .................................. 0 0 0 -------------- -------------- -------------- Net income ...................................................... 19,011 18,419 16,835 -------------- -------------- -------------- Total dividends on non-cumulative preferred stock ................ 0 2,030 (A) 880 -------------- -------------- -------------- Net income available for common shares ........................... $ 19,011 $ 16,389 $ 15,955 ============== ============== ============== Net income per common and common equivalent share ................ $ 1.01 $ 0.97 (A) $ 0.97 ============== ============== ============== Net income per common and common equivalent share assuming full dilution ......................................... $ 0.93 $ 0.96(A) $ 0.97 ============== ============== ============== Book value per common share ...................................... $ 8.05 $ 7.28 6.12 ============== ============== ============== Tangible book value per share .................................... $ 6.47 $ 6.59 6.12 ============== ============== ============== BALANCE SHEET DATA: Total assets ..................................................... $ 2,605,527 $ 1,750,689 $ 1,539,653 Loans receivable-net ............................................. 1,824,856 828,630 546,396 Debt securities available for sale ............................... 439,345 691,803 53,969 Investment and trading account securities, net ................... 54,511 49,856 211,776 Mortgage servicing rights ........................................ 25,002 20,738 20,584 Cost over fair value of net assets acquired and other intangibles 29,008 11,521 0 Deposits ......................................................... 1,832,780 1,300,377 1,085,782 Subordinated debentures, capital notes and note payable ......... 78,500 21,001 0 Total stockholders' equity ....................................... 147,704 120,561 105,520 PERFORMANCE RATIOS: Net interest spread (during period) .............................. 3.76 % 3.65 % 4.07 % Interest rate margin (during period) ............................. 4.08 4.04 4.32 Average equity to average assets ................................. 6.70 6.66 6.86 Return on average equity ......................................... 14.08 16.03 17.07 Return on average assets ......................................... 0.94 1.07 1.17 Efficiency ratio ................................................. 66.07 61.07 59.37 NON-PERFORMING ASSETS AS A PERCENT OF: Total loans, tax certificates and real estate owned ............ 1.26 2.37 3.66 Total assets ..................................................... 0.93 1.23 1.51 Allowances for loan losses and tax certificates as a percent of non-performing assets .......................................... 112.79 96.06 82.86 Net loan charge-offs as a percent of average outstanding loans .. 0.47 0.45 0.59 RATIO OF EARNINGS TO FIXED CHARGES: Including interest on deposits ................................. 1.40 1.43 1.63 Excluding interest on deposits ................................... 2.34 2.41 3.50
(RESTUBBED TABLE CONTINUED FROM ABOVE)
1993 1992 -------------- -------------- OPERATING RESULTS: Net interest income .............................................. $ 58,516 $ 60,909 Provision for loan losses ........................................ 3,450 6,650 -------------- -------------- Net interest income after provision for loan losses ........... 55,066 54,259 -------------- -------------- Total non-interest income ....................................... 11,638 17,051 -------------- -------------- NON-INTEREST EXPENSES ............................................ 43,533 46,817 -------------- -------------- Income before income taxes and extraordinary item ................ 23,171 24,493 Provision for income taxes ....................................... 7,093 9,201 -------------- -------------- Income before extraordinary item ................................. 16,078 15,292 Extraordinary item net of taxes .................................. 0 756 -------------- -------------- Net income ...................................................... 16,078 16,048 -------------- -------------- Total dividends on non-cumulative preferred stock ................ 880 880 -------------- -------------- 12 1993 1992 -------------- -------------- Net income available for common shares ........................... $ 15,198 $ 15,168 ============== ============== Net income per common and common equivalent share ................ $ 1.03 $ 1.32 ============== ============== Net income per common and common equivalent share assuming full dilution ......................................... $ 1.02 $ 1.15 ============== ============== Book value per common share ...................................... $ 5.20 $ 5.06 ============== ============== Tangible book value per share .................................... $ 5.20 $ 5.02 ============== ============== BALANCE SHEET DATA: Total assets ..................................................... $ 1,359,195 $ 1,303,071 Loans receivable-net ............................................. 485,956 556,662 Debt securities available for sale ............................... 83,116 137,963 Investment and trading account securities, net ................... 97,701 120,424 Mortgage servicing rights ........................................ 19,833 7,655 Cost over fair value of net assets acquired and other intangibles 0 0 Deposits ......................................................... 1,076,360 1,108,115 Subordinated debentures, capital notes and note payable ......... 0 9,524 Total stockholders' equity ....................................... 90,652 66,165 PERFORMANCE RATIOS: Net interest spread (during period) .............................. 4.67 % 4.60 % Interest rate margin (during period) ............................. 4.90 4.78 Average equity to average assets ................................. 5.85 4.07 Return on average equity ......................................... 21.32 27.09 Return on average assets ......................................... 1.25 1.10 Efficiency ratio ................................................. 62.03 60.22 NON-PERFORMING ASSETS AS A PERCENT OF: Total loans, tax certificates and real estate owned ............ 3.34 3.80 Total assets ..................................................... 1.47 2.07 Allowances for loan losses and tax certificates as a percent of non-performing assets .......................................... 99.90 66.88 Net loan charge-offs as a percent of average outstanding loans .. 0.56 0.60 RATIO OF EARNINGS TO FIXED CHARGES: Including interest on deposits ................................. 1.63 1.43 Excluding interest on deposits ................................... 5.67 3.62
- ----------------------------------------------------------------------------- (A) The excess of the redemption price above the recorded amount of preferred stock is considered a preferred stock dividend. The impact of the October 1995 preferred stock redemption for the year ended December 31, 1995 was a reduction of $0.08 for primary and fully diluted earnings per share. (B) Includes the $7.2 million SAIF one-time special assessment. 12 RISK FACTORS An investment in the Preferred Securities involves a high degree of risk. Prospective investors should carefully consider, together with the other information contained and incorporated by reference in this Prospectus, the following factors in evaluating the Company, its business and BBC Capital before purchasing the Preferred Securities offered hereby. Prospective investors should note, in particular, that this Prospectus contains 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 Prospectus, or in the documents incorporated by reference herein, the words "anticipate", "believe", "estimate", "may", "intend" and "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. The considerations listed below represent certain important factors the Company believes could cause such results to differ. These considerations are not intended to represent a complete list of the general or specific risks that may affect the Company and BBC Capital. It should be recognized that other risks, including general economic factors and expansion strategies, may be significant, presently or in the future, and the risks set forth below may affect the Company and BBC Capital to a greater extent than indicated. SOURCE OF PAYMENTS TO HOLDERS OF PREFERRED SECURITIES The ability of BBC Capital to pay amounts due on the Preferred Securities is solely dependent upon the Company making payments on the Junior Subordinated Debentures as and when required. As a holding company without significant assets other than the capital stock of BankAtlantic, the ability of the Company to pay interest on the principal of the Junior Subordinated Debentures to BBC Capital (and consequently, BBC Capital's ability to pay Distributions on the Preferred Securities and the Company's ability to pay its obligations under the Guarantee) will be significantly dependent on the ability of BankAtlantic to pay dividends to the Company in amounts sufficient to service the Company's obligations. The Company is currently obligated to pay interest semi-annually on its outstanding 9% Subordinated Debentures Due 2005 (the "9% Debentures") and its 6 3/4 % Convertible Subordinated Debentures Due 2006 (the "6 3/4 % Debentures") and to make any other payments with respect to securities issued by the Company in the future which are PARI PASSU or have a preference over the Junior Subordinated Debentures issued to BBC Capital with respect to the payment of principal, interest or dividends. There is no restriction on the ability of the Company to issue or limitations on the amount of securities which are PARI PASSU or have a preference over the Junior Subordinated Debentures issued to BBC Capital nor is there any restriction on the ability of BankAtlantic to issue additional capital stock or incur additional indebtedness. BankAtlantic's ability to pay dividends or make other capital distributions to the Company is governed by regulations promulgated by the Office of Thrift Supervision ("OTS") and is based on BankAtlantic's regulatory capital levels and net income. Under these regulations, "capital distributions" are defined as cash dividends, payments by a savings association to repurchase or otherwise acquire its shares, payments to shareholders of another entity in a cash-out merger, and other distributions charged against capital. An institution that has regulatory capital that is at least equal to its fully phased-in capital requirements (both before and after giving effect to the distribution), and that has not been notified that it "is in need of more than normal supervision" is a Tier 1 association. Upon prior notice to, and non-objection by, the OTS, a Tier 1 association is permitted to make capital distributions during a calendar year of up to the greater of (i) 100% of net income for the current calendar year, plus 50% of its capital surplus ("surplus" being the amount of capital in excess of its fully phased-in capital requirements) or (ii) 75% of its net income over the most recent four quarters. Any additional capital distributions would require prior regulatory approval. As of December 31, 1996, BankAtlantic's capital exceeded its fully phased-in capital requirements by approximately $51 million and BankAtlantic qualified as a Tier 1 association under applicable regulations. However, all capital distributions of BankAtlantic are also subject to the OTS' right to object to a distribution on safety and soundness 13 grounds. There is no assurance that BankAtlantic will be a Tier 1 association or that it will be in a position to make capital distributions to the Company in an amount sufficient for the Company to service the Junior Subordinated Debentures. See "Regulation and Supervision--Savings Institution Regulation--Restrictions on Dividends and Other Capital Distributions." RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR SUBORDINATED DEBENTURES The obligations of the Company under the Guarantee issued for the benefit of the holders of Preferred Securities and under the Junior Subordinated Debentures issued to BBC Capital are unsecured and rank subordinate and junior in right of payment to all Senior Debt and Subordinated Debt of the Company. At December 31, 1996, the aggregate outstanding Senior Debt and Subordinated Debt of the Company was approximately $78.5 million. Only the capital stock of the Company is currently junior in right of payment to the Junior Subordinated Debentures issued to BBC Capital. Because the Company is a holding company, the right of the Company to participate in any distribution of assets of a subsidiary, including BankAtlantic, upon a liquidation or reorganization or otherwise of such subsidiary (and thus the ability of holders of the Preferred Securities to benefit indirectly from such distribution) is subject to the prior claims of creditors of the subsidiary (including depositors in BankAtlantic), except to the extent that the Company may itself be recognized as a creditor of the subsidiary. If the Company is a creditor of a subsidiary, the claims of the Company would be subject to any prior security interest in the assets of the subsidiary and any indebtedness of the subsidiary senior to that of the Company. The Junior Subordinated Debentures, therefore, will be effectively subordinated to all existing and future liabilities of the Company's subsidiaries, including BankAtlantic. At December 31, 1996, BankAtlantic had liabilities of $2.4 billion (including $1.8 billion in deposits). Holders of Junior Subordinated Debentures and Preferred Securities should look only to the assets of the Company for payments on the Junior Subordinated Debentures. Neither the Indenture, the Guarantee nor the Trust Agreement places any limitation on the amount of secured or unsecured debt, including Senior Debt and Subordinated Debt that may be incurred by the Company or any of its subsidiaries. See "Description of the Guarantee--Status of the Guarantee" and "Description of the Junior Subordinated Debentures--Subordination." OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE CONSIDERATIONS The Company has the right under the Indenture, so long as no Debenture Event of Default has occurred and is continuing, to defer the payment of interest on the Junior Subordinated Debentures at any time or from time to time for a period not exceeding 20 consecutive quarters with respect to each Extended Interest Payment Period; provided that no Extended Interest Payment Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. In the event of any such deferral, quarterly Distributions on the Preferred Securities by BBC Capital will be deferred (and the amount of Distributions to which holders of the Preferred Securities are entitled will accumulate additional Distributions thereon at the rate of % per annum, compounded quarterly from the relevant payment date for such Distributions) during such Extended Interest Payment Period. During any such Extended Interest Payment Period, the Company may not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock (other than (a) the reclassification of any class of the Company's capital stock into another class of capital stock, (b) dividends or distributions payable in any class of the Company's common stock, (c) any declaration of a dividend in connection with the implementation of a shareholder rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto and (d) purchases of the Company's common stock related to the rights under any of the Company's benefit plans for its or its subsidiaries' directors, officers or employees), (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank PARI PASSU with or junior in interest to the Junior Subordinated Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks PARI PASSU with or junior in interest to the Junior Subordinated Debentures (other than payments under the Guarantee), or (iii) redeem, purchase or acquire less than all of the Junior Subordinated Debentures or any of the 14 Preferred Securities. Prior to the termination of any such Extended Interest Payment Period, the Company may further defer the payment of interest; provided that no Extended Interest Payment Period may exceed 20 consecutive quarters or extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the termination of any Extended Interest Payment Period and the payment of all interest then accrued and unpaid (together with interest thereon at the annual rate of % compounded quarterly, to the extent permitted by applicable law), the Company may elect to begin a new Extended Interest Payment Period, subject to the above restrictions. Subject only to compliance with the foregoing, there is no limit on the number of times that the Company may elect to begin an Extended Interest Payment Period so long as no Debenture Event of Default has occurred and is continuing. See "Description of the Preferred Securities--Distributions--Extended Interest Payment Period" and "Description of the Junior Subordinated Debentures--Option to Extend Interest Payment Period." Should an Extended Interest Payment Period occur, each holder of Preferred Securities will be required to accrue and recognize income (in the form of original issue discount) in respect of its pro rata share of the interest accruing on the Junior Subordinated Debentures held by BBC Capital for United States federal income tax purposes. A holder of Preferred Securities would, as a result, be required to include such income in gross income for United States federal income tax purposes in advance of the receipt of cash, and will not receive the cash related to such income from BBC Capital if the holder disposes of the Preferred Securities prior to the record date for the payment of the related Distributions. See "Certain Federal Income Tax Consequences--Interest Income and Original Issue Discount." See also "--Absence of Prior Public Market for the Preferred Securities; Trading Price and Tax Considerations." The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Junior Subordinated Debentures. However, should the Company elect to exercise such right in the future, the market price of the Preferred Securities is likely to be adversely affected. As a result of the existence of the Company's right to defer interest payments, the market price of the Preferred Securities may be more volatile than the market prices of other securities on which original issue discount accrues that do not provide for such optional deferrals. PROPOSED TAX LEGISLATION On February 6, 1997, President Clinton released his budget proposals for fiscal year 1998. One of the revenue provisions of those proposals would generally deny interest deductions for interest on an instrument issued by a corporation that has a maximum term of more than 15 years and that is not shown as indebtedness on the separate balance sheet of the issuer or, where the instrument is issued to a related party (other than a corporation), where the holder or some other related party issues a related instrument that is not shown as indebtedness on the issuer's consolidated balance sheet. If enacted as proposed by the President, this provision would be effective for instruments issued on or after the date of first action by a Congressional committee with respect to the proposal. It is not clear from the President's proposals as to what constitutes Congressional "committee action" with respect to this proposal. If the provision were to apply to the Junior Subordinated Debentures, the Company would be unable to deduct interest on the Junior Subordinated Debentures. Under current law, the Company will be able to deduct interest on the Junior Subordinated Debentures. However, there is no assurance that future legislative proposals or final legislation will not affect the ability of the Company to deduct interest on the Junior Subordinated Debentures. Such a change would give rise to a Tax Event. A Tax Event would permit the Company, upon receipt of regulatory approval if then required under applicable capital guidelines or regulatory policies to cause a redemption of the Preferred Securities before, as well as after, , 2002. See "Description of the Junior Subordinated Debentures--Redemption or Exchange--Tax Event Redemption, Investment Company Event Redemption or Capital Treatment Event Redemption" and "Certain Federal Income Tax Consequences--Effect of Proposed Changes in Tax Laws." 15 REDEMPTION DUE TO TAX EVENT, INVESTMENT COMPANY EVENT, OR CAPITAL TREATMENT EVENT The Company has the right to redeem the Junior Subordinated Debentures in whole (but not in part) within 180 days following the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event (whether occurring before or after , 2002), and, therefore, cause a mandatory redemption of the Preferred Securities. The exercise of such right is subject to the Company having received prior regulatory approval to do so if then required under applicable capital guidelines or regulatory policies. "Tax Event" means the receipt by BBC Capital 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 or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such pronouncement or decision is announced on or after the date of issuance of the Preferred Securities under the Trust Agreement, there is more than an insubstantial risk that (i) BBC Capital 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 Junior Subordinated Debentures, (ii) interest payable by the Company on the Junior Subordinated Debentures is not, or, within 90 days of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes, or (iii) BBC Capital is, or will be within 90 days of the date of the opinion, subject to more than a DE MINIMIS amount of other taxes, duties or other governmental charges. The Company must request and receive an opinion with regard to such matters within a reasonable period of time after it becomes aware of the possible occurrence of any of the events described in clauses (i) through (iii) above. "Investment Company Event" means the receipt by BBC Capital 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 a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, BBC Capital is or will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"), which change occurs or becomes effective on or after the date of original issuance of the Preferred Securities. "Capital Treatment Event" means the reasonable determination by the Company that, as a result of any amendment to, or change (including any proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision thereof or therein, or as a result of any official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such proposed change, pronouncement, action or decision is announced on or after the date of original issuance of the Preferred Securities, there is more than an insubstantial risk that the Company will not be entitled to treat an amount equal to the Liquidation Amount of the Preferred Securities as "Tier 1 Capital" (or the then equivalent thereof) for purposes of applicable capital adequacy guidelines of the Federal Reserve (or any successor regulatory authority with jurisdiction over bank holding companies), or any capital adequacy guidelines as then in effect and applicable to the Company. See "--Proposed Tax Legislation" for a discussion of certain legislative proposals that, if adopted, could give rise to a Tax Event, which may permit the Company to cause a redemption of the Preferred Securities prior to , 2002. For a discussion of possible tax consequences of a redemption, see "--Exchange of Preferred Securities for Junior Subordinated Debentures; Redemption and Tax Consequences." SHORTENING OF STATED MATURITY OF JUNIOR SUBORDINATED DEBENTURES The Company has the right, at any time, to shorten the maturity of the Junior Subordinated Debentures to a date not earlier than , 2002. The exercise of such right is subject to the 16 Company having received prior regulatory approval if then required under applicable capital guidelines or regulatory policies. See "Description of the Junior Subordinated Debentures--General." RIGHTS UNDER THE GUARANTEE The Guarantee guarantees to the holders of the Preferred Securities, to the extent not paid by BBC Capital, (i) any accrued and unpaid Distributions required to be paid on the Preferred Securities, to the extent that BBC Capital has funds available therefor at such time, (ii) the Redemption Price (as defined herein) with respect to any Preferred Securities called for redemption, to the extent that BBC Capital has funds available therefor at such time, and (iii) upon a voluntary or involuntary dissolution, winding-up or liquidation of BBC Capital (other than in connection with the distribution of Junior Subordinated Debentures to the holders of Preferred Securities or a redemption of all of the Preferred Securities), the lesser of (a) the amount of the Liquidation Distribution (as defined herein), to the extent BBC Capital has funds available therefor at such time, and (b) the amount of assets of BBC Capital remaining available for distribution to holders of the Preferred Securities in liquidation of BBC Capital. The holders of not less than a majority in Liquidation Amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of the Guarantee or to direct the exercise of any trust power conferred upon the Guarantee Trustee under the Guarantee. Any holder of the Preferred Securities may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against BBC Capital, the Guarantee Trustee or any other Person (as defined in the Guarantee). If the Company were to default on its obligation to pay amounts payable under the Junior Subordinated Debentures, BBC Capital would lack funds for the payment of Distributions or amounts payable on redemption of the Preferred Securities or otherwise, and, in such event, holders of Preferred Securities would not be able to rely upon the Guarantee for such amounts. In the event, however, that a Debenture Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest on or principal of the Junior Subordinated Debentures on the payment date on which such payment is due and payable, then a holder of Preferred Securities may institute a legal proceeding directly against the Company for enforcement of payment to such holder of the principal of or interest on such Junior Subordinated Debentures having a principal amount equal to the aggregate Liquidation Amount of the Preferred Securities of such holder (a "Direct Action"). The exercise by the Company of its right, as described herein, to defer the payment of interest on the Junior Subordinated Debentures does not constitute a Debenture Event of Default. In connection with such Direct Action, the Company will have a right of set-off under the Indenture to the extent of any payment made by the Company to such holder of Preferred Securities in the Direct Action. Except as described herein, holders of Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Junior Subordinated Debentures or assert directly any other rights in respect of the Junior Subordinated Debentures. See "Description of the Junior Subordinated Debentures--Enforcement of Certain Rights by Holders of Preferred Securities," "Description of the Junior Subordinated Debentures--Debenture Events of Default" and "Description of the Guarantee." The Trust Agreement provides that each holder of Preferred Securities by acceptance thereof agrees to the provisions of the Guarantee and the Indenture. LIMITED VOTING RIGHTS Holders of Preferred Securities will have no voting rights in BBC Capital except in limited circumstances relating only to the modification of the Preferred Securities and the exercise of the rights of BBC Capital as holder of the Junior Subordinated Debentures and the Guarantee. Holders of Preferred Securities will not be entitled to vote to appoint, remove or replace the Property Trustee or the Delaware Trustee, as such voting rights are vested exclusively in the holder of the Common Securities (except upon the occurrence of certain events described herein). The Property Trustee, the Administrative Trustees and the Company may amend the Trust Agreement without the consent of holders of Preferred Securities to ensure that BBC Capital will be classified for United States federal income tax purposes as a grantor trust even if such action adversely affects the interests of such holders. 17 See "Description of the Preferred Securities--Voting Rights; Amendment of Trust Agreement" and "Description of the Preferred Securities--Removal of BBC Capital Trustees." EXCHANGE OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES; REDEMPTION AND TAX CONSEQUENCES The Company, as the holder of the Common Securities, has the right at any time to dissolve, wind-up or terminate BBC Capital and cause the Junior Subordinated Debentures to be distributed to the holders of the Preferred Securities in exchange therefor in liquidation of BBC Capital. The exercise of such right is subject to the Company having received prior regulatory approval if then required under applicable capital guidelines or regulatory policies. The Company will have the right, in certain circumstances, to redeem the Junior Subordinated Debentures in whole or in part, in lieu of a distribution of the Junior Subordinated Debentures by BBC Capital, in which event BBC Capital will redeem the Trust Securities on a pro rata basis to the same extent as the Junior Subordinated Debentures are redeemed by the Company. Any such distribution or redemption prior to the Stated Maturity will be subject to prior regulatory approval if then required under applicable capital guidelines or regulatory policies. See "Description of the Preferred Securities--Redemption or Exchange--Tax Event Redemption, Investment Company Event Redemption or Capital Treatment Event Redemption." Under current United States federal income tax law, a distribution of Junior Subordinated Debentures upon the dissolution of BBC Capital would not be a taxable event to holders of the Preferred Securities. If, however, BBC Capital is characterized as an association taxable as a corporation at the time of the dissolution of BBC Capital, the distribution of the Junior Subordinated Debentures would constitute a taxable event to holders of Preferred Securities. Moreover, upon occurrence of a Tax Event, a dissolution of BBC Capital in which holders of the Preferred Securities receive cash may be a taxable event to such holders. See "Certain Federal Income Tax Consequences--Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of BBC Capital." There can be no assurance as to the market prices for the Preferred Securities or the Junior Subordinated Debentures that may be distributed in exchange for Preferred Securities upon a dissolution or liquidation of BBC Capital. The Preferred Securities or the Junior Subordinated Debentures, may, therefore, trade at a discount to the price that the investor paid to purchase the Preferred Securities offered hereby. Because holders of Preferred Securities may receive Junior Subordinated Debentures, prospective purchasers of Preferred Securities are also making an investment decision with regard to the Junior Subordinated Debentures and should carefully review all the information regarding the Junior Subordinated Debentures contained herein. If the Junior Subordinated Debentures are distributed to the holders of Preferred Securities upon the liquidation of BBC Capital, the Company will use all reasonable efforts to list the Junior Subordinated Debentures on The Nasdaq Stock Market's National Market or SmallCap Market or such stock exchanges, if any, on which the Preferred Securities are then listed. LIMITED COVENANTS The covenants in the Indenture are limited and there are no covenants in the Trust Agreement. As a result, neither the Indenture nor the Trust Agreement protects holders of Junior Subordinated Debentures or Preferred Securities, respectively, in the event of a material adverse change in the Company's financial condition or results of operations or limits the ability of the Company or any subsidiary to incur or assume additional indebtedness or other obligations. Additionally, neither the Indenture nor the Trust Agreement contain any financial ratios or specified levels of liquidity to which the Company must adhere. Therefore, the provisions of these governing instruments should not be considered a significant factor in evaluating whether the Company will be able to comply with its obligations under the Junior Subordinated Debentures or the Guarantee. 18 ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES; TRADING PRICE AND TAX CONSIDERATIONS There is no current public market for the Preferred Securities. Application has been made to list the Preferred Securities on The Nasdaq National Market. However, one of the requirements for listing and continued listing is the presence of two market makers for the Preferred Securities. The Company has been advised that the Underwriters intend to make a market in the Preferred Securities. However, the Underwriters are not obligated to do so and such market making may be discontinued at any time. Therefore, there is no assurance that an active trading market will develop for the Preferred Securities or, if such market develops, that it will be maintained or that the market price will equal or exceed the public offering price set forth on the cover page of this Prospectus. Accordingly, holders of Preferred Securities may experience difficulty reselling them or may be unable to sell them at all. The public offering price for the Preferred Securities has been determined through negotiations between the Company and the Underwriters. Prices for the Preferred Securities will be determined in the marketplace and may be influenced by many factors, including prevailing interest rates, the liquidity of the market for the Preferred Securities, investor perceptions of the Company and general industry and economic conditions. Further, should the Company exercise its option to defer any payment of interest on the Junior Subordinated Debentures, the Preferred Securities may trade at prices that do not fully reflect the value of accrued but unpaid interest with respect to the underlying Junior Subordinated Debentures. In the event of such a deferral, a holder of Preferred Securities that disposes of its Preferred Securities between record dates for payments of Distributions (and consequently does not receive a Distribution from BBC Capital for the period prior to such disposition) will nevertheless be required to include accrued but unpaid interest on the Junior Subordinated Debentures through the date of disposition in income as ordinary income and to add such amount to the adjusted tax basis in the holder's pro rata share of the underlying Junior Subordinated Debentures deemed disposed of. Such holder will recognize a capital loss to the extent the selling price (which may not fully reflect the value of accrued but unpaid interest) is less than its adjusted tax basis (which will include all accrued but unpaid interest). Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. See "Certain Federal Income Tax Consequences--Sales of Preferred Securities." PREFERRED SECURITIES ARE NOT INSURED The Preferred Securities are not insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation or by any other governmental agency. LOAN PORTFOLIO CONSIDERATIONS Loans receivable, net at BankAtlantic increased by approximately $996 million or 120% at December 31, 1996, from December 31, 1995. All components of lending increased in 1996 due to approximately $395.0 million of loans acquired in connection with the BNA acquisition, $465.9 million of wholesale residential loan purchases and an increase in loan fundings associated with residential real estate, construction and development and consumer loans of $111.0 million during 1996 compared to 1995. Commercial real estate and construction loans at BankAtlantic increased by approximately $155.4 million or 41% at December 31, 1996 from December 31, 1995. With respect to development and construction loans, the underlying real estate projects may be in the early stages of development. Further, these loans are concentrated in Broward, Dade and Palm Beach Counties, Florida. Recent increases in funding availability from competitors for commercial real estate projects could result in over building and a decline in real estate values. A decline in the real estate market, or in economic conditions in general, in Dade, Broward, and Palm Beach counties could have a material adverse effect on BankAtlantic's financial condition and results of operations. With respect to the wholesale residential loan purchases, the real estate securing such loans is located outside BankAtlantic's primary market area. Future purchases of wholesale residential loans will more than likely consist of loans secured by properties located outside BankAtlantic's market area. See "Business--Lending Activities." 19 BankAtlantic also makes various types of secured and unsecured consumer loans, including indirect automobile loans, and commercial business loans. Consumer and commercial business loans generally involve more credit risk than residential mortgage loans because of the higher potential of defaults and the difficulties involved in disposing of the collateral, if any. See "Business--Lending Activities." POTENTIAL IMPACT OF CHANGES IN INTEREST RATES BankAtlantic's profitability is dependent to a large extent on its net interest income, which is the difference between its interest income on interest-earning assets and its interest expense on interest-bearing liabilities. BankAtlantic, like most financial institutions, is affected by changes in general interest rate levels, which are currently at relatively low levels, and by other economic factors beyond its control. Interest rate risk arises from mismatches (I.E., the interest sensitivity gap) between the dollar amount of repricing or maturing assets and liabilities, and is measured in terms of the ratio of the interest rate sensitivity gap to total assets. More assets repricing or maturing than liabilities over a given time frame is considered asset-sensitive and is reflected as a positive gap, and more liabilities repricing or maturing than assets over a given time frame is considered liability-sensitive and is reflected as a negative gap. An asset-sensitive position (I.E., a positive gap) will generally enhance earnings in a rising interest rate environment and will negatively impact earnings in a falling interest rate environment, while a liability-sensitive position (I.E., a negative gap) will generally enhance earnings in a falling interest rate environment and negatively impact earnings in a rising interest rate environment. Fluctuations in interest rates are not predictable or controllable. BankAtlantic has attempted to structure its asset and liability management strategies to mitigate the impact on net interest income of changes in market interest rates. At December 31, 1996, BankAtlantic had a one year cumulative positive gap of .42%. This positive one year gap position may, as noted above, have a negative impact on earnings in a falling interest rate environment. See "Management's Discussion and Analysis of Results of Operations and Financial Condition--Interest Rate Sensitivity." REGULATORY OVERSIGHT BankAtlantic is subject to extensive regulation, supervision and examination by the OTS as its chartering authority and primary federal regulator, and by the FDIC, which insures its deposits up to applicable limits. BankAtlantic is a member of the FHLB of Atlanta and is subject to certain limited regulation by the Federal Reserve Board. As the holding company of BankAtlantic, the Company is also subject to regulation and oversight by the OTS. See "Regulation and Supervision." Such regulation and supervision governs the activities in which an institution may engage and is intended primarily for the protection of the FDIC insurance funds and depositors. Regulatory authorities have been granted extensive discretion in connection with their supervisory and enforcement activities and regulations have been implemented which have increased capital requirements, increased insurance premiums and have resulted in increased administrative, professional and compensation expenses. Any change in the regulatory structure or the applicable statutes or regulations could have a material impact on the Company and BankAtlantic and their operations. See "Regulation and Supervision." Additional legislation and regulations may be enacted or adopted in the future which could significantly affect the powers, authority and operations of BankAtlantic and BankAtlantic competitors which in turn could have a material adverse affect on BankAtlantic and its operations. See "Regulation and Supervision--Legislative Developments." COMPETITION The Company competes with various types of financial institutions, including other savings institutions, commercial banks, finance companies, mortgage banking companies, money market funds and credit unions, many of which have substantially greater financial resources than the Company and, in some cases, operate under fewer regulatory constraints. The Company not only competes with financial institutions headquartered in the State of Florida but also competes with a number of financial institutions headquartered outside of Florida who are active in the state. See "Business--Competition." See "Regulation and Supervision--Legislative Developments" for a discussion of recently enacted legislation that could result in increased competition from bank holding companies headquartered outside of Florida. 20 THE COMPANY The Company is the holding company for BankAtlantic. BankAtlantic reorganized into a holding company form in 1994 based on the belief that a holding company structure would provide greater financial and operating flexibility, including increased access to the capital markets for offerings such as the offering being made herein. Capital raised by the Company may be used to fund activities and transactions at the Company level or may be contributed to BankAtlantic to fund acquisitions or support growth. See "Use of Proceeds". The Company's activities to date have consisted solely of activities incident to its ownership of BankAtlantic. Accordingly, the business of the Company is the business of BankAtlantic and its subsidiaries. The principal executive offices of the Company are located at 1750 East Sunrise Boulevard, Fort Lauderdale, Florida, 33304, and its telephone number is (954) 760-5000. USE OF PROCEEDS BBC Capital will use the gross proceeds received from the sale of the Preferred Securities to purchase the Junior Subordinated Debentures from the Company. The net proceeds to the Company from the sale of the Junior Subordinated Debentures are estimated to be approximately $ million ($ million if the Underwriters' over-allotment option is exercised in full) after deduction of the underwriting discount and estimated expenses. The net proceeds from the sale of the Junior Subordinated Debentures will be used by the Company for general corporate purposes, including repurchase of its common stock, financing of possible future acquisitions and contribution to the capital of BankAtlantic. Such funds will similarly be utilized by BankAtlantic for general corporate purposes, including working capital, financing possible future acquisitions and for supporting growth. MARKET FOR THE PREFERRED SECURITIES Application has been made to list the Preferred Securities on the Nasdaq Stock Market's National Market under the symbol BANCP. Although the Underwriters have informed the Company that they presently intend to make a market in the Preferred Securities, the Underwriters are not obligated to do so and any such market making may be discontinued at any time. Accordingly, there is no assurance that an active and liquid trading market will develop or, if developed, that such a market will be sustained. The offering price and distribution rate have been determined by negotiations among representatives of the Company and the Underwriters, and the offering price of the Preferred Securities may not be indicative of the market price following the offering. See "Underwriting." ACCOUNTING TREATMENT For financial reporting purposes, BBC Capital will be treated as a subsidiary of the Company and, accordingly, the accounts of BBC Capital will be included in the consolidated financial statements of the Company. The Preferred Securities will be presented as a separate line item in the consolidated balance sheet of the Company under the caption "Guaranteed Preferred Beneficial Interests in Company's Junior Subordinated Debentures," and appropriate disclosures about the Preferred Securities, the Guarantee and the Junior Subordinated Debentures will be included in the notes to consolidated financial statements. For financial reporting purposes, the Company will record Distributions payable on the Preferred Securities as an expense in the consolidated statements of operations. As long as any Preferred Securities remain outstanding, all future reports of the Company filed under the Exchange Act will (a) present the Trust Securities issued by BBC Capital on the balance sheet as a separate line-item entitled "Guaranteed preferred beneficial interests in Company's Junior 21 Subordinated Debentures," (b) include in a footnote to the financial statements disclosure that the sole assets of BBC Capital are the Junior Subordinated Debentures (including the outstanding principal amount, interest rate and maturity date of such Junior Subordinated Debentures), and (c) include in an audited footnote to the financial statements disclosure that the Company owns all of the Common Securities of BBC Capital, the sole assets of BBC Capital are the Junior Subordinated Debentures, and the back-up obligations, in the aggregate, constitute a full and unconditional guarantee by the Company of the obligations of BBC Capital under the Preferred Securities. CAPITALIZATION The following table sets forth the consolidated historical capitalization, including deposits, of the Company at December 31, 1996 and as adjusted to reflect the issuance of the Preferred Securities hereby offered by BBC Capital and receipt by the Company of the net proceeds from the corresponding sale of the Junior Subordinated Debentures to BBC Capital. The information set forth below should be read in conjunction with the Consolidated Financial Statements of the Company included elsewhere in this Prospectus.
DECEMBER 31, 1996 ----------------------------- ACTUAL AS ADJUSTED ------------- -------------- (DOLLARS IN THOUSANDS) DEPOSITS AND BORROWINGS: Deposits ............................................... $1,832,780 $1,832,780 Advances from FHLB ..................................... 295,700 295,700 Securities sold under agreements to repurchase ........ 190,588 190,588 Subordinated debentures ................................ 78,500 78,500 GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S JUNIOR SUBORDINATED DEBENTURES(1) .................... 0 50,000 STOCKHOLDERS' EQUITY: Class A Common Stock, 30,000,000 shares authorized, 7,807,258 shares issued and outstanding .............. 78 78 Class B Common Stock, 15,000,000 shares authorized, 10,542,116 shares issued and outstanding ............. 105 105 Additional paid in capital ............................. 64,171 64,171 Retained earnings ...................................... 82,602 82,602 Net unrealized appreciation on debt securities available for sale--net of deferred income taxes ............... 748 748 ------------- -------------- Total stockholders' equity ............................ $ 147,704 $ 147,704 ============= ==============
- ----------------------------------------------------------------------------- (1) Preferred Securities representing beneficial interest in an aggregate amount of $50 million of the % Junior Subordinated Debentures of the Company. The Junior Subordinated Debentures will mature on , 2027. 22 SELECTED CONSOLIDATED FINANCIAL DATA The Selected Consolidated Financial Data presented below has been derived from the audited Consolidated Financial Statements of the Company and are qualified in their entirety by reference to the more detailed Consolidated Financial Statements and Independent Auditors Reports, included elsewhere within. Where appropriate, amounts and percentages have been adjusted for the July 1996 and February 1997 five for four common stock splits effected in the form of 25% stock dividends, issued August 1996 and March 1997.
AT DECEMBER 31, ---------------------------------------------------------------------------- -- 1996 1995 1994 1993 1992 -------------- -------------- -------------- -------------- -------------- (IN THOUSANDS, EXCEPT SHARE DATA) STATEMENT OF FINANCIAL CONDITION: Total assets ...................................... $ 2,605,527 $ 1,750,689 $ 1,539,653 $ 1,359,195 $ 1,303,071 Loans receivable-net .............................. 1,824,856 828,630 546,396 485,956 556,662 Mortgage-backed securities held to maturity ...... 0 0 573,913 443,249 349,531 Debt securities available for sale ................ 439,345 691,803 53,969 83,116 137,963 Investment and trading account securities, net(1) 54,511 49,856 211,776 97,701 120,424 Mortgage servicing rights ......................... 25,002 20,738 20,584 19,833 7,655 Cost over fair value of net assets acquired and other intangibles ............................... 29,008 11,521 0 0 0 Deposits .......................................... 1,832,780 1,300,377 1,085,782 1,076,360 1,108,115 Subordinated debentures, capital notes and note payable ................................ 78,500 21,001 0 0 9,524 Advances from FHLB, federal funds purchased and securities sold under agreements to repurchase .. 486,288 269,222 311,879 149,435 87,632 Total stockholders' equity ........................ 147,704 120,561 105,520 90,652 66,165
- ----------------------------------------------------------------------------- (1) Excludes FHLB stock. Includes interest-bearing deposits in other banks and securities purchased under agreement to resell. Excludes $109,931 of banker's acceptances in 1993, and includes trading account securities of $9.1 million in 1994.
AT OR FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------------------------ 1996 1995 1994 1993 1992 -------------- -------------- -------------- -------------- -------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATING RESULTS Total interest income .................... $ 152,631 $ 130,077 $ 98,549 $ 94,503 $ 116,476 Total interest expense ................... 77,031 65,686 41,431 35,987 55,567 -------------- -------------- -------------- -------------- -------------- Net interest income ...................... 75,600 64,391 57,118 58,516 60,909 Provision for loan losses ................ 5,844 4,182 2,299 3,450 6,650 -------------- -------------- -------------- -------------- -------------- Net interest income after provision for loan losses ............................ 69,756 60,209 54,819 55,066 54,259 -------------- -------------- -------------- -------------- -------------- NON-INTEREST INCOME: Loan servicing and other loan fees ..... 4,216 3,524 3,365 2,229 2,869 Gains on sales of loans originated for resale ............................. 534 395 773 1,246 976 Gains on sales of mortgage servicing rights ....................... 4,182 2,744 484 0 0 Gains on sales of investment and mortgaged-backed securities, net ....... 5,959 0 0 0 5,869 Unrealized and realized gains (losses) on trading account securities ............. 0 589 (558) 0 0 Gain (loss) on sales of property and equipment, net ......................... 3,061 18 272 (73) (71) Other .................................... 15,785 12,118 9,427 8,236 7,408 -------------- -------------- -------------- -------------- -------------- Total non-interest income ................ 33,737 19,388 13,763 11,638 17,051 -------------- -------------- -------------- -------------- --------------
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AT OR FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------------------- 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------------- ------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATING RESULTS (CONTINUED) NON-INTEREST EXPENSE: Employee compensation and benefits .... 33,216 25,403 22,382 19,617 19,202 Occupancy and equipment ................ 13,615 10,831 8,061 8,417 8,864 SAIF one time special assessment ...... 7,160 0 0 0 0 Federal insurance premium .............. 2,495 2,750 2,673 2,750 2,772 Advertising and promotion .............. 2,079 2,144 1,495 960 480 Foreclosed asset activity--net ......... (725) (3,178) (2,290) 1,243 4,323 Other .................................. 14,401 13,210 9,764 10,546 11,176 ------------- ------------- ------------- ------------- ------------- Total non-interest expense ............. 72,241 51,160 42,085 43,533 46,817 ------------- ------------- ------------- ------------- ------------- Income before income taxes and extraordinary item ................... 31,252 28,437 26,497 23,171 24,493 Provision for income taxes ............. 12,241 10,018 9,662 7,093 9,201 ------------- ------------- ------------- ------------- ------------- Income before extraordinary item ...... 19,011 18,419 16,835 16,078 15,292 Extraordinary item net of taxes ....... 0 0 0 0 756 (2) ------------- ------------- ------------- ------------- ------------- NET INCOME 19,011 18,419 16,835 16,078 16,048 Dividend on non-cumulative preferred stock paid by BFC escrow ............. 0 0 0 147 880 Dividends on non-cumulative preferred stock ................................ 0 677 880 733 0 Amounts classified as dividends on non-cumulative preferred stock redemption ........................... 0 1,353 (1) 0 0 0 ------------- ------------- ------------- ------------- ------------- Total dividends on non-cumulative preferred stock ...................... 0 2,030 880 880 880 ------------- ------------- ------------- ------------- ------------- Net income available for common shares $ 19,011 $ 16,389 $ 15,955 $ 15,198 $ 15,168 ============= ============= ============= ============= ============ NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE: Net income before extraordinary item . $ 1.01 $ 0.97 (1) $ 0.97 $ 1.03 $ 1.26 Extraordinary item ..................... 0.00 0.00 0.00 0.00 0.06 ------------- ------------- ------------- ------------- ------------- Net income ............................. $ 1.01 $ 0.97 $ 0.97 $ 1.03 $ 1.32 ============= ============= ============= ============= ============ NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE ASSUMING FULL DILUTION: Net income before extraordinary item . $ 0.93 $ 0.96 (1) $ 0.97 $ 1.02 $ 1.09 Extraordinary item ..................... 0.00 0.00 0.00 0.00 0.06 ------------- ------------- ------------- ------------- ----------- Net income ............................. $ 0.93 $ 0.96 $ 0.97 $ 1.02 $ 1.15 ============= ============= ============= ============= Book value per common share ............ $ 8.05 $ 7.28 $ 6.12 $ 5.20 $ 5.06 ============= ============= ============= ============= ============= Tangible book value per share .......... $ 6.47 $ 6.59 $ 6.12 $ 5.20 $ 5.02 ============= ============= ============= ============= Weighted average number of common and common equivalent shares outstanding . 18,896,691 16,922,816 16,390,677 14,781,256 11,460,204 ============= ============= ============= ============= ============= Weighted average number of common and common equivalent shares assuming full dilution ............................. 21,833,015 17,084,563 16,438,264 14,872,560 13,283,200 ============= ============= ============= ============= ============= Actual common shares outstanding at period end ........................... 18,349,374 16,551,561 15,871,239 15,816,906 11,429,756 ============= ============= ============= ============= =============
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FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------------- 1996 1995 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- OTHER FINANCIAL AND STATISTICAL DATA PERFORMANCE RATIOS: Return on average assets(3) ..................... 0.94 % 1.07 % 1.17 % 1.25 % 1.10 % Return on average equity(3) ....................... 14.08 16.03 17.07 21.32 27.09 Cash dividend payout ratio(4) (8) ................. 11.36 10.62 9.87 4.86 0.00 Average equity to average assets .................. 6.70 6.66 6.86 5.85 4.07 Average yield on loans, mortgage-backed securities, tax certificates and investment securities ........................... 8.23 8.16 7.45 7.95 9.14 Average cost of deposits and borrowings .......... 4.47 4.51 3.38 3.28 4.54 Net interest spread--during period(5) ............. 3.76 3.65 4.07 4.67 4.60 Interest rate margin--during period(5) ............ 4.08 4.04 4.32 4.90 4.78 Efficiency ratio(6) ............................... 66.07 61.07 59.37 62.03 60.22 OTHER FINANCIAL DATA: Cash dividends per common share(8) ................ $ 0.240 $ 0.133 $ 0.120 $ 0.062 $ 0.000 ASSET QUALITY RATIOS: Non-performing assets as a percent of total loans, tax certificates and real estate owned .......... 1.26 % 2.37 % 3.66 % 3.34 % 3.80 % Net charge-offs as a percent of average loans .... 0.47 0.45 0.59 0.56 0.60 Loan loss allowance as a percent of total loans .. 1.39 2.24 2.89 3.38 2.88 Loan loss allowance as a percent of non-performing loans ............................ 167.37 149.49 134.87 173.01 142.93 Non-performing loans as a percent of total loans ..................................... 0.83 1.50 2.14 1.95 2.01 Non-performing assets as a percent of total assets .................................... 0.93 1.23 1.51 1.47 2.07 RATIO OF EARNINGS TO FIXED CHARGES:(7) Including interest on deposits .................. 1.40 1.43 1.63 1.63 1.43 Excluding interest on deposits .................... 2.34 2.41 3.50 5.67 3.62 NUMBER OF: Offices (all full-service) ........................ 56 43 32 31 31 Branches with ATMs ................................ 56 43 29 29 29 Non-Branch ATMs ................................... 164 154 153 0 0 Deposit accounts .................................. 218,061 120,067 110,002 113,459 120,558 Loans ............................................. 37,707 23,172 15,319 19,163 27,761
- ----------------------------------------------------------------------------- (1) The excess of the redemption price above the recorded amount of preferred stock is considered a preferred stock dividend. The impact of the October 1995 preferred stock redemption for the year ended December 31, 1995 was a reduction of $0.08 for primary and fully diluted earnings per share. (2) Utilization of state net operating loss carry-forwards. (3) Based on income before extraordinary item. The return on average assets and average equity ("ROA" and "ROE") based on net income was 1.16% and 28.43%, respectively, for the year ended December 31, 1992. ROA and ROE excluding the $7.2 million SAIF one-time special assessment would have been 1.16% and 17.34%, respectively, for the year ended December 31, 1996. (4) Cash dividends declared on common shares divided by net income available for common shares. The cash dividend payout ratio for the year ended December 31, 1995 excluding the October 1995 preferred stock redemption was 9.81%. (5) Interest rate spread is equal to total interest earned on interest earning assets divided by average interest earning assets, less the total of interest expense divided by average interest-bearing liabilities. Interest rate margin is equal to total interest earned on average interest earning assets divided by average interest earning assets less the total of interest expense divided by average interest earning assets. Interest rate spread and margin during periods is based upon daily average balances of interest-bearing assets and liabilities. (6) The efficiency ratio is operating expenses (non-interest expenses) as a percent of net interest income plus non-interest income. Excluding the $7.2 million SAIF one-time special assessment, this ratio for the year ended December 31, 1996 would have been 59.52%. (7) Represents earnings before fixed charges, income taxes, and extraordinary items and non-cumulative preferred stock dividends and redemption. Fixed charges includes interest expense (inclusive or exclusive of interest on deposits as indicated). (8) Includes dividends for both Class A and Class B common stock. 25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION GENERAL BankAtlantic Bancorp, Inc.'s (the "Company") primary asset is the capital stock of BankAtlantic, a Federal Savings Bank ("BankAtlantic"), and its principal activities relate to the operations of BankAtlantic. During 1996 the Company issued $57.5 million of 6 3/4 % convertible debentures ("6 3/4 % Debentures") due July 1, 2006. The 6 3/4 % Debentures are convertible into Class A common stock at an exercise price of $10.24 per share. Net proceeds to the Company were $55.1 million net of underwriting discount and offering expenses. The Company contributed $40.0 million of the proceeds to BankAtlantic, and invested $3.9 million in marketable securities to cover two semi-annual interest payments in accordance with the terms of the underlying indenture. The balance of the net proceeds are available for general corporate purposes. Also during 1996, the Company issued approximately 2.1 million shares of Class A common stock in an underwritten public offering at $9.60 per share. Net proceeds to the Company were $18.1 million. The Company used the proceeds to contribute $14.0 million to the capital of BankAtlantic and repurchase $3.3 million of common stock. During 1995, the Company issued $21.0 million of 9% subordinated debentures (the "9% Debentures") due in October 2005. The proceeds of the offering were utilized as follows: $6.0 million was contributed to the capital of BankAtlantic, $2.9 million was utilized to repay a note payable, $8.4 million was used to redeem all of the outstanding shares of the Company's non-cumulative preferred stock, and in accordance with the terms of the underlying indenture, $1.9 million was invested in marketable securities to cover two semi-annual interest payments. Presently the Company has no significant operations and does not require funds other than to pay certain operating expenses, interest on the 6 3/4 % and 9% Debentures and dividend payments to its common shareholders. It is anticipated that funds for payment of its operating and interest expenses will continue to be obtained from BankAtlantic. Additionally, the Company intends to continue to pay regular quarterly cash dividends on its common stock. Payment of dividends by the Company will primarily be dependent upon BankAtlantic's ability to pay dividends or otherwise distribute funds to the Company. RESULTS OF OPERATIONS Net income available for common shares of $19.0 million, 16.4 million, and $16.0 million was recorded for the three years ended December 31, 1996, 1995 and 1994, respectively. Net interest income for 1996 reflects the October 1996 acquisition of BNA which increased loans, debt securities available for sale and deposits by $395.0 million, $66.4 million, and $469.1 million, respectively. Net interest income for 1995 reflects the February 1995 acquisition of MegaBank which increased loans, debt securities available for sale and deposits by $116.4 million, $18.1 million, and $120.2 million, respectively. Furthermore, loan fundings and purchases for portfolio during 1996 were $1.2 billion compared to $648.5 million and $372.1 million during 1995 and 1994, respectively. Net interest income during 1994 reflects $768,000 realized from the repayment of a loan purchased at a discount and a $1.4 million reversal of accrued tax certificate interest income to previously established allowance accounts. The $1.4 million interest reversal was offset by a $1.4 million reduction in provision for tax certificate losses included in non-interest expense. Non-interest income during 1996 included $4.2 million of gains on the sales of mortgage servicing rights, $6.0 million of realized gains on sales of debt securities available for sale, $3.1 million of gains on sales of properties leased to others and $534,000 of gains on the sales of loans originated for resale. During 1995, non-interest income included gains on sales of mortgage servicing rights, unrealized and realized gains on trading account securities, gains on sales of property and equipment and gains on sales of loans originated for resale of $2.7 million, $589,000, $18,000 and $395,000, respectively. During 1994, non-interest income included gains on sales of mortgage servicing rights, unrealized losses on trading account securities, gains on sales of property and equipment and gains on sales of loans originated for resale of $484,000, ($558,000), $272,000 and $773,000, respectively. ATM and transaction fee income was $12.5 million during 1996 compared to $9.0 million and $6.4 million during 1995 and 1994, respectively. Non-interest expenses during 1996 included a $7.2 million SAIF one-time special assessment. Employee compensation and occupancy and 26 equipment expense increased for each of the years in the three year period ended December 31, 1996 primarily as a result of the acquisition of MegaBank and BNA during 1995 and 1996, respectively, and the expansion of Wal-Mart in-store branches during 1995 and 1996. Provision for loan losses increased during 1996 to $5.8 million compared to $4.2 million and $2.3 million for the years ended December 31, 1995 and 1994, respectively. The increase during 1996 compared to the same period during 1995 reflects generally, increased levels of loans and specifically higher consumer and non-mortgage loan charge-offs. The increase during 1995 compared to 1994 reflects lower loan loss recoveries from the Subject Portfolio and higher non-mortgage loan charge-offs. The 1995 and 1994 tax provisions were reduced by $972,000 and $492,000 due to a reduction in the deferred tax asset valuation allowance. See Note 11 of the Consolidated Financial Statements for a further discussion. Net income available for common shareholders increased in 1996 by $2.6 million compared to 1995 and 1995 net income available for common shareholders increased by $434,000 compared to 1994. However, comparative net income per share amounts decreased. The decrease in earnings per share in 1996 resulted from the issuance of Class A common stock in early 1996, and the issuance of the 6 3/4 % Debentures in July 1996. Income per common equivalent share assuming full dilution and excluding the $7.2 million SAIF special assessment was $1.13 per common share for 1996 compared to 1995 income per common equivalent share assuming full dilution of $0.96. The decrease in 1995 income per share amounts was due to the October 1995 redemption of the Company's preferred stock at the stated redemption price of $25.00 per share. This amount resulted in a payment of $1.4 million above the recorded amount of the preferred stock. In accordance with generally accepted accounting principles ("GAAP"), the $1.4 million is not reflected in operations and has no effect on net income but does impact income per share since it is treated as a preferred stock dividend which reduced income per common share by $0.08 for both primary and fully diluted earnings per share. The primary reason for the redemption of the preferred stock was that the redemption resulted in savings representing an estimated after tax equivalent rate reduction of over 5%. BankAtlantic experienced a declining interest rate environment in 1996. During 1996, interest margins increased compared to 1995 as BankAtlantic shifted the mix of its interest earning assets from lower earning debt securities and investments to higher earning loans. During 1995 the interest margin decreased compared to 1994 as interest rates increased. A negative interest rate sensitivity gap provides the potential for widening interest margins and increased earnings during times of declining rates. However, a negative gap will correspondingly negatively impact earnings when rates increase. The cumulative one year interest rate gap was a positive .42% at December 31, 1996 compared to a negative 2.49% and 13.74% at December 31, 1995 and 1994, respectively. The 1996 improvement in the one year cumulative interest rate gap resulted from higher commercial real estate and construction loan balances, an increase in stockholders' equity, non-interest bearing deposits and intermediate term FHLB advances, partially offset by higher fixed rate residential loan balances (See "Asset and Liability Management" and "Interest Rate Sensitivity" for further discussions). The 1995 decline in the one year cumulative negative interest rate gap resulted from higher short term borrowings during the fourth quarter of 1994. In addition, during 1994, and most of 1995, a period when interest rates were increasing, liabilities repriced at a faster pace than BankAtlantic's assets, causing the net interest margin to decline from 4.32% during the comparable 1994 period and to 4.04% during 1995. The net interest margin increased during 1996 to 4.08% for the reasons discussed above. 27 NET-INTEREST INCOME A summary of net interest income follows:
1996 1995 FOR THE YEARS TO TO ENDED DECEMBER 31, 1995 1994 ------------------------------------- CHANGE CHANGE 1996 1995 1994 ----------- ----------- ----------- -------- ------- (IN THOUSANDS) Interest and fees on loans ..................... $107,922 $ 72,841 $ 49,426 $ 35,081 $ 23,415 Interest on banker's acceptances ............... 22 0 406 22 (406) Interest on mortgage-backed securities held to maturity ....................................... 0 37,855 30,550 (37,855) 7,305 Interest on debt securities available for sale 38,159 7,207 5,542 30,952 1,665 Interest and dividends on investment securities 6,528 12,174 12,625 (5,646) (451) Interest on deposits ........................... (55,028) (46,646) (31,646) (8,382) (15,000) Interest on advances from FHLB ................. (9,221) (7,449) (4,976) (1,772) (2,473) Interest on securities sold under agreements to repurchase and federal funds purchased ........ (8,764) (10,815) (4,809) 2,051 (6,006) Interest on capital notes, subordinated debentures and note payable .................... (4,018) (776) 0 (3,242) (776) ----------- ----------- ----------- ----------- ----------- Total net interest income ...................... $ 75,600 $ 64,391 $ 57,118 $ 11,209 $ 7,273 =========== =========== =========== =========== ===========
Net interest income increased for the year ended December 31, 1996. The increase in interest on loans during 1996 compared to 1995 was primarily due to higher average balances, partially offset by lower average yields. The higher loan average balances resulted from the 1996 BNA acquisition, residential loan purchases and loan originations. The BNA acquisition increased residential, commercial real estate, commercial business, and consumer loans by $221.0 million, $53.6 million, $31.8 million and $88.6 million, respectively. During the year ended December 31, 1996, BankAtlantic funded and purchased $1.2 billion of loans compared to $648.5 million of loans during 1995. As a result, BankAtlantic's average loan balances increased from $750.1 million during the year ended December 31, 1995 to $1.2 billion during 1996. The lower yields earned on real estate loans resulted from a change in the loan portfolio mix from higher yielding commercial real estate and non-mortgage loans to residential loans. The decrease in consumer loan yields resulted from the origination of loans at lower rates and the acquisition of the BNA loan portfolio. The increase in commercial loan yields was due to higher yields in the BNA loan portfolio. The composition of the loan portfolio changed as follows: residential real estate loans as a percent of loans receivable, net increased from 21.69% at December 31, 1995 to 48.63% at December 31, 1996. The percent of consumer and commercial business loans to loans receivable, net at December 31, 1996 was 18.89% and 4.28% compared to 26.82% and 7.75% at December 31, 1995, respectively. The percent of commercial real estate loans to loans receivable, net at December 31, 1996 was 39.95% compared to 57.04% at December 31, 1995. In December 1995, all mortgage-backed and investment securities, excluding tax certificates then classified as held to maturity, were reclassified as available for sale and all securities purchased during 1996 were also classified as available for sale. During 1996 there were no mortgage-backed securities held to maturity. Total mortgage-backed and investment securities average balances declined from $844.8 million for the year ended December 31, 1995 to $677.4 million for the comparable 1996 period. During the year ended December 31, 1996, BankAtlantic sold $368.5 million of mortgage-backed and investment securities and collected $95.6 million of principal on mortgage-backed and investment securities. The sales and principal repayments were partially offset by $231.8 million of treasury notes purchased and $66.4 million of treasury notes acquired in connection with the BNA acquisition. The lower yields earned on total mortgage-backed and investment securities reflect the prepayment of higher yielding securities and the purchase of treasury notes described above. BankAtlantic began issuing banker's acceptances with the acquisition of BNA in October 1996. 28 Net interest income increased for the year ended December 31, 1995. The increase in interest on loans during 1995 compared to the same period in 1994 was primarily due to higher average balances and yields earned on real estate loans and commercial business loans, and higher average balances of consumer loans. The above items were partially offset by lower average balances on banker's acceptances and lower yields earned on consumer loans. The higher loan average balances resulted from the 1995 MegaBank acquisition and increased loan originations. The MegaBank acquisition increased loans receivable by $116.4 million. During the year ended December 31, 1995 BankAtlantic funded and purchased $648.5 million of loans compared to $372.1 million of loans during 1994. The higher yields earned on real estate and commercial business loans reflect the increase in the prime rate of interest during 1995. The higher real estate and commercial business loan yields were partially offset by lower consumer loan yields as a result of the MegaBank acquisition and the repayment of higher yielding consumer loans. The increased income on mortgage-backed securities during 1995 was caused by higher average balances during the period and higher yields earned on adjustable rate mortgage-backed securities. During the year ended December 31, 1994, $268.8 million of mortgage backed securities were purchased and in January 1995, $75.3 million of adjustable rate mortgage-backed securities were purchased resulting in average mortgage-backed securities balances increasing from $514.5 million during the year ended December 31, 1994 to $574.0 million during the comparable 1995 period. Adjustable rate mortgage-backed securities purchased in prior periods repriced during the fourth quarter of 1994 and during 1995 causing an increase in the average yields earned on the portfolio. The increase in interest income on debt securities available for sale reflects higher average balances partially offset by lower yields. The higher average balances reflect the acquisition of $18.1 million of debt securities in connection with the MegaBank acquisition and the transfer from "held to maturity" of $638.8 million of securities to "available for sale" on December 15, 1995. The securities transferred increased the available for sale average balance by $24.9 million for the year ended December 31, 1995. The lower yields resulted primarily from the prepayments of higher yielding 15 and 30 year mortgage-backed securities. The decrease in interest and dividends on investment securities was primarily caused by lower average balances partially offset by a $1.4 million reversal of tax certificate interest during 1994. The reversal of tax certificate interest resulted from a change in methodology for classifying tax certificates and calculating the allowance for tax certificate losses. The 1994 tax certificate interest reversal was to previously established allowance accounts. The increase in interest expense on deposits for the year ended December 31, 1996 resulted from higher deposit balances during 1996. The increased deposit balances primarily resulted from $469.1 million of deposits acquired in connection with the acquisition of BNA. Average deposits increased from $1.14 billion during the year ended December 31, 1995 to $1.33 billion during 1996. Deposit rates during 1996 were lower on transaction accounts and higher on certificate accounts compared to 1995. During 1996, the interest rate environment enabled BankAtlantic to lower transaction account rates, whereas higher certificate accounts rates were due to competition. The lower interest cost on deposits during 1995 compared to 1994 was due to higher deposit balances during 1995, a change in the deposit mix from transaction accounts to time deposits and higher short term rates during 1995 compared to 1994. The average deposit mix during 1996 was 55% and 45% certificate accounts and transaction accounts, respectively. The increased deposit balances primarily resulted from $120.2 million of deposits (including non-interest bearing deposits) acquired in connection with the acquisition of MegaBank and additional growth in certificate accounts. Average deposits increased from $1.02 billion during the year ended December 31, 1994 to $1.14 billion during the comparable 1995 period. The higher short term interest rate environment during late 1994 and through most of 1995 contributed to a change in the deposit mix from lower rate transaction accounts to generally higher rate certificate accounts. The average deposit mix changed from 43% and 57% certificate accounts and transaction accounts, respectively, for the year ended December 31, 1994 to 53% and 47% certificate accounts and transaction accounts, respectively, for the same period in 1995. The increased interest expense on advances from FHLB during 1996 was primarily due to higher average balances and secondarily to higher rates. During 1996, BankAtlantic used one to six year 29 advances from the FHLB to finance the purchase of wholesale residential loans. During 1995, advances from the FHLB had maturities of less than one year. The lower interest expense on securities sold under agreements to repurchase reflect a decline in the borrowing rates during 1996 and lower average balances. The lower average balances in 1996 of securities sold under agreements to repurchase were the result of the availability of funds provided by the July 1996 $57.5 million issuance of the 6 3/4 % Debentures and $18.1 million of proceeds from the Class A common stock offering. The increased interest expense on advances from FHLB and securities sold under agreements to repurchase were due to higher average balances and rates paid during 1995 compared to 1994. The higher borrowings during 1995 were used to fund the purchase of mortgage-backed securities, and investment securities and the acquisition of MegaBank. Interest on subordinated debentures and note payable relates to a $4.0 million note payable issued in March 1995, $21.0 million of 9% Debentures issued in 1995 and $57.5 million of 6 3/4 % Debentures issued in 1996. During the year ended December 31, 1996, BankAtlantic's average interest earning assets and average interest bearing liabilities increased compared to the 1995 period, whereas BankAtlantic's rates earned on assets and average rates paid on liabilities declined. The higher balances on earning assets increased interest income by $27.0 million. Likewise, the higher balances on interest bearing liabilities increased interest expense by $13.6 million. The above increases were partially offset by the lower rates earned on assets which reduced interest income by $4.5 million and the lower rates paid on interest bearing liabilities which reduced interest expense by $2.3 million. The increase in balances on earning assets and interest paying liabilities was caused by the acquisition of BNA, loan originations, and loan purchases during 1996. The lower rates earned on loans reflects a shift in the portfolio mix from higher yielding commercial real estate and non-mortgage loans to lower yielding residential loans. The lower rates paid on liabilities primarily reflects a decline in short term interest rates and lower transaction account rates. During the year ended December 31, 1995, BankAtlantic's average interest earning assets and interest bearing liabilities increased. BankAtlantic's rates earned on assets and average rates paid on liabilities also increased. The higher balances of earning assets increased interest income by $25.9 million and the higher rates earned on assets increased interest income by $5.7 million (which also reflects the 1994 reversal of $1.4 million of tax certificate interest income). The increased interest income was partially offset by $14.7 million of additional interest expense due to higher volume and $9.5 million of additional interest expense due to a shift in the deposit mix and a rising interest rate environment. The net interest margin was 4.08%, 4.04%, and 4.32% for the three years ended December 31, 1996, 1995 and 1994, respectively. The increased margin during 1996 resulted from a shift in the composition of interest earning assets from lower rate debt securities to higher rate loans and lower overall rates paid on interest bearing liabilities. The reduced margin during 1995 compared to 1994 resulted from higher deposit and borrowings expense due to rising short term interest rates, and the shift in the deposit mix and increased borrowings. The 1994 margin was impacted by a $1.4 million reversal of tax certificate interest income. 30 YIELDS EARNED AND RATES PAID
FOR THE YEARS ENDED ----------------------------------------------------------------- DECEMBER 31, 1996 DECEMBER 31, 1995 ------------------------------------- -------------------------- AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ BALANCE EXPENSE RATE BALANCE EXPENSE ------------- ----------- --------- ------------- ----------- (DOLLARS IN THOUSANDS) INTEREST EARNING ASSETS Loans:(A) Real estate ............................ $ 869,176 $ 77,277 8.89% $ 499,275 $ 47,591 Consumer ............................... 242,876 24,285 10.00 192,409 19,636 Commercial business .................... 65,273 6,360 9.74 58,374 5,614 ------------- ----------- --------- ------------- ----------- Total loans ............................. 1,177,325 107,922 9.17 750,058 72,841 ------------- ----------- --------- ------------- ----------- Banker's acceptances .................... 329 22 6.69 0 0 ------------- ----------- --------- ------------- ----------- Mortgage-backed securities held to maturity ........................... 0 0 0.00 573,995 37,855 Debt securities available for sale(B) .. 605,766 38,159 6.30 89,757 7,207 Investment securities(C) ................ 68,996 6,419 9.30 178,449 12,019 Federal funds sold ...................... 2,670 109 4.08 2,571 155 ------------- ----------- --------- ------------- ----------- Total mortgage-backed and investment securities ................. 677,432 44,687 6.60 844,772 57,236 ------------- ----------- --------- ------------- ----------- Total interest earning assets ........... 1,855,086 152,631 8.23% 1,594,830 130,077 ------------- ----------- --------- ------------- ----------- NON-INTEREST EARNING ASSETS Total non-interest earning assets ...... 160,588 130,008 ------------- ------------- Total assets ............................ $2,015,674 $1,724,838 ============= ============= INTEREST BEARING LIABILITIES Deposits: Savings ................................ $ 118,306 $ 2,150 1.81% $ 109,068 $ 1,987 NOW, money funds and checking .......... 478,127 12,154 2.54 421,135 11,591 Certificate accounts ................... 738,254 40,724 5.50 607,300 33,068 ------------- ----------- --------- ------------- ----------- Total interest bearing deposits ........ 1,334,687 55,028 4.11 1,137,503 46,646 ------------- ----------- --------- ------------- ----------- Securities sold under agreements to repurchase and federal funds purchased ............................. 180,661 8,764 4.84 186,592 10,815 Advances from FHLB ...................... 152,138 9,221 6.04 125,246 7,449 Subordinated debentures and note payable .......................... 49,750 4,018 8.05 5,759 546 Other borrowings ........................ 0 0 0.00 1,544 230 ------------- ----------- --------- ------------- ----------- Total interest bearing liabilities ..... 1,717,236 77,031 4.47 1,456,644 65,686 ------------- ----------- --------- ------------- ----------- NON-INTEREST BEARING LIABILITIES Demand deposit and escrows accounts ..................... 148,054 135,027 Other liabilities ...................... 15,396 18,278 ------------- ------------- Total non-interest bearing liabilities 163,450 153,305 ------------- ------------- Stockholders' equity .................... 134,988 114,889 ------------- ------------- Total liabilities and stockholders' equity ................. $2,015,674 $1,724,838 ============= ============= Net interest income/net interest spread ....................... $ 75,600 3.76% $ 64,391 =========== ========= =========== MARGIN Interest income/interest earning assets 8.23% Interest expense/interest earnings assets ....................... 4.15 --------- Net interest margin ..................... 4.08% =========
(RESTUBBED TABLE CONTINUED FROM ABOVE)
DECEMBER 31, 1994 ------------------------------------------------ YIELD/ AVERAGE REVENUE/ YIELD/ RATE BALANCE EXPENSE RATE --------- ------------- ----------- --------- INTEREST EARNING ASSETS Loans:(A) 31 DECEMBER 31, 1994 ------------------------------------------------ YIELD/ AVERAGE REVENUE/ YIELD/ RATE BALANCE EXPENSE RATE --------- ------------- ----------- --------- Real estate ............................ 9.53% $ 372,031 $33,022 8.89% Consumer ............................... 10.21 122,235 14,118 11.55 Commercial business .................... 9.62 26,647 2,286 8.58 --------- ------------- ----------- --------- Total loans ............................. 9.71 520,913 49,426 9.49 --------- ------------- ----------- --------- Banker's acceptances .................... 0.00 12,366 406 3.28 --------- ------------- ----------- --------- Mortgage-backed securities held to maturity ........................... 6.59 514,460 30,550 5.94 Debt securities available for sale(B) .. 8.03 64,891 5,542 8.54 Investment securities(C) ................ 6.74 209,588 12,579 6.00 Federal funds sold ...................... 6.03 924 46 4.98 --------- ------------- ----------- --------- Total mortgage-backed and investment securities ................. 6.78 789,863 48,717 6.17 --------- ------------- ----------- --------- Total interest earning assets ........... 8.16% 1,323,142 98,549 7.45% --------- ------------- ----------- --------- NON-INTEREST EARNING ASSETS Total non-interest earning assets ...... 114,545 --------- ------------- Total assets ............................ $1,437,687 --------- ============= INTEREST BEARING LIABILITIES Deposits: Savings ................................ 1.82% $ 122,667 $ 2,116 1.72% NOW, money funds and checking .......... 2.75 457,529 10,751 2.35 Certificate accounts ................... 5.45 442,107 18,779 4.25 --------- ------------- ----------- --------- Total interest bearing deposits ........ 4.10 1,022,303 31,646 3.10 --------- ------------- ----------- --------- Securities sold under agreements to repurchase and federal funds purchased ............................. 5.80 105,462 4,809 4.56 Advances from FHLB ...................... 5.95 99,540 4,976 5.00 Subordinated debentures and note payable .......................... 9.45 0 0 0.00 Other borrowings ........................ 14.86 0 0 0.00 --------- ------------- ----------- --------- Total interest bearing liabilities ..... 4.51 1,227,305 41,431 3.38% --------- ------------- ----------- --------- NON-INTEREST BEARING LIABILITIES Demand deposit and escrows accounts ..................... 97,477 Other liabilities ...................... 14,265 --------- ------------- Total non-interest bearing liabilities 111,742 --------- ------------- Stockholders' equity .................... 98,640 --------- ------------- Total liabilities and stockholders' equity ................. $1,437,687 --------- ============= Net interest income/net interest spread ....................... 3.65% $57,118 4.07% ========= =========== ========= MARGIN Interest income/interest earning assets 8.16% 7.45% Interest expense/interest earnings assets ....................... 4.12 3.13 --------- --------- Net interest margin ..................... 4.04% 4.32% ========= =========
- ----------------------------------------------------------------------------- (A) Includes non-accruing loans. (B) Average balances were based on amortized cost. (C) Includes securities purchased under agreements to resell, tax certificates and interest-bearing deposits. 31 RATE/VOLUME ANALYSIS
YEAR ENDED YEAR ENDED DECEMBER 31, 1996 DECEMBER 31, 1995 COMPARED TO YEAR ENDED COMPARED TO YEAR ENDED DECEMBER 31, 1995 DECEMBER 31, 1994 ------------------------------------- ----------------------------------- VOLUME(A) RATE TOTAL VOLUME(A) RATE TOTAL ----------- ----------- ----------- ---------- ----------- ---------- INCREASE (DECREASE) DUE TO: Loans .............................. $ 39,131 $(4,050) $ 35,081 $22,322 $ 1,093 $23,415 Banker's acceptances ............... 22 0 22 (406) 0 (406) Mortgage-backed securities ......... (37,855) 0 (37,855) 3,961 3,344 7,305 Debt securities available for sale 32,505 (1,553) 30,952 1,996 (331) 1,665 Investment securities .............. (6,778) 1,178 (5,600) (2,111) 1,551 (B) (560) Federal funds sold ................. 4 (50) (46) 99 10 109 ----------- ----------- ----------- ---------- ----------- ---------- Total earnings assets .............. 27,029 (4,475) 22,554 25,861 5,667 31,528 ----------- ----------- ----------- ---------- ----------- ---------- Deposits: Savings ........................... 174 (11) 163 (251) 122 (129) NOW, money funds, and checking .................... 1,405 (842) 563 (990) 1,830 840 Certificate accounts .............. 7,352 304 7,656 8,984 5,305 14,289 ----------- ----------- ----------- ---------- ----------- ---------- Total deposits ..................... 8,931 (549) 8,382 7,743 7,257 15,000 ----------- ----------- ----------- ---------- ----------- ---------- Securities sold under agreements to repurchase .................... (297) (1,754) (2,051) 4,698 1,308 6,006 Advances from FHLB ................. 1,659 113 1,772 1,527 946 2,473 Subordinated debentures ............ 3,553 (81) 3,472 546 0 546 Other borrowings ................... (230) 0 (230) 230 0 230 ----------- ----------- ----------- ---------- ----------- ---------- 4,685 (1,722) 2,963 7,001 2,254 9,255 ----------- ----------- ----------- ---------- ----------- ---------- Total interest bearing liabilities 13,616 (2,271) 11,345 14,744 9,511 24,255 ----------- ----------- ----------- ---------- ----------- ---------- Change in net interest income ..... $ 13,413 $(2,204) $ 11,209 $11,117 $(3,844) $ 7,273 =========== =========== =========== ========== =========== ==========
- ----------------------------------------------------------------------------- (A) Changes attributable to rate/volume have been allocated to volume. (B) Includes $1.4 million reversal of accrued interest on tax certificates. PROVISION FOR LOAN LOSSES AND PROVISION FOR (REVERSAL OF) LOSSES ON REAL ESTATE OWNED During the years ended December 31, 1996, 1995 and 1994, the provision for loan losses was $5.8 million, $4.2 million, and $2.3 million, respectively. The provision in each of these years was substantially impacted by larger consumer loan balances. Consumer loan net charge-offs amounted to $4.7 million, $3.3 million, and $1.5 million in 1996, 1995 and 1994, respectively. The increase in consumer loan net charge-offs resulted primarily from the acquisition of MegaBank and BNA indirect automobile loan portfolios in 1995 and 1996, respectively. Also, the 1994 consumer loan net charge-offs were significantly impacted by $1.2 million of recoveries associated with the Covenant Not to Execute (the "Covenant") described herein and in Note 15 of the Consolidated Financial Statements. There were no consumer loan recoveries relating to the Covenant during 1995 and 1996. In addition, the 1996 provision reflects $530,000 of commercial business loan net charge-offs compared to a recovery of $356,000 during 1995 and net charge-offs of $1.1 million during 1994, respectively. The 1996 commercial business net charge-offs primarily reflect charge-offs of $478,000 and $450,000 relating to unsecured loans acquired in connection with the BNA and MegaBank acquisitions, respectively. The 1996 charge-offs were partially offset by $518,000 of commercial business recoveries relating to loans charged-off in prior periods. Included in commercial business loan charge-offs during 1994 was a $1.4 million business loan. Specific allowances were established for this loan during prior years. The allowance for loan losses increased by $6.8 million and $2.8 million during 1996 and 1995, respectively. The initial allowance for loan losses acquired in connection with the BNA acquisition was $6.4 million and in the 1995 32 MegaBank acquisition the acquired allowance for loan losses was $1.9 million; such amounts account for a significant portion of the increased allowance for loan losses in 1996 and 1995. The remaining increase in the 1996 loan loss allowance resulted from additional provisions due to loan growth. The remaining increase in the 1995 loan loss allowance resulted from a $200,000 specific allowance relating to an office building loan and a $600,000 increase in loan loss allowances based on then current trends. BankAtlantic's "risk elements" consist of restructured loans and "non-performing" assets. The classification of loans as "non-performing" is generally based upon non-compliance with loan performance and collateral coverage standards, as well as management's assessment of problems related to the borrower's or guarantor's financial condition. BankAtlantic generally designates any loan that is 90 days or more delinquent as non-performing. BankAtlantic may also designate loans as non-performing prior to the loan becoming 90 days delinquent if the borrower's ability to repay is questionable. A "non-performing" classification alone does not indicate an inherent principal loss; however, it generally indicates that management does not expect the asset to earn a market rate of return in the current period. Restructured loans are loans for which BankAtlantic has modified the loan terms due to the financial difficulties of the borrower. At December 31, 1996 restructured loans were $3.7 million compared to $2.5 million and $1.6 million at December 31, 1996, 1995 and 1994, respectively. Non-performing assets, net of write downs and allowances, were $24.1 million at December 31, 1996 compared to $21.5 million and $23.2 million during 1995 and 1994, respectively. Included in non-performing assets was $7.0 million in assets acquired in connection with the BNA acquisition. Risk elements, net of write-downs and dispositions, increased by $3.8 million in 1996 to $27.8 million at December 31, 1996 and decreased in 1995 by $836,000 to $24.0 million at December 31, 1995. The increase in total risk elements during 1996 primarily related to a $2.6 million rise in non-performing assets and a $1.2 million increase in restructured loans. The restructured loan increase primarily related to a $1.0 million non-residential loan classified as non-accruing at December 31, 1995. The increase in non-performing assets from 1995 to 1996 resulted from a $1.5 million increase in consumer repossessed assets, and a $517,000 increase in residential real estate owned, partially offset by a $1.9 million reduction in commercial real estate owned. The increase in consumer and residential repossessed assets was primarily the result of the BNA acquisition. The decline in commercial real estate owned reflects the sale of $4.4 million of commercial real estate owned partially offset by a $197,000 net reversal of allowance for losses on real estate owned, $1.0 million of REO acquired from BNA, and transfers of $1.8 million of nonaccrual loans to real estate owned. Non-accrual residential and consumer loans increased by $4.2 million and $1.5 million, whereas non-accrual commercial loans and tax certificates declined by $4.5 million and $209,000, respectively. The increase in non-accrual residential loans resulted from higher loan balances. Residential loan balances increased from $179.7 million at December 31, 1995 to $887.3 million at December 31, 1996. Included in nonaccrual consumer loans at December 31, 1996 are $1.0 million of indirect automobile loans acquired in connection with the BNA acquisition. The remaining increase in nonaccrual consumer loans was due to increased consumer loan balances during 1996 compared to 1995. The reduction in nonaccrual commercial real estate loans resulted from the reinstatement of a $2.5 million non-residential loan, the restructuring of a $1.0 million non-residential loan, transferring a $400,000 loan to an accruing status and foreclosing on a $700,000 loan. The decline in nonaccrual tax certificates was due to reduced investments in tax certificates in 1996. During 1996 loans contractually past due 90 days or more increased $1.4 million. These loans have matured and are in the process of renewing or extending their terms while the borrower continues to make payments under the matured loan agreement. The 1995 risk element net decrease primarily related to lower levels of non-performing assets partially offset by a higher level of restructured loans and loans contractually past due 90 days or more. The lower 1995 real estate owned balances resulted from the sale of $3.3 million of real estate owned offset by a $1.2 million net reversal of allowance for losses on real estate owned, and transfers of $1.0 million of loans to real estate owned. Non-accrual tax certificates declined due to lower balances relating to reduced investment in tax certificates in 1995 and 1994, repayments and charge-offs. The lower 1995 non-accrual commercial real estate and business loan balances and the higher amounts in restructured loans reflect the restructuring of a $3.0 million commercial real estate loan. BankAtlantic received a $600,000 payment when the loan was restructured. 33 For financial statement purposes such payment was initially recorded as a reduction in the basis of the loan. The $800,000 increase in loans contractually past due 90 days or more and still accruing related to two commercial real estate loans. The 1995 decrease in non-accrual loans was partially offset by a $510,000 increase in residential real estate non-accrual loans and a transfer of a $2.4 million commercial real estate loan to a non-accruing status. The loan loss allowance as a percent of total loans declined from 2.24% at December 31, 1995 to 1.39% at December 31, 1996. At December 31, 1996 gross real estate loans amounted to $1.6 billion of which $887.3 million were residential real estate loans which management believes carry minimal credit risk. The remaining real estate loans consisted of $427.2 million of commercial real estate loans, and $301.8 million of construction and development loans at December 31, 1996, respectively. Gross other loans amounted to $422.9 million and included commercial business loans and consumer loans (including second mortgages) of $78.2 million and $344.7 million, respectively, at December 31, 1996. Commercial real estate, commercial business and consumer loans generally involve greater risks of collectibility than residential loans; however, management does not believe that such risks have been greater than normal industry experience for these types of loans except for the Subject Portfolio discussed under "Financial Condition." During the year ended December 31, 1996, management reversed $197,000 from the allowance for real estate owned. Real estate owned charge-offs during the year ended December 31, 1996 were $803,000 primarily relating to three REO properties. Two of the properties were sold during 1996. During the year ended December 31, 1995 and 1994, BankAtlantic's provisions for real estate owned was a recovery of $1.2 million and a provision of $140,000, respectively. For the years ended December 31, 1995, and 1994 charge-offs were $213,000, and $40,000, respectively. The allowance for real estate owned is established by management based on its evaluation of foreclosed properties. 34
RISK ELEMENTS ------------------------------------------------------------------------- DECEMBER 31, ------------------------------------------------------------------------- 1996 1995 1994 1993 1992 ------------- ------------- ------------- ------------- ------------- (DOLLARS IN THOUSANDS) CONTRACTUALLY PAST DUE 90 DAYS OR MORE Commercial real estate and business(1) $ 2,961 $ 1,536 $ 736 $ 2,580 $ 1,108 NON-ACCRUAL Residential ............................ 6,477 2,228 1,718 2,468 3,642 Commercial real estate and business ......................... 3,868 8,361 9,325 3,802 5,317 Consumer ............................... 2,079 585 270 976 1,477 Tax certificates(2) .................... 1,835 2,044 3,578 0 0 ------------- ------------- ------------- ------------- ------------- 14,259 13,218 14,891 7,246 10,436 REPOSSESSED(3) Residential real estate owned .......... 748 231 303 319 756 Commercial real estate owned ........... 4,170 6,048 6,935 9,332 14,241 Consumer ............................... 1,992 461 350 512 461 ------------- ------------- ------------- ------------- ------------- 6,910 6,740 7,588 10,163 15,458 ------------- ------------- ------------- ------------- ------------- TOTAL NON-PERFORMING ASSETS ............ 24,130 21,494 23,215 19,989 27,002 ------------- ------------- ------------- ------------- ------------- RESTRUCTURED LOANS Commercial real estate and business ......................... 3,718 2,533 1,648 2,647 2,661 ------------- ------------- ------------- ------------- ------------- TOTAL RISK ELEMENTS .................... $ 27,848 $ 24,027 $ 24,863 $ 22,636 $ 29,663 ============= ============= ============= ============= ============= Total risk elements as a percentage of: Total assets .......................... 1.07% 1.37% 1.61% 1.67% 2.28% ============= ============= ============= ============= ============= Loans, tax certificates and net real estate owned ........................ 1.46% 2.65% 3.92% 3.78% 4.18% ============= ============= ============= ============= ============= TOTAL ASSETS ........................... $2,605,527 $1,750,689 $1,539,653 $1,359,195 $1,303,071 ============= ============= ============= ============= ============= TOTAL LOANS, TAX CERTIFICATES AND NET REAL ESTATE OWNED .................... $1,911,501 $ 905,413 $ 634,001 $ 599,504 $ 709,482 ============= ============= ============= ============= ============= Allowance for loan losses .............. $ 25,750 $ 19,000 $ 16,250 $ 17,000 $ 16,500 ============= ============= ============= ============= ============= Total tax certificates ................. $ 55,977 $ 51,504 $ 64,117 $ 86,897 $ 121,323 ============= ============= ============= ============= ============= Allowance for tax certificate losses .. $ 1,466 $ 1,648 $ 2,985 $ 2,970 $ 1,558 ============= ============= ============= ============= =============
- ----------------------------------------------------------------------------- (1) The majority of these loans have matured and the borrower continues to make payments under the matured loan agreement. BankAtlantic is in the process of renewing or extending these matured loans. (2) Classification results from a change in methodology for classifying tax certificates and calculating related allowance from the methodology used in 1993 and prior years. (3) Amounts are net of allowances for losses. The above schedule reflects, at December 31, 1996, all loans, other than as disclosed in Note 5 of the Consolidated Financial Statements as other impaired commercial loans with specific allowances, where known information about the possible credit problems of the borrower caused management to have serious doubts as to the ability of the borrower to comply with present loan repayment terms and which may result in disclosure of such loans in the future. 35 Interest income which would have been recorded under the original terms of nonaccrual and restructured loans and the interest income actually recognized for the years indicated are summarized below (in thousands):
FOR THE YEARS ENDED DECEMBER 31, ------------------------------- 1996 1995 1994 --------- --------- --------- Interest income which would have been recorded $1,505 $1,393 $1,170 Interest income recognized ..................... (698) (519) (443) --------- --------- --------- Interest income foregone ....................... $ 807 $ 874 $ 727 ========= ========= =========
Changes in the allowance for loan losses were as follows (dollars in thousands):
FOR THE YEARS ENDED DECEMBER 31, ----------------------------------------------------------- 1996 1995 1994 1993 1992 ---------- ---------- ---------- ---------- ----------- Balance, beginning of period ................... $19,000 $16,250 $17,000 $16,500 $ 13,750 Charge-offs: Commercial business loans ..................... (1,048) (382) (1,647) (835) (776) Commercial real estate loans .................. (266) (222) (220) 0 (1,028) Consumer loans ................................ (6,337) (4,566) (3,829) (4,322) (10,430) Residential real estate loans ................. (67) (263) (272) (302) (445) ---------- ---------- ---------- ---------- ----------- (7,718) (5,433) (5,968) (5,459) (12,679) ---------- ---------- ---------- ---------- ----------- Recoveries: Commercial business loans ..................... 518 738 565 262 175 Commercial real estate loans .................. 47 102 18 6 20 Consumer loans ................................ 1,659 1,219 2,336 2,231 8,584 Residential real estate loans ................. 0 0 0 10 0 ---------- ---------- ---------- ---------- ----------- 2,224 2,059 2,919 2,509 8,779 ---------- ---------- ---------- ---------- ----------- Net charge-offs ................................ (5,494) (3,374) (3,049) (2,950) (3,900) Additions charged to operations ................ 5,844 4,182 2,299 3,450 6,650 Allowance for loan losses acquired ............. 6,400 1,942 0 0 0 ---------- ---------- ---------- ---------- ----------- Balance, end of period ......................... $25,750 $19,000 $16,250 $17,000 $ 16,500 ========== ========== ========== ========== =========== Allowance as a percentage of: Total loans ................................... 1.39% 2.24% 2.89% 3.38% 2.88% Total loans including banker's acceptances ... 1.39 2.24 2.89 2.77 2.88 ========== ========== ========== ========== =========== Non-performing assets(1) ...................... 115.5% 97.69% 82.75% 85.05% 61.11% ========== ========== ========== ========== =========== Ratio of net charge-offs to average outstanding loans ............................ 0.47% 0.45% 0.59% 0.56% 0.60% ========== ========== ========== ========== =========== Ratio of net charge-offs to average outstanding loans plus banker's acceptances .............. 0.47% 0.45% 0.57% 0.55% 0.60% ========== ========== ========== ========== ===========
- ----------------------------------------------------------------------------- (1) Excluding tax certificates. The allowance for tax certificates as a percentage of total tax certificates was 2.62%, 3.20%, 4.66%, 3.47%, and 1.28%, for each of the years in the five-year period ended December 31, 1996, and as a percentage of non-performing tax certificates was 79.89% and 80.63% at December 31, 1996 and 1995. 36 The table below presents (dollars in thousands) an allocation of the allowance for loan losses among various loan classifications and sets forth the percentage of loans in each category to total loans. The allowance shown in the table should not be interpreted as an indication that charge-offs in future periods will occur in these amounts or proportions or that the allowance indicates future charge-off amounts or trends.
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 -------------------------- -------------------------- -------------------------- PERCENT PERCENT PERCENT OF GROSS OF GROSS OF GROSS ALLOCATION LOANS ALLOCATION LOANS ALLOCATION LOANS OF IN EACH OF IN EACH OF IN EACH ALLOWANCE CATEGORY ALLOWANCE CATEGORY ALLOWANCE CATEGORY FOR LOAN TO TOTAL FOR LOAN TO TOTAL FOR LOAN TO TOTAL LOSS BY GROSS LOSS BY GROSS LOSS BY GROSS CATEGORY(1) LOANS CATEGORY LOANS CATEGORY LOANS ------------- ----------- ------------- ----------- ------------- ----------- Commercial business .... $ 3,676 3.83% $ 2,288 6.84% $ 1,109 4.00% Real estate .. 8,727 79.27 6,657 69.49 8,102 75.82 Consumer(2) .. 8,921 16.90 5,346 23.67 2,527 20.18 Unallocated .. 4,426 N/A 4,709 N/A 4,512 N/A ------------- ----------- ------------- ----------- ------------- ----------- $25,750 100.00% $19,000 100.00% $16,250 100.00% ============= =========== ============= =========== ============= ===========
(RESTUBBED TABLE CONTINUED FROM ABOVE)
DECEMBER 31, 1993 DECEMBER 31, 1992 -------------------------- -------------------------- PERCENT PERCENT OFGROSS OF GROSS ALLOCATION LOANS ALLOCATION LOANS OF IN EACH OF IN EACH ALLOWANCE CATEGORY ALLOWANCE CATEGORY FOR LOAN TO TOTAL FOR LOAN TO TOTAL LOSS BY GROSS LOSS BY GROSS CATEGORY(1) LOANS CATEGORY LOANS ------------- ----------- ------------- ----------- Commercial business .... $ 1,924 5.48% $ 2,676 5.69% Real estate .. 6,038 67.29 5,261 57.61 Consumer(2) .. 4,687 27.23 5,613 36.70 Unallocated .. 4,351 N/A 2,950 N/A ------------- ----------- ------------- ----------- $17,000 100.00% $16,500 100.00% ============= =========== ============= ===========
- ----------------------------------------------------------------------------- (1) Excludes banker's acceptances. (2) Includes second mortgage loans. NON-INTEREST INCOME A summary of non-interest income follows:
1996 1995 FOR THE YEARS TO TO ENDED DECEMBER 31, 1995 1994 ---------------------------------- CHANGE CHANGE 1996 1995 1994 ---------- ---------- ---------- (IN THOUSANDS) Loan servicing and other loan fees ................... $ 4,216 $ 3,524 $ 3,365 $ 692 $ 159 Gains on sales of loans originated for resale ....... 534 395 773 139 (378) Unrealized and realized gain (losses) on trading account securities ................................... 0 589 (558) (589) 1,147 Gains on sales of debt securities available for sale 5,959 0 0 5,959 0 Gains on sales of property and equipment ............. 3,061 18 272 3,043 (254) Gains on sales of mortgage servicing rights ......... 4,182 2,744 484 1,438 2,260 Other ................................................ 15,785 12,118 9,427 3,667 2,691 ---------- ---------- ---------- ---------- --------- Total non-interest income .......................... $33,737 $19,388 $13,763 $14,349 $5,625 ========== ========== ========== ========== =========
For a discussion relating to gains on sales of debt securities available for sale, see "Mortgage-Backed Securities and Investments." Loan servicing and other loan fees increased during each of the three years ended December 31, 1996. The increase for the year ended December 31, 1996 compared to the same period during 1995 resulted from higher loan and late fee income. Late fee income increased from $955,000 for the year ended December 31, 1995 to $1.4 million during the comparable 1996 period. Loan fee income was $1.1 million during 1995 compared to $1.4 million during 1996. The 37 increase in loan and late fees reflects higher loan production and balances during 1996 compared to the comparable 1995 period. The increase for the year ended December 31, 1995 compared to the same period during 1994 resulted from higher loan prepayment penalties and increased commercial loan commitment fee income. 37 During the years ended December 31, 1996, 1995 and 1994, BankAtlantic sold mortgage servicing rights with a book value of $20.9 million, $5.6 million and $2.4 million, respectively, for gains as reported in the above table. These rights related to approximately $1.4 billion, $492.1 million and $233.0 million of loans serviced for others during 1996, 1995 and 1994, respectively. At December 31, 1996, 1995 and 1994, BankAtlantic serviced loans for the benefit of others amounting to approximately $2.7 billion, $1.8 billion, and $1.9 billion, respectively. BankAtlantic periodically sells mortgage servicing rights based on the composition of the servicing portfolio and market conditions. During the year ended December 31, 1996, BankAtlantic sold properties leased to others with a book value of $5.0 million for gains as reported in the above table. During the years ended December 31, 1995 and 1994 BankAtlantic sold properties with a book value of $0 and $371,000, respectively. Non-interest income -other increased during the three years ended December 31, 1996. The higher income during the three year period primarily related to transaction account and ATM fee income. Transaction account and ATM fee income increased by $3.5 million during 1996 and $2.6 million during 1995. Transaction account fee income was $8.6 million during 1996 compared to $7.0 million during 1995 and $5.4 million in 1994. The higher transaction fee income during 1996 and 1995 reflects an increase in transaction account balances primarily obtained in connection with acquisitions and an increase in the fees charged during the latter part of 1994 and 1995. ATM fee income was $3.9 million during 1996 compared to $2.0 million during 1995 and $958,000 during 1994, respectively. In April 1996, BankAtlantic's ATM network initiated surcharge fees for non-customers. The significant increase in ATM fee income during 1996 was primarily the result of this surcharge. BankAtlantic established its ATM network to enhance fee income and to expand banking services throughout Florida. Currently, BankAtlantic has 144 ATM machines located in Wal-Mart Superstores, 10 ATM machines located on cruise ships, and 66 machines located in branches, shopping centers and businesses throughout South Florida. Furthermore, 1996 lease income increased by $320,000 compared to 1995 due to additional rents received on leased property. As indicated previously, the leased property was sold in December 1996. Non-interest income-other for 1994 was also favorably impacted by a $332,000 dormant account settlement with the State of Florida. The settlement related to a review by the Florida Comptroller's Office of BankAtlantic's procedures for the assessment of fees on dormant accounts. NON-INTEREST EXPENSE A summary of non-interest expense follows:
1996 1995 FOR THE YEARS TO TO ENDED DECEMBER 31, 1995 1994 ---------------------------------- CHANGE CHANGE 1996 1995 1994 ---------- ---------- ---------- (IN THOUSANDS) Employee compensation and benefits ................ $33,216 $25,403 $22,382 $ 7,813 $3,021 Occupancy and equipment ........................... 13,615 10,831 8,061 2,784 2,770 SAIF one-time special assessment .................. 7,160 0 0 7,160 0 Federal insurance premium ......................... 2,495 2,750 2,673 (255) 77 Advertising and promotion ......................... 2,079 2,144 1,495 (65) 649 Foreclosed asset activity, net .................... (725) (3,178) (2,290) 2,453 (888) Amortization of cost over fair value of net assets required .......................................... 1,545 1,122 0 423 1,122 Other ............................................. 12,856 12,088 9,764 768 2,324 ---------- ---------- ---------- ---------- --------- Total non-interest expenses ..................... $72,241 $51,160 $42,085 $21,081 $9,075 ========== ========== ========== ========== =========
The increase in employee compensation and benefits for the three years ended December 31, 1996 resulted from the number of full-time equivalent employees increasing from 624 at December 31, 1994 38 to 746 at December 31, 1995 and to 989 at December 31, 1996 as well as annual salary and benefit increases throughout the three year period. During 1996, approximately 160 of the new employees were related to the BNA acquisition and the remaining new employees primarily related to five new Wal-Mart branches. During 1995 approximately 70 of the new employees were related to the acquisition of MegaBank and the remaining new employees primarily related to six new branches. Occupancy and equipment expenses increased during the year ended December 31, 1996 compared to the 1995 period due to the opening of five additional Wal-Mart in-store branches and the acquisition of BNA. The new branches and the BNA acquisition resulted in increased depreciation and rent expense. Depreciation and rent expense increased from $3.2 million and $1.9 million during 1995 to $3.8 million and $2.1 million during the same 1996 period, respectively. Also included in occupancy and equipment expenses during 1996 was $1.7 million of conversion costs and processing fees associated with the conversion of all data processing functions to an outside service bureau. BankAtlantic converted to the service bureau on October 11, 1996 and the estimated annual expense for the service bureau is approximately $2.4 million. The service bureau conversion is intended to enable BankAtlantic to offer innovative new products and services. Occupancy and equipment expenses increased during the year ended December 31, 1995 compared to 1994 due to the acquisition of MegaBank and the opening of three additional Wal-Mart in-store branches and three branches in South Florida. Furthermore, in December 1994 BankAtlantic converted to a service bureau for its serviced residential loans resulting in $350,000 of expenses during the year ended December 31, 1995 compared to $93,000 during 1994. The residential loan service bureau expense was $558,000 during the year ended December 31, 1996. On September 30, 1996, President Clinton signed into law H.R. 3610, which was intended to recapitalize the SAIF and substantially bridge the assessment rate disparity existing between SAIF and BIF insured institutions. The law required institutions with SAIF assessable deposits, including BankAtlantic, to pay a one-time assessment of 0.657% of covered deposits at March 31, 1995. BankAtlantic's one-time assessment resulted in a pre-tax charge of $7.2 million for the year ended December 31, 1996. The $7.2 million charge excludes the $2.3 million amount assessed on BNA deposits which was considered in recording the acquisition of BNA under the purchase method of accounting. Future assessments paid by BankAtlantic to the SAIF will be reduced as a consequence of the recapitalization. The increase in advertising and promotion for the year ended December 31, 1995 resulted from increased promotion of lending activities, branch openings and acquisition-related advertising. The components of "Foreclosed asset activity, net" were (in thousands):
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------ 1996 1995 1994 --------- ------------- ---------- Real estate acquired in settlement of loans: Operating expenses (income), net ............ $ 47 $ 41 $ (325) Provision for (reversal of) losses on REO .. (197) (1,187) 140 Net (gains) on sales ........................ (575) (2,032)(A) (2,105) --------- ------------- ---------- Net (income) ................................ $(725) $ (3,178) $(2,290) ========= ============= ==========
- ----------------------------------------------------------------------------- (A) Including a $1.3 million gain related to a property originally acquired through a tax deed during 1995. The decline in foreclosed asset activity, net during 1996 compared to 1995 was primarily due to sales of commercial real estate owned and a $1.2 million reduction in the allowance for real estate owned during 1995 compared to a $197,000 reduction during 1996. The improvement in foreclosed asset activity, net during 1995 compared to 1994 was primarily due to the $1.2 million reduction in the allowance for real estate owned compared to a $140,000 provision during 1994, partially offset by lower operating expenses during 1994 compared to 1995. For further discussion, see "Provision for Loan Losses and Provision for (Reversal of) Losses on Real Estate Owned." 39 Other non-interest expense increased during the three years ended December 31, 1996. The additional other expenses in 1996 were associated with expanding the branch network and the acquisition of eight BNA branches. Stationery, printing and supplies, and telephone expenses increased by a total of $798,000 during 1996 compared to 1995. The additional 1995 non-interest expenses compared to 1994 related to the acquisition of five MegaBank branches and the opening of three South Florida branches and three Florida West Coast branches. During 1995, stationery, printing and supplies, and telephone expenses increased by a total of $538,000. In addition, legal costs, ATM expenses and tax certificate provision increased by $660,000, $283,000 and $260,000, respectively. The higher legal expenses incurred during 1995 related to $1.2 million of Subject Portfolio legal costs. During 1994, legal costs were reimbursed pursuant to the terms of the Covenant, while only $120,000 was reimbursed during 1995. The ATM expense increase resulted from the addition of approximately 151 ATMs in Wal-Mart and Sam's Club Florida locations during 1994. Also included in 1995 other expenses was a write-off of $400,000 associated with a Senior Note offering withdrawn in March 1995. The amortization of cost over fair value of net assets acquired relates to the BNA and MegaBank acquisitions. MORTGAGE-BACKED SECURITIES AND INVESTMENT SECURITIES In 1994, Statement of Financial Accounting Standards No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES ("FAS 115") was implemented. Upon implementation, BankAtlantic transferred all of its fixed rate mortgage-backed securities having original terms of 15 and 30 years to maturity which were classified as held for sale during prior periods to available for sale at December 31, 1994. During the year ended December 31, 1995 BankAtlantic acquired $10.0 million and $8.1 million of government obligations and collateralized mortgage obligations in connection with the MegaBank acquisition and designated these securities as available for sale. Based upon the guidance provided in a Special Report issued by the Financial Accounting Standards Board ("FASB"), BankAtlantic reassessed its security classifications, considering, among other issues, flexibility in management of the portfolio for liquidity and interest rate risk management as well as the potential Savings Association Insurance Fund ("SAIF") one-time special assessment discussed under "Liquidity and Capital Resources." As a result of this reassessment, effective December 15, 1995, BankAtlantic transferred all of its mortgage-backed securities and investment securities, excluding tax certificates, classified as held-to-maturity to available for sale. The securities transferred had a carrying value of $638.8 million and an estimated fair value of $644.1 million resulting in a net increase to stockholders' equity for the net unrealized appreciation of $3.3 million after deduction of applicable income taxes of $1.2 million. During the year ended December 31, 1996 BankAtlantic purchased $231.8 million of treasury notes and acquired $66.4 million of treasury notes in connection with the BNA acquisition. All treasury notes purchased or acquired were classified as available for sale. During 1996 BankAtlantic sold from its available for sale portfolio, $205.5 million of treasury notes, $136.6 million of adjustable rate mortgage-backed securities, $20.5 million of 15 year mortgage-backed securities, and $5.9 million of seven year balloon mortgage backed securities for gains of $6.0 million. The proceeds from the sales of securities were utilized to support loan growth. BankAtlantic currently sells substantially all fixed rate residential real estate loans it originates. During the year ended December 31, 1995 two $5.0 million treasury notes classified as trading securities were sold for a $589,000 net realized gain. At December 31, 1994, the market value of trading account securities was less than BankAtlantic's original cost. The unrealized loss on trading account securities of $558,000 is reflected in the consolidated statement of operations for the year ended December 31, 1994. 40 A summary of the cost and gross unrealized appreciation or depreciation of estimated fair value compared to cost of investment securities held to maturity, investment securities held for trading, mortgage-backed securities held to maturity, and debt securities available for sale, follows (in thousands):
DECEMBER 31, 1996 ------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED COST APPRECIATION DEPRECIATION FAIR VALUE ------------ --------------- --------------- ------------- Tax certificates held to maturity: Cost equals market .............................. $ 54,511 $ 0 $ 0 $ 54,511 Investment securities available for sale(1): Cost equals market .............................. 6,038 0 0 6,038 Market over cost ................................ 92,483 481 0 92,962 Cost over market ................................ 45,717 0 114 45,605 Mortgage-backed securities available for sale(1): Market over cost ................................ 157,178 1,756 0 158,934 Cost over market ................................ 136,711 0 905 135,806 ------------ --------------- --------------- ------------- Total ............................................ $492,638 $2,237 $1,019 $493,856 ============ =============== =============== =============
- ----------------------------------------------------------------------------- (1) Amortized cost excludes net unrealized appreciation of $851,000 on mortgage-backed securities and unrealized appreciation of $367,000 on investment securities. At December 31, 1996 and 1995 all mortgage-backed and investment securities, excluding tax certificates, were available for sale, whereas during 1994 only certain mortgage-backed securities with a fair value and amortized cost of $54.0 million and $53.7 million at December 31, 1994 were classified as available for sale. The composition, yields and maturities of debt securities were as follows (in thousands):
MORTGAGE ASSET WEIGHTED U.S. TREASURY TAX BACKED BACKED AVERAGE AND AGENCIES CERTIFICATES SECURITIES SECURITIES TOTAL TOTAL ---------------- --------------- ------------- ------------- ------------ ----------- DECEMBER 31, 1996: Maturity:(1) One year or less .............. $ 44,485 $41,656 $ 25,198 $ 0 $111,339 6.26% After one through five years . 70,169 12,855 252,704 28,967 364,695 6.00 After five through ten years . 984 0 4,887 0 5,871 6.04 After ten years ............... 0 0 11,951 0 11,951 6.10 ---------------- --------------- ------------- ------------- ------------ ----------- Fair values .................... $115,638 $54,511 $294,740 $ 28,967 $493,856 6.06% ================ =============== ============= ============= ============ =========== Amortized cost ................. $115,295 $54,511 $293,889 $ 28,943 $492,638 6.08% ================ =============== ============= ============= ============ =========== Weighted average yield based on fair value ................... 5.73% 6.92% 6.10% 5.43% 6.06% Weighted average maturity ..... 1.2 years 2.0 years 2.9 years 2.5 years 2.3 years ---------------- --------------- ------------- ------------- ------------ DECEMBER 31, 1995 Fair value ..................... $ 25,113 $49,856 $597,751 $ 68,939 $741,659 6.72% ================ =============== ============= ============= ============ =========== Amortized Cost ................. $ 24,606 $49,856 $588,956 $ 68,907 $732,325 6.81% ================ =============== ============= ============= ============ =========== DECEMBER 31, 1994 Fair value ..................... $ 12,279 $61,132 $604,103 $124,259 $801,773 6.49% ================ =============== ============= ============= ============ =========== Amortized cost ................. $ 13,563 $61,132 $627,568 $127,981 $830,244 6.27% ================ =============== ============= ============= ============ ===========
- ----------------------------------------------------------------------------- (1) Maturities are based on contractual maturities. Tax certificate maturities are based on historical repayment experience and BankAtlantic's charge-off policies since tax certificates do not have contractual maturities. 41 Activity in the allowance for tax certificate losses was (dollars in thousands):
FOR THE YEARS ENDED DECEMBER 31, --------------------------------- 1996 1995 1994 --------- ---------- ---------- Balance, beginning of period ........................... $1,648 $ 2,985 $ 2,970 Charge-offs ............................................ (909) (1,854) (1,892) Recoveries ............................................. 911 662 1,792 --------- ---------- ---------- Net charge-offs ........................................ 2 (1,192) (100) Additions (reversals) charged to operations ........... (184) (145) 115 --------- ---------- ---------- Balance, end of period ................................. $1,466 $ 1,648 $ 2,985 ========= ========== ========== Average yield on tax certificates during the period(1) 9.73% 9.27% 7.43% ========= ========== ==========
- ----------------------------------------------------------------------------- (1) During the year ended December 31, 1994 BankAtlantic reversed $1.4 million of accrued interest on tax certificates. The average yield on tax certificates during the period, excluding the reversal of $1.4 million, was 9.31%. Included in gains on sales of real estate owned for the year ended December 31, 1995 was approximately $1.3 million related to a property originally acquired through a tax deed. FINANCIAL CONDITION BankAtlantic's total assets at December 31, 1996 and 1995 were $2.6 billion and $1.75 billion, respectively. The increase in total assets was primarily the result of a $996.2 million increase in loans receivable, partially offset by a $252.5 million decrease in debt securities available for sale. The loans receivable increase reflects $395.0 million of loans acquired in the BNA acquisition and $1.2 billion of loan fundings and purchases during 1996. The loan fundings and purchases were partially offset by $548.8 million of principal reductions on loans and $59.4 million of loan sales. The decline in debt securities available for sale balances resulted from the sale of $374.4 million of securities and $43.2 million of principal reductions, partially offset by the purchase of approximately $231.8 million of treasury notes and $66.4 million of treasury notes acquired in connection with the BNA acquisition. Furthermore, cash including federal funds sold and other short term investments, cost over fair value of net assets acquired, other assets and tax certificates increased by $39.3 million, $17.8 million, $24.9 million, and $4.7 million, respectively. Cash including federal funds sold and other short term investments increased due to the eight branches acquired from BNA and the five branches opened during 1996. The increase in cost over fair value of net assets relates to the BNA acquisition. The increase in other assets resulted from receivables of $9.5 million and $5.4 million from the sale of servicing and the sale of properties leased to others, respectively. During 1996 BankAtlantic purchased $56.9 million of tax certificates and $52.4 million of tax certificates paid off. At December 31, 1996, deposits increased by $532.4 million including deposits acquired in connection with the BNA acquisition ($690.1 million at acquisition including non-interest bearing deposits). The remaining net deposit increase primarily resulted from money market account deposit growth. Advances from the Federal Home Loan Bank and securities sold under agreements to repurchase increased by $93.9 million and $124.4 million, respectively. The additional borrowings were used to fund loan growth. In July 1996, the Company issued $57.5 million of 6 3/4 % Debentures. Repayment of securities sold under agreements to repurchase, common stock redemptions, payments for advances by borrowers for taxes and insurance, the acquisition of BNA, loan originations, and the purchases of loans, debt securities and tax certificates were primarily funded through the sales of debt securities available for sale, mortgage servicing rights and properties leased to others, proceeds from FHLB advances, federal funds purchased, loan and debt securities repayments, proceeds from the issuance of 6 3/4 % Debentures and Class A common stock. 42 LOAN ACTIVITY--The following table shows loan activity by major categories for the periods indicated (in thousands):
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------------------------- 1996 1995 1994 1993 1992 ------------ ------------ ------------ ------------ ------------ LOAN FUNDINGS:(1) Residential real estate loans ..... $ 133,184 $ 111,361 $ 40,706 $ 52,674 $ 41,336 Construction and development loans 147,200 93,102 22,958 13,744 18,912 Commercial real estate and business loans ................... 314,319 319,530 259,285 186,584 108,744 Consumer loans(2) .................. 154,940 114,607 45,159 10,222 7,075 ------------ ------------ ------------ ------------ ------------ Total loan fundings ............... 749,643 638,600 368,108 263,224 176,067 ------------ ------------ ------------ ------------ ------------ PURCHASES:(3)(4) Residential real estate loans ..... 465,942 9,930 0 0 0 Commercial real estate and business loans ................... 0 0 3,989 5,142 0 ------------ ------------ ------------ ------------ ------------ Total purchases ................... 465,942 9,930 3,989 5,142 0 ------------ ------------ ------------ ------------ ------------ Total loan production ............. 1,215,585 648,530 372,097 268,366 176,067 ------------ ------------ ------------ ------------ ------------ Loan sales .......................... (59,408) (34,153) (38,168) (44,983) (36,054) Principal reduction on loans(1) .... (548,847) (444,867) (270,986) (289,037) (297,263) Transfer to real estate owned(5) ... (1,788) (1,029) (1,282) (2,396) (7,994) ------------ ------------ ------------ ------------ ------------ Net loan activity ................. $ 605,542 $ 168,481 $ 61,661 $ (68,050) $(165,244) ============ ============ ============ ============ ============
- ----------------------------------------------------------------------------- (1) Does not include banker's acceptances. (2) Includes second mortgage loans. (3) Does not include indirect consumer loans purchased through dealers; such loans are included as originations. (4) Excludes $395.0 million in 1996 and $116.4 million in 1995 of loans acquired in the BNA and MegaBank acquisitions, respectively. (5) Includes foreclosures. Total loan originations for the years ended December 31, 1996, 1995 and 1994 were $133.2 million, $111.0 million, and $36.1 million, respectively, for residential real estate loans, and $316.0 million, $224.7 million, and $203.3 million, respectively, for commercial real estate and business loans (including construction and development loans) and $75.4 million, $55.8 million, and $47.7 million, respectively, for direct consumer loans, and $76.9 million, $56.1 million, and $0, respectively, for indirect consumer loans (all of which were indirect automobile loans). In addition there were $465.9 million in residential real estate loan purchases during the year ended December 31, 1996. 43 PRINCIPAL REPAYMENTS--The following table sets forth the scheduled contractual principal repayments at maturity dates of BankAtlantic's loan portfolios and debt securities available for sale at December 31, 1996. As of December 31, 1996, the total amount of principal repayments on loans and debt securities available for sale contractually due after December 31, 1997 was $2.2 billion, $1.4 billion having fixed interest rates and $749.0 million having floating or adjustable interest rates.
OUTSTANDING ON DECEMBER 31, FOR THE PERIOD ENDING DECEMBER 31,(1) 1996 ------------------------------------------------------------------- 1997 1998-1999 2000-2004 2005-2009 2010-2014 2015 ---------------- ----------- ------------ ------------ ------------ ------------ Commercial and residential real estate ............... $1,314,536 $ 67,592 $ 68,874 $117,209 $155,621 $57,692 $847,548 Real estate construction . 301,813 112,840 79,387 88,538 20,520 528 0 Consumer (2) .............. 344,690 17,110 22,476 114,497 129,733 38,959 21,915 Commercial business ....... 78,177 55,714 5,900 10,673 5,890 0 0 ---------------- ----------- ------------ ------------ ------------ ------------ ----------- Total loans(3) ........... $2,039,216 $253,256 $176,637 $330,917 $311,764 $97,179 $869,463 ================ =========== ============ ============ ============ ============ =========== Total debt securities available for sale(3) .... $ 439,345 $ 69,683 $320,839 $ 36,673 $ 7,041 $ 791 $ 4,318 ================ =========== ============ ============ ============ ============ ===========
- ----------------------------------------------------------------------------- (1) Does not include banker's acceptances, deductions for undisbursed portion of loans in process, deferred loan fees, unearned discounts and allowances for loan losses. (2) Includes second mortgage loans. (3) Actual principal repayments may differ from information shown above. LOAN CONCENTRATION--BankAtlantic's geographic loan concentration at December 31, 1996 was:
FLORIDA ........ 67% California ..... 7% Northeast ...... 9% Other .......... 17% -------- Total ........ 100% ========
The loan concentration for BankAtlantic's portfolio is primarily in South Florida where economic conditions have generally remained stable during the three years ended December 31, 1996. The concentration in California and the Northeast primarily relates to purchased wholesale residential loans during 1996. The balance of the portfolio is throughout the United States without any specific concentration. Loan maturities and sensitivity of loans to changes in interest rates for commercial business loans and real estate construction loans at December 31, 1996 were (in thousands):
COMMERCIAL REAL ESTATE BUSINESS CONSTRUCTION TOTAL ------------- --------------- ----------- One year or less ........................ $73,513 $292,846 $366,359 Over one year, but less than five years 4,871 8,967 13,838 Over five years ......................... 0 0 0 ------------- --------------- ----------- $78,384 $301,813 $380,197 ============= =============== =========== Pre-determined interest rate ............ $ 4,871 $ 8,967 $ 13,838 Floating or adjustable interest rate ... 0 0 0 ------------- --------------- ----------- $ 4,871 $ 8,967 $ 13,838 ============= =============== ===========
44 DEPOSITS--Deposit accounts consisted of the following (in thousands):
DECEMBER 31, ------------------------------------------ 1996 1995 1994 ------------- ------------- ------------ Non-interest bearing deposits .... $ 163,616 $ 98,964 $ 69,658 Interest bearing deposits: Insured money fund savings ...... 358,927 249,273 267,770 NOW account ...................... 216,587 171,726 151,890 Savings account .................. 170,352 103,759 113,578 Time deposits less than $100,000 739,622 528,163 413,415 Time deposits $100,000 and over . 183,676 148,492 69,471 ------------- ------------- ------------ Total ........................... $1,832,780 $1,300,377 $1,085,782 ============= ============= ============
Time deposits $100,000 and over, have the following maturities:
DECEMBER 31, 1996 --------------- Less than 3 months . $ 55,743 3 to 6 months ....... 45,946 6 to 12 months ...... 50,412 More than 12 months 31,575 --------------- Total ............. $183,676 ===============
BankAtlantic currently has no brokered deposits however, has established a facility with Merrill Lynch enabling it to issue up to $150 million of deposits at BankAtlantic's discretion. BankAtlantic's deposit accounts are insured by the Federal Deposit Insurance Corporation ("FDIC") through SAIF and the Bank Insurance Fund ("BIF") up to a maximum of $100,000 for each insured depositor. 45 The stated rates and balances at which BankAtlantic paid interest on deposits were (dollars in thousands):
DECEMBER 31, ------------------------------------------- 1996 1995 1994 ------------- ------------- ------------- Interest free checking ............................... $ 163,616 $ 98,964 $ 69,658 Insured money fund savings: 3.76% at December 31, 1996, 3.22% at December 31, 1995, and 3.71% at December 31, 1994 .................................... 358,927 249,273 267,770 NOW accounts: 1.60% at December 1996, 1.66% at December 31, 1995, and 1.57% at December 31, 1994 ... 216,587 171,726 151,890 Savings accounts: 1.30% at December 31, 1996, 1.71% at December 31, 1995, and 1.87% December 31, 1994 ... 170,352 103,759 113,578 ------------- ------------- ------------- Total non-certificate accounts ....................... 909,482 623,722 602,896 ------------- ------------- ------------- Certificate accounts: 0.00% to 3.00% ...................................... 12,104 56,667 54,738 3.01% to 4.00% ...................................... 11,257 25,602 82,934 4.01% to 5.00% ...................................... 275,991 135,107 182,518 5.01% to 6.00% ...................................... 478,148 303,497 123,016 6.01% to 7.00% ...................................... 112,865 137,917 27,857 7.01% and greater ................................... 30,749 17,543 11,674 ------------- ------------- ------------- Total certificate accounts ........................... 921,114 676,333 482,737 ------------- ------------- ------------- 1,830,596 1,300,055 1,085,633 ------------- ------------- ------------- Interest earned not credited to deposit accounts .... 2,184 322 149 ------------- ------------- ------------- Total deposit accounts ............................. $1,832,780 $1,300,377 $1,085,782 ============= ============= ============= Weighted average stated interest rate on deposits at the end of each period ............................ 3.78% 3.85% 3.45% ============= ============= =============
The amounts of scheduled maturities of certificate accounts were (dollars in thousands):
YEAR ENDING DECEMBER 31, DECEMBER 31, 1996 ------------------------------------------------------------- 1997 1998 1999 2000 2001 THEREAFTER - ------------------- ----------- ---------- ---------- ---------- ---------- 0.00% to 3.00% ... $ 10,533 $ 1,379 $ 50 $ 32 $ 50 $ 60 3.01% to 4.00% ... 10,536 479 191 0 51 0 4.01% to 5.00% ... 252,171 20,041 2,051 215 1,085 428 5.01% to 6.00% ... 395,414 63,178 10,420 3,634 4,869 633 6.01% to 7.00% ... 76,563 8,742 13,574 5,009 8,170 807 7.01% and greater 18,995 773 1,074 9,719 66 122 ----------- ---------- ---------- ---------- ---------- ------------- Total ........... $764,212 $94,592 $27,360 $18,609 $14,291 $2,050 =========== ========== ========== ========== ========== =============
The following table sets forth the deposit activities for the periods indicated (in thousands):
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------- 1996 1995 1994 ----------- ----------- ------------ Net increase (decrease) before interest credited ........ $ 15,905 $ 51,093 $(20,814) Deposits acquired net of purchase accounting amortization 469,065 120,055 0 Interest credited ........................................ 47,433 43,447 30,236 ----------- ----------- ------------ Total .................................................. $532,403 $214,595 $ 9,422 =========== =========== ============
46 SUBJECT PORTFOLIO--From 1987 through 1990, BankAtlantic purchased in excess of $50 million of indirect home improvement loans from certain dealers, primarily in the northeastern United States. BankAtlantic ceased purchasing loans from such dealers in the latter part of 1990. These dealers were affiliated with each other but were not affiliated with BankAtlantic. In connection with loans originated through these dealers, BankAtlantic funded amounts to the dealers as a dealer reserve. Such loans and related dealer reserves are referred to herein as the "Subject Portfolio." In late 1990, questions arose relating to the practices and procedures used in the origination and underwriting of the Subject Portfolio, which suggested that the dealers, certain home improvement contractors and borrowers, together with certain former employees of BankAtlantic, engaged in practices intended to defraud BankAtlantic. After BankAtlantic made a claim against its fidelity bond carrier, the carrier and BankAtlantic entered into a Covenant. Pursuant to the Covenant, BankAtlantic will continue to pursue its litigation against the carrier, but has agreed to limit execution on any judgment obtained against the carrier to $18 million. Further, BankAtlantic agreed to join certain third parties as defendants in that action. In accordance with the terms of the Covenant the carrier paid BankAtlantic a total of $18 million through December 31, 1996 to reimburse it for losses incurred by BankAtlantic in connection with the Subject Portfolio. Three actions have been filed, two in New Jersey and one in New York, relating to the Subject Portfolio. One of the New Jersey actions was brought on behalf of the State of the New Jersey. The New York action and the action brought by the State of New Jersey were resolved in 1996 and 1995, respectively. The remaining New Jersey action purports to be a class action on behalf of named and unnamed plaintiffs that may have obtained loans from dealers who subsequently sold the loans to financial institutions including BankAtlantic. The New Jersey action seeks civil remedies against certain contractors and a named dealer and also seeks to cancel or modify certain mortgage loans and was commenced immediately after resolution of the State of New Jersey action. The pending New Jersey action which was brought against over 15 parties, including BankAtlantic, purports to be a class action on behalf of named and unnamed plaintiffs that may have obtained loans from dealers who subsequently sold the loans to financial institutions including BankAtlantic. The New Jersey action seeks, among other things, rescission of the loan agreements and damages. In November 1995, the court in the remaining New Jersey action entered an order dismissing the complaint against BankAtlantic; plaintiffs appealed this ruling. In January 1996, the Appellate Court reversed the lower court's decision and remanded the case back to trial court to determine whether the action may be maintained as a class action. The reversal was without prejudice to BankAtlantic's right to renew their summary judgment motion after the trial court has made a determination as to plaintiff's ability to maintain this case as a class action. While management believes that established reserves will be adequate to cover any additional losses that BankAtlantic may incur from the Subject Portfolio or the above described litigation, there is no assurance that this will be the case. See Note 15 to the Consolidated Financial Statements for further discussion on the Subject Portfolio. 47 Loans receivable composition, including mortgage-backed securities, at the dates indicated was (dollars in thousands):
DECEMBER 31, ---------------------------------------------------------------------------- 1996 1995 1994 ------------------------- ----------------------- ----------------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------------- ---------- ----------- ---------- ----------- ---------- LOANS RECEIVABLE: Real estate loans: Residential real estate $ 867,081 47.52% $157,361 18.99% $102,677 18.79% Residential real estate available for sale .... 16,207 0.89 17,122 2.07 6,843 1.25 Construction and development ........... 301,813 16.54 122,371 14.77 45,725 8.37 FHA and VA insured ..... 4,013 0.22 5,183 0.63 6,395 1.17 Commercial real estate ................ 427,235 23.41 350,256 42.27 303,877 55.61 Other loans: Second mortgage -direct 86,234 4.73 63,052 7.61 40,564 7.42 Second mortgage -indirect ............. 9,894 0.54 25,621 3.09 34,585 6.33 Commercial business .... 78,177 4.28 64,194 7.75 24,566 4.50 Consumer -other direct ................ 74,072 4.06 37,502 4.53 16,386 3.00 Consumer -other indirect .............. 174,490 9.56 96,042 11.59 32,373 5.93 ------------- ---------- ----------- ---------- ----------- ---------- Total .................. 2,039,216 111.75 938,704 113.30 613,991 112.37 ------------- ---------- ----------- ---------- ----------- ---------- Adjustments: Undisbursed portion of loans in process ....... 190,874 10.45 89,896 10.85 49,981 9.15 Other .................... 0 0.00 0 0.00 63 0.01 Unearned discounts on commercial real estate loans ........... 705 0.04 793 0.10 874 0.16 Unearned discounts (premium) on purchased and consumer loans ..... (2,762) (0.15) 385 0.05 427 0.08 Allowance for loan losses ............ 25,750 1.41 19,000 2.30 16,250 2.97 ------------- ---------- ----------- ---------- ----------- ---------- Total loans receivable, net ...... $1,824,649 100.00% $828,630 100.00% $546,396 100.00% ============= ========== =========== ========== =========== ========== Mortgage-backed securities: FNMA participation certificates ......... $ 101,381 34.40% $132,554 22.18% $147,652 23.52% GNMA and FHLMC mortgage-backed securities ............. 193,359 65.60 465,197 77.82 480,230 76.48 ------------- ---------- ----------- ---------- ----------- ---------- Total mortgage-backed securities(1) ........ $ 294,740 100.00% $597,751 100.00% $627,882 100.00% ============= ========== =========== ========== =========== ========== Banker's acceptances .... $ 207 100.00% $ 0 0.00% $ 0 0.00% ============= ========== =========== ========== =========== ==========
(RESTUBBED TABLE CONTINUED FROM ABOVE)
1993 1992 ----------------------- ----------------------- AMOUNT PERCENT AMOUNT PERCENT ----------- ---------- ----------- ---------- LOANS RECEIVABLE: Real estate loans: Residential real estate $120,531 24.80% $147,654 26.52% Residential real estate available for sale .... 5,752 1.19 7,641 1.37 Construction and development ........... 11,333 2.34 12,961 2.33 FHA and VA insured ..... 7,972 1.64 9,854 1.77 Commercial real estate ................ 198,095 40.76 156,844 28.18 Other loans: Second mortgage -direct 15,971 3.29 7,434 1.34 Second mortgage -indirect ............. 47,307 9.73 65,074 11.69 Commercial business .... 27,979 5.76 33,071 5.94 Consumer -other direct ................ 19,667 4.05 31,722 5.70 Consumer -other indirect .............. 56,896 11.71 109,187 19.61 ----------- ---------- ----------- ---------- Total .................. 511,503 105.27 581,442 104.45 ----------- ---------- ----------- ---------- 48 1993 1992 ----------------------- ----------------------- AMOUNT PERCENT AMOUNT PERCENT ----------- ---------- ----------- ---------- Adjustments: Undisbursed portion of loans in process ....... 5,570 1.15 6,492 1.17 Other .................... 33 0.01 55 0.01 Unearned discounts on commercial real estate loans ........... 2,124 0.44 0 0.00 Unearned discounts (premium) on purchased and consumer loans ..... 820 0.17 1,733 0.31 Allowance for loan losses ............ 17,000 3.50 16,500 2.96 ----------- ---------- ----------- ---------- Total loans receivable, net ...... $485,956 100.00% $556,662 100.00% =========== ========== =========== ========== Mortgage-backed securities: FNMA participation certificates ......... $178,928 33.99% $174,666 35.83% GNMA and FHLMC mortgage-backed securities ............. 347,437 66.01 312,828 64.17 ----------- ---------- ----------- ---------- Total mortgage-backed securities(1) ........ $526,365 100.00% $487,494 100.00% =========== ========== =========== ========== Banker's acceptances .... $109,931 100.00% $ 0 0.00% =========== ========== =========== ==========
- ----------------------------------------------------------------------------- (1) Includes net unrealized appreciation on mortgage-backed securities available for sale of $851,000, $8.8 million and $314,000 at December 31, 1996, 1995 and 1994, respectively. 48 ASSET AND LIABILITY MANAGEMENT BankAtlantic's business emphasis is the origination of commercial real estate loans, commercial business loans and consumer loans which generally have higher yields and shorter durations than residential real estate loans. BankAtlantic originates residential loans with both fixed and adjustable rates. The majority of fixed rate and some adjustable rate loans are currently sold to correspondents. BankAtlantic also purchases residential loans with both fixed and adjustable rates, which are retained for portfolio. Since these bulk loan purchases are acquired periodically, management is in a position (unlike the case of individual loan originations) to partially hedge the underlying interest rate risk in this portfolio due to the size and generally homogeneous nature of these purchases. BankAtlantic also acquires mortgage-backed securities and Treasury securities with intermediate terms. During recent years in order to lower its cost of funds, BankAtlantic has not emphasized certificates of deposit and seeks to emphasize generating low cost transaction and escrow accounts as market opportunities allow. See "Mortgage-Backed Securities and Investment Securities." Management continually assesses general economic conditions, the interest rate environment and the yields and credit risk associated with alternative investments. INTEREST RATE SENSITIVITY BankAtlantic's net earnings are materially impacted by the difference between the income it receives from its loan portfolio, tax certificates and debt securities available for sale and its cost of funds. The interest paid by BankAtlantic on deposits and borrowings determines its cost of funds. The yield on BankAtlantic's loan portfolio changes principally as a result of loan repayments, the interest rate and the volume of new loans. Fluctuations in income from debt securities will occur based on the amount invested during the period and interest rate levels yielded by such securities. BankAtlantic's net interest spread will fluctuate in response to interest rate changes. Like many savings institutions, BankAtlantic's interest rate sensitive liabilities (generally, deposits with maturities of one year or less) have in the past exceeded its interest rate sensitive assets (assets which reprice based on an index or which have short term maturities). This imbalance is referred to as a negative interest rate sensitivity gap, and measures an institution's ability to adjust to changes in the general level of interest rates. The effect of the "mismatch" is that a rise in interest rates will have a negative impact on earnings as the cost of funds increases to a greater extent than the yield earned on interest-earning assets, while a decline in interest rates will have a positive impact on earnings. The larger the gap, whether positive or negative, the greater the impact of changing interest rates. BankAtlantic's one year interest rate sensitivity gap ratio, which is the difference between the amount of interest bearing liabilities which are projected to mature or reprice within one year and the amount of interest earning assets which are similarly projected to mature or reprice, all divided by total assets, amounted to a positive .42% at December 31, 1996. The gap ratio was a negative 2.49% at December 31, 1995. The improvement in the 1996 gap ratio resulted from higher commercial and construction loan balances, and an increase in stockholder's equity, non-interest bearing deposits, and intermediate term FHLB borrowings. The above items were partially offset by increased fixed rate residential loan balances. Commercial and construction loan balances increased from $472.6 million at December 31, 1995 to $729.0 at December 31, 1996. Commercial and construction loans generally have floating rates and terms of less than one year. BankAtlantic's non-interest bearing deposits increased from $99.0 million at December 31, 1995 to $163.6 million at December 31, 1996. The increase in non-interest bearing deposits primarily resulted from the BNA acquisition. BankAtlantic's stockholder's equity increased by $63.9 million due to contributions by the Company and earnings. During 1996, BankAtlantic borrowed $175.7 million of one to six year FHLB advances to fund fixed rate residential loans. Fixed rate residential loans increased from $48.5 million at December 31, 1995 to $468.9 million at December 31, 1996. The higher fixed rate residential loan balances resulted from the BNA acquisition and purchased loans. The absolute amount of BankAtlantic's one year gap changed from a negative $43.6 million at December 31, 1995, to a positive $10.9 million at December 31, 1996. 49 At December 31, 1996 BankAtlantic had a negative 91-180 day cumulative gap of 5.06% and a positive cumulative gap of .15%, .42%, 6.45%, 8.74% 13.33%, 14.31% and 14.33% for 0-90 days, 181 days to 1 year, 1-3 years, 3-5 years, 5-10 years, 10-20 years and greater than 20 years, respectively. Interest rates declined during 1996. Interest rate rises would be minimized by the fact that a significant amount of BankAtlantic's interest bearing liabilities are deposits for which interest rates paid do not generally increase at the same proportionate rate as an increase in the prime rate. However, the interest rates charged on BankAtlantic's adjustable rate loans and securities are priced on the basis of the prime rate and other indices and increase at the same rate as the prime or applicable index rate, subject only to caps that may exist in the loan or security instrument. At the present time, caps on interest earning assets generally do not have the effect of limiting increases in the interest rate charged on such assets. As noted above, the cumulative positive gap in future periods provides the opportunity to increase earnings in a rising interest rate environment due to the ability to reprice more assets than liabilities Management considers BankAtlantic's current gap position to be within acceptable parameters. To the extent the gap position deviates from this status, actions which could be taken, if deemed appropriate, include the lengthening or shortening of maturities for borrowings and investment security purchases, disposing of debt securities which are available for sale as well as purchasing more variable rate than fixed rate investment securities. In August 1993, the OTS adopted a final rule incorporating an interest-rate risk component into the risk-based capital regulation. At December 31, 1996, no interest rate risk deduction to capital would have been required under the rule, although BankAtlantic's net portfolio value ("NPV") would decrease in a rising interest rate environment. NPV is the difference between incoming and outgoing discounted cash flows from assets, liabilities and off-balance sheet contracts. For further discussion see "Savings Institution Regulation". Presented below is an analysis of BankAtlantic's interest rate risk at September 30, 1996 (the latest date for which information was available), as calculated by the OTS, based on information provided to the OTS by BankAtlantic. The table measures changes in BankAtlantic's net portfolio value for instantaneous and parallel shifts in the yield curve in 100 basis point increments up or down (dollars in thousands):
CHANGE NET PORFOLIO VALUE IN RATES ----------- $ AMOUNT $ CHANGE - --------------- ----------- /plus/200bp 223,252 (32,495) /plus/100bp 242,106 (13,641) 0bp 255,747 0 /minus/100bp 260,825 5,078 /minus/200bp 258,669 2,922
50 BANKATLANTIC'S CUMULATIVE RATE SENSITIVITY GAP AT DECEMBER 31, 1996
181 0-90 91-180 DAYS TO 1-3 3-5 DAYS DAYS 1 YEAR YEARS YEARS ----------- ------------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS) Interest earning assets: Investment securities(5)(7) . $ 35,921 $ 11,450 $ 15,220 $ 12,855 $ 0 Residential loans(1)(2) Conventional single family .................... 19,226 11,276 21,862 78,910 66,839 Adjustable single family ... 138,911 101,446 141,866 36,199 0 Debt securities available for sale -fixed rates(3)(6) ..... 27,280 22,438 80,264 172,734 95,849 Debt securities available for sale floating rates .......... 8,168 0 0 0 0 Commercial real estate loans ........................ 68,392 19,086 227,704 124,960 29,752 Adjustable commercial real estate loans ................. 259,154 0 0 0 0 Other loans: Commercial business .......... 1,732 1,290 2,373 4,871 0 Commercial business adjustable ................... 68,118 0 0 0 0 Consumer ..................... 23,655 22,743 42,216 131,607 59,253 Consumer prime rate .......... 51,194 0 0 0 0 ----------- ------------- ----------- ----------- ----------- Total interest earning assets ....................... 701,751 189,729 531,505 562,136 251,693 ----------- ------------- ----------- ----------- ----------- Interest bearing liabilities: Money fund savings(4) ........ 70,888 56,888 91,305 73,265 34,882 Savings and NOW(4) ........... 26,561 24,520 44,678 124,066 50,340 Certificate accounts ......... 269,659 243,758 252,979 121,952 32,900 Borrowings: Securities sold under agreements to repurchase ................... 210,854 0 0 0 0 Advances from FHLB ........... 119,963 0 0 86,036 74,011 ----------- ------------- ----------- ----------- ----------- Total interest-bearing liabilities .................. $697,925 $ 325,166 $388,962 $405,319 $192,133 =========== ============= =========== =========== =========== Interest rate sensitivity GAP (repricing difference) ....... $ 3,826 $(135,437) $142,543 $156,817 $ 59,560 Cumulative GAP ............... $ 3,826 $(131,611) $ 10,932 $167,749 $227,309 Cumulative ratio of GAP to total assets ................. 0.15% (5.06)% 0.42% 6.45% 8.74% =========== ============= =========== =========== ===========
(RESTUBBED TABLE CONTINUED FROM ABOVE)
5-10 10-20 20 YEARS YEARS YEARS TOTAL ----------- ----------- ----------- ------------- Interest earning assets: Investment securities(5)(7) . $ 0 $ 0 $ 0 $ 75,446 Residential loans(1)(2) Conventional single family .................... 254,664 15,550 552 468,879 Adjustable single family ... 0 0 0 418,422 Debt securities available for sale -fixed rates(3)(6) ..... 25,886 854 29 425,334 Debt securities available for sale floating rates .......... 0 0 0 8,168 Commercial real estate loans ........................ 0 0 0 469,894 Adjustable commercial real estate loans ................. 0 0 0 259,154 Other loans: Commercial business .......... 0 0 0 10,266 Commercial business adjustable ................... 0 0 0 68,118 Consumer ..................... 4,804 9,218 0 293,496 Consumer prime rate .......... 0 0 0 51,194 ----------- ----------- ----------- ------------- Total interest earning assets ....................... 285,354 25,622 581 2,548,371 ----------- ----------- ----------- ------------- Interest bearing liabilities: Money fund savings(4) ........ 31,699 0 0 358,927 Savings and NOW(4) ........... 116,774 0 0 386,939 Certificate accounts ......... 2,050 0 0 923,298 Borrowings: Securities sold under agreements to repurchase ................... 0 0 0 210,854 Advances from FHLB ........... 15,690 0 0 295,700 51 5-10 10-20 20 YEARS YEARS YEARS TOTAL ----------- ----------- ----------- ------------- ----------- ----------- ----------- ------------- Total interest-bearing liabilities .................. $166,213 $ 0 $ 0 $2,175,718 =========== =========== =========== ============= Interest rate sensitivity GAP (repricing difference) ....... $119,141 $ 25,622 $ 581 $ 372,653 Cumulative GAP ............... $346,450 $372,072 $372,653 Cumulative ratio of GAP to total assets ................. 13.33% 14.31% 14.33% =========== =========== ===========
- ----------------------------------------------------------------------------- (1) Fixed rate mortgages are shown in periods which reflect normal amortization plus prepayments of 7-8% per annum, depending on coupon. (2) Adjustable rate mortgages and debt securities available for sale-floating rate are shown in the periods in which the mortgages are scheduled for repricing. (3) Fixed rate debt securities available for sale are shown in periods which reflect normal amortization plus prepayments equal to BankAtlantic's experience of 9-15% per annum. (4) BankAtlantic determines deposit run-off on money fund checking, savings and NOW accounts based on statistics obtained from external sources. BankAtlantic does not believe its experience differs significantly from these sources. Interest-free transaction accounts are non-interest bearing liabilities and are accordingly, excluded from the cumulative rate sensitivity gap analysis.
WITHIN 1-3 3-5 OVER 5 1 YEAR YEARS YEARS YEARS --------- --------- --------- --------- Savings accounts decay rates ................................... 17.00% 17.00% 16.00% 14.00% Insured money fund savings (excluding tiered savings) decay rates ............................................................. 79.00% 31.00% 31.00% 31.00% NOW and tiered savings accounts decay rates .................... 37.00% 32.00% 17.00% 17.00% ========= ========= ========= =========
(5) Includes FHLB stock and federal funds sold. (6) Asset-backed securities are shown in periods which reflect normal amortization plus prepayments equal to BankAtlantic's experience of 45% per annum. (7) Tax certificates are shown in periods which reflects normal repayment equal to BankAtlantic's experience of 10% of the outstanding monthly balance. 51 LIQUIDITY AND CAPITAL RESOURCES Liquidity refers to BankAtlantic's ability to generate sufficient cash to meet funding needs to support loan demand, to meet deposit withdrawals and to pay operating expenses. BankAtlantic's securities portfolio provides an internal source of liquidity as a consequence of its short-term investments as well as scheduled maturities and interest payments. Loan repayments and sales also provide an internal source of liquidity. The Company's principal source of cash flow is dividends from BankAtlantic and it is anticipated that such funds will be utilized by the Company to pay dividends on its outstanding common stock and interest on outstanding debentures. The Company also obtains funds through the exercise of stock options. A summary of the Company's consolidated cash flows follows (in thousands):
FOR THE YEARS ENDED DECEMBER 31, --------------------------------------- 1996 1995 1994 ------------ ----------- ------------ Net cash provided (used) by: Operating activities ............... $ 29,159 $ 36,649 $ 12,199 Investing activities ............... (336,615) (65,233) (162,055) Financing activities ............... 346,732 42,471 169,485 ------------ ----------- ------------ Increase in cash and due from banks $ 39,276 $ 13,887 $ 19,629 =========== ============
The changes in cash used or provided in operating activities are affected by the changes in operations, which are discussed elsewhere herein, and by certain other adjustments. These other adjustments include additions to operating cash flows for nonoperating charges such as depreciation and the provision for loan losses and write downs of assets. Cash flow of operating activities is also adjusted to reflect the use or the providing of cash for increases and decreases in operating assets and decreases or increases, in operating liabilities. Accordingly, the changes in cash flow of operating activities in the periods indicated above has been impacted not only by the changes in operations during the periods but also by these other adjustments. In August 1996, the Company announced a plan to purchase up to 1.25 million shares of the Company's common stock. As of December 31, 1996, the Company had repurchased, in the secondary market, 228,125 and 112,500 of Class A and Class B common shares, respectively, for $3.3 million. These shares were retired at the time of repurchase. Management believes that the company and BankAtlantic have adequate liquidity to meet their business needs and regulatory requirements. The Company's primary use of funds is to pay cash dividends and interest expense on $57.5 million and $21.0 million of currently outstanding 6 3/4 % and 9% Debentures, respectively. It is anticipated that funds for payment of such expenses will continue to be obtained from BankAtlantic. Additionally, the ultimate repayment by the Company of its outstanding Debentures may be dependent upon dividends from BankAtlantic, refinancing of the debt or raising additional equity capital by the Company. BankAtlantic's primary sources of funds have been deposits, principal repayments of loans, debt securities available for sale and tax certificates, proceeds from the sale of loans originated for sale, mortgage-backed securities, mortgage servicing rights, investment securities, proceeds from securities sold under agreements to repurchase, advances from the FHLB, operations, other borrowings, and capital transactions. These funds were primarily utilized to fund loan disbursements and purchases, repayments of securities sold under agreements to repurchase, maturities of advances from the FHLB, purchases of tax certificates and payments of maturing certificates of deposit. In August 1994 the FHLB 52 granted BankAtlantic a $300 million line of credit with a maximum term of ten years. In January 1997, the FHLB increased BankAtlantic's line of credit to $500 million. In November 1996, Merrill Lynch granted BankAtlantic a facility of up to $150.0 million for broker deposits. The facility will be exercised as an alternative source of borrowings, when and if needed. BankAtlantic also has three $5.0 million lines of credit with three federally insured banking institutions to purchase Federal Funds. At December 31, 1996, there were $6.1 million of Federal funds balances outstanding. Regulations currently require that savings institutions maintain an average daily balance of liquid assets (cash and short-term United States Government and other specified securities) equal to 5% of net withdrawable accounts and borrowings payable in one year or less. BankAtlantic had a liquidity ratio of 12.98% under these regulations at December 31, 1996. See "Regulation and Supervision--Savings Institution Regulations--Liquidity Requirements of the OTS." Total commitments to originate and purchase loans, asset-backed securities and mortgage-backed securities, excluding the undisbursed portion of loans in process, were approximately $83.7 million, $69.7 million and $83.9 million at December 31, 1996, 1995 and 1994, respectively. BankAtlantic funded its commitments out of loan repayments and, for a limited period of time, short-term borrowings. At December 31, 1996, loan commitments were approximately 4.6% of loans receivable, net. As more fully described under "Regulation and Supervision--Savings Institution Regulations--Capital Requirements," BankAtlantic is required to meet all capital standards promulgated pursuant to FIRREA and FDICIA. DIVIDENDS The Company intends to pay regular quarterly cash dividends on its common stock. Funds for dividend payments and interest expense on the 9% and 6 3/4 % Debentures are or will be dependent upon BankAtlantic's ability to pay dividends to the Company. Current regulations applicable to the payment of cash dividends by savings institutions impose limits on capital distributions based on an institution's regulatory capital levels and net income. See discussion on Regulation and Supervision "Restriction on Dividends and Other Capital Distributions." In August 1993, BankAtlantic declared and paid a quarterly cash dividend to its common stockholders and has paid a regular quarterly dividend since that time. Subject to the results of operations and regulatory capital requirements for BankAtlantic, the Company will seek to declare regular quarterly cash dividends on its common stock. The Company declared five for four common share stock splits effected in the form of 25% stock dividends payable in Class A shares to all shareholders of both classes of common stock in February 1997 paid in March 1997, and July 1996 paid in August 1996. Due to accounting and tax considerations, the Company issued the stock dividend in shares of Class B common stock with respect to options to purchase Class B common stock previously granted under the Company's stock option plans. See discussion on "Restrictions on Dividends and Other Capital Distributions." IMPACT OF INFLATION The financial statements and related financial data and notes presented herein have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of BankAtlantic are monetary in nature. As a result, interest rates have a more significant impact on BankAtlantic's performance than the effects of general price levels. Although interest rates generally move in the same direction as inflation, the magnitude of such changes varies. The possible effect of fluctuating interest rates is discussed more fully under the previous section entitled "Interest Rate Sensitivity." 53 BUSINESS GENERAL BankAtlantic Bancorp, Inc. (the "Company"), is the holding company for BankAtlantic, a Federal Savings Bank ("BankAtlantic"). The Company acquired all of the capital stock of BankAtlantic on July 13, 1994 pursuant to a holding company reorganization. The Company's principal asset is its ownership of all of the capital stock of BankAtlantic. As a unitary savings bank holding company, the Company is registered with the Office of Thrift Supervision ("OTS") and is subject to OTS regulations, examinations, supervision and reporting. See "Regulation and Supervision." BankAtlantic is headquartered in Ft. Lauderdale, Florida and provides a full range of commercial banking products and related financial services directly and through subsidiary corporations. The principal business of BankAtlantic is attracting checking and savings deposits from the public and general business customers and using these deposits to originate or acquire commercial, residential and consumer loans and to make other permitted investments such as the purchase of mortgage-backed securities, tax certificates and other investment securities. BankAtlantic has shifted its activities from those of a traditional savings and loan to those generally associated with commercial banking. In February 1995, BankAtlantic acquired MegaBank, a Miami-based commercial bank with deposits of approximately $120 million. The MegaBank acquisition added 5 branches to BankAtlantic's branch network. In October 1996, BankAtlantic acquired Bank of North America ("BNA"), a Florida chartered commercial bank with deposits of approximately $470 million and 13 branches, 5 of which were closed upon acquisition. See Note 20 of the Consolidated Financial Statements. BankAtlantic operates through 56 branch offices located primarily in Dade, Broward and Palm Beach Counties in South Florida. As reported by an independent statistical reporting service, BankAtlantic is currently the largest independent savings bank headquartered in the State of Florida and third in size among all independent financial institutions headquartered in the State of Florida, based on deposits at September 30, 1996, the most recent date utilized by such reporting service. BankAtlantic is regulated and examined by the OTS and the Federal Deposit Insurance Corporation ("FDIC") and its deposit accounts are insured up to applicable limits by the FDIC. BankAtlantic's revenues are derived principally from interest earned on loans, mortgage-backed securities, tax certificates, investment securities, fees and interest earned from its mortgage servicing operations and fees earned on deposits and ATMs. BankAtlantic's major expense items are interest paid on deposits and borrowings, provision for loan losses and general and administrative expenses. LENDING ACTIVITIES GENERAL--BankAtlantic's lending activities are currently divided into three primary segments: residential real estate lending (including purchases of wholesale residential real estate loans), commercial lending (consisting of commercial real estate and commercial business lending); and consumer lending (primarily consisting of loans secured by second liens on residential real property, loans secured by automobiles and boats and unsecured signature loans). See "Regulation and Supervision" for a description of restrictions on BankAtlantic's lending activities. Interest rates and origination fees charged on loans originated by BankAtlantic are generally competitive with other financial institutions and other mortgage originators in BankAtlantic's general market area. BankAtlantic has an affirmative obligation, under the provisions of the Community Reinvestment Act of 1977, as amended (the "CRA"), to serve the credit needs of the communities in which it operates, and management believes that BankAtlantic fulfills its obligations under the CRA. See "Regulation and Supervision--Community Reinvestment." UNDERWRITING PROCEDURES--BankAtlantic's loan origination underwriting procedures are designed to assess both the borrower's ability to make principal and interest payments and the value of the 54 collateral securing the loan. BankAtlantic's loan purchasing underwriting procedures are designed to assess the seller's underwriting procedures, as well as individual loan quality including credit review. BankAtlantic obtains a current credit history for each loan. The Company has developed comprehensive purchase guidelines for its loan eligibility requirements with respect to loan amount, type of property, state of residence, loan-to-value ratios, borrower's sources of funds, appraisal and loan documentation, among other things. An underwriting and legal due diligence review is completed prior to purchase. A legal review of every file is conducted to determine the adequacy of the legal documentation. In its loan purchases, BankAtlantic generally reserves the right to reject particular loans from a loan package being considered for purchase and does so for loans in a package that do not meet its eligibility requirements. Commitments to purchase residential loans are made to mortgage bankers, investment bankers and unrelated financial institutions typically thirty to sixty days in advance of delivery, subject to due diligence. Loan officers or other loan production personnel in a position to directly benefit monetarily through loan solicitation fees from individual loan transactions do not have approval authority and commercial real estate and business and residential loans of $500,000 or more and consumer loans of $100,000 or more require the approval of BankAtlantic's Major Loan Committee. The Major Loan Committee consists of the Chairman of the Board, the Vice Chairman, the Senior Executive Vice President, certain Executive Vice Presidents and certain other officers of BankAtlantic. COMMERCIAL REAL ESTATE LOANS--Substantially all of BankAtlantic's commercial real estate loans relate to property located in Dade, Broward and Palm Beach Counties, Florida. BankAtlantic has, however, made commercial real estate loans elsewhere in Florida and anticipates increasing lending outside the South Florida area in the future. BankAtlantic's commercial real estate loans include permanent mortgage loans on commercial and industrial properties (generally having five to seven year maturities), construction loans secured by income producing properties (or for residential development and land acquisition) and development loans. These loans are originated on both a one year line of credit basis and on a fixed-term basis generally ranging from one to five years. BankAtlantic generally lends not more than 75% of the collateral's appraised value and requires borrowers to maintain, appropriate escrow accounts at BankAtlantic for real estate taxes and insurance. In making lending decisions, BankAtlantic generally considers, among other things, the overall quality of the loan, the credit of the borrower, the location of the real estate, the projected income stream of the property and the reputation and quality of management constructing or administering the property. No one factor is determinative and such factors may be accorded different weight in any particular lending decision. As a general rule, BankAtlantic also requires that these loans be guaranteed by one or more of the individuals who have made a significant equity investment in the property. Commercial real estate loans generally have shorter terms, prime-based interest rates which adjust more rapidly to interest rate fluctuations and bear higher rates of interest than alternative investments. Accordingly, income from this type of loan should be more responsive to changes in the general level of interest rates. However, permanent commercial real estate and construction lending is generally considered to have higher credit risk than single-family residential lending because the concentration of principal is on a limited number of loans and borrowers and repayment is significantly dependent on the successful operation of the related real estate project and thus may be subject, to a greater extent, to adverse conditions in the real estate market or the economy, generally. BankAtlantic's risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property's sell-out value upon completion of the project and the estimated cost of the project. If the estimated cost of construction or development proves to be inaccurate, BankAtlantic may be compelled to advance funds beyond the amount originally committed to permit completion of the project. If the estimate of value proves to be inaccurate, BankAtlantic may be confronted, at or prior to the maturity of the loan, with a project value which is insufficient to assure full repayment. As loan payments become due, the cash flow from the project may not be adequate to service total debt and the borrower may seek to modify the terms of the loan. In addition, the nature of these loans is such that they are generally less predictable and more difficult to evaluate and monitor and collateral may be difficult to dispose of. BankAtlantic has sought to minimize these risks by lending primarily to established developers. 55 COMMERCIAL BUSINESS LOANS--BankAtlantic's corporate lending activities are generally directed towards small to medium size companies located in Dade, Broward and Palm Beach Counties, Florida. BankAtlantic's corporate lending division makes both secured and unsecured loans, although the majority of such lending is done on a secured basis. The average balance of new commercial business loans is in excess of $1 million and such loans are generally secured by the receivables, inventory, equipment, and/or general corporate assets of the borrowers. These loans are originated on both a one year line of credit basis and on a fixed-term basis ranging from one to five years. Commercial business loans generally have annual maturities and prime-based interest rates. However, commercial business loans generally have a higher degree of credit risk than residential loans because they are more likely to be adversely affected by unfavorable economic conditions. The development of ongoing customer relationships with commercial borrowers is an important part of BankAtlantic's efforts to attract more low-interest and non-interest bearing demand deposits and to generate other fee-based, non-lending services. RESIDENTIAL REAL ESTATE LOANS--BankAtlantic's residential real estate lending includes home mortgage loans originated by BankAtlantic and secured by residential real estate located in Dade, Broward and Palm Beach Counties, Florida. and commencing in 1996, substantially increased the purchase of wholesale residential real estate loans located throughout the United States. BankAtlantic's residential loans have been originated through its branch banking network, a staff of commissioned lending officers, and outside brokers. These outside brokers had received a fee for services rendered upon the successful underwriting and closing of a loan. Applicable regulations require that all loans in excess of 90% of appraised value be insured by private mortgage insurance. BankAtlantic's policy is in compliance with these regulations and generally requires insurance on loan to value ratios greater than 80%. In connection with residential loans insured by the Federal Housing Administration ("FHA") or guaranteed by the Veterans Administration ("VA"), BankAtlantic may lend up to the maximum percentage of the appraised value acceptable to the insuring or guaranteeing agency. Appraised values are determined by on-site inspections conducted by qualified independent appraisers. BankAtlantic generally follows regulatory and agency guidelines when it originates such loans for sale. BankAtlantic originates fixed rate loans with amortization periods of up to 30 years; however, substantially all of these loans are sold to correspondents. BankAtlantic also originates adjustable rate mortgage loans ("ARMs") with amortization periods of up to 30 years, the majority of which have been sold to correspondents with a lesser number retained for portfolio investment based on specific needs and criteria. During 1996, BankAtlantic purchased approximately $465.9 million of one-to-four family of fixed and adjustable residential loans from various mortgage bankers, investment bankers and unrelated financial institutions throughout the United States. Purchases of residential loans throughout the United States reduces BankAtlantic's loan concentration in South Florida. BankAtlantic primarily purchases loans in the secondary market where yields are generally lower than on originated loans, however, management believes that the lower yield is significantly offset by lower administrative costs based on the volume of activity and the ability to partially hedge the interest rate risk associated with these loans due to the size and generally homogenous nature of the purchases. CONSUMER LOANS--BankAtlantic originates consumer loans bearing both fixed and prime-based interest rates primarily ranging in terms up to 5 years other than second mortgage loans which may have longer terms. Loans are originated directly through the branch network. Consumer loans typically involve a higher degree of credit risk than one-to-four family residential loans secured by first mortgages, but they generally carry higher yields and have shorter terms to maturity. The volume of direct consumer lending increased in 1996 from 1995 levels but is expected to decline during 1997. Prior to 1997, direct consumer loans were solicited through mass and direct marketing and through the distribution and display of advertising materials at branch offices and, brokers. During 1997, direct consumer loans will primarily be solicited through branch offices. BankAtlantic also obtains automobile loans indirectly through automobile dealerships located in South Florida. BankAtlantic's primary focus of its consumer lending in recent years has been the origination of direct second mortgage loans (home equity loans secured by a junior lien on residential real property). 56 These loans are typically based on a maximum 80% loan-to-value ratio. Second mortgage loans generally are originated on both a line of credit and a fixed term basis ranging from 5 to 15 years. BankAtlantic also extends personal loans which may be secured by various forms of collateral, both real and personal, or to a minimal extent, may be made on an unsecured basis. Such loans generally bear interest at floating rates. For several years, BankAtlantic eliminated its indirect lending activities and through its acquisition of MegaBank in February 1995, BankAtlantic reentered the indirect automobile lending market, which consists of automobile loans made by others and acquired by BankAtlantic. MegaBank historically obtained fixed-rate automobile loans indirectly through various automobile dealerships located in Dade County, Florida and BankAtlantic has continued this practice and has increased its indirect lending activities with various dealerships throughout South Florida. The indirect origination of consumer loan products generally requires funding of dealer reserves to dealers who originated such loans. The risk of amounts previously advanced to the dealer is primarily dependent upon loan performance but, secondarily, is dependent upon the financial condition of the dealer. The dealer is generally responsible to BankAtlantic for the amount of the reserve only if a loan giving rise to the reserve becomes delinquent or is prepaid. However, the dealer's ability to refund any portion of the unearned reserve to BankAtlantic is subject to economic conditions, generally, and the financial condition of the dealer. A decline in economic conditions could adversely affect both the performance of the loans and the financial condition of the dealer. There is no assurance that BankAtlantic can successfully recover amounts advanced in the event it pursues the dealer for amounts due. See Note 15 of the Consolidated Financial Statements regarding BankAtlantic's experience relating to the Subject Portfolio. LOAN COMMITMENTS--BankAtlantic issues commitments to originate residential and commercial real estate loans and commercial business loans on specified terms which are conditioned upon the occurrence of stated events. Loan commitments are generally issued in connection with (i) the origination of loans for the financing of residential properties by prospective purchasers, (ii) construction or permanent loans secured by commercial and multi-unit residential income-producing properties, (iii) loans to corporate borrowers in connection with loans secured by corporate assets, and (iv) the origination of loans for the refinancing of residential properties by existing owners. The commitment procedure followed by BankAtlantic depends on the type of loan underlying the commitment. Residential loan commitments are generally limited to 60 days and are issued after the loan is approved. However, loan commitments may be extended based on the circumstances. BankAtlantic offers interest rate "locks" for a fee for periods of up to 270 days. BankAtlantic also issues short-term commitments on commercial real estate loans and commercial business loans. Short-term commitments generally remain open for no more than 90 days. BankAtlantic usually charges a commitment fee of 1% to 2% on short-term commitments relating to commercial real estate loans and commercial business loans. In most cases, half of the fee is payable upon the acceptance of the commitment and is non-refundable. If the loan is ultimately made, the remainder of the commitment fee is collected at closing. FACTORING--In January 1997, BankAtlantic Factors, Inc. ("Factors Inc.") was established as a subsidiary of BankAtlantic. Factors Inc. purchases accounts receivable from a client with recourse. Clients are generally manufacturers, distributors, importers and service companies in various industries. Factors Inc. will advance funds to the client based on the eligible collateral. However, it may suffer a loss if the client's customer fails to pay and the client does not meet its recourse obligations to Factors, Inc. Credit facilities of $500,000 or more require the approval of BankAtlantic's Major Loan Committee. Discounts will generally vary between 1 1/4 % to 2% per month based on various criteria up to statutory limits. Outside brokers may be used to obtain certain relationships and will be paid commissions based on a percentage of earnings from an account as collected. During 1997, it is anticipated that the average balances of factored receivables will not exceed $10.0 million. 57 MORTGAGE SERVICING RIGHTS--As part of its strategic business plan, BankAtlantic periodically purchases mortgage servicing rights in small volumes through concurrent flow servicing arrangements supplemented with small bulk purchases and sells such rights in larger volumes where the premiums available are generally greater. It is BankAtlantic's intent to maintain servicing right balances below 35% of core capital. Further, BankAtlantic generally retains servicing rights on loans that its sells, and purchases wholesale residential real estate loans on both a servicing retained and servicing released basis. Sales of servicing rights are made based on market conditions as well as maintaining servicing rights below the determined level. The fees derived from servicing mortgage loans include mortgage servicing fees as well as return check and late charge fees. The amount of revenue earned from loan servicing is dependent on the prepayments of the underlying loans. Generally, as interest rates fall, loan prepayments accelerate, resulting in higher amortization of mortgage servicing rights due to the write-off of rights relating to loans that are prepaid. A decline in the value of mortgage servicing rights may also reduce regulatory capital. (See "Savings Institutions Regulation"). Conversely, as interest rates rise, loan prepayments decline, resulting in a longer average life of the rights and higher cumulative net revenues earned on mortgage servicing rights. . Premiums paid in connection with the purchase of mortgage loan servicing rights are amortized by BankAtlantic using prepayment assumptions that management believes are on the conservative end of a probable range which results in higher expenses on a monthly basis but may result in increased gains on a sale of the mortgage servicing rights. USURY LIMITATIONS--The maximum rate of interest that BankAtlantic may charge for any particular loan transaction varies depending upon the purpose of the loan, the nature of the borrower, the security and other various factors set forth in Florida and federal interest rate laws. Under Florida law, BankAtlantic is not subject to any usury ceiling on loans secured by a first lien on residential real estate and certain other secured loans. Other types of loans are subject to Florida's statutory usury ceiling which is currently 18% per annum, although certain types of loans, such as automobile loans, factored receivables and loans in excess of $500,000 may legally carry an interest rate of up to 25% per annum. NON-PERFORMING AND CLASSIFIED ASSETS, LOAN DELINQUENCIES AND DEFAULTS--When a borrower fails to make a required payment on a loan, BankAtlantic attempts to have the deficiency cured by communicating with the borrower. In most cases, deficiencies are cured promptly. If the delinquency is not cured within 90 days the loan is placed on non-accrual. It is BankAtlantic's general policy to institute appropriate legal action to collect the loan, including foreclosing on any collateral securing the loan and obtaining a deficiency judgment against the borrower, if appropriate. Current regulations provide for the classification of loans and other assets considered by examiners to be of lesser quality as "special mention," "substandard," "doubtful" or "loss" assets. The special mention category applies to assets not warranting classification as substandard but possessing credit deficiencies or potential weaknesses necessitating management's close attention. Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that such weaknesses make collection of the loan or liquidation in full on the basis of currently existing facts, conditions and values, highly questionable or improbable. For components of the portfolio that are not classified, or classified as special mention, estimated losses for the upcoming twelve months are provided for. For loans classified as substandard or doubtful, whether analyzed and provided for individually or as part of pools, all estimated credit losses over the lives of these loans are provided for. Prompt charge-off is required for loans or portions of loans that available information confirms to be uncollectible. Assets classified as a loss are considered uncollectible and of such little value that their continued treatment as assets is not warranted. The asset classification regulations require insured institutions to classify their own assets and to establish prudent general allowances for loan losses. However, regulators have considerable discretion 58 to review asset classifications and loss allowances of insured institutions, and, if a regulator concludes that the valuation allowances established by an institution are inadequate, the regulator may determine, subject to certain reviews, the need for, and extent of, any increase necessary in the institution's general allowance for loan losses. Management of BankAtlantic has identified certain loans as non-performing or restructured assets. These assets include: (i) loans accounted for on a non-accrual basis; (ii) loans not included in category (i) which have matured or are contractually 90 days or more past due as to interest or principal payments; (iii) assets acquired in settlement of loans; (iv) restructured loans, and (v) non-accrual tax certificates. Non-accrual loans are loans on which interest recognition has been suspended until realized because of doubts as to the borrower's ability to repay principal or interest. Restructured loans are loans on which the terms have been altered to provide a reduction or deferral of interest or principal because of a deterioration in the borrower's financial position. Such restructured loans may be removed from the restructured category based upon various factors, including a period of satisfactory loan performance under the revised terms. ALLOWANCE FOR LOAN LOSSES--BankAtlantic prospectively adopted SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan--Income Recognition and Disclosures" ("FAS 114"), effective January 1, 1995. There was no impact to the consolidated statement of financial condition or the consolidated statement of operations upon implementation. FAS 114 does not apply to large groups of smaller balance homogeneous loans that are collectively evaluated for impairment. Loans collectively reviewed by BankAtlantic for impairment include all residential and consumer loans and performing commercial real estate and business loans under $500,000, excluding loans which are individually reviewed based on specific criteria, such as delinquency and condition of collateral property. BankAtlantic's impaired loans within the scope of FAS 114 include nonaccrual commercial loans, restructured loans, and performing commercial loans less than 90 days delinquent, where management does not expect the loans to be repaid in accordance with their contractual terms but which are expected to be collected in full. Generally, BankAtlantic recognizes interest income on impaired loans on a cash basis. BankAtlantic bases the measurement of loan impairment on the fair value of the loan's collateral in accordance with FAS 114. Non-collateral dependent loan impairment is based on the present value of the estimated future cash flows. For collateral dependent loans, impairment is based on the fair value of the underlying collateral. Impairment losses are included in the allowance for loan losses through a charge to the provision for loan losses. Adjustments to impairment losses resulting from changes in the fair value of an impaired loan's collateral or projected cash flows are included in the provision for loan losses. Upon disposition of an impaired loan, any related valuation allowance is relieved from the allowance for loan losses. The allowance for loan losses is maintained by additions charged to operations as a provision for loan losses and by loan recoveries, while charge-offs reduce the allowance. BankAtlantic's process for evaluating the adequacy of the allowance for loan losses has three basic elements: first, the identification of impaired loans; second, the establishment of appropriate loan loss allowances once individual specific impaired loans are identified; and third, a methodology for estimating loan losses based on the inherent risk in the remainder of the loan portfolio. INVESTMENT ACTIVITIES GENERAL--BankAtlantic maintains an investment portfolio consisting primarily of MBS, tax certificates, Treasury Notes, Federal agency obligations, and asset-backed securities. Additionally, BankAtlantic has, in the past, purchased banker's acceptances and corporate bonds. Federal regulations limit the types and quality of instruments in which BankAtlantic may invest. MBS are pools of residential loans which are made to consumers and then generally sold to governmental agencies, such as the Government National Mortgage Corporation ("GNMA"), Federal 59 National Mortgage Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"). MBS have fixed or variable rates ("ARMs") and either 15-30 year maturities or 5-7 year balloon maturities. BankAtlantic generally invests in ARMs or 5-7 year balloon MBS insured or guaranteed by these government agencies. Banker's acceptances are unconditional obligations of the issuing bank and are collateralized by various means, including the inventory and receivables of borrowers of the issuing bank. Asset-backed securities purchased by BankAtlantic consist of pooled automobile receivables and are limited to only those that are investment grade. Corporate bonds consist of investment grade obligations of corporate borrowers with an average duration not to exceed three years. Investments in debt securities which BankAtlantic has a positive intent and ability to hold to maturity are classified as "securities held to maturity" and are carried at cost, adjusted for discounts and premiums which are accreted or amortized to estimated maturity under the interest method. A security cannot be classified as held to maturity if it might be sold in response to changes in market interest rates, related changes in the security's prepayment risk, liquidity needs, changes in the availability of and the yield on alternative investments, and changes in funding sources and terms. . Currently, debt and equity securities and options related thereto, purchased or sold for the purpose of a short-term profit are classified as "trading account securities" and are recorded at fair value. Unrealized gains and losses in trading account securities are reflected in operations. Debt and equity securities not classified as held to maturity or trading account securities are classified as "available for sale". Debt and equity securities available for sale are carried at fair value, with the related unrealized appreciation or depreciation, net of deferred income taxes, reported as a separate component of stockholders' equity. TAX CERTIFICATES--BankAtlantic's portfolio also includes tax certificates issued by various counties in the State of Florida. Tax certificates are evidences of tax obligations that are auctioned by county taxing authorities on an annual basis when the property owner fails to pay the real estate taxes on the property when due. Tax certificates represent a priority lien against the real property for which the assessed real estate taxes are delinquent. Interest accrues on the tax certificates at the rate established at the auction. The minimum repayment on tax certificates in order to satisfy the lien is the certificate amount plus the greater of five percent of the certificate amount or the interest accrued through the redemption date. Although tax certificates have no payment schedule or stated maturity, the certificate holder has the right to collect the delinquent tax amount, plus interest and can file for a deed to the underlying property if the delinquent tax amount is unpaid at the end of two years. If the certificate holder does not file for the deed within seven years, the certificate becomes null and void. BankAtlantic's experience with this type of investment has been favorable as rates earned are generally higher than many alternative investments, substantial repayment generally occurs over a two year period and losses to date have been minimal. The primary risks BankAtlantic has experienced with tax certificates have related to the risk that additional funds may be required to purchase other certificates relating to the property, the risk that the liened property may be unusable and the risk that potential environmental concerns may make taking title to the property untenable. During 1997, BankAtlantic intends to acquire tax certificates from various municipalities outside of the State of Florida. The nature of priority, statutory periods and deed procedures does vary by applicable taxing authorities. It is not anticipated that there will be any significant concentration of tax certificate purchases in any one taxing authority outside of the State of Florida. The OTS has reviewed the amount invested in, and procedures utilized in the acquisition and administration of, tax certificates by savings institutions. After such review, the Southeast Regional Office of the OTS recommended that the maximum amount of tax certificates purchased be based on a formula whereby the rolling twelve month average of aggregate investments in tax certificates, including interest thereon, not exceed 100% of risk-based capital. Based on market conditions, BankAtlantic purchased approximately $49 million, $44 million and $47 million in tax certificates at auctions in 1996, 1995 and 1994, respectively, less than that permitted by the OTS recommendation. At December 31, 60 1996, BankAtlantic had an outstanding balance of approximately $54.5 million in tax certificates. For descriptions of BankAtlantic's investments in tax certificates and other investment securities, see Note 2 to the Consolidated Financial Statements. For a discussion of regulatory limitations on BankAtlantic's investments, see "Regulation and Supervision." Management of BankAtlantic establishes allowances for tax certificate losses in amounts which it believes is sufficient to provide for potential future losses. In establishing its allowances for tax certificates, management considers past loss experience, present indicators such as the length of time the certificate has been outstanding, economic conditions and collateral values. Tax certificates and resulting deed applications are classified as nonaccrual when a tax certificate is outstanding 48 months and a deed has aged 48 months from BankAtlantic's acquisition date. At that time, interest ceases to be accrued and previously accrued interest is reversed. SOURCES OF FUNDS GENERAL--Historically, deposits have been the principal source of BankAtlantic's funds for use in lending and for other general business purposes. Loan repayments, sales of securities, capital contributions from the Company, advances from the Federal Home Loan Bank ("FHLB") of Atlanta and other borrowings, and the use of repurchase agreements have been additional sources of funds. Loan amortization payments and deposit inflows and outflows are significantly influenced by general interest rates. Borrowings may be used by BankAtlantic on a short to intermediate term basis to compensate for reductions in normal sources of funds such as savings inflows, and to provide additional liquidity investments. On a long-term basis, borrowings may support expanded lending activities and purchases of investments. Historically, BankAtlantic has borrowed primarily from the FHLB of Atlanta and through the use of repurchase agreements. DEPOSIT ACTIVITIES--BankAtlantic offers several types of deposit programs designed to attract both short-term and long-term funds from the general public by providing an assortment of accounts and rates. BankAtlantic believes that its product line is comparable to that offered by its competitors. BankAtlantic offers the following accounts: commercial and retail demand deposit accounts; regular passbook and statement savings accounts; money market accounts; fixed-rate, fixed-maturity certificates of deposit, ranging in maturity from 30 days to 8 years; variable-maturity jumbo certificates of deposit; and various NOW accounts. BankAtlantic also offers IRA and Keogh retirement accounts. BankAtlantic's deposit accounts are insured by the FDIC through the SAIF and the Bank Insurance Fund ("BIF") up to a maximum of $100,000 for each insured depositor. BankAtlantic solicits deposits through advertisements in newspapers and magazines of general circulation and on radio and television in Dade, Broward and Palm Beach Counties, Florida. Most of its depositors are residents of these three counties at least part of the year. BankAtlantic does not currently hold any deposits obtained through brokers. In November 1996, Merrill Lynch granted BankAtlantic a facility of up to $150 million for brokered deposits. The facility is considered to be an alternative source of borrowings. BORROWINGS--BankAtlantic has utilized wholesale repurchase agreements as a means of obtaining funds and increasing yields on its investment portfolio. In a wholesale repurchase transaction, BankAtlantic sells a portion of its current investment portfolio (usually government and mortgage-backed securities) at a negotiated rate and agrees to repurchase the same assets on a specified date. Proceeds from such transactions are treated as secured borrowings pursuant to applicable regulations. See Note 9 to the Consolidated Financial Statements. BankAtlantic is a member of the FHLB and is authorized to apply for secured advances from the FHLB of Atlanta. See "Regulation and Supervision." BankAtlantic uses advances from the FHLB to match fund or partially match fund fixed rate wholesale residential real estate loans purchased, to repay other borrowings, meet deposit withdrawals and expand its lending and short-term investment activities. See Note 8 to the Consolidated Financial Statements. 61 FEDERAL FUNDS BORROWINGS--BankAtlantic has established three $5.0 million unsecured facilities with three federally insured banking institutions to purchase Federal Funds. The facilities are used on an overnight borrowing basis to assist in managing BankAtlantic's cash flow requirements. These Federal Fund lines are subject to periodic review and may be terminated at any time by the issuer institution. COMPETITION As reported by an independent statistical reporting service, BankAtlantic is currently the largest independent savings bank and third largest independent financial institution headquartered in the State of Florida based on deposits at September 30, 1996, the most recent date utilized by such reporting service. BankAtlantic's operating goal is to provide a broad range of financial services with a strong emphasis on customer service. BankAtlantic has substantial competition in attracting and retaining deposits and in lending funds. The primary factors in competing for deposits are the range and quality of financial services offered, the ability to offer attractive rates and the availability of convenient locations. There is direct competition for deposits from credit unions and commercial banks and other savings institutions. Additional significant competition for savings deposits comes from other investment alternatives, such as money market funds, credit unions, and corporate and government securities. The primary factors in competing for loans are the range and quality of lending services offered, interest rates and loan origination fees. Competition for the origination of real estate loans normally comes from other savings and financial institutions, commercial banks, mortgage bankers, finance and insurance companies. Legislative developments relating to interstate branching and the ownership of financial institutions are expected to result in continued consolidation of financial institutions, and also provide larger financial institutions increased access in the marketplace. Accordingly, BankAtlantic expects increased competition in the immediate future. See further discussion under "Regulation and Supervision--Legislative Developments". EMPLOYEES The Company does not have any employees who are not also employees of BankAtlantic. At December 31, 1996, BankAtlantic employed 961 full-time and 56 part-time employees. Management believes that its relations with its employees are satisfactory. BankAtlantic currently maintains a comprehensive employee benefits program providing, among other benefits, a qualified pension plan, managed health care programs and life insurance. These employee benefits are considered by management to be generally competitive with employee benefits provided by other major employers in Florida. BankAtlantic's employees are not represented by any collective bargaining group. REGULATION AND SUPERVISION GENERAL The Company, by virtue of its ownership of all of the outstanding stock of BankAtlantic, is a unitary savings bank holding company subject to regulatory oversight by the OTS. As such, the Company is required to register with and be subject to OTS examination, supervision and certain reporting requirements. Further, as a company having a class of publicly held equity securities, the Company is subject to the reporting and the other requirements of the Securities and Exchange Act. In addition, BFC Financial Corporation ("BFC") which owns 46% of the Company's voting common stock, is subject to the same oversight by the OTS as discussed herein with respect to the Company. BankAtlantic is a member of the FHLB system and its deposit accounts are insured up to applicable limits by the FDIC. BankAtlantic is subject to supervision, examination and regulation by 62 the OTS and to a lesser extent by the FDIC as the insurer of its deposits. BankAtlantic must file reports with the OTS and the FDIC concerning its activities and financial condition, in addition to obtaining regulatory approvals prior to entering into certain transactions. The OTS and the FDIC periodically review BankAtlantic's compliance with various regulatory requirements. The regulatory structure also gives regulatory authorities extensive discretion in connection with their with respect to the classification of non-performing and other assets and the establishment of adequate loan loss reserves for regulatory purposes. HOLDING COMPANY REGULATIONS The Home Owner's Loan Act ("HOLA") prohibits a savings bank holding company from directly or indirectly acquiring control, including through an acquisition by merger, consolidation or purchase of assets, of any savings association (as defined in Section 3 of the Federal Deposit Insurance Act) or any other savings and loan or savings bank holding company, without prior OTS approval. In considering whether to grant approval for any such transaction, the OTS will take into consideration a number of factors, including the competitive effects of the transaction, the financial and managerial resources and future prospects of the holding company and its bank or thrift subsidiaries following the transaction, and the compliance records of such subsidiaries with the CRA. Generally, a savings bank holding company may not acquire more than 5% of the voting shares of any savings association unless by merger, consolidation or purchase of assets, in each case subject to prior OTS approval. A savings bank holding company may not acquire as a separate subsidiary an insured institution which has its principal offices outside of the state where the principal offices of its subsidiary institution is located, except in the case of certain emergency acquisitions approved by the FDIC, or when the laws of the state in which the insured institution to be acquired is located specifically authorize such an acquisition. However, a savings bank holding company may acquire up to 5% of the voting shares of any savings association or savings bank holding company not a subsidiary thereof without prior regulatory approval. Another provision of HOLA permits a savings bank holding company to acquire up to 15% of the voting shares of certain undercapitalized savings associations. Federal law empowers the Director of the OTS to take substantive action when it determines that there is reasonable cause to believe that the continuation by a savings bank holding company of any particular activity constitutes a serious risk to the financial safety, soundness, or stability of a savings bank holding company's subsidiary savings institution. The Director of the OTS has oversight authority for all holding company affiliates, not just the insured institution. Specifically, the Director of the OTS may, as necessary, (i) limit the payment of dividends by the savings institution; (ii) limit transactions between the savings institution, the holding company and the subsidiaries or affiliates of either; or (iii) limit any activities of the savings institution that might create a serious risk that the liabilities of the holding company and its affiliates may be imposed on the savings institution. Any such limits would be issued in the form of a directive having the legal effect of a cease and desist order. ACTIVITIES LIMITATIONS--The Company will remain a unitary savings bank holding company under applicable law until it acquires as a separate subsidiary another savings institution. A savings bank holding company whose sole subsidiary qualifies as a qualified thrift lender ("QTL"), described below, generally has the broadest authority to engage in various types of business activities with little to no restrictions on its activities, except that historically savings bank holding companies have not been permitted to acquire or be acquired by an entity engaged in securities underwriting or market making. A holding company that acquires another institution and maintains it as a separate subsidiary or whose sole subsidiary fails to meet the QTL test will become subject to the activities limitations applicable to multiple savings bank holding companies. In general, a multiple savings bank holding company (or subsidiary thereof that is not an insured institution) may not commence, or continue for more than a limited period of time after becoming a multiple savings bank holding company (or a subsidiary thereof), any business activity other than (i) furnishing or performing management services for a subsidiary insured institution; (ii) conducting an insurance agency or an escrow business; (iii) holding, managing or liquidating assets owned by or acquired from a subsidiary insured institution; (iv) holding or managing properties used or occupied by a subsidiary insured institution; (v) acting as trustee under 63 deeds of trust; (vi) those activities previously directly authorized by the OTS by regulation as of March 5, 1987 to be engaged in by multiple savings bank holding companies; or (vii) subject to prior approval of the OTS, those activities authorized by the Federal Reserve Board ("FRB") as permissible investments for bank holding companies. These restrictions do not apply to a multiple savings bank holding company if (a) all, or all but one, of its insured institution subsidiaries were acquired in emergency thrift acquisitions or assisted acquisitions and (b) all of its insured institution subsidiaries are QTLs. RESTRICTIONS ON TRANSACTIONS WITH BANKATLANTIC--BankAtlantic is subject to restrictions in its dealings with the Company and any other companies that are "affiliates" of the Company under HOLA and certain provisions of the Federal Reserve Act ("FRA") that are made applicable to savings institutions by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and OTS regulations. See "Regulation and Supervision--Savings Institution Regulations--Transactions with Affiliates" below for a general discussion of the restrictions on dealing with affiliates. LEGISLATIVE DEVELOPMENTS INTERSTATE BANKING--The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("RNA") authorizes interstate acquisition of banks and bank holding companies without geographic limitation beginning one year after enactment. In addition, beginning June 1, 1997, a bank may merge with a bank in another state as long as neither of the states has opted out of interstate branching between the date of enactment of the RNA and May 31, 1997. The RNA further provides that states may enact laws permitting interstate merger transactions prior to June 1, 1997. A bank may establish and operate a de novo branch in a state in which the bank does not maintain a branch if that state expressly permits de novo branching. Once a bank has established branches in a state through an interstate merger transaction, the bank may establish and acquire additional branches at any location in the state where any bank involved in the interstate merger transaction could have established or acquired branches under applicable federal or state law. A bank that has established a branch in a state through DE NOVO branching may establish and acquire additional branches in such state in the same manner and to the same extent as a bank having a branch in such state as a result of an interstate merger. If a state opts out of interstate branching within the specified time period, no bank in any other state may establish a branch in the opting out state, whether through an acquisition or DE NOVO. EXPANDED NON-BANKING ACTIVITIES--Various bills have been introduced into the United States Congress that would repeal in some respects the provisions of the Glass-Steagall Act prohibiting certain banking organizations from engaging in certain securities activities and the provisions of the Bank Holding Company Act prohibiting affiliations between banking organizations and non-banking organizations. This legislation is still under discussion. FDIC DEPOSIT INSURANCE--On September 30, 1996, President Clinton signed into law H.R. 3610, which recapitalized the SAIF and substantially bridged the assessment rate disparity existing between SAIF and BIF insured institutions. The new law subjected institutions with SAIF assessable deposits, including BankAtlantic, to a one-time assessment of 0.657% of covered deposits at March 31, 1995. BankAtlantic's one-time assessment, which was paid in November 1996, resulted in a pre-tax charge of $7.2 million for the year ended December 31, 1996, and under provisions of the law, was treated as a fully deductible "ordinary and necessary business expense" for tax purposes. The $7.2 million charge excludes the $2.3 million amount assessed on BNA deposits which was included considered in recording the acquisition of BNA under the purchase method of accounting. in As a result of the special assessment, discussed herein, the SAIF was capitalized at the target Designated Reserve Ratio ("DRR") of 1.25 percent of estimated insured deposits on October 1, 1996. On December 1, 1996 the FDIC finalized a rule lowering the rates on insurance assessments paid to the SAIF, effective October 1, 1996. The rule also separates, effective January 1, 1997, the Financing Corporation ("FICO") assessment to service the interest on its bond obligations from the SAIF assessment. The amount assessed on individual institutions by the FICO will be in addition to the 64 amount paid for deposit insurance according to the FDIC's risk-related assessment rate schedules. The FICO assessment rate for the first semi-annual period in 1997 was set at 6.48 basis points annually for SAIF-assessable deposits and 1.30 basis points for BIF assessable deposits. By law, the FICO rate on BIF-assessable deposits must be one-fifth the rate on SAIF-assessable deposits until pro-rata sharing begins, when the insurance funds merge or January 1, 2000, whichever occurs first. The rule established a special interim rate schedule of 18 to 27 basis points annually between October 1, 1996 and January 1, 1997. Excess assessments were refunded during January 1997. Insurance premiums range from zero to 27 basis points annually, with well capitalized institutions in the highest supervisory subgroup paying zero basis points and undercapitalized institutions in the lowest supervisory subgroup paying 27 basis points. At December 31, 1996, BankAtlantic met the capital requirements for a well capitalized institution and anticipates paying zero basis points for insurance premiums and anticipates paying 6.48 basis points for its SAIF-assessable deposits and 1.30 for its BIF-assessable deposits based on it supervisory subgroup for FICO assessments. BankAtlantic pays deposit insurance premiums primarily to the SAIF and secondarily to the BIF in connection with the deposits it acquired as a result of the acquisition of MegaBank. All BNA deposits acquired are subject to SAIF premiums. At December 31, 1996, BankAtlantic had approximately $143.8 million of deposits subject to BIF premiums and $1.7 billion subject to SAIF premiums. The Company has been considering converting BankAtlantic's charter to that of a commercial bank, however, the Company is not presently pursuing a conversion of BankAtlantic's charter since it is awaiting the outcome of the legislative proposals relating to the possible consolidation of bank and thrift charters. SAVINGS INSTITUTION REGULATIONS REGULATORY CAPITAL--Both the OTS and the FDIC have promulgated regulations establishing capital requirements applicable to savings institutions. The effect and interrelationship of these regulations is discussed below. Savings institutions must meet the OTS' specific capital standards which by law must be no less stringent than capital standards applicable to national banks, with exceptions for risk-based capital requirements to reflect interest rate risk or other risk. Capital calculated pursuant to the OTS' regulations varies substantially from capital calculated pursuant to generally accepted accounting principles ("GAAP"). At December 31, 1996, BankAtlantic exceeded all applicable regulatory capital requirements. The capital requirements are as follows: (a) The leverage limit requires savings institutions to maintain core capital of at least 3% of adjusted total assets. Adjusted total assets are calculated as GAAP total assets, minus intangible assets (except those included in core capital as described below). Core capital consists of common shareholders' equity, including retained earnings, noncumulative perpetual preferred stock and related surplus, less specified intangible assets (including goodwill and mortgage servicing rights ("MSR")). However, a portion of MSR may be included in adjusted assets and core capital. Generally, an amount may be included equal to the lower of (i) 90% of the fair market value of readily marketable MSR (ii) the current amortized book value as determined under GAAP or (iii) 50% of core capital. (b) Under the tangible capital requirement, savings institutions must maintain tangible capital in an amount not less than 1.5% of adjusted total assets. Tangible capital is defined in the same manner as core capital, except that all intangible assets, except MSR, must be deducted. The percentage of MSR which may be included in tangible capital is equal to the lesser of (a) 100% of the amount of tangible capital that exists before the deduction of any disallowed MSR or (b) the amount of MSR allowed to be included in core capital. (c) The risk-based standards of the OTS currently require maintenance of core capital equal to at least 4% of risk-weighted assets, and total capital equal to at least 8% of risk-weighted assets. Total capital includes core capital plus supplementary capital, but supplementary capital that may be included 65 in computing total capital for this purpose may not exceed core capital. Supplementary capital includes cumulative perpetual preferred stock, allowable subordinated debt and general loan loss allowances, within specified limits. Such general loss allowances may not exceed 1.25% of risk-weighted assets. Risk-weighted assets are determined by assigning to all assets designated risk weights ranging from 0% to 100%, based on the credit risk assumed to be associated with the particular asset. Generally, zero weight is assigned to risk-free assets, such as cash and unconditionally guaranteed United States government securities, including mortgage-backed securities issued or guaranteed by GNMA. A weight of 20% is assigned to, among other things, certain obligations of United States government-sponsored agencies (such as the FNMA and the FHLMC), stock of a FHLB and high quality mortgage-related securities. A weight of 50% is assigned to qualifying mortgage loans and certain other residential mortgage-related securities. A weight of 100% is assigned to consumer, commercial and other loans, repossessed assets and assets that are 90 days or more past due and all other assets not identified in the categories above. See "Liquidity and Capital Resources" and Note 14 of the Consolidated Financial Statements for a discussion on BankAtlantic's capital position. In addition to the capital requirements set forth in the OTS' regulations, the OTS has delegated to its Regional Directors the authority to establish higher individual minimum capital requirements for savings institutions based upon a determination that the institution's capital is or may become inadequate in view of its circumstances. In August 1993, the OTS adopted a final rule incorporating an interest-rate risk component into the risk-based capital regulation. Under the rule, an institution with a greater than "normal" level of interest-rate risk will be subject to a deduction of its interest-rate risk component from total capital for purposes of calculating the risk-based capital requirement. As a result, such an institution will be required to maintain additional capital in order to comply with the risk-based capital requirement. An institution with a greater than normal interest-rate risk is defined as an institution that would suffer a loss of net portfolio value exceeding 2.0% of the estimated market value of its assets in the event of a 200 basis point increase or decrease (with certain minor exceptions) in interest rates. The interest-rate risk component is calculated, on a quarterly basis, as one-half of the difference between an institution's measured interest-rate risk, and 2.0% multiplied by the market value of its assets. The rule also authorizes the director of the OTS, or his designee, to waive or defer an institution's interest-rate risk component on a case-by-case basis. The OTS implemented the interest-rate risk capital deduction on June 30, 1995. However, in a letter dated March 20, 1995, the OTS stated that no institution would be required to deduct capital for interest rate risk or to report such a deduction until guidance is issued describing the appeals process for the deduction. The December 31, 1996 deduction would have been based on the lesser of the March 1996, June 1996 or September 1996 interest rate risk components. At December 31, 1996, based on the above, no interest rate risk deduction to capital would have been required by BankAtlantic. Additionally, the OCC, which is the primary regulator for national banks, has adopted a final rule increasing the leverage ratio requirements for all but the most highly rated national banks. Pursuant to FIRREA, the OTS is required to issue capital standards for savings institutions that are no less stringent than those applicable to national banks. Based on the OCC rule, savings institutions would be required to maintain a leverage ratio (defined as the ratio of core capital to adjusted total assets) of between 4% and 5%. If the OCC rule was in effect for OTS regulated financial institutions at December 31, 1996, BankAtlantic would have been in full compliance with the requirement. Effective March 1, 1994, core deposit intangibles ("CDIs") have been excluded in the determination of regulatory capital. BankAtlantic did not have CDIs since the effective date of the final rule and accordingly, BankAtlantic was not affected by this exclusion from capital. However, as a result of the MegaBank and BNA acquisitions, BankAtlantic recorded as intangible assets amounts representing the excess of the cost of the net assets acquired over the fair value of such assets and the cost of the non-competition agreement with a principal of MegaBank. Such amounts are deducted in full from tangible, core and risk-based capital. At December 31, 1996, $29.0 million has been deducted 66 in connection with the MegaBank and BNA acquisitions based upon the intangible exclusion. For a further discussion of the acquisitions, see Note 20 of the Consolidated Financial Statements. INSURANCE OF ACCOUNTS--BankAtlantic's deposits are insured by the SAIF and BIF for up to $100,000 for each insured account holder, the maximum amount currently permitted by law. Pursuant to the FDICIA, the FDIC adopted transitional regulations implementing risk-based insurance premiums that became effective on January 1, 1993. Under these regulations, institutions are divided into groups based on criteria consistent with those established pursuant to the prompt regulatory action provisions of the FDICIA (see "Savings Institution Regulations--Prompt Regulatory Action", below). Each of these groups is further divided into three subgroups, based on a subjective evaluation of supervisory risk to the insurance fund posed by the institution. See also "Legislative Developments--FDIC Deposit Insurance." As an insurer, the FDIC issues regulations and conducts examinations of its insured members. Insurance of deposits by the FDIC may be terminated by the FDIC, after notice and hearing, upon a finding that an institution has engaged in unsafe and unsound practices, is in an unsafe and unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the OTS or the FDIC. When conditions warrant, the FDIC may impose less severe sanctions as an alternative to termination of insurance. BankAtlantic's management does not know of any present condition pursuant to which the FDIC would seek to impose sanctions on BankAtlantic or terminate insurance of its deposits. See "Competition" for potential changes in insurance assessments. RESTRICTIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS--Current regulations applicable to the payment of cash dividends by savings institutions impose limits on capital distributions based on an institution's regulatory capital levels and net income. An institution that meets or exceeds all of its fully phased-in capital requirements (both before and after giving effect to the distribution) and is not in need of more than normal supervision would be a "Tier 1 association." Upon prior notice to, and non-objection by, the OTS, a Tier 1 association may make capital distributions during a calendar year up to the greater of (i) 100% of net income for the current calendar year plus 50% of its capital surplus or (ii) 75% of its net income over the most recent four quarters. Any additional capital distributions would require prior regulatory approval. An institution that meets the minimum regulatory capital requirements but does not meet the fully phased-in capital requirements would be a "Tier 2 association," which may make capital distributions of between 25% and 75% of its net income over the most recent four-quarter period, depending on the institution's risk-based capital level. A "Tier 3 association" is defined as an institution that does not meet all of the minimum regulatory capital requirements and therefore may not make any capital distributions without the prior approval of the OTS. A "well capitalized" institution must have risk-based capital of 10% or more, core capital of 5% or more and Tier 1 risk-based capital (based on the ratio of core capital to risk-weighted assets) of 6% or more and may not be subject to any written agreement, order, capital directive or prompt corrective action directive issued by the OTS to meet and maintain a specific capital level or a specific capital measure. An institution will be categorized as: "adequately capitalized" if it has total risk-based capital of 8% or more, Tier 1 risk-based capital of 4% or more and core capital of 4% or more; "undercapitalized" if it has total risk-based capital of less than 8%, Tier 1 risk-based capital of less than 4% or core capital of less than 4%; "significantly undercapitalized" if it has total risk-based capital of less than 6%, Tier 1 risk-based capital of less than 3% or core capital of less than 3%; and "critically undercapitalized" if it has tangible capital of less than 2%. Any savings institution that fails its regulatory capital requirement is subject to enforcement action by the OTS or the FDIC. At December 31, 1996 BankAtlantic met the capital requirements of a "well capitalized" institution as defined above. Savings institutions must provide the OTS with at least 30 days written notice before making any capital distributions. All capital distributions are subject to the OTS' right to object to a distribution on 67 safety and soundness grounds. While proposed regulations would eliminate the notice requirement for certain institutions, the proposal would not apply to BankAtlantic because it is owned by a holding company. THE FEDERAL HOME LOAN BANK ("FHLB") SYSTEM--BankAtlantic is a member of the FHLB system, which consists of 12 regional FHLBs governed and regulated by the Federal Housing Finance Board ("FHFB"). The FHLBs provide a central credit facility for member institutions. BankAtlantic, as a member of the FHLB of Atlanta, is required to acquire and hold shares of capital stock in the FHLB of Atlanta in an amount at least equal to the greater of 1% of the aggregate principal amount of its unpaid residential mortgage loans, home purchase contracts and similar obligations as of the close of each calendar year, or 5% of its borrowings from the FHLB of Atlanta (including advances and letters of credit issued by the FHLB on BankAtlantic's behalf). BankAtlantic is currently in compliance with this requirement. Each FHLB makes loans (advances) to members in accordance with policies and procedures established by the board of directors of the FHLB. These policies and procedures are subject to the regulation and oversight of the FHLB. The FHLB Act establishes collateral requirements for advances from the FHLB. All advances from the FHLB must be fully secured by sufficient collateral as determined by the FHLB of Atlanta. The FHLB Act prescribes eligible collateral as first mortgage loans less than 90 days delinquent or securities evidencing interests therein, securities (including mortgage-backed securities) issued, insured or guaranteed by the Federal government or any agency thereof, deposits with the FHLB and, to a limited extent, real estate with readily ascertainable value in which a perfected security interest may be obtained. All long-term advances are required to provide funds for residential home financing. The FHLB of Atlanta has established standards of community service that members must meet to maintain access to long-term advances. FEES AND ASSESSMENTS OF THE OTS--The OTS has adopted regulations to assess fees on savings institutions to fund the operations of the OTS. The regulations provide for the OTS' assessments to be made based on the total consolidated assets of a savings institution as shown on its most recent report to the agency. Troubled savings institutions (generally, those operating in conservatorship or with the lowest two (of five) supervisory subgroup ratings) are to be assessed at a rate 50% higher than similarly sized thrifts that are not experiencing problems. INVESTMENT ACTIVITIES--As a federally-chartered savings bank, BankAtlantic is subject to various restrictions and prohibitions with respect to its investment activities. These restrictions and prohibitions are set forth in HOLA and in the rules of the OTS and include dollar amount and procedural limitations. BankAtlantic is in compliance with these restrictions. Under the Federal Deposit Insurance Act ("FDIA"), a savings institution is required to provide 30 days prior notice to the FDIC and the OTS of its desire to establish or acquire a new subsidiary or conduct any new activity through a subsidiary. The institution is also required to conduct the activities of the subsidiary in accordance with the OTS' orders and regulations. The Director of the OTS has the power to force divestiture of any subsidiary or the termination of any activity it determines is a serious threat to the safety, soundness or stability of the savings institution or is otherwise inconsistent with sound banking principles. Additionally, the FDIC is authorized to determine whether any specific activity poses a threat to SAIF and to prohibit any member of SAIF from engaging directly in the activity, even if it is an activity that is permissible for a federally-chartered savings institution or for a subsidiary of a state-chartered savings institution. SAFETY AND SOUNDNESS--Operational and managerial standards for internal controls, information systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation and benefits for bank officers, employees, directors and principal shareholders are all the subject of extensive guidelines. Additionally, the OTS is empowered to set standards for any other facet of an institution's operations, not specifically covered by regulations. The OTS is required to prescribe asset quality, earnings and stock valuation standards specifying: (i) a maximum ratio of classified assets 68 to capital; (ii) minimum earnings sufficient to absorb losses without impairing capital; (iii) to the extent feasible, a minimum ratio of market value to book value for publicly traded shares of the institution; and (iv) such other standards relating to asset quality, earnings and valuation as the OTS deems appropriate. LOANS TO ONE BORROWER--Generally, a savings institution's total loans and extensions of credit to one borrower or related group of borrowers, outstanding at one time and not fully secured by readily marketable collateral, may not exceed 15% of the institution's unimpaired capital and surplus. Except as set forth below for certain highly rated securities, an institution's investment in commercial paper and corporate debt securities of any one issuer or related entity must be aggregated "loans" for purposes of the immediately preceding sentence. Savings institutions may invest, in addition to the 15% general limitation, up to 10% of unimpaired capital and surplus in commercial paper of one issuer rated by two nationally recognized rating services in the highest category, or in corporate debt securities rated in one of the two highest categories by at least one such service. A savings institution may also lend up to 10% of unimpaired capital and surplus, if the loan is fully secured by readily marketable collateral. Readily marketable collateral is defined to include certain securities and bullion, but generally does not include real estate. A savings institution which meets its capital requirements may make loans to one borrower to develop domestic residential housing units, up to the lesser of $30,000,000 or 30% of the savings institution's unimpaired capital and surplus if certain other conditions are satisfied. BankAtlantic has requested and received approval for one construction lending relationship under the above exception. This exception is an alternative to the 15% limitation and not in addition to that limitation. At December 31, 1996, BankAtlantic was in compliance with the loans to one borrower limitations. During 1997, BankAtlantic originated a $35.0 million commercial real estate loan in which the Company participated $6.5 million of the loan. QUALIFIED THRIFT LENDER--BankAtlantic, like all savings institutions, is required to meet the QTL test for, among other things, future eligibility for advances from the FHLB. The QTL test requires that a savings institution's qualified thrift investments equal or exceed 65% of the savings institution's portfolio assets calculated on a monthly average basis in nine out of every twelve months. For the purposes of the QTL test, portfolio assets are total assets less intangibles, properties used to conduct business and liquid assets (up to 20% of total assets). The following assets are included as qualified thrift investments without limit: (i) domestic residential housing or manufactured housing loans; (ii) home equity loans and mortgage-backed securities secured by residential housing or manufactured housing loans; and (iii) certain obligations of the FDIC and other related entities. Other qualifying assets which may be included up to an aggregate of 20% of portfolio assets are: (i) 50% of originated residential mortgage loans sold within 90 days of origination; (ii) investments in debt or equity securities of service corporations that derive at least 80% of their gross revenues from housing-related activities; (iii) 200% of certain loans to and investments in low-cost, one-to-four family housing; (iv) 200% of loans for residential real property, churches, nursing homes, schools and small businesses in areas where credit needs of low-to-moderate income families are not met; (v) other loans for churches, schools, nursing homes and hospitals; and (vi) consumer and education loans up to 10% of total portfolio assets. Any savings institution that fails to meet the QTL test must convert to a commercial bank charter or limit its future investments and activities to those permitted for both savings institutions and national banks. Additionally, any such savings institution that does not convert to a commercial bank charter will be ineligible to receive future advances from the FHLB and, beginning three years after the loss of QTL status, will be required to repay all outstanding advances from the FHLB except for special liquidity advances and dispose of or discontinue all preexisting investments and activities not permitted for both savings institutions and national banks. If an institution converts to a commercial bank charter, its deposits remain insured by SAIF until the FDIC permits it to transfer to BIF. If any institution that fails the QTL test and is controlled by a holding company, then, within one year after the failure, the 69 holding company must register as a bank holding company and will be subject to all applicable restrictions on bank holding companies. At December 31, 1996, BankAtlantic was in compliance with current QTL requirements. TRANSACTION WITH AFFILIATES--As a federally chartered savings institution, BankAtlantic is subject to the OTS' regulations relating to transactions with affiliates, including officers and directors. BankAtlantic is subject to substantially similar restrictions regarding affiliate transactions as those imposed on member banks under Sections 22(g), 22(h), 23A, and 23B of the FRA. Sections 22(g) and 22(h) establish restrictions on loans to directors, controlling shareholders and their related companies and certain officers. Section 22(g) provides that no institution may extend credit to an executive officer unless (i) the bank would be authorized to make such extension of credit to borrowers other than its officers, (ii) the extension of credit is on terms not more favorable than those afforded to other borrowers, (iii) the officer has submitted a detailed current financial statement and (iv) the extension of credit is on the condition that it shall become due and payable on demand at any time that the officer is indebted to any other bank or banks on account of extensions of credit in any one of the following three categories, in an aggregate amount greater than the amount of credit of the same category that could be extended to the officer by the institution: (a) an extension of credit secured by a first lien on a dwelling which is expected to be owned by the officer and used by the officer as his or her residence; (b) an extension of credit to finance the education of the children of the officer; or (c) for any other purpose prescribed by the OTS. Section 22(g) also imposes reporting requirements on both the officers to whom it applies and on the institution. Section 22(h) requires that loans to directors, controlling shareholders and their related companies and certain officers be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and that those loans do not involve more than the normal risk of repayment or present other unfavorable features. On September 30, 1996, Congress amended Section 22(h) by adding an exception for extensions of credit made pursuant to a program that is widely available to all employees of the lending institution and does not give preference to insiders over other employees. Effective November 4, 1996, the FRB amended Regulation O to implement this amendment to 22(h). Section 23A limits transactions with any one affiliate to 10% of the institution's capital and surplus and limits aggregate affiliate transactions to 20% of such capital and surplus. Sections 23A and 23B provide that a loan transaction with an affiliate generally must be collateralized (other than by a low-quality asset or by securities issued by an affiliate) and that all covered transactions as well as the sale of assets, the payment of money or the providing of services by a savings institution to an affiliate must be on terms and conditions that are substantially the same, or at least as favorable to the savings institution, as those prevailing for comparable non-affiliated transactions. A covered transaction is defined as a loan to an affiliate, the purchase of securities issued by an affiliate, the purchase of assets from an affiliate (with some exceptions), the acceptance of securities issued by an affiliate as collateral for a loan or the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. The OTS regulations clarify that transactions between either a thrift or a thrift subsidiary and an unaffiliated person that benefit an affiliate are considered covered transactions. A savings institution may make loans to or otherwise extend credit to an affiliate only if the affiliate is engaged solely in activities permissible for bank holding companies. In addition, no savings institution may purchase the securities of any affiliate other than the shares of a subsidiary. The Director of the OTS may further restrict these transactions in the interest of safety and soundness. At December 31, 1996, BankAtlantic was in compliance with the restrictions regarding transactions with affiliates. LIQUIDITY REQUIREMENTS OF THE OTS--The OTS' regulations currently require all member savings institutions to maintain an average daily balance of liquid assets (cash, certain time deposits, banker's acceptances, specified United States government, state or Federal agency obligations and other corporate debt obligations and commercial paper) equal to 5% of the sum of the average daily balance during the preceding calendar month of net withdrawable accounts and short-term borrowings payable in one year or less. The liquidity requirement may vary from time to time (between 4% and 10%) 70 depending upon economic conditions and savings flows of all savings institutions. All savings institutions are also required to maintain an average daily balance of short-term liquid assets (generally having maturities of 12 months or less) equal to at least 1% of the average daily balance of net withdrawable accounts and current borrowings. Monetary penalties may be imposed by the OTS for failure to meet liquidity requirements. At December 31, 1996, BankAtlantic was in compliance with all applicable liquidity requirements. THE FEDERAL RESERVE SYSTEM--BankAtlantic is subject to certain regulations promulgated by the FRB. Pursuant to such regulations, savings institutions are required to maintain non-interest bearing reserves against their transaction accounts (which include deposit accounts that may be accessed by writing checks) and non-personal time deposits. The FRB has authority to adjust reserve percentages and to impose in specified circumstances emergency and supplemental reserves in excess of the percentage limitations otherwise prescribed. The balances maintained to meet the reserve requirements imposed by the FRB may be used to satisfy liquidity requirements which may be imposed by the OTS. In addition, FRB regulations limit the periods within which depository institutions must provide availability for and pay interest on deposits to transaction accounts. Depository institutions are required to disclose their check holding policies and any changes to those policies in writing to customers. BankAtlantic believes that it is in compliance with all such FRB regulations. COMMUNITY REINVESTMENT ACT--Under the CRA, as implemented by OTS regulations, a savings institution has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low-and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the OTS, in connection with its examination of a savings institution, to assess the institution's record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution. The CRA, as amended by FIRREA, requires public disclosure of an institution's CRA rating and requires that the OTS provide a written evaluation of an institution's CRA performance utilizing a four-tiered descriptive rating system. The four ratings are "outstanding record of meeting community credit needs", "satisfactory record of meeting community credit needs", "needs to improve record of meeting community credit needs" and "substantial non-compliance in meeting community credit needs." An institution's CRA rating is taken into account in determining whether to grant charters, branches and other deposit facilities, relocations, mergers, consolidations and acquisitions. Poor CRA performance maybe the basis for denying an application. BankAtlantic received an "outstanding record of meeting community credit needs" during its most recent OTS examination. NEW ACCOUNTING STANDARDS AND POLICIES Financial Accounting Standards Board Statement No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities ("FAS 125") was issued in June 1996. FAS 125 provides accounting and reporting standards for transfers and servicing of financial assets and extinguishment of liabilities based on consistent application of a financial-components approach that focuses on control. If a transfer does not meet the criteria for a sale, the transfer is accounted for as a secured borrowing with pledge of collateral. FAS 125 must be implemented, prospectively on January 1, 1997. Implementation of FAS 125 is not expected to have a material impact on BankAtlantic's Statement of Operations or Statement of Financial Condition upon adoption. 71 MANAGEMENT The table below sets forth the names and ages of the directors and executive officers of the Company as well as the positions and offices held by such persons. The Company's Board of Directors consists of seven directors divided into three classes, two composed of three directors each and one composed of one director. The Company's Board of Directors consists of the same persons who serve on BankAtlantic's Board of Directors. The directors are elected for staggered three-year terms with one class elected each year.
NAME AGE POSITION - ---------------------------------------------------------------------------------- Alan B. Levan 52 Chairman of the Board, President and Chief Executive Officer John E. Abdo 53 Vice Chairman of the Board Frank V. Grieco 52 Director; Senior Executive Vice President Jasper R. Eanes 51 Executive Vice President; Chief Financial Officer Steven M. Coldren 49 Director Bruno L. DiGiulian 63 Director Charlie C. Winningham, II 64 Director Mary E. Ginestra 72 Director
ALAN B. LEVAN has been the Company's Chairman of the Board and Chief Executive Officer since its inception and President since January 1997. He has been a director of BankAtlantic since 1984 and was elected Chairman of the Board and Chief Executive Officer of BankAtlantic in April 1987 and became President in January 1997. Mr. Levan also served as Chairman of the Board and Chief Executive Officer of BFC Financial Corporation or its predecessor since 1972. Mr. Levan's term as a director of the Company expires in 1999. JOHN E. ABDO has been the Company's Vice Chairman of the Board since its inception. He has been a director of BankAtlantic since 1984 and was President of BankAtlantic Development Corporation, a wholly-owned subsidiary of BankAtlantic since 1985. He was elected Vice Chairman of the Board in 1987. Mr. Abdo has been principally employed as President and Chief Executive Officer of Wellington Construction & Realty, Inc., a real estate development, construction and brokerage firm, for more than five years. Mr. Abdo is also a director and Vice Chairman of the Board of BFC Financial Corporation, a director of Benihana National Corporation and a director and Chairman of the Board of Coconut Code, Inc. Mr. Abdo's term as a director expires in 1997. FRANK V. GRIECO has been a director of the Company since its inception and Senior Executive Vice President since July 1994. Mr. Grieco was an Executive Vice President of the Company at its inception. He has been a director of BankAtlantic since 1991 and was elected as an officer of BankAtlantic in 1991. Mr. Grieco's term as a director expires in 1997. JASPER R. EANES has been the Company's Chief Financial Officer since its inception and Executive Vice President since July 1994. He initially joined BankAtlantic in January 1989 as Senior Vice President, Director of Internal Auditing and became Executive Vice President, Chief Financial Officer in August 1989. STEVEN M. COLDREN has been a director of the Company since its inception and a director of BankAtlantic since 1986. Mr. Coldren is also the President and Chairman of the Board of Business Information Systems, Inc., a distributor of dictation, word processing and computer equipment, for more than five years and Chairman of the Board of Digital Information Systems Corp., a distributor of hospital computer systems. Mr. Coldren's term as a director expires in 1998. BRUNO L. DIGIULIAN has been a director of the Company since its inception and a director of BankAtlantic since 1985. Mr. DiGiulian is of counsel, Ruden McClosky Smith Schuster & Russell, P.A., 72 a law firm, since January 1994. Prior to that time, Mr. DiGiulian had been the President of DiGiulian & Di Chiara, P.A., or Bruno L. DiGiulian & Associates, P.A., both law firms, for more than five years. Mr. DiGiulian's term as a director expires in 1997. CHARLIE C. WINNINGHAM, II has been a director of the Company since its inception and a director of BankAtlantic since 1976. Mr. Winningham has been principally employed as President of C.C. Winningham Corporation, a land surveying firm, for more than five years. Mr. Winningham's term as a director expires in 1998. MARY E. GINESTRA has been a director of the Company since its inception and a director of BankAtlantic since 1980. Mrs. Ginestra has been principally engaged in private investments for more than five years. Ms. Ginestra's term as a director expires in 1998. DESCRIPTION OF THE PREFERRED SECURITIES The Preferred Securities will be issued pursuant to the terms of the Trust Agreement. The Trust Agreement will be qualified as an indenture under the Trust Indenture Act. The Property Trustee, Wilmington Trust Company, will act as indenture trustee for the Preferred Securities under the Trust Agreement for purposes of complying with the provisions of the Trust Indenture Act. The terms of the Preferred Securities will include those stated in the Trust Agreement and those made part of the Trust Agreement by the Trust Indenture Act. The following summary of the material terms and provisions of the Preferred Securities and the Trust Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Trust Agreement, the Delaware Business Trust Act (the "Trust Act"), and the Trust Indenture Act. Wherever particular defined terms of the Trust Agreement are referred to, but not defined herein, such defined terms are incorporated herein by reference. The form of the Trust Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. GENERAL Pursuant to the terms of the Trust Agreement, the Trustees, on behalf of BBC Capital, will issue the Trust Securities. All of the Common Securities will be owned by the Company. The Preferred Securities will represent preferred undivided beneficial interests in the assets of BBC Capital and the holders thereof will be entitled to a preference in certain circumstances with respect to Distributions and amounts payable on redemption or liquidation over the Common Securities, as well as other benefits as described in the Trust Agreement. The Trust Agreement does not permit the issuance by BBC Capital of any securities other than the Trust Securities or the incurrence of any indebtedness by BBC Capital. The Preferred Securities will rank PARI PASSU, and payments will be made thereon pro rata, with the Common Securities, except as described under "--Subordination of Common Securities." Legal title to the Junior Subordinated Debentures will be held by the Property Trustee in trust for the benefit of the holders of the Trust Securities. The Guarantee executed by the Company for the benefit of the holders of the Preferred Securities will be a guarantee on a subordinated basis with respect to the Preferred Securities, but will not guarantee payment of Distributions or amounts payable on redemption or liquidation of such Preferred Securities when BBC Capital does not have funds on hand available to make such payments. Wilmington Trust Company, as Guarantee Trustee, will hold the Guarantee for the benefit of the holders of the Preferred Securities. See "Description of the Guarantee." DISTRIBUTIONS PAYMENT OF DISTRIBUTIONS. Distributions on each Preferred Security will be payable at the annual rate of % of the stated Liquidation Amount of $25, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, to the holders of the Preferred Securities on the 73 relevant record dates (each date on which Distributions are payable in accordance with the foregoing, a "Distribution Date"). The record date will be the 15th day of the month in which the relevant Distribution Date occurs. Distributions will accumulate from the date of original issuance. The first Distribution Date for the Preferred Securities will be the first payment date following the date of issuance. The amount of Distributions payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which Distributions are payable on the Preferred Securities is not a Business Day, then payment of the Distributions payable on such date will be made on the next succeeding day that is a Business Day (and without any additional Distributions, interest or other payment in respect of any such delay) with the same force and effect as if made on the date such payment was originally due and payable. "Business Day" means any day other than a Saturday or a Sunday, a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed or a day on which the corporate trust office of the Property Trustee or the Debenture Trustee is closed for business. EXTENSION PERIOD. The Company has the right under the Indenture, so long as no Debenture Event of Default has occurred and is continuing, to defer the payment of interest on the Junior Subordinated Debentures at any time, or from time to time (each, an "Extended Interest Payment Period"), which, if exercised, would result in quarterly Distributions on the Preferred Securities also being deferred during any such Extended Interest Payment Period. Distributions to which holders of the Preferred Securities are entitled will accumulate additional Distributions thereon at the rate per annum of % thereof, compounded quarterly from the relevant Distribution Date. The term "Distributions," as used herein, includes any such additional Distributions. The right to defer the payment of interest on the Junior Subordinated Debentures is limited, however, to a period, in each instance, not exceeding 20 consecutive quarters and no Extended Interest Payment Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. During any such Extended Interest Payment Period, the Company may not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Company's capital stock (other than (a) the reclassification of any class of the Company's capital stock into another class of capital stock, (b) dividends or distributions payable in any class of the Company's common stock, (c) any declaration of a dividend in connection with the implementation of a shareholder rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto and (d) purchases of the Company's common stock related to the rights under any of the Company's benefit plans for its or its subsidiaries' directors, officers or employees), (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu with or junior in interest to the Junior Subordinated Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Junior Subordinated Debentures (other than payments under the Guarantee), or (iii) redeem, purchase or acquire less than all of the Junior Subordinated Debentures or any of the Preferred Securities. Prior to the termination of any such Extended Interest Payment Period, the Company may further defer the payment of interest; provided that such Extended Interest Payment Period may not exceed 20 consecutive quarters or extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the termination of any such Extended Interest Payment Period and the payment of all amounts then due, the Company may elect to begin a new Extended Interest Payment Period, subject to the above requirements. Subject to the foregoing, there is no limitation on the number of times that the Company may elect to begin an Extended Interest Payment Period. The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Junior Subordinated Debentures. SOURCE OF DISTRIBUTION. The funds of BBC Capital available for distribution to holders of its Preferred Securities will be limited to payments received the Junior Subordinated Debentures in which BBC Capital will invest the proceeds from the issuance and sale of its Trust Securities. See "Description of the Junior Subordinated Debentures." Distributions will be paid through the Property Trustee who will hold amounts received in respect of the Junior Subordinated Debentures in the Property Account 74 for the benefit of the holders of the Trust Securities. If the Company does not make interest payments on the Junior Subordinated Debentures, the Property Trustee will not have funds available to pay Distributions on the Preferred Securities. The payment of Distributions (but only if and to the extent BBC Capital has funds legally available for the payment of such Distributions and cash sufficient to make such payments) is guaranteed by the Company. See "Description of the Guarantee." Distributions on the Preferred Securities will be payable to the holders thereof as they appear on the register of holders of the Preferred Securities on the relevant record dates, which will be the 15th day of the month in which the relevant Distribution Date occurs. REDEMPTION OR EXCHANGE GENERAL. The Junior Subordinated Debentures will mature on , 2027. The Company will have the right to redeem the Junior Subordinated Debentures (i) on or after , 2002, in whole at any time or in part from time to time, or (ii) at any time, in whole (but not in part), within 180 days following the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event, in each case subject to receipt of prior regulatory approval if then required under applicable capital guidelines or regulatory policies. Subject to the foregoing events, the Company will not have the right to purchase the Junior Subordinated Debentures, in whole or in part, from BBC Capital until after , 2002. See "Description of the Junior Subordinated Debentures--General." MANDATORY REDEMPTION. Upon the repayment or redemption, in whole or in part, of any Junior Subordinated Debentures, whether at Stated Maturity or upon earlier redemption as provided in the Indenture, the proceeds from such repayment or redemption will be applied by the Property Trustee to redeem a Like Amount (as defined herein) of the Trust Securities, upon not less than 30 nor more than 60 days notice, at a redemption price (the "Redemption Price") equal to the aggregate Liquidation Amount of such Trust Securities plus accumulated but unpaid Distributions thereon to the date of redemption (the "Redemption Date"). See "Description of the Junior Subordinated Debentures--Redemption or Exchange." If less than all of the Junior Subordinated Debentures are to be repaid or redeemed on a Redemption Date, then the proceeds from such repayment or redemption will be allocated to the redemption of the Trust Securities pro rata. DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES. Subject to the Company having received prior regulatory approval if then required, the Company, as holder of the Common Securities, will have the right at any time to dissolve, wind-up or terminate BBC Capital and, after satisfaction of the liabilities of creditors of BBC Capital as provided by applicable law, cause the Junior Subordinated Debentures to be distributed to the holders of Trust Securities in liquidation of BBC Capital. See "--Liquidation Distribution Upon Termination." TAX EVENT REDEMPTION, INVESTMENT COMPANY EVENT REDEMPTION OR CAPITAL TREATMENT EVENT REDEMPTION. If a Tax Event, an Investment Company Event or a Capital Treatment Event occurs and is continuing, the Company has the right to redeem the Junior Subordinated Debentures in whole (but not in part) and thereby cause a mandatory redemption of the Trust Securities in whole (but not in part) at the Redemption Price within 180 days following the occurrence of such Tax Event, Investment Company Event or Capital Treatment Event. In the event a Tax Event, an Investment Company Event or a Capital Treatment Event in respect of the Trust Securities has occurred and the Company does not elect to redeem the Junior Subordinated Debentures and thereby cause a mandatory redemption of the Trust Securities or to liquidate BBC Capital and cause the Junior Subordinated Debentures to be distributed to holders of such Trust Securities in liquidation of BBC Capital as described below under "--Liquidation Distribution Upon Termination," such Preferred Securities will remain outstanding and Additional Interest (as defined herein) may be payable on the Junior Subordinated Debentures. "Additional Interest" means the additional amounts as may be necessary in order that the amount of Distributions then due and payable by BBC Capital on the outstanding Trust Securities will not be reduced as a result of any additional taxes, duties and other governmental charges to which BBC Capital has become subject as a result of a Tax Event. 75 "Like Amount" means (i) with respect to a redemption of Trust Securities, Trust Securities having a Liquidation Amount equal to that portion of the principal amount of Junior Subordinated Debentures to be contemporaneously redeemed in accordance with the Indenture, which will be used to pay the Redemption Price of such Trust Securities, and (ii) with respect to a distribution of Junior Subordinated Debentures to holders of Trust Securities in connection with a dissolution or liquidation of BBC Capital, Junior Subordinated Debentures having a principal amount equal to the Liquidation Amount of the Trust Securities of the holder to whom such Junior Subordinated Debentures are distributed. Each Junior Subordinated Debenture distributed pursuant to clause (ii) above will carry with it accumulated interest in an amount equal to the accumulated and unpaid interest then due on such Junior Subordinated Debentures. "Liquidation Amount" means the stated amount of $25 per Trust Security. There can be no assurance as to the market prices of the Preferred Securities or the Junior Subordinated Debentures that may be distributed in exchange for Preferred Securities if a dissolution and liquidation of BBC Capital were to occur. The Preferred Securities that an investor may purchase, or the Junior Subordinated Debentures that an investor may receive on dissolution and liquidation of BBC Capital, may trade at a discount to the price that the investor paid to purchase the Preferred Securities offered hereby. REDEMPTION PROCEDURES Preferred Securities redeemed on each Redemption Date will be redeemed at the Redemption Price with the applicable proceeds from the contemporaneous redemption of the Junior Subordinated Debentures. Redemptions of the Preferred Securities will be made and the Redemption Price will be payable on each Redemption Date only to the extent that BBC Capital has funds on hand available for the payment of such Redemption Price. See "--Subordination of Common Securities." If BBC Capital gives a notice of redemption in respect of its Preferred Securities, then, by 12:00 noon, eastern standard time, on the Redemption Date, to the extent funds are available, the Property Trustee will irrevocably deposit with DTC funds sufficient to pay the aggregate Redemption Price and will give DTC irrevocable instructions and authority to pay the Redemption Price to the holders of the Preferred Securities. If such Preferred Securities are no longer held in book-entry form, the Property Trustee, to the extent funds are available, will irrevocably deposit with the paying agent for the Preferred Securities funds sufficient to pay the applicable Redemption Price and will give such paying agent irrevocable instructions and authority to pay the Redemption Price to the holders thereof upon surrender of their certificates evidencing the Preferred Securities. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Preferred Securities called for redemption will be payable to the holders of such Preferred Securities on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of the holders of such Preferred Securities so called for redemption will cease, except the right of the holders of such Preferred Securities to receive the Redemption Price, but without interest on such Redemption Price, and such Preferred Securities will cease to be outstanding. In the event that any date fixed for redemption of Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without any additional Distribution, interest or other payment in respect of any such delay) with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of Preferred Securities called for redemption is improperly withheld or refused and not paid either by BBC Capital or by the Company pursuant to the Guarantee, Distributions on such Preferred Securities will continue to accrue at the then applicable rate, from the Redemption Date originally established by BBC Capital for such Preferred Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. See "Description of the Guarantee." 76 Subject to applicable law (including, without limitation, United States federal securities law) and, further provided, that the Company has not and is not continuing to exercise its right to defer interest payments, the Company or its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. Payment of the Redemption Price on the Preferred Securities and any distribution of Junior Subordinated Debentures to holders of Preferred Securities will be made to the applicable recordholders thereof as they appear on the register for the Preferred Securities on the relevant record date, which date will be the date 15 days prior to the Redemption Date or liquidation date, as applicable. If less than all of the Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of such Trust Securities to be redeemed will be allocated pro rata to the Trust Securities based upon the relative Liquidation Amounts of such classes. The particular Preferred Securities to be redeemed will be selected by the Property Trustee from the outstanding Preferred Securities not previously called for redemption, by such method as the Property Trustee deems fair and appropriate and which may provide for the selection for redemption of portions (equal to $25 or an integral multiple of $25 in excess thereof) of the Liquidation Amount of Preferred Securities of a denomination larger than $25. The Property Trustee will promptly notify the registrar for the Preferred Securities in writing of the Preferred Securities selected for redemption and, in the case of any Preferred Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all purposes of the Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Preferred Securities will relate to the portion of the aggregate Liquidation Amount of Preferred Securities which has been or is to be redeemed. Notice of any redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each holder of Trust Securities to be redeemed at its registered address. Unless the Company defaults in payment of the redemption price on the Junior Subordinated Debentures, on and after the Redemption Date interest will cease to accrue on such Junior Subordinated Debentures or portions thereof (and Distributions will cease to accrue on the related Preferred Securities or portions thereof) called for redemption. SUBORDINATION OF COMMON SECURITIES Payment of Distributions on, and the Redemption Price of, the Preferred Securities and Common Securities, as applicable, will be made pro rata based on the Liquidation Amount of the Preferred Securities and Common Securities; provided, however, that if on any Distribution Date or Redemption Date a Debenture Event of Default has occurred and is continuing, no payment of any Distribution on, or Redemption Price of, any of the Common Securities, and no other payment on account of the redemption, liquidation or other acquisition of such Common Securities, will be made unless payment in full in cash of all accumulated and unpaid Distributions on all of the outstanding Preferred Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all of the outstanding Preferred Securities then called for redemption, will have been made or provided for, and all funds available to the Property Trustee will first be applied to the payment in full in cash of all Distributions on, or Redemption Price of, the Preferred Securities then due and payable. In the case of any Event of Default resulting from a Debenture Event of Default, the Company as holder of the Common Securities will be deemed to have waived any right to act with respect to any such Event of Default under the Trust Agreement until the effect of all such Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated. Until any such Events of Default under the Trust Agreement with respect to the Preferred Securities has been so cured, waived or otherwise eliminated, the Property Trustee will act solely on behalf of the holders of the Preferred Securities and not on behalf of the Company, as holder of the Common Securities, and only the holders of the Preferred Securities will have the right to direct the Property Trustee to act on their behalf. 77 LIQUIDATION DISTRIBUTION UPON TERMINATION The Company will have the right at any time to dissolve, wind-up or terminate BBC Capital and cause the Junior Subordinated Debentures to be distributed to the holders of the Preferred Securities. Such right is subject, however, to the Company having received prior regulatory approval if then required under applicable capital guidelines or regulatory policies. Pursuant to the Trust Agreement, BBC Capital will automatically terminate upon expiration of its term and will terminate earlier on the first to occur of (i) certain events of bankruptcy, dissolution or liquidation of the Company, (ii) the distribution of a Like Amount of the Junior Subordinated Debentures to the holders of its Trust Securities, if the Company, as depositor, has given written direction to the Property Trustee to terminate BBC Capital (which direction is optional and wholly within the discretion of the Company, as depositor), (iii) redemption of all of the Preferred Securities as described under "Description of the Preferred Securities--Redemption or Exchange--Mandatory Redemption," or (iv) the entry of an order for the dissolution of BBC Capital by a court of competent jurisdiction. If an early termination occurs as described in clause (i), (ii) or (iv) of the preceding paragraph, BBC Capital will be liquidated by the Trustees as expeditiously as the Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of BBC Capital as provided by applicable law, to the holders of such Trust Securities a Like Amount of the Junior Subordinated Debentures, unless such distribution is determined by the Property Trustee not to be practical, in which event such holders will be entitled to receive out of the assets of BBC Capital available for distribution to holders, after satisfaction of liabilities to creditors of BBC Capital as provided by applicable law, an amount equal to, in the case of holders of Preferred Securities, the aggregate of the Liquidation Amount plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If such Liquidation Distribution can be paid only in part because BBC Capital has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by BBC Capital on the Preferred Securities will be paid on a pro rata basis. The Company, as the holder of the Common Securities, will be entitled to receive distributions upon any such liquidation pro rata with the holders of the Preferred Securities, except that, if a Debenture Event of Default has occurred and is continuing, the Preferred Securities will have a priority over the Common Securities. See "--Subordination of Common Securities." After the liquidation date fixed for any distribution of Junior Subordinated Debentures (i) the Preferred Securities will no longer be deemed to be outstanding, (ii) DTC or its nominee, as the registered holder of Preferred Securities, will receive a registered global certificate or certificates representing the Junior Subordinated Debentures to be delivered upon such distribution with respect to Preferred Securities held by DTC or its nominee and (iii) any certificates representing the Preferred Securities not held by DTC or its nominee will be deemed to represent the Junior Subordinated Debentures having a principal amount equal to the stated Liquidation Amount of the Preferred Securities and bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid Distributions on the Preferred Securities until such certificates are presented to the Administrative Trustees and their agent for transfer or reissuance. Under current United States federal income tax law and interpretations and assuming, as expected, that BBC Capital is treated as a grantor trust, a distribution of the Junior Subordinated Debentures should not be a taxable event to holders of the Preferred Securities. Should there be a change in law, a change in legal interpretation, a Tax Event or other circumstances, however, the distribution could be a taxable event to holders of the Preferred Securities. See "Certain Federal Income Tax Consequences--Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of BBC Capital." If the Company elects neither to redeem the Junior Subordinated Debentures prior to maturity nor to liquidate BBC Capital and distribute the Junior Subordinated Debentures to holders of the Preferred Securities, the Preferred Securities will remain outstanding until the repayment of the Junior 78 Subordinated Debentures. If the Company elects to liquidate BBC Capital and thereby causes the Junior Subordinated Debentures to be distributed to holders of the Preferred Securities in liquidation of BBC Capital, the Company will continue to have the right to shorten the maturity of such Junior Subordinated Debentures, subject to certain conditions. See "Description of the Junior Subordinated Debentures--General." LIQUIDATION VALUE The amount of the Liquidation Distribution payable on the Preferred Securities in the event of any liquidation of BBC Capital is $25 per Preferred Security plus accrued and unpaid Distributions thereon to the date of payment, which may be in the form of a distribution of such amount in Junior Subordinated Debentures with a like amount of accrued interest, subject to certain exceptions. See "--Liquidation Distribution Upon Termination." EVENTS OF DEFAULT; NOTICE Any one of the following events constitutes an event of default under the Trust Agreement (an "Event of Default") with respect to the Preferred Securities (whatever the reason for such Event of Default and whether voluntary or involuntary or 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): (i) the occurrence of a Debenture Event of Default (see "Description of the Junior Subordinated Debentures--Debenture Events of Default"); or (ii) default by BBC Capital in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days; or (iii) default by BBC Capital in the payment of any Redemption Price of any Trust Security when it becomes due and payable: or (iv) default in the performance, or breach, in any material respect, of any covenant or warranty of the Trustee(s) in the Trust Agreement (other than a covenant or warranty a default in the performance of which or the breach of which is dealt with in clauses (ii) or (iii) 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 Trustee(s) by the holders of at least 25% in aggregate Liquidation Amount of the outstanding Preferred 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" under the Trust Agreement: or (v) the occurrence of certain events of bankruptcy or insolvency with respect to the Property Trustee and the failure by the Company to appoint a successor Property Trustee within 60 days thereof. Within five Business Days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee will transmit notice of such Event of Default to the holders of the Preferred Securities, the Administrative Trustees and the Company, as depositor, unless such Event of Default has been cured or waived. The Company, as depositor, and the Administrative Trustees are required to file annually with the Property Trustee a certificate as to whether or not they are in compliance with all the conditions and covenants applicable to them under the Trust Agreement. If a Debenture Event of Default has occurred and is continuing, the Preferred Securities will have a preference over the Common Securities upon termination of BBC Capital. See "--Liquidation Distribution Upon Termination." The existence of an Event of Default does not entitle the holders of Preferred Securities to accelerate the maturity thereof. 79 REMOVAL OF BBC CAPITAL TRUSTEES Unless a Debenture Event of Default has occurred and is continuing, any Trustee may be removed at any time by the holder of the Common Securities. If a Debenture Event of Default has occurred and is continuing, the Property Trustee and the Delaware Trustee may be removed by the holders of a majority in Liquidation Amount of the outstanding Preferred Securities. In no event, however, will the holders of the Preferred Securities have the right to vote to appoint, remove or replace the Administrative Trustees, which voting rights are vested exclusively in the Company as the holder of the Common Securities. No resignation or removal of a Trustee and no appointment of a successor trustee will be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the Trust Agreement. CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE Unless an Event of Default has occurred and is continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property (as defined in the Trust Agreement) may at the time be located, the Company, as the holder of the Common Securities, will have power to appoint one or more Persons (as defined in the Trust Agreement) either to act as a co-trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to act as separate trustee of any such Trust Property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in such capacity any property, title, right or power deemed necessary or desirable, subject to the provisions of the Trust Agreement. In case a Debenture Event of Default has occurred and is continuing, the Property Trustee alone will have power to make such appointment. MERGER OR CONSOLIDATION OF TRUSTEES Any Person into which the Property Trustee, the Delaware Trustee or any Administrative Trustee that is not a natural person may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Trustee is a party, or any Person succeeding to all or substantially all the corporate trust business of such Trustee, will be the successor of such Trustee under the Trust Agreement, provided such Person is otherwise qualified and eligible. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF BBC CAPITAL BBC Capital may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any Person, except as described below. BBC Capital may, at the request of the Company, with the consent of the Administrative Trustees and without the consent of the holders of the Preferred Securities, the Property Trustee or the Delaware Trustee, merge with or into, consolidate, amalgamate, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any State; provided, that (i) such successor entity either (a) expressly assumes all of the obligations of BBC Capital with respect to the Preferred Securities, or (b) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank in priority with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) the Company expressly appoints a trustee of such successor entity possessing the same powers and duties as the Property Trustee in its capacity as the holder of the Junior Subordinated Debentures, (iii) the Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed (including, if applicable, The Nasdaq Stock Market's National Market), if any, (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Preferred Securities (including any Successor Securities) in any material respect, (v) prior to such merger, consolidation, amalgamation, replacement, 80 conveyance, transfer or lease, the Company has received an opinion from independent counsel to the effect that (a) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Preferred Securities (including any Successor Securities) in any material respect, and (b) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither BBC Capital nor such successor entity will be required to register as an "investment company" under the Investment Company Act, and (vi) the Company owns all of the common securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee. Notwithstanding the foregoing, BBC Capital will not, except with the consent of holders of 100% in Liquidation Amount of the Preferred Securities, 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 other Person or permit any other Person to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause BBC Capital or the successor entity to be classified as other than a grantor trust for United States federal income tax purposes. VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT Except as provided below and under "Description of the Guarantee--Amendments and Assignment" and as otherwise required by the Trust Act and the Trust Agreement, the holders of the Preferred Securities will have no voting rights. The Trust Agreement may be amended from time to time by the Company, the Property Trustee and the Administrative Trustees, without the consent of the holders of the Preferred Securities (i) with respect to acceptance of appointment by a successor trustee, (ii) to cure any ambiguity, correct or supplement any provisions in such Trust Agreement that may be inconsistent with any other provision, or to make any other provisions with respect to matters or questions arising under the Trust Agreement (provided such amendment is not inconsistent with the other provisions of the Trust Agreement), or (iii) to modify, eliminate or add to any provisions of the Trust Agreement to such extent as is necessary to ensure that BBC Capital will be classified for United States federal income tax purposes as a grantor trust at all times that any Trust Securities are outstanding or to ensure that BBC Capital will not be required to register as an "investment company" under the Investment Company Act; provided, however, that in the case of clause (ii), such action may not adversely affect in any material respect the interests of any holder of Trust Securities, and any amendments of such Trust Agreement will become effective when notice thereof is given to the holders of Trust Securities. The Trust Agreement may otherwise be amended by the Trustees and the Company with (i) the consent of holders representing not less than a majority in the aggregate Liquidation Amount of the outstanding Trust Securities, and (ii) receipt by the Trustees of an opinion of counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not affect BBC Capital's status as a grantor trust for United States federal income tax purposes or BBC Capital's exemption from status as an "investment company" under the Investment Company Act. Notwithstanding anything in this paragraph to the contrary, without the consent of each holder of Trust Securities, the Trust Agreement may not be amended to (a) change the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date, or (b) restrict the right of a holder of Trust Securities to institute suit for the enforcement of any such payment on or after such date. The Trustees will not, so long as any Junior Subordinated Debentures are held by the Property Trustee, (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or executing any trust or power conferred on the Property Trustee with respect to the Junior Subordinated 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 Junior Subordinated Debentures will be due and payable, or (iv) consent to any amendment, modification or termination of the Indenture or the Junior Subordinated Debentures, where such consent is required, without, in each case, obtaining the prior approval of the holders of a majority in aggregate Liquidation Amount of all 81 outstanding Preferred Securities; provided, however, that where a consent under the Indenture requires the consent of each holder of Junior Subordinated Debentures affected thereby, no such consent will be given by the Property Trustee without the prior consent of each holder of the Preferred Securities. The Trustees may not revoke any action previously authorized or approved by a vote of the holders of the Preferred Securities except by subsequent vote of the holders of the Preferred Securities. The Property Trustee will notify each holder of Preferred Securities of any notice of default with respect to the Junior Subordinated Debentures. In addition to obtaining the foregoing approvals of the holders of the Preferred Securities, prior to taking any of the foregoing actions, the Trustees must obtain an opinion of counsel experienced in such matters to the effect that BBC Capital will not be classified as an association taxable as a corporation for United States federal income tax purposes on account of such action. Any required approval of holders of Preferred Securities may be given at a meeting of holders of Preferred Securities convened for such purpose or pursuant to written consent. The Property Trustee will cause a notice of any meeting at which holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be given to each holder of record of Preferred Securities in the manner set forth in the Trust Agreement. No vote or consent of the holders of Preferred Securities will be required for BBC Capital to redeem and cancel its Preferred Securities in accordance with the Trust Agreement. Notwithstanding the fact that holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned by the Company, the Trustees or any affiliate of the Company or any Trustee, will, for purposes of such vote or consent, be treated as if they were not outstanding. BOOK ENTRY, DELIVERY AND FORM The Preferred Securities will be issued in the form of one or more fully registered global securities which will be deposited with, or on behalf of, DTC and registered in the name of DTC's nominee. Unless and until it is exchangeable in whole or in part for the Preferred Securities in definitive form, a global security may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor of such depository or a nominee of such successor. Ownership of beneficial interests in a global security will be limited to persons that have accounts with DTC or its nominee ("Participants") or persons that may hold interests through Participants. The Company expects that, upon the issuance of a global security, DTC will credit, on its book-entry registration and transfer system, the Participants' accounts with their respective liquidation amounts of the Preferred Securities represented by such global security. Ownership of beneficial interests in such global security will be shown on, and the transfer of such ownership interests will be effected only through, records maintained by DTC (with respect to interests of Participants) and on the records of Participants (with respect to interests of Persons held through Participants). Beneficial owners will not receive written confirmation from DTC of their purchase, but are expected to receive written confirmations from the Participants through which the beneficial owner entered into the transaction. Transfers of ownership interests will be accomplished by entries on the books of Participants acting on behalf of the beneficial owners. So long as DTC, or its nominee, is the registered owner of a global security, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Preferred Securities represented by such global security for all purposes under the indenture under which the Junior Subordinated Debentures are issued (the "Indenture"). Except as provided below, owners of beneficial interests in a global security will not be entitled to receive physical delivery of the Preferred Securities in definitive form and will not be considered the owners or holders thereof under the Indenture. Accordingly, each person owning a beneficial interest in such a global security must rely on the procedures of DTC and, if 82 such person is not a Participant, on the procedures of the Participant through which such person owns its interest, to exercise any rights of a holder of Preferred Securities under the Indenture. The Company understands that, under DTC's existing practices, in the event that the Company requests any action of holders, or an owner of a beneficial interest in such a global security desires to take any action which a holder is entitled to take under the Indenture, DTC would authorize the Participants holding the relevant beneficial interests to take such action, and such Participants would authorize beneficial owners owning through such Participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them. Redemption notices will also be sent to DTC. If less than all of the Preferred Securities are being redeemed, the Company understands that it is DTC's existing practice to determine by lot the amount of the interest of each Participant to be redeemed. Distributions on the Preferred Securities registered in the name of DTC or its nominee will be made to DTC or its nominee, as the case may be, as the registered owner of the global security representing such Preferred Securities. None of the Company, the Administrative Trustees, any paying agent or any other agent of the Company or the Administrative Trustees will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the global security for such Preferred Securities or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Disbursements of Distributions to Participants shall be the responsibility of DTC. DTC's practice is to credit Participants' accounts on a payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on the payable date. Payments by Participants to beneficial owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Company, the Administrative Trustees, the paying agent or any other agent of the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. DTC may discontinue providing its services as securities depository with respect to the Preferred Securities at any time by giving reasonable notice to the Company or the Administrative Trustees. If DTC notifies the Company that it is unwilling to continue as such, or if it is unable to continue or ceases to be a clearing agency registered under the Exchange Act and a successor depository is not appointed by the Company within ninety days after receiving such notice or becoming aware that DTC is no longer so registered, the Company will issue the Preferred Securities in definitive form upon registration of transfer of, or in exchange for, such global security. In addition, the Company may at any time and in its sole discretion determine not to have the Preferred Securities represented by one or more global securities and, in such event, will issue Preferred Securities in definitive form in exchange for all of the global securities representing such Preferred Securities. DTC has advised the Company and BBC Capital as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its Participants and to facilitate the clearance and settlement of securities transactions between Participants through electronic book entry changes to accounts of its Participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers (such as the Underwriters), banks, trust companies and clearing corporations and may include certain other organizations. Certain of such Participants (or their representatives), together with other entities, own DTC. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through, or maintain a custodial relationship with a Participant, either directly or indirectly. PAYMENT AND PAYING AGENCY Payments in respect of the Preferred Securities will be made to DTC, which will credit the relevant accounts at DTC on the applicable Distribution Dates or, if the Preferred Securities are not held by 83 DTC, such payments will be made by check mailed to the address of the holder entitled thereto as such address appears on the securities register for the Preferred Securities. The paying agent will initially be the Property Trustee and any co-paying agent chosen by the Property Trustee and acceptable to the Administrative Trustees and the Company. The paying agent will be permitted to resign as paying agent upon 30 days' written notice to the Property Trustee and the Administrative Trustees. If the Property Trustee is no longer the paying agent, the Property Trustee will appoint a successor (which must be a bank or trust company reasonably acceptable to the Administrative Trustees) to act as paying agent. REGISTRAR AND TRANSFER AGENT The Property Trustee will act as the registrar and the transfer agent for the Preferred Securities. Registration of transfers of Preferred Securities will be effected without charge by or on behalf of BBC Capital, except for the payment of any tax or other governmental charges that may be imposed in connection with any transfer or exchange. BBC Capital will not be required to register or cause to be registered the transfer of Preferred Securities after such Preferred Securities have been called for redemption. INFORMATION CONCERNING THE PROPERTY TRUSTEE The Property Trustee, other than upon the occurrence and during the continuance of an Event of Default, undertakes to perform only such duties as are specifically set forth in the Trust Agreement and, after such Event of Default, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the Property Trustee is under no obligation to exercise any of the powers vested in it by the Trust Agreement at the request of any holder of Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. If no Event of Default has occurred and is continuing and the Property Trustee is required to decide between alternative causes of action, construe ambiguous provisions in the Trust Agreement or is unsure of the application of any provision of the Trust Agreement, and the matter is not one on which holders of Preferred Securities are entitled under the Trust Agreement to vote, then the Property Trustee will take such action as is directed by the Company and if not so directed, will take such action as it deems advisable and in the best interests of the holders of the Trust Securities and will have no liability except for its own bad faith, negligence or willful misconduct. MISCELLANEOUS The Administrative Trustees are authorized and directed to conduct the affairs of and to operate BBC Capital in such a way that BBC Capital will not be deemed to be an "investment company" required to be registered under the Investment Company Act or classified as an association taxable as a corporation for United States federal income tax purposes and so that the Junior Subordinated Debentures will be treated as indebtedness of the Company for United States federal income tax purposes. In this connection, the Company and the Administrative Trustees are authorized to take any action, not inconsistent with applicable law, the certificate of trust of BBC Capital or the Trust Agreement, that the Company and the Administrative Trustees determine in their discretion to be necessary or desirable for such purposes. Holders of the Preferred Securities have no preemptive or similar rights. The Trust Agreement and the Preferred Securities will be governed by, and construed in accordance with, the internal laws of the State of Delaware. 84 DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES Concurrently with the issuance of the Preferred Securities, BBC Capital will invest the proceeds thereof, together with the consideration paid by the Company for the Common Securities, in the Junior Subordinated Debentures issued by the Company. The Junior Subordinated Debentures will be issued as unsecured debt under the Indenture, to be dated as of , 1997 (the "Indenture"), between the Company and Wilmington Trust Company, as trustee (the "Debenture Trustee"). The Indenture will be qualified as an indenture under the Trust Indenture Act. The following summary of the material terms and provisions of the Junior Subordinated Debentures and the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Indenture and to the Trust Indenture Act. Wherever particular defined terms of the Indenture are referred to, but not defined herein, such defined terms are incorporated herein by reference. The form of the Indenture has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. GENERAL The Junior Subordinated Debentures will be limited in aggregate principal amount to approximately $51,546,391 (or $59,278,350 if the Underwriters' over-allotment option is exercised in full by the Underwriters), such amount being the sum of the aggregate stated Liquidation Amount of the Trust Securities. The Junior Subordinated Debentures will bear interest at the annual rate of % of the principal amount thereof, payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year (each, an "Interest Payment Date") beginning , 1997, to the Person (as defined in the Indenture) in whose name each Junior Subordinated Debenture is registered, subject to certain exceptions, at the close of business on the Business Day next preceding such Interest Payment Date. It is anticipated that, until the liquidation, if any, of BBC Capital, the Junior Subordinated Debentures will be held in the name of the Property Trustee in trust for the benefit of the holders of the Preferred Securities. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the Junior Subordinated Debentures is not a Business Day, then payment of the interest 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) with the same force and effect as if made on the date such payment was originally due and payable. Accrued interest that is not paid on the applicable Interest Payment Date will bear additional interest on the amount thereof (to the extent permitted by law) at the rate per annum of % thereof, compounded quarterly. The term "interest," as used herein, includes quarterly interest payments, interest on quarterly interest payments not paid on the applicable Interest Payment Date and Additional Interest, as applicable. The Junior Subordinated Debentures will mature on , 2027 (such date, as it may be shortened as hereinafter described, the "Stated Maturity"). Such date may be shortened at any time by the Company to any date not earlier than , 2002, subject to the Company having received prior regulatory approval if then required under applicable capital guidelines or regulatory policies. In the event that the Company elects to shorten the Stated Maturity of the Junior Subordinated Debentures, it will give notice thereof to the Debenture Trustee, BBC Capital and to the holders of the Junior Subordinated Debentures no more than 180 days and no less than 90 days prior to the effectiveness thereof. The Junior Subordinated Debentures will be unsecured and will rank junior and be subordinate in right of payment to all Senior Debt and Subordinated Debt of the Company. Because the Company is a holding company, the right of the Company to participate in any distribution of assets of a subsidiary, including BankAtlantic, upon any liquidation or reorganization or otherwise of such subsidiary (and thus the ability of holders of the Junior Subordinated Debentures to benefit indirectly from such distribution), is subject to the prior claim of creditors of the subsidiary (including depositors in BankAtlantic), except to the extent that the Company may itself be recognized as a creditor of the subsidiary. The Junior Subordinated Debentures will, therefore, be effectively subordinated to all existing and future liabilities of the Company's subsidiaries, including BankAtlantic, and holders of 85 Junior Subordinated Debentures should look only to the assets of the Company for payments on the Junior Subordinated Debentures. The Indenture does not limit the incurrence or issuance of other secured or unsecured debt of the Company, including Senior Debt and Subordinated Debt, whether under the Indenture or any existing indenture or other indenture that the Company or any of its subsidiaries may enter into in the future or otherwise. See "--Subordination." The Indenture does not contain provisions that afford holders of the Junior Subordinated Debentures protection in the event of a highly leveraged transaction or other similar transaction involving the Company that may adversely affect such holders. OPTION TO EXTEND INTEREST PAYMENT PERIOD The Company has the right under the Indenture at any time during the term of the Junior Subordinated Debentures, so long as no Debenture Event of Default has occurred and is continuing, to defer the payment of interest at any time, or from time to time (each, an "Extended Interest Payment Period"). The right to defer the payment of interest on the Junior Subordinated Debentures is limited, however, to a period, in each instance, not exceeding 20 consecutive quarters and no Extended Interest Payment Period may extend beyond the Stated Maturity of the Junior Subordinated Debentures. At the end of each Extended Interest Payment Period, the Company must pay all interest then accrued and unpaid (together with interest thereon at the annual rate of %, compounded quarterly, to the extent permitted by applicable law). During an Extended Interest Payment Period, interest will continue to accrue and holders of Junior Subordinated Debentures (or the holders of Preferred Securities if such securities are then outstanding) will be required to accrue and recognize income for United States federal income tax purposes. See "Certain Federal Income Tax Consequences--Interest Income and Original Issue Discount." During any such Extended Interest Payment Period, the Company may not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Company's capital stock (other than (a) the reclassification of any class of the Company's capital stock into another class of capital stock, (b) dividends or distributions payable in any class of the Company's common stock, (c) any declaration of a dividend in connection with the implementation of a shareholder rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto and (d) purchases of the Company's common stock related to the rights under any of the Company's benefit plans for its or its subsidiaries' directors, officers or employees), (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu with or junior in interest to the Junior Subordinated Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu or junior in interest to the Junior Subordinated Debentures (other than payments under the Guarantee), or (iii) redeem, purchase or acquire less than all of the Junior Subordinated Debentures or any of the Preferred Securities. Prior to the termination of any such Extended Interest Payment Period, the Company may further defer the payment of interest; provided that no Extended Interest Payment Period may exceed 20 consecutive quarters or extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the termination of any such Extended Interest Payment Period and the payment of all amounts then due on any Interest Payment Date, the Company may elect to begin a new Extended Interest Payment Period subject to the above requirements. No interest will be due and payable during an Extended Interest Payment Period, except at the end thereof. The Company must give the Property Trustee, the Administrative Trustees and the Debenture Trustee notice of its election of such Extended Interest Payment Period at least two Business Days prior to the earlier of (i) the next succeeding date on which Distributions on the Trust Securities would have been payable except for the election to begin such Extended Interest Payment Period, or (ii) the date the Trust is required to give notice of the record date, or the date such Distributions are payable, to The Nasdaq Stock Market's National Market (or other applicable self-regulatory organization) or to holders of the Preferred 86 Securities, but in any event at least one Business Day before such record date. Subject to the foregoing, there is no limitation on the number of times that the Company may elect to begin an Extended Interest Payment Period. ADDITIONAL SUMS If BBC Capital or the Property Trustee is required to pay any additional taxes, duties or other governmental charges as a result of the occurrence of a Tax Event, the Company will pay as additional amounts (referred to herein as "Additional Interest") on the Junior Subordinated Debentures such additional amounts as may be required so that the net amounts received and retained by BBC Capital after paying any such additional taxes, duties or other governmental charges will not be less than the amounts BBC Capital would have received had such additional taxes, duties or other governmental charges not been imposed. REDEMPTION OR EXCHANGE The Company will have the right to redeem the Junior Subordinated Debentures prior to maturity (i) on or after , 2002, in whole at any time or in part from time to time, or (ii) at any time in whole (but not in part), within 180 days following the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event, in each case at a redemption price equal to the accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof. Any such redemption prior to the Stated Maturity will be subject to prior regulatory approval if then required under applicable capital guidelines or regulatory policies. "Tax Event" means the receipt by BBC Capital 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 or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of issuance of the Preferred Securities under the Trust Agreement, there is more than an insubstantial risk that (i) interest payable by the Company on the Junior Subordinated 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, (ii) BBC Capital is, or will be within 90 days after the date of such opinion of counsel, subject to United States federal income tax with respect to income received or accrued on the Junior Subordinated Debentures, or (iii) BBC Capital is, or will be within 90 days after the date of such opinion of counsel, subject to more than a DE MINIMIS amount of other taxes, duties, assessments or other governmental charges. The Company must request and receive an opinion with regard to such matters within a reasonable period of time after it becomes aware of the possible occurrence of any of the events described in clauses (i) through (iii) above. "Investment Company Event" means the receipt by BBC Capital 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 a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, BBC Capital is or will be considered an "investment company" that is required to be registered under the Investment Company Act, which change becomes effective on or after the date of original issuance of the Preferred Securities. "Capital Treatment Event" means the reasonable determination by the Company that, as a result of any amendment to, or change (including any proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision thereof or therein, or as a result of any official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such proposed change pronouncement, action or decision is announced on or after the date of original issuance of the Preferred Securities, 87 there is more than an insubstantial risk that the Company will not be entitled to treat an amount equal to the Liquidation Amount of the Preferred Securities as "Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital adequacy guidelines of the Federal Reserve (or any successor regulatory authority with jurisdiction over bank holding companies), or any capital adequacy guidelines as then in effect and applicable to the Company. There are currently no capital adequacy guidelines applicable to savings bank holding companies such as the Company. Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of Junior Subordinated Debentures to be redeemed at its registered address. Unless the Company defaults in payment of the redemption price for the Junior Subordinated Debentures, on and after the redemption date interest ceases to accrue on such Junior Subordinated Debentures or portions thereof called for redemption. The Junior Subordinated Debentures will not be subject to any sinking fund. DISTRIBUTION UPON LIQUIDATION As described under "Description of the Preferred Securities--Liquidation Distribution Upon Termination," under certain circumstances involving the termination of BBC Capital, the Junior Subordinated Debentures may be distributed to the holders of the Preferred Securities in liquidation of BBC Capital after satisfaction of liabilities to creditors of BBC Capital as provided by applicable law. Any such distribution will be subject to receipt of prior regulatory approval if then required under applicable regulatory policies or guidelines. If the Junior Subordinated Debentures are distributed to the holders of Preferred Securities upon the liquidation of BBC Capital, the Company will use its best efforts to list the Junior Subordinated Debentures on The Nasdaq Stock Market's National Market or such stock exchanges, if any, on which the Preferred Securities are then listed. There can be no assurance as to the market price of any Junior Subordinated Debentures that may be distributed to the holders of Preferred Securities. RESTRICTIONS ON CERTAIN PAYMENTS If at any time (i) there has occurred a Debenture Event of Default, (ii) the Company is in default with respect to its obligations under the Guarantee, or (iii) the Company has given notice of its election of an Extended Interest Payment Period as provided in the Indenture with respect to the Junior Subordinated Debentures and has not rescinded such notice, or such Extended Interest Payment Period, or any extension thereof, is continuing, the Company will not (1) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock (other than (a) the reclassification of any class of the Company's capital stock into another class of capital stock, (b) dividends or distributions payable in any class of the Company's common stock, (c) any declaration of a dividend in connection with the implementation of a shareholder rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto and (d) purchases of the Company's common stock related to the rights under any of the Company's benefit plans for its or its subsidiaries' directors, officers or employees), (2) make any payment of principal, interest or premium, if any, on or repay or repurchase or redeem any debt securities of the Company that rank PARI PASSU with or junior in interest to the Junior Subordinated Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks PARI PASSU or junior in interest to the Junior Subordinated Debentures (other than payments under the Guarantee), or (3) redeem, purchase or acquire less than all of the Junior Subordinated Debentures or any of the Preferred Securities. SUBORDINATION The Indenture provides that the Junior Subordinated Debentures are subordinated and junior in right of payment to all Senior Debt and Subordinated Debt of the Company. Upon any payment or 88 distribution of assets to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt restructuring or similar proceedings in connection with any insolvency or bankruptcy proceedings of the Company, the holders of Senior Debt and Subordinated Debt of the Company will first be entitled to receive payment in full of principal of (and premium, if any) and interest, if any, on such Senior Debt and Subordinated Debt of the Company before the holders of Junior Subordinated Debentures will be entitled to receive or retain any payment in respect of the principal of or interest on the Junior Subordinated Debentures. In the event of the acceleration of the maturity of any Junior Subordinated Debentures, the holders of all Senior Debt and Subordinated Debt of the Company outstanding at the time of such acceleration will first be entitled to receive payment in full of all amounts due thereon (including any amounts due upon acceleration) before the holders of the Junior Subordinated Debentures will be entitled to receive or retain any payment in respect of the principal of or interest on the Junior Subordinated Debentures. No payments on account of principal or interest in respect of the Junior Subordinated Debentures may be made if there has occurred and is continuing a default in any payment with respect to Senior Debt and Subordinated Debt of the Company or an event of default with respect to any Senior Debt and Subordinated Debt of the Company resulting in the acceleration of the maturity thereof, or if any judicial proceeding is pending with respect to any such default. "Debt" means, with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such person for money borrowed, (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses, (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business), (v) every capital lease obligation of such Person, and (vi) every obligation of the type referred to in clauses (i) through (v) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable, directly or indirectly, as obligor or otherwise. "Senior Debt" means, with respect to the Company, the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding), on Debt, whether incurred on or prior to the date of the Indenture or thereafter incurred, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are not superior in right of payment to the Junior Subordinated Debentures or to other Debt which is PARI PASSU with, or subordinated to, the Junior Subordinated Debentures; provided, however, that Senior Debt will not be deemed to include (i) any Debt of the Company which when incurred and without respect to any election under section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was without recourse to the Company, (ii) any Debt of the Company to any of its subsidiaries, (iii) any Debt to any employee of the Company, (iv) any Debt which by its terms is subordinated to trade accounts payable or accrued liabilities arising in the ordinary course of business to the extent that payments made to the holders of such Debt by the holders of the Junior Subordinated Debentures as a result of the subordination provisions of the Indenture would be greater than they otherwise would have been as a result of any obligation of such holders to pay amounts over to the obligees on such trade accounts payable or accrued liabilities arising in the ordinary course of business as a result of subordination provisions to which such Debt is subject, and (v) Debt which constitutes Subordinated Debt. "Subordinated Debt" means, with respect to the Company, the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for 89 reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding), on Debt, whether incurred on or prior to the date of the Indenture or thereafter incurred, which is by its terms expressly provided to be junior and subordinate to other Debt of the Company (other than the Junior Subordinated Debentures). On December 31, 1996, the Company had Subordinated Debt of $78.5 million outstanding, consisting of $21 million in aggregate principal amount of the 9% Debentures and $57.5 million in aggregate principal amount of the 6 3/4 % Debentures. The Indenture places no limitation on the amount of additional Senior Debt and Subordinated Debt that may be issued or incurred by the Company. The Company expects from time to time to issue or incur additional indebtedness constituting Senior Debt and Subordinated Debt. As of December 31, 1996, the Company had aggregate Senior Debt and Subordinated Debt of approximately $78.5 million. Because the Company is a holding company, the Junior Subordinated Debentures are effectively subordinated to all existing and future liabilities of the Company's subsidiaries, including obligations to depositors of BankAtlantic. REGISTRATION, DENOMINATION AND TRANSFER The Junior Subordinated Debentures will initially be registered in the name of BBC Capital. If the Junior Subordinated Debentures are distributed to holders of Preferred Securities, it is anticipated that the depositary arrangements for the Junior Subordinated Debentures will be substantially identical to those in effect for the Preferred Securities. See "Description of the Preferred Securities--Book Entry, Delivery and Form." Although DTC has agreed to the procedures described above, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. If DTC is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by the Company within 90 days of receipt of notice from DTC to such effect, the Company will cause the Junior Subordinated Debentures to be issued in definitive form. Payments on Junior Subordinated Debentures represented by a global security will be made to Cede & Co., the nominee for DTC, as the registered holder of the Junior Subordinated Debentures, as described under "Description of the Preferred Securities--Book Entry, Delivery and Form." Junior Subordinated Debentures will be exchangeable for other Junior Subordinated Debentures of like tenor, of any authorized denominations, and of a like aggregate principal amount. Junior Subordinated Debentures may be presented for exchange as provided above, and may be presented for registration of transfer (with the form of transfer endorsed thereon, or a satisfactory written instrument of transfer, duly executed), at the office of the debenture registrar appointed under the Indenture or at the office of any transfer agent designated by the Company for such purpose without service charge and upon payment of any taxes and other governmental charges as described in the Indenture. The Company will appoint the Debenture Trustee as debenture registrar under the Indenture. The Company may at any time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent acts; provided that the Company maintains a transfer agent in the place of payment. The Company may at any time designate additional transfer agents with respect to the Junior Subordinated Debentures. In the event of any redemption, neither the Company nor the Debenture Trustee shall be required to (i) issue, register the transfer of or exchange Junior Subordinated Debentures during a period beginning at the opening of business 15 days before the day of selection for redemption of the Junior Subordinated Debentures to be redeemed and ending at the close of business on the day of mailing of the relevant notice of redemption or (ii) transfer or exchange any Junior Subordinated Debentures so selected for redemption, except, in the case of any Junior Subordinated Debentures being redeemed in part, any portion thereof not to be redeemed. 90 PAYMENT AND PAYING AGENTS Payment of principal of and any interest on the Junior Subordinated Debentures will be made at the office of the Debenture Trustee, except that, at the option of the Company, payment of any interest may be made (i) except in the case of Junior Subordinated Debentures represented by a global security, by check mailed to the address of the Person entitled thereto as such address appears in the register of holders of the Junior Subordinated Debentures, or (ii) by transfer to an account maintained by the Person entitled thereto as specified in the register of holders of the Junior Subordinated Debentures, provided that proper transfer instructions have been received by the regular record date. Payment of any interest on Junior Subordinated Debentures will be made to the Person in whose name such Junior Subordinated Debenture is registered at the close of business on the regular record date for such interest, except in the case of defaulted interest. The Company may at any time designate additional paying agents for the Junior Subordinated Debentures or rescind the designation of any paying agent for the Junior Subordinated Debentures; however, the Company will at all times be required to maintain a paying agent in each place of payment for the Junior Subordinated Debentures. Any moneys deposited with the Debenture Trustee or any paying agent for the Junior Subordinated Debentures, or then held by the Company in trust, for the payment of the principal of or interest on the Junior Subordinated Debentures and remaining unclaimed for two years after such principal or interest has become due and payable will be repaid to the Company on May 31 of each year or (if then held in trust by the Company) will be discharged from such trust and the holder of such Junior Subordinated Debenture will thereafter look, as a general unsecured creditor, only to the Company for payment thereof. MODIFICATION OF INDENTURE The Company and the Debenture Trustee may, from time to time without the consent of the holders of the Junior Subordinated Debentures, amend, waive or supplement the Indenture for specified purposes, including, among other things, curing ambiguities, defects or inconsistencies and qualifying, or maintaining the qualification of, the Indenture under the Trust Indenture Act. The Indenture also contains provisions permitting the Company and the Debenture Trustee, with the consent of the holders of not less than a majority in principal amount of the outstanding Junior Subordinated Debentures, to modify the Indenture; provided, that no such modification may, without the consent of the holder of each outstanding Junior Subordinated Debenture affected by such proposed modification, (i) extend the fixed maturity of the Junior Subordinated Debentures, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or (ii) reduce the percentage of principal amount of Junior Subordinated Debentures, the holders of which are required to consent to any such modification of the Indenture; provided that so long as any of the Preferred Securities remain outstanding, no such modification may be made that requires the consent of the holders of the Junior Subordinated Debentures, and no termination of the Indenture may occur, and no waiver of any Debenture Event of Default may be effective, without the prior consent of the holders of at least a majority of the aggregate Liquidation Amount of the Preferred Securities and that if the consent of the holder of each Junior Subordinated Debenture is required, such modification will not be effective until each holder of Trust Securities has consented thereto. DEBENTURE EVENTS OF DEFAULT The Indenture provides that any one or more of the following described events with respect to the Junior Subordinated Debentures that has occurred and is continuing constitutes an event of default (each, a "Debenture Event of Default") with respect to the Junior Subordinated Debentures: (i) failure for 30 days to pay any interest on the Junior Subordinated Debentures, when due (subject to the deferral of any due date in the case of an Extended Interest Payment Period); or (ii) failure to pay any principal on the Junior Subordinated Debentures when due whether at maturity, upon redemption by declaration or otherwise; or 91 (iii) failure to observe or perform in any material respect certain other covenants contained in the Indenture for 90 days after written notice to the Company from the Debenture Trustee or the holders of at least 25% in aggregate outstanding principal amount of the Junior Subordinated Debentures; or (iv) certain events in bankruptcy, insolvency or reorganization of the Company. The holders of a majority in aggregate outstanding principal amount of the Junior Subordinated Debentures have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee. The Debenture Trustee, or the holders of not less than 25% in aggregate outstanding principal amount of the Junior Subordinated Debentures, may declare the principal due and payable immediately upon a Debenture Event of Default. The holders of a majority in aggregate outstanding principal amount of the Junior Subordinated Debentures may annul such declaration and waive the default if the default (other than the non-payment of the principal of the Junior Subordinated Debentures which has become due solely by such acceleration) has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee. Should the holders of the Junior Subordinated Debentures fail to annul such declaration and waive such default, the holders of a majority in aggregate Liquidation Amount of the Preferred Securities will have such right. The Company is required to file annually with the Debenture Trustee a certificate as to whether or not the Company is in compliance with all the conditions and covenants applicable to it under the Indenture. If a Debenture Event of Default has occurred and is continuing, the Property Trustee will have the right to declare the principal of and the interest on such Junior Subordinated Debentures, and any other amounts payable under the Indenture, to be forthwith due and payable and to enforce its other rights as a creditor with respect to such Junior Subordinated Debentures. ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES If a Debenture Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest on or the principal of the Junior Subordinated Debentures on the payment date on which such payment is due and payable, then a holder of Preferred Securities may institute a legal proceeding directly against the Company for enforcement of payment to such holder of the principal of or interest on such Junior Subordinated Debentures having a principal amount equal to the aggregate Liquidation Amount of the Preferred Securities of such holder (a "Direct Action"). [In connection with such Direct Action, the Company will have a right of set-off under the Indenture to the extent of any payment made by the Company to such holder of Preferred Securities in the Direct Action.] The Company may not amend the Indenture to remove the foregoing right to bring a Direct Action without the prior written consent of the holders of all of the Preferred Securities. If the right to bring a Direct Action is removed, BBC Capital may become subject to the reporting obligations under the Exchange Act. The holders of the Preferred Securities will not be able to exercise directly any remedies, other than those set forth in the preceding paragraph, available to the holders of the Junior Subordinated Debentures unless there has been an Event of Default under the Trust Agreement. See "Description of the Preferred Securities--Events of Default; Notice." CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS The Company may not consolidate with or merge into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person, and any Person may not consolidate with or merge into the Company or sell, convey, transfer or otherwise dispose of its properties and assets substantially as an entirety to the Company, unless (i) in the event the Company consolidates 92 with or merges into another Person or conveys or transfers its properties and assets substantially as an entirety to any Person, the successor Person is organized under the laws of the United States or any State or the District of Columbia, and such successor Person expressly assumes by supplemental indenture the Company's obligations on the Junior Subordinated Debentures issued under the Indenture, (ii) immediately after giving effect thereto, no Debenture Event of Default, and no event which, after notice or lapse of time or both, would become a Debenture Event of Default, has occurred and is continuing, and (iii) certain other conditions as prescribed in the Indenture are met. SATISFACTION AND DISCHARGE The Indenture will cease to be of further effect (except as to the Company's obligations to pay certain sums due pursuant to the Indenture and to provide certain officers' certificates and opinions of counsel described therein) and the Company will be deemed to have satisfied and discharged the Indenture when, among other things, all Junior Subordinated Debentures not previously delivered to the Debenture Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year or are to be called for redemption within one year, and the Company deposits or causes to be deposited with the Debenture Trustee funds, in trust, for the purpose and in an amount sufficient to pay and discharge the entire indebtedness on the Junior Subordinated Debentures not previously delivered to the Debenture Trustee for cancellation, for the principal and interest to the date of the deposit or to the Stated Maturity or redemption date, as the case may be. GOVERNING LAW The Indenture and the Junior Subordinated Debentures will be governed by and construed in accordance with the laws of the State of Florida. INFORMATION CONCERNING THE DEBENTURE TRUSTEE The Debenture Trustee has and is subject to all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. Subject to such provisions, the Debenture Trustee is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of Junior Subordinated Debentures, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The Debenture Trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Debenture Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. MISCELLANEOUS The Company has agreed, pursuant to the Indenture, for so long as Trust Securities remain outstanding, (i) to maintain directly or indirectly 100% ownership of the Common Securities of BBC Capital (provided that certain successors which are permitted pursuant to the Indenture may succeed to the Company's ownership of the Common Securities), (ii) not to voluntarily terminate, wind up or liquidate BBC Capital without prior regulatory approval if then so required under applicable capital guidelines or regulatory policies, and (a) in connection with a distribution of Junior Subordinated Debentures to the holders of the Preferred Securities in liquidation of BBC Capital, or (b) in connection with certain mergers, consolidations or amalgamations permitted by the Trust Agreement, and (iii) to use its reasonable efforts, consistent with the terms and provisions of the Trust Agreement, to cause BBC Capital to remain classified as a grantor trust and not as an association taxable as a corporation for United States federal income tax purposes. DESCRIPTION OF THE GUARANTEE The Preferred Securities Guarantee Agreement (the "Guarantee") will be executed and delivered by the Company concurrently with the issuance of the Preferred Securities for the benefit of the holders 93 of the Preferred Securities. The Guarantee will be qualified as an indenture under the Trust Indenture Act. The Guarantee Trustee will act as indenture trustee under the Guarantee for purposes of complying with the provisions of the Trust Indenture Act. The Guarantee Trustee, Wilmington Trust Company, will hold the Guarantee for the benefit of the holders of the Preferred Securities. The following summary of the material terms and provisions of the Guarantee does not purport to be complete and is subject to, and qualified in its entirety by reference to, all of the provisions of the Guarantee and the Trust Indenture Act. Wherever particular defined terms of the Guarantee are referred to, but not defined herein, such defined terms are incorporated herein by reference. The form of the Guarantee has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. GENERAL The Guarantee will be an irrevocable guarantee on a subordinated basis of BBC Capital's obligations under the Preferred Securities, but will apply only to the extent that BBC Capital has funds sufficient to make such payments. The Company will, pursuant to the Guarantee, irrevocably agree to pay in full on a subordinated basis, to the extent set forth therein, the Guarantee Payments (as defined below) to the holders of the Preferred Securities, as and when due, regardless of any defense, right of set-off or counterclaim that BBC Capital may have or assert other than the defense of payment. The following payments with respect to the Preferred Securities, to the extent not paid by or on behalf of BBC Capital (the "Guarantee Payments"), will be subject to the Guarantee: (i) any accrued and unpaid Distributions required to be paid on the Preferred Securities, to the extent that BBC Capital has funds available therefor at such time, (ii) the Redemption Price with respect to any Preferred Securities called for redemption to the extent that BBC Capital has funds available therefor at such time, and (iii) upon a voluntary or involuntary dissolution, winding up or liquidation of BBC Capital (other than in connection with the distribution of Junior Subordinated Debentures to the holders of Preferred Securities or a redemption of all of the Preferred Securities), the lesser of (a) the amount of the Liquidation Distribution, to the extent BBC Capital has funds available therefor at such time, and (b) the amount of assets of BBC Capital remaining available for distribution to holders of Preferred Securities in liquidation of BBC Capital. The obligation of the Company to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of the Preferred Securities or by causing BBC Capital to pay such amounts to such holders. The Guarantee will not apply to any payment of Distributions except to the extent BBC Capital has funds available therefor. If the Company does not make interest payments on the Junior Subordinated Debentures held by BBC Capital, BBC Capital will not pay Distributions on the Preferred Securities and will not have funds legally available therefor. STATUS OF THE GUARANTEE The Guarantee will constitute an unsecured obligation of the Company and will rank subordinate and junior in right of payment to all Senior Debt and Subordinated Debt of the Company in the same manner as the Junior Subordinated Debentures. The Guarantee does not place a limitation on the amount of additional Senior Debt and Subordinated Debt that may be incurred by the Company. The Company expects from time to time to incur additional indebtedness constituting Senior Debt and Subordinated Debt. The Guarantee will constitute a guarantee of payment and not of collection (that is, the guaranteed party may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against any other Person). The Guarantee will not be discharged except by payment of the Guarantee Payments in full to the extent not paid by BBC Capital or upon distribution of the Junior Subordinated Debentures to the holders of the Preferred Securities. Because the Company is a holding company, the right of the Company to participate in any distribution of assets of a subsidiary, including BankAtlantic, upon a liquidation or reorganization or otherwise is subject to the prior claims of creditors of the subsidiary, except to the extent the Company may itself be recognized as a creditor of the subsidiary. The Company's obligations 94 under the Guarantee, therefore, will be effectively subordinated to all existing and future liabilities of the Company's subsidiaries, including BankAtlantic, and claimants should look only to the assets of the Company for payments thereunder. AMENDMENTS AND ASSIGNMENT Except with respect to any changes which do not materially adversely affect the rights of holders of the Preferred Securities (in which case no vote will be required), the Guarantee may not be amended without the prior approval of the holders of not less than a majority of the aggregate Liquidation Amount of the outstanding Preferred Securities. See "Description of the Preferred Securities--Voting Rights; Amendment of Trust Agreement." All guarantees and agreements contained in the Guarantee will bind the successors, assigns, receivers, trustees and representatives of the Company and will inure to the benefit of the holders of the Preferred Securities then outstanding. EVENTS OF DEFAULT An event of default under the Guarantee will occur upon the failure of the Company to perform any of its payment or other obligations thereunder. The holders of not less than a majority in aggregate Liquidation Amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of the Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Guarantee. Any holder of Preferred Securities may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against BBC Capital, the Guarantee Trustee or any other Person. The Company, as guarantor, is required to file annually with the Guarantee Trustee a certificate as to whether or not the Company is in compliance with all the conditions and covenants applicable to it under the Guarantee. INFORMATION CONCERNING THE GUARANTEE TRUSTEE The Guarantee Trustee, other than during the occurrence and continuance of a default by the Company in performance of the Guarantee, undertakes to perform only such duties as are specifically set forth in the Guarantee and, after default with respect to the Guarantee, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to such provisions, the Guarantee Trustee is under no obligation to exercise any of the powers vested in it by the Guarantee at the request of any holder of any Preferred Securities, unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. TERMINATION OF THE GUARANTEE The Guarantee will terminate and be of no further force and effect upon (a) full payment of the Redemption Price of the Preferred Securities, (b) full payment of the amounts payable upon liquidation of BBC Capital, or (c) distribution of the Junior Subordinated Debentures to the holders of the Preferred Securities. The Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of the Preferred Securities must restore payment of any sums paid under such Preferred Securities or the Guarantee. GOVERNING LAW The Guarantee will be governed by and construed in accordance with the laws of the State of Florida. 95 EXPENSE AGREEMENT The Company will, pursuant to the Agreement as to Expenses and Liabilities entered into by it under the Trust Agreement (the "Expense Agreement"), irrevocably and unconditionally guarantee to each person or entity to whom BBC Capital becomes indebted or liable, the full payment of any costs, expenses or liabilities of BBC Capital, other than obligations of BBC Capital to pay to the holders of the Preferred Securities or other similar interests in BBC Capital of the amounts due such holders pursuant to the terms of the Preferred Securities or such other similar interests, as the case may be. Third party creditors of BBC Capital may proceed directly against the Company under the Expense Agreement, regardless of whether such creditors had notice of the Expense Agreement. RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE FULL AND UNCONDITIONAL GUARANTEE Payments of Distributions and other amounts due on the Preferred Securities (to the extent BBC Capital has funds available for the payment of such Distributions) are irrevocably guaranteed by the Company as and to the extent set forth under "Description of the Guarantee." The Company and BBC Capital believe that, taken together, the obligations of the Company under the Junior Subordinated Debentures, the Indenture, the Trust Agreement, the Expense Agreement, and the Guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee, on a subordinated basis, of payment of Distributions and other amounts due on the Preferred Securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes such guarantee. It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of the obligations of BBC Capital under the Preferred Securities. If and to the extent that the Company does not make payments on the Junior Subordinated Debentures, BBC Capital will not pay Distributions or other amounts due on the Preferred Securities. The Guarantee does not cover payment of Distributions when BBC Capital does not have sufficient funds to pay such Distributions. In such event, the remedy of a holder of Preferred Securities is to institute a legal proceeding directly against the Company for enforcement of payment of such Distributions to such holder. The obligations of the Company under the Guarantee are subordinate and junior in right of payment to all Senior Debt and Subordinated Debt of the Company. SUFFICIENCY OF PAYMENTS As long as payments of interest and other payments are made when due on the Junior Subordinated Debentures, such payments will be sufficient to cover Distributions and other payments due on the Preferred Securities, primarily because (i) the aggregate principal amount of the Junior Subordinated Debentures will be equal to the sum of the aggregate stated Liquidation Amount of the Trust Securities, (ii) the interest rate and interest and other payment dates on the Junior Subordinated Debentures will match the Distribution rate and Distribution and other payment dates for the Preferred Securities, (iii) the Company will pay for all and any costs, expenses and liabilities of BBC Capital (except the obligations of BBC Capital to holders of the Preferred Securities), and (iv) the Trust Agreement further provides that BBC Capital will not engage in any activity that is not consistent with the limited purposes of BBC Capital. ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES A holder of any Preferred Security may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against the Guarantee Trustee, BBC Capital or any other Person. A default or event of default under any Senior Debt and Subordinated Debt of the Company would not constitute a default or Event of Default. In the 96 event, however, of payment defaults under, or acceleration of, Senior Debt and Subordinated Debt of the Company, the subordination provisions of the Indenture provide that no payments may be made in respect of the Junior Subordinated Debentures until such Senior Debt and Subordinated Debt has been paid in full or any payment default thereunder has been cured or waived. Failure to make required payments on the Junior Subordinated Debentures would constitute an Event of Default. LIMITED PURPOSE OF BBC CAPITAL The Preferred Securities evidence a preferred undivided beneficial interest in the assets of BBC Capital. BBC Capital exists for the sole purpose of issuing the Trust Securities and investing the proceeds thereof in Junior Subordinated Debentures. A principal difference between the rights of a holder of a Preferred Security and the rights of a holder of a Junior Subordinated Debenture is that a holder of a Junior Subordinated Debenture is entitled to receive from the Company the principal amount of and interest accrued on Junior Subordinated Debentures held, while a holder of Preferred Securities is entitled to receive Distributions from BBC Capital (or from the Company under the Guarantee) if and to the extent BBC Capital has funds available for the payment of such Distributions. RIGHTS UPON TERMINATION Upon any voluntary or involuntary termination, winding-up or liquidation of BBC Capital involving the liquidation of the Junior Subordinated Debentures, the holders of the Preferred Securities will be entitled to receive, out of assets held by BBC Capital, the Liquidation Distribution in cash. See "Description of the Preferred Securities-Liquidation Distribution Upon Termination." Upon any voluntary or involuntary liquidation or bankruptcy of the Company, the Property Trustee, as holder of the Junior Subordinated Debentures, would be a subordinated creditor of the Company, subordinated in right of payment to all Senior Debt and Subordinated Debt of the Company (as set forth in the Indenture), but entitled to receive payment in full of principal and interest before any shareholders of the Company receive payments or distributions. Since the Company is the guarantor under the Guarantee and has agreed to pay for all costs, expenses and liabilities of BBC Capital (other than the obligations of BBC Capital to the holders of its Preferred Securities), the positions of a holder of the Preferred Securities and a holder of the Junior Subordinated Debentures relative to other creditors and to shareholders of the Company in the event of liquidation or bankruptcy of the Company are expected to be substantially the same. CERTAIN FEDERAL INCOME TAX CONSEQUENCES GENERAL The following is a summary of the material United States federal income tax considerations that may be relevant to the purchasers of Preferred Securities. The statements of law or legal conclusions set forth in this summary constitute the opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., counsel to the Company and BBC Capital. The conclusions expressed herein are based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), regulations thereunder and current administrative rulings and court decisions, all of which are subject to change at any time, with possible retroactive effect. Subsequent changes to these authorities may cause tax consequences to vary substantially from the consequences described below. Furthermore, the authorities on which the following summary is based are subject to various interpretations, and it is therefore possible that the United States federal income tax treatment of the purchase, ownership, and disposition of Preferred Securities may differ from the treatment described below. No attempt has been made in the following discussion to comment on all United States federal income tax matters affecting purchasers of Preferred Securities. Moreover, the discussion generally focuses on holders of Preferred Securities who are individual citizens or residents of the United States 97 and who acquire Preferred Securities on their original issue at their offering price and hold Preferred Securities as capital assets. The discussion has only limited application to dealers in securities, corporations, estates, trusts or nonresident aliens and does not address all the tax consequences that may be relevant to holders who may be subject to special tax treatment, such as, for example, banks, thrifts, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, tax-exempt investors, or persons that will hold the Preferred Securities as a position in a "straddle," as part of a "synthetic security" or "hedge," as part of a "conversion transaction" or other integrated investment, or as other than a capital asset. The following summary also does not address the tax consequences to persons that have a functional currency other than the U.S. dollar or the tax consequences to shareholders, partners or beneficiaries of a holder of Preferred Securities. Further, it does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may be applicable to the Preferred Securities. Accordingly, each prospective investor should consult, and should rely exclusively on, such investor's own tax advisors in analyzing the federal, state, local and foreign tax consequences of the purchase, ownership or disposition of Preferred Securities. CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES The Company intends to take the position that the Junior Subordinated Debentures will be classified for United States federal income tax purposes as indebtedness of the Company under current law, and, by acceptance of a Preferred Security, each holder covenants to treat the Junior Subordinated Debentures as indebtedness and the Preferred Securities as evidence of an indirect beneficial ownership interest in the Junior Subordinated Debentures. Counsel for the Company is of the opinion that, under current law, and based upon the representations, facts and assumptions set forth herein, the Junior Subordinated Debentures will be classified as indebtedness for United States federal income tax purposes. No assurance can be given, however, that such position of the Company will not be challenged by the Internal Revenue Service or, if challenged, that such a challenge will not be successful. The remainder of this discussion assumes that the Junior Subordinated Debentures will be classified for United States federal income tax purposes as indebtedness of the Company. CLASSIFICATION OF BBC CAPITAL Under current law and assuming full compliance with the terms of the Trust Agreement and Indenture (and certain other documents described herein), BBC Capital will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Accordingly, for United States federal income tax purposes, each holder of Preferred Securities generally will be treated as owning an undivided beneficial interest in the Junior Subordinated Debentures, and each holder will be required to include in its gross income its pro rata share of interest income, including any original issue discount ("OID"), paid or accrued with respect to its allocable share of the Junior Subordinated Debentures. INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT Under applicable Treasury regulations (the "Regulations"), a "remote" contingency that stated interest will not be timely paid will be ignored in determining whether a debt instrument is issued with OID. The Company believes that the likelihood of its exercising its option to defer payments of interest is remote. Based on the foregoing, the Company believes that the Junior Subordinated Debentures will not be considered to be issued with OID at the time of their original issuance and, accordingly, a holder should include in gross income such holder's allocable share of interest on the Junior Subordinated Debentures in accordance with such holder's method of tax accounting. Under the Regulations, if the Company exercised its option to defer any payment of interest, the Junior Subordinated Debentures would at that time be treated as issued with OID, and all stated interest (and DE MINIMIS OID, if any) on the Junior Subordinated Debentures would thereafter be treated as OID as long as the Junior Subordinated Debentures remained outstanding. In such event, all 98 of the holder's taxable interest income with respect to the Junior Subordinated Debentures would be accounted for as OID on an economic accrual basis regardless of such holder's method of tax accounting, and actual distributions of stated interest would not be reported as taxable income. Consequently, a holder would be required to include in gross income OID even though the Company would not make any actual cash payments during an Extended Interest Payment. The Regulations have not been addressed in any published rulings or other published interpretations by the Internal Revenue Service, and it is possible that the Internal Revenue Service could take a position contrary to the interpretation herein. Because income on the Preferred Securities will constitute interest or OID, corporate holders will not be entitled to a dividends-received deduction with respect to any income recognized with respect to the Preferred Securities. Subsequent uses of the term "interest" in this summary include income in the form of OID. MARKET DISCOUNT AND ACQUISITION PREMIUM Holders of Preferred Securities other than a holder who purchased the Preferred Securities upon original issuance may be considered to have acquired their undivided interests in the Junior Subordinated Debentures with "market discount" or "acquisition premium" as such phrases are defined for United States federal income tax purposes. Such holders are advised to consult their tax advisors as to the income tax consequences of the acquisition, ownership and disposition of the Preferred Securities. RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF BBC CAPITAL Under certain circumstances, as described under "Description of the Preferred Securities-Redemption or Exchange" and "-Liquidation Distribution Upon Termination," the Junior Subordinated Debentures may be distributed to holders of Preferred Securities upon a liquidation of BBC Capital. Under current United States federal income tax law, such a distribution would be treated as a nontaxable event to each such holder and would result in such holder having an aggregate tax basis in the Junior Subordinated Debentures received in the liquidation equal to such holder's aggregate tax basis in the Preferred Securities immediately before the distribution. A holder's holding period in the Junior Subordinated Debentures so received in liquidation of BBC Capital would include the period for which such holder held the Preferred Securities. If, however, a Tax Event occurs which results in BBC Capital being treated as an association taxable as a corporation, the distribution would constitute a taxable event to holders of the Preferred Securities. Under certain circumstances described herein, the Junior Subordinated Debentures may be redeemed for cash and the proceeds of such redemption distributed to holders in redemption of their Preferred Securities. Under current law, such a redemption would, for United States federal income tax purposes, constitute a taxable disposition of the redeemed Preferred Securities, and a holder would recognize gain or loss as if the holder sold such Preferred Securities for cash. See "Description of the Preferred Securities--Redemption or Exchange" and "--Liquidation Distribution Upon Termination." SALES OF PREFERRED SECURITIES A holder that sells Preferred Securities will recognize gain or loss equal to the difference between its adjusted tax basis in the Preferred Securities and the amount realized on the sale of such Preferred Securities. Assuming that the Company does not exercise its option to defer payment of interest on the Junior Subordinated Debentures, and the Preferred Securities are not considered issued with OID, a holder's adjusted tax basis in the Preferred Securities generally will be its initial purchase price. If the Junior Subordinated Debentures are deemed to be issued with OID as a result of the Company's 99 deferral of any interest payment, or otherwise, a holder's tax basis in the Preferred Securities generally will be its initial purchase price, increased by OID previously includible in such holder's gross income to the date of disposition and decreased by distributions or other payments received on the Preferred Securities since and including the date of commencement of the first Extended Interest Payment Period. Such gain or loss generally will be a capital gain or loss (except to the extent of any accrued interest with respect to such holder's pro rata share of the Junior Subordinated Debentures required to be included in income) and generally will be a long-term capital gain or loss if the Preferred Securities have been held for more than one year. Should the Company exercise its option to defer any payment of interest on the Junior Subordinated Debentures, the Preferred Securities may trade at a price that does not accurately reflect the value of accrued but unpaid interest with respect to the underlying Junior Subordinated Debentures. In the event of such a deferral, a holder that disposes of its Preferred Securities between record dates for payments of distributions thereon will be required to include accrued but unpaid interest on the Junior Subordinated Debentures to the date of disposition as OID, but may not receive the cash related thereto. However, such Securityholder will add such amount to its adjusted tax basis in the Preferred Securities. To the extent the selling price is less than the holder's adjusted tax basis in the Preferred Securities, such holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. EFFECT OF PROPOSED CHANGES IN TAX LAWS On February 6, 1997, President Clinton released his budget proposals for fiscal year 1998. One of the revenue provisions of those proposals would generally deny interest deductions for interest on an instrument issued by a corporation that has a maximum term of more than 15 years and that is not shown as indebtedness on the separate balance sheet of the issuer or, where the instrument is issued to a related party (other than a corporation), where the holder or some other related party issues a related instrument that is not shown as indebtedness on the issuer's consolidated balance sheet. If enacted as proposed by the President, this provision would be effective for instruments issued on or after the date of first action by a Congressional committee with respect to the proposal. It is not clear from the President's proposals as to what constitutes Congressional "committee action" with respect to this proposal. If the provision were to apply to the Junior Subordinated Debentures, the Company would be unable to deduct interest on the Junior Subordinated Debentures. Under current law, the Company will be able to deduct interest on the Junior Subordinated Debentures. However, counsel for the Company has advised that such proposed legislation could change the deductibility of the interest paid by the Company on the Junior Subordinated Debentures for federal income tax purposes, and that Congress could amend such legislation giving it retroactive effect prior to its enactment to law. There can be no assurance that future legislative proposals or final legislation will not affect the ability of the Company to deduct interest on the Junior Subordinated Debentures. Such a change would give rise to a Tax Event. A Tax Event would permit the Company, upon prior regulatory approval if then required under applicable capital guidelines or regulatory policies, to cause a redemption of the Preferred Securities before, as well as after, , 2002. See "Description of the Junior Subordinated Debentures--Redemption or Exchange" and "Description of the Preferred Securities--Redemption or Exchange--Tax Event Redemption, Investment Company Event Redemptions or Capital Treatment Event Redemptions." BACKUP WITHHOLDING AND INFORMATION REPORTING The amount of OID accrued on the Preferred Securities held of record by individual citizens or residents of the United States, or certain trusts, estates, and partnerships, will be reported to the Internal Revenue Service on Forms 1099, which forms should be mailed to such holders of Preferred Securities by January 31 following each calendar year. Payments made on, and proceeds from the sale of, the Preferred Securities may be subject to a "backup" withholding tax (currently at 31%) unless the holder complies with certain identification and other requirements. Any amounts withheld under the 100 backup withholding rules will be allowed as a credit against the holder's United States federal income tax liability, provided the required information is provided to the Internal Revenue Service. THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON THE PARTICULAR SITUATION OF A HOLDER OF PREFERRED SECURITIES. HOLDERS OF PREFERRED SECURITIES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS. ERISA CONSIDERATIONS Employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code ("Plans"), generally may purchase Preferred Securities, subject to the investing fiduciary's determination that the investment in Preferred Securities satisfies ERISA's fiduciary standards and other requirements applicable to investments by the Plan. In any case, the Company and/or any of its affiliates may be considered a "party in interest" (within the meaning of ERISA) or a "disqualified person" (within the meaning of Section 4975 of the Code) with respect to certain plans (generally, Plans maintained or sponsored by, or contributed to by, any such persons with respect to which the Company or an affiliate is a fiduciary or Plans for which the Company or an affiliate provides services). The acquisition and ownership of Preferred Securities by a Plan (or by an individual retirement arrangement or other Plans described in Section 4975(e)(1) of the Code) with respect to which the Company or any of its affiliates is considered a party in interest or a disqualified person may constitute or result in a prohibited transaction under ERISA or Section 4975 of the Code, unless such Preferred Securities are acquired pursuant to and in accordance with an applicable exemption. As a result, Plans with respect to which the Company or any of its affiliates is a party in interest or a disqualified person should not acquire Preferred Securities unless such Preferred Securities are acquired pursuant to and in accordance with an applicable exemption. Any other Plans or other entities whose assets include Plan assets subject to ERISA or Section 4975 of the Code proposing to acquire Preferred Securities should consult with their own counsel. 101 UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement, the Underwriters, Ryan, Beck & Co., Inc. and Tucker Anthony Incorporated, have severally agreed to purchase from BBC Capital the number of Preferred Securities set forth opposite their respective names below. The Underwriters are committed to purchase and pay for all Preferred Securities if any Preferred Securities are purchased.
NUMBER OF UNDERWRITER SHARES - ---------------------------- ------------ Ryan, Beck & Co., Inc. .... Tucker Anthony Incorporated ------------ TOTAL .................... 2,000,000 ============
The Company has been advised by the Underwriters that the Underwriters propose initially to offer the Preferred Securities to the public at the public offering price set forth on the cover page of this Prospectus, and to certain dealers at such price less a concession not in excess of $ per Preferred Security. The Underwriters may allow and such dealers may re-allow a concession not in excess of $ per Preferred Security to certain other dealers. After the initial public offering, the public offering price and such concessions may be changed by the Underwriters. In view of the fact that the proceeds from the sale of the Preferred Securities will be used to purchase the Junior Subordinated Debentures issued by the Company, the Underwriting Agreement provides that the Company will pay as compensation an amount of $ per Preferred Security for the Underwriters' arranging the investment therein of such proceeds. BBC Capital has granted to the Underwriters an option, exercisable for 30 days from the date of this Prospectus, to purchase up to an additional 300,000 Preferred Securities at the public offering price set forth on the cover page hereof less underwriting discounts. The Underwriters may exercise such option to purchase additional Preferred Securities solely for the purpose of covering over-allotments, if any, incurred in the sale of the Preferred Securities. To the extent that the Underwriters exercise their option to purchase additional Preferred Securities, BBC Capital will issue and sell to the Company additional Common Securities and the Company will issue and sell to BBC Capital Junior Subordinated Debentures in an aggregate principal amount equal to the total aggregate Liquidation Amount of the additional Preferred Securities being purchased pursuant to the option and the additional Common Securities. Because the National Association of Securities Dealers, Inc. ("NASD") is expected to view the Preferred Securities as interests in a direct participation program, the offering of the Preferred Securities is being made in compliance with the applicable provisions of Rule 2810 of the NASD's Conduct Rules. The Company and BBC Capital have agreed to indemnify the Underwriters against and contribute toward certain liabilities, including liabilities under the Securities Act. The Company has agreed to reimburse the Underwriters for certain expenses and legal fees related to the sale of the Preferred Securities. The Preferred Securities are a new series of securities with no established trading market. Application has been made to list the Preferred Securities on The Nasdaq Stock Market's National Market. The Underwriters have advised BBC Capital that they presently intend to make a market in the Preferred Securities after the commencement of trading on The Nasdaq National Market, but no assurances can be made as to the liquidity of such Preferred Securities or that an active and liquid trading market will develop or, if developed, that it will be sustained. The Underwriters will have no obligation to make a market in the Preferred Securities, however, and may cease market-making activities, if commenced, at any time. 102 VALIDITY OF SECURITIES Certain matters of Delaware law relating to the validity of the Preferred Securities, the enforceability of the Trust Agreement and the formation of BBC Capital will be passed upon by Richards, Layton & Finger, special Delaware counsel to the Company and BBC Capital. Certain legal matters for the Company and BBC Capital, including the validity of the Guarantee and the Junior Subordinated Debentures will be passed upon for the Company and BBC Capital by Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., counsel to the Company and BBC Capital. Certain legal matters will be passed upon for the Underwriters by Malizia, Spidi, Sloane & Fisch, P.C., Washington, D.C. Stearns Weaver Miller Weissler, Alhadeff & Sitterson, P.A., and Malizia, Spidi, Sloane & Fisch, P.C. will rely on the opinion of Richards, Layton & Finger as to matters of Delaware law. Certain matters relating to United States federal income tax considerations will be passed upon for the Company by Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. EXPERTS The consolidated financial statements of BankAtlantic Bancorp, Inc. as of December 31, 1996 and 1995, and for each of the years in the three-year period ended December 31, 1996, have been included herein and in the Registration Statement in reliance upon reports of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information can be inspected and copied at the public reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's regional offices at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission maintains an Internet web site that contains reports, proxy and information statements and other information regarding issuers who file electronically with the Commission. The address of that site is http://www.sec.gov. The Company and BBC Capital have filed with the Commission a Registration Statement on Form S-3 (together with all amendments thereto, the "Registration Statement"), of which this Prospectus is a part, under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Preferred Securities, the Junior Subordinated Debentures and the Guarantee. This Prospectus does not contain all of the information set forth in the Registration Statement, certain portions of which have been omitted as permitted by the rules and regulations of the Commission. In addition, certain documents filed by the Company with the Commission have been incorporated in this Prospectus by reference. See "Incorporation of Certain Documents by Reference." For further information with respect to the Company, BBC Capital, the Preferred Securities and the Junior Subordinated Debentures, reference is made to the Registration Statement, including the exhibits thereto and the documents incorporated herein by reference. Any statements contained herein concerning the provisions of any document filed as an exhibit to the Registration Statement or otherwise filed with the Commission or incorporated by reference herein are not necessarily complete, and, in each instance, reference is made to the copy of such document so filed for a more complete description of the matter involved. Each such statement is qualified in its entirety by such reference. The Registration Statement may be inspected without charge at the principal office of the Commission in Washington, D.C., and copies of all or part of it may be obtained from the Commission upon payment of the prescribed fees. 103 No separate financial statements of BBC Capital have been included herein. The Company does not consider that such financial statements would be material to holders of Preferred Securities because (i) all of the voting securities of BBC Capital will be owned by the Company, a reporting company under the Exchange Act, (ii) BBC Capital has no independent operations but exists for the sole purpose of issuing securities representing undivided beneficial interests in the assets of BBC Capital and investing the proceeds thereof in Junior Subordinated Debentures issued by the Company, and (iii) the obligations of the Company described herein to provide certain indemnities in respect of and be responsible for certain costs, expenses, debts and liabilities of BBC Capital under the Indenture and pursuant to the Trust Agreement, the guarantee issued by the Company with respect to the Preferred Securities, the Junior Subordinated Debentures purchased by BBC Capital, the related Indenture and the Expense Agreement, taken together, constitute, in the belief of the Company and BBC Capital, a full and unconditional guarantee of payments due on the Preferred Securities. See "Description of the Junior Subordinated Debentures" and "Description of the Guarantee." BBC Capital is not currently subject to the information reporting requirements of the Exchange Act and the Company does not expect that BBC Capital will file reports, proxy statements and other information under the Exchange Act with the Commission. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents previously filed with the Commission are hereby incorporated in this Prospectus by reference and made a part hereof: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 1996, filed with the Commission on March 21, 1997. (2) The Company's Current Report on Form 8-K, dated January 6, 1997, filed with the Commission on January 13, 1997. (3) The Company's Current Report on Form 8-K, dated February 4, 1997, filed with the Commission on February 13, 1997. All documents subsequently filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering of the Junior Subordinated Debentures shall be deemed to be incorporated by reference into this Prospectus and to be a part of this Prospectus from the date of filing thereof. Any statement contained in a document incorporated by reference herein, shall be deemed to be modified or superseded for purposes of the Registration Statement and this Prospectus to the extent that a statement contained herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Registration Statement or this Prospectus. The Company will provide without charge to any person to whom this Prospectus is delivered, on the written or oral request of such person, a copy of any or all of the foregoing documents incorporated by reference, other than certain exhibits to such documents. Written requests should be directed to BankAtlantic Bancorp, Inc., 1750 East Sunrise Boulevard, Fort Lauderdale, Florida 33304, Attention: Secretary, telephone: 954-760-5000. 104 F- BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE --------- Independent Auditors' Report ................................................................. F-3 Consolidated Statements of Financial Condition as of December 31, 1996 and 1995 ............. F-4 Consolidated Statements of Operations for each of the years in the three year period ended December 31, 1996 ............................................................................ F-5 Consolidated Statements of Stockholders' Equity for each of the years in the three year period ended December 31, 1996 ............................................................... F-6 Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 1996 ............................................................................ F-7 Notes to Consolidated Financial Statements ................................................... F-10
1 [THIS PAGE INTENTIONALLY LEFT BLANK] 2 INDEPENDENT AUDITORS' REPORT The Board of Directors BankAtlantic Bancorp, Inc.: We have audited the accompanying consolidated statements of financial condition of BankAtlantic Bancorp, Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of BankAtlantic Bancorp, Inc. and subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 1996, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Fort Lauderdale, Florida January 28, 1997 3 BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, ------------------------------ 1996 1995 -------------- -------------- (IN THOUSANDS, EXCEPT SHARE DATA) ASSETS Cash and due from depository institutions ........................... $ 102,995 $ 69,867 Federal Funds sold .................................................. 6,148 0 Investment securities, net--held to maturity, at cost which approximates market value ......................................... 54,511 49,856 Loans receivable, net ............................................... 1,824,856 828,630 Debt securities available for sale (at market value) ................ 439,345 691,803 Accrued interest receivable ......................................... 20,755 14,553 Real estate owned, net .............................................. 4,918 6,279 Office properties and equipment, net ................................ 48,274 40,954 Federal Home Loan Bank stock, at cost which approximates market value ...................................................... 14,787 10,089 Mortgage servicing rights ........................................... 25,002 20,738 Deferred tax asset, net ............................................. 3,355 0 Cost over fair value of net assets acquired ......................... 28,591 10,823 Other assets ........................................................ 31,990 7,097 -------------- -------------- Total assets ...................................................... $ 2,605,527 $ 1,750,689 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits ............................................................ $ 1,832,780 $ 1,300,377 Advances from FHLB .................................................. 295,700 201,785 Federal Funds purchased ............................................. 0 1,200 Securities sold under agreements to repurchase ...................... 190,588 66,237 Subordinated debentures and note payable ............................ 78,500 21,001 Drafts payable ...................................................... 386 796 Deferred tax liabilities, net ....................................... 0 744 Advances by borrowers for taxes and insurance ....................... 29,659 15,684 Other liabilities ................................................... 30,210 22,304 -------------- -------------- Total liabilities ................................................. 2,457,823 1,630,128 -------------- -------------- Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value, $25 per share preference value, 10,000,000 shares authorized; none issued and outstanding ......... 0 0 Class A common stock, $.01 par value, authorized 30,000,000 shares; issued and outstanding 7,807,258 and 0 shares ..................... 78 0 Class B common stock, $.01 par value, authorized 15,000,000 shares; issued and outstanding 10,542,116 and 10,592,999 shares ........... 105 106 Additional paid-in capital .......................................... 64,171 48,905 Retained earnings ................................................... 82,602 65,817 -------------- -------------- Total stockholders' equity before net unrealized appreciation on debt securities available for sale--net of deferred income taxes .. 146,956 114,828 Net unrealized appreciation on debt securities available for sale-- net of deferred income taxes ...................................... 748 5,733 -------------- -------------- Total stockholders' equity ........................................ 147,704 120,561 -------------- -------------- Total liabilities and stockholders' equity ........................ $ 2,605,527 $ 1,750,689 ============== ==============
See Notes to Consolidated Financial Statements 4 BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATION
FOR THE YEARS ENDED DECEMBER 31, --------------------------------------- 1996 1995 1994 ------------ ------------ ----------- (IN THOUSANDS, EXCEPT PER SHARE DATE) INTEREST INCOME: Interest and fees on loans .......................................... $ 107,922 $ 72,841 $49,426 Interest on banker's acceptances .................................... 22 0 406 Interest on mortgage-backed securities held to maturity ............ 0 37,855 30,550 Interest on debt securities available for sale ...................... 38,159 7,207 5,542 Interest and dividends on investment securities ..................... 6,528 12,174 12,625 ------------ ------------ ----------- Total interest income ............................................. 152,631 130,077 98,549 ------------ ------------ ----------- INTEREST EXPENSE: Interest on deposits ................................................ 55,028 46,646 31,646 Interest on advances from FHLB ...................................... 9,221 7,449 4,976 Interest on securities sold under agreements to repurchase and federal funds purchased ....................................... 8,764 10,815 4,809 Interest on subordinated debentures and note payable ................ 4,018 776 0 ------------ ------------ ----------- Total interest expense ............................................ 77,031 65,686 41,431 ------------ ------------ ----------- Net interest income ................................................. 75,600 64,391 57,118 Provision for loan losses ........................................... 5,844 4,182 2,299 ------------ ------------ ----------- Net interest income after provision for loan losses ................. 69,756 60,209 54,819 ------------ ------------ ----------- NON-INTEREST INCOME: Loan servicing and other loan fees .................................. 4,216 3,524 3,365 Gains on sales of loans originated for resale ....................... 534 395 773 Unrealized and realized gains (losses) on trading account securities 0 589 (558) Gains on sales of mortgage servicing rights ......................... 4,182 2,744 484 Gains on sales of debt securities available for sale ................ 5,959 0 0 Gains on sales of property and equipment, net ....................... 3,061 18 272 Other ............................................................... 15,785 12,118 9,427 ------------ ------------ ----------- Total non-interest income ......................................... 33,737 19,388 13,763 ------------ ------------ ----------- NON-INTEREST EXPENSE: Employee compensation and benefits .................................. 33,216 25,403 22,382 Occupancy and equipment ............................................. 13,615 10,831 8,061 SAIF special assessment ............................................. 7,160 0 0 Federal insurance premium ........................................... 2,495 2,750 2,673 Advertising and promotion ........................................... 2,079 2,144 1,495 Foreclosed asset activity, net ...................................... (725) (3,178) (2,290) Amortization of cost over fair value of net assets acquired ........ 1,545 1,122 0 Other ............................................................... 12,856 12,088 9,764 ------------ ------------ ----------- Total non-interest expense ........................................ 72,241 51,160 42,085 ------------ ------------ ----------- Income before income taxes .......................................... 31,252 28,437 26,497 Provision for income taxes .......................................... 12,241 10,018 9,662 ------------ ------------ ----------- Net income .......................................................... 19,011 18,419 16,835 ------------ ------------ ----------- Dividends on non-cumulative preferred stock ......................... 0 677 880 Amount classified as dividends on non-cumulative preferred stock redemption (A) .................................... 0 1,353 0 ------------ ------------ ----------- Total dividends on non-cumulative preferred stock ................. 0 2,030 880 ------------ ------------ ----------- Net income available for common shares .............................. $ 19,011 $ 16,389 $ 15,955 ============ ============ =========== Income per common and common equivalent share ....................... $ 1.01 $ 0.97 (A) $ 0.97 ============ ============ =========== Income per common equivalent share assuming full dilution .......... $ 0.93 $ 0.96 (A) $ 0.97 ============ ============ ===========
(A) The excess of the redemption price above the recorded amount of preferred stock is considered a preferred stock dividend. The impact of the October 1995 preferred stock redemption for the year ended December 31, 1995 was a reduction of $0.08 for primary and fully diluted earnings per share. See Notes to Consolidated Financial Statements 5 BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED DECEMBER 31, 1996
ADDITIONAL PAID-IN CAPITAL PREFERRED PREFERRED COMMON ADDITIONAL STOCK STOCK STOCK PAID-IN ------------ ------------- --------- ------------- BALANCE, DECEMBER 31, 1993 ............ $ 3 $ 7,033 $ 65 $ 46,726 Net income ............................ 0 0 0 0 Dividends on preferred stock .......... 0 0 0 0 Dividends on common stock ............. 0 0 0 0 Exercise of 1984 common stock options ......................... 0 0 0 266 Tax effect relating to the exercise of employee stock options .............. 0 0 0 35 Net unrealized appreciation on debt securities available for sale--net of deferred income taxes ................. 0 0 0 0 Preferred stock redemption ............ 0 (6) 0 0 ------------ ------------- --------- ------------- BALANCE, DECEMBER 31, 1994 ............ 3 7,027 65 47,027 Net income ............................ 0 0 0 0 5 for 4 stock split June 1995 ......... 0 0 16 0 5 for 4 stock split January 1996 ..... 0 0 21 0 Dividends on preferred stock .......... 0 0 0 0 Redemption of preferred stock ......... 3 (7,027) 0 0 Dividends on common stock ............. 0 0 0 0 Exercise of 1984 common stock options ......................... 0 0 2 706 Tax effect relating to the exercise of employee stock options .............. 0 0 0 173 Exercise of stock warrants ............ 0 0 2 999 Net change in unrealized appreciation on debt securities available for sale--net of deferred income taxes .. 0 0 0 0 ------------ ------------- --------- ------------- BALANCE, DECEMBER 31, 1995 ............ 0 0 106 48,905 Net income ............................ 0 0 0 0 Proceeds from issuance of Class A .... common stock, net ................... 0 0 12 17,992 Dividends on common stock ............. 0 0 0 0 Exercise of 1984 Class B common stock options .................. 0 0 0 413 Tax effect relating to the exercise of employee stock options .............. 0 0 0 118 Purchase and retirement of Class A common stock .......................... 0 0 (1) (1,856) Purchase and retirement of Class B common stock .......................... 0 0 (1) (1,401) 5 for 4 stock split July 1996 ......... 0 0 30 0 5 for 4 stock split February 1997 .... 0 0 37 0 Net change in unrealized appreciation on debt securities available for sale--net of deferred income taxes .. 0 0 0 0 ------------ ------------- --------- ------------- BALANCE, DECEMBER 31, 1996 ............ $ 0 $ 0 $ 183 $ 64,171 ============ ============= ========= =============
(RESTUBBED TABLE CONTINUED FROM ABOVE)
NET UNREALIZED APPRECIATION ON SECURITIES RETAINED AVAILABLE EARNINGS FOR SALE TOTAL ----------- ---------------- ----------- BALANCE, DECEMBER 31, 1993 ............ $ 36,825 $ 0 $ 90,652 Net income ............................ 16,835 0 16,835 Dividends on preferred stock .......... (880) 0 (880) Dividends on common stock ............. (1,575) 0 (1,575) Exercise of 1984 common stock options ......................... 0 0 266 Tax effect relating to the exercise of employee stock options .............. 0 0 35 Net unrealized appreciation on debt securities available for sale--net of deferred income taxes ................. 0 193 193 Preferred stock redemption ............ 0 0 (6) ----------- ---------------- ----------- BALANCE, DECEMBER 31, 1994 ............ 51,205 193 105,520 Net income ............................ 18,419 0 18,419 5 for 4 stock split June 1995 ......... (16) 0 0 5 for 4 stock split January 1996 ..... (21) 0 0 Dividends on preferred stock .......... (677) 0 (677) Redemption of preferred stock ......... (1,353) 0 (8,383) Dividends on common stock ............. (1,740) 0 (1,740) 6 NET UNREALIZED APPRECIATION ON SECURITIES RETAINED AVAILABLE EARNINGS FOR SALE TOTAL ----------- ---------------- ----------- Exercise of 1984 common stock options ......................... 0 0 708 Tax effect relating to the exercise of employee stock options .............. 0 0 173 Exercise of stock warrants ............ 0 0 1,001 Net change in unrealized appreciation on debt securities available for sale--net of deferred income taxes .. 0 5,540 5,540 ----------- ---------------- ----------- BALANCE, DECEMBER 31, 1995 ............ 65,817 5,733 120,561 Net income ............................ 19,011 0 19,011 Proceeds from issuance of Class A .... common stock, net ................... 0 0 18,004 Dividends on common stock ............. (2,159) 0 (2,159) Exercise of 1984 Class B common stock options .................. 0 0 413 Tax effect relating to the exercise of employee stock options .............. 0 0 118 Purchase and retirement of Class A common stock .......................... 0 0 (1,857) Purchase and retirement of Class B common stock .......................... 0 0 (1,402) 5 for 4 stock split July 1996 ......... (30) 0 0 5 for 4 stock split February 1997 .... (37) 0 0 Net change in unrealized appreciation on debt securities available for sale--net of deferred income taxes .. 0 (4,985) (4,985) ----------- ---------------- ----------- BALANCE, DECEMBER 31, 1996 ............ $ 82,602 $ 748 $ 147,704 =========== ================ ===========
See Notes to Consolidated Financial Statements. 6 BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------- 1996 1995 1994 ----------- ----------- ----------- (IN THOUSANDS) OPERATING ACTIVITIES: Net Income ................................................. $ 19,011 $ 18,419 $ 16,835 ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Provision for loan losses ................................ 5,844 4,182 2,299 Provision for (reversal of) losses on real estate owned ... (197) (1,187) 140 FHLB stock dividends ....................................... 0 0 (110) Depreciation ............................................... 3,835 3,203 2,731 Amortization of mortgage servicing rights .................. 6,849 4,362 4,960 Increase (decrease) in deferred income taxes ............... 1,495 1,551 (1,266) Net amortization (accretion) of securities ................. (257) 780 1,068 Gains on sales of real estate owned ........................ (575) (2,032) (2,105) Net accretion of deferred loan origination fees ........... (1,154) (1,095) (1,078) Proceeds from sales of loans originated for resale ........ 59,942 34,548 38,941 Fundings of loans originated for resale .................... (57,097) (41,326) (39,259) Gains on sales of loans originated for resale .............. (534) (395) (773) Gains on sales of office properties and equipment ......... (3,061) (18) (272) Purchase of trading account securities, net ................ 0 0 (9,658) Proceeds from sales of trading account securities ......... 0 9,524 0 Unrealized and realized (gains) losses on trading account securities ....................................... 0 (589) 558 Gains on sales of debt securities available for sale ...... (5,959) 0 0 Gains on sales of mortgage servicing rights ................ (4,182) (2,744) (484) Income (loss) from joint venture operations ................ 0 (6) 30 Decrease (increase) in accrued interest receivable ........ (2,021) 1,593 2,636 Amortization of dealer reserve ............................. 4,159 2,071 453 Amortization of cost over fair value of net assets acquired 1,545 1,122 0 Net accretion of other purchase accounting adjustments .... (329) (612) 0 Amortization of subordinated debentures and note payable deferred costs ..................................... 222 98 0 Decrease in other assets ................................... 804 4,574 2,505 Increase (decrease) in drafts payable ...................... (410) 111 112 Increase (decrease) in other liabilities ................... 1,150 540 (6,179) Write down of office properties and equipment .............. 263 120 0 Provision for (recovery from) tax certificate losses ...... (184) (145) 115 ----------- ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES .................. 29,159 36,649 12,199 ----------- ----------- -----------
(Continued) See Notes to Consolidated Financial Statements. 7 BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------- 1996 1995 1994 ------------ ------------ ------------ (IN THOUSANDS) INVESTING ACTIVITIES: Purchase of investment securities ............................... (56,884) (70,872) (240,726) Purchase of debt securities available for sale .................. (231,765) 0 0 Proceeds from redemption and maturity of investment securities . 52,413 140,837 135,978 Principal collected on debt securities available for sale ...... 43,236 11,989 29,312 Proceeds from sales of debt securities available for sale ...... 374,413 852 0 Residential loans purchased ..................................... (465,942) (9,930) (3,989) Principal reduction on loans .................................... 548,847 444,867 270,986 Loan fundings for portfolio ..................................... (692,546) (597,274) (328,849) Banker's acceptances funded ..................................... (86) 0 0 Proceeds from maturity of banker's acceptances .................. 108 0 109,931 Mortgage--backed securities purchased ........................... 0 (75,262) (268,776) Proceeds from sales of real estate owned ........................ 4,938 5,373 5,660 Principal collected on mortgage-backed securities ............... 131,361 110,084 136,863 Additions to dealer reserve ..................................... (4,203) (3,684) 0 Additions to office properties and equipment .................... (10,326) (5,535) (3,861) Proceeds from sales of properties and equipment ................. 2,666 18 643 Proceeds received from joint ventures ........................... 0 1,239 0 Purchases of FHLB stock net of redemptions ...................... (1,923) (1,249) 0 Proceeds from maturities of interest bearing deposits with banks 19,795 0 0 Proceeds from sales of mortgage servicing rights ................ 15,586 8,340 2,920 Mortgage servicing rights purchased and originated .............. (27,992) (10,112) (8,147) Bank acquisitions, net of cash acquired ......................... (38,311) (14,914) 0 ------------ ------------ ------------ NET CASH USED BY INVESTING ACTIVITIES ........................... (336,615) (65,233) (162,055) ------------ ------------ ------------ FINANCING ACTIVITIES: Net increase (decrease) in deposits ............................. 15,905 51,093 (20,814) Interest credited to deposits ................................... 47,433 43,447 30,236 Proceeds from FHLB advances ..................................... 577,643 641,785 516,400 Repayments of FHLB advances ..................................... (488,755) (602,050) (482,650) Net increase (decrease) in federal funds purchased .............. (1,200) 1,200 0 Proceeds from note payable ...................................... 0 4,000 0 Repayment of note payable ....................................... (1) (3,999) 0 Net increase (decrease) in securities sold under agreements to repurchase ........................................ 122,329 (104,207) 128,694 Proceeds from the issuance of subordinated debentures .......... 57,500 21,000 0 Deferred costs on subordinated debentures ....................... (2,356) (1,052) 0 Preferred stock redemption ...................................... 0 (8,383) (6) Payment to acquire and retire common stock ...................... (3,259) 0 0 Issuance of common stock , net .................................. 18,417 1,709 266 Receipts (payments) of advances by borrowers for taxes and insurance, net ........................................ 5,235 277 (584) Preferred stock dividends paid .................................. 0 (677) (880) Common stock dividends paid ..................................... (2,159) (1,672) (1,177) ------------ ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES ....................... 346,732 42,471 169,485 Increase in cash and cash equivalents ........................... 39,276 13,887 19,629 ------------ ------------ ------------ Cash and cash equivalents at the beginning of period ........... 69,867 55,980 36,351 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................... $ 109,143 $ 69,867 $ 55,980 ============ ============ ============
(Continued) See Notes to Consolidated Financial Statements 8 BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------- 1996 1995 1994 ----------- ----------- ----------- (IN THOUSANDS) SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Interest paid ............................................................ $ 71,656 $ 65,708 $ 40,334 Income taxes paid ........................................................ 8,600 9,320 10,435 Income taxes refunded .................................................... 0 88 0 Loans transferred to real estate owned ................................... 1,788 1,029 1,282 Loans charged-off ........................................................ 7,718 5,433 5,968 Real estate owned charged-off ............................................ 803 213 40 Tax certificates charged-off (recoveries), net ........................... (2) 1,192 100 Book value of debt securities transferred to available for sale ......... 0 638,818 0 Increase in equity for the tax effect related to the exercise of employee stock options ..................................... 118 173 35 Common stock cash dividends declared and paid in subsequent period ...................................................... 551 467 398 Net change in unrealized appreciation on debt securities available for sale ..................................................... (8,115) 9,019 314 Change in deferred taxes on net unrealized appreciation on debt securities available for sale .......................................... (3,130) 3,479 121 Change in stockholders' equity from net unrealized appreciation on debt securities available for sale, less related deferred income taxes .................................................. (4,985) 5,540 193 Proceeds receivable from sales of mortgage servicing rights ............. 9,522 0 0 Proceeds receivable from sales of properties leased to others ........... 5,401 0 0
See Notes to Consolidated Financial Statements 9 BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF FINANCIAL STATEMENT PRESENTATION --On July 13, 1994, BankAtlantic, A Federal Savings Bank ("BankAtlantic") consummated its reorganization (the "Reorganization") into a holding company structure and BankAtlantic Bancorp., Inc. (the "Company") acquired all the capital stock of BankAtlantic thereby becoming a unitary savings bank holding company. The Reorganization resulted in the shareholders of BankAtlantic becoming shareholders of the Company on the same proportionate basis as their ownership in BankAtlantic and BankAtlantic becoming a wholly-owned subsidiary of the Company. This Reorganization has been accounted for in a manner similar to a pooling of interests, and has been given retroactive effect in the accompanying consolidated financial statements. At the time of, and as a result of the Reorganization, BFC Financial Corporation ("BFC") owned approximately 48.17% of the common stock of the Company. The accounts of BFC are not included in the consolidated financial statements of the Company. The Company's primary asset is the capital stock of BankAtlantic and its principal activities relate to the operations of BankAtlantic and BankAtlantic's subsidiaries. These subsidiaries are primarily utilized to dispose of real estate acquired through foreclosure. All significant intercompany balances and transactions have been eliminated in consolidation. At December 31, 1996 BFC owned 46% of the Company's voting common stock. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and operations for the periods presented. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the next year relate to the determination of the allowance for loan losses, the valuation of real estate acquired in connection with foreclosure or in satisfaction of loans and the evaluation of the value of mortgage servicing rights. In connection with the determination of the allowances for loan losses and real estate owned, management obtains independent appraisals for significant properties when it is deemed prudent. Certain amounts for prior years have been reclassified to conform with statement presentations for 1996. CASH EQUIVALENTS --Cash and due from depository institutions include demand deposits at other financial institutions and federal funds sold. Generally, federal funds are sold for one-day periods. INVESTMENTS AND MORTGAGE-BACKED SECURITIES --Investments in debt securities which BankAtlantic has a positive intent and ability to hold to maturity are classified as securities held to maturity and are carried at cost, adjusted for discounts and premiums which are accreted or amortized to estimated maturity under the interest method. A security cannot be classified as held to maturity if it might be sold in response to changes in market interest rates, related changes in the security's prepayment risk, liquidity needs, changes in the availability of and the yield on alternative investments, and changes in funding sources and terms. Losses relating to permanent impairment of securities are reflected in the statement of operations. Debt and equity securities and options related thereto, purchased or sold for the purpose of a short-term profit are classified as "trading account securities" and are recorded at fair value. Unrealized gains and losses in trading account securities are reflected in operations. Debt and equity securities not classified as held to maturity or trading account securities are classified as "available for sale". Debt and equity securities available for sale are carried at fair value, 10 with the related unrealized appreciation or depreciation, net of deferred income taxes, reported as a separate component of stockholders' equity. On November 15, 1995, the FASB issued Special Report No. 155-B, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES (the "Special Report"). Pursuant to the Special Report, BankAtlantic was permitted to conduct a one-time reassessment of the classifications of all securities held at that time. Any reclassifications from the held-to-maturity category made in conjunction with that reassessment would not call into question an enterprise's intent to hold other debt securities to maturity in the future. BankAtlantic undertook such a reassessment and, effective December 15, 1995, all mortgage-backed and investment securities, excluding tax certificates then classified as held-to-maturity were reclassified as available for sale. TAX CERTIFICATES --Tax certificates are carried at cost. All tax certificates are classified as held to maturity because management has the positive intent and ability to hold such certificates to maturity. Tax certificates and resulting deeds are classified as non-accrual when a tax certificate is 48 months delinquent and a deed has aged 48 months from BankAtlantic's acquisition date. At that time interest ceases to be accrued. Allowance for tax certificate losses represents the amount which management believes is sufficient to provide for future losses. In establishing its allowance for tax certificates, management considers past loss experience, present indicators, such as the length of time the certificate has been outstanding, economic conditions and collateral values. CONSTRUCTION AND DEVELOPMENT LENDING --BankAtlantic's construction and development lending generally requires an equity investment in the form of contributed assets or direct cash investment from the borrower. Other than advances to joint ventures, BankAtlantic has no loans which provide for a participation in profits at December 31, 1996, 1995 and 1994. Accordingly, construction and development lending arrangements have been classified and accounted for as loans. NON-ACCRUAL LOANS, IMPAIRED LOANS AND REAL ESTATE OWNED --Interest income on loans, including the recognition of discounts and loan fees, is accrued based on the outstanding principal amount of loans using the interest method. A loan is generally placed on nonaccrual status at the earlier of, management becoming aware that the borrower has entered bankruptcy proceedings and the loan is delinquent, or when the loan is past due 90 days as to either principal or interest. When a loan is placed on nonaccrual status, interest accrued but not received is reversed against interest income. A nonaccrual loan may be restored to accrual status when delinquent loan payments are collected and the loan is expected to perform according to its contractual terms. BankAtlantic adopted prospectively Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by Statement of Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan--Income Recognition and Disclosures" ("FAS 114"), effective January 1, 1995. There was no impact to the consolidated statement of financial condition or the consolidated statement of operations upon implementation. FAS 114 does not apply to large groups of smaller balance homogeneous loans that are collectively evaluated for impairment. Management considers a loan to be impaired when, based upon current information and events, it believes it is probable that BankAtlantic will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans collectively reviewed by BankAtlantic for impairment include residential and consumer loans and performing commercial real estate and business loans under $500,000, excluding loans which are 11 individually reviewed based on specific criteria, such as delinquency and condition of collateral property. BankAtlantic's impaired loans within the scope of FAS 114 include nonaccrual commercial loans, restructured loans, and performing commercial loans less than 90 days delinquent, where management does not expect the loans to be repaid in accordance with their contractual terms but which are expected to be collected in full. Generally, BankAtlantic recognizes interest income on impaired loans on a cash basis. ALLOWANCE FOR LOAN LOSSES --BankAtlantic, beginning on January 1, 1995, based the measurement of loan impairment on the fair value of the loan's collateral in accordance with FAS 114. Non-collateral dependent loan impairment is based on the present value of the estimated future cash flows. Impairment losses are included in the allowance for loan losses through a charge to the provision for loan losses. Adjustments to impairment losses resulting from changes in the fair value of an impaired loan's collateral or projected cash flows are included in the provision for loan losses. Upon disposition of an impaired loan, any related valuation allowance is relieved from the allowance for loan losses. The allowance for loan losses is maintained by additions charged to operations as a provision for loan losses and by loan recoveries, with charge-offs reducing the allowance. BankAtlantic's process for evaluating the adequacy of the allowance for loan losses has three basic elements: first, the identification of impaired loans; second, the establishment of appropriate loan loss allowances once individual specific impaired loans are identified; and third, a methodology for estimating loan losses based on the inherent risk in the remainder of the loan portfolio. The identification of impaired loans is achieved mainly through individual review of all commercial real estate and business loans over $500,000. Loss allowances are established for specifically identified impaired loans based on the fair value of the underlying collateral, and for non collateral dependent loans, the present value of the estimated future cash flows. The methodology for estimating losses inherent for non impaired loans also includes estimates based upon consideration of actual loss experience for loans during the past several years by loan type, condition of collateral and projected economic conditions and other trends. Based upon this process, consideration of the current economic environment and other factors, management determines what it considers to be an appropriate allowance for loan losses. Although BankAtlantic believes it has a sound basis for this estimation, actual charge-offs incurred in the future are highly dependent upon future events, including the economics of the areas in which BankAtlantic lends. In addition, various regulatory agencies, as an integral part of their examination process, periodically review BankAtlantic's allowance for loan losses. Such agencies may require BankAtlantic to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. REAL ESTATE OWNED ("REO") --is recorded at the lower of the loan balance, plus acquisition costs, or fair value, less estimated disposition costs. Expenditures for capital improvements made thereafter are generally capitalized. Real estate acquired in settlement of loans are anticipated to be sold and valuation allowance adjustments are made to reflect any subsequent changes in fair values from the initially recorded amount. Costs of holding REO are charged to operations as incurred. Provisions and reversals in the REO valuation allowance are reflected in operations. Profit or loss on real estate sold is recognized in accordance with Statement of Financial Accounting Standard No. 66, Accounting for Sales of Real Estate. Any estimated loss is recognized in the period in which it becomes apparent. 12 IMPAIRMENT --In 1995, the FASB issued Statement of Financial Accounting Standard SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("FAS 121"). FAS 121 requires that long-lived assets, assets to be disposed of, and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, the entity should estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment loss for long-lived assets, assets to be disposed of, and identifiable intangibles that an entity expects to hold and use should be based on the fair value of the asset. FAS 121 was effective for the year beginning January 1, 1996. There was no significant impact upon adoption. OFFICE PROPERTIES AND EQUIPMENT --Land is carried at cost. Office properties and equipment are carried at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the assets which generally range up to 50 years for buildings and 10 years for equipment. The cost of leasehold improvements is being amortized using the straight-line method over the terms of the related leases. Expenditures for new properties and equipment and major renewals and betterments are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred and gains or losses on disposal of assets are reflected in current operations. LOANS ORIGINATED FOR RESALE --Residential first mortgage loans originated for resale are reported at the lower of cost or estimated fair value. Loan origination fees and related direct loan origination costs for these loans are deferred until the related loan is sold. Generally these loans are committed for sale prior to origination; however, in 1994, 1995 and 1996, a portion of these loans had not been committed for sale, and were or will be held for no longer than 12 months. LOAN ORIGINATION AND COMMITMENT FEES, PREMIUMS AND DISCOUNTS ON LOANS AND MORTGAGE BANKING ACTIVITIES --Origination and commitment fees collected are deferred net of direct costs and are being amortized to interest income over the loan life using the level yield method. Amortization of deferred fees is discontinued when the related loan is placed on non-accrual status. Commitment fees related to expired commitments are recognized as income when the commitment expires. Unearned discounts on installment, second mortgage and home improvement loans are amortized to income using the level yield method over the terms of the related loans. Unearned discounts on purchased loans are amortized to income using the effective interest method over the estimated life of the loans. LOAN SERVICING FEES --BankAtlantic services mortgage loans for investors. These mortgage loans serviced are not included in the accompanying consolidated statements of financial condition. Loan servicing fees are based on a stipulated percentage of the outstanding loan principal balances being serviced and are recognized as income when related loan payments from mortgagors are collected. Loan servicing costs are charged to expense as incurred. In May 1995 the FASB issued Statement of Financial Accounting Standard No. 122 ("FAS 122") which eliminated the accounting distinction between rights to service mortgage loans for others that are acquired through loan origination activities and those 13 acquired through purchase transactions. FAS 122 requires an entity to recognize as separate assets rights to service mortgage loans for others, however those servicing rights are acquired. FAS 122 requires the periodic evaluation of capitalized mortgage servicing rights for impairment based on fair value. On January 1, 1996, this statement was implemented prospectively. The amortization of mortgage servicing rights ("MSR") are on an individual loan basis. Both purchased and originated MSR are amortized to expense using the level yield method over the estimated life of the loan and continually adjusted for prepayments. For the purpose of evaluating and measuring impairment of MSR, BankAtlantic stratifies those rights based on the predominant risk characteristics of the underlying loans. Those characteristics include loan type, note rate and term. Upon implementation of FAS 122, no additional valuation allowance was required and the impact of adoption related to MSR on originated loans was not material. Adjustments to the valuation allowance are reflected in operations. DEALER RESERVES, NET --The dealer reserve receivable represents the portion of interest rates passed through to dealers on indirect consumer loans. BankAtlantic funds 100% of the dealer reserves at the inception of the loan. Dealer reserves are amortized over the contractual life of the related loans, adjusted for actual prepayments and losses, using the interest method and classified as an adjustment to interest income except for the Subject Portfolio discussed further in Note 15 herein. Dealer reserves are stated net of accumulated amortization, allowances, and any unfunded amounts due to the dealer. COST OVER FAIR VALUE OF NET ASSETS ACQUIRED AND OTHER INTANGIBLE ASSETS -- Cost over fair value of assets acquired is being amortized on a straight-line basis over its estimated useful life of 10-15 years. A non-competition agreement is being amortized on a straight-line basis over its useful life of approximately three years. Cost over fair value of net assets acquired and other intangible assets is evaluated by management for impairment on an on-going basis based on the facts and circumstances related to the net assets acquired and in accordance with FAS 121. INCOME TAXES --BankAtlantic and its subsidiaries file consolidated federal and state income tax returns. The Company utilizes the asset and liability method to account for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the statutory enactment date. A deferred tax asset valuation allowance is recorded when it is more likely than not that deferred tax assets will not be utilized. PREFERRED STOCK --All three Series of preferred stock had a preference value of $25.00 per share and the shares issued were redeemable by BankAtlantic at $25.00 per share. On July 13, 1994, pursuant to the Reorganization, 260 shares of BankAtlantic's Series C preferred stock held by dissenting shareholders were canceled in connection with the holders' exercise of statutory appraisal rights. In October 1995, all preferred stock was redeemed. For purposes of calculating income per common share, the excess of the redemption price above the recorded amount is considered a preferred stock dividend. INCOME PER COMMON SHARE --In calculating income per common and common equivalent share ("primary income per share") preferred stock dividends are deducted from net income and the resulting amount is divided by the weighted average number of common and common equivalents shares 14 outstanding, when dilutive. Common stock equivalents consist of common stock warrants and options. On July 3, 1996, the Company closed a public offering of $57.5 million of 6 3/4 % convertible subordinated debentures ("6 3/4 % Debentures"). The 6 3/4 % Debentures are not common stock equivalents and therefore, will not affect net income per common and common equivalent share. However, convertible securities, if dilutive, are considered in net income per common and common equivalent share assuming full dilution. Fully diluted income per common share will assume the hypothetical conversion of the 6 3/4 % Debentures by excluding the interest charges of the 6 3/4 % Debentures from fully diluted net income and by increasing the weighted average number of common and common equivalent shares outstanding assuming full dilution. In July 1995, January 1996, July 1996 and February 1997, the Board of Directors declared five for four stock splits effected in the form of 25% stock dividends issued in August 1995 and February 1996, July 1996 and March 1997, respectively. Where appropriate, amounts throughout this report have been adjusted to reflect the stock splits. Common stock equivalents are not reflected in income per share until the market price of the common stock obtainable has been in excess of the exercise price for substantially all of three consecutive months, ending with the last month of the period.
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------- 1996 1995 1994 ------------- ------------- ------------- Weighted average number of common and common equivalent shares outstanding ...................... 18,896,691 16,922,816 16,390,677 Weighted average number of common and common equivalent shares outstanding assuming full dilution 21,833,015 17,084,563 16,438,264
On October 23, 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"). This Statement applies to all transactions in which an entity acquires goods or services by issuing equity instruments or by incurring liabilities where the payment amounts are based on the entity's common stock price. The Statement covers transactions with employees and non-employees and is applicable to both public and non-public entities. Entities are allowed (1) to continue to use the Accounting Principles Board Opinion No. 25 method ("APB 25") relating to stock-based compensation for employees, or (2) to adopt the FAS 123 fair value based method. Once the method is adopted, an entity cannot change and the method selected applies to all of an entity's compensation plans and transactions. The Company has elected to continue to account for stock-based compensation for employees under APB 25. See Note 10. 2. DEBT SECURITIES AVAILABLE-FOR-SALE AND HELD-TO-MATURITY Effective December 15, 1995, all mortgage-backed and investment securities, excluding tax certificates then classified as held-to-maturity were reclassified as available for sale. On the effective date of the reclassification, the securities transferred had a carrying value of $638.8 million and an estimated fair value of $644.1 million resulting in a net increase to stockholders' equity for the net unrealized appreciation of $3.3 million after deducting applicable income taxes of $1.2 million. 15 The following is a summary of debt securities available-for-sale and held-to-maturity (in thousands):
AVAILABLE FOR SALE ------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED DECEMBER 31, 1996 COST APPRECIATION DEPRECIATION FAIR VALUE - ------------------------------------------------ ------------ --------------- --------------- ------------- MORTGAGE-BACKED SECURITIES (1) : FNMA mortgage backed securities ................ $ 95,180 $ 822 $ 172 $ 95,830 FHLMC mortgage backed securities ............... 191,462 443 708 191,197 FNMA real estate mortgage investment conduits . 5,201 352 2 5,551 FHLMC real estate mortgage investment conduits 2,046 139 23 2,162 ------------ --------------- --------------- ------------- Total mortgage-backed securities .............. 293,889 1,756 905 294,740 ------------ --------------- --------------- ------------- INVESTMENT SECURITIES: FHLB Bonds ..................................... 15,406 150 34 15,522 FHLMC Bond ..................................... 1,843 102 0 1,945 FNMA Bond ...................................... 6,762 57 0 6,819 Asset-backed securities ........................ 28,943 89 65 28,967 U.S. Treasury Notes ............................ 91,284 83 15 91,352 ------------ --------------- --------------- ------------- Total investment securities ................... 144,238 481 114 144,605 ------------ --------------- --------------- ------------- Total ........................................ $ 438,127 $ 2,237 $ 1,019 $ 439,345 ============ =============== =============== =============
AVAILABLE FOR SALE ------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED DECEMBER 31, 1995 COST APPRECIATION DEPRECIATION FAIR VALUE - ------------------------------------------------ ------------ --------------- --------------- ------------- MORTGAGE-BACKED SECURITIES (2): FNMA mortgage backed securities ................ $ 120,584 $ 1,959 $ 123 $122,420 FHLMC mortgage backed securities ............... 455,962 7,118 874 462,206 FNMA real estate mortgage investment conduits . 9,643 521 30 10,134 FHLMC real estate mortgage investment conduits 2,767 224 0 2,991 ------------ --------------- --------------- ------------- Total mortgage-backed securities .............. 588,956 9,822 1,027 597,751 ------------ --------------- --------------- ------------- INVESTMENT SECURITIES: FHLB Bonds ..................................... 16,114 316 87 16,343 FHLMC Bond ..................................... 1,803 171 0 1,974 FNMA Bond ...................................... 2,790 94 0 2,884 Asset-backed securities ........................ 68,907 224 192 68,939 Corporate bonds ................................ 3,457 0 9 3,448 Other .......................................... 442 22 0 464 --------------- --------------- ------------- Total investment securities ................... 93,513 827 288 94,052 ------------ --------------- --------------- ------------- Total ........................................ $ 682,469 $ 10,649 $ 1,315 $ 691,803 ============ =============== =============== ============= (1) Pledged as collateral were $4.1 million, $5.9 million, $214.2 million and $18.7 million for commercial letters of credit, treasury tax and loan, repurchase agreements and public funds, respectively. (2) Pledged as collateral was $8.4 million, $9.9 million, $105.6 million, $71.6 million and $11.6 million for commercial letters of credit, treasury tax and loan, FHLB advances, repurchase agreements, and public funds, respectively.
16 Included in the December 31, 1996 and 1995 tables are approximately $14.7 million and $17.0 million of government agency bonds and real estate mortgage conduits (at market) which were acquired during the MegaBank acquisition, and are adjustable rate securities tied to various short term and long term indices. The maturities of mortgage-backed and investment securities available for sale were (in thousands):
DECEMBER 31, 1996 -------------------------- FAIR AMORTIZED ESTIMATED COST VALUE ------------ ------------ Due within one year ........................ $ 69,568 $ 69,683 Due after one year, but within five years . 351,888 351,840 Due after five years, but within ten years 5,613 5,871 Due after ten years ........................ 11,058 11,951 ------------ ------------ Total .................................... $ 438,127 $ 439,345 ============ ============
HELD TO MATURITY ------------------------------------------------------------ GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR DECEMBER 31, 1996 COST APPRECIATION DEPRECIATION VALUE - ------------------------------------ ------------ --------------- --------------- ------------ (IN THOUSANDS) Tax certificates--net of allowance of $1,466 (1) .................... $ 54,511 $ 0 $ 0 $54,511 =========== =============== =============== ============ DECEMBER 31, 1995 - ------------------------------------ Tax certificates--net of allowance of $1,648 (1) .................... $49,856 $ 0 $ 0 $49,856 ============ =============== =============== ============ (1) Management considers estimated fair value equivalent to book value for tax certificates since these securities have no readily traded market. The maturities of tax certificates held to maturity were (in thousands):
DECEMBER 31, 1996 -------------------------- BOOK ESTIMATED VALUE FAIR VALUE ----------- ------------- Due in one year or less ................ $ 41,656 $ 41,656 Due after one year through five years . 12,855 12,855 Due after five years through ten years 0 0 ----------- ------------- Total ................................ $54,511 $54,511 =========== =============
In Florida, tax certificates represent a priority lien against real property for which assessed real estate taxes are delinquent. BankAtlantic's experience with this type of investment has been favorable as rates earned are generally higher than many alternative investments and substantial repayment occurs over a two year period. The primary risks BankAtlantic has experienced with tax certificates have related to the risk that additional funds may be required to purchase other certificates related to 17 the property, the risk that the liened property may be unusable and the risk that potential environmental concerns may make taking title to the property untenable. See Note 5 for activity in the allowance for tax certificate losses. During the year ended December 31, 1994, there were no sales of debt securities. During the year ended December 31, 1995, $253,000 of Federal Reserve stock and $599,000 of GNMA mortgage-backed securities classified as available for sale were sold. During the year ended December 31, 1996, BankAtlantic sold $136.6 million of adjustable rate mortgage-backed securities, $20.5 million of 15 year mortgage-backed securities, $5.9 million of seven year balloon mortgage-backed securities and $205.5 million of treasury notes for gains of $6.0 million During the third quarter of 1993, BankAtlantic established an investment policy to increase fee income by selling uncovered European put options on five-year treasury notes with notional principal not to exceed $10.0 million. During the three months ended March 31, 1994, BankAtlantic sold two $5.0 million U.S. Treasury European put options with expiration dates of April 27,1994 and May 31, 1994, respectively. BankAtlantic acquired the two five-year treasury notes on the respective option expiration dates for $9.7 million and recorded the notes in the trading category. At December 31, 1994, the mark-to-market allowance for these treasury notes was $558,000. On May 11, 1995, in order to lock-in the market values on the above treasury notes, BankAtlantic purchased two 90 day U.S. Treasury European put options with the proceeds from the sale of two 90 day U.S. Treasury European call options. The put options and call options had $5.0 million notional principal each and expired on August 7, 1995. The unrealized gain/loss is included in the consolidated statement of operations under net "trading account securities" and amounted to an unrealized loss of $558,000 for the year ended December 31, 1994, with the 1994 option proceeds reducing the call on the treasury notes. A net realized gain of $589,000 was recognized inclusive of the 1995 options for the year ended December 31, 1995 on the sale of the trading account securities upon exercise of the call option. During the years ended December 31, 1996 and 1995, BankAtlantic invested in repurchase agreements. The ending balances at December 31, 1996 and 1995 were zero. The maximum amount of repurchase agreements outstanding at any month end was zero and $20.0 million for 1996 and 1995, respectively, and the average amount invested was $1.9 million and $771,000 for 1996 and 1995, respectively. The average yield on repurchase agreements for the years ended December 31, 1996 and 1995 was 5.47% and 5.82%, respectively. The underlying securities were in the possession of BankAtlantic. During the years ended December 31, 1996 and 1995 BankAtlantic sold Federal Funds. The outstanding balances at December 31, 1996 and 1995, of Federal Funds sold was zero. The maximum amount of Federal Funds sold outstanding at any month end and the average amount invested for the period were $16.0 million and $11.0 million and $2.7 million and $2.6 million, respectively. 18 3. LOANS RECEIVABLE--NET Loans receivable net are summarized below:
DECEMBER 31, -------------------------- 1996 1995 ------------- ----------- (IN THOUSANDS) Real estate loans: Residential .......................................... $ 867,081 $157,361 Residential held for sale (market value of $16,535 and $17,254) ....................................... 16,207 17,122 Construction and development ......................... 301,813 122,371 FHA and VA insured ................................... 4,013 5,183 Commercial ........................................... 427,235 350,256 Other loans: Second mortgages--direct ............................. 86,234 63,052 Second mortgages--indirect ........................... 9,894 25,621 Commercial business .................................. 78,177 64,194 Banker's acceptances ................................. 207 0 Deposit overdrafts ................................... 2,434 832 Consumer loans--other direct ......................... 74,072 36,670 Consumer loans--other indirect ....................... 172,056 96,042 ------------- ----------- Total gross loans ................................... 2,039,423 938,704 ------------- ----------- Adjustments: Undisbursed portion of loans in process .............. 190,874 89,896 Unearned premiums .................................... (2,762) 0 Unearned discounts on commercial real estate loans .. 705 793 Unearned discounts on consumer loans ................. 0 385 Allowance for loan losses ............................ 25,750 19,000 ------------- ----------- Loan receivable--net ................................ $1,824,856 $828,630 ============= ===========
BankAtlantic is subject to economic conditions which could adversely affect both the performance of the borrower or the collateral securing the loan. At December 31, 1996, 67% of total aggregate outstanding loans were to borrowers in Florida, 9% of total loans were to borrowers in the Northeastern United States 7% of the total loans were to borrowers in California, and 17% were to borrowers located elsewhere. Additionally, deferred loan fees netted against loan balances were $1.5 million and $1.8 million at December 31, 1996 and 1995, respectively. Commitments to sell residential mortgage loans were $7.3 million and $5.7 million at December 31, 1996 and 1995, respectively. Variable rate commitments to sell residential mortgage loans were $153,000 and $122,000, whereas, fixed rate commitments to sell residential mortgage loans were $7.1 million and $5.6 million at December 31, 1996 and 1995, respectively. Such residential mortgage loan sales related to loans originated for sale. Included in other assets was $9.1 million and $4.4 million of prepaid dealer reserves at December 31, 1996 and 1995, respectively. 19 Activity in the allowance for loan losses was (in thousands):
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------ 1996 1995 1994 (1) -------------- ------------ ------------ Balance, beginning of period .......................... $ 19,000 $ 16,250 $ 17,000 Charge-offs: Commercial business loans ............................ (1,048) (382) (1,647) Commercial real estate loans ......................... (266) (222) (220) Consumer loans ....................................... (6,337) (4,566) (3,829) Residential real estate loans ........................ (67) (263) (272) -------------- ------------ ------------ (7,718) (5,433) (5,968) -------------- ------------ ------------ Recoveries: Commercial business loans ............................ 518 738 565 Commercial real estate loans ......................... 47 102 18 Consumer loans ....................................... 1,659 1,219 2,336 -------------- ------------ ------------ Net charge-offs ....................................... (5,494) (3,374) (3,049) Additions charged to operations ....................... 5,844 4,182 2,299 Allowance for loan losses acquired .................... 6,400 1,942 0 -------------- ------------ ------------ Balance, end of period ................................ $ 25,750 $ 19,000 $ 16,250 ============== ============ ============ Average outstanding loans during the period .......... $ 1,177,325 $ 750,058 $ 520,913 ============== ============ ============ Average outstanding banker's acceptances during the period ................................... $ 329 $ 0 $ 12,366 ============== ============ ============ Ratio of net charge-offs to average outstanding loans 0.47 % 0.45 % 0.59 % ============== ============ ============ Ratio of net charge-offs to average outstanding loans including banker's acceptances ................ 0.47 % 0.45 % 0.57 % ============== ============ ============ (1) Included in installment loan recoveries for the year ended December 31, 1994 is approximately $1.2 million received from BankAtlantic's fidelity bond carrier (see Note 15). The ratio of net charge-offs to average outstanding loans, excluding this recovery, would have been 0.81% for the year ended December 31, 1994.
Aggregate loans to and repayments of loans by directors, executive officers, principal stockholders and other related interests for the years ended December 31, 1996 and 1995, were (in thousands):
BALANCE AT BALANCE AT BALANCE AT DECEMBER 31, DECEMBER 31, DECEMBER 31, 1994 ADDITIONS DELETIONS 1995 ADDITIONS DELETIONS 1996 - --------------- ------------ ------------ --------------- ------------ ------------ --------------- $992 15 70 937 24 594 $ 367 =============== ============ ============ =============== ============ ============ ===============
20 Accrued interest receivable consisted of (in thousands):
DECEMBER 31, ----------------------- 1996 1995 ----------- ---------- Loans receivable ....................... $ 13,713 $ 5,970 Investment securities held to maturity 3,705 3,407 Debt securities available for sale .... 3,337 5,176 ----------- ---------- $20,755 $ 14,553 =========== ==========
4. MORTGAGE SERVICING RIGHTS At December 31, 1996, 1995 and 1994, BankAtlantic serviced loans for the benefit of others amounting to approximately $2.7 billion, $1.8 billion and $1.9 billion, respectively. At December 31, 1996 and 1995, other liabilities includes approximately $7.7 million and $7.9 million, respectively, of loan payments due to others. Activity in mortgage servicing rights was (in thousands):
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------- 1996 1995 1994 ----------- ----------- ----------- Balance, beginning of period ..... $ 20,738 $ 20,584 $ 19,833 Mortgage servicing rights acquired in BNA acquisition .............. 4,047 0 0 Servicing rights originated ...... 311 0 0 Servicing rights purchased ........ 27,681 10,112 8,147 Servicing rights sold ............. (20,926) (5,596) (2,436) Amortization of servicing rights . (6,849) (4,362) (4,960) ----------- ----------- ----------- Balance, end of period ............ $ 25,002 $ 20,738 $ 20,584 =========== =========== ===========
The fair value of the MSR at December 31, 1996 was estimated at $31.6 million. Upon implementation of FAS 122 on January 1, 1996, no additional valuation allowance was required and during the year ended December 31, 1996, and there was no activity in the valuation allowance. The fair value was calculated using market prepayment assumptions and discount rates. 5. NON-PERFORMING ASSETS AND RESTRUCTURED LOANS Risk elements consist of non-accrual loans, non-accrual tax certificates, restructured loans, past-due loans, REO, repossessed assets, and other loans which management has doubts about the borrower's ability to comply with the contractual repayment terms. Non-accrual loans are loans on which interest recognition has been suspended because of doubts as to the borrower's ability to repay principal or interest. Non-accrual tax certificates are tax deeds or securities in which interest recognition has been suspended due to the aging of the certificate or deed. Restructured loans are where the terms have been altered to provide a reduction or deferral of interest or principal because of a deterioration in the borrower's financial position. BankAtlantic did not have any commitments outstanding to lend additional funds on restructured loans at December 31, 1996 and 1995. Past-due loans are accruing loans that are contractually past due 90 days or more as to interest or principal payments. 21 Risk elements were (in thousands):
DECEMBER 31, ------------------------------------- 1996 1995 1994 ----------- ----------- ----------- Non-accrual--tax certificates .................... $ 1,835 $ 2,044 $ 3,578 Non-accrual--loans ............................... 12,424 11,174 11,313 Loans contractually past due 90 days or more (1) 2,961 1,536 736 Real estate owned, net of allowance .............. 4,918 6,279 7,238 Other repossessed assets ......................... 1,992 461 350 ----------- ----------- ----------- Total non-performing ........................... 24,130 21,494 23,215 Restructured ..................................... 3,718 2,533 1,648 ----------- ----------- ----------- Total risk elements ............................ $ 27,848 $ 24,027 $ 24,863 =========== =========== =========== Allowance for tax certificate losses ............. $ 1,466 $ 1,648 $ 2,985 =========== =========== =========== Allowance for loan losses ........................ $ 25,750 $ 19,000 $ 16,250 =========== =========== =========== (1) The majority of these loans have matured and the borrower continues to make the payments under the matured loan agreement. BankAtlantic is in the process of renewing or extending these matured loans.
The following summarizes impaired loans at:
DECEMBER 31, 1996 DECEMBER 31, 1995 ---------------------------- ---------------------------- RECORDED SPECIFIC RECORDED SPECIFIC INVESTMENT ALLOWANCES INVESTMENT ALLOWANCES ------------- ------------- ------------- ------------- IMPAIRED LOANS: Nonaccrual loans: With specific allowances ...... $ 1,047 $ 350 $ 1,962 $ 800 Without specific allowances ... 11,727 0 10,012 0 ------------- ------------- ------------- ------------- 12,774 350 11,974 800 ------------- ------------- ------------- ------------- Restructured loans: Without specific allowances ... $ 3,718 $ 0 $ 2,533 $ 0 ------------- ------------- ------------- ------------- Other impaired loans: Other impaired commercial loans with specific allowances (1) . $ 977 $ 514 $ 1,340 $ 577 Other impaired commercial loans without specific allowances .. 2,961 0 1,536 0 ------------- ------------- ------------- ------------- Total ......................... $ 20,430 $ 864 $ 17,383 $ 1,377 ============= ============= ============= ============= (1) Theses loans are not included in risk elements, since subsequent to the date of impairment these loans have performed based on their contractual terms.
The above schedules reflect at December 31, 1996, all loans where known information about the possible credit problems of the borrower caused management to have serious doubts as to the ability of the borrower to comply with present loan repayment terms and which may result in disclosure of such loans in the future. 22 The average net recorded investment in impaired loans for the years ended December 31, 1996 and 1995 were $15.4 million and $16.9 million, respectively. Interest income of $988,000 and $788,000 for the year ended December 31, 1996 and 1995, was recognized on impaired loans during the periods of impairment. Recorded investment of impaired loans reflects direct deferrals of interest of $240,000 and $480,000 at December 31, 1996 and 1995, respectively. There was no net interest forgone related to restructured loans at December 31, 1996 and 1995. Interest income of $336,000 and $243,000 were recognized on restructured loans during 1996 and 1995, respectively. Interest income which would have been recorded under the original terms of non-accrual and restructured loans and the interest income actually recognized are summarized below (in thousands):
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Interest income which would have been recorded $ 1,505 $ 1,393 $ 1,170 Interest income recognized ..................... (698) (519) (443) ---------- ---------- ---------- Interest income foregone ....................... $ 807 $ 874 $ 727 ========== ========== ==========
The components of "Foreclosed asset activity, net" were (in thousands):
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------- 1996 1995 1994 ---------- ------------ ----------- Real estate acquired in settlement of loans: Operating expenses (income), net ............ $ 47 $ 41 $ (325) Provision for (reversals of) losses on REO . (197) (1,187) 140 Net gains on sales .......................... (575) (2,032) (2,105) ---------- ------------ ----------- Total (income) ............................ $ (725) $ (3,178) $ (2,290) ========== ============ ===========
Activity in the allowance for real estate owned consisted of (in thousands):
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Balance, beginning of period ............... $ 2,800 $ 4,200 $ 4,100 Charge-offs: Commercial real estate .................... (781) (213) 0 Residential real estate ................... (22) 0 (40) ---------- ---------- ---------- (803) (213) (40) Provision for (reversals of) losses on REO (197) (1,187) 140 ---------- ---------- ---------- Balance, end of period ..................... $ 1,800 $ 2,800 $ 4,200 ========== ========== ==========
23 Activity in the allowance for tax certificate losses was: (in thousands)
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Balance, beginning of period ................ $ 1,648 $ 2,985 $ 2,970 Charge-offs ................................. (909) (1,854) (1,892) Recoveries .................................. 911 662 1,792 ---------- ---------- ---------- Net recoveries (charge-offs) ................ 2 (1,192) (100) Additions (reversals) charged to operations (184) (145) 115 ---------- ---------- ---------- Balance, end of period ...................... $ 1,466 $ 1,648 $ 2,985 ========== ========== ==========
6. OFFICE PROPERTIES AND EQUIPMENT
DECEMBER 31, ----------------------- 1996 1995 ----------- ---------- (IN THOUSANDS) Land ........................................................ $ 12,115 $ 8,721 Building and improvements ................................... 42,593 35,620 Furniture and equipment ..................................... 26,257 20,743 Properties under operating lease and property held for lease 0 5,906 ----------- ---------- Total ..................................................... 80,965 70,990 Less accumulated depreciation ............................... 32,691 30,036 ----------- ---------- Office properties and equipment--net ........................ $ 48,274 $ 40,954 =========== ==========
Properties with a net book value of $4.0 million at December 1995, were leased to unrelated third parties. Capitalized improvements to the properties of $1.0 million were performed during the year ended December 31, 1996. These properties were sold for $8.1 million (net of selling costs) as of December 31, 1996 for a net gain of $3.1 million. Net rental income for the three years ended December 31, 1996 was $368,000, $343,000 and $248,000, respectively. 24 7. DEPOSITS The weighted average nominal interest rate payable on deposit accounts at December 31, 1996 and 1995 was 3.78% and 3.85%, respectively. The stated rates and balances at which BankAtlantic paid interest on deposits were:
DECEMBER 31, ------------------------------------------------------- 1996 1995 --------------------------- -------------------------- AMOUNT PERCENT AMOUNT PERCENT -------------- ----------- -------------- ---------- (DOLLARS IN THOUSANDS) Interest free checking ........................... $ 163,616 8.93% $ 98,964 7.61 % Insured money fund savings 3.76% at December 31, 1996, 3.22% at December 31, 1995 ...................... 358,927 19.58 249,273 19.17 NOW accounts ..................................... 1.60% at December 31, 1996, 1.66% at December 31, 1995 ...................... 216,587 11.82 171,726 13.21 Savings accounts ................................. 1.30% at December 31, 1996, 1.71% at December 31, 1995 ...................... 170,352 9.29 103,759 7.98 -------------- ----------- -------------- ---------- Total non-certificate accounts ................... 909,482 49.62 623,722 47.97 -------------- ----------- -------------- ---------- Certificate accounts: 0.00% to 3.00% .................................. 12,104 0.66 56,667 4.36 3.01% to 4.00% .................................. 11,257 0.61 25,602 1.97 4.01% to 5.00% .................................. 275,991 15.06 135,107 10.39 5.01% to 6.00% .................................. 478,148 26.09 303,497 23.34 6.01% to 7.00% .................................. 112,865 6.16 137,917 10.61 7.01% and greater ............................... 30,749 1.68 17,543 1.34 -------------- ----------- -------------- ---------- Total certificate accounts ....................... 921,114 50.26 676,333 52.01 -------------- ----------- -------------- ---------- Total deposit accounts ........................... 1,830,596 99.88 1,300,055 99.98 -------------- ----------- -------------- ---------- Interest earned not credited to deposit accounts 2,184 0.12 322 0.02 -------------- ----------- -------------- ---------- Total ............................................ $ 1,832,780 100.00 % $ 1,300,377 100.00 % ============== =========== ============== ==========
Interest expense by deposit category was (in thousands):
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------- 1996 1995 1994 ----------- ----------- ----------- Money fund savings and NOW accounts ..... $ 12,154 $ 11,591 $ 10,751 Savings accounts ......................... 2,150 1,987 2,116 Certificate accounts--below $100,000 .... 32,416 27,059 16,480 Certificate accounts, $100,000 and above 8,513 6,269 2,471 Less early withdrawal penalty ............ (205) (260) (172) ----------- ----------- ----------- Total .................................. $ 55,028 $ 46,646 $ 31,646 =========== =========== ===========
Included in other non-interest income is approximately $8.6 million, $7.0 million and $5.4 million of checking account fees for years ended December 31, 1996, 1995 and 1994, respectively. 25 At December 31, 1996, the amounts of scheduled maturities of certificate accounts were (in thousands):
YEAR ENDING DECEMBER 31, -------------------------------------------------------------------------------- 1997 1998 1999 2000 2001 THEREAFTER ------------ ----------- ----------- ----------- ----------- ------------- 0.00% to 3.00% ... $ 10,533 $ 1,379 $ 50 $ 32 $ 50 $ 60 3.01% to 4.00% ... 10,536 479 191 0 51 0 4.01% to 5.00% ... 252,171 20,041 2,051 215 1,085 428 5.01% to 6.00% ... 395,414 63,178 10,420 3,634 4,869 633 6.01% to 7.00% ... 76,563 8,742 13,574 5,009 8,170 807 7.01% and greater 18,995 773 1,074 9,719 66 122 ------------ ----------- ----------- ----------- ----------- ------------- Total ........... $ 764,212 $ 94,592 $ 27,360 $ 18,609 $ 14,291 $ 2,050 ============ =========== =========== =========== =========== =============
Time deposits of $100,000 and over had the following maturities at (in thousands):
DECEMBER 31, --------------- 1996 --------------- Less than 3 months . $ 55,743 3 to 6 months ....... 45,946 6 to 12 months ...... 50,412 More than 12 months 31,575 --------------- Total ............. $ 183,676 ===============
Currently, BankAtlantic does not obtain deposits from brokers. In November 1996, Merrill Lynch granted BankAtlantic a facility for broker deposits of up to $150.0 million. The facility will be evaluated as an alternative source of borrowings, when and if needed. Beginning in 1990, the Office of the Comptroller for the State of Florida ("Comptroller") commenced a review of BankAtlantic's procedures for the assessment of fees on dormant accounts. The Comptroller subsequently indicated that BankAtlantic was not in compliance with applicable Florida law as interpreted by the Comptroller. BankAtlantic amended its procedures to satisfy the Comptroller's interpretation. On June 30, 1994 all issues were resolved with the Comptroller and in connection therewith, BankAtlantic recognized $332,000 of previously deferred dormant account fee income. 26 8. ADVANCES FROM FEDERAL HOME LOAN BANK AND FEDERAL FUNDS PURCHASED Advances from Federal Home Loan Bank ("FHLB") incur interest and were repayable as follows (in thousands):
DECEMBER 31, ------------------------ REPAYABLE DURING YEAR ENDING DECEMBER 31, INTEREST RATE 1996 1995 - ---------------------- --------------- ----------- ----------- 1996 ................. 5.62% to 5.94% $ 0 $201,785 1997 ................. 5.50% to 7.73% 119,965 0 1998 ................. 6.00% to 6.58% 43,143 0 1,999 ................ 6.13% to 6.83% 42,892 0 2000 ................. 6.29% to 7.00% 40,892 0 2001 ................. 6.35% to 7.18% 33,118 0 2002 ................. 6.61% to 7.16% 6,150 0 2003 ................. 7.24% to 7.25% 9,540 0 ----------- ----------- Total .............. $295,700 $ 201,785 =========== ===========
In June 1994, the FHLB accepted BankAtlantic's request to establish a blanket floating lien for additional advance borrowings. Under the lien, BankAtlantic assigns a security lien against its residential loans. At December 31, 1996, $611.4 million of 1-4 family residential loans were pledged against FHLB advances and at December 31, 1995 approximately $160.0 million and $105.6 million of residential loans and mortgage-backed securities were pledged against FHLB advances. In addition, FHLB stock is pledged as collateral for outstanding FHLB advances. In August 1994, a $300 million credit availability was established with the FHLB with a maximum term of 10 years. In January 1997, BankAtlantic increased its $300 million credit availability to $500 million. The two FHLB advance forward commitments were funded in January 1997. Both FHLB advances forward commitments were for $6.0 million each, bear interest at 6.29% and 6.35% and mature in the year 2001 and 2002, respectively. During the fourth quarter of 1994, BankAtlantic established three $5.0 million unsecured lines of credit with three federally insured banking institutions for the purchase of Federal Funds. BankAtlantic had not used these lines of credit as of December 31, 1994. At December 31, 1996 and 1995, the outstanding balance of these lines of credit was $0 and $1.2 million, respectively. The average balance outstanding at any month end during 1996 and 1995, of the three Federal Funds purchased lines of credit was $2.7 million and $1.0 million. respectively. The maximum outstanding balance at any month end during 1996 and 1995 of the three Federal Funds purchased lines of credit was $16.0 million and $4.5 million, respectively. 9. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE Securities sold under agreements to repurchase are summarized below (in thousands):
DECEMBER 31, ------------------------- 1996 1995 ------------ ----------- Agreements to repurchase the same security $ 143,377 $ 23,860 Customer repurchase agreements ............. 47,211 42,377 ------------ ----------- Total .................................... $190,588 $ 66,237 ============ ===========
27 The following table provides information on the agreements to repurchase (dollars in thousands):
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------- 1996 1995 1994 ------------ ------------ ------------ Maximum borrowing at any month-end within the period ........................ $ 362,147 $ 328,666 $ 182,736 Average borrowing during the period ....... $ 178,883 $ 186,592 $ 105,462 Average interest cost during the period ... 4.83 % 5.80 % 4.56 % Average interest cost at end of the period 5.13 % 4.59 % 5.94 % ============ ============ ============
Average borrowing was computed based on average daily balances during the period. Average interest rates during the period were computed by dividing interest expense for the period by the average borrowing during the period. Customer repurchase agreements at December 31, 1996 and 1995 included a $9.7 million and $7.5 million customer repurchase agreement, respectively related to a BFC escrow account. Total interest expense related to this reverse repurchase agreement, which was initiated on March 2, 1994, was approximately $312,000, $374,000 and $284,000 during the year ended December 31, 1996, 1995 and 1994, respectively. The following table lists the amortized cost and estimated fair value of securities sold under repurchase agreements, and the repurchase liability associated with such transactions (dollars in thousands):
WEIGHTED ESTIMATED AVERAGE DECEMBER 31, 1996 AMORTIZED FAIR REPURCHASE INTEREST (1) COST VALUE BALANCE RATE - --------------------- ------------ ------------ ------------- ----------- US Treasuries ....... $ 70,637 $ 70,686 $ 66,622 5.54 % FHLB Bonds .......... 2,015 2,006 1,481 4.02 FNMA ................ 73,707 73,897 67,848 5.18 FHLMC ............... 67,735 67,650 54,637 4.59 ------------ ------------ ------------- ----------- Total ............. $ 214,094 $ 214,239 $ 190,588 5.13 % ============ ============ ============= =========== DECEMBER 31, 1995 (1) - --------------------- FNMA ................ $ 8,780 $ 8,750 $ 7,981 3.91 % FHLMC ............... 62,773 63,341 58,256 4.69 ------------ ------------ ------------- ----------- Total ............. $ 71,553 $ 72,091 $ 66,237 4.59 % ============ ============ ============= =========== (1) At December 31, 1996 and 1995 these securities are classified as available for sale and recorded at market value in the consolidated statements of financial condition.
All repurchase agreements at December 31, 1996 and 1995, matured and were repaid in January 1997 and 1996, respectively. These securities were held by unrelated broker dealers. 28 10. CAPITAL NOTES, SUBORDINATED DEBENTURES, NOTE PAYABLE, PREFERRED STOCK, COMMON STOCK WARRANTS, AND COMMON STOCK OPTIONS In March 1991, $10.2 million of 1986 Capital Notes were exchanged for noncumulative preferred stock. All three series of preferred stock had a preference value of $25.00 per share and were redeemable at $25.00 per share. During July 1994, 260 shares of Series C preferred stock were canceled in connection with the exercise of dissenters' rights by certain BankAtlantic preferred shareholders in connection with the Reorganization. In October 1995, all series of preferred stock were redeemed at $25.00 per share. In June 1990, a third party acquired $1.0 million of BankAtlantic's subordinated debentures at a rate of 14% per annum with a maturity of June 1997. The subordinated debentures were issued with detachable warrants entitling the holder to purchase 528,742 shares of BankAtlantic's common stock at an exercise price of $1.89 per share at any time prior to maturity. On March 31, 1991, BankAtlantic issued to certain of its existing shareholders, 11,911 shares of common stock and $8,000 of 14% subordinated debentures, having a March 1998 maturity date, with related detachable warrants to purchase 11,231 shares of common stock. The $1.0 million and $8,000 of subordinated debentures were redeemed along with the Capital Notes on August 31, 1993. However, the warrants relating to such debentures are detachable and remain outstanding until the earlier of exercise or original maturity of the subordinated debentures. The warrants outstanding at December 1994 relating to the redeemed debentures were 528,742 and 8,419 with exercise prices of $1.89 and $0.71, respectively. On May 12, 1995, 528,742 of these stock warrants were exercised for $1.89 per share. The proceeds of $1.0 million were utilized to partially repay the note payable discussed below. The warrants outstanding at December 31, 1996 relating to the redeemed debentures are 7,016 with a $0.71 exercise price. On March 30, 1995, the Company borrowed $4.0 million from an unrelated financial institution and incurred financing costs of $69,000. The debt matured on March 30, 1996, bore interest at prime plus 1% and was collateralized by 12% non-cumulative preferred stock of BankAtlantic having a preference value of $4.0 million. The $4.0 million was utilized by the Company to purchase the BankAtlantic preferred stock used as collateral. In a public offering dated September 22, 1995, the Company issued $21.0 million principal amount of 9% subordinated debentures due October 1, 2005 (the "Debentures"). The underwriting discount and other expenses of $1.0 million are included in other assets in the December 31, 1996 and 1995 statement of financial condition. The proceeds from the offering were utilized as follows: $6.0 million was contributed to the capital of BankAtlantic; $2.9 million was utilized to repay a note payable; $8.4 million was used to redeem all of the outstanding shares of the Company non-cumulative preferred stock, and, in accordance with the requirements of the Indenture under which the Debentures were issued, $1.9 million was invested in marketable securities to cover two semi-annual interest payments. The net proceeds retained by the Company are available for general corporate purposes. The October 7, 1995 preferred stock redemption resulted in a $1.4 million payment above the recorded amount of the preferred stock. Such excess was treated as a preferred stock dividend and impacted earnings per common and common equivalent share by $.08 per share, for the year ended December 31, 1995. On February 13, 1996, the stockholders of the Company approved at a special meeting, an amendment to the Company's Articles of Incorporation (the "Amendment") authorizing 30,000,000 shares of a new class of non-voting common stock designated Class A Common Stock, and redesignating the Company's existing Common Stock, par value $0.01 per share, as Class B Common 29 Stock. The Class A Common Stock has no voting rights except as may be required by Florida law. The two classes of stock generally have the same economic rights, except Class A Common Stock is entitled to receive cash dividends equal to at least 110% of any cash dividends declared and paid on Class B Common Stock. In March 1996, BBC issued 1.80 million shares of Class A Common Stock in an underwritten public offering at $9.60 per share. Net proceeds to the Company after underwriting costs and other expenses of $1.2 million and $247,000, respectively, were $15.8 million. In April 1996 the underwriter exercised an overallotment option to purchase an additional 252,817 shares of Class A Common Stock resulting in net proceeds to BBC of $2.3 million. In March 1996, BBC contributed $14.0 million of the net proceeds to the capital of BankAtlantic where it was used for general corporate purposes. The Company utilized $3.3 million relating to the repurchase of 228,125 and 112,500 shares of the Company's Class A and Class B common stock, respectively. As of result of the above Class A Common Stock issuance, BFC Financial Corporation's ("BFC") ownership in BBC's total outstanding (A and B) Common Stock was approximately 42% at December 31, 1996, comprised of 35% of Class A Common Stock and 46% of BBC's outstanding Class B Common Stock. On July 3, 1996, The Company closed a public offering of $57.5 million of 6 3/4 % Convertible Subordinated Debentures due July 1, 2006 (the "6 3/4 % Debentures"). The 6 3/4 % Debentures are convertible at an exercise price of $10.24 per share into and aggregate of 5,615,235 shares of Class A Common Stock. Net proceeds to BBC were $55.2 million net of underwriting discount and offering expenses. The Company contributed $40.0 million of the proceeds to BankAtlantic which were utilized for the acquisition of BNA and general corporate purposes. The remaining net proceeds are available for general corporate purposes. The Debenture Indentures provide that the Company cannot declare or pay dividends on, or purchase, redeem or acquire for value its capital stock, return any capital to holders of capital stock as such, or make any distributions of assets to holders of capital stock as such, unless, from and after the date of any such dividend declaration (a "Declaration Date") or the date of any such purchase, redemption, payment or distribution (a "Redemption Date"), the Company retains cash, cash equivalents (as determined in accordance with GAAP) or marketable securities (with a market value as measured on the applicable Declaration Date or Redemption Date) in an amount sufficient to cover the two consecutive semi-annual interest payments that will be due and payable on the Debentures following such Declaration Date or Redemption Date, as the case may be. The Indentures further provide that the amount of any interest payment made by the Company with respect to the Debentures after any applicable Declaration Date or Redemption Date shall be deducted from the aggregate amount of cash or cash equivalents which the Company shall be required to retain pursuant to the foregoing provision. At December 31, 1996 and 1995 the Company designated $5.8 million and $1.9 million of Federal Agency investments to satisfy the above provision. The Company intends to pay a regular cash quarterly common stock dividend. The availability of funds for the payment of dividends is dependent upon BankAtlantic's ability to pay dividends to the Company. Currently, the Company pays a quarterly dividend of $.0324, and $.0291 per share for Class A and Class B Common Stock, respectively. On April 6, 1984, BankAtlantic's stockholders approved a Stock Option Plan ("1984 Plan") under which options to purchase up to 756,836 shares of common stock may be granted. The plan provided for the grant of both incentive stock options and non-qualifying options. The exercise price of an incentive 30 stock option was not to be less than the fair market value of the common stock on the date of the grant. The exercise price of non-qualifying options was determined by a committee of the Board of Directors. The "1984 Plan" has expired; however, options granted under this plan are still outstanding. On May 25, 1993, the Board of Directors authorized the issuance of 465,380 incentive stock options and 264,602 non-qualifyingstock options under the 1984 plan. Of the incentive and non-qualifying stock options, 106,348 were issued at 110% of the fair market value at the date of grant. The remaining incentive and non-qualifyingstock options were issued at the fair market value at the date of grant. Non-qualifying stock options for 56,153 shares were issued outside of the Plan to non-employee directors. These options have similar terms and conditions as non-qualifying options under the 1984 Plan. On May 31, 1994, the stockholders of BankAtlantic approved the BankAtlantic 1994 Stock Option Plan ("1994 Plan"), authorizing the issuance of options to acquire up to 1,464,844 shares of BankAtlantic's common stock. In accordance with the Reorganization, all outstanding options under the 1984 Plan and 1994 Stock Option Plan became the obligation of the Company as of July 13, 1994. The stock options issued in May 1993 expire on May 25, 1998 and are fully vested as of December 31, 1996. At May 31, 1993, all issuable options under the 1984 Plan were outstanding and no further options will be granted under the Plan. On June 1, 1994, 444,484 of incentive stock options and 455,236 of non-qualifying stock options were granted pursuant to the 1994 Stock Option Plan to officers and directors of BankAtlantic. All the incentive and non-qualifying stock options were issued at fair market value at the date of grant ($6.09) and expire ten years from date of grant. All employee stock options vest and are exercisable five years from the date of grant and directors stock options vested immediately. On April 4, 1995, 128,063 of incentive stock options and 439,755 of non-qualifying stock options were granted pursuant to the 1994 Stock Option Plan to executives and directors of the Company. All the incentive and non-qualifying stock options were issued at fair market value at the grant date ($6.25), expire ten years from date of grant, vest and are exercisable five years from grant date, and directors stock options vest immediately. On May 21, 1996 the shareholders approved the BankAtlantic Bancorp 1996 Stock Option Plan (the "1996 Plan") which authorized the issuance of options to acquire up to 1.25 million shares of Class A common stock. The 1996 Plan expires on April 2, 2006. On May 22, 1996, 31,250 non-qualifying stock options were issued outside of the Plan to non-employee directors. On July 9, 1996, 344,216 of incentive stock options and 274,001 of non-qualifying stock options were granted pursuant to the BankAtlantic Bancorp 1996 Stock Option Plan to all officers of BankAtlantic. On September 3, 1996, 9,375 incentive stock options were granted to an officer of BankAtlantic. All of the incentive and non-qualifying stock options are exercisable for The Company's Class A common stock, with an exercise price equal to the fair market value at the date of grant ($9.76, $8.96 and $9.50) from the May, July and September grants, respectively. All employee stock options vest and are exercisable five years for the date of grant and directors stock options vested immediately. During the latter part of 1996 and early 1997, certain executives and officers received prorata vesting as part of their severance arrangements relating to previously granted 1994 and 1996 plan options. Forfeited and vested options were 95,218 shares and 124,518 shares for the 1994 plan and 53,908 shares and 16,406 shares for the 1996 plan, respectively. 31 The following table sets forth all outstanding options, adjusted for the July 1996 and February 1997 five for four common share stock splits effected in the form of 25% stock dividends in Class A common stock, however, due to accounting and tax considerations, with respect to options to purchase Class B common stock previously granted under the Company's stock option plan anti-dilution provisions related to Class B common stock options required that additional Class B options be granted in lieu of Class A options. A summary of 1984, 1994 and 1996 Plan activity was:
CLASS B OUTSTANDING OPTIONS PRICE PER SHARE -------------- --------------------------- Outstanding December 31, 1993 ............ 794,569 $ 3.56 to $ 5.17 Exercised ................................ (52,928) 4.63 to 4.63 Forfeited ................................ (33,325) 4.70 to 6.09 Issued ................................... 899,720 6.09 to 6.09 -------------- --------- Outstanding December 31, 1994 ............ 1,608,036 3.56 to 6.09 Exercised ................................ (149,962) 4.63 to 4.76 Forfeited ................................ (65,488) 4.70 to 6.25 Issued ................................... 567,817 6.25 to 6.25 -------------- --------- Outstanding December 31, 1995 ............ 1,960,403 3.56 to 6.25 Exercised ................................ (88,571) 4.63 to 4.70 Forfeited ................................ (121,393) 6.09 to 6.25 -------------- --------- --------- Outstanding December 31, 1996 ............ 1,750,439 $ 3.56 to $ 6.25 ============== ========= Exercisable at December 31, 1996 ........ 535,605 $3.56 to $6.25 ============== ========= ========= Available for grant at December 31, 1996 201,174 ==============
CLASS A OUTSTANDING OPTIONS PRICE PER SHARE -------------- --------------------------- Outstanding December 31, 1995 ............ 0 $0.00 to $0.00 Exercised ................................ 0 0.00 to 0.00 Forfeited ................................ (64,065) 8.96 to 8.96 Issued ................................... 658,252 8.96 to 9.76 -------------- --------- --------- Outstanding December 31, 1996 ............ 594,187 $ 8.96 to $ 9.76 ============== ========= ========= Exercisable at December 31, 1996 ........ 31,250 $ 9.76 to $ 9.76 ============== ========= ========= Available for grant at December 31, 1996 655,814 ==============
The weighted average exercise price of options outstanding at December 31, 1996, 1995 and 1994 was $6.59, $5.74, and $5.49, respectively. The weighted average exercise price of stock options exercised was $4.70 and $4.71 for the years ended December 31, 1996 and 1995, respectively. The weighted average exercise price of options forfeited during the years ended December 31, 1996 and 1995 was $7.13 and $6.13, respectively. 32 During the years ended December 31, 1996 and 1995, 8,151 and 39,041 of non-qualifying and 80,420 and 100,922 of incentive stock options issued under the 1984 Plan were exercised resulting in increases of $531,000 and $881,000 in stockholders' equity, respectively. The tax effect of the exercise of 1984 stock options for December 31, 1996 and 1995 was $117,530 and $173,000, respectively, and has been reflected in additional paid in capital. During the years ended December 31, 1996 and 1995, 64,065 of options under the 1996 Plan and 121,983 and 40,410 of options under the 1994 Plan and 0 and 1,499 of options under the 1984 Plan were forfeited. At December 31, 1996, 486,769, 48,836 and 31,250 of options from the 1984, 1994 and 1996 Plan were exercisable. The adoption of FAS 123 under the fair value based method would have increased compensation expense by $474,000 and $272,000 for the years ended December 31, 1996 and 1995, respectively. The effect of FAS 123 under the fair value based method would have effected net income and earnings per share as follows:
FOR THE YEARS ENDED DECEMBER 31, ------------------------ 1996 1995 ----------- ----------- Net income available for common shares As reported ................................. $ 19,011 $ 16,389 =========== =========== Pro forma ................................... $ 18,537 $ 16,117 =========== =========== Income per common and common equivalent share As reported ............................... $ 1.01 $ 0.97 =========== =========== Pro forma ................................... $ 0.99 $ 0.96 =========== =========== Income per common and common equivalent share assuming full dilution As reported ............................... $ 0.93 $ 0.96 =========== =========== Pro forma ................................... $ 0.91 $ 0.95 =========== ===========
The option method used to calculate the FAS 123 compensation adjustment was the Black-Scholes model with the following grant date fair values and assumptions:
NUMBER OF CLASS OF RISK FREE EXPECTED EXPECTED DATE OF OPTIONS GRANT DATE COMMON EXERCISE INTEREST LIFE EXPECTED DIVIDEND GRANT GRANTED FAIR VALUE STOCK PRICE RATE (YEARS) VOLATILITY YIELD - ---------- ------------ ------------- ----------- ----------- ------------ ----------- ------------- ----------- 4/04/95 567,817 $ 3.35 B $ 6.25 6.32 % 7.5 25.8 % 0.47 % 5/22/96 31,250 $ 4.90 A $ 9.76 6.55 % 7.5 18.6 % 0.33 % 7/09/96 618,217 $ 4.60 A $ 8.96 6.88 % 7.5 18.6 % 0.36 % 9/03/96 9,375 $ 4.86 A $ 9.50 6.81 % 7.5 18.6 % 0.34 %
The employee turnover factor was 13.4% for incentive stock options and 5.2% for non-qualifying stock options. The weighted average fair value of options granted during the years ended December 31, 1996 and 1995 was $4.62 and $3.35, respectively. 33 The following table summarizes information about fixed stock options outstanding at December 31, 1996:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE -------------------------------------------------- ------------------------------- WEIGHTED- CLASS OF NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED- COMMON RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE STOCK EXERCISE PRICES AT 12/31/96 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/96 EXERCISE PRICE - ----------- ---------------- -------------- ----------------- --------------- -------------- --------------- B $3.56 to 5.17 486,769 1.4 years $ 4.77 486,769 $ 4.77 B $6.09 to 6.25 1,263,670 8.3 years 6.15 48,836 6.09 A $8.96 to 9.76 594,187 9.5 years 9.01 31,250 9.76 -------------- ----------------- --------------- -------------- --------------- 2,344,626 7.15 years $ 6.59 566,855 $ 6.59 ============== ================= =============== ============== ===============
11. INCOME TAXES For federal income tax purposes, BankAtlantic reports its income and expenses on the accrual method of accounting. Prior to 1996, savings institutions that met certain definitional tests and other conditions prescribed by the Internal Revenue Code of 1986 (the "Code") relating primarily to the composition of their assets and the nature of their business activities were, within certain limitations, permitted to establish, and deduct additions to, reserves for bad debts in amounts in excess of those which would otherwise be allowable on the basis of actual loss experience. A qualifying savings institution could elect annually, and was not bound by such election in any subsequent year, one of the following two methods for computing additions to its bad debt reserves for losses on "qualifying real property loans" (generally, loans secured by interests in improved real property): (i) the experience method or (ii) the percentage of taxable income method. BankAtlantic has utilized both the percentage of taxable income method and the experience method in computing the tax-deductible addition to its bad debt reserves. Additions to the reserve for losses on non-qualifying loans, however, must be computed under the experience method and reduce the current year's addition to the reserve for losses on qualifying real property loans, unless the qualifying addition also is determined under the experience method. The sum of the addition to each reserve for each year was BankAtlantic's annual bad debt deduction. The Small Business Job Protection Act of 1996 repealed the reserve method of accounting for bad debts for tax years beginning after 1995. As a "large" thrift (more than $500 million in assets), BankAtlantic must switch to the specific charge-off method to compute its bad debt deduction starting in 1996. BankAtlantic is required to recapture into taxable income the portion of its bad debt reserves that exceeds its base year reserves. For financial reporting purposes, deferred taxes have previously been provided for amounts in excess of the base year tax bad debt reserve and accordingly, recapture of such amounts for tax purposes will not trigger expense for financial reporting purposes. BankAtlantic will have to recapture $1.7 million (after tax) of bad debt reserve due to the law change. BankAtlantic's recapture amount will be taken into taxable income ratably (on a straight-line basis) over a six-year period. If BankAtlantic meets a residential loan requirement for a tax year beginning in 1996 or 1997, the recapture of the reserves will be suspended for such tax years. BankAtlantic met this residential loan requirement for 1996 and therefore does not have to recapture its reserve in 1996. At December 31, 1996 , BankAtlantic had a $3.9 million (after tax) base year reserve for which deferred taxes have not been provided which is subject to recapture if BankAtlantic, redeems its common stock 34 or certain other events occur. The base year reserve is not amortized and remains fixed. Such amount would not be subject to recapture upon conversion to a commercial bank charter. The provision for income taxes consisted of (in thousands):
1996 1995 1994 ----------- ----------- ---------- Current: Federal ................... $ 9,305 $ 7,257 $ 9,379 State ..................... 1,441 1,210 1,549 ----------- ----------- ---------- 10,746 8,467 10,928 ----------- ----------- ---------- Deferred: Federal ................... 1,287 1,191 (1,159) State ..................... 208 360 (107) ----------- ----------- ---------- 1,495 1,551 (1,266) ----------- ----------- ---------- Provision for income taxes $ 12,241 $ 10,018 $ 9,662 =========== =========== ==========
The December 31, 1996, 1995 and 1994 amounts above do not include deferred taxes of $470,000, $3.6 million and $121,000, respectively, related to unrealized appreciation on debt securities available for sale which is a separate component of stockholders' equity. BankAtlantic's actual provision differs from the Federal expected income tax provision as follows (in thousands):
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------ 1996 1995 1994 ----------- ----------- ---------- Income tax provision at expected federal income tax rate (1) ............................... $ 10,938 $ 9,953 $ 9,274 Increase (decrease) resulting from: Base year bad debt reserve increase ........................ (362) 0 0 Tax-exempt interest income ................................. (26) (104) (110) Provision for state taxes net of federal benefit .......... 1,117 897 941 Change in the beginning of the period balance of the valuation allowance for deferred tax assets allocated to income tax expense (credit) ........................... 0 (972) (492) Expenses related to holding company reorganization ........ 0 0 30 Amortization of costs over fair value of net assets acquired 541 393 0 Charitable deduction of appreciated property ................ 0 (70) 0 Other--net .................................................. 33 (79) 19 ----------- ----------- ---------- Provision for income taxes ................................ $12,241 $ 10,018 $ 9,662 =========== =========== ========== (1) The expected federal income tax rate is 35% for the years ended December 31, 1996, 1995 and 1994.
35 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and tax liabilities were:
DECEMBER 31, -------------------------------------- 1996 1995 1994 ------------ ------------ ---------- (IN THOUSANDS) DEFERRED TAX ASSETS: Allowance for loans, REO and tax certificate losses, for financial statement purposes ................................. $ 8,692 $ 6,798 $ 5,713 Other allowances and expense accruals recorded for financial statement purposes not currently recognized for tax purposes ..... 1,495 3,330 4,244 Deferred compensation accrued for financial statement purpose not currently recognized for tax purposes ........................ 266 199 186 Unearned commitment fees ........................................... 114 101 75 Amortization of mortgage servicing rights for financial reporting purposes in excess of amount amortized for tax purposes .......... 251 255 188 Amortization of intangible assets for financial reporting purposes in excess of amounts amortized for tax purposes .................. 225 0 0 Purchase accounting adjustments for Bank acquisitions ............. 170 1,073 0 Other .............................................................. 10 171 123 ------------ ------------ ---------- Total gross deferred tax assets ..................................... 11,223 11,927 10,529 Less valuation allowance ............................................ 0 0 972 ------------ ------------ ---------- Total deferred tax assets ........................................... 11,223 11,927 9,557 ------------ ------------ ---------- DEFERRED TAX LIABILITIES: Tax bad debt reserve in excess of base year reserve ................ 1,684 2,725 1,095 Office properties and equipment and real estate owned due to depreciation differences ...................................... 1,172 1,613 1,202 FHLB stock, due to differences in the recognition of stock dividends .................................................. 1,740 1,646 1,689 Deferred loan income, due to differences in the recognition of loan origination fees and discounts ........................... 2,039 1,479 1,461 Discount on securities, due to the accretion of discounts ......... 286 673 1,010 Capital leases for financial reporting purposes and operating leases for tax purposes .......................................... 0 21 309 Prepaid pension expenses ........................................... 313 473 370 Deferred tax liability on unrealized appreciation on debt securities available for sale .................................... 470 3,600 121 Prepaid insurance, primarily FDIC assessments ...................... 142 355 679 Other .............................................................. 22 86 53 ------------ ------------ ---------- Total gross deferred tax liabilities ................................ 7,868 12,671 7,989 ------------ ------------ ---------- Net deferred tax asset (liability) .................................. 3355 (744) 1,568 Less deferred income tax (assets) liabilities at beginning of period 744 (1,568) (423) Deferred tax asset, net related to acquisitions ..................... (2,464) (2,718) 0 Increase (decrease) in deferred tax liability on unrealized appreciation on debt securities available for sale included as a separate component of stockholders' equity ...................... (3,130) 3,479 121 ------------ ------------ ---------- Benefit (provision) for deferred income taxes ....................... $ (1,495) $ (1,551) $ 1,266 ============ ============ ==========
36 On December 31, 1994, BankAtlantic had a $972,000 valuation allowance. The valuation allowance was reduced to zero due to management's determination that, more likely than not, the valuation allowance was not required. The valuation allowance at December 31, 1996 and 1995 was zero. At December 31, 1996, the Company had a tax refund receivable of $723,000 and $132,000 for Federal and State income taxes, respectively. The tax refunds were acquired with the BNA acquisition. The net operating loss ("NOL") and investment tax credits ("ITC") carryovers acquired in connection with the acquisition of MegaBank were $878,000 and $48,000, respectively, upon acquisition. Due to IRS limitations, only $784,000 of the NOL and none of the ITC was utilized in 1995. The remaining NOL and ITC was fully utilized in 1996. The utilization of MegaBank's NOL and ITC are limited by regulations. Such utilization was assumed at the date of acquisition of Mega Bank and resulted in an adjustment of cost over fair value of assets acquired and does not affect the provision for income taxes. The NOL will expire in 2010 and the ITC will expire in 1998 and 1999. 12. PENSION PLAN BankAtlantic sponsors a non-contributory defined benefit pension plan (the "Plan") covering substantially all of its employees. The benefits are based on years of service and the employee's average earnings received during the highest five consecutive years out of the last ten years of employment. The funding policy is to contribute an amount not less than the ERISA minimum funding requirement nor more than the maximum tax-deductible amount under Internal Revenue Service rules and regulations. Plan assets consist of mutual funds, corporate equities and cash equivalents at December 31, 1996 and 1995. The following table sets forth the Plan's funded status and the prepaid pension cost included in the Consolidated Statements of Financial Condition at:
DECEMBER 31, ---------------------------- 1996 1995 ------------- ------------- (IN THOUSANDS) Actuarial present value of accumulated benefit obligation, including vested benefits of $13,301 and $9,911 ......... $ (14,370) $ (10,533) Actuarial present value of projected benefit obligation for service rendered to date ................................ (17,301) (13,435) Plan assets at fair value as of the actuarial date ....... 15,728 12,768 ------------- ------------- Plan assets in excess (below) projected benefit obligation (1,573) (667) Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions ...... 3,868 3,638 Prior service (cost) benefit not yet recognized in net periodic pension cost ................................... 61 69 Unrecognized net asset at October 1, 1987, being recognized over 15 years ........................................... (1,540) (1,808) ------------- ------------- Prepaid pension cost ...................................... $ 816 $ 1,232 ============= =============
37 Net pension cost includes the following components:
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- (IN THOUSANDS) Service cost benefits earned during the period $ 1,065 $ 785 $ 811 Interest cost on projected benefit obligation . 1,151 1,010 833 Estimated return on plan assets ................ (1,297) (1,009) (1,044) Net amortization and deferral .................. (3) 44 45 ---------- ---------- ---------- Net periodic pension expense ................... $ 916 $ 830 $ 645 ========== ========== ==========
The actuarial assumptions used in accounting for the Plan were:
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------- 1996 1995 1994 ----------- ----------- ----------- Weighted average discount rate ..................... 7.50 % 8.50 % 8.50 % Rate of increase in future compensation levels .... 5.00 % 6.50 % 6.50 % Expected long-term rate of return .................. 9.00 % 9.00 % 9.00 % =========== =========== ===========
Actuarial assumptions for the years ended December 31, 1996, 1995 and 1994 are projected based upon participant data at October 1 of the same year. Actuarial estimates and assumptions are based on various market factors and are evaluated on an annual basis, and changes in such assumptions may impact future pension costs. Management believes that the impact, if any, of the difference between actuarial assumptions utilized on October 1 and those appropriate at December 31 is immaterial. There have been no changes in the plan during the year ended December 31, 1996 that would significantly effect the actuarial assumptions. During the years ended December 31, 1996 and 1995 and 1994, BankAtlantic funded $500,000, $1.1 million and $490,000, respectively to the plan. BankAtlantic sponsors a defined contribution plan ("401k Plan") for all employees who have completed six months of service. Employees can contribute up to 14% of their salary, not to exceed $9,500 for 1996 and $9,240 for 1995 and 1994. For employees that fall within the highly compensated criteria, maximum contributions are currently 10% of salary. Effective October 1991, BankAtlantic's 401k Plan was amended to include only a discretionary match as deemed appropriate by the Board of Directors. Included in employee compensation and benefits on the consolidated statement of operations was $147,000, $75,000 and $98,000 of expenses and employer contributions related to the 401k Plan for the years ended December 31, 1996, 1995 and 1994, respectively. For the year ended December 31, 1996, the Board of Directors declared a discretionary match of 25% of the first 4% of an employee's contribution. Ten percent of the 25% discretionary match related to meeting specific profit goals. For the year ended December 31, 1996 and 1995, participating employees were matched 25% and 15% of their first 4% of contributions. 38 13. COMMITMENTS AND CONTINGENCIES BankAtlantic is lessee under various operating leases for real estate and equipment extending to the year 2072. The approximate minimum rental under such leases, at December 31, 1996, for the periods shown was (in thousands):
YEAR ENDING DECEMBER 31, AMOUNT - ------------------------- ---------- 1997 .................... $ 3,477 1998 .................... 3,103 1999 .................... 2,382 2000 .................... 1,232 2001 .................... 741 Thereafter .............. 3,339 ---------- Total ................. $ 14,274 ==========
Rental expense for premises and equipment was $3.8 million, $3.4 million, and $2.4 million for the years ended December 31, 1996, 1995 and 1994, respectively. Included in other liabilities at December 31, 1996 and 1995, is an allowance of $266,000 and $110,000, respectively, for future rental payments on closed branches. Included in the December 31, 1996 allowance for branches closed was a $195,000 reserve for future lease payments on five BNA branches that were closed at acquisition. BankAtlantic opened 5 Wal-Mart in-store branches and added eight branches associated with the BNA acquisition during the year ended December 31, 1996. BankAtlantic purchased two branch locations from unrelated financial institutions, opened three Wal-Mart in-store branches and acquired five branches associated with the MegaBank acquisition during the year ended December 31, 1995. Management has committed to two additional in-store full service branches, which are anticipated to open during the year ended December 31, 1997. The estimated annual lease payments are $48,600, other annual expenses are $50,000, and estimated leasehold improvements and other capitalizable costs associated with the two branches to be opened during 1997, will be approximately $420,000. BankAtlantic signed an agreement dated April 29, 1994 with Wal-Mart Stores, Inc., pursuant to which BankAtlantic leased and placed ATMs in 151 Wal-Mart and Sam's Club locations throughout Florida. These ATMs accept BankAtlantic ATM cards, as well as bank cards, Visa, MasterCard and American Express cards that are compatible with national and international Cirrus, Plus and Honor ATM systems. During the ordinary course of business, BankAtlantic and its subsidiaries are involved as plaintiff or defendant in various lawsuits. Management, based on discussions with legal counsel believes results of operations or financial position will not be significantly impacted by the resolution of these matters. In the normal course of its business, BankAtlantic is a party to financial instruments with off-balance-sheet risk, when it is deemed appropriate in order to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby and documentary letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the statement of financial position. BankAtlantic's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit written is represented by the contractual amount of those instruments. BankAtlantic uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. 39 Financial instruments with off-balance sheet risk were:
DECEMBER 31, -------------------------- 1996 1995 ------------ ------------ (IN THOUSANDS) Commitments to extend credit, including the undisbursed portion of loans in process ......................... $ 345,524 $ 201,717 Standby and documentary letters of credit ............. 520 5,671 FHLB advance forward commitments ...................... 12,000 0 Commitments to purchase residential loans ............. 28,000 0 ============ ============
Commitments to extend credit are agreements to lend funds to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. BankAtlantic evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral required by BankAtlantic in connection with an extension of credit is based on management's credit evaluation of the counter-party. Collateral held varies but may include first mortgages on commercial and residential real estate. As part of the commitment for standby letters of credit, BankAtlantic is required to collateralize 120% of the commitment balance with mortgage-backed securities. At December 31, 1996, $4.1 million of mortgage-backed securities were pledged against the commitment balance. Standby letters of credit written are conditional commitments issued by or for the benefit of BankAtlantic to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. BankAtlantic may hold certificates of deposit and residential and commercial liens as collateral for such commitments which are collateralized similar to other types of borrowings. BankAtlantic is required to maintain average reserve balances with the Federal Reserve Bank. Such reserves consisted of cash and amounts due from banks of $28.3 million and $21.5 million December 31, 1996 and 1995, respectively. BankAtlantic is a member of the FHLB system. As a member, BankAtlantic is required to purchase and hold stock in the FHLB of Atlanta, in amounts at least equal to the greater of (i) 1% of its aggregate unpaid residential mortgage loans, home purchase contracts and similar obligations at the beginning of each year or (ii) 5% of its outstanding advances from the FHLB of Atlanta. As of December 31, 1996, BankAtlantic was in compliance with this requirement with an investment of approximately $14.8 million in stock of the FHLB of Atlanta. 14. REGULATORY MATTERS The Company, by virtue of its ownership of all of the common stock of BankAtlantic, is a unitary savings bank holding company subject to regulatory oversight by the OTS. As such, the Company is required to register with and be subject to OTS examination, supervision and certain reporting requirements. Further, as a company having a class of publicly held equity securities, the Company is 40 subject to the reporting and the other requirements of the Exchange Act. In addition, BFC owns 2,654,945 and 4,876,124 of Class A and Class B common stock, respectively, which amounts to 41.52% of the Company's common stock. BFC is subject to the same oversight by the OTS as discussed herein with respect to the Company. On September 30, 1996, President Clinton signed into law H.R. 3610, which recapitalized the SAIF and substantially bridged the assessment rate disparity existing between SAIF and BIF insured institutions. The new law subjected institutions with SAIF assessable deposits, including BankAtlantic, to a one-time assessment of 0.657% of covered deposits at March 31, 1995. BankAtlantic's one-time assessment, which was paid in November 1996, resulted in a pre-tax charge of $7.2 million for the year ended December 31, 1996, and under provisions of the law, was treated as a fully deductible "ordinary and necessary business expense" for tax purposes. The $7.2 million charge excludes the $2.3 million amount assessed on BNA deposits which was considered in recording the acquisition of BNA under the purchase method of accounting. As a result of the special assessment, discussed herein, the SAIF was capitalized at the target Designated Reserve Ratio ("DRR") of 1.25 percent of estimated insured deposits on October 1, 1996. BankAtlantic's deposits are insured by the SAIF and BIF for up to $100,000 for each insured account holder, the maximum amount currently permitted by law. Pursuant to the FDICIA, the FDIC adopted transitional regulations implementing risk-based insurance premiums that became effective on January 1, 1993. Under these regulations, institutions are divided into groups based on criteria consistent with those established pursuant to the prompt regulatory action provisions of the FDICIA (see "Savings Institution Regulations--Prompt Regulatory Action", below). Each of these groups is further divided into three subgroups, based on a subjective evaluation of supervisory risk to the insurance fund posed by the institution. On December 1, 1996 the FDIC finalized a rule lowering the rates on assessments paid to the SAIF, effective October 1, 1996. The rule also separates, effective January 1, 1997, the Financing Corporation ("FICO") assessment to service the interest on its bond obligations from the SAIF assessment. The amount assessed on individual institutions by the FICO will be in addition to the amount paid for deposit insurance according to the FDIC's risk-related assessment rate schedules. The FICO assessment rate for the first semi-annual period in 1997 was set at 6.48 basis points annually for SAIF-assessable deposits and 1.30 basis points for BIF assessable deposits. By law, the FICO rate on BIF-assessable deposits must be one-fifth the rate on SAIF-assessable deposits until the insurance funds merge or until January 1, 2000, whichever occurs first. The rule established a special interim rate schedule of 18 to 27 basis points annually between October 1, 1996 and January 1, 1997. Excess assessments were refunded during January 1997. Insurance premiums range from zero to 27 basis points, with well capitalized institutions in the highest supervisory subgroup paying zero basis points and undercapitalized institutions in the lowest supervisory subgroup paying 27 basis points. BankAtlantic anticipates paying 6.48 basis points for its SAIF-assessable deposits and 1.30 for its BIF-assessable deposits based on it supervisory subgroup. BankAtlantic pays deposit insurance premiums primarily to the SAIF and secondarily to the BIF in connection with the deposits it acquired as a result of the acquisition of MegaBank. All Bank of North America ("BNA") deposits acquired are subject to SAIF premiums. At December 31, 1996, BankAtlantic had approximately $143.8 million of deposits subject to BIF premiums and $1.7 billion subject to SAIF premiums. BankAtlantic is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory--and 41 possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on BankAtlantic's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, BankAtlantic must meet specific capital guidelines that involve quantitative measures of BankAtlantic's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. BankAtlantic's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require BankAtlantic to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 1996, that BankAtlantic meets all capital adequacy requirements to which it is subject. As of December 31, 1996, BankAtlantic is considered a well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized BankAtlantic must maintain minimum total risk-based, Tier I risk-based, tangible and core capital ratios as set forth in the table. There are no conditions or events since December 31, 1996 that management believes have changed the institution's category. BankAtlantic's actual capital amounts and ratios are presented in the table:
TO BE WELL FOR CAPITAL CAPITALIZED UNDER ADEQUACY PROMPT CORRECTIVE ACTUAL PURPOSES ACTION PROVISIONS ----------------------- --------------------------------------------- ----------------------------------- AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO ------------ --------- ----------------------- -------------------- ------------ --------------------- (IN THOUSANDS) As of December 31, 1996: Total risk-based capital . $ 193,196 10.83% $/greater than/142,691 /greater than/8.00% $ 178,407 /greater than/10.00% Tier I risk-based capital $ 170,865 9.58% $/greater than/ 71,363 /greater than/4.00% $ 107,004 /greater than/ 6.00% Tangible capital .......... $ 170,865 6.65% $/greater than/ 38,547 /greater than/1.50% $ 38,547 /greater than/ 1.50% Core capital .............. $ 170,865 6.65% $/greater than/ 77,094 /greater than/3.00% $128,491 /greater than/ 5.00% As of December 31, 1995: Total risk-based capital . $133,846 11.67% $/greater than/ 91,770 /greater than/8.00% $114,713 /greater than/10.00% Tier I risk-based capital $119,451 10.41% $/greater than/ 45,885 /greater than/4.00% $ 68,828 /greater than/ 6.00% Tangible capital .......... $119,451 6.90% $/greater than/ 25,949 /greater than/1.50% $ 25,949 /greater than/ 1.50% Core capital .............. $119,451 6.90% $/greater than/ 51,899 /greater than/3.00% $ 86,498 /greater than/ 5.00%
15. SUBJECT PORTFOLIO From 1987 through 1990, BankAtlantic purchased in excess of $50 million of indirect home improvement loans from certain dealers, primarily in the northeastern United States. BankAtlantic ceased purchasing loans from such dealers in the latter part of 1990. These dealers are affiliated with each other but are not affiliated with BankAtlantic. In connection with loans originated through these dealers, BankAtlantic funded amounts to the dealers as a dealer reserve. Such loans and related dealer reserves are hereafter referred to as the "Subject Portfolio." The risk of amounts advanced to the dealers is primarily associated with loan performance but secondarily is dependent on the financial 42 condition of the dealers. The dealers were to be responsible to BankAtlantic for the amount of the reserve only if the loan giving rise to the reserve became delinquent or was prepaid. One of the dealers filed for protection under the bankruptcy laws of the United States, while the other dealers have not indicated any financial ability to fund the dealer reserve. In late 1990, questions arose relating to the practices and procedures used in the origination and underwriting of the Subject Portfolio, which suggested that the dealers, certain home improvement contractors and borrowers, together with certain former employees of BankAtlantic, engaged in practices intended to defraud BankAtlantic. Due to these questions and potential exposure, BankAtlantic performed, and continues to perform, certain investigations, notified appropriate regulatory and law enforcement agencies, and notified its fidelity bond carrier (the "carrier"). After an initial review and discussions with the carrier, BankAtlantic concluded that any losses sustained from the Subject Portfolio would adequately be covered by its fidelity bond coverage and, in fact, on August 13, 1991, the carrier advanced $1.5 million against BankAtlantic's losses. This payment and future payments by the carrier are subject to identification and confirmation of the losses which are appropriately covered under the fidelity bond. Subsequently, commencing in September, 1991, as a consequence of issues raised by the carrier, BankAtlantic reviewed the Subject Portfolio without regard to the availability of any fidelity bond coverage. As a result of the review, the provision for loan losses for the year ended December 31, 1991 was increased by approximately $5.7 million, approximately $5.5 million of loans were charged off, and $2.7 million of dealer reserves were charged to current operations. On December 20, 1991, the carrier denied coverage and BankAtlantic thereafter filed an appropriate action against the carrier. On October 30, 1992, BankAtlantic and the carrier entered into the Covenant. Pursuant to the Covenant, BankAtlantic will continue to pursue its litigation against the carrier, but has agreed to limit execution on any judgment obtained against the carrier to $18 million. Further, BankAtlantic agreed to join certain third parties as defendants in that action. The carrier paid BankAtlantic $6.1 million during the fourth quarter of 1992, $3 million in November 1993, and an additional $2.9 million in November 1994. Such amounts related to losses and expenses previously charged to operations by BankAtlantic. Additional reimbursements have been made on a quarterly reporting basis commencing with the period ended December 31, 1992. Reimbursable amounts are as defined in the Covenant. Based upon such definitions BankAtlantic recorded estimated charges to operations in advance of when such charges became reimbursable. Amounts to be reimbursed were reflected in the period for which the reimbursement is related. Through December 31, 1995 and 1994, the carrier has paid or committed to pay approximately $18.0 million and $17.9 million, respectively. The financial statement effect of the Covenant for the fourth quarter and year ended December 31, 1992 was to reduce expenses by $3.3 million, increase interest income by $1.9 million and to record $7.3 million of loan loss recoveries. In no event will the carrier be obligated to pay BankAtlantic in the aggregate more than $18 million, which amount has been fully paid. However, in the event of recovery by BankAtlantic of damages from third party wrongdoers, BankAtlantic will be entitled to retain such amounts until such amounts, plus any payments received from the carrier, equal $22 million. Thereafter, the carrier will be entitled to any such recoveries to the extent of its payments to BankAtlantic. To the extent that BankAtlantic incurs losses in excess of $18 million plus available recoveries from third parties, BankAtlantic will be required to absorb any such losses. BankAtlantic also agreed to exercise reasonable collection activities with regard to the Subject Portfolio and to provide the carrier with a credit for any recoveries with respect to such loans against future losses that the carrier would otherwise be obligated to reimburse. The carrier has 43 no further obligations for reimbursement. In August 1994, BankAtlantic filed an action against the dealers, certain home improvement contractors, and various individuals seeking compensatory and other damages. On February 17, 1995, the United States Attorney for the Eastern District of New York and the Assistant Attorney General, Tax Division, United States Department of Justice, announced that the President of the dealers noted above has pleaded guilty to bank fraud, bribery and tax fraud conspiracy charges. The guilty plea states that BankAtlantic was one of the financial institutions which was defrauded by the dealers and various home improvement contractors. Three actions have been filed, two in New Jersey and one in New York, relating to the Subject Portfolio. One of the New Jersey actions was brought on behalf of the State of the New Jersey. The New York action and the action brought by the State of New Jersey were resolved in 1996 and 1995, respectively. The remaining New Jersey action, which was brought against over 25 parties, including BankAtlantic, purports to be a class action on behalf of named and unnamed plaintiffs that may have obtained loans from dealers who subsequently sold the loans to financial institutions including BankAtlantic. This action seeks, among other things, rescission of the loan agreements and damages. In November 1995, the court in the remaining New Jersey action entered an order dismissing the complaint against BankAtlantic and plaintiffs appealed this ruling. In January 1996, the Appellate Court reversed the lower court's decision and remanded the case back to the trial court to determine whether the action may be maintained as a class action. The reversal was without prejudice to BankAtlantic's right to renew its summary judgment motion after the trial court has made a determination as to plaintiff's ability to maintain this case as a class action. The balance of the loans associated with the Subject Portfolio amounted to approximately $9.9 million and $14.2 million at December 31, 1996 and 1995, respectively. The related dealer reserve had been completely charged-off by December 31, 1993. Net charge-offs relating to the Subject Portfolio amounted to $666,000, $1.0 million, and $1.2 million for the years ended December 31, 1996, 1995 and 1994, respectively. All 1994 charge-offs were recovered from the carrier compared to none in 1995. At December 31, 1996, 10% of the loans were secured by collateral in South Florida and 90% of such loans were secured by collateral in the northeastern United States, respectively. Collateral for these loans is generally a second mortgage on the borrower's property. However, it appears that in most cases, the property is encumbered with loans having high loan to value ratios. Loans in the Subject Portfolio are charged-off if payments are more than 90 days delinquent. While management believes that established reserves will be adequate to cover any additional losses that BankAtlantic may incur from the Subject Portfolio or the above described litigation, there is no assurance that this will be the case. 16. PARENT COMPANY FINANCIAL INFORMATION The Company was not in existence prior to July 13, 1994. Condensed Statements of Financial Condition and Condensed Statements of Operations of the Company, at December 31, 1996 and 1995 and for each of the periods shown below. (in thousands): 44 CONDENSED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, -------------------------- 1996 1995 ------------ ------------ ASSETS Cash deposited at BankAtlantic ................................................. $ 20,226 $ 2,079 Debt securities available for sale ............................................. 5,843 1,892 Investment in subsidiaries ..................................................... 200,760 136,816 Due from BankAtlantic .......................................................... 0 639 Deferred offering costs on subordinated debentures ............................. 3,156 1,023 Income tax receivable .......................................................... 1,819 448 Other assets ................................................................... 175 0 ------------ ------------ Total assets ................................................................... $ 231,979 $ 142,897 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Subordinated debentures and note payable ....................................... $ 78,500 $ 21,001 Due to BankAtlantic ............................................................ 2,742 0 Other liabilities .............................................................. 3,033 1,335 ------------ ------------ Total liabilities .............................................................. 84,275 22,336 ------------ ------------ Stockholders' equity: Preferred Stock, $25.00 per share preference value, $0.01 par value 10,000,000 shares authorized; none outstanding ............................... 0 0 Class A Common Stock, $0.01 par value, authorized 30,000,000 shares; issued and outstanding, 7,807,258 and zero .......................................... 78 0 Class B Common Stock, $0.01 par value, authorized 15,000,000 shares; issued and outstanding, 10,542,116 and 10,592,999 shares ............................ 105 106 Additional paid-in capital ..................................................... 64,171 48,905 Retained earnings .............................................................. 82,602 65,817 ------------ ------------ Total stockholder's equity before net unrealized appreciation on debt securities available for sale--net of deferred income taxes ............................. 146,956 114,828 Net unrealized appreciation on debt securities available for sale and owned by BankAtlantic--net of deferred income taxes ...................... 748 5,733 Total stockholders' equity ..................................................... 147,704 120,561 ------------ ------------ Total liabilities and stockholders' equity ..................................... $ 231,979 $ 142,897 ============ ============
CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------ 1996 1995 1994 ----------- ----------- ---------- Interest income on repurchase agreements and deposits at BankAtlantic ..... $ 597 $ 51 $ 0 Interest income on Federal agency securities ............................... 209 29 0 ----------- ----------- ---------- Total interest income ...................................................... 806 80 0 ----------- ----------- ---------- Interest expense on subordinated debentures and note payable .............. 4,018 776 0 Net interest (expense) ..................................................... (3,212) (696) 0 Other expenses ............................................................. (39) (5) 0 ----------- ----------- ---------- Loss before income tax benefit and earnings of subsidiaries ............... (3,251) (701) 0 Income tax benefit ......................................................... 1,253 274 0 ----------- ----------- ---------- (Loss) before earnings of subsidiaries ..................................... (1,998) (427) 0 Equity in undistributed net earnings of subsidiaries excluding BankAtlantic 27 1 0 Equity in net earnings of BankAtlantic ..................................... 20,982 18,845 16,835 ----------- ----------- ---------- Net income ................................................................. $ 19,011 $ 18,419 $ 16,835 =========== =========== ==========
45 CONDENSED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, ------------------------ 1996 1995 ----------- ----------- (IN THOUSANDS) OPERATING ACTIVITIES: Net income ............................................................. $ 19,011 $ 18,419 Adjustment to reconcile net income to net cash provided (used) by operating activities: Equity in net earnings of BankAtlantic and other subsidiaries ........ (21,009) (18,846) Accretion on debt securities available for sale ........................ (209) (29) Amortization of note payable deferred costs ............................ 0 69 Amortization of subordinated debentures deferred costs ................. 222 29 Increase in dividends payable .......................................... 85 69 Increase in accrued interest payable ................................... 1,859 522 Increase (decrease) in other liabilities ............................... (127) 347 (Decrease) increase in receivable (payable) from (to) BankAtlantic .... 3,381 (241) Increase in income tax receivable ...................................... (1,371) (448) ----------- ----------- Net cash provided (used) by operating activities ....................... 1,842 (109) ----------- ----------- INVESTING ACTIVITIES: Purchase of BankAtlantic preferred stock ............................... 0 (4,000) Additional investment in BankAtlantic .................................. (54,000) (6,000) Dividends from BankAtlantic preferred and common stock ................. 6,080 3,034 Purchase of investment securities ...................................... (13,617) (3,663) Proceeds from maturity of investment securities ........................ 9,700 1,800 ----------- ----------- Net cash used by investing activities .................................. (51,837) (8,829) ----------- ----------- FINANCING ACTIVITIES: Issuance of common stock upon exercise of options, net ................. 18,417 1,709 Common stock dividends paid ............................................ (2,159) (1,672) Preferred stock dividends paid ......................................... 0 (677) Proceeds from note payable ............................................. 0 4,000 Repayment of note payable .............................................. (1) (3,999) Proceeds from issuance of subordinated debentures ...................... 57,500 21,000 Deferred costs on subordinated debentures .............................. (2,356) (1,052) Preferred stock redemption ............................................. 0 (8,383) Payment to acquire and retire common stock ............................. (3,259) 0 ----------- ----------- Net cash provided by financing activities .............................. 68,142 10,926 ----------- ----------- Increase in cash and cash equivalents .................................. 18,147 1,988 Cash and cash equivalents at beginning of period ....................... 2,079 91 ----------- ----------- Cash and cash equivalents at end of period ............................. $ 20,226 $ 2,079 =========== =========== SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Interest paid ........................................................ $ 1,937 $ 161 Common stock dividends declared and not paid until subsequent period .. 551 467 Increase (decrease) in stockholders' equity from net unrealized appreciation on debt securities available for sale by BankAtlantic, less related deferred income taxes ................................... (4,985) 5,540 Increase in equity for the tax effect related to the exercise of employee stock options ............................................ 118 173
46 17. SELECTED QUARTERLY RESULTS (UNAUDITED) The following tables summarize the quarterly results of operations for the years ended December 31, 1996 and 1995 (in thousands except per share data):
FIRST SECOND THIRD FOURTH 1996 QUARTER QUARTER QUARTER QUARTER TOTAL - ------------------------------------ ------------- ------------- ------------- ------------- ------------- Interest income .................... $ 32,092 $ 32,758 $ 38,521 $ 49,260 $ 152,631 Interest expense ................... 15,620 15,096 19,610 26,705 77,031 ------------- ------------- ------------- ------------- ------------- Net interest income ................ $ 16,472 $ 17,662 $ 18,991 $ 22,555 $ 75,600 Provision for loan losses .......... $ 940 $ 1,455 $ 1,869 $ 1,580 $ 5,844 ------------- ------------- ------------- ------------- ------------- Net interest income after provision for loan losses .................. $ 15,532 $ 16,207 $ 17,042 $ 20,975 $ 69,756 ------------- ------------- ------------- ------------- ------------- Income before income taxes ......... $ 7,851 $ 9,236 $ 1,977 $ 12,188 $ 31,252 ------------- ------------- ------------- ------------- ------------- Net income ......................... $ 4,710 $ 5,549 $ 1,091 $ 7,661 $ 19,011 ============= ============= ============= ============= ============= Income per common and common equivalent share ................. $ 0.27 $ 0.29 $ 0.06 $ 0.40 $ 1.01 ============= ============= ============= ============= ============= Income per common and common equivalent share assuming full di- lution ........................... $ 0.27 $ 0.29 $ 0.06 $ 0.33 $ 0.93 ============= ============= ============= ============= ============= Weighted average number of common and common equivalent shares out- standing ......................... 17,644,250 19,377,105 19,262,360 19,295,514 18,896,691 ============= ============= ============= ============= ============= Weighted average number of common and common equivalent shares out- standing assuming full dilution .. 17,699,328 19,377,105 19,402,964 24,911,634 21,833,015 ============= ============= ============= ============= =============
During the third quarter of 1996, a SAIF one-time special assessment resulted in a pre-tax charge of $7.2 million. During the fourth quarter of 1996, the Company sold office properties with a book value of $8.1 million for a pre-tax gain of $3.1 million. Furthermore, during the fourth quarter of 1996 mortgage servicing rights were sold for a pre-tax gain of $1.6 million. 47
FIRST SECOND THIRD FOURTH 1995 QUARTER QUARTER QUARTER QUARTER TOTAL - --------------------------- ------------- ------------- ------------- ------------- ------------- Interest income ........... $ 30,452 $ 32,588 $ 33,683 $ 33,354 $ 130,077 Interest expense .......... 15,655 16,743 16,704 16,584 65,686 ------------- ------------- ------------- ------------- ------------- Net interest income ....... $ 14,797 $ 15,845 $ 16,979 $ 16,770 $ 64,391 Provision for loan losses $ 176 $ 1,205 $ 1,436 $ 1,365 $ 4,182 ------------- ------------- ------------- ------------- ------------- Net interest income after provision for loan losses $ 14,621 $ 14,640 $ 15,543 $ 15,405 $ 60,209 ------------- ------------- ------------- ------------- ------------- Income before income taxes $ 6,727 $ 7,706 $ 7,721 $ 6,283 $ 28,437 ------------- ------------- ------------- ------------- ------------- Net income ................ $ 4,381 $ 4,935 $ 5,038 $ 4,065 $ 18,419 ============= ============= ============= ============= ============= Income per common and com- mon equivalent share .... $ 0.25 $ 0.28 $ 0.28 $ 0.16(A) $ 0.97(A) ============= ============= ============= ============= ============= Income per common and com- mon equivalent share as- suming full dilution .... $ 0.25 $ 0.28 $ 0.28 $ 0.16(A) $ 0.96(A) ============= ============= ============= ============= ============= Weighted average number of common and common equivalent shares outstanding ...... 16,518,078 16,577,091 17,224,430 17,361,981 16,922,816 ============= ============= ============= ============= ============= Weighted average number of common and common equiva- lent shares outstanding assuming full dilution ........... 16,518,078 16,739,850 17,360,134 17,361,981 17,084,563 ============= ============= ============= ============= =============
(A) During the fourth quarter of 1995, the Company redeemed $8.4 million of preferred stock. The October 7, 1995 preferred stock redemption resulted in a $1.4 million payment above the recorded amount of the preferred stock. Such excess is treated as preferred stock dividend which impacted earnings per share by $.08 primary and fully diluted earnings per share, for the year 1995 and $.08 for both primary and fully diluted earnings per share for the fourth quarter of 1995. 18. OTHER INFORMATION Alan B. Levan, serves as the Chairman, Chief Executive Officer and President of BankAtlantic, the Company and BFC. John E. Abdo is the Vice Chairman of BankAtlantic, the Company, and BFC and President of BankAtlantic Development Corporation, a wholly owned subsidiary of BankAtlantic. On January 6, 1997, John O'Neill, the former President and Director of BankAtlantic and the Company resigned. 48 In August 1996, BBC announced a plan to purchase up to 1.25 million shares of the Company's common stock. As of December 31, 1996, the Company repurchased in the secondary market 228,125 and 112,500 of Class A and Class B common shares, respectively, for $3.3 million. These shares were retired at the time of repurchase. 19. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS The information set forth below provides disclosure of the estimated fair value of BankAtlantic's financial instruments presented in accordance with the requirements of Statement. No. 107, "Disclosures about Fair Value of Financial Instruments" ("FAS 107") issued by the FASB. Management has made estimates of fair value discount rates that it believes to be reasonable. However, because there is no 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. Fair values are estimated for loan portfolios with similar financial characteristics. Loans are segregated by category such as commercial, commercial real estate, residential mortgage, second mortgages, and other installment. Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and non-performing categories. The fair value of performing loans, except residential mortgage and adjustable rate loans, is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan. The estimate of average maturity is based on BankAtlantic's historical experience with prepayments for each loan classification, modified, as required, by an estimate of the effect of current economic and lending conditions. For performing residential mortgage loans, fair value is estimated by discounting contractual cash flows adjusted for national historical prepayment estimates using discount rates based on secondary market sources adjusted to reflect differences in servicing and credit costs. For adjustable rate loans, the fair value is estimated at book value after adjusting for credit risk inherent in the loan. BankAtlantic's interest rate risk is considered insignificant since the majority of BankAtlantic's adjustable rate loans are based on prime rates or one year Constant Maturity Treasuries ("CMT") rates and adjust monthly or generally not greater than one year. Fair values of non-performing loans are based on the assumption that non-performing loans are on a non-accrual status discounted at market rates during a 24 month work-out period. Assumptions regarding credit risk are judgmentally determined using available market information and specific borrower information. The book value of tax certificates approximates market value. Fair value of mortgage-backed and investment securities is estimated based on bid prices available from security dealers. Estimated cash flows of securities were based on BankAtlantic's historical experience, modified by current economic conditions. Fair value of mortgage-backed securities is estimated based on bid prices available from security dealers. 49 Under FAS 107, the fair value of deposits with no stated maturity, such as non-interest bearing demand deposits, savings and NOW accounts, and money market and checking accounts, is equal to the amount payable on demand at December 31, 1996 and 1995. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using current rates offered by the Bank for such remaining maturities. The book value of securities sold under agreements to repurchase and note payable approximates fair value. The fair values of advances from FHLB, were based upon comparable terms to maturity, interest rates and issuer credit standing. The following table presents information for BankAtlantic's financial instruments at December 31, 1996 and 1995 (in thousands):
DECEMBER 31, 1996 DECEMBER 31, 1995 ------------------------------ ------------------------------ CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------------- -------------- -------------- -------------- Financial assets: Cash and due from depository institutions ..................... $ 102,995 $ 102,995 $ 69,867 $ 69,867 Federal funds sold and other short term investments ........... 6,148 6,148 0 0 Debt securities available for sale 439,345 439,345 691,803 691,803 Investment securities .............. 54,511 54,511 49,856 49,856 Loans receivable ................... 1,824,856 1,832,814 828,630 839,763 Financial liabilities: Deposits ........................... $ 1,832,780 $ 1,828,656 $ 1,300,377 $ 1,306,732 Securities sold under agreements to repurchase .................... 190,588 190,593 66,237 66,240 Advances from FHLB ................. 295,700 293,587 201,785 201,795 Subordinated debentures and note payable ..................... 78,500 73,036 21,001 21,537 Federal funds purchased ............ 0 0 1,200 1,200
The contract amount and related fees of BankAtlantic's commitments to extend credit, standby letters of credit, financial guarantees and forward FHLB commitments approximates fair value (see Note 15 for the contractual amounts of BankAtlantic's financial instrument commitments). 20. ACQUISITIONS On October 11, 1996, BankAtlantic consummated its acquisition of Bank of North America Bancorp ("BNAB") for $53.8 million in cash. The acquisition was accounted for as a purchase for financial reporting purposes as of October 1, 1996. The results of operations include BNAB since October 1, 1996. Funds were obtained through a $57.5 million debt offering and traditional sources. Interest expense of $87,000 was imputed on the purchase price for the period of October 1, 1996 (effective date) through October 11, 1996 (acquisition date). BNAB's primary asset was its wholly owned subsidiary, Bank of North America ("BNA"), a Florida chartered commercial bank. BNA had assets of $525.5 million and a net loss of $2.5 million for the nine 50 months ended September 30, 1996 and net income of $2.2 million for the year ended December 31, 1995. BNA had 13 branches, 5 of which were closed upon acquisition. On February 17, 1995, BankAtlantic completed an acquisition of MegaBank, a Miami-based commercial bank, for $21.4 million in cash, of which $900,000 was paid to the Chief Executive Officer of MegaBank in connection with a non-competition agreement. MegaBank had assets of approximately $152 million. The MegaBank acquisition added 5 branches to BankAtlantic's branch network. The MegaBank acquisition, accounted for by the purchase method of accounting, was effective for financial statement purposes as of February 1, 1995. The results of operations include MegaBank since February 1, 1995. Funds for this acquisition were obtained from traditional sources. Interest expense of $34,000 was imputed on the purchase price for the period of February 1, 1995 (effective date) through February 17, 1995 (acquisition date). 51 The net cash utilized in the purchase is summarized below. The fair value of assets acquired and liabilities assumed inconjunction with the purchase of all the capital stock of Bank of North America in 1996 and MegaBank in 1995 is as follows:
DECEMBER 31 ------------------------ 1996 1995 ----------- ----------- (IN THOUSANDS) Cash ........................................... $ 16,814 $ 6,512 Interest bearing deposits with banks ........... 19,795 0 Investments .................................... 0 1,700 FHLB stock ..................................... 2,788 0 Deferred tax asset ............................. 2,464 2,697 Loans receivable, net .......................... 395,030 116,389 Debt securities available for sale ............. 66,371 18,119 Cost over fair value of net assets acquired ... 19,313 12,072 Accrued interest receivable .................... 4,181 1,208 Real estate owned .............................. 1,017 348 Property and equipment ......................... 6,098 613 Mortgage loan servicing rights ................. 4,047 0 Non-competition agreement ...................... 0 900 Other assets ................................... 8,220 3,137 ----------- ----------- Fair value of assets acquired ................ 546,138 163,695 Deposits ....................................... 469,092 120,165 Securities sold under agreements to repurchase 1,935 20,615 FHLB advances .................................. 5,027 0 Advances by borrowers for taxes and insurance . 8,740 0 Other liabilities .............................. 6,874 1,954 ----------- ----------- Fair value of liabilities assumed ............ 491,668 142,734 Acquisition costs .............................. 655 465 ----------- ----------- Purchase of Bank ............................... $ 55,125 $ 21,426 ----------- ----------- Cash acquired .................................. 16,814 6,512 ----------- ----------- Purchase of Bank, net of cash acquired ........ $ 38,311 $ 14,914 =========== ===========
52 The following table indicates the estimated net decrease in earnings resulting from the net amortization/accretion of the adjustments, including the excess of costs over fair value of net assets acquired, resulting from the use of the purchase method of accounting during each of the years 1997 through 2001. The amounts (in thousands) assume no sales or dispositions of the related assets or liabilities.
NET DECREASE OF YEARS ENDING DECEMBER 31, NET EARNINGS - -------------------------- ---------------- 1997 ..................... $ (2,957) 1998 ..................... $ (3,142) 1999 ..................... $ (2,737) 2000 ..................... $ (2,635) 2001 ..................... $ (2,610) Thereafter ............... $ (15,547)
Adjustments to fair value are being amortized on a straight-line basis, which approximates the level yield method, over the estimated average term of three years for loans and investments, and one year for deposits. Cost over fair value of net assets acquired does not qualify for amortization for tax purposes. Costs over fair value of net assets acquired is being amortized on a straight-line basis over its estimated useful life of 15 years and 10 years for the BNA and MegaBank acquisitions, respectively. The cost over fair value of net assets acquired as of December 31, 1996 and 1995 is $28.6 million and $10.8 million. The $900,000 non-competition agreement is considered an intangible asset for tax purposes and amortized ratably over 15 years. At December 31, 1996 and 1995, the non-competition agreement balance was $417,000 and $696,000, respectively. The agreement is being amortized on a straight-line basis for financial statement purposes over its useful life which was revised from six years to approximately three years upon the resignation of the former MegaBank CEO from BankAtlantic's senior management group. 53 The following is proforma information for the year ended December 31, 1996 and 1995 as if the acquisitions were consummated on January 1, 1996 and 1995, respectively. The proforma information is not necessarily indicative of the combined financial position or results of operations which would have been realized had the acquisition been consummated during the period or as of the dates for which the proforma financial information is presented. (in thousands, except for per share data):
FOR THE YEAR ENDED -------------------------------------------------------- DECEMBER 31, 1996 DECEMBER 31, 1995 --------------------------- --------------------------- HISTORICAL PROFORMA HISTORICAL PROFORMA ------------- ------------ ------------- ------------ Interest income ........................ $ 152,631 $ 182,921 $ 130,077 $ 170,071 Interest expense ....................... 77,031 95,975 65,686 91,756 Provision for loan losses .............. 5,844 9,087 4,182 5,332 ------------- ------------ ------------- ------------ Net interest income after provision for loan losses ...................... 69,756 77,859 60,209 72,983 ------------- ------------ ------------- ------------ Net Income ............................. $ 19,011 $ 13,807 $ 18,419 $ 17,143 ============= ============ ============= ============ Income per common and common equivalent share ..................... $ 1.01 $ 0.73 $ 0.97 $ 0.89 ============= ============ ============= ============ Income per common and common equivalent share assuming full dilution ......... $ 0.93 $ 0.69 $ 0.96 $ 0.88 ============= ============ ============= ============
The proforma includes losses incurred by BNA of $3.0 million on the sale of treasury notes and a $2.3 million SAIF one time special assessment. The following is proforma information for the year ended December 31, 1994 as if the 1995 MegaBank purchase was consummated on January 1, 1994 (in thousands, except for per share data):
FOR THE YEAR ENDED DECEMBER 31, 1994 --------------------------- HISTORICAL PROFORMA ------------- ------------ Interest income ..................................... $ 98,549 $ 110,900 Interest expense .................................... 41,431 46,096 Provision for loan losses ........................... 2,299 2,869 ------------- ------------ Net interest income after provision for loan losses 54,819 61,935 ------------- ------------ Net Income .......................................... $ 16,835 $ 16,680 ============= ============ Income per common and common equivalent share ...... $ 0.97 $ 0.96 ============= ============ Income per common and common equivalent share assuming full dilution ............................ $ 0.97 $ 0.96 ============= ============
The proforma has been adjusted for MegaBank to exclude transaction costs of $635,000 from historical results. Such transaction costs consisted primarily of contract and employee severance costs. These proforma results may not be representative of the actual results that would have occurred or may occur in the future if the transaction had been in effect on the date indicated. 54 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, BBC CAPITAL OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. - ----------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ------- Summary ..................................... 5 Risk Factors ................................ 13 The Company ................................. 21 Use of Proceeds ............................. 21 Market for the Preferred Securities ........ 21 Accounting Treatment ........................ 21 Capitalization .............................. 22 Selected Consolidated Financial Data ....... 23 Management's Discussion and Analysis of Results of Operations and Financial Condition ................................... 26 Business .................................... 54 Regulation and Supervision .................. 62 Management .................................. 72 Description of the Preferred Securities .... 73 Description of the Junior Subordinated Debentures .................................. 85 Description of the Guarantee ................ 93 Relationship Among the Preferred Securities, the Junior Subordinated Debentures and the Guarantee ................................... 96 Certain Federal Income Tax Consequences .... 97 ERISA Considerations ........................ 101 Underwriting ................................ 102 Validity of the Securities .................. 103 Experts ..................................... 103 Available Information ....................... 103 Incorporation of Certain Documents By Reference ................................ 104 Index to Consolidated Financial Statements . F-1
2,000,000 PREFERRED SECURITIES [PU LOGO] BBC CAPITAL TRUST I CUMULATIVE TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY) GUARANTEED, AS DESCRIBED HEREIN, BY BANKATLANTIC BANCORP, INC. - ----------------------------------------------------------------------------- PROSPECTUS - ----------------------------------------------------------------------------- RYAN, BECK & CO. TUCKER ANTHONY INCORPORATED , 1997 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC REGISTRATION FEE ............... $17,424.25 NASD Filing Fee .................... 6,250.00 Nasdaq National Market Listing Fee 17,500.00 Legal Fees and Expenses ............ Trustee Fees and Expenses .......... Accounting Fees and Expenses ...... Printing and Mailing Expenses ..... Blue Sky Fees and Expenses ......... Miscellaneous Expenses ............. ------------- TOTAL FEES AND EXPENSES .......... $ =============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 607.0850 of the Florida Business Corporation Act and the Articles of Incorporation and Bylaws of BankAtlantic Bancorp, Inc. (the "Company") provide for indemnification of the Company's directors and officers against claims, liabilities, amounts paid in settlement and expenses in a variety of circumstances, which may include liabilities under the Securities Act of 1933, as amended (the "Securities Act"). In addition, the Company carries insurance permitted by the laws of the State of Florida on behalf of Directors, officers, employees or agents which may cover liabilities under the Securities Act. Under the Trust Agreement of BBC Capital Trust I ("BBC Capital"), the Company will agree to indemnify each of the Trustees of BBC Capital or any predecessor Trustee for BBC Capital, and to hold each Trustee harmless against, any loss, damage, claim, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the Trust Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties under the Trust Agreement. ITEM 16. EXHIBITS The following exhibits either are filed herewith or incorporated by reference to documents previously filed or will be filed by amendment, as indicated below:
EXHIBITS DESCRIPTION - -------------------------------------------------------------------------------------------------------------- 1 Form of Underwriting Agreement* 3.1 Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-3, filed on June 5, 1996 (Registration No. 333-05287) 3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-4, filed on May 5, 1994 (Registration No. 33-77708)) 4.1 Form of Indenture with respect to the Company's % Junior Subordinated Debentures 4.2 Form of Specimen Junior Subordinated Debenture (included as an exhibit to the Form of Indenture filed as Exhibit 4.1) 4.3 Certificate of Trust of BBC Capital Trust I 4.4 Trust Agreement of BBC Capital Trust I 4.5 Form of Amended and Restated Trust Agreement of BBC Capital Trust I 4.6 Form of Certificate for Cumulative Trust Preferred Security of BBC Capital Trust I (included as an exhibit to Exhibit 4.5) 4.7 Form of Guarantee Agreement for BBC Capital Trust* II-1 EXHIBITS DESCRIPTION - -------------------------------------------------------------------------------------------------------------- 4.8 Form of Agreement as to Expenses and Liabilities (included as an exhibit to Exhibit 4.5)* 5.1 Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. regarding validity of the issuance of the Junior Subordinated Debentures 5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, as to the validity of the issuance of the Cumulative Trust Preferred Securities to be issued by BBC Capital Trust I 8.1 Tax Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. 12 Statement regarding computation of earnings to fixed charges (incorporated by reference to Exhibit 12.1 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996, filed on March 21, 1997) 23.1 Consent of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. (included in Exhibit 5 and Exhibit 8.1) 23.2 Consent of Richards, Layton & Finger (included in Exhibit 5.2) 23.3 Consent of KPMG Peat Marwick L.L.P. 24 Power of Attorney (included with signature pages to this Registration Statement). 25.1 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the Indenture 25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the Amended and Restated Trust Agreement 25.3 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the Guarantee Agreement for BBC Capital Trust I
- ----------------------------------------------------------------------------- * To be filed by amendment ITEM 17. UNDERTAKINGS Each of the undersigned Registrants hereby undertake: (a) That, for purposes of determining any liability under the Securities Act, each filing of the Company's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrants pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (c)(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Company certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fort Lauderdale, State of Florida, on the 21st day of March, 1997. BANKATLANTIC BANCORP, INC. By: /s/ ALAN B. LEVAN Alan B. Levan, Chairman of the Board of Directors, Chief Executive Officer and President Pursuant to the requirements of the Securities Act of 1933, BBC Capital Trust I certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fort Lauderdale, State of Florida, on the 21st day of March, 1997. BBC CAPITAL TRUST I By: /s/ ALAN B. LEVAN Alan B. Levan, Trustee By: /s/ FRANK V. GRIECO Frank V. Grieco, Trustee By: /s/ JASPER R. EANES Jasper R. Eanes, Trustee II-3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Alan B. Levan and Frank V. Grieco and each of them acting alone, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - ----------------------------------------------------------------------------------------- /s/ ALAN B. LEVAN Chairman of the Board March 21, 1997 Alan B. Levan Chief Executive Officer and President /s/ JASPER R. EANES Executive Vice President, March 21, 1997 Jasper R. Eanes Chief Financial Officer /s/ JOHN E. ABDO Vice-Chairman of the Board March 21, 1997 John E. Abdo /s/ FRANK V. GRIECO Senior Executive Vice President March 21, 1997 Frank V. Grieco and Director Director Steven M. Coldren /s/ MARY E. GINESTRA Director March 21, 1997 Mary E. Ginestra /s/ BRUNO DiGIULIAN Director March 21, 1997 Bruno DiGiulian /s/ CHARLIE C. WINNINGHAM, II Director March 21, 1997
Charlie C. Winningham, II II-4 INDEX TO EXHIBITS
SEQUENTIALLY NUMBERED EXHIBIT DESCRIPTION PAGE - ----------------------------------------------------------------------------------------------------------------- 4.1 Form of Indenture with respect to the Company's % Junior Subordinated Debentures 4.3 Certificate of Trust of BBC Capital Trust I 4.4 Trust Agreement of BBC Capital Trust I 4.5 Form of Amended and Restated Trust Agreement of BBC Capital Trust I 5.1 Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. regarding validity of the issuance of the Junior Subordinated Debentures 5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, as to the validity of the issuance of the Cumulative Trust Preferred Securities to be issued by BBC Capital Trust I 8.1 Tax Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. 23.3 Consent of KPMG Peat Marwick L.L.P. 25.1 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the Indenture 25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the Amended and Restated Trust Agreement 25.3 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the Guarantee Agreement for BBC Capital Trust I
EX-4.1 2 EXHIBIT 4.1 [FORM OF INDENTURE] BANKATLANTIC BANCORP, INC. AND WILMINGTON TRUST COMPANY, AS TRUSTEE INDENTURE _______% JUNIOR SUBORDINATED DEBENTURES DUE 2027 DATED AS OF ______________ ____, 1997
TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS................................................................. 2 SECTION 1.1 DEFINITIONS OF TERMS................................................ 2 ARTICLE II ISSUE, DESCRIPTION, TERMS, CONDITIONS REGISTRATION AND EXCHANGE OF THE DEBENTURES................................. 11 SECTION 2.1 DESIGNATION AND PRINCIPAL AMOUNT.................................... 11 SECTION 2.2 MATURITY............................................................ 11 SECTION 2.3 FORM AND PAYMENT.................................................... 11 SECTION 2.4 INTEREST............................................................ 12 SECTION 2.5 EXECUTION AND AUTHENTICATIONS....................................... 13 SECTION 2.6 REGISTRATION OF TRANSFER AND EXCHANGE............................... 14 SECTION 2.7 TEMPORARY DEBENTURES................................................ 16 SECTION 2.8 MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES.......................................................... 16 SECTION 2.9 CANCELLATION........................................................ 17 SECTION 2.10 BENEFIT OF INDENTURE................................................ 18 SECTION 2.11 AUTHENTICATION AGENT................................................ 18 SECTION 2.12 RIGHT OF SET-OFF.................................................... 19 ARTICLE III REDEMPTION OF DEBENTURES.................................................... 19 SECTION 3.1 REDEMPTION.......................................................... 19 SECTION 3.2 SPECIAL EVENT REDEMPTION............................................ 19 SECTION 3.3 OPTIONAL REDEMPTION BY COMPANY...................................... 20 SECTION 3.4 NOTICE OF REDEMPTION................................................ 20 SECTION 3.5 PAYMENT UPON REDEMPTION............................................. 22 SECTION 3.6 NO SINKING FUND..................................................... 22 ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD........................................ 22 SECTION 4.1 EXTENSION OF INTEREST PAYMENT PERIOD................................ 22 SECTION 4.2 NOTICE OF EXTENSION................................................. 23 SECTION 4.3 LIMITATION ON TRANSACTIONS.......................................... 24 ARTICLE V PARTICULAR COVENANTS OF THE COMPANY......................................... 24 SECTION 5.1 PAYMENT OF PRINCIPAL AND INTEREST................................... 24 SECTION 5.2 MAINTENANCE OF AGENCY............................................... 25 SECTION 5.3 PAYING AGENTS....................................................... 25 SECTION 5.4 APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE............................................................. 27 SECTION 5.5 COMPLIANCE WITH CONSOLIDATION PROVISIONS.......................................................... 27 SECTION 5.6 LIMITATION ON TRANSACTIONS.......................................... 27 SECTION 5.7 COVENANTS AS TO THE TRUST........................................... 27 SECTION 5.8 COVENANTS AS TO PURCHASES........................................... 28
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PAGE ARTICLE VI DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE.............................................. 28 SECTION 6.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF DEBENTUREHOLDERS....................................... 28 SECTION 6.2 PRESERVATION OF INFORMATION COMMUNICATIONS WITH DEBENTUREHOLDERS................................ 29 SECTION 6.3 REPORTS BY THE COMPANY.............................................. 29 SECTION 6.4 REPORTS BY THE TRUSTEE.............................................. 30 ARTICLE VII REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS ON EVENT OF DEFAULT......................................................... 30 SECTION 7.1 EVENTS OF DEFAULT................................................... 30 SECTION 7.2 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.............................................. 33 SECTION 7.3 APPLICATION OF MONEYS COLLECTED..................................... 34 SECTION 7.4 LIMITATION ON SUITS................................................. 35 SECTION 7.5 RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER................................................. 36 SECTION 7.6 CONTROL BY DEBENTUREHOLDERS......................................... 36 SECTION 7.7 UNDERTAKING TO PAY COSTS............................................ 37 SECTION 7.8 DIRECT ACTION BY HOLDERS OF PREFERRED SECURITIES.......................................................... 38 ARTICLE VIII FORM OF DEBENTURE AND ORIGINAL ISSUE........................................ 38 SECTION 8.1 FORM OF DEBENTURE................................................... 38 SECTION 8.2 ORIGINAL ISSUE OF DEBENTURES........................................ 38 SECTION 8.3 GLOBAL DEBENTURES................................................... 38 ARTICLE IX CONCERNING THE TRUSTEE...................................................... 40 SECTION 9.1 CERTAIN DUTIES AND RESPONSIBILITIES................................. 40 SECTION 9.2 NOTICE OF DEFAULTS.................................................. 42 SECTION 9.3 CERTAIN RIGHTS OF TRUSTEE........................................... 42 SECTION 9.4 TRUSTEE NOT RESPONSIBLE FOR RECITALS, ETC................................................................. 44 SECTION 9.5 MAY HOLD DEBENTURES................................................. 44 SECTION 9.6 MONEYS HELD IN TRUST................................................ 44 SECTION 9.7 COMPENSATION AND REIMBURSEMENT...................................... 44 SECTION 9.8 RELIANCE ON OFFICERS' CERTIFICATE................................... 45 SECTION 9.9 DISQUALIFICATION: CONFLICTING INTERESTS............................. 45 SECTION 9.10 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY............................. 45 SECTION 9.11 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR........................................................... 46 SECTION 9.12 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.............................. 47 SECTION 9.13 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.............................................. 48 SECTION 9.14 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY......................................................... 49
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PAGE ARTICLE X CONCERNING THE DEBENTUREHOLDERS............................................. 49 SECTION 10.1 EVIDENCE OF ACTION BY HOLDERS....................................... 49 SECTION 10.2 PROOF OF EXECUTION BY DEBENTUREHOLDERS.............................. 50 SECTION 10.3 WHO MAY BE DEEMED OWNERS............................................ 50 SECTION 10.4 CERTAIN DEBENTURES OWNED BY COMPANY DISREGARDED......................................................... 51 SECTION 10.5 ACTIONS BINDING ON FUTURE DEBENTUREHOLDERS.................................................... 51 ARTICLE XI SUPPLEMENTAL INDENTURES..................................................... 52 SECTION 11.1 SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF DEBENTUREHOLDERS......................................... 52 SECTION 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF DEBENTUREHOLDERS.................................................... 53 SECTION 11.3 EFFECT OF SUPPLEMENTAL INDENTURES................................... 54 SECTION 11.4 DEBENTURES AFFECTED BY SUPPLEMENTAL INDENTURES.......................................................... 54 SECTION 11.5 EXECUTION OF SUPPLEMENTAL INDENTURES................................ 54 ARTICLE XII SUCCESSOR CORPORATION....................................................... 55 SECTION 12.1 COMPANY MAY CONSOLIDATE, ETC........................................ 55 SECTION 12.2 SUCCESSOR CORPORATION SUBSTITUTED................................... 56 SECTION 12.3 EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE............................................................. 56 ARTICLE XIII SATISFACTION AND DISCHARGE.................................................. 57 SECTION 13.1 SATISFACTION AND DISCHARGE OF INDENTURE............................. 57 SECTION 13.2 DISCHARGE OF OBLIGATIONS............................................ 57 SECTION 13.3 DEPOSITED MONEYS TO BE HELD IN TRUST................................ 58 SECTION 13.4 PAYMENT OF MONIES HELD BY PAYING AGENTS............................. 58 SECTION 13.5 REPAYMENT TO COMPANY................................................ 58 ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS...................................................... 59 SECTION 14.1 NO RECOURSE......................................................... 59 ARTICLE XV MISCELLANEOUS PROVISIONS.................................................... 59 SECTION 15.1 EFFECT ON SUCCESSORS AND ASSIGNS.................................... 59 SECTION 15.2 ACTIONS BY SUCCESSOR................................................ 59 SECTION 15.3 SURRENDER OF COMPANY POWERS......................................... 60 SECTION 15.4 NOTICES............................................................. 60 SECTION 15.5 GOVERNING LAW....................................................... 60 SECTION 15.6 TREATMENT OF DEBENTURES AS DEBT..................................... 60 SECTION 15.7 COMPLIANCE CERTIFICATES AND OPINIONS................................ 60 SECTION 15.8 PAYMENTS ON BUSINESS DAYS........................................... 61 SECTION 15.9 CONFLICT WITH TRUST INDENTURE ACT................................... 61 SECTION 15.10 COUNTERPARTS........................................................ 61
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PAGE SECTION 15.11 SEPARABILITY........................................................ 61 SECTION 15.12 ASSIGNMENT.......................................................... 62 SECTION 15.13 ACKNOWLEDGMENT OF RIGHTS............................................ 62 ARTICLE XVI SUBORDINATION OF DEBENTURES................................................. 62 SECTION 16.1 AGREEMENT TO SUBORDINATE............................................ 62 SECTION 16.2 DEFAULT ON SENIOR DEBT OR SUBORDINATED DEBT................................................................ 63 SECTION 16.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY................................ 63 SECTION 16.4 SUBROGATION......................................................... 65 SECTION 16.5 TRUSTEE TO EFFECTUATE SUBORDINATION................................. 66 SECTION 16.6 NOTICE BY THE COMPANY............................................... 67 SECTION 16.7 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS........................................................ 68 SECTION 16.8 SUBORDINATION MAY NOT BE IMPAIRED................................... 68
-iv- PAGE CROSS-REFERENCE TABLE Section of Trust Indenture Act Section of of 1939, as amended Indenture - ------------------- --------- 310(a) 9.10 310(b) 9.9 9.11 310(c) N/A 311(a) 9.14 311(b) 9.14 311(c) N/A 312(a) 6.1 6.2(a) 312(b) 6.2(c) 312(c) 6.2(c) 313(a) 6.4(a) 313(b) 6.4(b) 313(c) 6.4(a) 6.4(b) 313(d) 6.4(c) 314(a) 6.3(a) 314(b) N/A 314(c) 15.7 314(d) N/A 314(e) 15.7 314(f) N/A 315(a) 9.1(a) 9.3 315(b) 9.2 315(c) 9.1(a) 315(d) 9.1(b) 315(e) 7.7 316(a) 1.1 7.6 316(b) 7.4(b) 316(c) 10.1(b) 317(a) 7.2 317(b) 5.3 318(a) 15.9 Note: This Cross-Reference Table does not constitute part of this Indenture and shall not affect the interpretation of any of its terms or provisions. -v- INDENTURE INDENTURE, dated as of January ____, 1997, between BANKATLANTIC BANCORP, INC., a Florida corporation (the "Company"), and WILMINGTON TRUST COMPANY, a banking corporation duly organized and existing under the laws of the State of Massachusetts, as trustee (the "Trustee"); RECITALS WHEREAS, for its lawful corporate purposes, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of securities to be known as its _____% Junior Subordinated Debentures due 2027 (hereinafter referred to as the "Debentures"), the form and substance of such Debentures and the terms, provisions and conditions thereof to be set forth as provided in this Indenture; and WHEREAS, BBC Capital Trust I, a Delaware statutory business trust (the "Trust"), has offered to the public $_______ million aggregate liquidation amount of its Preferred Securities (as defined herein) and proposes to invest the proceeds from such offering, together with the proceeds of the issuance and sale by the Trust to the Company of $_______ million aggregate liquidation amount of its Common Securities (as defined herein), in $_________ million aggregate principal amount of the Debentures; and WHEREAS, the Company has requested that the Trustee execute and deliver this Indenture; and WHEREAS, all requirements necessary to make this Indenture a valid instrument in accordance with its terms, and to make the Debentures, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company, have been performed, and the execution and delivery of this Indenture have been duly authorized in all respects; and WHEREAS, to provide the terms and conditions upon which the Debentures are to be authenticated, issued and delivered, the Company has duly authorized the execution of this Indenture; and WHEREAS, all things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, in consideration of the premises and the purchase of the Debentures by the holders thereof, it is mutually covenanted and agreed as follows for the equal and ratable benefit of the holders of the Debentures: ARTICLE I DEFINITIONS SECTION 1.1 DEFINITIONS OF TERMS. The terms defined in this Section 1.1 (except as in this Indenture 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 and shall include the plural as well as the singular. All other terms used in this Indenture that are defined in the Trust Indenture Act, or that are by reference in the Trust Indenture Act defined in the Securities Act (except as herein otherwise expressly provided or unless the context otherwise requires), shall have the meanings assigned to such terms in the Trust Indenture Act and in the Securities Act as in force at the date of the execution of this instrument. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with Generally Accepted Accounting Principles. "Accelerated Maturity Date" means if the Company elects to accelerate the Maturity Date in accordance with Section 2.2(b), the date selected by the Company which is prior to the Scheduled Maturity Date, but is after _____________, 2002. "Additional Interest" shall have the meaning set forth in Section 2.4. "Administrative Trustees" shall have the meaning set forth in the Trust Agreement. "Affiliate" means, with respect to a specified Person, (a) any Person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities or other ownership interests of the specified Person; (b) any Person 10% or more of whose outstanding voting securities or other ownership interests are directly or indirectly owned, controlled or held with power to vote by the specified Person; (c) any Person directly or indirectly controlling, controlled by, or under common control with the specified Person; (d) a partnership in which the specified Person is a general partner; (e) any officer or director of the specified Person; and (f) if the specified Person is an individual, any entity of which the specified Person is an officer, director or general partner. "Agent Member" means any member of, or participant in, the Depositary. -2- "Applicable Procedures" means, with respect to any transfer or transaction involving a Global Debenture or beneficial interest therein, the rules and procedures of the Depositary for such Global Debenture, in each case to the extent applicable to such transaction and as in effect from time to time. "Authenticating Agent" means an authenticating agent with respect to the Debentures appointed by the Trustee pursuant to Section 2.11. "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 of the Company or any duly authorized committee of such Board. "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. "Business Day" means, with respect to the Debentures, any day other than a Saturday or a Sunday or a day on which federal or state banking institutions in the Borough of Manhattan, The City of New York, are authorized or required by law, executive order or regulation to close, or a day on which the Corporate Trust Office of the Trustee or the Property Trustee is closed for business. "Capital Treatment Event" means the reasonable determination by the Company that, as a result of any amendment to, or change (including any proposed change) in, the laws (or any regulations thereunder) of the United States or any political subdivision thereof or therein, or as a result of any official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such proposed change pronouncement, action or decision is announced on or after the date of original issuance of the Preferred Securities under the Trust Agreement, there is more than an insubstantial risk that the Company will not be entitled to treat an amount equal to the Liquidation Amount of such Preferred Securities as "Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital adequacy guidelines of the Federal Reserve (or any successor regulatory authority with jurisdiction over bank holding companies), or any capital adequacy guidelines as then in effect and applicable to the Company. "Certificate" means a certificate signed by the principal executive officer, the principal financial officer, the principal accounting officer, the treasurer or any vice president of the Company. The Certificate need not comply with the provisions of Section 15.7. -3- "Change in 1940 Act Law" shall have the meaning set forth in the definition of "Investment Company Event." "Commission" means the Securities and Exchange Commission. "Common Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with the Preferred Securities; provided, however, that upon the occurrence of an Event of Default, the rights of holders of Common Securities to payment in respect of (i) distributions, and (ii) payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of Preferred Securities. "Company" means BankAtlantic Bancorp, Inc., a corporation duly organized and existing under the laws of the State of Florida, and, subject to the provisions of Article XII, shall also include its successors and assigns. "Compounded Interest" shall have the meaning set forth in Section 4.1. "Corporate Trust Office" means the office of the Trustee at which, at any particular time, its corporate trust business shall be principally administered, which office at the date hereof is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administrator. "Coupon Rate" shall have the meaning set forth in Section 2.4. "Custodian" means any receiver, trustee, assignee, liquidator, or similar official under any Bankruptcy Law. "Debentures" shall have the meaning set forth in the Recitals hereto. "Debentureholder," "holder of Debentures," "registered holder," or other similar term, means the Person or Persons in whose name or names a particular Debenture shall be registered on the books of the Company or the Trustee kept for that purpose in accordance with the terms of this Indenture. "Debenture Register" shall have the meaning set forth in Section 2.6(b). "Debt" means with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including -4- obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person; and (vi) every obligation of the type referred to in clauses (i) through (v) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable, directly or indirectly, as obligor or otherwise. "Default" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default. "Deferred Interest" shall have the meaning set forth in Section 4.1. "Depositary" means, with respect to the Debentures issuable or issued in whole or in part in the form of one or more Global Debentures, the Person designated as Depositary by the Company. "Dissolution Event" means that as a result of the occurrence and continuation of a Special Event, the Trust is to be dissolved in accordance with the Trust Agreement and the Debentures held by the Property Trustee are to be distributed to the holders of the Trust Securities issued by the Trust pro rata in accordance with the Trust Agreement. "Event of Default" means, with respect to the Debentures, any event specified in Section 7.1 , which has continued for the period of time, if any, and after the giving of the notice, if any, therein designated. "Exchange Act" means the Securities Exchange Act of 1934, as amended, as in effect at the date of execution of this instrument. "Extended Interest Payment Period" shall have the meaning set forth in Section 4.1. "Federal Reserve" means the Board of Governors of the Federal Reserve System. "Generally Accepted Accounting Principles" means such accounting principles as are generally accepted at the time of any computation required hereunder. -5- "Global Debenture" means a Debenture in the form prescribed in Exhibit A hereto evidencing all or part of the Debentures, issued to the Depositary or its nominee, and registered in the name of such Depositary or its nominee. "Governmental Obligations" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged; or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America that, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such Governmental Obligation or a specific payment of principal of or interest on any such Governmental Obligation held by such custodian for the account of the holder of such depositary receipt; provided, however, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the Governmental Obligation or the specific payment of principal of or interest on the Governmental Obligation evidenced by such depositary receipt. "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. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into in accordance with the terms hereof. "Interest Payment Date," when used with respect to any installment of interest on the Debentures, means the date specified in the Debenture or in a Board Resolution or in an indenture supplemental hereto with respect to the Debentures as the fixed date on which an installment of interest with respect to the Debentures is due and payable. "Investment Company Act" means the Investment Company Act of 1940, as amended, as in effect at the date of execution of this instrument. "Investment Company Event" means the receipt by the Trust of an Opinion of Counsel, rendered by a law firm having experience in tax and securities practice, to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any -6- legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or shall be considered an "investment company" that is required to be registered under the Investment Company Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities under the Trust Agreement. "Maturity Date" means the date on which the Debentures mature and on which the principal shall be due and payable together with all accrued and unpaid interest thereon including Compounded Interest and Additional Interest, if any. "Ministerial Action" shall have the meaning set forth in Section 3.2. "Officers' Certificate" means a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Controller or an Assistant Controller or the Secretary or an Assistant Secretary of the Company that is delivered to the Trustee in accordance with the terms hereof. "Opinion of Counsel" means an opinion in writing of legal counsel, who may be an employee of or counsel for the Company, that is delivered to the Trustee in accordance with the terms hereof. "Outstanding," when used with reference to the Debentures, means, subject to the provisions of Section 10.4, as of any particular time, all Debentures theretofore authenticated and delivered by the Trustee under this Indenture, except (a) Debentures theretofore canceled by the Trustee or any paying agent, or delivered to the Trustee or any paying agent for cancellation or that have previously been canceled; (b) Debentures or portions thereof for the payment or redemption of which moneys or Governmental Obligations 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 of such Debentures are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in Article III or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Debentures in lieu of or in substitution for which other Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.6. "Person" means any individual, corporation, partnership, joint-venture, joint-stock company, unincorporated organization or government or any agency or political subdivision thereof. -7- "Place of Payment" means the place or places where the principal of and interest on the Debentures are payable in accordance with the terms of this Indenture. "Predecessor Debenture" means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and, for the purposes of this definition, any Debenture authenticated and delivered under Section 2.8 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture. "Preferred 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 of an Event of Default, the rights of holders of Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of Preferred Securities. "Preferred Securities Guarantee" means any guarantee that the Company may enter into with the Trustee or other Persons that operate directly or indirectly for the benefit of holders of Preferred Securities. "Property Trustee" has the meaning set forth in the Trust Agreement. "Responsible Officer" when used with respect to the Trustee means the Chairman of the Board of Directors, the President, any Vice President, the Secretary, the Treasurer, any trust officer, any corporate trust officer or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject. "Scheduled Maturity Date" means _____________, 2027. "Securities Act," means the Securities Act of 1933, as amended, as in effect at the date of execution of this instrument. "Senior Debt" means the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding), on Debt, whether incurred on or prior to the date of this Indenture or thereafter incurred, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations -8- are not superior in right of payment to the Debentures or to other Debt which is pari passu with, or subordinated to, the Debentures; provided, however, that Senior Debt shall not be deemed to include (i) any Debt of the Company which when incurred and without respect to any election under Section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was without recourse to the Company; (ii) any Debt of the Company to any of its subsidiaries; (iii) any Debt to any employee of the Company; (iv) any Debt which by its terms is subordinated to trade accounts payable or accrued liabilities arising in the ordinary course of business to the extent that payments made to the holders of such Debt by the holders of the Debentures as a result of the subordination provisions of this Indenture would be greater than they otherwise would have been as a result of any obligation of such holders to pay amounts over to the obligees on such trade accounts payable or accrued liabilities arising in the ordinary course of business as a result of subordination provisions to which such Debt is subject; and (v) any Debt which constitutes Subordinated Debt. "Senior Indebtedness" shall have the meaning set forth in Section 16.1. "Special Event" means a Tax Event, an Investment Company Event or a Capital Treatment Event. "Subordinated Debt" means the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding), on Debt, whether incurred on or prior to the date of this Indenture or thereafter incurred, which is by its terms expressly provided to be junior and subordinate to other Debt of the Company (other than the Debentures) including, without limitation, the Company's currently outstanding 9% Subordinated Debentures due 2005 and 6 3/4% Convertible Subordinated Debentures due 2006. "Subsidiary" means, with respect to any Person, (i) any corporation at least a majority of whose outstanding Voting Stock shall at the time be 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, trust or similar entity, at least a majority of whose outstanding partnership or similar interests shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. -9- "Tax Event" means the receipt by the Trust of an Opinion of Counsel, rendered by a law firm having experience in tax and securities practice, to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of issuance of the Preferred Securities under the Trust Agreement, there is more than an insubstantial risk that (i) the Trust is, or shall be within 90 days after the date of such Opinion of Counsel, 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 after the date of such Opinion of Counsel, shall not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or shall be within 90 days after the date of such Opinion of Counsel, subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges. The Trust or the Company shall request and receive such Opinion of Counsel with regard to such matters within a reasonable period of time after the Trust or the Company shall have become aware of the possible occurrence of any of the events described in clauses (i) through (iii) above. "Trust" means BBC Capital Trust I, a Delaware statutory business trust. "Trust Agreement" means the Amended and Restated Trust Agreement, dated ______________, 1997, of the Trust. "Trustee" means Wilmington Trust Company and, subject to the provisions of Article IX, shall also include its successors and assigns, and, if at any time there is more than one Person acting in such capacity hereunder, "Trustee" shall mean each such Person. "Trust Indenture Act," means the Trust Indenture Act of 1939, as amended, subject to the provisions of Sections 11.1, 11.2, and 12.1, as in effect at the date of execution of this instrument. "Trust Securities" means the Common Securities and Preferred Securities, collectively. "Voting Stock," as applied to stock of any Person, 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, -10- participations or other equivalents having such power only by reason of the occurrence of a contingency. ARTICLE II ISSUE, DESCRIPTION, TERMS, CONDITIONS REGISTRATION AND EXCHANGE OF THE DEBENTURES SECTION 2.1 DESIGNATION AND PRINCIPAL AMOUNT. There is hereby authorized Debentures designated the "____% Subordinated Debentures due 2027," limited in aggregate principal amount to $_____________ million, which amount shall be as set forth in any written order of the Company for the authentication and delivery of Debentures pursuant to Section 2.5. SECTION 2.2 MATURITY. (a) The Maturity Date shall be either: (i) the Scheduled Maturity Date; or (ii) if the Company elects to accelerate the Maturity Date to be a date prior to the Scheduled Maturity Date in accordance with Section 2.2(b), the Accelerated Maturity Date. (b) The Company may at any time before the day which is 90 days before the Scheduled Maturity Date and after ______________, 2002, elect to shorten the Maturity Date only once to the Accelerated Maturity Date provided that the Company has received prior regulatory approval if then required under applicable capital guidelines or regulatory policies. (c) if the Company elects to accelerate the Maturity Date in accordance with Section 2.2(b), the Company shall give notice to the registered holders of the Debentures, the Property Trustee and the Trust of the acceleration of the Maturity Date and the Accelerated Maturity Date at least 90 days and no more than 180 days before the Accelerated Maturity Date. SECTION 2.3 FORM AND PAYMENT. The Debentures shall be issued in fully registered certificated form without interest coupons. Principal and interest on the Debentures issued in certificated form shall be payable, the transfer of such Debentures shall be registrable and such Debentures shall be exchangeable for Debentures bearing identical -11- terms and provisions at the office or agency of the Trustee; provided, however, that payment of interest may be made at the option of the Company by check mailed to the holder at such address as shall appear in the Debenture Register or by wire transfer to an account maintained by the holder as specified in the Debenture Register, provided that the holder provides proper transfer instructions by the regular record date. Notwithstanding the foregoing, so long as the holder of any Debentures is the Property Trustee, the payment of the principal of and interest (including Compounded Interest and Additional Interest, if any) on such Debentures held by the Property Trustee shall be made at such place and to such account as may be designated by the Property Trustee. SECTION 2.4 INTEREST. (a) Each Debenture shall bear interest at the rate of ____% per annum (the "Coupon Rate") from the original date of issuance 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) on any overdue installment of interest at the Coupon Rate, compounded quarterly, payable (subject to the provisions of Article IV) quarterly in arrears on March 31, June 30, September 30, and December 31 of each year (each, an "Interest Payment Date," commencing on __________, 1997), to the Person in whose name such Debenture or any Predecessor Debenture is registered, at the close of business on the regular record date for such interest installment, which shall be the fifteenth day of the last month of the calendar quarter. (b) The amount of interest payable for any period shall be computed on the basis of a 360-day year of twelve 30-day months. Except as provided in the following sentence, the amount of interest payable for any period shorter than a full quarterly period for which interest is computed, shall be computed on the basis of the actual number of days elapsed in such period. 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. -12- (c) If, at any time while the Property Trustee is the holder of any Debentures, the Trust or the Property Trustee is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any case, the Company shall pay as additional interest ("Additional Interest") on the Debentures held by the Property Trustee, such additional amounts as shall be required so that the net amounts received and retained by the Trust and the Property Trustee after paying such taxes, duties, assessments or other governmental charges shall be equal to the amounts the Trust and the Property Trustee would have received had no such taxes, duties, assessments or other governmental charges been imposed. SECTION 2.5 EXECUTION AND AUTHENTICATIONS. (a) The Debentures shall be signed on behalf of the Company by its Chief Executive Officer, President or one of its Vice Presidents, under its corporate seal attested by its Secretary or one of its Assistant Secretaries. Signatures may be in the form of a manual or facsimile signature. The Company may use the facsimile signature of any Person who shall have been a Chief Executive Officer, President or Vice President thereof, or of any Person who shall have been a Secretary or Assistant Secretary thereof, notwithstanding the fact that at the time the Debentures shall be authenticated and delivered or disposed of such Person shall have ceased to be the Chief Executive Officer, President or a Vice President, or the Secretary or an Assistant Secretary, of the Company. The seal of the Company may be in the form of a facsimile of such seal and may be impressed, affixed, imprinted or otherwise reproduced on the Debentures. The Debentures may contain such notations, legends or endorsements required by law, stock exchange rule or usage. Each Debenture shall be dated the date of its authentication by the Trustee. (b) A Debenture shall not be valid until authenticated manually by an authorized signatory of the Trustee, or by an Authenticating Agent. Such signature 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. (c) At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver -13- Debentures executed by the Company to the Trustee for authentication, together with a written order of the Company for the authentication and delivery of such Debentures signed by its Chief Executive Officer, President or any Vice President and its Secretary or any Assistant Secretary, and the Trustee in accordance with such written order shall authenticate and deliver such Debentures. (d) 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 9.1) shall be fully protected in relying upon, an Opinion of Counsel stating that the form and terms thereof have been established in conformity with the provisions of this Indenture. (e) The Trustee shall not be required to authenticate such Debentures if the issue of such Debentures pursuant to this Indenture shall affect the Trustee's own rights, duties or immunities under the Debentures and this Indenture or otherwise in a manner that is not reasonably acceptable to the Trustee. (f) Debentures distributed to holders of Global Preferred Securities (as defined in the Trust Agreement) upon the dissolution of the Trust shall be distributed in the form of one or more Global Debentures registered in the name of a Depositary or its nominee, and deposited with the Debenture Registrar, as custodian for such Depositary, or with such Depositary, for credit by the Depositary to the respective accounts of the beneficial owners of the Debentures represented thereby (or such other accounts as they may direct). Debentures distributed to holders of Preferred Securities other than Global Preferred Securities upon the dissolution of the Trust shall not be issued in the form of a Global Debenture or any other form intended to facilitate book-entry trading in beneficial interests in such Debentures. SECTION 2.6 REGISTRATION OF TRANSFER AND EXCHANGE. (a) Debentures may be exchanged upon presentation thereof at the office or agency of the Company designated for such purpose, for other Debentures and for a like aggregate principal amount, upon payment of a sum sufficient to cover any tax or other governmental charge in relation thereto, all as provided in this Section 2.6. In respect of any Debentures so surrendered for exchange, the -14- Company shall execute, the Trustee shall authenticate and such office or agency shall deliver in exchange therefor the Debenture or Debentures that the Debenture holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously outstanding. (b) The Company shall keep, or cause to be kept, at its office or agency designated for such purpose or such other location designated by the Company a register or registers (herein referred to as the "Debenture Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall register the Debentures and the transfers of Debentures as in this Article II provided and which at all reasonable times shall be open for inspection by the Trustee. The registrar for the purpose of registering Debentures and transfer of Debentures as herein provided shall be appointed as authorized by Board Resolution (the "Debenture Registrar"). Upon surrender for transfer of any Debenture at the office or agency of the Company designated for such purpose, the Company shall execute, the Trustee shall authenticate and such office or agency shall deliver in the name of the transferee or transferees a new Debenture or Debentures for a like aggregate principal amount. All Debentures presented or surrendered for exchange or registration of transfer, as provided in this Section 2.6, shall be accompanied (if so required by the Company or the Debenture Registrar) by a written instrument or instruments of transfer, in form satisfactory to the Company or the Debenture Registrar, duly executed by the registered holder or by such holder's duly authorized attorney in writing. (c) No service charge shall be made for any exchange or registration of transfer of Debentures, or issue of new Debentures in case of partial redemption, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge in relation thereto, other than exchanges pursuant to Section 2.7, Section 3.5(b) and Section 11.4 not involving any transfer. (d) The Company shall not be required (i) to issue, exchange or register the transfer of any Debentures during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of less than all the Outstanding Debentures and ending at the close of business on the day of such mailing; nor (ii) to register the transfer of or exchange any Debentures or portions thereof called for redemption. -15- SECTION 2.7 TEMPORARY DEBENTURES. Pending the preparation of definitive Debentures, the Company may execute, and the Trustee shall authenticate and deliver, temporary Debentures (printed, lithographed, or typewritten). Such temporary Debentures shall be 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 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 like effect, as the definitive Debentures. Without unnecessary delay the Company shall execute and shall furnish definitive Debentures and thereupon any or all temporary Debentures may be surrendered in exchange therefor (without charge to the holders), at the office or agency of the Company designated for such purpose, and the Trustee shall authenticate and such office or agency shall deliver in exchange for such temporary Debentures an equal aggregate principal amount of definitive Debentures, unless the Company advises the Trustee to the effect that definitive Debentures need not be executed and furnished until further notice from the Company. Until so exchanged, the temporary Debentures shall be entitled to the same benefits under this Indenture as definitive Debentures authenticated and delivered hereunder. SECTION 2.8 MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES. (a) In case any temporary or definitive Debenture shall become mutilated or be destroyed, lost or stolen, the Company (subject to the next succeeding sentence) shall execute, and upon the Company's request the Trustee (subject as aforesaid) 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 the applicant's Debenture and of the ownership thereof. The Trustee may authenticate any such substituted Debenture and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Debenture, the Company may require the payment of a sum sufficient to cover any tax or other -16- governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. In case any Debenture that has matured or is about to mature 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 they may require to save them harmless, and, in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Trustee of the destruction, loss or theft of such Debenture and of the ownership thereof. (b) Every replacement Debenture issued pursuant to the provisions of this Section 2.8 shall constitute an additional contractual obligation of the Company whether or not the mutilated, destroyed, lost or stolen Debenture shall be found at any time, or be enforceable by anyone, 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 the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures, and shall preclude (to the extent lawful) 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 2.9 CANCELLATION. 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 delivered to the Trustee for cancellation, or, if surrendered to the Trustee, shall be canceled by it, and no Debentures shall be issued in lieu thereof except as expressly required or permitted by any of the provisions of this Indenture. On request of the Company at the time of such surrender, the Trustee shall deliver to the Company canceled Debentures held by the Trustee. In the absence of such request the Trustee may dispose of canceled Debentures in accordance with its standard procedures and deliver a certificate of disposition to the Company. If the Company shall otherwise acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such -17- Debentures unless and until the same are delivered to the Trustee for cancellation. SECTION 2.10 BENEFIT OF INDENTURE. Nothing in this Indenture or in the Debentures, express or implied, shall give or be construed to give to any Person, other than the parties hereto and the holders of the Debentures (and, with respect to the provisions of Article XVI, the holders of Senior Indebtedness) any legal or equitable right, remedy or claim under or in respect of this Indenture, or under any covenant, condition or provision herein contained; all such covenants, conditions, and provisions being for the sole benefit of the parties hereto and of the holders of the Debentures (and, with respect to the provisions of Article XVI, the holders of Senior Indebtedness). SECTION 2.11 AUTHENTICATION AGENT. (a) So long as any of the Debentures remain Outstanding there may be an Authenticating Agent for any or all such Debentures, which the Trustee shall have the right to appoint. Said Authenticating Agent shall be authorized to act on behalf of the Trustee to authenticate Debentures issued upon exchange, transfer or partial redemption thereof, and Debentures so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. All references in this Indenture to the authentication of Debentures by the Trustee shall be deemed to include authentication by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall be a corporation that has a combined capital and surplus, as most recently reported or determined by it, sufficient under the laws of any jurisdiction under which it is organized or in which it is doing business to conduct a trust business, and that is otherwise authorized under such laws to conduct such business and is subject to supervision or examination by federal or state authorities. If at any time any Authenticating Agent shall cease to be eligible in accordance with these provisions, it shall resign immediately. (b) 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 (and upon request by the Company shall) terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon resignation, termination or cessation of -18- eligibility of any Authenticating Agent, the Trustee may appoint an eligible successor Authenticating Agent acceptable to the Company. Any successor Authenticating Agent, upon acceptance of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder as if originally named as an Authenticating Agent pursuant hereto. SECTION 2.12 RIGHT OF SET-OFF. With respect to the Debentures initially issued to the Trust, notwithstanding anything to the contrary herein, the Company shall have the right to set off any payment it is otherwise required to make in respect of any such Debenture to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Preferred Securities Guarantee relating to such Debenture or to a holder of Preferred Securities pursuant to an action undertaken under Section 7.8 of this Indenture. ARTICLE III REDEMPTION OF DEBENTURES SECTION 3.1 REDEMPTION. Subject to the Company having received prior regulatory approval, if then required under applicable capital guidelines or regulatory policies, the Company may redeem the Debentures issued hereunder on and after the dates set forth in and in accordance with the terms of this Article III. SECTION 3.2 SPECIAL EVENT REDEMPTION. Subject to the Company having received prior regulatory approval, if then required under applicable capital guidelines or regulatory policies, if a Special Event has occurred and is continuing, then, notwithstanding Section 3.3, the Company shall have the right upon not less than 30 days nor more than 60 days notice to the holders of the Debentures to redeem the Debentures, in whole but not in part, for cash within 180 days following the occurrence of such Special Event (the "180-Day Period") at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon to the date of such redemption (the "Redemption Price"), provided that if at the time there is available to the Company the opportunity to eliminate, within the 180-Day Period, a Tax Event by taking some ministerial action (a "Ministerial Action"), such as filing a form or making an election, or pursuing some other similar reasonable measure which has no adverse effect on the Company, the Trust or the holders of the Trust Securities issued by the Trust, the Company shall pursue such Ministerial Action in lieu of redemption, and, provided further, -19- that the Company shall have no right to redeem the Debentures while the Trust is pursuing any Ministerial Action pursuant to its obligations under the Trust Agreement. The Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or such earlier time as the Company determines, provided that the Company shall deposit with the Trustee an amount sufficient to pay the Redemption Price by 10:00 a.m., New York time, on the date such Redemption Price is to be paid. SECTION 3.3 OPTIONAL REDEMPTION BY COMPANY. Except as otherwise may be specified in this Indenture, the Company shall have the right to redeem the Debentures, in whole or in part, from time to time, on or after ____________, 2002, at a Redemption Price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon to the date of such redemption. Any redemption pursuant to this Section 3.3 shall be made upon not less than 30 days nor more than 60 days notice to the holder of the Debentures, at the Redemption Price. If the Debentures are only partially redeemed pursuant to this Section 3.3, the Debentures shall be redeemed pro rata or by lot or in such other manner as the Trustee shall deem appropriate and fair in its discretion. The Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company determines provided that the Company shall deposit with the Trustee an amount sufficient to pay the Redemption Price by 10:00 a.m., New York time, on the date such Redemption Price is to be paid. SECTION 3.4 NOTICE OF REDEMPTION. (a) In case the Company shall desire to exercise such right to redeem all or a portion of the Debentures in accordance with the right reserved so to do, the Company shall, or shall cause the Trustee to upon receipt of 45 days' written notice from the Company, give notice of such redemption to holders of the Debentures to be redeemed by mailing, first class postage prepaid, a notice of such redemption not less than 30 days and not more than 60 days before the date fixed for redemption to such holders at their last addresses as they shall appear upon the Debenture Register unless a shorter period is specified in the Debentures to be redeemed. Any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the registered holder receives the notice. In any case, failure duly to give such notice to the holder of any Debenture designated for redemption in whole or in part, or any defect in the notice, shall not affect the validity of the proceedings for the redemption of any other Debentures. In the case of any redemption of -20- Debentures prior to the expiration of any restriction on such redemption provided in the terms of such Debentures or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with any such restriction. Each such notice of redemption shall specify the date fixed for redemption and the Redemption Price and shall state that payment of the Redemption Price shall be made at the office or agency of the Company or at the Corporate Trust Office, upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption shall be paid as specified in said notice and that from and after said date interest shall cease to accrue. If less than all the Debentures are to be redeemed, the notice to the holders of the Debentures shall specify the particular Debentures to be redeemed. If the Debentures are to be redeemed in part only, the notice shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the redemption date, upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof shall be issued. (b) If less than all the Debentures are to be redeemed, the Company shall give the Trustee at least 45 days' notice in advance of the date fixed for redemption as to the aggregate principal amount of Debentures to be redeemed, and thereupon the Trustee shall select, by lot or in such other manner as it shall deem appropriate and fair in its discretion, the portion or portions (equal to $25 or any integral multiple thereof) of the Debentures to be redeemed and shall thereafter promptly notify the Company in writing of the numbers of the Debentures to be redeemed, in whole or in part. The Company may, if and whenever it shall so elect pursuant to the terms hereof, by delivery of instructions signed on its behalf by its President or any Vice President, instruct the Trustee or any paying agent to call all or any part of the Debentures for redemption and to give notice of redemption in the manner set forth in this Section 3.4, such notice to be in the name of the Company or its own name as the Trustee or such paying agent may deem advisable. In any case in which notice of redemption is to be given by the Trustee or any such paying agent, the Company shall deliver or cause to be delivered to, or permit to remain with, the Trustee or such paying agent, as the case may be, such Debenture Register, transfer books or other records, or suitable copies or extracts therefrom, sufficient to enable the Trustee or such -21- paying agent to give any notice by mail that may be required under the provisions of this Section 3.4. SECTION 3.5 PAYMENT UPON REDEMPTION. (a) If the giving of notice of redemption shall have been completed as above provided, the Debentures or portions of Debentures to be redeemed specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable Redemption Price, and interest on such Debentures or portions of Debentures shall cease to accrue on and after the date fixed for redemption, unless the Company shall default in the payment of such Redemption Price with respect to any such Debenture or portion thereof. On presentation and surrender of such Debentures on or after the date fixed for redemption at the place of payment specified in the notice, said Debentures shall be paid and redeemed at the Redemption Price (but if the date fixed for redemption is an interest payment date, the interest installment payable on such date shall be payable to the registered holder at the close of business on the applicable record date pursuant to Section 2.4). (b) Upon presentation of any Debenture that is to be redeemed in part only, the Company shall execute and the Trustee shall authenticate and the office or agency where the Debenture is presented shall deliver to the holder thereof, at the expense of the Company, a new Debenture of authorized denomination in principal amount equal to the unredeemed portion of the Debenture so presented. SECTION 3.6 NO SINKING FUND. The Debentures are not entitled to the benefit of any sinking fund. ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD SECTION 4.1 EXTENSION OF INTEREST PAYMENT PERIOD. So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time and from time to time during the term of the Debentures, to defer payments of interest by extending the interest payment period of such Debentures for a period not exceeding 20 consecutive quarters (the "Extended Interest Payment Period"), during which Extended Interest Payment Period no interest shall be due and payable; provided that no -22- Extended Interest Payment Period may extend beyond the Maturity Date. Interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 4.1 , shall bear interest thereon at the Coupon Rate compounded quarterly for each quarter of the Extended Interest Payment Period ("Compounded Interest"). At the end of the Extended Interest Payment Period, the Company shall calculate (and deliver such calculation to the Trustee) and pay all interest accrued and unpaid on the Debentures, including any Additional Interest and Compounded Interest (together, "Deferred Interest") that shall be payable to the holders of the Debentures in whose names the Debentures are registered in the Debenture Register on the first record date after the end of the Extended Interest Payment Period. Before the termination of any Extended Interest Payment Period, the Company may further extend such period, provided that such period together with all such further extensions thereof shall not exceed 20 consecutive quarters, or extend beyond the Maturity Date of the Debentures. Upon the termination of any Extended Interest Payment Period and upon the payment of all Deferred Interest then due, the Company may commence a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof, but the Company may prepay at any time all or any portion of the interest accrued during an Extended Interest Payment Period. SECTION 4.2 NOTICE OF EXTENSION. (a) If the Property Trustee is the only registered holder of the Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give written notice to the Administrative Trustees, the Property Trustee and the Trustee of its selection of such Extended Interest Payment Period one Business Day before the earlier of [(i) the next succeeding date on which Distributions on the Trust Securities issued by the Trust are payable; or (ii) the date the Trust is required to give notice of the record date, or the date such Distributions are payable, to The Nasdaq Stock Market's National Market or other applicable self-regulatory organization or to holders of the Preferred Securities issued by the Trust, but in any event at least one Business Day before such record date.] [sense?] (b) If the Property Trustee is not the only holder of the Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give the holders of the Debentures and the Trustee written notice of its selection of such Extended Interest Payment Period at least one Business Day before the earlier of (i) the -23- next succeeding Interest Payment Date; or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to The Nasdaq Stock Market's National Market or other applicable self-regulatory organization or to holders of the Debentures. (c) The quarter in which any notice is given pursuant to paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20 quarters permitted in the Minimum Extended Interest Payment Period permitted under Section 4.1. SECTION 4.3 LIMITATION ON TRANSACTIONS. If (i) the Company shall exercise its right to defer payment of interest as provided in Section 4.1; or (ii) there shall have occurred any Event of Default, then (a) the Company shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than (1) the reclassification of any class of its capital stock for another class of its capital stock; (2) dividends or distributions payable in any class of the Company's common stock, (3) any declaration of a dividend in connection with the implementation of a shareholder rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto and (4) purchases of the Company's common stock related to the rights under any of the Company's benefit plans for its or its subsidiaries' directors, officers or employees); (b) the Company shall not make any payment of interest, principal or premium, if any, or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to the Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any Subsidiary of the Company if such guarantee ranks pari passu with or junior to the Debentures; provided, however, that notwithstanding the foregoing the Company may make payments pursuant to its obligations under the Preferred Securities Guarantee; and (c) the Company shall not redeem, purchase or acquire less than all of the outstanding Debentures or any of the Preferred Securities. -24- ARTICLE V PARTICULAR COVENANTS OF THE COMPANY SECTION 5.1 PAYMENT OF PRINCIPAL AND INTEREST. The Company shall duly and punctually pay or cause to be paid the principal of and interest on the Debentures at the time and place and in the manner provided herein. SECTION 5.2 MAINTENANCE OF AGENCY. So long as any of the Debentures remain Outstanding, the Company shall maintain an office or agency in the Place of Payment where (i) Debentures may be presented for payment; (ii) Debentures may be presented as hereinabove authorized for registration of transfer and exchange; and (iii) notices and demands to or upon the Company in respect of the Debentures and this Indenture may be given or served, such designation to continue with respect to such office or agency until the Company shall, by written notice signed by its President or a Vice President and delivered to the Trustee, designate some other office or agency for such purposes or any of them. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, notices and demands. In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies where the Debentures may be presented for registration or transfer and for exchange in the manner provided herein, 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 the Place of Payment for such purposes. The Company shall give the Trustee prompt written notice of any such designation or rescission thereof. SECTION 5.3 PAYING AGENTS. (a) If the Company shall appoint one or more paying agents for the Debentures, other than the Trustee, the Company shall cause each such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 5.3: (i) that it shall hold all sums held by it as such agent for the payment of the principal of or interest on the Debentures (whether such sums have -25- been paid to it by the Company or by any other obligor of such Debentures) in trust for the benefit of the Persons entitled thereto; (ii) that it shall give the Trustee notice of any failure by the Company (or by any other obligor of such Debentures) to make any payment of the principal of or interest on the Debentures when the same shall be due and payable; (iii) that it shall, at any time during the continuance of any failure referred to in the preceding paragraph (a)(ii) above, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent; and (iv) that it shall perform all other duties of paying agent as set forth in this Indenture. (b) If the Company shall act as its own paying agent with respect to the Debentures, it shall on or before each due date of the principal of or interest on such Debentures, set aside, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay such principal or interest so becoming due on Debentures until such sums shall be paid to such Persons or otherwise disposed of as herein provided and shall promptly notify the Trustee of such action, or any failure (by it or any other obligor on such Debentures) to take such action. Whenever the Company shall have one or more paying agents for the Debentures, it shall, prior to each due date of the principal of or interest on any Debentures, deposit with the paying agent a sum sufficient to pay the principal or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal or interest, and (unless such paying agent is the Trustee) the Company shall promptly notify the Trustee of this action or failure so to act. (c) Notwithstanding anything in this Section 5.3 to the contrary, (i) the agreement to hold sums in trust as provided in this Section 5.3 is subject to the provisions of Section 13.3 and 13.4; and (ii) the Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or direct any paying agent to pay, to the Trustee all sums held in trust by the Company or such paying agent, such sums to be held by the Trustee upon the same terms and conditions as those upon which such sums were held by the Company or such paying agent; and, upon such -26- payment by any paying agent to the Trustee, such paying agent shall be released from all further liability with respect to such money. SECTION 5.4 APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, shall appoint, in the manner provided in Section 9.10, a Trustee, so that there shall at all times be a Trustee hereunder. SECTION 5.5 COMPLIANCE WITH CONSOLIDATION PROVISIONS. The Company shall 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 company unless the provisions of Article XII hereof are complied with. SECTION 5.6 LIMITATION ON TRANSACTIONS. If Debentures are issued to the Trust or a trustee of the Trust in connection with the issuance of Trust Securities by the Trust and (i) there shall have occurred any event that would constitute an Event of Default; (ii) the Company shall be in default with respect to its payment of any obligations under the Preferred Securities Guarantee relating to the Trust; or (iii) the Company shall have given notice of its election to defer payments of interest on such Debentures by extending the interest payment period as provided in this Indenture and such period, or any extension thereof, shall be continuing, then (a) the Company shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than (1) the reclassification of any class of the Company's capital stock into another class of capital stock, (2) dividends or distributions payable in any class of the Company's common stock, (3) any declaration of a dividend in connection with the implementation of a shareholder rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto and (4) purchases of the Company's common stock related to the rights under any of the Company's benefit plans for its or its subsidiaries' directors, officers or employees); (b) the Company shall not make any payment of interest, principal or premium, if any, or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to the Debentures; provided, however, that the Company may make payments pursuant to its obligations under the Preferred Securities Guarantee; and (c) the Company shall not redeem, purchase or acquire less than all of the outstanding Debentures or any of the Preferred Securities. -27- SECTION 5.7 COVENANTS AS TO THE TRUST. For so long as such Trust Securities of the Trust remain outstanding, the Company shall (i) maintain 100% direct or indirect ownership of the Common Securities of the Trust; provided, however, that any permitted successor of the Company under this Indenture may succeed to the Company's ownership of the Common Securities; (ii) not voluntarily terminate, wind up or liquidate the Trust, except upon prior regulatory approval if then so required under applicable capital guidelines or regulatory policies and use its reasonable efforts to cause the Trust (a) to remain a business trust, except in connection with a distribution of Debentures, the redemption of all of the Trust Securities of the Trust or certain mergers, consolidations or amalgamations, each as permitted by the Trust Agreement; and (b) to otherwise continue not to be treated as an association taxable as a corporation or partnership for United States federal income tax purposes; and (iii) use its reasonable efforts to cause each holder of Trust Securities to be treated as owning an individual beneficial interest in the Debentures. In connection with the distribution of the Debentures to the holders of the Preferred Securities issued by the Trust upon a Dissolution Event, the Company shall use its best efforts to list such Debentures on The Nasdaq Stock Market's National Market or on such other exchange as the Preferred Securities are then listed. SECTION 5.8 COVENANTS AS TO PURCHASES. Prior to March 31, 2002, the Company shall not purchase any Debentures, in whole or in part, from the Trust. ARTICLE VI DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE SECTION 6.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF DEBENTUREHOLDERS The Company shall furnish or cause to be furnished to the Trustee (a) on a monthly basis on each regular record date (as described in Section 2.4) a list, in such form as the Trustee may reasonably require, of the names and addresses of the holders of the Debentures as of such regular record date, provided that the Company shall not be obligated to furnish or cause to furnish such list at any time that the list shall not differ in any respect from the most recent list furnished to the Trustee by the Company; 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 -28- than 15 days prior to the time such list is furnished; provided, however, that, in either case, no such list need be furnished if the Trustee shall be the Debenture Registrar. SECTION 6.2 PRESERVATION OF INFORMATION COMMUNICATIONS WITH DEBENTUREHOLDERS (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 contained in the most recent list furnished to it as provided in Section 6.1 and as to the names and addresses of holders of Debentures received by the Trustee in its capacity as registrar for the Debentures (if acting in such capacity). (b) The Trustee may destroy any list furnished to it as provided in Section 6.1 upon receipt of a new list so furnished. (c) Debentureholders may communicate as provided in Section 312(b) of the Trust Indenture Act with other Debentureholders with respect to their rights under this Indenture or under the Debentures. SECTION 6.3 REPORTS BY THE COMPANY. (a) The Company covenants and agrees to file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) that the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports that may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations. (b) The Company covenants and agrees to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from to time by the Commission, -29- such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations. (c) The Company covenants and agrees to transmit by mail, first class postage prepaid, or reputable over-night delivery service that provides for evidence of receipt, to the Debentureholders, as their names and addresses appear upon the Debenture Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 6.3 as may be required by rules and regulations prescribed from time to time by the Commission. SECTION 6.4 REPORTS BY THE TRUSTEE. (a) On or before July 15 in each year in which any of the Debentures are Outstanding, the Trustee shall transmit by mail, first class postage prepaid, to the Debentureholders, as their names and addresses appear upon the Debenture Register, a brief report dated as of the preceding May 15, if and to the extent required under Section 313(a) of the Trust Indenture Act. (b) The Trustee shall comply with Section 313(b) and 313(c) of the Trust Indenture Act. (c) A copy of each such report shall, at the time of such transmission to Debentureholders, be filed by the Trustee with the Company, with each stock exchange upon which any Debentures are listed (if so listed) and also with the Commission. The Company agrees to notify the Trustee when any Debentures become listed on any stock exchange. ARTICLE VII REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS ON EVENT OF DEFAULT SECTION 7.1 EVENTS OF DEFAULT. (a) Whenever used herein with respect to the Debentures, "Event of Default" means any one or more of the following events that has occurred and is continuing: (i) the Company defaults in the payment of any installment of interest upon any of the Debentures, -30- as and when the same shall become due and payable, and continuance of 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; (ii) the Company defaults in the payment of the principal on the Debentures as and when the same shall become due and payable whether at maturity, upon redemption, by declaration or otherwise; (iii) the Company fails to observe or perform any other of its covenants or agreements with respect to the Debentures for a period of 90 days after the date on which written notice of such failure, requiring the same to be remedied and stating that such notice is a "Notice of Default" hereunder, shall have been given to the Company by the Trustee, by registered or certified mail, or to the Company and the Trustee by the holders of at least 25% in principal amount of the Debentures at the time Outstanding; (iv) the Company pursuant to or within the meaning of any Bankruptcy Law (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; or (iv) makes a general assignment for the benefit of its creditors; (v) a court of competent jurisdiction enters an order under any Bankruptcy Law that (i) is for relief against the Company in an involuntary case; (ii) appoints a Custodian of the Company for all or substantially all of its property; or (iii) orders the liquidation of the Company, and the order or decree remains unstayed and in effect for 90 days; or (vi) the Trust shall have voluntarily or involuntarily dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of Debentures to holders of Trust Securities in liquidation of their interests in the Trust; (ii) the redemption of all of the outstanding Trust Securities of the Trust; or (iii) -31- certain mergers, consolidations or amalgamations, each as permitted by the Trust Agreement. (b) In each and every such case, unless the principal of all 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 such Debentureholders) may declare the principal of all the Debentures to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, notwithstanding anything contained in this Indenture or in the Debentures. (c) 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 holders of a majority in aggregate principal amount of the Debentures then Outstanding hereunder, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (i) the Company has paid or deposited with the Trustee a sum sufficient to pay all matured installments of interest upon all the Debentures and the principal of any and all Debentures that shall have become due otherwise than by acceleration (with interest upon such principal, and upon overdue installments of interest, at the rate per annum expressed in the Debentures to the date of such payment or deposit) and the amount payable to the Trustee under Section 9.6; and (ii) any and all Events of Default under this Indenture, other than the nonpayment of principal on Debentures that shall not have become due by their terms, shall have been remedied or waived as provided in Section 7.6. No such rescission and annulment shall extend to or shall affect any subsequent default or impair any right consequent thereon. (d) In case the Trustee shall have proceeded to enforce any right with respect to Debentures 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 and the Trustee shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company and the Trustee shall continue as though no such proceedings had been taken. -32- SECTION 7.2 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. (a) The Company covenants that (1) in case it shall default in the payment of any installment of interest on any of the Debentures, and such default shall have continued for a period of 90 Business Days; or (2) in case it shall default in the payment of the principal of any of the Debentures when the same shall have become due and payable, whether upon maturity of the Debentures or upon redemption or upon declaration or otherwise, then, upon demand of the Trustee, the Company shall pay to the Trustee, for the benefit of the holders of the Debentures, the whole amount that then shall have been become due and payable on all such Debentures for principal or interest, or both, as the case may be, with interest upon the overdue principal and (if the Debentures are held by the Trust or a trustee of the Trust, without duplication of any other amounts paid by the Trust or trustee in respect thereof) upon overdue installments of interest at the rate per annum expressed in the Debentures; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, and the amount payable to the Trustee under Section 9.7. (b) If the Company shall fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action 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 other obligor upon the Debentures and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or other obligor upon the Debentures, wherever situated. (c) In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, readjustment, arrangement, composition or judicial proceedings affecting the Company or the creditors or property of either, the Trustee shall have power to intervene in such proceedings and take any action therein that may be permitted by the court and shall (except as may be otherwise provided by law) be entitled to file such proofs of claim and other papers and documents as may be necessary or advisable in order to have the claims of the Trustee and of the holders of the Debentures allowed for the entire amount due and -33- payable by the Company under this Indenture at the date of institution of such proceedings and for any additional amount that may become due and payable by the Company after such date, and to collect and receive any moneys or other property payable or deliverable on any such claim, and to distribute the same after the deduction of the amount payable to the Trustee under Section 9.7; and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the holders of the Debentures to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to such Debentureholders, to pay to the Trustee any amount due it under Section 9.7. (d) All rights of action and of asserting claims under this Indenture, or under any of the terms established with respect to Debentures, may be enforced by the Trustee without the possession of any of such Debentures, or the production thereof at any trial or other proceeding relating 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, after provision for payment to the Trustee of any amounts due under Section 9.7, be for the ratable benefit of the holders of the Debentures. 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 at law or in equity or 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. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Debentureholder 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 Debentureholder in any such proceeding. SECTION 7.3 APPLICATION OF MONEYS COLLECTED. Any moneys collected by the Trustee pursuant to this Article VII with respect to the Debentures shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of -34- the distribution of such moneys on account of principal or interest, upon presentation of the Debentures, and notation thereon the payment, if only partially paid, and upon surrender thereof if fully paid: FIRST: To the payment of costs and expenses of collection and of all amounts payable to the Trustee under Section 9.7; SECOND: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XVI; and THIRD: To the payment of the amounts then due and unpaid upon the Debentures for principal and interest, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Debentures for principal and interest, respectively. SECTION 7.4 LIMITATION ON SUITS. (a) No holder of any Debenture shall have any right by virtue or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (i) such holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance thereof with respect to the Debentures specifying such Event of Default, as hereinbefore provided; (ii) the holders of not less than 25% in aggregate principal amount of the Debentures then Outstanding shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as trustee hereunder; (iii) such holder or holders shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby; and (iv) 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; and (v) during such 60 day period, the holders of a majority in principal amount of the Debentures do not give the Trustee a direction inconsistent with the request. (b) Notwithstanding anything contained herein to the contrary or any other provisions of this Indenture, the right of any holder of the Debentures to receive payment of the principal of and interest on the Debentures, as therein provided, on or after the respective due dates expressed -35- in such Debenture (or in the case of redemption, on the redemption date), or to institute suit for the enforcement of any such payment on or after such respective dates or redemption date, 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 of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other of such 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 7.4, each and every Debentureholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. SECTION 7.5 RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER. (a) Except as otherwise provided in Section 2.8, all powers and remedies given by this Article VII to the Trustee or to the Debentureholders 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 such Debentures. (b) No delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 7.4, every power and remedy given by this Article VII or by law to the Trustee or the Debentureholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Debentureholders. -36- SECTION 7.6 CONTROL BY DEBENTUREHOLDERS. The holders of a majority in aggregate principal amount of the Debentures at the time Outstanding, determined in accordance with Section 10.4, 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; provided, however, that such direction shall not be in conflict with any rule of law or with this Indenture. Subject to the provisions of Section 9.1, the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall, by a Responsible Officer or Officers of the Trustee, determine that the proceeding 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 affected thereby, determined in accordance with Section 10.4, may on behalf of the holders of all of the Debentures waive any past default in the performance of any of the covenants contained herein and its consequences, except (i) a default in the payment of the principal of or interest on, any of the Debentures as and when the same shall become due by the terms of such Debentures otherwise than by acceleration (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal has been deposited with the Trustee (in accordance with Section 7.l(c)); (ii) a default in the covenants contained in Section 5.6; or (iii) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the holder of each Outstanding Debenture affected; provided, however, that if the Debentures are held by the Trust or a trustee of the Trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in liquidation preference 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 impair any right consequent thereon. SECTION 7.7 UNDERTAKING TO PAY COSTS. All parties to this Indenture agree, and each holder of any Debentures by such holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken -37- 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, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 7.7 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Debentureholder, or group of Debentureholders holding more than 10% in aggregate principal amount of the Outstanding Debentures, or to any suit instituted by any Debentureholder for the enforcement of the payment of the principal of or interest on the Debentures, on or after the respective due dates expressed in such Debenture or established pursuant to this Indenture. SECTION 7.8 DIRECT ACTION BY HOLDERS OF PREFERRED SECURITIES. Any registered holder of the Preferred Securities issued by the Trust shall have the right, upon the occurrence of an Event of Default described in Section 7.1(a)(i) or 7.1(a)(ii), to institute a suit directly against the Company for enforcement of payment to such holder of principal of and (subject to Sections 2.4 and 4.1) interest (including any Additional Interest) on the Debentures having a principal amount equal to the aggregate Liquidation Amount (as defined in the Trust Agreement) of such Preferred Securities held by such holder. ARTICLE VIII FORM OF DEBENTURE AND ORIGINAL ISSUE SECTION 8.1 FORM OF DEBENTURE. The Debenture and the Trustee's Certificate of Authentication to be endorsed thereon are to be substantially in the forms contained as Exhibit A attached hereto and incorporated herein by reference. SECTION 8.2 ORIGINAL ISSUE OF DEBENTURES. Debentures in the aggregate principal amount of $_______________ may, upon execution of this Indenture, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Debentures to or upon the written order of the Company, signed by its Chairman, its Vice Chairman, its President, or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company. SECTION 8.3 GLOBAL DEBENTURES. (a) Each Global Debenture issued under this Indenture shall be registered in the name of the Depositary designated by the Company for such Global Debenture or a nominee -38- thereof and delivered to such Depositary or a nominee thereof or custodian thereof, and each such Global Debenture shall constitute a single Debenture for all purposes of this Indenture. (b) Notwithstanding any other provision in this Indenture, no Global Debenture may be exchanged in whole or in part for Debentures registered, and no transfer of a Global Debenture in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Debenture or a nominee thereof unless (i) such Depositary advises the Trustee in writing that such Depositary is no longer willing or able to properly discharge its responsibilities as Depositary with respect to such Global Debenture, and the Company is unable to locate a qualified successor, (ii) the Company executes and delivers to the Trustee an Officers' Certificate stating that the Company elects to terminate the book-entry system through the Depositary, or (iii) there shall have occurred and be continuing an Event of Default. (c) If any Global Debenture is to be exchanged for other Debentures or cancelled in whole, it shall be surrendered by or on behalf of the Depositary or its nominee to the Debenture Registrar for exchange or cancellation as provided in this Article II. If any Global Debenture is to be exchanged for other Debentures or cancelled in part, or if another Debenture is to be exchanged in whole or in part for a beneficial interest in any Global Debenture, then either (i) such Global Debenture shall be so surrendered for exchange or cancellation as provided in this Article II or (ii) the principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or cancelled, or equal to the principal amount of such other Debenture to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Debenture Registrar, whereupon the Trustee, in accordance with the Applicable Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Debenture by the Depositary, accompanied by registration instructions, the Trustee shall, subject to the other provisions of this Article II, authenticate and deliver any Debentures issuable in exchange for such Global Debenture (or any portion thereof) in accordance with the instructions of the Depositary. The Trustee shall not be liable for any delay in delivery of such -39- instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. (d) Every Debenture authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Debenture or any portion thereof, whether pursuant to this Article II, Section 3.5 or 11.4 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Debenture, unless such Debenture is registered in the name of a Person other than the Depositary for such Global Debenture or a nominee thereof. (e) The Depositary or its nominee, as the registered owner of a Global Debenture, shall be the Holder of such Global Debenture for all purposes under this Indenture and the Debentures, and owners of beneficial interests in a Global Debenture shall hold such interests pursuant to the Applicable Procedures. Accordingly, any such owner's beneficial interest in a Global Debenture shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or agent. Neither the Trustee nor the Debenture Registrar shall have any liability in respect of any transfers effected by the Depositary. (f) The rights of owners of beneficial interests in a Global Debenture shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its Agent Members. ARTICLE IX CONCERNING THE TRUSTEE SECTION 9.1 CERTAIN DUTIES AND RESPONSIBILITIES. (a) The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform with respect to the Debentures 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 has occurred that 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. -40- (b) 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: (1) prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default that may have occurred: (i) the duties and obligations of the Trustee shall, with respect to the Debentures, be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable with respect to the Debentures except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on the part of the Trustee, the Trustee may with respect to the Debentures 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 that 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; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) 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 holders of not less than a majority in principal amount of the Debentures at the time outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture with respect to the Debentures; and -41- (4) 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 reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Indenture or adequate indemnity against such risk is not reasonably assured to it. SECTION 9.2 NOTICE OF DEFAULTS. Within 90 days after actual knowledge by a Responsible Officer of the Trustee of the occurrence of any default hereunder with respect to the Debentures, the Trustee shall transmit by mail to all holders of the Debentures, as their names and addresses appear in the Debenture Register, notice of such default, unless such default shall have been cured or waived; provided, however, that, except in the case of any default in the payment of the principal or interest (including any Additional Interest) on any Debenture, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of the directors and/or Responsible Officers of the Trustee determines in good faith that the withholding of such notice is in the interests of the holders of such Debentures; and provided, further, that in the case of any default of the character specified in section 7.l(a)(iii), no such notice to holders of Debentures need be sent until at least 30 days after the occurrence thereof. For the purposes of this Section 9.2, the term "default" means any event which is, or after notice or lapse of time or both, would become, an Event of Default with respect to the Debentures. SECTION 9.3 CERTAIN RIGHTS OF TRUSTEE. Except as otherwise provided in Section 9.1: (a) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security 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 a Board Resolution or an instrument signed in the name of the Company by the President or any Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer thereof (unless other evidence in respect thereof is specifically prescribed herein); -42- (c) The Trustee shall not be deemed to have knowledge of a default or an Event of Default, other than an Event of Default specified in Section 7.1(a)(i) or (ii), unless and until it receives notification of such Event of Default from the Company or by holders of at least 25% of the aggregate principal amount of the Debentures at the time Outstanding; (d) The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted hereunder in good faith and in reliance thereon; (e) 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 Debentureholders, pursuant to the provisions of this Indenture, unless such Debentureholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default (that has not been cured or waived) to exercise with respect to the 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 liable for any action taken or omitted to be taken 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; (g) 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, security, or other papers or documents, but the Trustee in its discretion may make such inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and (h) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly -43- or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 9.4 TRUSTEE NOT RESPONSIBLE FOR RECITALS, ETC. (a) The Recitals contained herein and in the Debentures, except the certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. (b) The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Debentures. (c) The Trustee shall not be accountable for the use or application by the Company of any of the Debentures or of the proceeds of such Debentures, or for the use or application of any moneys paid over by the Trustee in accordance with any provision of this Indenture, or for the use or application of any moneys received by any paying agent other than the Trustee. SECTION 9.5 MAY HOLD DEBENTURES. The Trustee or any paying agent or registrar for the Debentures, in its individual or any other capacity, may become the owner or pledgee of Debentures and, subject to Sections 9.9 and 9.14, may other deal with the Company with the same rights it would have if it were not Trustee, paying agent or Debenture Registrar. SECTION 9.6 MONEYS HELD IN TRUST. Subject to the provisions of Section 13.5, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any moneys received by it hereunder except such as it may agree with the Company to pay thereon. SECTION 9.7 COMPENSATION AND REIMBURSEMENT. The Company covenants and agrees to pay to the Trustee, and the Trustee shall be entitled to, such reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), as the Company and the Trustee may from time to time agree in writing, for all services rendered by it in the execution of the trusts hereby created and in the exercise and performance of any of the powers -44- and duties hereunder of the Trustee, and, except as otherwise expressly provided herein, the Company shall 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 bad faith. The Company also covenants to indemnify the Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith 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 in the premises. SECTION 9.8 RELIANCE ON OFFICERS' CERTIFICATE. Except as otherwise provided in Section 9.1, 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 suffering or omitting to take any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted to be taken by it under the provisions of this Indenture upon the faith thereof. SECTION 9.9 DISQUALIFICATION: CONFLICTING INTERESTS. If the Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the Company shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 9.10 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY There shall at all times be a Trustee with respect to the Debentures issued hereunder which shall at all times be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia or a corporation or other Person permitted to act as trustee by the Commission, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject to supervision or -45- 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 9.10, 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. 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 9.10, the Trustee shall resign immediately in the manner and with the effect specified in Section 9.11. SECTION 9.11 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) The Trustee or any successor hereafter appointed, may at any time resign by giving written notice thereof to the Company and by transmitting notice of resignation by mail, first class postage prepaid, to the Debentureholders, as their names and addresses appear upon the Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee with respect to Debentures by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee with respect to Debentures, or any Debentureholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 9.9, 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 one of the following shall occur (i) the Trustee shall fail to comply with the provisions of Section 9.9 after written request therefor by the Company or by any Debentureholder who has been a bona fide holder of a Debenture or Debentures for at least six months; or -46- (ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 9.10 and shall fail to resign after written request therefor by the Company or by any such Debentureholder; or (iii) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or commence a voluntary bankruptcy proceeding, or a receiver of the Trustee or of its property shall be appointed or consented to, 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 with respect to all Debentures 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 9.9, unless the Trustee's duty to resign is stayed as provided herein, any Debentureholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, on behalf of that holder and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The holders of a majority in aggregate principal amount of the Debentures at the time Outstanding may at any time remove the Trustee by so notifying the Trustee and the Company and may appoint a successor Trustee with the consent of the Company. (d) No resignation or removal of the Trustee and no appointment of a successor trustee with respect to the Debentures pursuant to any of the provisions of this Section 9.11 shall become effective until acceptance of appointment by the successor trustee as provided in Section 9.12. SECTION 9.12 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. (a) In case of the appointment hereunder of a successor trustee with respect to the Debentures, every successor -47- trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, 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, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor trustee all the rights, powers, and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor trustee all property and money held by such retiring Trustee hereunder. (b) Upon request of any successor trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor trustee all such rights, powers and trusts referred to in paragraph (a) of this Section 9.12. (c) No successor trustee shall accept its appointment unless at the time of such acceptance such successor trustee shall be qualified and eligible under this Article IX. (d) Upon acceptance of appointment by a successor trustee as provided in this Section 9.12, the Company shall transmit notice of the succession of such trustee hereunder by mail, first class postage prepaid, to the Debentureholders, as their names and addresses appear upon the Debenture Register. If the Company fails to transmit such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be transmitted at the expense of the Company. SECTION 9.13 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. 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 the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be qualified under the provisions of Section 9.9 and eligible under the provisions of Section 9.10, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case -48- any Debentures shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Debentures so authenticated with the same effect as if such successor Trustee had itself authenticated such Debentures. SECTION 9.14 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship described in Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent included therein. ARTICLE X CONCERNING THE DEBENTUREHOLDERS SECTION 10.1 EVIDENCE OF ACTION BY HOLDERS. (a) Whenever in this Indenture it is provided that the holders of a majority or 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 majority or specified percentage have joined therein may be evidenced by any instrument or any number of instruments of similar tenor executed by such holders of Debentures in Person or by agent or proxy appointed in writing. (b) If the Company shall solicit from the Debentureholders any request, demand, authorization, direction, notice, consent, waiver or other action, the Company may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for the determination of Debentureholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action, 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 may be given before or after the record date, but only the Debentureholders of record at the close of business on the record date shall be computed to be Debentureholders for the purposes of determining whether Debentureholders of the requisite proportion of -49- Outstanding Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action, 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 Debentureholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. SECTION 10.2 PROOF OF EXECUTION BY DEBENTUREHOLDERS. Subject to the provisions of Section 9.1, proof of the execution of any instrument by a Debentureholder (such proof shall not require notarization) or his agent or proxy and proof of the holding by any Person of any of the Debentures shall be sufficient if made in the following manner: (a) The fact and date of the execution by any such Person of any instrument may be proved in any reasonable manner acceptable to the Trustee. (b) The ownership of Debentures shall be proved by the Debenture Register of such Debentures or by a certificate of the Debenture Registrar thereof. (c) The Trustee may require such additional proof of any matter referred to in this Section 10.2 as it shall deem necessary. SECTION 10.3 WHO MAY BE DEEMED OWNERS. Prior to the due presentment for registration of transfer of any Debenture, the Company, the Trustee, any paying agent, any Authenticating Agent and any Debenture Registrar may deem and treat the Person in whose name such Debenture shall be registered upon the books of the Company as the absolute owner of such Debenture (whether or not such Debenture shall be overdue and notwithstanding any notice of ownership or writing thereon made by anyone other than the Debenture Registrar) for the purpose of receiving payment of or on account of the principal of and interest on such Debenture (subject to Section 2.3) and for all other purposes; and neither the Company nor the Trustee nor any paying agent nor any Authenticating Agent nor any Debenture Registrar shall be affected by any notice to the contrary. No holder of any beneficial interest in any Global Debenture held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Debenture, and such -50- Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the owner of such Global Debenture for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as holder of any Debenture. SECTION 10.4 CERTAIN DEBENTURES OWNED BY COMPANY DISREGARDED. In determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent or waiver under this Indenture, the Debentures that 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 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, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures that the Trustee actually knows are so owned shall be so disregarded. The Debentures so owned that have been pledged in good faith may be regarded as Outstanding for the purposes of this Section 10.4, if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right so to act with respect to such Debentures and that the pledgee is not a Person directly or indirectly, controlling or controlled by, or under direct or indirect common control with the Company or any such other obligor. In 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 10.5 ACTIONS BINDING ON FUTURE DEBENTUREHOLDERS. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 10.1, of the taking of any action by the holders of the majority or percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action, any holder of a Debenture that 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, and upon proof of holding as provided in Section 10.2, revoke such action so far as concerns such 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 therefor, on registration of transfer thereof or -51- in place thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture. Any action taken by the holders of the majority or percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Trustee and the holders of all the Debentures. ARTICLE XI SUPPLEMENTAL INDENTURES SECTION 11.1 SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF DEBENTUREHOLDERS. In addition to any supplemental indenture otherwise authorized by this Indenture, the Company and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as then in effect), without the consent of the Debentureholders, for one or more of the following purposes: (a) to cure any ambiguity, defect, or inconsistency herein, in the Debentures; (b) to comply with Article X; (c) to provide for uncertificated Debentures in addition to or in place of certificated Debentures; (d) to add to the covenants of the Company for the benefit of the holders of all or any of the Debentures or to surrender any right or power herein conferred upon the Company; (e) to evidence the succession of another corporation to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Debentures contained; (f) to convey, transfer, assign, mortgage or pledge to or with the Trustee any property or assets which the Company may desire to convey, transfer, assign, mortgage or pledge; (g) to add to, delete from, or revise the conditions, limitations, and restrictions on the authorized amount, terms, or purposes of issue, authentication, and delivery of Debentures, as herein set forth; -52- (h) to make any change that does not adversely affect the rights of any Debentureholder in any material respect; (i) 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 of the Debentures, or to add to the rights of the holders of the Debentures; or (j) qualify or maintain the qualification of this Indenture under the Trust Indenture Act. The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section 11.1 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 11.2. SECTION 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF DEBENTUREHOLDERS. With the consent (evidenced as provided in Section 10.1) of the holders of not less than a majority in aggregate principal amount of the Debentures at the time Outstanding, the Company, when authorized by Board Resolutions, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as then in effect) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner not covered by Section 11.1 the rights of the holders of the Debentures under this Indenture; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then Outstanding and affected thereby, (i) extend the fixed maturity of any Debentures, reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon (other than the Company's right to defer interest pursuant to this Indenture), without the consent of the holder of each Debenture so affected; or (ii) reduce the aforesaid percentage of Debentures, the holders of which are required to consent to any such supplemental indenture; provided further, that if the Debentures are held by the Trust or a trustee of the Trust, such supplemental indenture shall not be effective until the holders of a majority in liquidation preference -53- of Trust Securities of the Trust shall have consented to such supplemental indenture; provided further, that if the consent of the holder of each Outstanding Debenture is required, such supplemental indenture shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such supplemental indenture. It shall not be necessary for the consent of the Debentureholders affected thereby under this Section 11.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. SECTION 11.3 EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture pursuant to the provisions of this Article XI, 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 11.4 DEBENTURES AFFECTED BY SUPPLEMENTAL INDENTURES. Debentures affected by a supplemental indenture, authenticated and delivered after the execution of such supplemental indenture pursuant to the provisions of this Article XI, may bear a notation in form approved by the Company, provided such form meets the requirements of any exchange upon which the Debentures may be listed, as to any matter provided for in such supplemental indenture. If the Company 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 by the Company, authenticated by the Trustee and delivered in exchange for the Debentures then Outstanding. SECTION 11.5 EXECUTION OF SUPPLEMENTAL INDENTURES. (a) Upon the request of the Company, accompanied by their Board Resolutions authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Debentureholders required to consent thereto 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 -54- Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. The Trustee, subject to the provisions of Section 9.1, may receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article XI is authorized or permitted by, and conforms to, the terms of this Article XI and that it is proper for the Trustee under the provisions of this Article XI to join in the execution thereof. (b) Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section 11.5, the Trustee shall transmit by mail, first class postage prepaid, a notice, setting forth in general terms the substance of such supplemental indenture, to the Debentureholders 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. ARTICLE XII SUCCESSOR CORPORATION SECTION 12.1 COMPANY MAY CONSOLIDATE, ETC. Nothing contained in this Indenture or in any of the Debentures shall prevent any consolidation or merger of the Company with or into any other corporation or corporations (whether or not affiliated with the Company, as the case may be), or successive consolidations or mergers in which the Company, as the case may be, or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property of the Company, as the case may be, or its successor or successors as an entirety, or substantially as an entirety, to any other corporation (whether or not affiliated with the Company, as the case may be, or its successor or successors) authorized to acquire and operate the same; provided, however, the Company hereby covenants and agrees that, (i) upon any such consolidation, merger, sale, conveyance, transfer or other disposition, the due and punctual payment, in the case of the Company, of the principal of and interest on all of the Debentures, 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 as the case may be, shall be expressly assumed, by supplemental indenture (which shall conform to the provisions of the Trust Indenture Act, as then in effect) satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which -55- the Company, as the case may be, shall have been merged, or by the entity which shall have acquired such property; (ii) in case the Company consolidates with or merges into another Person or conveys or transfers its properties and assets substantially then as an entirety to any Person, the successor Person is organized under the laws of the United States or any state or the District of Columbia; and (iii) immediately after giving effect thereto, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing. SECTION 12.2 SUCCESSOR CORPORATION SUBSTITUTED. (a) In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of, in the case of the Company, the due and punctual payment of the principal of and interest on all of the Debentures Outstanding and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Company, as the case may be, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named as the Company herein, and thereupon the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Debentures. (b) In case of any such consolidation, merger, sale, conveyance, transfer or other disposition such changes in phraseology and form (but not in substance) may be made in the Debentures thereafter to be issued as may be appropriate. (c) Nothing contained in this Indenture or in any of the Debentures shall prevent the Company from merging into itself or acquiring by purchase or otherwise all or any part of the property of any other Person (whether or not affiliated with the Company). SECTION 12.3 EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE. The Trustee, subject to the provisions of Section 9.1 , may receive an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale, conveyance, transfer or other disposition, and any such assumption, comply with the provisions of this Article XII. -56- ARTICLE XIII SATISFACTION AND DISCHARGE SECTION 13.1 SATISFACTION AND DISCHARGE OF INDENTURE. If at any time: (a) the Company shall have delivered to the Trustee for cancellation all Debentures theretofore authenticated (other than any Debentures that shall have been destroyed, lost or stolen and that shall have been replaced or paid as provided in Section 2.8) and Debentures for whose payment money or Governmental Obligations have theretofore been deposited in trust or segregated and held in trust by the Company (and thereupon repaid to the Company or discharged from such trust, as provided in Section 13.5); or (b) all such Debentures not theretofore delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit or cause to be deposited with the Trustee as trust funds the entire amount in moneys or Governmental Obligations sufficient or a combination thereof, sufficient in the opinion of a nationally recognized firm of independent public accountants expressed in written certification thereof delivered to the Trustee, to pay at maturity or upon redemption all Debentures not theretofore delivered to the Trustee for cancellation, including principal and interest due or to become due to such date of maturity or date fixed for redemption, as the case may be, and if the Company shall also pay or cause to be paid all other sums payable hereunder by the Company; then this Indenture shall thereupon cease to be of further effect except for the provisions of Sections 2.3, 2.6, 2.8, 5.1, 5.2, 5.3 and 9.10, that shall survive until the date of maturity or redemption date, as the case may be, and Sections 9.6 and 13.5, that shall survive to such date and thereafter, and the Trustee, on demand of the Company and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. SECTION 13.2 DISCHARGE OF OBLIGATIONS. If at any time all Debentures not heretofore delivered to the Trustee for cancellation or that have not become due and payable as described in Section 13.1 shall have been paid by the Company by depositing irrevocably with the Trustee as trust funds moneys or an amount of Governmental Obligations sufficient to pay at maturity or upon redemption all Debentures not theretofore delivered to the Trustee for cancellation, including principal and interest due or to become due to such date of maturity or date fixed for redemption, as the case may be, and if the Company shall also pay or cause to be paid all other sums payable hereunder by the -57- Company, then after the date such moneys or Governmental Obligations, as the case may be, are deposited with the Trustee, the obligations of the Company under this Indenture shall cease to be of further effect except for the provisions of Sections 2.3, 2.6, 2.8, 5.1, 5.2, 5.3, 9.6, 9.10 and 13.5 hereof that shall survive until such Debentures shall mature and be paid. Thereafter, Sections 9.6 and 13.5 shall survive. SECTION 13.3 DEPOSITED MONEYS TO BE HELD IN TRUST. All monies or Governmental Obligations deposited with the Trustee pursuant to Sections 13.1 or 13.2 shall be held in trust and shall be available for payment as due, either directly or through any paying agent (including the Company acting as its own paying agent), to the holders of the Debentures for the payment or redemption of which such moneys or Governmental Obligations have been deposited with the Trustee. SECTION 13.4 PAYMENT OF MONIES HELD BY PAYING AGENTS. In connection with the satisfaction and discharge of this Indenture, all moneys or Governmental Obligations then held by any paying agent under the provisions of this Indenture shall, upon demand of the Company, be paid to the Trustee and thereupon such paying agent shall be released from all further liability with respect to such moneys or Governmental Obligations. SECTION 13.5 REPAYMENT TO COMPANY. Any monies or Governmental Obligations deposited with any paying agent or the Trustee, or then held by the Company in trust, for payment of principal of or interest on the Debentures that are not applied but remain unclaimed by the holders of such Debentures for at least two years after the date upon which the principal of or interest on such Debentures shall have respectively become due and payable, shall be repaid to the Company, as the case may be, on May 31 of each year or (if then held by the Company) shall be discharged from such trust; and thereupon the paying agent and the Trustee shall be released from all further liability, with respect to such money's or Governmental Obligations, and the holder of any of the Debentures entitled to receive such payment shall thereafter, as an unsecured general creditor, look only to the Company for the payment thereof. -58- ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS SECTION 14.1 NO RECOURSE. No recourse under or upon any obligation, covenant or agreement of this Indenture, or of the Debentures, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, past, present or future as such, of the Company or of any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, stockholders, officers or directors as such, of the Company or of any predecessor or successor corporation, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Debentures or implied therefrom; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Debentures or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of such Debentures. ARTICLE XV MISCELLANEOUS PROVISIONS SECTION 15.1 EFFECT ON SUCCESSORS AND ASSIGNS. All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Company shall bind their respective successors and assigns, whether so expressed or not. SECTION 15.2 ACTIONS BY SUCCESSOR. 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 corresponding board, committee or -59- officer of any corporation that shall at the time be the lawful sole successor of the Company. SECTION 15.3 SURRENDER OF COMPANY POWERS. The Company by instrument in writing executed by appropriate authority 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, as the case may be, and as to any successor corporation. SECTION 15.4 NOTICES. Except as otherwise expressly provided herein any notice or demand that by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Debentures to or on the Company may be given or served by being deposited first class postage prepaid in a post-office letter box addressed(until another address is filed in writing by the Company with the Trustee), as follows: BankAtlantic Bancorp, Inc., 1750 East Sunrise Boulevard, Fort Lauderdale, FL 33304, Attention: Secretary. Any notice, election, request or demand by the Company or any Debentureholder 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 Corporate Trust Office of the Trustee. SECTION 15.5 GOVERNING LAW. This Indenture and each Debenture shall be deemed to be a contract made under the internal laws of the State of Florida and for all purposes shall be construed in accordance with the laws of said State. SECTION 15.6 TREATMENT OF DEBENTURES AS DEBT. It is intended that the Debentures shall be treated as indebtedness and not as equity for federal income tax purposes. The provisions of this Indenture shall be interpreted to further this intention. SECTION 15.7 COMPLIANCE CERTIFICATES AND OPINIONS. (a) 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 all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to -60- which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. (b) Each certificate or opinion of the Company provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant 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, in the opinion of such Person, 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 15.8 PAYMENTS ON BUSINESS DAYS. In any case where the date of maturity of interest or principal of any Debenture or the date of redemption of any Debenture shall not be a Business Day, then payment of interest or principal may (subject to Section 2.4) be made on the next succeeding Business Day with the same force and effect as if made on the nominal date of maturity or redemption, and no interest shall accrue for the period after such nominal date. SECTION 15.9 CONFLICT WITH TRUST INDENTURE ACT. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 15.10 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 15.11 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, -61- illegality or unenforceability shall not affect any other provisions of this Indenture or of the Debentures, but this Indenture and the Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. SECTION 15.12 ASSIGNMENT. The Company shall have the right at all times to assign any of its respective rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company, provided that, in the event of any such assignment, the Company shall 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 15.13 ACKNOWLEDGMENT OF RIGHTS. The Company acknowledges that, with respect to any Debentures held by the Trust or a trustee of the Trust, if the Property Trustee fails to enforce its rights under this Indenture as the holder of the Debentures held as the assets of the Trust, any holder of Preferred Securities may institute legal proceedings directly against the Company to enforce such Property Trustee's rights under this Indenture without first instituting any legal proceedings against such Property Trustee or any other person or entity. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company 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), the Company acknowledges that a holder of Preferred 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 Preferred Securities of such holder on or after the respective due date specified in the Debentures. ARTICLE XVI SUBORDINATION OF DEBENTURES SECTION 16.1 AGREEMENT TO SUBORDINATE. The Company covenants and agrees, and each holder of Debentures issued hereunder by such holder's acceptance thereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article XVI; and each holder of a Debenture, whether upon original issue or upon transfer or -62- assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of and interest on all Debentures issued hereunder 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 Debt and Subordinated Debt (collectively, "Senior Indebtedness") to the extent provided herein, whether outstanding at the date of this Indenture or thereafter incurred. No provision of this Article XVI shall prevent the occurrence of any default or Event of Default hereunder. SECTION 16.2 DEFAULT ON SENIOR DEBT OR SUBORDINATED DEBT. 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, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption payments) of 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 sentence of this Section 16.2, such payment shall 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 Company or 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 16.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY. (a) 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 or interest on the Debentures; and upon any such dissolution or winding-up or liquidation or reorganization, any payment by the -63- Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the holders of the Debentures or the Trustee would be entitled to receive from the Company, except for the provisions of this Article XVI, 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 holders of the Debentures or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Company (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the holders of Debentures or to the Trustee. (b) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness of the Company is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness of the Company, as the case may be, 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. (c) For purposes of this Article XVI, 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 -64- 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 XVI with respect to the Debentures to the payment of all Senior Indebtedness of the Company, as the case may be, 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 XII shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 16.3 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article XII. Nothing in Section 16.2 or in this Section 16.3 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 9.7. SECTION 16.4 SUBROGATION. (a) Subject to the payment in full of all Senior Indebtedness of the Company, the rights of the holders of the Debentures 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, as the case may be, applicable to such Senior Indebtedness until the principal of and interest on the Debentures shall be paid in full; and for the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the holders of the Debentures or the Trustee would be entitled except for the provisions of this Article XVI, and no payment over pursuant to the provisions of this Article XVI to or for the benefit of the holders of such Senior Indebtedness by holders of the Debentures 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 by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XVI are and are intended solely for the purposes of defining the relative rights -65- of the holders of the Debentures, on the one hand, and the holders of such Senior Indebtedness on the other hand. (b) Nothing contained in this Article XVI 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 of the Company), 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 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, as the case may be, other than the holders of Senior Indebtedness of the Company, 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 XVI of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, as the case may be, received upon the exercise of any such remedy. (c) Upon any payment or distribution of assets of the Company referred to in this Article XVI, the Trustee, subject to the provisions of Article IX, and the holders of the Debentures shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the holders of the Debentures, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XVI. SECTION 16.5 TRUSTEE TO EFFECTUATE SUBORDINATION. Each holder of Debentures by such holder's acceptance thereof authorizes and directs the Trustee on such holder's behalf to take such action as may be necessary or appropriate to effectuate the -66- subordination provided in this Article XVI and appoints the Trustee such holder's attorney-in-fact for any and all such purposes. SECTION 16.6 NOTICE BY THE COMPANY. (a) The Company shall give prompt written notice to a Responsible Officer 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 XVI. Notwithstanding the provisions of this Article XVI or any other provisions 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 XVI, unless and until a Responsible 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 Section 9.1, shall not 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 16.6 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of or 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 two Business Days prior to such date. (b) The Trustee, subject to the provisions of Section 9.1, 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 of the Company (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee on behalf of any such holder or holders. In the event that the 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 XVI, the Trustee may request such Person to furnish evidence to the -67- 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 XVI, 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 16.7 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS. (a) The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XVI 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. The Trustee's right to compensation and reimbursement of expenses as set forth in Section 9.7 shall not be subject to the subordination provisions of the Article XVI. (b) With respect to the holders of Senior Indebtedness of the Company, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XVI, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to have any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Section 9.1, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall in good faith mistakenly pay over or deliver to holders of Debentures, 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 XVI or otherwise. SECTION 16.8 SUBORDINATION MAY NOT BE IMPAIRED. (a) No right of any present or future holder of any Senior Indebtedness of the Company to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any -68- knowledge thereof that any such holder may have or otherwise be charged with. (b) Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of the Company may, at any time and from time to time, without the consent of or notice to the Trustee or the holders of the Debentures, without incurring responsibility to the holders of the Debentures and without impairing or releasing the subordination provided in this Article XVI 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. -69- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. BANKATLANTIC BANCORP, INC. By: __________________________________ Name: ________________________________ Title: _______________________________ Attest: ____________________________ WILMINGTON TRUST COMPANY, as trustee By: __________________________________ Name: ________________________________ Title: _______________________________ Attest: _____________________________ -70- EXHIBIT A (FORM OF FACE OF DEBENTURE) No. _______________ $________________ CUSIP No. ------------------------ BANKATLANTIC BANCORP, INC. ___ % SUBORDINATED DEBENTURE DUE ____________, 2027 BankAtlantic Bancorp, Inc., a Florida corporation (the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to, __________ or registered assigns, the principal sum of _____________________ Dollars ($__________) on _____________, 2027 (the "Stated Maturity"), and to pay interest on said principal sum from ______________, 1997, or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 31, June 30, September 30 and December 31 of each year commencing _______________, 1997, at the rate of ___% per annum until the principal hereof shall have become due and payable, and on any overdue principal and (without duplication) on any overdue installment of interest at the same rate per annum compounded quarterly. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Debenture is not a business day, then payment of interest payable on such date shall 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 preceding business day, in each case with the same force and effect as if made on such date. The interest installment so payable, and punctually, paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the person in whose name this Debenture (or one or more Predecessor Debentures, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment, which shall be the close of business on the business day next preceding such Interest Payment Date unless otherwise provided in the Indenture. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered holders on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, Exhibit A-1 notice whereof shall be given to the registered holders of the Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of and the interest on this Debenture shall be payable at the office or agency of the Trustee maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debenture Register. Notwithstanding the foregoing, so long as the holder of this Debenture is the Property Trustee, the payment of the principal of and interest on this Debenture shall be made at such place and to such account as may be designated by the Trustee. The Stated Maturity may be shortened at any time by the Company to any date not earlier than ____________________, 2002, subject to the Company having received prior regulatory approval if then required under applicable capital guidelines or regulatory policies. 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. The provisions of this Debenture are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. Exhibit A-2 IN WITNESS WHEREOF, the Company has caused this instrument to be executed. BANKATLANTIC BANCORP, INC,. By: _____________________________ Name: ___________________________ Title: __________________________ Attest: By: _______________________________ Name: _____________________________ Title: ____________________________ Exhibit A-3 [FORM OF CERTIFICATE OF AUTHENTICATION] CERTIFICATE OF AUTHENTICATION This is one of the Debentures described in the within-mentioned Indenture. Dated: WILMINGTON TRUST COMPANY ___________________________ as Trustee or Authentication Agent By ___________________________ By ________________________ Authorized Signatory Exhibit A-4 [FORM OF REVERSE OF DEBENTURE] _____% JUNIOR SUBORDINATED DEBENTURE (CONTINUED) This Debenture is one of the subordinated debentures of the Company (herein sometimes referred to as the "Debentures"), specified in the Indenture, all issued or to be issued under and pursuant to an Indenture dated as of April ___, 1997 (the "Indenture") duly executed and delivered between the Company and Wilmington Trust Company, as Trustee (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 Company has the right to redeem this Debenture at the option of the Company, without premium or penalty (i) at any time on or after _____, 2002 in whole or in part, or (ii) at any time in certain circumstances in whole (but not in part) upon the occurrence of a Special Event, in each case at a Redemption Price equal to 100% of the principal amount plus any accrued but unpaid interest, to the date of such redemption (the "Redemption Price"). The Redemption Price shall be paid prior to 12:00 noon, Eastern Standard Time, time, on the date of such redemption or at such earlier time as the Company determines. Any redemption pursuant to this paragraph shall be made upon not less than 30 days nor more than 60 days notice, at the Redemption Price. If the Debentures are only partially redeemed by the Company, the Debentures shall be redeemed pro rata or by lot or by any other method utilized by the Trustee. In the event of redemption of this Debenture in part only, a new Debenture or Debentures for the unredeemed portion hereof shall bc issued in the name of the holder hereof upon the cancellation hereof. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debentures may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall (i) extend the Exhibit A-5 fixed maturity of the Debentures except as provided in the Indenture, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon (except for deferrals of interest as described below), without the consent of the holder of each Debenture so affected; or (ii) reduce the aforesaid percentage of Debentures, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of each Debenture then outstanding and affected thereby. The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Debentures at the time outstanding, on behalf of all of the holders of the Debentures, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture, and its consequences, except a default in the payment of the principal of or interest on any of the Debentures. Any such consent or waiver by the registered holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Debenture and of any Debenture issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise or whether any notation of such consent or waiver is made upon this Debenture). No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal and interest on this Debenture at the time and place and at the rate and in the money herein prescribed. The Company shall have the right at any time during the term of the Debentures and from time to time to extend the interest payment period of such Debentures for up to 20 consecutive quarters (each, an "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Debentures to the extent that payment of such interest is enforceable under applicable law). Before the termination of any such Extended Interest Payment Period, the Company may further extend such Extended Interest Payment Period, provided that such Extended Interest Payment Period together with all such further extensions thereof shall not exceed 20 consecutive quarters. At the termination of any such Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any additional amounts then due, the Company may commence a new Extended Interest Payment Period. As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is transferable by the registered holder hereof on the Debenture Register of the Company, upon surrender of this Debenture for registration of transfer at the office or agency of the Trustee accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or Exhibit A-6 the Trustee duly executed by the registered holder hereof or his attorney duly authorized in writing, and thereupon one or more new Debentures of authorized denominations and for the same aggregate principal amount shall be issued to the designated transferee or transferees. No service charge shall be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Debenture, the Company, the Trustee, any paying agent and the Debenture Registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Debenture Registrar) for the purpose of receiving payment of or on account of the principal hereof and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Debenture Registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Debenture, or for any claim based hereon, or otherwise in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. The Debentures are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. All terms used in this Debenture that are defined in the Indenture shall have the meanings assigned to them in the Indenture. [Additional Provisions to be Included if a Global Debenture, substantially in the following form: THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE REFERRED TO HEREIN AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS DEBENTURE IS EXCHANGEABLE FOR DEBENTURES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.] Exhibit A-7 EX-4.3 3 EXHIBIT 4.3 CERTIFICATE OF TRUST OF BBC CAPITAL TRUST I THIS CERTIFICATE OF TRUST OF BBC CAPITAL TRUST I (the "Trust"), dated March 21, 1997, is being duly executed and filed by WILMINGTON TRUST COMPANY, a Delaware banking corporation, ALAN B. LEVAN, FRANK V. GRIECO and JASPER R. EANES, each an individual, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. Section 3801 et seq.). 1. NAME. The name of the business trust formed hereby is BBC CAPITAL TRUST I. 2. DELAWARE TRUSTEE. The name and business address of the trustee of the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration. 3. EFFECTIVE DATE. This Certificate of Trust shall be effective on March 21, 1997. IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust, have executed this Certificate of Trust on the date first above written. WILMINGTON TRUST COMPANY as Trustee By:/S/ AUTHORIZED REPRESENTATIVE ------------------------------ Authorized Representative /S/ ALAN B. LEVAN --------------------------------- ALAN B. LEVAN as Trustee /S/ FRANK V. GRIECO --------------------------------- FRANK V. GRIECO as Trustee /S/ JASPER R. EANES --------------------------------- JASPER R. EANES as Trustee EX-4.4 4 EXHIBIT 4.4 TRUST AGREEMENT This TRUST AGREEMENT, dated as of March 21, 1997 (this "Trust Agreement"), among (i) BankAtlantic Bancorp, Inc., a Florida corporation (the "Depositor"), (ii) Wilmington Trust Company, a Delaware banking corporation, as trustee, and (iii) Alan B. Levan, Frank V. Grieco and Jasper R. Eanes, each an individual, as trustees (each of such trustees in (ii) and (iii) a "Trustee" and collectively, the "Trustees"). The Depositor and the Trustees hereby agree as follows: 1. The trust created hereby (the "Trust") shall be known as "BBC Capital Trust I" in which name the Trustees, or the Depositor to the extent provided herein, may engage in the transactions contemplated hereby, make and execute contracts, and sue and be sued. 2. The Depositor hereby assigns, transfers, conveys and sets over to the Trustees the sum of $10.00. The Trustees hereby acknowledge receipt of such amount in trust from the Depositor, which amount shall constitute the initial trust estate. The Trustees hereby declare that they will hold the trust estate in trust for the Depositor. It is the intention of the parties hereto that the Trust created hereby constitute a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section 3801, et seq. (the "Business Trust Act"), and that this document constitutes the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State in accordance with the provisions of the Business Trust Act. 3. The Depositor and the Trustees will enter into an amended and restated Trust Agreement, satisfactory to each such party and substantially in the form included as an exhibit to the 1933 Act Registration Statement (as defined below), to provide for the contemplated operation of the Trust created hereby and the issuance of the Preferred Securities and Common Securities referred to therein. Prior to the execution and delivery of such amended and restated Trust Agreement, the Trustees shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise required by applicable law or as may be necessary to obtain, prior to such execution and delivery, any licenses, consents or approvals required by applicable law or otherwise. 4. The Depositor and the Trustees hereby authorize and direct the Depositor, as the sponsor of the Trust, (i) to file with the Securities and Exchange Commission (the "Commission") and execute, in each case on behalf of the Trust, (a) the Registration Statement on Form S-3 (the "1933 Act Registration Statement"), including any pre-effective or post-effective amendments to the 1933 Act Registration Statement, relating to the registration under the Securities Act of 1933, as amended, of the Preferred Securities of the Trust and possibly certain other securities and (b) a Registration Statement on Form 8-A (the "1934 Act Registration Statement") (including all pre-effective and post-effective amendments thereto) relating to the registration of the Preferred Securities of the Trust under the Securities Exchange Act of 1934, as amended; (ii) to file with The Nasdaq Stock Market's National Market or a national stock exchange (each, an "Exchange") and execute on behalf of the Trust one or more listing applications and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities to be listed on any of the Exchanges; (iii) to file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as shall be necessary or desirable to register the Preferred Securities under the securities or blue sky laws of such jurisdictions as the Depositor, on behalf of the Trust, may deem necessary or desirable; and (iv) to execute on behalf of the Trust that certain Underwriting Agreement relating to the Preferred Securities, among the Trust, the Depositor and the several Underwriters named therein, substantially in the form included as an exhibit to the 1933 Act Registration Statement. In the event that any filing referred to in clauses (i), (ii) and (iii) above is required by the rules and regulations of the Commission, an Exchange or state securities or blue sky laws, to be executed on behalf of the Trust by one or more of the Trustees, each of the Trustees, in its or his capacity as a Trustee of the Trust, is hereby authorized and, to the extent so required, directed to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that Wilmington Trust Company in its capacity as a Trustee of the Trust shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission, the Exchange or state securities or blue sky laws. In connection with the filings referred to above, the Depositor, and Alan B. Levan, Frank V. Grieco and Jasper R. Eanes, each as Trustees and not in their individual capacities, hereby constitutes and appoints Alan B. Levan, Frank V. Grieco and Jasper R. Eanes, and each of them, as its true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the Depositor or such Trustees or in the Depositor's or such Trustees' name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to the 1933 Act Registration Statement and the 1934 Act Registration Statement and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Commission, the Exchange and administrators of the state securities or blue sky laws, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as the Depositor or such Trustee might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and -2- agents or any of them, or their respective substitute or substitutes, shall do or cause to be done by virtue hereof. 5. This Trust Agreement may be executed in one or more counterparts. 6. The number of Trustees initially shall be four and thereafter the number of Trustees shall be such number as shall be set forth in the amended and restated Trust Agreement or as shall be fixed from time to time by a written instrument signed by the Depositor which may increase or decrease the number of Trustees; provided, however, that to the extent required by the Business Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable Delaware law. Subject to the foregoing, the Depositor is entitled to appoint or remove without cause any Trustee at any time. The Trustees may resign upon thirty (30) days' prior notice to the Depositor. 7. This Trust Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (without regard to conflict of laws principles). [Signatures On Next Page] -3- IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed as of the day and year first above written. BANKATLANTIC BANCORP, INC. as Depositor By: /S/ ALAN B. LEVAN ------------------------------ Alan B. Levan Chairman of the Board, President and Chief Executive Officer WILMINGTON TRUST COMPANY, as Trustee By:/S/ AUTHORIZED REPRESENTATIVE ------------------------------ Authorized Representative /S/ ALAN B. LEVAN --------------------------------- ALAN B. LEVAN as Trustee /S/ FRANK V. GRIECO --------------------------------- FRANK V. GRIECO as Trustee /S/ JASPER R. EANES --------------------------------- JASPER R. EANES as Trustee -4- EX-4.5 5 DRAFT 3/20/97 BBC CAPITAL TRUST I AMENDED AND RESTATED TRUST AGREEMENT AMONG BANKATLANTIC BANCORP, INC., AS DEPOSITOR WILMINGTON TRUST COMPANY, AS PROPERTY TRUSTEE AND THE ADMINISTRATIVE TRUSTEES NAMED HEREIN DATED AS OF _________, 1997 TABLE OF CONTENTS PAGE ARTICLE I DEFINED TERMS Section 101. Definitions ARTICLE II ESTABLISHMENT OF THE TRUST. Section 201. Name Section 202. Office of the Property Trustee; Principal Place of Business Section 203. Initial Contribution of Trust Property; Organizational Expenses Section 204. Issuance of the Preferred Securities. Section 205. Issuance of the Common Securities; Subscription and Purchase of Debentures. Section 206. Declaration of Trust Section 207. Authorization to Enter into Certain Transactions. Section 208. Assets of Trust Section 209. Title to Trust Property ARTICLE III PAYMENT ACCOUNT Section 301. Payment Account ARTICLE IV DISTRIBUTIONS; REDEMPTION Section 401. Distributions Section 402. Redemption. Section 403. Subordination of Common Securities. Section 404. Payment Procedures Section 405. Tax Returns and Reports Section 406. Payment of Taxes, Duties, etc. of the Trust Section 407. Payments Under Indenture. ARTICLE V TRUST SECURITIES CERTIFICATES Section 501. Initial Ownership Section 502. The Trust Securities Certificates Section 503. Execution and Delivery of Trust Securities Certificates Section 504. Registration of Transfer and Exchange of Preferred Securities Certificates Section 505. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates Section 506. Persons Deemed Securityholders Section 507. Access to List of Securityholders' Names and Addresses Section 508. Maintenance of Office or Agency Section 509. Appointment of Paying Agent - i - PAGE Section 510. Ownership of Common Securities by Depositor Section 511. Preferred Securities Certificates Section 512. [Intentionally Omitted] Section 513. [Intentionally Omitted] Section 514. Rights of Securityholders ARTICLE VI. ACTS OF SECURITYHOLDERS; MEETINGS; VOTING Section 601. Limitations on Voting Rights Section 602. Notice of Meetings Section 603. Meetings of Preferred Securityholders Section 604. Voting Rights Section 605. Proxies, etc. Section 606. Securityholder Action by Written Consent Section 607. Record Date for Voting and Other Purposes Section 608. Acts of Securityholders Section 609. Inspection of Records ARTICLE VII. REPRESENTATIONS AND WARRANTIES. Section 701. Representations and Warranties of the Bank and the Property Trustee Section 702. Representations and Warranties of Depositor ARTICLE VIII. TRUSTEES. Section 801. Certain Duties and Responsibilities Section 802. Certain Notices Section 803. Certain Rights of Property Trustee Section 804. Not Responsible for Recitals or Issuance of Securities Section 805. May Hold Securities Section 806. Compensation; Indemnity; Fees Section 807. Corporate Property Trustee Required; Eligibility of Trustees Section 808. Conflicting Interests Section 809. Co-Trustees and Separate Trustee. Section 810. Resignation and Removal; Appointment of Successor Section 811. Acceptance of Appointment by Successor Section 812. Merger, Conversion, Consolidation or Succession to Business - ii - PAGE Section 813. Preferential Collection of Claims Against Depositor or Trust Section 814. Reports by Property Trustee Section 815. Reports to the Property Trustee Section 816. Evidence of compliance with conditions Precedent Section 817. Number of Trustees Section 818. Delegation of Power Section 819. Voting ARTICLE IX. TERMINATION, LIQUIDATION AND MERGER Section 901. Termination Upon Expiration Date Section 902. Early Termination Section 903. Termination Section 904. Liquidation Section 905. Mergers, Consolidations, Amalgamations or Replacements of the Trust ARTICLE X. MISCELLANEOUS PROVISIONS. Section 1001. Limitation of Rights of Securityholders Section 1002. Amendment Section 1003. Separability Section 1004. Governing Law Section 1005. Payments Due on Non-Business Day Section 1006. Successors Section 1007. Headings Section 1008. Reports, Notices and Demands Section 1009. Agreement Not to Petition Section 1010. Trust Indenture Act; conflict with Trust Indenture Act Section 1011. Acceptance of Terms of Trust Agreement, Guarantee and Indenture Exhibit A Certificate of Trust Exhibit B Form of Certificate Depository Agreement Exhibit C Form of Common Securities Certificate Exhibit D Form of Expense Agreement Exhibit E Form of Preferred Securities Certificate - iii - CROSS-REFERENCE TABLE SECTION OF SECTION OF AMENDED TRUST INDENTURE ACT AND RESTATED OF 1939, AS AMENDED TRUST AGREEMENT - ------------------- ------------------ 310(a)(1) .807 310(a)(2) .807 310(a)(3) .807 310(a)(4) 207(a)(ii) 310(b) .808 311(a) .813 311(b) .813 312(a) .507 312(b) .507 312(c) .507 313(a) 814(a) 313(a)(4) 814(b) 313(b) 814(b) 313(c) 1008 313(d) 814(c) 314(a) .815 314(b) Not Applicable 314(c)(1) .816 314(c)(2) .816 314(c)(3) Not Applicable 314(d) Not Applicable 314(e) 101,816 315(a) 801(a), 803(a) 315(b) .802, 1008 315(c) 801(a) 315(d) 801, 803 316(a)(2) Not Applicable 316(b) Not Applicable 316(c) .607 317(a)(1) Not Applicable 317(a)(2) Not Applicable 317(b) .509 318(a) 1010 Note: This Cross-Reference Table does not constitute part of this Agreement and shall not affect any interpretation of any of its terms or provisions. - iv - AMENDED AND RESTATED TRUST AGREEMENT AMENDED AND RESTATED TRUST AGREEMENT, dated as of ____________ ___, 1997, among (i) BankAtlantic Bancorp, Inc., a Florida corporation (including any successors or assigns, the "Depositor"), (ii) Wilmington Trust Company, a banking corporation duly organized and existing under the laws of the State of Delaware, as property trustee (the "Property Trustee" and, in its separate corporate capacity and not in its capacity as Property Trustee: the "Bank"), (iii) Alan B. Levan, an individual, Frank V. Greico, an individual, and Jasper R. Eanes, an individual, each of whose address is c/o BankAtlantic Bancorp, Inc., 1750 East Sunrise Boulevard, Fort Lauderdale, Florida 33304 (each an "Administrative Trustee" and collectively the "Administrative Trustees") (the Property Trustee, the Delaware Trustee and the Administrative Trustees referred to collectively as the "Trustees"), and (v) the several Holders (as hereinafter defined). RECITALS WHEREAS, the Depositor, the Property Trustee, and Alan B. Levan, Frank V. Greico and Jasper R. Eanes, each as an Administrative Trustee, have heretofore duly declared and established a business trust pursuant to the Delaware Business Trust Act by the entering into of that certain Trust Agreement, dated as of March ____, 1997 (the "Original Trust Agreement"), and by the execution and filing by the Delaware Trustee, the Depositor and the Administrative Trustees with the Secretary of State of the State of Delaware of the Certificate of Trust, filed on March ____, 1997, the form of which is attached as Exhibit A; and WHEREAS, the Depositor, the Delaware Trustee, the Property Trustee and the Administrative Trustees desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the issuance of the Common Securities (as defined herein) by the Trust (as defined herein) to the Depositor; (ii) the issuance and sale of the Preferred Securities (as defined herein) by the Trust pursuant to the Underwriting Agreement (as defined herein); (iii) the acquisition by the Trust from the Depositor of all of the right, title and interest in the Debentures (as defined herein); and (iv) the appointment of the Trustees; NOW THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each party for the benefit of the other parties and for the benefit of the Securityholders (as defined herein) hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows. ARTICLE I DEFINED TERMS SECTION 101. DEFINITIONS. For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article I have the meanings assigned to them in this Article I and include the plural as well as the singular; - 1 - (b) all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Trust Agreement; and (d) the words "herein", "hereof' and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 608. "Additional Amount" means, with respect to Trust Securities of a given Liquidation Amount and/or a given period, the amount of additional interest accrued on interest in arrears and paid by the Depositor on a like Amount of Debentures for such period. "Additional Interest" has the meaning specified in Section 1.1 of the Indenture. "Administrative Trustee" means each of Alan B. Levan, Frank V. Greico and Jasper R. Eanes, solely in his capacity as Administrative Trustee of the Trust formed and continued hereunder and not in his individual capacity, or such Administrative Trustee's successor in interest in such capacity, or any successor trustee appointed as herein provided. "Affiliate" means, with respect to a specified Person, (a) any Person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities or other ownership interests of the specified Person; (b) any Person 10% or more of whose outstanding voting securities or other ownership interests are directly or indirectly owned, controlled or held with power to vote by the specified Person; (c) any Person directly or indirectly controlling, controlled by, or under common control with the specified Person; (d) a partnership in which the specified person is a general partner; (e) any officer or director of the specified Person; and (f) if the specified Person is an individual, any entity of which the specified Person is an officer, director or general partner. "Bank" has the meaning specified in the Preamble to this Trust Agreement. "Bankruptcy Event" means, with respect to any Person: (a) the entry of a decree or order by a court having jurisdiction in the premises adjudging such Person a bankrupt or insolvent, or approving as properly filed a petition seeking liquidation or reorganization of or in respect of such Person under the United States Bankruptcy Code of 1978, as amended, or any other similar applicable federal or state law, and the continuance of any such decree or order unvacated and unstayed for a period of 90 days; or the commencement of an involuntary case under the United States Bankruptcy Code of 1978, as amended, in respect of such Person, which shall continue undismissed for a period of 90 days or entry of an order for relief in such case; or the entry of a decree or order of a court having jurisdiction in the premises for the appointment on the ground of insolvency or bankruptcy of a receiver, custodian, liquidator, trustee or assignee in bankruptcy or insolvency of such Person or of its property, or for the winding up or liquidation of its affairs, and such decree or order shall have remained in force unvacated and unstayed for a period of 90 days; or - 2 - (b) the institution by such Person of proceedings to be adjudicated a voluntary bankrupt, or the consent by such Person to the filing of a bankruptcy proceeding against it, or the filing by such Person of a petition or answer or consent seeking liquidation or reorganization under the United States Bankruptcy Code of 1978, as amended, or other similar applicable Federal or State law, or the consent by such Person to the filing of any such petition or to the appointment on the ground of insolvency or bankruptcy of a receiver or custodian or liquidator or trustee or assignee in bankruptcy or insolvency of such Person or of its property, or shall make a general assignment for the benefit of creditors. "Bankruptcy Laws" has the meaning specified in Section 1009. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Depositor to have been duly adopted by the Depositor's Board of Directors, or such committee of the Board of Directors or officers of the Depositor to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the appropriate Trustee. "Business Day" means a day other than a Saturday or Sunday, a day on which banking institutions in The City of New York are authorized or required by law, executive order or regulation to remain closed, or a day on which the Property Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture Trustee is closed for business. "Certificate of Trust" means the certificate of trust filed with the Secretary of State of the State of Delaware with respect to the Trust, as amended or restated from time to time. "Change in 1940 Act Law" shall have the meaning set forth in the definition of "Investment Company Event." "Closing Date" means the date of execution and delivery of this Trust Agreement. "Code" means the Internal Revenue Code of 1986, or any successor statute, in each case as amended from time to time. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $25 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit C. "Corporate Trust Office" means the office at which, at any particular time, the corporate trust business of the Property Trustee or the Debenture Trustee, as the case may be, shall be principally administered, - 3 - which office at the date hereof, in each such case, is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration. "Debenture Event of Default" means an "Event of Default" as defined in Section 7.1 of the Indenture. "Debenture Redemption Date" means, with respect to any Debentures to be redeemed under the Indenture, the date fixed for redemption under the Indenture. "Debenture Tax Event" means a "Tax Event" as specified in Section 1.1 of the Indenture. "Debenture Trustee" means Wilmington Trust Company, a banking corporation company organized under the laws of the State of Delaware and any successor thereto, as trustee under the Indenture. "Debentures" means the $________ aggregate principal amount of the Depositor's ______% Junior Subordinated Debentures due 2027, issued pursuant to the Indenture. "Definitive Preferred Securities Certificates" means the Preferred Securities Certificates issued in certificated, fully registered form as provided in Section 513. "Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Delaware Code Sections 3801 et seq. as it may be amended from time to time. "Depositor" has the meaning specified in the Preamble to this Trust Agreement. "Distribution Date" has the meaning specified in Section 401(a) "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 401(a). "Event of Default" 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 occurrence of a Debenture Event of Default; or (b) default by the Trust or the Property Trustee in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days; or (c) default by the Trust or the Property Trustee in the payment of any Redemption Price of any Trust Security when it becomes due and payable; or (d) default in the performance, or breach, in any material respect, of any covenant or warranty of the Trustees in this Trust Agreement (other than a covenant or warranty a default in the performance of which or the breach of which is dealt with in clause (b) or (c), 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 defaulting Trustee or Trustees by the Holders of at least 25% in aggregate liquidation preference of the Outstanding Preferred Securities a written notice - 4 - specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) the occurrence of a Bankruptcy Event with respect to the Property Trustee and the failure by the Depositor to appoint a successor property Trustee within 60 days thereof "Exchange Act" means the Securities Exchange Act of 1934, or any successor statute, in each case as amended from time to time. "Expense Agreement" means the Agreement as to Expenses and Liabilities between the Depositor and the Trust, substantially in the form attached as Exhibit D, as amended from time to time. "Expiration Date" has the meaning specified in Section 901. "Extended Interest Payment Period" has the meaning specified in Section 4.1 of the Indenture. "Guarantee" means the Preferred Securities Guarantee Agreement executed and delivered by the Depositor and Wilmington Trust Company, as trustee, contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the holders of the Preferred Securities, as amended from time to time. "Indenture" means the Indenture, dated as of ____________, 1997 between the Depositor and the Debenture Trustee, as trustee, as amended or supplemented from time to time. "Investment Company Act," means the Investment Company Act of 1940, or any successor statute, in each case as amended from time to time. "Investment Company Event" means the receipt by the Trust of an Opinion of Counsel, rendered by a law firm experienced in such matters, to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or shall be considered an "investment company" that is required to be registered under the Investment Company Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities under this Trust Agreement. "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "Like Amount" means (a) with respect to a redemption of Trust Securities, Trust Securities having a Liquidation Amount equal to the principal amount of Debentures to be contemporaneously redeemed in accordance with the Indenture and the proceeds of which shall be used to pay the Redemption Price of such Trust Securities; and (b) with respect to a distribution of Debentures to Holders of Trust Securities in connection with a termination or liquidation of the Trust, Debentures having a principal amount equal to the Liquidation Amount of the Trust Securities of the Holder to whom such Debentures are distributed. Each Debenture distributed pursuant to clause (b) above shall carry with it accumulated interest in an amount equal to the accumulated and unpaid interest then due on such Debentures. - 5 - "Liquidation Amount" means the stated amount of $25 per Trust Security. "Liquidation Date" means the date on which Debentures are to be distributed to Holders of Trust Securities in connection with a termination and liquidation of the Trust pursuant to Section 904(a). "Liquidation Distribution" has the meaning specified in Section 904(d). "Officers' Certificate" means a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Controller or an Assistant Controller or the Secretary or an Assistant Secretary, of the Depositor, and delivered to the appropriate Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 816 shall be the principal executive, financial or accounting officer of the Depositor. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Opinion of Counsel" means an opinion in writing of legal counsel, who may be counsel for the Trust, the Property Trustee, or the Depositor, but not an employee of any thereof, and who shall be reasonably acceptable to the Property Trustee. "Original Trust Agreement" has the meaning specified in the Recitals to this Trust Agreement. "Outstanding", when used with respect to Preferred Securities, means, as of the date of determination, all Preferred Securities theretofore executed and delivered under this Trust Agreement, except: (a) Preferred securities theretofore canceled by the Property Trustee or delivered to the Property Trustee for cancellation; (b) Preferred Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent for the Holders of such Preferred Securities; provided that, if such Preferred Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Trust Agreement; and (c) Preferred Securities which have been paid or in exchange for or in lieu of which other Preferred Securities have been executed and delivered pursuant to Sections 504, 505, 511 and 513; provided, however, that in determining whether the Holders of the requisite Liquidation Amount - 6 - of the Outstanding Preferred Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Preferred Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor or any Trustee shall be disregarded and deemed not to be Outstanding, except that (a) in determining whether any Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Preferred Securities that such Trustee knows to be so owned shall be so disregarded and (b) the foregoing shall not apply at any time when all of the outstanding Preferred Securities are owned by the Depositor, one or more of the Trustees and/or any such Affiliate. Preferred Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrative Trustees the pledgee's right so to the Depositor or any Affiliate of the Depositor. "Paying Agent" means any paying agent or co-paying agent appointed pursuant to Section 509 and shall initially be the Bank. "Payment Account" means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee with the Bank in its trust department for the benefit of the Securityholders in which all amounts paid in respect of the Debentures shall be held and from which the Property Trustee shall make payments to the Securityholders in accordance with Sections 401 and 102. "Person" means any individual, corporation, partnership, joint venture, trust, limited liability company or corporation, unincorporated organization or government or any agency or political subdivision thereof. "Preferred Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $25 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Preferred Securities Certificate", means a certificate evidencing ownership of Preferred Securities, substantially in the form attached as Exhibit E. "Property Trustee" means the commercial bank or trust company identified as the "Property Trustee," in the Preamble to this Trust Agreement solely in its capacity as Property Trustee of the Trust heretofore formed and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as herein provided. "Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Trust Agreement; provided that each Debenture Redemption Date and the stated maturity of the Debentures shall be a Redemption Date for a Like Amount of Trust Securities. "Redemption Price" means, with respect to any Trust Security, the Liquidation Amount of such Trust Security, plus accumulated and unpaid Distributions to the Redemption Date, paid by the Depositor upon the concurrent redemption of a Like Amount of Debentures, allocated on a pro rata basis (based on Liquidation Amounts) among the Trust Securities. "Relevant Trustee" shall have the meaning specified in Section 810. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 504. - 7 - "Securityholder" or "Holder" means a Person in whose name a Trust Security or Securities is registered in the Securities Register; any such Person is a beneficial owner within the meaning of the Delaware Business Trust Act. "Trust" means the Delaware business trust created and continued hereby and identified on the cover page to this Trust Agreement. "Trust Agreement" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including all exhibits hereto, including, for all purposes of this Trust Agreement and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Trust Agreement and any such modification, amendment or supplement, respectively. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939, as amended, is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Property" means (a) the Debentures; (b) the rights of the Property Trustee under the Guarantee; (c) any cash on deposit in, or owing to, the Payment Account; and (d) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Property Trustee pursuant to the trusts of this Trust Agreement. "Trust Security" means any one of the Common Securities or the Preferred Securities. "Trust Securities Certificate" means any one of the Common Securities Certificates or the Preferred Securities Certificates. "Trustees" means, collectively, the Property Trustee and the Administrative Trustees. "Underwriting Agreement" means the Underwriting Agreement, dated as of ____________, 1997, among the Trust, the Depositor and the Underwriters named therein. ARTICLE II ESTABLISHMENT OF THE TRUST SECTION 201. NAME. The Trust created and continued hereby shall be known as "BBC Capital Trust I," as such name may be modified from time to time by the Administrative Trustees following written notice to the Holders of Trust Securities and the other Trustees, in which name the Trustees may engage in the transactions contemplated hereby, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. - 8 - SECTION 202. OFFICE OF THE PROPERTY TRUSTEE; PRINCIPAL PLACE OF BUSINESS. The address of the Property Trustee in the State of Delaware is c/o Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Securityholders and the Depositor. The principal executive office of the Trust is c/o BankAtlantic Bancorp, Inc., 1750 East Sunrise Boulevard, Fort Lauderdale, Florida 33304. SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL EXPENSES. The Trustees acknowledge receipt in trust from the Depositor in connection with the Original Trust Agreement of the sum of $10, which constituted the initial Trust Property. The Depositor shall pay organizational expenses of the Trust as they arise or shall, upon request of any Trustee, promptly reimburse such Trustee for any such expenses paid by such Trustee. The Depositor shall make no claim upon the Trust Property for the payment of such expenses. SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES. On ____________, 1997, the Depositor and an Administrative Trustee, on behalf of the Trust and pursuant to the Original Trust Agreement, executed and delivered the Underwriting Agreement. Contemporaneously with the execution and delivery of this Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 502 and deliver in accordance with the Underwriting Agreement, Preferred Securities Certificates, registered in the name of the Persons entitled thereto, in an aggregate amount of ________ Preferred Securities having an aggregate Liquidation Amount of $________ against receipt of the aggregate purchase price of such Preferred Securities of $________, which amount such Administrative Trustee shall promptly deliver to the Property Trustee. If the underwriters exercise their Option and there is an Option Closing Date (as such terms are defined in the Underwriting Agreement), then an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 502 and deliver in accordance with the Underwriting Agreement, Preferred Securities Certificates, registered in the name of the Persons entitled thereto, in an aggregate amount of up to ________ Preferred Securities having an aggregate Liquidation Amount of up to $ _________ against receipt of the aggregate purchase price of such Preferred Securities of $_________, which amount such Administrative Trustee shall promptly deliver to the Property Trustee. SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE OF DEBENTURES. (a) Contemporaneously with the execution and delivery of this Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 502 and deliver to the Depositor, Common Securities Certificates, registered in the name of the Depositor in an aggregate amount of Common Securities having an aggregate Liquidation Amount of $_________ against payment by the Depositor of such amount. Contemporaneously therewith, an Administrative Trustee on behalf of the Trust, shall subscribe to and purchase from the Depositor Debentures, registered in the name of the Property Trustee on behalf of the Trust and having an aggregate principal amount equal to $_________, and, in satisfaction of the purchase price for such Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the sum of $__________. - 9 - (b) If the underwriters exercise the Option and there is an Option Closing Date, then an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 502 and deliver to the Depositor, Common Securities Certificates, registered in the name of the Depositor, in an aggregate amount of Common Securities having an aggregate Liquidation Amount of up to $________ against payment by the Depositor of such amount. Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase from the Depositor, Debentures, registered in the name of the Trust and having an aggregate principal amount of up to $________, and, in satisfaction of the purchase price of such Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the amount received from one of the Administrative Trustees pursuant to the last sentence of Section 204 (being the sum of the amounts delivered to the Property Trustee pursuant to (i) the third sentence of Section 204; and (ii) the first sentence of this Section 205(b)). SECTION 206. DECLARATION OF TRUST. The exclusive purposes and functions of the Trust are (a) to issue and sell Trust Securities and use the proceeds from such sale to acquire the Debentures; and (b) to engage in those activities necessary, convenient or incidental thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to have all the rights, powers and duties to the extent set forth herein, and the Trustees hereby accept such appointment. The Property Trustee hereby declares that it shall hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Securityholders. The Administrative Trustees shall have all rights, powers and duties set forth herein and in accordance with applicable law with respect to accomplishing the purposes of the Trust. SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS. (a) The Trustees shall conduct the affairs of the Trust in accordance with the terms of this Trust Agreement. Subject to the limitations set forth in paragraph (b) of this Section 207 and Article VIII, and in accordance with the following provisions (i) and (ii), the Administrative Trustees shall have the authority to enter into all transactions and agreements determined by the Administrative Trustees to be appropriate in exercising the authority, express or implied, otherwise granted to the Administrative Trustees under this Trust Agreement, and to perform all acts in furtherance thereof, including without limitation, the following: (i) As among the Trustees, each Administrative Trustee, acting singly or jointly, 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 Trust Securities; (B) to cause the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, the Expense Agreement and such other agreements or documents as may be necessary or desirable in connection with the purposes and function of the Trust; (C) assisting in the registration of the Preferred Securities under the Securities Act of 1933, as amended, and under state securities or blue sky laws, and the - 10 - qualification of this Trust Agreement as a trust indenture under the Trust Indenture Act; (D) assisting in the listing of the Preferred Securities upon The Nasdaq Stock Market's National Market or such securities exchange or exchanges as shall be determined by the Depositor and the registration of the Preferred Securities under the Exchange Act, and the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing; (E) the sending of notices (other than notices of default) and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement; (F) the appointment of a Paying Agent, authenticating agent and Securities Registrar in accordance with this Trust Agreement; (G) to the extent provided in this Trust Agreement, 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 Delaware; (H) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Preferred Securities or to enable the Trust to effect the purposes for which the Trust was created; and (I) the taking of any action incidental to the foregoing as the Administrative Trustees may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder). (ii) As among the Trustees, the Property 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 Payment 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 Payment Account; (D) the distribution of amounts owed to the Securityholders in respect of the Trust Securities in accordance with the terms of this Trust Agreement; - 11 - (E) the exercise of all of the rights, powers and privileges of a holder of the Debentures; (F) the sending of notices of default and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement; (G) the distribution of the Trust Property in accordance with the terms of this Trust Agreement; (H) to the extent provided in this Trust Agreement, the winding up of the affairs of and liquidation of the Trust; (I) after an Event of Default, the taking of any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement and protect and conserve the Trust Property for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder); (J) registering transfers of the Trust Securities in accordance with this Trust Agreement; and (K) except as otherwise provided in this Section 207(a)(ii), the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Administrative Trustees set forth in Section 207(a)(i). (b) So long as this Trust Agreement remains in effect, the Trust (or the Trustees acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Trustees shall not (i) acquire any investments or engage in any activities not authorized by this Trust Agreement; (ii) sell, assign, transfer, exchange, mortgage, pledge, setoff or otherwise dispose of any of the Trust Property or interests therein, including to Securityholders, except as expressly provided herein; (iii) take any action that would cause the Trust to fail or cease to qualify as a "grantor trust" for United States federal income tax purposes; (iv) incur any indebtedness for borrowed money or issue any other debt; or (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The Administrative Trustees shall 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 Securityholders in their capacity as Securityholders. (c) In connection with the issue and sale of the Preferred Securities, the Depositor 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 Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): (i) the preparation and filing by the Trust with the Commission and the execution on behalf of the Trust of a registration statement on the appropriate form in relation to the Preferred Securities and the Debentures, including any amendments thereto; - 12 - (ii) the determination of the states in which to take appropriate action to qualify or, register for sale all or part of the Preferred Securities and to do any and all such acts, other than actions which must be taken by or on behalf of the Trust, and advise the Trustees of actions they must take on behalf of the Trust, and prepare for execution and filing any documents to be executed and filed by the Trust or on behalf of the Trust, as the Depositor deems necessary or advisable in order to comply with the applicable laws of any such States; (iii) the preparation for filing by the Trust and execution on behalf of the Trust of an application to The Nasdaq Stock Market's National Market or a national stock exchange or other organizations for listing upon notice of issuance of any Preferred Securities and to file or cause an Administrative Trustee to file thereafter with such exchange or organization such notifications and documents as may be necessary from time to time; (iv) the preparation for filing by the Trust with the Commission and the execution on behalf of the Trust of a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) or 12(g) of the Exchange Act, including any amendments thereto; (v) the negotiation of the terms of, and the execution and delivery of, the Underwriting Agreement providing for the sale of the Preferred Securities; and (vi) 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 Administrative Trustees are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust shall not be deemed to be an "investment company" required to be registered under the Investment Company Act, shall be classified as a "grantor trust" and not as an association taxable as a corporation for United States federal income tax purposes and so that the Debentures shall be treated as indebtedness of the Depositor for United States federal income tax purposes. In this connection, subject to Section 1002, the Depositor and the Administrative Trustees are authorized to take any action, not inconsistent with applicable law or this Trust Agreement, that each of the Depositor and the Administrative Trustees determines in their discretion to be necessary or desirable for such purposes. SECTION 208. ASSETS OF TRUST. The assets of the Trust shall consist of the Trust Property. SECTION 209. TITLE TO TRUST PROPERTY. Legal title to all Trust Property shall be vested at all times in the Property Trustee (in its capacity as such) and shall be held and administered by the Property Trustee for the benefit of the Securityholders in accordance with this Trust Agreement. - 13 - ARTICLE III PAYMENT ACCOUNT SECTION 301. PAYMENT ACCOUNT. (a) On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. The Property Trustee and any agent of the Property Trustee shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making deposits and withdrawals from the Payment Account in accordance with this Trust Agreement. All monies and other property deposited or held from time to time in the Payment Account shall be held by the Property Trustee in the Payment Account for the exclusive benefit of the Securityholders and for distribution as herein provided, including (and subject to) any priority of payments provided for herein. (b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or interest on, and any other payments or proceeds with respect to, the Debentures. Amounts held in the Payment Account shall not be invested by the Property Trustee pending distribution thereof. ARTICLE IV DISTRIBUTIONS; REDEMPTION SECTION 401. DISTRIBUTIONS. (a) Distributions on the Trust Securities shall be cumulative, and shall accumulate whether or not there are funds of the Trust available for the payment of Distributions. Distributions shall accumulate from __________,1997, and, except during any Extended Interest Payment Period with respect to the Debentures, shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on ____________, 1997. If any date on which a Distribution is otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distribution shall 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, payment of such Distribution shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date (each date on which distributions are payable in accordance with this Section 401(a), a "Distribution Date"). (b) The Trust Securities represent undivided beneficial interests in the Trust Property, and, as a practical matter, the Distributions on the Trust Securities shall be payable at a rate of _____% per annum of the Liquidation Amount of the Trust Securities. The amount of Distributions payable for any full period shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of Distributions for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30 day months. During any Extended Interest Payment Period with respect to the Debentures, Distributions on the Preferred Securities shall be deferred for a period equal to the Extended Interest Payment Period. The amount of Distributions payable for any period shall include the Additional Amounts, if any. - 14 - (c) Distributions on the Trust Securities shall be made by the Property Trustee solely from the Payment Account and shall be payable on each Distribution Date only to the extent that the Trust has funds then on hand and immediately available in the Payment Account for the payment of such Distributions. (d) Distributions on the Trust Securities with respect to a Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be 15th day of the month in which the Distribution is payable. SECTION 402. REDEMPTION. (a) On each Debenture Redemption Date and on the stated maturity of the Debentures the Trust shall be required to redeem a Like Amount of Trust Securities at the Redemption Price. (b) Notice of redemption shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Securities Register. The Property Trustee shall have no responsibility for the accuracy of any CUSIP number contained in such notice. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) the CUSIP number; (iv) if less than all the Outstanding Trust Securities are to be redeemed, the identification and the aggregate Liquidation Amount of the particular Trust Securities to be redeemed; and (v) that, on the Redemption Date, the Redemption Price shall become due and payable upon each such Trust Security to be redeemed and that Distributions thereon shall cease to accumulate on and after said date. (c) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption of Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has immediately available funds then on hand and available in the Payment Account for the payment of such Redemption Price. (d) If the Property Trustee gives a notice of redemption in respect of any Preferred Securities, then, by 12:00 noon, New York City time, on the Redemption Date, subject to Section 402(c), the Property Trustee shall deposit with the Paying Agent funds sufficient to pay the applicable Redemption Price and shall give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders thereof upon surrender of their Preferred Securities Certificates. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the Holders of such Trust - 15 - Securities as they appear on the Register for the Trust Securities on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of Securityholders holding Trust Securities so called for redemption shall cease, except the right of such Securityholders to receive the Redemption Price and any Distribution payable on or prior to the Redemption Date, but without interest, and such Securities shall cease to be Outstanding. In the event that any date on which any Redemption Price is payable is not a Business Day, then payment of the Redemption Price payable on such date shall 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 shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused and not paid either by the Trust or by the Depositor pursuant to the Guarantee, Distributions on such Trust Securities shall continue to accumulate, at the then applicable rate, from the Redemption Date originally established by the Trust for such Trust Securities to the date such Redemption Price is actually paid, in which case the actual payment date shall be the date fixed for redemption for purposes of calculating the Redemption Price. (e) Payment of the Redemption Price on the Trust Securities shall be made to the record holders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be the date 15 days prior to the relevant Redemption Date. (f) Subject to Section 403(a), if less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated on a pro rata basis (based on Liquidation Amounts) among the Common Securities and the Preferred Securities. The particular Preferred Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Property Trustee from the outstanding Preferred Securities not previously called for redemption, by such method (including, without limitation, by lot) as the Property Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $25 or an integral multiple of $25 in excess thereof) of the Liquidation Amount of Preferred Securities of a denomination larger than $25. The Property Trustee shall promptly notify the Securities Registrar in writing of the Preferred Securities selected for redemption and, in the case of any Preferred Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all purposes of this Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Preferred Securities shall relate, in the case of any Preferred Securities redeemed or to be redeemed only in part, to the portion of the Liquidation Amount of Preferred Securities which has been or is to be redeemed. SECTION 403. SUBORDINATION OF COMMON SECURITIES. (a) Payment of Distributions (including Additional Amounts, if applicable) on, and the Redemption Price of, the Trust Securities, as applicable, shall be made, subject to Section 402(f), pro rata among the Common Securities and the Preferred Securities based on the Liquidation Amount of the Trust Securities, provided, however, that if on any Distribution Date or Redemption Date any Event of Default resulting from a Debenture Event of Default shall have occurred and be continuing, no payment of any Distribution (including Additional Amounts, if applicable) on, or Redemption Price of, any Common Security, and no other payment on account - 16 - of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions (including Additional Amounts, if applicable) on all Outstanding Preferred Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all Outstanding Preferred Securities then called for redemption, shall have been made or provided for, and all funds immediately available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions (including Additional Amounts, if applicable) on, or the Redemption Price of, Preferred Securities then due and payable. (b) In the case of the occurrence of any Event of Default resulting from a Debenture Event of Default, the Holder of Common Securities shall be deemed to have waived any right to act with respect to any such Event of Default under this Trust Agreement until the effect of all such Events of Default with respect to the Preferred Securities shall have been cured, waived or otherwise eliminated. Until any such Event of Default under this Trust Agreement with respect to the Preferred Securities shall have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the Holders of the Preferred Securities and not the Holder of the Common Securities, and only the Holders of the Preferred Securities shall have the right to direct the Property Trustee to act on their behalf. SECTION 404. PAYMENT PROCEDURES. Payments of Distributions (including Additional Amounts, if applicable) in respect of the Preferred Securities shall be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Property Trustee and the Common Securityholder. SECTION 405. TAX RETURNS AND REPORTS. The Administrative Trustees shall prepare (or cause to be prepared), at the Depositor's expense, and file all United States federal, state and local tax and information returns and reports required to be filed by or in respect of the Trust. In this regard, the Administrative Trustees shall (a) prepare and file (or cause to be prepared and filed) the appropriate Internal Revenue Service Form required to be filed in respect of the Trust in each taxable year of the Trust; and (b) prepare and furnish (or cause to be prepared and furnished) to each Securityholder the appropriate Internal Revenue Service form required to be furnished to such Securityholder or the information required to be provided on such form. The Administrative Trustees shall provide the Depositor with a copy of all such returns and reports promptly after such filing or furnishing. The Property Trustee shall comply with United States federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Securityholders under the Trust Securities. SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST. Upon receipt under the Debentures of Additional Interest (as defined in Section 1.1 of the Indenture), the Property Trustee, at the direction of an Administrative Trustee or the Depositor, shall promptly pay any taxes, duties or governmental charges of whatsoever nature (other than withholding taxes) imposed on the Trust by the United States or any other taxing authority. - 17 - SECTION 407. PAYMENTS UNDER INDENTURE. Any amount payable hereunder to any Holder or Preferred Securities shall be reduced by the amount of any corresponding payment such Holder has directly received under the Indenture pursuant to Section 514(b) or (c) hereof ARTICLE V TRUST SECURITIES CERTIFICATES SECTION 501. INITIAL OWNERSHIP. Upon the creation of the Trust and the contribution by the Depositor pursuant to Section 203 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are outstanding, the Depositor shall be the sole beneficial owner of the Trust. SECTION 502. THE TRUST SECURITIES CERTIFICATES. The Preferred Securities Certificates shall be issued in minimum denominations of $25 Liquidation Amount and integral multiples of $25 in excess thereof, and the Common Securities Certificates shall be issued in denominations of $25 Liquidation Amount and integral multiples thereof. The Trust Securities Certificates shall be executed on behalf of the Trust by manual signature of at least one Administrative Trustee. Trust Securities Certificates bearing the manual signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefits of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Securityholder, and shall be entitled to the rights and subject to the obligations of a Securityholder hereunder, upon due registration of such Trust Securities Certificate in such transferee's name pursuant to Sections 504, 511 and 513. SECTION 503. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES. On the Closing Date and on the date on which the Underwriter exercises the option, as applicable (the "Option Closing Date"), the Administrative Trustees shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 204 and 205, to be executed on behalf of the Trust by at least one of the Administrative Trustees and delivered to or upon the written order of the Depositor, signed by its Chief Executive Officer, President, any Vice President, the Treasurer or an Assistant Treasurer without further corporate action by the Depositor, in authorized denominations. SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED SECURITIES CERTIFICATES (a) The Property Trustee shall keep or cause to be kept, at the office or agency maintained pursuant to Section 508, a register or registers for the purpose of registering Trust Securities Certificates and transfers and exchanges of Preferred Securities Certificates (herein referred to as the "Securities Register") in which the registrar and transfer agent (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Preferred Securities Certificates and Common Securities Certificates (subject to Section 510 in - 18 - the case of the Common Securities Certificates) and registration of transfers and exchanges of Preferred Securities Certificates as herein provided. The Property Trustee shall be the initial Securities Registrar. (b) Upon surrender for registration of transfer of any Preferred Securities Certificate at the office or agency maintained pursuant to Section 508, the Administrative Trustees or any one of them and the Property Trustee shall execute and deliver, in the name of the designated transferee or transferees, one or more new Preferred Securities Certificates in authorized denominations of a like aggregate Liquidation Amount dated the date of execution by such Administrative Trustee or Trustees. The Securities Registrar shall not be required to register the transfer of any Preferred Securities that have been called for redemption. At the option of a Holder, Preferred Securities Certificates may be exchanged for other Preferred Securities Certificates in authorized denominations of the same class and of a like aggregate Liquidation Amount upon surrender of the Preferred Securities Certificates to be exchanged at the office or agency maintained pursuant to Section 508. (c) Every Preferred Securities Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Property Trustee and the Securities Registrar duly executed by the Holder or his attorney duly authorized in writing. Each Preferred Securities Certificate surrendered for registration of transfer or exchange shall be canceled and subsequently disposed of by the Property Trustee in accordance with its customary practice. The Trust shall not be required to (i) issue, register the transfer of, or exchange any Preferred Securities during a period beginning at the opening of business 15 calendar days before the date of mailing of a notice of redemption of any Preferred Securities called for redemption and ending at the close of business on the day of such mailing; or (ii) register the transfer of or exchange any Preferred Securities so selected for redemption, in whole or in part, except the unredeemed portion of any such Preferred Securities being redeemed in part. (d) No service charge shall be made for any registration of transfer or exchange of Preferred Securities Certificates, but the Securities Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Preferred Securities Certificates. SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES CERTIFICATES. If (a) any mutilated Trust Securities certificate shall be surrendered to the Securities Registrar, or if the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Securities Certificate, and (b) there shall be delivered to the Securities Registrar and the Administrative Trustees such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Administrative Trustees, or any one of them, on behalf of the Trust shall execute and make available for delivery, and the Property Trustee shall countersign, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities Certificate of like class, tenor and denomination. In connection with the issuance of any new Trust Securities Certificate under this Section 505, the Administrative Trustees or the Securities Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection - 19 - therewith. Any duplicate Trust Securities Certificate issued pursuant to this Section 505 shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. SECTION 506. PERSONS DEEMED SECURITYHOLDERS. The Trustees, the Paying Agent and the Securities Registrar shall treat the Persons in whose name any Trust Securities are issued as the owner of such Trust Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and neither the Trustees nor the Securities Registrar shall be bound by any notice to the contrary. SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES. At any time when the Property Trustee is not also acting as the Securities Registrar, the Administrative Trustees or the Depositor shall furnish or cause to be furnished to the Property Trustee (a) semi-annually on or before January 15 and July 15 in each year, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Securityholders as of the most recent record date; and (b) promptly after receipt by any Administrative Trustee or the Depositor of a request therefor from the Property Trustee in order to enable the Property Trustee to discharge its obligations under this Trust Agreement, in each case to the extent such information is in the possession or control of the Administrative Trustees or the Depositor and is not identical to a previously supplied list or has not otherwise been received by the Property Trustee in its capacity as Securities Registrar. The rights of Securityholders to communicate with other Securityholders with respect to their rights under this Trust Agreement or under the Trust Securities, and the corresponding rights of the Trustee shall be as provided in the Trust Indenture Act. Each Holder and each owner shall be deemed to have agreed not to hold the Depositor, the Property Trustee or the Administrative Trustees accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. SECTION 508. MAINTENANCE OF OFFICE OR AGENCY. The Property Trustee shall designate, with the consent of the Administrative Trustees, which consent shall not be unreasonably withheld, an office or offices or agency or agencies where Preferred Securities Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Trustees in respect of the Trust Securities Certificates may be served. The Property Trustee initially designates its corporate trust office at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, as the principal corporate trust office for such purposes. The Property Trustee shall give prompt written notice to the Depositor, the Administrative Trustees and to the Securityholders of any change in the location of the Securities Register or any such office or agency. SECTION 509. APPOINTMENT OF PAYING AGENT. The Paying Agent shall make Distributions to Securityholders from the Payment Account and shall report the amounts of such Distributions to the Property Trustee and the Administrative Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account for the purpose of making the Distributions referred to above. The Property Trustee may revoke such power and remove the Paying Agent if such Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligation under this Trust Agreement in any material respect. The Paying Agent shall initially be the Property Trustee, and any co-paying agent chosen by the Property Trustee, and acceptable - 20 - to the Administrative Trustees and the Depositor. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Administrative Trustee and the Property Trustee. In the event that the Property Trustee shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Property Trustee shall appoint a successor that is reasonably acceptable to the Administrative Trustees to act as Paying Agent to execute and deliver to the Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Trustees that as Paying Agent, such successor Paying Agent or additional Paying Agent shall hold all sums, if any, held by it for payment to the Securityholders in trust for the benefit of the Securityholders entitled thereto until such sums shall be paid to such Securityholders. The Paying Agent shall return all unclaimed funds to the Property Trustee and, upon removal of a Paying Agent, such Paying Agent shall also return all funds in its possession to the Property Trustee. The provisions of Sections 801, 803 and 806 shall apply to the Property Trustee also in its role as Paying Agent, for so long as the Property Trustee shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR. On the Closing Date, the Depositor shall acquire and retain beneficial and record ownership of the Common Securities. To the fullest extent permitted by law, any attempted transfer of the Common Securities (other than a transfer in connection with a merger or consolidation of the Depositor into another corporation pursuant to Section 12.1 of the Indenture) shall be void. The Administrative Trustees shall cause each Common Securities Certificate issued to the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE". SECTION 511. PREFERRED SECURITIES CERTIFICATES (a) Upon their original issuance, Preferred Securities Certificates shall be issued in the form of one or more fully registered Global Preferred Securities Certificates which will be deposited with or on behalf of the Depositary and registered in the name of the Depositary's nominee. Unless and until it is exchangeable in whole or in part for the Preferred Securities in definitive form, a global security may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor of such Depositary or a nominee of such successor. (b) A Single Common Securities Certificate representing the Common Securities shall be issued to the Depositor in the form of a definitive Common Securities Certificate. SECTION 512. GLOBAL PREFERRED SECURITY. (a) Any Global Preferred Security issued under this Trust Agreement shall be registered in the name of the nominee of the Clearing Agency and delivered to such custodian therefor, and such Global Preferred Security shall constitute a single Preferred Security for all purposes of this Trust Agreement. (b) Notwithstanding any other provision in this Trust Agreement, a Global Preferred Security may not be exchanged in whole or in part for Preferred Securities registered, and no transfer of the Global Preferred Security in whole or in part may be registered, in the name of any Person other than the Clearing Agency for such Global Preferred Security, or its nominee thereof unless (i) such Clearing - 21 - Agency advises the Property Trustee in writing that such Clearing Agency is no longer willing or able to properly discharge its responsibilities as Clearing Agency with respect to such Global Preferred Security, and the Depositor is unable to locate a qualified successor, (ii) the Trust at its option advises the Depositary in writing that it elects to terminate the book-entry system through the Clearing Agency, or (iii) there shall have occurred and be continuing an Event of Default. (c) If a Preferred Security is to be exchanged in whole or in part for a beneficial interest in a Global Preferred Security, then either (i) such Global Preferred Security shall be so surrendered for exchange or cancellation as provided in this Article V or (ii) the Liquidation Amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or cancelled, or equal to the Liquidation Amount of such other Preferred Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Security Registrar, whereupon the Property Trustee, in accordance with the Applicable Procedures, shall instruct the Clearing Agency or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Preferred Security by the Clearing Agency, accompanied by registration instructions, the Administrative Trustees shall execute and the Property Trustee shall, subject to Section 512(b) and as otherwise provided in this Article V, countersign, register and deliver any Preferred Securities issuable in exchange for such Global Preferred Security (or any portion thereof) in accordance with the instructions of the Clearing Agency. The Property Trustee shall not be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. (d) Every Preferred Security countersigned, registered and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Preferred Security or any portion thereof, whether pursuant to this Article V or Article IV or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Preferred Security, unless such Global Preferred Security is registered in the name of a Person other than the Clearing Agency for such Global Preferred Security or a nominee thereof. (e) The Clearing Agency or its nominee, as the registered owner of a Global Preferred Security, shall be considered the Holder of the Preferred Securities represented by such Global Preferred Security for all purposes under this Trust Agreement and the Preferred Securities, and owners of beneficial interests in such Global Preferred Security shall hold such interests pursuant to the Applicable Procedures and, except as otherwise provided herein, shall not be entitled to receive physical delivery of any such Preferred Securities in definitive form and shall not be considered the Holders thereof under this Trust Agreement. Accordingly, any such owner's beneficial interest in the Global Preferred Security shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Clearing Agency or its nominee. Neither the Property Trustee, the Securities Registrar nor the Depositor shall have any liability in respect of any transfers effected by the Clearing Agency. (f) The rights of owners of beneficial interests in a Global Preferred Security shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such owners and the Clearing Agency. SECTION 513. NOTICES TO CLEARING AGENCY. To the extent that a notice or other communication to the Holders is required under this Trust Agreement, for so long as Preferred Securities are represented by a Global Preferred Securities Certificate, the Administrative Trustees and the Property Trustee shall give all such notices and - 22 - communications specified herein to be given to the Clearing Agency, and shall have no obligations to the Owners. SECTION 514. RIGHTS OF SECURITYHOLDERS. (a) The legal title to the Trust Property is vested exclusively in the Property Trustee (in its capacity as such) in accordance with Section 209, and the Securityholders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. The Trust Securities shall have no preemptive or similar rights. When issued and delivered to Holders of the Preferred Securities against payment of the purchase price therefor, the Preferred Securities shall be fully paid and nonassessable interests in the Trust. The Holders of the Preferred Securities, in their capacities as such, shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. (b) For so long as any Preferred Securities remain Outstanding, if, upon a Debenture 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 at least 25% in Liquidation Amount of the Preferred Securities then Outstanding shall have such right by a notice in writing to the Depositor and the Debenture Trustee; and upon any such declaration such principal amount of and the accrued interest on all of the Debentures shall become immediately due and payable, provided that the payment of principal and interest on such Debentures shall remain subordinated to the extent provided in the Indenture. (c) For so long as any Preferred Securities remain outstanding, if, upon a Debenture Event of Default arising from the failure to pay interest or principal on the Debentures, the Holders of any Preferred Securities then Outstanding shall, to the fullest extent permitted by law, have the right to directly institute proceedings for enforcement of payment to such Holders of principal of or interest on the Debentures having a principal amount equal to the Liquidation Amount of the Preferred Securities of such Holders. ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING SECTION 601. LIMITATIONS ON VOTING RIGHTS. (a) Except as provided in this Section 601, in Sections 514, 810 and 1002 and in the Indenture and as otherwise required by law, no Holder of Preferred Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Securityholders from time to time as partners or members of an association. - 23 - (b) So long as any Debentures are held by the Property Trustee, the Trustees shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or executing any trust or power conferred on the Debenture Trustee with respect to such Debentures; (ii) waive any past default which is waivable under Article VII of 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 to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of at least a majority in Liquidation Amount of all Outstanding Preferred Securities; provided, however, that where a consent under the Indenture would require the consent of each Holder of Outstanding Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior written consent of each holder of Preferred Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of the Outstanding Preferred Securities, except by a subsequent vote of the Holders of the Outstanding Preferred Securities. The Property Trustee shall notify each Holder of the Outstanding Preferred Securities of any notice of default received from the Debenture Trustee with respect to the Debentures. In addition to obtaining the foregoing approvals of the Holders of the Preferred Securities, prior to taking any of the foregoing actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that the Trust shall continue to be classified as a grantor trust and not as an association taxable as a corporation for United States federal income tax purposes on account of such action. (c) If any proposed amendment to the Trust Agreement provides for, or the Trustees otherwise propose to effect, (i) any action that would adversely affect in any material respect the powers, preferences or special rights of the Preferred Securities, whether by way of amendment to the Trust Agreement or otherwise; or (ii) the dissolution, winding-up or termination of the Trust, other than pursuant to the terms of this Trust Agreement, then the Holders of Outstanding Preferred Securities as a class shall 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 Outstanding Preferred Securities. No amendment to this Trust Agreement may be made if, as a result of such amendment, the Trust would cease to be classified as a grantor trust or would be classified as an association taxable as a corporation for United States federal income tax purposes. SECTION 602. NOTICE OF MEETINGS. Notice of all meetings of the Preferred Securityholders, stating the time, place and purpose of the meeting, shall be given by the Property Trustee pursuant to Section 1008 to each Preferred Securityholder of record, at his registered address, at least 15 days and not more than 90 days before the meeting. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. SECTION 603. MEETINGS OF PREFERRED SECURITYHOLDERS. (a) No annual meeting of Securityholders is required to be held. The Administrative Trustees, however, shall call a meeting of Securityholders to vote on any matter in respect of which Preferred Securityholders are entitled to vote upon the written request of the Preferred Securityholders of 25% of the Outstanding Preferred Securities (based upon their aggregate - 24 - Liquidation Amount) and the Administrative Trustees or the Property Trustee may, at any time in their discretion, call a meeting of Preferred Securityholders to vote on any matters as to which the Preferred Securityholders are entitled to vote. (b) Preferred Securityholders of record of 50% of the Outstanding Preferred Securities (based upon their aggregate Liquidation Amount), present in person or by proposal shall constitute a quorum at any meeting of Securityholders (c) If a quorum is present at a meeting, an affirmative vote by the Preferred Securityholders of record present, in person or by proxy, holding more than a majority of the Preferred Securities (based upon their aggregate Liquidation Amount) held by the Preferred Securityholders of record present, either in person or by proxy, at such meeting shall constitute the action of the Securityholders unless this Trust Agreement requires a greater number of affirmative votes. SECTION 604. VOTING RIGHTS. Securityholders shall be entitled to one vote for each $25 of Liquidation Amount represented by their Trust Securities in respect of any matter as to which such Securityholders are entitled to vote. SECTION 605. PROXIES, ETC. At any meeting of Securityholders, any Securityholder entitled to vote thereat may vote by proxy, provided that no proxy, shall be voted at any meeting unless it shall have been placed on file with the Administrative Trustees, or with such other officer or agent of the Trust as the Administrative Trustees may direct, for verification prior to the time at which such vote shall be taken. When Trust Securities are held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Securityholder shall be deemed valid unless challenged at or prior to its exercise, and, the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT Any action which may be taken by Securityholders at a meeting may be taken without a meeting if Securityholders holding more than a majority of all Outstanding Trust Securities (based upon their aggregate Liquidation Amount) entitled to vote in respect of such action (or such larger proportion thereof as shall be required by any express provision of this Trust Agreement) shall consent to the action in writing (based upon their aggregate Liquidation Amount). SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES. For the purposes of determining the Securityholders who are entitled to notice of and to vote at any meeting or by written consent, or to participate in any Distribution on the Trust Securities in respect of which a record date is not otherwise provided for in this Trust Agreement, or for the purpose of any other action, the Administrative Trustees may from time to time fix a date, not more than 90 days prior to the date of any meeting of Securityholders or the payment of Distribution or other action: as the case - 25 - may be, as a record date for the determination of the identity of the Securityholders of record for such purposes. SECTION 608. ACTS OF SECURITYHOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Securityholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to an Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Securityholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Trust Agreement and (subject to Section 801) conclusive in favor of the Trustees, if made in the manner provided in this Section 608. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which any Trustee receiving the same deems sufficient. (c) The ownership of Preferred Securities shall be proved by the Securities Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Securityholder of any Trust Security shall bind every future Securityholder of the same Trust Security and the Securityholder of every Trust Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustees or the Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. (e) Without limiting the foregoing, a Securityholder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such liquidation amount. (f) A Securityholder may institute a legal proceeding directly against the Depositor under the Guarantee to enforce its rights under the Guarantee without first instituting a legal proceeding against the Guarantee Trustee (as defined in the Guarantee), the Trust or any Person. - 26 - SECTION 609. INSPECTION OF RECORDS. Upon reasonable notice to the Administrative Trustees and the Property Trustee, the records of the Trust shall be open to inspection and copying by Securityholders and their authorized representatives during normal business hours for any purpose reasonably related to such Securityholder's interest as a Securityholder. ARTICLE VII REPRESENTATIONS AND WARRANTIES SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND THE PROPERTY TRUSTEE. The Bank and the Property Trustee, each severally on behalf of and as to itself, as of the date hereof, and each Successor Property Trustee at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee hereunder (the term "Bank" being used to refer to such Successor Property Trustee in its separate corporate capacity) hereby represents and warrants (as applicable) for the benefit of the Depositor and the Securityholders that: (a) the Bank is a banking corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (b) the Bank has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) this Trust Agreement has been duly authorized, executed and delivered by the Property Trustee and constitutes the valid and legally binding agreement of the Property Trustee enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors, rights and to general equity principles; (d) the execution, delivery and performance by the Property Trustee of this Trust Agreement has been duly authorized by all necessary corporate or other action on the part of the Property Trustee and does not require any approval of stockholders of the Bank and such execution, delivery and performance shall not (i) violate the Bank's charter or by-laws; (ii) violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of, any Lien on any properties included in the Trust Property pursuant to the provisions of, any indenture, mortgage, credit agreement, license or other agreement or instrument to which the Property Trustee or the Bank is a party or by which it is bound; or (iii) violate any law, governmental rule or regulation of the United States or the State of Delaware, as the case may be, governing the banking or trust powers of the Bank or the Property Trustee (as appropriate in context) or any order, judgment or decree applicable to the Property Trustee or the Bank; (e) neither the authorization, execution or delivery by the Property Trustee of this Trust Agreement nor the consummation of any of the transactions by the Property Trustee contemplated herein or therein requires the consent or approval of, the giving of notice to, the registration with - 27 - or the taking of any other action with respect to any governmental authority or agency under any existing federal law governing the banking or trust powers of the Bank or the Property Trustee, as the case may be, under the laws of the United States or the State of Delaware; and (f) there are no proceedings pending or, to the best of the Property Trustee's knowledge, threatened against or affecting the Bank or the Property Trustee in any court or before any governmental authority, agency or arbitration board or tribunal which, individually or in the aggregate, would materially and adversely affect the Trust or would question the right, power and authority of the Property Trustee to enter into or perform its obligations as one of the Trustees under this Trust Agreement. SECTION 702. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR. The Depositor hereby represents and warrants for the benefit of the Securityholders that: (a) the Trust Securities Certificates issued on the Closing Date or the Option Closing Date, if applicable, on behalf of the Trust have been duly authorized and, shall have been, duly and validly executed, issued and delivered by the Administrative Trustees pursuant to the terms and provisions of, and in accordance with the requirements of, this Trust Agreement and the Securityholders shall be, as of such date, entitled to the benefits of this Trust Agreement; and (b) there are no taxes, fees or other governmental charges payable by the Trust (or the Trustees on behalf of the Trust) under the laws of the State of Delaware or any political subdivision thereof in connection with the execution, delivery and performance by the Bank or the Property Trustee, as the case may be, of this Trust Agreement. ARTICLE VIII TRUSTEES SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES. (a) The duties and responsibilities of the Trustees shall be as provided by this Trust Agreement and, in the case of the Property Trustee, by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Trust Agreement shall require the Trustees 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 they shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. No Administrative Trustee shall be liable for its act or omissions hereunder except as a result of its own gross negligence or willful misconduct. The Property Trustee's liability shall be determined under the Trust Indenture Act. Whether or not therein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Trustees shall be subject to the provisions of this Section 801. To the extent that, at law or in equity, an Administrative Trustee has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to the Securityholders, such Administrative Trustee shall not be liable to the Trust or to any Securityholder for such Trustee's good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities - 28 - of the Administrative Trustees otherwise existing at law or in equity, are agreed by the Depositor and the Securityholders to replace such other duties and liabilities of the Administrative Trustees. (b) All payments made by the Property Trustee or a Paying Agent in respect of the Trust 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 Property Trustee or a Paying agent to make payments in accordance with the terms hereof. With respect to the relationship of each Securityholder and the Trustee, each Securityholder, by its acceptance of a Trust Security, agrees that it shall look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 801(b) does not limit the liability of the Trustees expressly set forth elsewhere in this Trust Agreement or, in the case of the Property Trustee, in the Trust Indenture Act. (c) No provision of this Trust Agreement shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) the property Trustee shall not be liable for any error of judgment made in good faith by an authorized officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (ii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in Liquidation Amount of the Trust Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Trust Agreement; (iii) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Payment Account shall be to deal with such Property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Trust Agreement and the Trust Indenture Act; (iv) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Depositor and money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Property Trustee pursuant to Section 301 and except to the extent otherwise required by law; and (v) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall the Property Trustee be liable for the negligence, default or misconduct of the Administrative Trustees or the Depositor. - 29 - SECTION 802. CERTAIN NOTICES. (a) Within 5 Business Days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee shall transmit, in the manner and to the extent provided in Section 1008, notice of such Event of Default to the Securityholders, the Administrative Trustees and the Depositor, unless such Event of Default shall have been cured or waived. For purposes of this Section 802 the term "Event of Default" means any event that is, or after notice or lapse of time or both would become, an Event of Default. (b) The Administrative Trustees shall transmit, to the Securityholders in the manner and to the extent provided in Section 1008, notice of the Depositor's election to begin or further extend an Extended Interest Payment Period on the Debentures (unless such election shall have been revoked) within the time specified for transmitting such notice to the holders of the Debentures pursuant to the Indenture as originally executed. SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE. Subject to the provisions of Section 801: (a) the Property Trustee may rely and shall 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, 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 or presented by the proper party or parties; (b) if (i) in performing its duties under this Trust Agreement the Property Trustee is required to decide between alternative courses of action; or (ii) in construing any of the provisions of this Trust Agreement the Property Trustee finds the same ambiguous or inconsistent with other provisions contained herein; or (iii) the Property Trustee is unsure of the application of any provision of this Trust Agreement, then, except as to any matter as to which the Preferred Securityholders are entitled to vote under the terms of this Trust Agreement, the Property Trustee shall deliver a notice to the Depositor requesting written instructions of the Depositor as to the course of action to be taken and the Property Trustee shall take such action, or refrain from taking such action, as the Property Trustee shall be instructed in writing to take, or to refrain from taking, by the Depositor, provided, however, that if the Property Trustee does not receive such instructions of the Depositor within 10 Business Days after it has delivered such notice, or such reasonably shorter period of time set forth in such notice (which to the extent practicable shall not be less than 2 Business Days), it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Trust Agreement as it shall deem advisable and in the best interests of the Securityholders, in which event the Property Trustee shall have no liability except for its own bad faith, negligence or willful misconduct; (c) any direction or act of the Depositor or the Administrative Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by an Officers' Certificate; (d) whenever in the administration of this Trust Agreement, the Property Trustee shall deem it desirable that a matter be established before undertaking, suffering or omitting any action - 30 - hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officer's Certificate which, upon receipt of such request, shall be promptly delivered by the Depositor or the Administrative Trustees; (e) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement, any filing under tax or securities laws) or any filing under tax or securities laws or any rerecording refiling reregistration thereof; (f) the Property Trustee may consult with counsel of its choice (which counsel may be counsel to the Depositor 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, such counsel may be counsel to the Depositor or any of its Affiliates, and may include any of its employees, the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Trust Agreement from any court of competent jurisdiction; (g) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Securityholders pursuant to this Trust Agreement, unless such Securityholders shall have offered to the Property Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (h) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, 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 Securityholders, but the Property Trustee may make such further inquiry or investigation into such facts or matters as it may see fit; (i) the Property 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, provided that the Property Trustee shall be responsible for its own negligence or recklessness with respect to selection of any agent or attorney appointed by it hereunder; (j) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Property Trustee (i) may request instructions from the Holders of the Trust Securities which instructions may only be given by the Holders of the same proportion in Liquidation Amount of the Trust Securities as would be entitled to direct the Property Trustee under the terms of the Trust Securities in respect of such remedy, right or action; (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received; and (iii) shall be protected in acting in accordance with such instructions; and (k) except as otherwise expressly provided by this Trust Agreement, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Trust Agreement. No provision of this Trust Agreement shall be deemed to impose any duty - 31- or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The Recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Trust, and the Trustees do not assume any responsibility for their correctness. The Trustees shall not be accountable for the use or application by the Depositor of the proceeds of the Debentures. SECTION 805. MAY HOLD SECURITIES. Any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Sections 808 and 813 and except as provided in the definition of the term "Outstanding" in Article I, may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent. SECTION 806. COMPENSATION; INDEMNITY; FEES. The Depositor agrees: (a) to pay to the Trustees from time to time reasonable compensation for all services rendered by them hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Trust Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to such Trustee's negligence, bad faith or willful misconduct (or, in the case of the Administrative Trustees, any such expense, disbursement or advance as may be attributable to its, his or her gross negligence, bad faith or willful misconduct); and (c) to indemnify each of the Trustees or any predecessor Trustee for, and to hold the Trustees harmless against, any loss, damage, claims, liability, penalty or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Trust Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except any such expense, disbursement or advance as may be attributable to such Trustee's negligence, bad faith or willful misconduct (or, in the case of the Administrative Trustees, any such expense, disbursement or advance as may be attributable to its, his or her gross negligence, bad faith or willful misconduct). - 32 - No Trustee may claim any Lien or charge on any Trust Property as a result of any amount due pursuant to this Section 806. SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES. (a) There shall at all times be a Property Trustee hereunder with respect to the Trust Securities. The Property Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section 807, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Property Trustee with respect to the Trust Securities shall cease to be eligible in accordance with the provisions of this Section 807, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VIII. (b) There shall at all times be one or more Administrative Trustees hereunder with respect to the Trust Securities. Each Administrative Trustee shall be either a natural person who is at least 31 years of age or a legal entity that shall act through one or more persons authorized to bind that entity. (c) There shall at all times be a Delaware Trustee with respect to the Trust Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware; or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law that shall act through one or more persons authorized to bind such entity. SECTION 808. CONFLICTING INTERESTS. If the Property Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Property Trust shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Trust Agreement. SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE. (a) Unless an Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Depositor shall have power to appoint, and upon the written request of the Property Trustee, the Depositor shall for such purpose join with the Property Trustee in the execution, delivery and performance of an instruments and agreements necessary or proper to appoint, one or more Persons approved by the Property Trustee either to act as co-trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to the extent required by law to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section 809. If the Depositor does not join in such appointment within 15 days after the receipt by it of a request - 33 - so to do, or in case a Debenture Event of Default has occurred and is continuing, the Property Trustee alone shall have power to make such appointment. Any co-trustee or separate trustee appointed pursuant to this Section 809 shall either be (i) a natural person who is at least 21 years of age and a resident of the United States; or (ii) a legal entity with its principal place of business in the United States that shall act through one or more persons authorized to bind such entity. (b) Should any written instrument from the Depositor be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such property, title, right, or power, any and all such instruments shall, on request, be executed, acknowledged, and delivered by the Depositor. (c) Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely: (i) The Trust Securities shall be executed and delivered and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustees specified hereunder, shall be exercised, solely by such Trustees and not by such co-trustee or separate trustee. (ii) The rights, powers, duties and obligations hereby conferred or imposed upon the Property Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Property Trustee or by the Property Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Property Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee. (iii) The Property Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Depositor, may accept the resignation of or removed any co-trustee or separate trustee appointed under this Section 809, and, in case a Debenture Event of Default has occurred and is continuing, the Property Trustee shall have the power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Depositor. Upon the written request of the Property Trustee, the Depositor shall join with the Property Trustee in the execution, delivery and performance of all instruments necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section 809. (iv) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Property Trustee or any other trustee hereunder. (v) The Property Trustee shall not be liable by reason of any act of a co-trustee or separate trustee. - 34- (vi) Any Act of Holders delivered to the Property Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of any Trustee (the "Relevant Trustee") and no appointment of a successor Trustee pursuant to this Article VIII shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 811. (b) Subject to the immediately preceding paragraph, the Relevant Trustee may resign at any time with respect to the Trust Securities by giving written notice thereof to the Securityholders. If the instrument of acceptance by the successor Trustee required by Section 811 shall not have been delivered to the Relevant Trustee within 30 days after the giving of such notice of resignation, the Relevant Trustee may petition, at the expense of the Depositor, any court of competent jurisdiction for the appointment of a successor Relevant Trustee with respect to the Trust Securities. (c) Unless a Debenture Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by Act of the Common Securityholder. If a Debenture Event of Default shall have occurred and be continuing, the Property Trustee of the Delaware Trustee, or both of them, may be removed at such time by Act of the Holders of a majority in Liquidation Amount of the Preferred Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust). An Administrative Trustee may be removed by the Common Securityholder at any time. (d) If any Trustee shall resign, be removed or become incapable of acting as Trustee, or if a vacancy shall occur in the office of any Trustee for any cause, at a time when no Debenture Event of Default shall have occurred and be continuing, the Common Securityholder, by Act of the Common Securityholder delivered to the retiring Trustee, shall promptly appoint a successor Trustee or Trustees with respect to the Trust Securities and the Trust, and the successor Trustee shall comply with the applicable requirements of Section 811. If the Property Trustee shall resign, be removed or become incapable of continuing to act as the Property Trustee at a time when a Debenture Event of Default shall have occurred and is continuing, the Preferred Securityholders, by Act of the Securityholders of a majority in Liquidation Amount of the Preferred Securities then Outstanding delivered to the retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees with respect to the Trust Securities and the Trust, and such successor Trustee shall comply with the applicable requirements of Section 811. If an Administrative Trustee shall resign, be removed or become incapable of acting as Administrative Trustee, at a time when a Debenture Event of Default shall have occurred and be continuing, the Common Securityholder, by Act of the Common Securityholder delivered to an Administrative Trustee, shall promptly appoint a successor Administrative Trustee or Administrative Trustees with respect to the Trust Securities and the Trust, and such successor Administrative Trustee or Administrative Trustees shall comply with the applicable requirements of Section 811. If no successor Relevant Trustee with respect to the Trust Securities shall have been so appointed by the Common Securityholder or the Preferred Securityholders and accepted appointment in the manner required by Section 811, any Securityholder who has been a Security - 35 - holder of Trust Securities on behalf of himself and all others similarly situated may petition a court of competent jurisdiction for the appointment Trustee with respect to the Trust Securities. (e) The Property Trustee shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee to all Securityholders in the manner provided in Section 1008 and shall give notice to the Depositor. Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust office if it is the Property Trustee. (f) Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee who is a natural person dies or becomes, in the opinion of the Depositor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (a) the unanimous act of remaining Administrative Trustees if there are at least two of them; or (b) otherwise by the Depositor (with the successor in each case being a Person who satisfies the eligibility requirement for Administrative Trustees set forth in Section 807). SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. (a) In case of the appointment hereunder of a successor Relevant Trustee with respect to the Trust Securities and the Trust, the retiring Relevant Trustee and each successor Relevant Trustee with respect to the Trust Securities shall execute and deliver an instrument hereto wherein each successor Relevant Trustee shall accept such appointment and which shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust and upon the execution and delivery of such instrument the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust, but, on request of the Trust or any successor Relevant Trustee such retiring Relevant Trustee shall duly assign, transfer and deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Trust Securities and the Trust. (b) Upon request of any such successor Relevant Trustee, the Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Relevant Trustee all such rights. powers and trusts referred to in the immediately preceding paragraph, as the case may be. (c) No successor Relevant Trustee shall accept its appointment unless at the time of such acceptance such successor Relevant Trustee shall be qualified and eligible under this Article VIII. SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any Person into which the Property Trustee or any Administrative 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 such Relevant Trustee shall be a party, or any corporation succeeding to all or - 36 - substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder, provided such Person shall be otherwise qualified and eligible under this Article VIII, without the execution or filing of any paper or any further act on the part of any of the parties hereto. SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST. If and when the Property Trustee shall be or become a creditor of the Depositor or the Trust (or any other obliger upon the Debentures or the Trust Securities), the Property Trustee shall be subject to and shall take all actions necessary in order to comply with the provisions of the Trust Indenture Act regarding the collection of claims against the Depositor or Trust (or any such other obliger). SECTION 814. REPORTS BY PROPERTY TRUSTEE. (a) Not later than July 15 of each year commencing with July 15, 1997, the Property Trustee shall transmit to all Securityholders in accordance with Section 1008, and to the Depositor, a brief report dated as of such December 31 with respect to: (i) its eligibility under Section 807 or, in lieu thereof, if to the best of its knowledge it has continued to be eligible under said Section, a written statement to such effect; and (ii) any change in the property and funds in its possession as Property Trustee since the date of its last report and any action taken by the Property Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Trust Securities (b) In addition the Property Trustee shall transmit to Securityholders such reports concerning the Property Trustee and its actions under this Trust Agreement as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Property Trustee with The Nasdaq Stock Market's National Market, and each national securities exchange or other organization upon which the Trust Securities are listed, and also with the Commission and the Depositor. SECTION 815. REPORTS TO THE PROPERTY TRUSTEE. The Depositor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each of the Depositor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Trust Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any - 37 - certificate or opinion required to be given by an officer pursuant to Section 314(c)(l) of the Trust Indenture Act shall be given in the form of an Officers' Certificate. SECTION 817. NUMBER OF TRUSTEES. (a) The number of Trustees shall be five, provided that the Holder of all of the Common Securities by written instrument may increase or decrease the number of Administrative Trustees. The Property Trustee and the Delaware Trustee may be the same Person. (b) If a Trustee ceases to hold office for any reason and the number of Administrative Trustees is not reduced pursuant to Section 817(a), or if the number of Trustees is increased pursuant to Section 817(a), a vacancy shall occur. The vacancy shall be filled with a Trustee appointed in accordance with Section 810. (c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with Section 810, the Administrative Trustees in office, regardless of their number (and notwithstanding any other provision of this Agreement), shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement. SECTION 818. DELEGATION OF POWER. (a) Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 207(a); and (b) The Administrative Trustees shall have power to delegate from time to time to such of their number or to the Depositor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. SECTION 819. VOTING. Except as otherwise provided in this Trust Agreement, the consent or approval of the Administrative Trustees shall require consent or approval by not less than a majority of the Administrative Trustees, unless there are only two, in which case both must consent. ARTICLE IX TERMINATION, LIQUIDATION AND MERGER SECTION 901. TERMINATION UPON EXPIRATION DATE. Unless earlier dissolved, the Trust shall automatically dissolve on ________________, 2028 (the "Expiration Date") subject to distribution of the Trust Property in accordance with Section 904. - 38 - SECTION 902. EARLY TERMINATION. The first to occur of any of the following events is an "Early Termination Event:" (a) the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of, the Depositor; (b) delivery of written direction to the Property Trustee by the Depositor at any time (which direction is wholly optional and within the discretion of the Depositor) to dissolve the Trust and distribute the Debentures to Securityholders in exchange for the Preferred Securities in accordance with Section 904; (c) the redemption of all of the Preferred Securities in connection with the redemption of all of the Debentures; and (d) an order for dissolution of the Trust shall have been entered by a court of competent jurisdiction. SECTION 903. TERMINATION. The respective obligations and responsibilities of the Trustees and the Trust created and continued hereby shall terminate upon the latest to occur of the following: (a) the distribution by the Property Trustee to Securityholders upon the liquidation of the Trust pursuant to Section 904, or upon the redemption of all of the Trust Securities pursuant to Section 402, of all amounts required to be distributed hereunder upon the final payment of the Trust Securities; (b) the payment of any expenses owed by the Trust; (c) the discharge of all administrative duties of the Administrative Trustees, including the performance of any tax reporting obligations with respect to the Trust or the Securityholders; and (d) the filing of a Certificate of Cancellation by the Administrative Trustee under the Business Trust Act. SECTION 904. LIQUIDATION. (a) If an Early Termination Event specified in clause (a), (b), or (d) of Section 902 occurs or upon the Expiration Date, the Trust shall be liquidated by the Trustees as expeditiously as the Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to each Securityholder a Like Amount of Debentures, subject to Section 904(d). Notice of liquidation shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not later than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All notices of liquidation shall: (i) state the Liquidation Date; (ii) state that from and after the Liquidation Date, the Trust Securities shall no longer be deemed to be Outstanding and any Trust Securities Certificates not surrendered for exchange shall be deemed to represent a Like Amount of Debentures; and (iii) provide such information with respect to the mechanics by which Holders may exchange Trust Securities Certificates for Debentures, or, if Section 904(d) applies, - 39 - receive a Liquidation Distribution, as the Administrative Trustees or the Property Trustee shall deem appropriate. (b) Except where Section 902(c) or 904(d) applies, in order to effect the liquidation of the Trust and distribution of the Debentures to Securityholders, the Property Trustee shall establish a record date for such distribution (which shall be not more than 45 days prior to the Liquidation Date) and, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish such procedures as it shall deem appropriate to effect the distribution of Debentures in exchange for the Outstanding Trust Securities Certificates. (c) Except where Section 902(c) or 904(d) applies, after the Liquidation Date, (i) the Trust Securities shall no longer be deemed to be outstanding; (ii) certificates representing a Like Amount of Debentures shall be issued to holders of Trust Securities Certificates upon surrender of such certificates to the Administrative Trustees or their agent for exchange; (iii) the Depositor shall use its reasonable efforts to have the Debentures listed on The Nasdaq Stock Market's National Market or on such other securities exchange or other organization as the Preferred Securities are then listed or traded; (iv) any Trust Securities Certificates not so surrendered for exchange shall be deemed to represent a Like Amount of Debentures, accruing interest at the rate provided for in the Debentures from the last Distribution Date on which B Distribution was made on such Trust Securities Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments of interest or principal shall be made to holders of Trust Securities Certificates with respect to such Debentures): and (v) all rights of Securityholders holding Trust Securities shall cease, except the right of such Securityholders to receive Debentures upon surrender of Trust Securities Certificates. (d) In the event that, notwithstanding the other provisions of this Section 904, whether because of a order for dissolution entered by a court of competent jurisdiction or otherwise, distribution of the Debentures in the manner provided herein is determined by the Property Trustees not to be practical, the Trust Property shall be liquidated, and the Trust shall 41 dissolved, would-up or terminated, by the Property Trustee in such manner as the Property Trustee determines. In such event, on the date of the dissolution, winding-up or other termination of the Trust, Securityholders shall be entitled to receive out of the assets of the Trust available for distribution to Securityholders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, a amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such dissolution, winding-up or termination, 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, subject to the next succeeding sentence, the amounts payable by the Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The holder of the Common Securities shall be entitled to receive Liquidation Distributions upon any such dissolution, winding-up or termination pro rata (determined as aforesaid) with Holders of Preferred Securities, except that, if a Debenture Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities. - 40 - SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS 0F THE TRUST. The Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other Person, except pursuant to this Section 905. At the request of the Depositor, with the consent of the Administrative Trustees and without the consent of the holders of the Preferred Securities, the Property Trustee or the Delaware Trustee, the Trust may merge with or into, consolidate, amalgamate, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any state; provided, that (i) such successor entity either (a) expressly assumes all of the obligations of the Trust with respect to the Preferred Securities; or (b) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank in priority with respect to distributions and payments upon liquidation, redemption and otherwise; (ii) the Depositor expressly appoints a trustee of such successor entity possessing substantially the same powers and duties as the Property Trustee as the holder of the Debentures; (iii) the Successor Securities are listed or traded, or any Successor Securities shall be listed or traded upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed, if any; (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Preferred Securities (including any Successor Securities) in any material respect; (v) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Depositor has received an Opinion of Counsel to the effect that (a) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Preferred Securities (including any Successor Securities) in any material respect: and (b) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor such successor entity shall be required to register as an "investment company" under the Investment Company Act, and (vi) the Depositor owns all of the Common Securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee. Notwithstanding the foregoing, the Trust shall not, except with the consent of holders of 100% in Liquidation Amount of the Preferred Securities, 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 other Person or permit any other Person to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or the successor entity to be classified as other than a grantor trust for United States federal income tax purposes. ARTICLE X MISCELLANEOUS PROVISIONS SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS. The death or incapacity of any Person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Trust Agreement, nor entitle the legal representatives or heirs of such person or any Securityholder for such Person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding-up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. -41- SECTION 1002. AMENDMENT. (a) This Trust Agreement may be amended from time to time by the Trustees and the Depositor, without the consent of any Securityholders, (i) as provided in Section 811 with respect to acceptance of appointment by a successor Trustee; (ii) to cure any ambiguity, correct or supplement any provision herein or therein which may be inconsistent with any other provision herein or therein, or to make any other provisions with respect to matters or questions arising under this Trust Agreement, that shall not be inconsistent with the other provisions of this Trust Agreement; or (iii) to modify, eliminate or add to any provisions of this Trust Agreement to such extent as shall be necessary to ensure that the Trust shall be classified for United States federal income tax purposes as a grantor trust at all times that any Trust Securities are outstanding or to ensure that the Trust shall not be required to register as an "investment company" under the Investment Company Act; provided, however, that in the case of clause (ii), such action shall not adversely affect in any material respect the interests of any Securityholder, and any amendments of this Trust Agreement shall become effective when notice thereof is given to the Securityholders. (b) Except as provided in Section 601(c) or Section 1002(c) hereof, any provision of this Trust Agreement may be amended by the Trustees and the Depositor (i) with the consent of Trust Securityholders representing not less than a majority (based upon Liquidation Amounts) of the Trust Securities then Outstanding; and (ii) upon receipt by the Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment shall not affect the Trust's status as a grantor trust for United Status federal income tax purposes or the Trust's exemption from status of an "investment company" under the Investment Company Act. (c) In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Securityholder (such consent being obtained in accordance with Section 603 or 606 hereof), this Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date; or (ii) restrict the right of a Securityholder to institute suit for the enforcement of any such payment on or after such date; notwithstanding any other provision herein, without the unanimous consent of the Securityholders (such consent being obtained in accordance with Section 603 or 606 hereof), this paragraph (c) of this Section 1002 may not be amended. (d) Notwithstanding any other provisions of this Trust Agreement, no Trustee shall enter into or consent to any amendment to this Trust Agreement which would cause the Trust to fail or cease to qualify for the exemption from status of an "investment company" under the Investment company Act or to fail or cease to be classified as a grantor trust for United States federal income tax purposes. (e) Notwithstanding any other provisions of this Trust Agreement, no Trustee shall enter into or consent to any amendment to this Trust Agreement which would cause the Trust to fail or cease to qualify for the exemption from status of an "investment company" under the Investment Company Act or to fail or cease to be classified as a grantor trust for United States federal income tax purposes. - 42 - (f) In the event that any amendment to this Trust Agreement is made, the Administrative Trustees shall promptly provide to the Depositor a copy of such amendment. (g) The Property Trustee shall be required to enter into any amendment to this Trust Agreement which affects its own rights, duties or immunities under this Trust Agreement. The Property Trustee shall be entitled to receive an Opinion of Counsel and an Officers' Certificate stating that any amendment to this Trust Agreement is in compliance with this Trust Agreement. SECTION 1003. SEPARABILITY. In case any provision in this Trust Agreement or in the Trust Securities Certificates shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 1004. GOVERNING LAW. THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES). SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY. If the date fixed for any payment on any Trust Security shall be a day that is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day which is a Business Day (except as otherwise provided in Sections 401(a) and 402(d)), with the same force and effect as though made on the date fixed for such payment, and no distribution shall accumulate thereon for the period after such date. SECTION 1006. SUCCESSORS. This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Depositor, the Trust or the Relevant Trustee(s), including any successor by operation of law. Except in connection with a consolidation, merger or sale involving the Depositor that is permitted under Article XII of the Indenture and pursuant to which the assignee agrees in writing to perform the Depositor's obligations hereunder, the Depositor shall not assign its obligations hereunder. SECTION 1007. HEADINGS. The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement. SECTION 1008. REPORTS, NOTICES AND DEMANDS. Any report, notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Securityholder or the Depositor may be given or served in writing by deposit thereof, first-class postage prepaid, in the United States mail, hand - 43 - delivery or facsimile transmission, in each case, addressed, (a) in the case of a Preferred Securityholder, to such Preferred Securityholder as such Securityholder's name and address may appear on the Securities Register; and (b) in the case of the Common Securityholder or the Depositor, to BankAtlantic Bancorp, Inc., 1750 East Sunrise Boulevard, Fort Lauderdale, Florida 33304, Attention: Chief Financial Officer, facsimile no.: (954) 768-0520. Any notice to Preferred Securityholders shall also be given to such owners as have, within two years preceding the giving of such notice, filed their names and addresses with the Property Trustee for that purpose. Such notice, demand or other communication to or upon a Securityholder shall be deemed to have been sufficiently given or made, for all purposes, upon hand delivery, mailing or transmission. Any notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Trust, the Property Trustee or the Administrative Trustees shall be given in writing addressed (until another address is published by the Trust) as follows: (a) with respect to the Property Trustee to Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration; and (b) with respect to the Administrative Trustees, to them at the address above for notices to the Depositor, marked "Attention: Administrative Trustees of BBC Capital Trust I." Such notice, demand or other communication to or upon the Trust or the Property Trustee shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Trust or the Property Trustee. SECTION 1009. AGREEMENT NOT TO PETITION. Each of the Trustees and the Depositor agree for the benefit of the Securityholders that, until at least one year and 1 day after the Trust has been terminated in accordance with Article IX, they shall not file, or join in the filing of, a petition against the Trust under any bankruptcy, insolvency, reorganization or other similar law (including, without limitation, the United States Bankruptcy Code of 1978, as amended) (collectively, "Bankruptcy Laws") or otherwise join in the commencement of any proceeding against the Trust under any Bankruptcy Law. In the event the Depositor takes action in violation of this Section 1009, the Property Trustee agrees, for the benefit of Securityholders, that at the expense of the Depositor (which expense shall be paid prior to the filing), it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition by the Depositor against the Trust or the commencement of such action and raise the defense that the Depositor has agreed in writing not to take such action and should be stopped and precluded therefrom. The provisions of this Section 1009 shall survive the termination of this Trust Agreement. SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT. (a) This Trust Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Trust Agreement and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Trustee which is a trustee for the purposes of the Trust Indenture Act. (c) If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Trust Agreement by any of the provisions of the Trust Indenture Act, such required provision shall control. If any provision of this Trust Agreement modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the - 44 - latter provision shall be deemed to apply to this Trust Agreement as so modified or to be excluded, as the case may be. (d) The application of the Trust Indenture Act to this Trust Agreement shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND INDENTURE. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS. - 45 - BANKATLANTIC BANCORP, INC. By: ------------------------------------------ Name: Title: WILMINGTON TRUST COMPANY, as Property Trustee By: ------------------------------------------ Name: Title: ------------------------------------------ Alan B. Levan, as Administrative Trustee ------------------------------------------ Frank V. Greico, as Administrative Trustee ------------------------------------------ Jasper R. Eanes, as Administrative Trustee - 46 - EXHIBIT A A-1 EXHIBIT B B-1 EXHIBIT C C-1 EXHIBIT E Certificate Number P- Number of Preferred Securities CUSIP NO. Certificate Evidencing Preferred securities of BBC Capital Trust I % Cumulative Trust Preferred Securities (Liquidation Amount $25 per Preferred Security) BBC CAPITAL TRUST I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that ______________ (the "Holder") is the registered owner of ___ preferred securities of the Trust representing undivided beneficial interest in the asset of the Trust and designated the ___% Cumulative Trust Preferred Securities (Liquidation Amount $25 per Preferred Securities) (the "Preferred Securities"). the Preferred 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 as provided in Section [504] of the Trust Agreement. The designations, rights, privileges, restrictions, preferences, and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of April __, 1997, as the same may be amended from time to time (the "Trust Agreement"), including the designation of the terms of Preferred Securities as set forth therein. The Holder is entitled to the benefits of the Preferred Securities Guarantee Agreement entered into by BankAtlantic Bancorp, Inc. a Florida corporation, and Wilmington Trust Company, as guarantee trustee, dated as of April __, 1997 (the "Guarantee"), to the extent provided herein. The Trust shall furnish a copy of the Trust Agreement and the Guarantee to the Holder without charge upon written request to the Trust as its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed this certificate this __ day of April, 1997. BBC CAPITAL TRUST I By: ----------------------------- Name:______________________ Title:_____________________ EX-5.1 6 EXHIBIT 5.1 [Letterhead of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.] March 21, 1997 BankAtlantic Bancorp, Inc. 1750 East Sunrise Boulevard Fort Lauderdale, FL 33304 Attention: Board of Directors BBC Capital Trust I c/o BankAtlantic Bancorp, Inc. 1750 East Sunrise Boulevard Fort Lauderdale, FL 33304 Attention: Administrative Trustees Re: BBC CAPITAL TRUST I Gentlemen: We have acted as counsel to BankAtlantic Bancorp, Inc., a Florida corporation (the "Company"), and BBC Capital Trust I, a Delaware statutory business trust ("BBC Capital"), in connection with the preparation of a Registration Statement on Form S-3 (the "Registration Statement") to be filed by the Company and BBC with the Securities and Exchange Commission (the "SEC") for the purpose of registering under the Securities Act of 1933, as amended, preferred securities (the "Preferred Securities") of BBC Capital, junior subordinated debentures (the "Junior Subordinated Debentures") of the Company and the guarantee of the Company with respect to the Preferred Securities (the "Guarantee"). In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of (i) the certificate of trust (the "Certificate of Trust") filed by BBC Capital with the Secretary of State of the State of Delaware on March 21, 1997, (ii) the Trust Agreement, dated as of March 21, 1997, with respect to BBC Capital; (iii) the form of the Amended and Restated Trust Agreement with respect to BBC Capital; (iv) the form of the Preferred Securities of BBC Capital; (v) the form of the Guarantee between the Company and Wilmington Trust Company, as trustee, (vi) the form of the Junior Subordinated Debentures; (vii) the form of the indenture (the "Indenture"), between the Company and Wilmington Trust Company, as trustee, in each case in the form filed as an exhibit to the Registration Statement and (viii) the Registration Statement. We have also examined originals or copies, certified, or otherwise identified to our satisfaction, of such other documents, certificates, and records as we have deemed necessary or appropriate as a basis for the opinions set forth herein. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies and the authenticity of the originals of such copies. In examining documents executed by parties other than the Company or BBC Capital, we have assumed that such parties had the power, corporate or otherwise, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or otherwise, and execution and delivery by such parties of such documents and that, except as set forth in paragraphs (1) and (2) below, such documents constitute valid and binding obligations of such parties. In addition, we have BankAtlantic Bancorp, Inc. BBC Capital Trust I March 21, 1997 Page 2 assumed that the Amended and Restated Trust Agreement of BBC Capital, the Preferred Securities of BBC Capital, the Guarantee, the Junior Subordinated Debentures and the Indenture, when executed, will be executed in substantially the form reviewed by us. As to any facts material to the opinions express herein which were not independently established or verified, we have relied upon oral or written statements and representations of officers, trustees, and other representatives of the Company, BBC Capital and others. We are qualified to practice law only in the State of Florida and we do not purport to be experts on, or to express any opinion herein concerning, any law other than the law of the State of Florida and the federal law of the United States. Accordingly, the opinions contained herein are expressly limited to the matters of the law of the State of Florida and the federal law of the United States. Based upon and subject to the foregoing and other qualifications and limitations set forth herein, we are of the opinion that: 1. After the Indenture has been duly executed and delivered, the Junior Subordinated Debentures, when duly executed, delivered, authenticated and issued in accordance with the Indenture and delivered and paid for as contemplated by the Registration Statement, will be valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and (ii) general principles of equity regardless of whether enforceability is considered in a proceeding at law or in equity. 2. The Guarantee, when duly executed and delivered by the parties thereto, will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and (ii) general principles of equity regardless of whether enforceability is considered in a proceeding at law or in equity. We consent to the filing of this opinion with the SEC as an exhibit to the Registration Statement and to the use of our name under the heading "Validity of Securities" in the Registration Statement. Very truly yours, STEARNS, WEAVER, MILLER, WEISSLER ALHADEFF & SITTERSON, P.A. EX-5.2 7 EXHIBIT 5.2 [Letterhead of Richards Layton & Finger] March 21, 1997 BBC Capital Trust I c/o BankAtlantic Bancorp, Inc. 1750 East Sunrise Boulevard Fort Lauderdale, FL 33304 Re: BBC CAPITAL TRUST Ladies and Gentlemen: We have acted as special counsel for BBC Capital Trust I, a Delaware business trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of the Trust, dated March 21, 1997 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on March 21, 1997; (b) The Trust Agreement of the Trust, dated as of March 21, 1997, among BankAtlantic Bancorp, Inc., a Florida corporation (the "Company") and the trustees of the Trust named therein; (c) The Registration Statement on Form S-3 (the "Registration Statement"), including a prospectus (the "Prospectus") relating to the __% Cumulative Trust Preferred Securities of the Trust representing undivided beneficial interests in the Trust (each, a "Preferred Security" and collectively, the "Preferred Securities"), as filed by the Company and the Trust as set forth therein with the Securities and Exchange Commission on March 21, 1997; (d) A form of Amended and Restated Trust Agreement of the Trust, to be entered into among the Company, the trustees of the Trust named therein, and the holders, from time to time, of undivided beneficial interests in the Trust (the "Trust Agreement"), attached as an exhibit to the Registration Statement; and (e) A Certificate of Good Standing for the Trust, dated March 21, 1997, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Trust Agreement. For purposes of this opinion, we have not reviewed any documents other than the documents listed above, and we have assumed that there exists no provision in any document that we have not reviewed that bears upon or is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. BBC Capital Trust I March 21, 1997 Page 2 With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies of forms and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Trust Agreement constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation and termination of the Trust, and that the Trust Agreement and the Certificate are in full force and effect and have not been amended, (ii) except to the extent provided in paragraph 1 below, the due creation or due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its creation, organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the receipt by each Person to whom a Preferred Security is to be issued by the Trust (collectively, the "Preferred Security Holders") of a Preferred Security Certificate for such Preferred Security and the payment for the Preferred Security acquired by it, in accordance with the Trust Agreement and the Prospectus and (vii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with the Trust Agreement and the Prospectus. We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of laws and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Business Trust Act, 12 Del. C. Sec. 3801, et seq. 2. The Preferred Securities will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. 3. The Preferred Security Holders, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. We note that the Preferred Security Holders may be obligated to make payments as set forth in the Trust Agreement. BBC Capital Trust I March 21, 1997 Page 3 We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. In addition, we hereby consent to the use of our name under the heading "Validity of Securities" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, RICHARDS, LAYTON & FINGER EX-8.1 8 EXHIBIT 8.1 [STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON, P.A. LETTERHEAD] March 21, 1997 BankAtlantic Bancorp, Inc. 1750 East Sunrise Boulevard Fort Lauderdale, FL 33304 Attention: Board of Directors Gentlemen: We have acted as counsel to BankAtlantic Bancorp, Inc., a Florida corporation (the "Company"), and BBC Capital Trust I, a Delaware statutory business trust ("BBC Capital"), in connection with the registration statement of the Company and BBC Capital on Form S-3 (the "Registration Statement") of which a prospectus ("Prospectus") is a part, to be filed by the Company and BBC Capital with the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended, for the purpose of registering preferred securities of BBC Capital, junior subordinated debentures of the Company and the guarantee of the Company with respect to such preferred securities. This opinion is furnished pursuant to the requirements of Item 601(b)(8) of Regulation S-K. For purposes of rendering this opinion, we have reviewed and relied upon the Registration Statement and such other documents and instruments as we deemed necessary for the rendering of this opinion. In our examination of relevant documents, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies, the authenticity of such copies and BankAtlantic Bancorp, Inc. Page 2 the accuracy and completeness of all corporate records made avilable to us by the Company and BBC Capital. Based solely on our review of such documents, and upon such information as the Company has provided to us (which we have not attempted to verify in any respect), and reliance upon such documents and information, we hereby adopt and incorporate by reference the opinion set forth in the Prospectus under the caption "Certain Federal Income Tax Consequences." Our opinion is limited to the federal income tax matters described above and does not address any other federal income tax considerations or any state, local, foreign, or other tax considerations. If any of the information on which we have relied is incorrect, or if changes in the relevant facts occur after the date hereof, our opinion could be affected thereby. Moreover, our opinion is based on the Internal Revenue Code of 1986, as amended, applicable Treasury regulations promulgated thereunder, and Internal Revenue Service rulings, procedures, and other pronouncements published by the United States Internal Revenue Service. These authorities are all subject to change, and such change may be made with retroactive effect. We can give no assurance that, after such change, our opinion would not be different. We undertake no responsibility to update or supplement our opinion. This opinion is not binding on the Internal Revenue Service, and there can be no assurance, and none is hereby given, that the Internal Revenue Service will not take a position contrary to one or more of the positions reflected in the foregoing opinion, or that our opinion will be upheld by the courts if challenged by the Internal Revenue Service. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. We also consent to the use of our name in the Prospectus under the caption "Certain Federal Income Tax Consequences." Very truly yours, STEARNS, WEAVER, MILLER, WEISSLER ALHADEFF & SITTERSON, P.A. EX-23.3 9 EXHIBIT 23.3 ACCOUNTANTS' CONSENT The Board of Directors BankAtlantic Bancorp. Inc.: We consent to the use of our reports included herein and to the reference to our firm under the heading "Experts" in the prospectus. s/KPMG Peat Marwick LLP Fort Lauderdale, Florida March 21, 1997 EX-25.1 10 EXHIBIT 25.1 Registration No. =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) _______ WILMINGTON TRUST COMPANY (Exact name of trustee as specified in its charter) Delaware 51-0055023 (State of incorporation) (I.R.S. employer identification no.) Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 (Address of principal executive offices) Cynthia L. Corliss Vice President and Trust Counsel Wilmington Trust Company Rodney Square North Wilmington, Delaware 19890 (302) 651-8516 (Name, address and telephone number of agent for service) BANKATLANTIC BANCORP, INC. (Exact name of obligor as specified in its charter) Florida 65-0507804 (State of incorporation) (I.R.S. employer identification no.) 1750 East Sunrise Boulevard Fort Lauderdale, Florida 33304 (Address of principal executive offices) (Zip Code) ___% Subordinated Debentures of BankAtlantic Bancorp, Inc. (Title of the indenture securities) =============================================================================== ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Deposit Insurance Co. State Bank Commissioner Five Penn Center Dover, Delaware Suite #2901 Philadelphia, PA (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the trustee, describe each affiliation: Based upon an examination of the books and records of the trustee and upon information furnished by the obligor, the obligor is not an affiliate of the trustee. ITEM 3. LIST OF EXHIBITS. List below all exhibits filed as part of this Statement of Eligibility and Qualification. A. Copy of the Charter of Wilmington Trust Company, which includes the certificate of authority of Wilmington Trust Company to commence business and the authorization of Wilmington Trust Company to exercise corporate trust powers. B. Copy of By-Laws of Wilmington Trust Company. C. Consent of Wilmington Trust Company required by Section 321(b) of Trust Indenture Act. D. Copy of most recent Report of Condition of Wilmington Trust Company. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wilmington Trust Company, a corporation organized and existing under the laws of Delaware, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Wilmington and State of Delaware on the 19th day of March, 1997. WILMINGTON TRUST COMPANY [SEAL] Attest:/S/ W. CHRIS SPONENBERG By:/S/ EMMETT R. HARMON ----------------------- ------------------------ Assistant Secretary Name: Emmett R. Harmon Title: Vice President 2 EXHIBIT A AMENDED CHARTER WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON MAY 9, 1987 AMENDED CHARTER OR ACT OF INCORPORATION OF WILMINGTON TRUST COMPANY WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act of Incorporation of which company has been from time to time amended and changed by merger agreements pursuant to the corporation law for state banks and trust companies of the State of Delaware, does hereby alter and amend its Charter or Act of Incorporation so that the same as so altered and amended shall in its entirety read as follows: FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY. SECOND: - The location of its principal office in the State of Delaware is at Rodney Square North, in the City of Wilmington, County of New Castle; the name of its resident agent is WILMINGTON TRUST COMPANY whose address is Rodney Square North, in said City. In addition to such principal office, the said corporation maintains and operates branch offices in the City of Newark, New Castle County, Delaware, the Town of Newport, New Castle County, Delaware, at Claymont, New Castle County, Delaware, at Greenville, New Castle County Delaware, and at Milford Cross Roads, New Castle County, Delaware, and shall be empowered to open, maintain and operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in the City of Wilmington, New Castle County, Delaware, and such other branch offices or places of business as may be authorized from time to time by the agency or agencies of the government of the State of Delaware empowered to confer such authority. THIRD: - (a) The nature of the business and the objects and purposes proposed to be transacted, promoted or carried on by this Corporation are to do any or all of the things herein mentioned as fully and to the same extent as natural persons might or could do and in any part of the world, viz.: (1) To sue and be sued, complain and defend in any Court of law or equity and to make and use a common seal, and alter the seal at pleasure, to hold, purchase, convey, mortgage or otherwise deal in real and personal estate and property, and to appoint such officers and agents as the business of the Corporation shall require, to make by-laws not inconsistent with the Constitution or laws of the United States or of this State, to discount bills, notes or other evidences of debt, to receive deposits of money, or securities for money, to buy gold and silver bullion and foreign coins, to buy and sell bills of exchange, and generally to use, exercise and enjoy all the powers, rights, privileges and franchises incident to a corporation which are proper or necessary for the transaction of the business of the Corporation hereby created. (2) To insure titles to real and personal property, or any estate or interests therein, and to guarantee the holder of such property, real or personal, against any claim or claims, adverse to his interest therein, and to prepare and give certificates of title for any lands or premises in the State of Delaware, or elsewhere. (3) To act as factor, agent, broker or attorney in the receipt, collection, custody, investment and management of funds, and the purchase, sale, management and disposal of property of all descriptions, and to prepare and execute all papers which may be necessary or proper in such business. (4) To prepare and draw agreements, contracts, deeds, leases, conveyances, mortgages, bonds and legal papers of every description, and to carry on the business of conveyancing in all its branches. (5) To receive upon deposit for safekeeping money, jewelry, plate, deeds, bonds and any and all other personal property of every sort and kind, from executors, administrators, guardians, public officers, courts, receivers, assignees, trustees, and from all fiduciaries, and from all other persons and individuals, and from all corporations whether state, municipal, corporate or private, and to rent boxes, safes, vaults and other receptacles for such property. (6) To act as agent or otherwise for the purpose of registering, issuing, certificating, countersigning, transferring or underwriting the stock, bonds or other obligations of any corporation, association, state or municipality, and may receive and manage any sinking fund therefor on such terms as may be agreed upon between the two parties, and in like manner may act as Treasurer of any corporation or municipality. (7) To act as Trustee under any deed of trust, mortgage, bond or other instrument issued by any state, municipality, body politic, corporation, association or person, either alone or in conjunction with any other person or persons, corporation or corporations. 2 (8) To guarantee the validity, performance or effect of any contract or agreement, and the fidelity of persons holding places of responsibility or trust; to become surety for any person, or persons, for the faithful performance of any trust, office, duty, contract or agreement, either by itself or in conjunction with any other person, or persons, corporation, or corporations, or in like manner become surety upon any bond, recognizance, obligation, judgment, suit, order, or decree to be entered in any court of record within the State of Delaware or elsewhere, or which may now or hereafter be required by any law, judge, officer or court in the State of Delaware or elsewhere. (9) To act by any and every method of appointment as trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity in the receiving, holding, managing, and disposing of any and all estates and property, real, personal or mixed, and to be appointed as such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian or bailee by any persons, corporations, court, officer, or authority, in the State of Delaware or elsewhere; and whenever this Corporation is so appointed by any person, corporation, court, officer or authority such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity, it shall not be required to give bond with surety, but its capital stock shall be taken and held as security for the performance of the duties devolving upon it by such appointment. (10) And for its care, management and trouble, and the exercise of any of its powers hereby given, or for the performance of any of the duties which it may undertake or be called upon to perform, or for the assumption of any responsibility the said Corporation may be entitled to receive a proper compensation. (11) To purchase, receive, hold and own bonds, mortgages, debentures, shares of capital stock, and other securities, obligations, contracts and evidences of indebtedness, of any private, public or municipal corporation within and without the State of Delaware, or of the Government of the United States, or of any state, territory, colony, or possession thereof, or of any foreign government or country; to receive, collect, receipt for, and dispose of interest, dividends and income upon and from any of the bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property held and owned by it, and to exercise in respect of all such bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property, any and all the rights, powers and privileges of individual 3 owners thereof, including the right to vote thereon; to invest and deal in and with any of the moneys of the Corporation upon such securities and in such manner as it may think fit and proper, and from time to time to vary or realize such investments; to issue bonds and secure the same by pledges or deeds of trust or mortgages of or upon the whole or any part of the property held or owned by the Corporation, and to sell and pledge such bonds, as and when the Board of Directors shall determine, and in the promotion of its said corporate business of investment and to the extent authorized by law, to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and convey real and personal property of any name and nature and any estate or interest therein. (b) In furtherance of, and not in limitation, of the powers conferred by the laws of the State of Delaware, it is hereby expressly provided that the said Corporation shall also have the following powers: (1) To do any or all of the things herein set forth, to the same extent as natural persons might or could do, and in any part of the world. (2) To acquire the good will, rights, property and franchises and to undertake the whole or any part of the assets and liabilities of any person, firm, association or corporation, and to pay for the same in cash, stock of this Corporation, bonds or otherwise; to hold or in any manner to dispose of the whole or any part of the property so purchased; to conduct in any lawful manner the whole or any part of any business so acquired, and to exercise all the powers necessary or convenient in and about the conduct and management of such business. (3) To take, hold, own, deal in, mortgage or otherwise lien, and to lease, sell, exchange, transfer, or in any manner whatever dispose of property, real, personal or mixed, wherever situated. (4) To enter into, make, perform and carry out contracts of every kind with any person, firm, association or corporation, and, without limit as to amount, to draw, make, accept, endorse, discount, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and other negotiable or transferable instruments. (5) To have one or more offices, to carry on all or any of its operations and businesses, without restriction to the same extent as natural persons might or could do, to purchase or otherwise acquire, to hold, own, to mortgage, sell, convey or otherwise dispose of, real and personal property, of every class and description, in any State, District, Territory or Colony of the United States, and in any foreign country or place. 4 (6) It is the intention that the objects, purposes and powers specified and clauses contained in this paragraph shall (except where otherwise expressed in said paragraph) be nowise limited or restricted by reference to or inference from the terms of any other clause of this or any other paragraph in this charter, but that the objects, purposes and powers specified in each of the clauses of this paragraph shall be regarded as independent objects, purposes and powers. FOURTH: - (a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is forty-one million (41,000,000) shares, consisting of: (1) One million (1,000,000) shares of Preferred stock, par value $10.00 per share (hereinafter referred to as "Preferred Stock"); and (2) Forty million (40,000,000) shares of Common Stock, par value $1.00 per share (hereinafter referred to as "Common Stock"). (b) Shares of Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors each of said series to be distinctly designated. All shares of any one series of Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends, if any, thereon shall be cumulative, if made cumulative. The voting powers and the preferences and relative, participating, optional and other special rights of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and, subject to the provisions of subparagraph 1 of Paragraph (c) of this Article FOURTH, the Board of Directors of the Corporation is hereby expressly granted authority to fix by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock, the voting powers and the designations, preferences and relative, optional and other special rights, and the qualifications, limitations and restrictions of such series, including, but without limiting the generality of the foregoing, the following: (1) The distinctive designation of, and the number of shares of Preferred Stock which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (2) The rate and times at which, and the terms and conditions on which, dividends, if any, on Preferred Stock of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes, or series of the same or other class of 5 stock and whether such dividends shall be cumulative or non-cumulative; (3) The right, if any, of the holders of Preferred Stock of such series to convert the same into or exchange the same for, shares of any other class or classes or of any series of the same or any other class or classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (4) Whether or not Preferred Stock of such series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which, Preferred Stock of such series may be redeemed. (5) The rights, if any, of the holders of Preferred Stock of such series upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the Corporation. (6) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock of such series; and (7) The voting powers, if any, of the holders of such series of Preferred Stock which may, without limiting the generality of the foregoing include the right, voting as a series or by itself or together with other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such circumstances and on such conditions as the Board of Directors may determine. (c) (1) After the requirements with respect to preferential dividends on the Preferred Stock (fixed in accordance with the provisions of section (b) of this Article FOURTH), if any, shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts (fixed in accordance with the provisions of section (b) of this Article FOURTH), and subject further to any conditions which may be fixed in accordance with the provisions of section (b) of this Article FOURTH, then and not otherwise the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. (2) After distribution in full of the preferential amount, if any, (fixed in accordance with the provisions of section (b) of this Article FOURTH), to be distributed to the holders of Preferred Stock in the event of voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding- up, of the Corporation, the holders of the Common Stock shall be entitled to 6 receive all of the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. (3) Except as may otherwise be required by law or by the provisions of such resolution or resolutions as may be adopted by the Board of Directors pursuant to section (b) of this Article FOURTH, each holder of Common Stock shall have one vote in respect of each share of Common Stock held on all matters voted upon by the stockholders. (d) No holder of any of the shares of any class or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued stock of any class or series or any additional shares of any class or series to be issued by reason of any increase of the authorized capital stock of the Corporation of any class or series, or bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for stock of the Corporation of any class or series, or carrying any right to purchase stock of any class or series, but any such unissued stock, additional authorized issue of shares of any class or series of stock or securities convertible into or exchangeable for stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations, whether such holders or others, and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its sole discretion. (e) The relative powers, preferences and rights of each series of Preferred Stock in relation to the relative powers, preferences and rights of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to authority granted in section (b) of this Article FOURTH and the consent, by class or series vote or otherwise, of the holders of such of the series of Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in the resolution or resolutions as to any series of Preferred Stock adopted pursuant to section (b) of this Article FOURTH that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock. 7 (f) Subject to the provisions of section (e), shares of any series of Preferred Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (g) Shares of Common Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (h) The authorized amount of shares of Common Stock and of Preferred Stock may, without a class or series vote, be increased or decreased from time to time by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote thereon. FIFTH: - (a) The business and affairs of the Corporation shall be conducted and managed by a Board of Directors. The number of directors constituting the entire Board shall be not less than five nor more than twenty-five as fixed from time to time by vote of a majority of the whole Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the whole Board shall be twenty-four until otherwise fixed by a majority of the whole Board. (b) The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the whole Board permits, with the term of office of one class expiring each year. At the annual meeting of stockholders in 1982, directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting and directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next annual election of directors. At such election, the stockholders shall elect a successor to such director to hold office until the next election of the class for which such director shall have been chosen and until his successor shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. (c) Notwithstanding any other provisions of this Charter or Act of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Charter or Act of Incorporation or the ByLaws of the Corporation), any director or the entire Board of Directors of the 8 Corporation may be removed at any time without cause, but only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast at a meeting of the stockholders called for that purpose. (d) Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Such nominations shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation not less than 14 days nor more than 50 days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than 21 days' notice of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of the Corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders. Notice of nominations which are proposed by the Board of Directors shall be given by the Chairman on behalf of the Board. (e) Each notice under subsection (d) shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of such nominee and (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee. (f) The Chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. (g) No action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. SIXTH: - The Directors shall choose such officers, agent and servants as may be provided in the By-Laws as they may from time to time find necessary or proper. SEVENTH: - The Corporation hereby created is hereby given the same powers, rights and privileges as may be conferred upon corporations organized under the Act entitled "An Act Providing a General Corporation Law", approved March 10, 1899, as from time to time amended. EIGHTH: - This Act shall be deemed and taken to be a private Act. 9 NINTH: - This Corporation is to have perpetual existence. TENTH: - The Board of Directors, by resolution passed by a majority of the whole Board, may designate any of their number to constitute an Executive Committee, which Committee, to the extent provided in said resolution, or in the By-Laws of the Company, shall have and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. ELEVENTH: - The private property of the stockholders shall not be liable for the payment of corporate debts to any extent whatever. TWELFTH: - The Corporation may transact business in any part of the world. THIRTEENTH: - The Board of Directors of the Corporation is expressly authorized to make, alter or repeal the By-Laws of the Corporation by a vote of the majority of the entire Board. The stockholders may make, alter or repeal any By-Law whether or not adopted by them, provided however, that any such additional By-Laws, alterations or repeal may be adopted only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class). FOURTEENTH: - Meetings of the Directors may be held outside of the State of Delaware at such places as may be from time to time designated by the Board, and the Directors may keep the books of the Company outside of the State of Delaware at such places as may be from time to time designated by them. FIFTEENTH: - (a) In addition to any affirmative vote required by law, and except as otherwise expressly provided in sections (b) and (c) of this Article FIFTEENTH: (A) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with or into (i) any Interested Stockholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Stockholder), which, after such merger or consolidation, would be an Affiliate (as hereinafter defined) of an Interested Stockholder, or (B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of related transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate fair market value of $1,000,000 or more, or 10 (C) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of related transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $1,000,000 or more, or (D) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation, or (E) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any similar transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder, or any Affiliate of any Interested Stockholder, shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for the purpose of this Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) The term "business combination" as used in this Article FIFTEENTH shall mean any transaction which is referred to any one or more of clauses (A) through (E) of paragraph 1 of the section (a). (b) The provisions of section (a) of this Article FIFTEENTH shall not be applicable to any particular business combination and such business combination shall require only such affirmative vote as is required by law and any other provisions of the Charter or Act of Incorporation of By-Laws if such business combination has been approved by a majority of the whole Board. (c) For the purposes of this Article FIFTEENTH: (1) A "person" shall mean any individual firm, corporation or other entity. (2) "Interested Stockholder" shall mean, in respect of any business combination, any person (other than the Corporation or any Subsidiary) who or which as of the record date for the determination of stockholders entitled to notice of and to vote on 11 such business combination, or immediately prior to the consummation of any such transaction: (A) is the beneficial owner, directly or indirectly, of more than 10% of the Voting Shares, or (B) is an Affiliate of the Corporation and at any time within two years prior thereto was the beneficial owner, directly or indirectly, of not less than 10% of the then outstanding voting Shares, or (C) is an assignee of or has otherwise succeeded in any share of capital stock of the Corporation which were at any time within two years prior thereto beneficially owned by any Interested Stockholder, and such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (3) A person shall be the "beneficial owner" of any Voting Shares: (A) which such person or any of its Affiliates and Associates (as hereafter defined) beneficially own, directly or indirectly, or (B) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding, or (C) which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation. (4) The outstanding Voting Shares shall include shares deemed owned through application of paragraph (3) above but shall not include any other Voting Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options or otherwise. (5) "Affiliate" and "Associate" shall have the respective meanings given those terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981. 12 (6) "Subsidiary" shall mean any corporation of which a majority of any class of equity security (as defined in Rule 3a11-1 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect in December 31, 1981) is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Investment Stockholder set forth in paragraph (2) of this section (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (d) majority of the directors shall have the power and duty to determine for the purposes of this Article FIFTEENTH on the basis of information known to them, (1) the number of Voting Shares beneficially owned by any person (2) whether a person is an Affiliate or Associate of another, (3) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in paragraph (3) of section (c), or (4) whether the assets subject to any business combination or the consideration received for the issuance or transfer of securities by the Corporation, or any Subsidiary has an aggregate fair market value of $1,00,000 or more. (e) Nothing contained in this Article FIFTEENTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. SIXTEENTH: Notwithstanding any other provision of this Charter or Act of Incorporation or the By-Laws of the Corporation (and in addition to any other vote that may be required by law, this Charter or Act of Incorporation by the By-Laws), the affirmative vote of the holders of at least two-thirds of the outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter or Act of Incorporation. SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Laws as the same exists or may hereafter be amended. (b) Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a Director of the Corporation existing hereunder with respect to any act or omission occurring prior to the time of such repeal or modification." 13 EXHIBIT B BY-LAWS WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON JANUARY 16, 1997 BY-LAWS OF WILMINGTON TRUST COMPANY ARTICLE I STOCKHOLDERS' MEETINGS Section 1. The Annual Meeting of Stockholders shall be held on the third Thursday in April each year at the principal office at the Company or at such other date, time, or place as may be designated by resolution by the Board of Directors. Section 2. Special meetings of all stockholders may be called at any time by the Board of Directors, the Chairman of the Board or the President. Section 3. Notice of all meetings of the stockholders shall be given by mailing to each stockholder at least ten (10) days before said meeting, at his last known address, a written or printed notice fixing the time and place of such meeting. Section 4. A majority in the amount of the capital stock of the Company issued and outstanding on the record date, as herein determined, shall constitute a quorum at all meetings of stockholders for the transaction of any business, but the holders of a small number of shares may adjourn, from time to time, without further notice, until a quorum is secured. At each annual or special meeting of stockholders, each stockholder shall be entitled to one vote, either in person or by proxy, for each shares of stock registered in the stockholder's name on the books of the Company on the record date for any such meeting as determined herein. ARTICLE II DIRECTORS Section 1. The number and classification of the Board of Directors shall be as set forth in the Charter of the Bank. Section 2. No person who has attained the age of seventy-two (72) years shall be nominated for election to the Board of Directors of the Company, provided, however, that this limitation shall not apply to any person who was serving as director of the Company on September 16, 1971. Section 3. The class of Directors so elected shall hold office for three years or until their successors are elected and qualified. Section 4. The affairs and business of the Company shall be managed and conducted by the Board of Directors. Section 5. The Board of Directors shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Board of Directors or the President. Section 6. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board of Directors or by the President, and shall be called upon the written request of a majority of the directors. Section 7. A majority of the directors elected and qualified shall be necessary to constitute a quorum for the transaction of business at any meeting of the Board of Directors. Section 8. Written notice shall be sent by mail to each director of any special meeting of the Board of Directors, and of any change in the time or place of any regular meeting, stating the time and place of such meeting, which shall be mailed not less than two days before the time of holding such meeting. Section 9. In the event of the death, resignation, removal, inability to act, or disqualification of any director, the Board of Directors, although less than a quorum, shall have the right to elect the successor who shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, and until such director's successor shall have been duly elected and qualified. Section 10. The Board of Directors at its first meeting after its election by the stockholders shall appoint an Executive Committee, a Trust Committee, an Audit Committee and a Compensation Committee, and shall elect from its own members a Chairman of the Board of Directors and a President who may be the same person. The Board of Directors shall also elect at such meeting a Secretary and a Treasurer, who may be the same person, may appoint at any time such other committees and elect or appoint such other officers as it may deem advisable. The Board of Directors may also elect at such meeting one or more Associate Directors. Section 11. The Board of Directors may at any time remove, with or without cause, any member of any Committee appointed by it or any associate director or officer elected by it and may appoint or elect his successor. Section 12. The Board of Directors may designate an officer to be in charge of such of the departments or division of the Company as it may deem advisable. ARTICLE III COMMITTEES Section I. Executive Committee (A) The Executive Committee shall be composed of not more than nine members who shall be selected by the Board of Directors from its own members and who 2 shall hold office during the pleasure of the Board. (B) The Executive Committee shall have all the powers of the Board of Directors when it is not in session to transact all business for and in behalf of the Company that may be brought before it. (C) The Executive Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Executive Committee or at the call of the Chairman of the Board of Directors. The majority of its members shall be necessary to constitute a quorum for the transaction of business. Special meetings of the Executive Committee may be held at any time when a quorum is present. (D) Minutes of each meeting of the Executive Committee shall be kept and submitted to the Board of Directors at its next meeting. (E) The Executive Committee shall advise and superintend all investments that may be made of the funds of the Company, and shall direct the disposal of the same, in accordance with such rules and regulations as the Board of Directors from time to time make. (F) In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Company by its directors and officers as contemplated by these By-Laws any two available members of the Executive Committee as constituted immediately prior to such disaster shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Company in accordance with the provisions of Article III of these By-Laws; and if less than three members of the Trust Committee is constituted immediately prior to such disaster shall be available for the transaction of its business, such Executive Committee shall also be empowered to exercise all of the powers reserved to the Trust Committee under Article III Section 2 hereof. In the event of the unavailability, at such time, of a minimum of two members of such Executive Committee, any three available directors shall constitute the Executive Committee for the full conduct and management of the affairs and business of the Company in accordance with the foregoing provisions of this Section. This By-Law shall be subject to implementation by Resolutions of the Board of Directors presently existing or hereafter passed from time to time for that purpose, and any provisions of these By-Laws (other than this Section) and any resolutions which are contrary to the provisions of this Section or to the provisions of any such implementary Resolutions shall be suspended during such a disaster period until it shall be determined by any interim Executive Committee acting under this section that it shall be to the advantage of the Company to resume the conduct and management of its affairs and business under all of the other provisions of these By-Laws. 3 Section 2. Trust Committee (A) The Trust Committee shall be composed of not more than thirteen members who shall be selected by the Board of Directors, a majority of whom shall be members of the Board of Directors and who shall hold office during the pleasure of the Board. (B) The Trust Committee shall have general supervision over the Trust Department and the investment of trust funds, in all matters, however, being subject to the approval of the Board of Directors. (C) The Trust Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members or at the call of its chairman. A majority of its members shall be necessary to constitute a quorum for the transaction of business. (D) Minutes of each meeting of the Trust Committee shall be kept and promptly submitted to the Board of Directors. (E) The Trust Committee shall have the power to appoint Committees and/or designate officers or employees of the Company to whom supervision over the investment of trust funds may be delegated when the Trust Committee is not in session. Section 3. Audit Committee (A) The Audit Committee shall be composed of five members who shall be selected by the Board of Directors from its own members, none of whom shall be an officer of the Company, and shall hold office at the pleasure of the Board. (B) The Audit Committee shall have general supervision over the Audit Division in all matters however subject to the approval of the Board of Directors; it shall consider all matters brought to its attention by the officer in charge of the Audit Division, review all reports of examination of the Company made by any governmental agency or such independent auditor employed for that purpose, and make such recommendations to the Board of Directors with respect thereto or with respect to any other matters pertaining to auditing the Company as it shall deem desirable. (C) The Audit Committee shall meet whenever and wherever the majority of its members shall deem it to be proper for the transaction of its business, and a majority of its Committee shall constitute a quorum. Section 4. Compensation Committee (A) The Compensation Committee shall be composed of not more than 4 five (5) members who shall be selected by the Board of Directors from its own members who are not officers of the Company and who shall hold office during the pleasure of the Board. (B) The Compensation Committee shall in general advise upon all matters of policy concerning the Company brought to its attention by the management and from time to time review the management of the Company, major organizational matters, including salaries and employee benefits and specifically shall administer the Executive Incentive Compensation Plan. (C) Meetings of the Compensation Committee may be called at any time by the Chairman of the Compensation Committee, the Chairman of the Board of Directors, or the President of the Company. Section 5. Associate Directors (A) Any person who has served as a director may be elected by the Board of Directors as an associate director, to serve during the pleasure of the Board. (B) An associate director shall be entitled to attend all directors meetings and participate in the discussion of all matters brought to the Board, with the exception that he would have no right to vote. An associate director will be eligible for appointment to Committees of the Company, with the exception of the Executive Committee, Audit Committee and Compensation Committee, which must be comprised solely of active directors. Section 6. Absence or Disqualification of Any Member of a Committee (A) In the absence or disqualification of any member of any Committee created under Article III of the By-Laws of this Company, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absence or disqualified member. ARTICLE IV OFFICERS Section 1. The Chairman of the Board of Directors shall preside at all meetings of the Board and shall have such further authority and powers and shall perform such duties as the Board of Directors may from time to time confer and direct. He shall also exercise such powers and perform such duties as may from time to time be agreed upon between himself and the President of the Company. Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board of 5 Directors shall preside at all meetings of the Board of Directors at which the Chairman of the Board shall not be present and shall have such further authority and powers and shall perform such duties as the Board of Directors or the Chairman of the Board may from time to time confer and direct. Section 3. The President shall have the powers and duties pertaining to the office of the President conferred or imposed upon him by statute or assigned to him by the Board of Directors in the absence of the Chairman of the Board the President shall have the powers and duties of the Chairman of the Board. Section 4. The Chairman of the Board of Directors or the President as designated by the Board of Directors, shall carry into effect all legal directions of the Executive Committee and of the Board of Directors, and shall at all times exercise general supervision over the interest, affairs and operations of the Company and perform all duties incident to his office. Section 5. There may be one or more Vice Presidents, however denominated by the Board of Directors, who may at any time perform all the duties of the Chairman of the Board of Directors and/or the President and such other powers and duties as may from time to time be assigned to them by the Board of Directors, the Executive Committee, the Chairman of the Board or the President and by the officer in charge of the department or division to which they are assigned. Section 6. The Secretary shall attend to the giving of notice of meetings of the stockholders and the Board of Directors, as well as the Committees thereof, to the keeping of accurate minutes of all such meetings and to recording the same in the minute books of the Company. In addition to the other notice requirements of these By-Laws and as may be practicable under the circumstances, all such notices shall be in writing and mailed well in advance of the scheduled date of any other meeting. He shall have custody of the corporate seal and shall affix the same to any documents requiring such corporate seal and to attest the same. Section 7. The Treasurer shall have general supervision over all assets and liabilities of the Company. He shall be custodian of and responsible for all monies, funds and valuables of the Company and for the keeping of proper records of the evidence of property or indebtedness and of all the transactions of the Company. He shall have general supervision of the expenditures of the Company and shall report to the Board of Directors at each regular meeting of the condition of the Company, and perform such other duties as may be assigned to him from time to time by the Board of Directors of the Executive Committee. Section 8. There may be a Controller who shall exercise general supervision over the internal operations of the Company, including accounting, and shall render to the Board of Directors at appropriate times a report relating to the general condition and internal operations of the Company. 6 There may be one or more subordinate accounting or controller officers however denominated, who may perform the duties of the Controller and such duties as may be prescribed by the Controller. Section 9. The officer designated by the Board of Directors to be in charge of the Audit Division of the Company with such title as the Board of Directors shall prescribe, shall report to and be directly responsible only to the Board of Directors. There shall be an Auditor and there may be one or more Audit Officers, however denominated, who may perform all the duties of the Auditor and such duties as may be prescribed by the officer in charge of the Audit Division. Section 10. There may be one or more officers, subordinate in rank to all Vice Presidents with such functional titles as shall be determined from time to time by the Board of Directors, who shall ex officio hold the office Assistant Secretary of this Company and who may perform such duties as may be prescribed by the officer in charge of the department or division to whom they are assigned. Section 11. The powers and duties of all other officers of the Company shall be those usually pertaining to their respective offices, subject to the direction of the Board of Directors, the Executive Committee, Chairman of the Board of Directors or the President and the officer in charge of the department or division to which they are assigned. ARTICLE V STOCK AND STOCK CERTIFICATES Section 1. Shares of stock shall be transferrable on the books of the Company and a transfer book shall be kept in which all transfers of stock shall be recorded. Section 2. Certificate of stock shall bear the signature of the President or any Vice President, however denominated by the Board of Directors and countersigned by the Secretary or Treasurer or an Assistant Secretary, and the seal of the corporation shall be engraved thereon. Each certificate shall recite that the stock represented thereby is transferrable only upon the books of the Company by the holder thereof or his attorney, upon surrender of the certificate properly endorsed. Any certificate of stock surrendered to the Company shall be cancelled at the time of transfer, and before a new certificate or certificates shall be issued in lieu thereof. Duplicate certificates of stock shall be issued only upon giving such security as may be satisfactory to the Board of Directors or the Executive Committee. Section 3. The Board of Directors of the Company is authorized to fix in advance a record date for the determination of the stockholders entitled to notice of, and to vote at, any meeting of stockholders and any adjournment thereof, or entitled to receive payment of 7 any dividend, or to any allotment or rights, or to exercise any rights in respect of any change, conversion or exchange of capital stock, or in connection with obtaining the consent of stockholders for any purpose, which record date shall not be more than 60 nor less than 10 days proceeding the date of any meeting of stockholders or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent. ARTICLE VI SEAL Section 1. The corporate seal of the Company shall be in the following form: Between two concentric circles the words "Wilmington Trust Company" within the inner circle the words "Wilmington, Delaware." ARTICLE VII FISCAL YEAR Section 1. The fiscal year of the Company shall be the calendar year. ARTICLE VIII EXECUTION OF INSTRUMENTS OF THE COMPANY Section 1. The Chairman of the Board, the President or any Vice President, however denominated by the Board of Directors, shall have full power and authority to enter into, make, sign, execute, acknowledge and/or deliver and the Secretary or any Assistant Secretary shall have full power and authority to attest and affix the corporate seal of the Company to any and all deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes, mortgages and all other instruments incident to the business of this Company or in acting as executor, administrator, guardian, trustee, agent or in any other fiduciary or representative capacity by any and every method of appointment or by whatever person, corporation, court officer or authority in the State of Delaware, or elsewhere, without any specific authority, ratification, approval or confirmation by the Board of Directors or the Executive Committee, and any and all such instruments shall have the same force and validity as although expressly authorized by the Board of Directors and/or the Executive Committee. 8 ARTICLE IX COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES Section 1. Directors and associate directors of the Company, other than salaried officers of the Company, shall be paid such reasonable honoraria or fees for attending meetings of the Board of Directors as the Board of Directors may from time to time determine. Directors and associate directors who serve as members of committees, other than salaried employees of the Company, shall be paid such reasonable honoraria or fees for services as members of committees as the Board of Directors shall from time to time determine and directors and associate directors may be employed by the Company for such special services as the Board of Directors may from time to time determine and shall be paid for such special services so performed reasonable compensation as may be determined by the Board of Directors. ARTICLE X INDEMNIFICATION Section 1. (A) The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The Corporation shall indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the Corporation. (B) The Corporation shall pay the expenses incurred in defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER, that the payment of expenses incurred by a Director officer in his capacity as a Director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Director or officer to repay all amounts advanced if it should be ultimately determined that the Director or officer is not entitled to be indemnified under this Article or otherwise. (C) If a claim for indemnification or payment of expenses, under this Article X is not paid in full within ninety days after a written claim therefor has been received by the Corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification of payment of expenses 9 under applicable law. (D) The rights conferred on any person by this Article X shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Charter or Act of Incorporation, these By-Laws, agreement, vote of stockholders or disinterested Directors or otherwise. (E) Any repeal or modification of the foregoing provisions of this Article X shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. ARTICLE XI AMENDMENTS TO THE BY-LAWS Section 1. These By-Laws may be altered, amended or repealed, in whole or in part, and any new By-Law or By-Laws adopted at any regular or special meeting of the Board of Directors by a vote of the majority of all the members of the Board of Directors then in office. 10 EXHIBIT C SECTION 321(B) CONSENT Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended, Wilmington Trust Company hereby consents that reports of examinations by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. WILMINGTON TRUST COMPANY Dated: March 19, 1997 By: /S/ EMMETT R. HARMON -------------------- Name: Emmett R. Harmon Title: Vice President EXHIBIT D NOTICE This form is intended to assist state nonmember banks and savings banks with state publication requirements. It has not been approved by any state banking authorities. Refer to your appropriate state banking authorities for your state publication requirements. R E P O R T O F C O N D I T I O N Consolidating domestic subsidiaries of the WILMINGTON TRUST COMPANY of WILMINGTON - ----------------------------------------------------------- ----------------- Name of Bank City in the State of DELAWARE , at the close of business on December 31, 1996. ------------
ASSETS Thousands of dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coins..........................213,895 Interest-bearing balances........................................................ 0 Held-to-maturity securities.......................................................... 465,818 Available-for-sale securities..........................................................752,297 Federal funds sold......................................................................95,000 Securities purchased under agreements to resell........................................ 39,190 Loans and lease financing receivables: Loans and leases, net of unearned income. . . . . . . 3,634,003 LESS: Allowance for loan and lease losses. . . . . . 51,847 LESS: Allocated transfer risk reserve. . . . . . . . 0 Loans and leases, net of unearned income, allowance, and reserve...........3,582,156 Assets held in trading accounts..............................................................0 Premises and fixed assets (including capitalized leases)................................89,129 Other real estate owned................................................................. 3,520 Investments in unconsolidated subsidiaries and associated companies....................... 52 Customers' liability to this bank on acceptances outstanding.................................0 Intangible assets........................................................................4,593 Other assets...........................................................................114,300 Total assets.........................................................................5,359,950 CONTINUED ON NEXT PAGE LIABILITIES Deposits: In domestic offices..................................................................3,749,697 Noninterest-bearing . . . . . . . . 852,790 Interest-bearing. . . . . . . . . . 2,896,907 Federal funds purchased................................................................ 77,825 Securities sold under agreements to repurchase........................................ 192,295 Demand notes issued to the U.S. Treasury................................................53,526 Trading liabilities..........................................................................0 Other borrowed money:................................................................../////// With original maturity of one year or less...................................714,000 With original maturity of more than one year..................................43,000 Mortgage indebtedness and obligations under capitalized leases........................... 0 Bank's liability on acceptances executed and outstanding.....................................0 Subordinated notes and debentures............................................................0 Other liabilities..................................................................... 98,756 Total liabilities.................................................................. 4,929,099 Limited-life preferred stock and related surplus.............................................0 EQUITY CAPITAL Perpetual preferred stock and related surplus................................................0 Common Stock...............................................................................500 Surplus.................................................................................62,118 Undivided profits and capital reserves.................................................367,371 Net unrealized holding gains (losses) on available-for-sale securities................ 862 Total equity capital...................................................................430,851 Total liabilities, limited-life preferred stock, and equity capital..................5,359,950
2 EX-25.2 11 EXHIBIT 25.2 Registration No. =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) WILMINGTON TRUST COMPANY (Exact name of trustee as specified in its charter) Delaware 51-0055023 (State of incorporation) (I.R.S. employer identification no.) Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 (Address of principal executive offices) Cynthia L. Corliss Vice President and Trust Counsel Wilmington Trust Company Rodney Square North Wilmington, Delaware 19890 (302) 651-8516 (Name, address and telephone number of agent for service) BANKATLANTIC BANCORP, INC. BBC CAPITAL TRUST I (Exact name of obligor as specified in its charter) Florida 65-0507804 Delaware Applied For (State of incorporation) (I.R.S. employer identification no.) 1750 East Sunrise Boulevard Fort Lauderdale, Florida 33304 (Address of principal executive offices) (Zip Code) ___% Cumulative Trust Preferred Securities of BBC Capital Trust I (Title of the indenture securities) =============================================================================== ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Deposit Insurance Co. State Bank Commissioner Five Penn Center Dover, Delaware Suite #2901 Philadelphia, PA (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the trustee, describe each affiliation: Based upon an examination of the books and records of the trustee and upon information furnished by the obligor, the obligor is not an affiliate of the trustee. ITEM 3. LIST OF EXHIBITS. List below all exhibits filed as part of this Statement of Eligibility and Qualification. A. Copy of the Charter of Wilmington Trust Company, which includes the certificate of authority of Wilmington Trust Company to commence business and the authorization of Wilmington Trust Company to exercise corporate trust powers. B. Copy of By-Laws of Wilmington Trust Company. C. Consent of Wilmington Trust Company required by Section 321(b) of Trust Indenture Act. D. Copy of most recent Report of Condition of Wilmington Trust Company. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wilmington Trust Company, a corporation organized and existing under the laws of Delaware, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Wilmington and State of Delaware on the 19th day of March, 1997. WILMINGTON TRUST COMPANY [SEAL] Attest: /S/ W. CHRIS SPONENBERG By: /S/ EMMETT R. HARMON ------------------------ ---------------------- Assistant Secretary Name: Emmett R. Harmon Title: Vice President 2 EXHIBIT A AMENDED CHARTER WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON MAY 9, 1987 AMENDED CHARTER OR ACT OF INCORPORATION OF WILMINGTON TRUST COMPANY WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act of Incorporation of which company has been from time to time amended and changed by merger agreements pursuant to the corporation law for state banks and trust companies of the State of Delaware, does hereby alter and amend its Charter or Act of Incorporation so that the same as so altered and amended shall in its entirety read as follows: FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY. SECOND: - The location of its principal office in the State of Delaware is at Rodney Square North, in the City of Wilmington, County of New Castle; the name of its resident agent is WILMINGTON TRUST COMPANY whose address is Rodney Square North, in said City. In addition to such principal office, the said corporation maintains and operates branch offices in the City of Newark, New Castle County, Delaware, the Town of Newport, New Castle County, Delaware, at Claymont, New Castle County, Delaware, at Greenville, New Castle County Delaware, and at Milford Cross Roads, New Castle County, Delaware, and shall be empowered to open, maintain and operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in the City of Wilmington, New Castle County, Delaware, and such other branch offices or places of business as may be authorized from time to time by the agency or agencies of the government of the State of Delaware empowered to confer such authority. THIRD: - (a) The nature of the business and the objects and purposes proposed to be transacted, promoted or carried on by this Corporation are to do any or all of the things herein mentioned as fully and to the same extent as natural persons might or could do and in any part of the world, viz.: (1) To sue and be sued, complain and defend in any Court of law or equity and to make and use a common seal, and alter the seal at pleasure, to hold, purchase, convey, mortgage or otherwise deal in real and personal estate and property, and to appoint such officers and agents as the business of the Corporation shall require, to make by-laws not inconsistent with the Constitution or laws of the United States or of this State, to discount bills, notes or other evidences of debt, to receive deposits of money, or securities for money, to buy gold and silver bullion and foreign coins, to buy and sell bills of exchange, and generally to use, exercise and enjoy all the powers, rights, privileges and franchises incident to a corporation which are proper or necessary for the transaction of the business of the Corporation hereby created. (2) To insure titles to real and personal property, or any estate or interests therein, and to guarantee the holder of such property, real or personal, against any claim or claims, adverse to his interest therein, and to prepare and give certificates of title for any lands or premises in the State of Delaware, or elsewhere. (3) To act as factor, agent, broker or attorney in the receipt, collection, custody, investment and management of funds, and the purchase, sale, management and disposal of property of all descriptions, and to prepare and execute all papers which may be necessary or proper in such business. (4) To prepare and draw agreements, contracts, deeds, leases, conveyances, mortgages, bonds and legal papers of every description, and to carry on the business of conveyancing in all its branches. (5) To receive upon deposit for safekeeping money, jewelry, plate, deeds, bonds and any and all other personal property of every sort and kind, from executors, administrators, guardians, public officers, courts, receivers, assignees, trustees, and from all fiduciaries, and from all other persons and individuals, and from all corporations whether state, municipal, corporate or private, and to rent boxes, safes, vaults and other receptacles for such property. (6) To act as agent or otherwise for the purpose of registering, issuing, certificating, countersigning, transferring or underwriting the stock, bonds or other obligations of any corporation, association, state or municipality, and may receive and manage any sinking fund therefor on such terms as may be agreed upon between the two parties, and in like manner may act as Treasurer of any corporation or municipality. (7) To act as Trustee under any deed of trust, mortgage, bond or other instrument issued by any state, municipality, body politic, corporation, association or person, either alone or in conjunction with any other person or persons, corporation or corporations. 2 (8) To guarantee the validity, performance or effect of any contract or agreement, and the fidelity of persons holding places of responsibility or trust; to become surety for any person, or persons, for the faithful performance of any trust, office, duty, contract or agreement, either by itself or in conjunction with any other person, or persons, corporation, or corporations, or in like manner become surety upon any bond, recognizance, obligation, judgment, suit, order, or decree to be entered in any court of record within the State of Delaware or elsewhere, or which may now or hereafter be required by any law, judge, officer or court in the State of Delaware or elsewhere. (9) To act by any and every method of appointment as trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity in the receiving, holding, managing, and disposing of any and all estates and property, real, personal or mixed, and to be appointed as such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian or bailee by any persons, corporations, court, officer, or authority, in the State of Delaware or elsewhere; and whenever this Corporation is so appointed by any person, corporation, court, officer or authority such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity, it shall not be required to give bond with surety, but its capital stock shall be taken and held as security for the performance of the duties devolving upon it by such appointment. (10) And for its care, management and trouble, and the exercise of any of its powers hereby given, or for the performance of any of the duties which it may undertake or be called upon to perform, or for the assumption of any responsibility the said Corporation may be entitled to receive a proper compensation. (11) To purchase, receive, hold and own bonds, mortgages, debentures, shares of capital stock, and other securities, obligations, contracts and evidences of indebtedness, of any private, public or municipal corporation within and without the State of Delaware, or of the Government of the United States, or of any state, territory, colony, or possession thereof, or of any foreign government or country; to receive, collect, receipt for, and dispose of interest, dividends and income upon and from any of the bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property held and owned by it, and to exercise in respect of all such bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property, any and all the rights, powers and privileges of individual 3 owners thereof, including the right to vote thereon; to invest and deal in and with any of the moneys of the Corporation upon such securities and in such manner as it may think fit and proper, and from time to time to vary or realize such investments; to issue bonds and secure the same by pledges or deeds of trust or mortgages of or upon the whole or any part of the property held or owned by the Corporation, and to sell and pledge such bonds, as and when the Board of Directors shall determine, and in the promotion of its said corporate business of investment and to the extent authorized by law, to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and convey real and personal property of any name and nature and any estate or interest therein. (b) In furtherance of, and not in limitation, of the powers conferred by the laws of the State of Delaware, it is hereby expressly provided that the said Corporation shall also have the following powers: (1) To do any or all of the things herein set forth, to the same extent as natural persons might or could do, and in any part of the world. (2) To acquire the good will, rights, property and franchises and to undertake the whole or any part of the assets and liabilities of any person, firm, association or corporation, and to pay for the same in cash, stock of this Corporation, bonds or otherwise; to hold or in any manner to dispose of the whole or any part of the property so purchased; to conduct in any lawful manner the whole or any part of any business so acquired, and to exercise all the powers necessary or convenient in and about the conduct and management of such business. (3) To take, hold, own, deal in, mortgage or otherwise lien, and to lease, sell, exchange, transfer, or in any manner whatever dispose of property, real, personal or mixed, wherever situated. (4) To enter into, make, perform and carry out contracts of every kind with any person, firm, association or corporation, and, without limit as to amount, to draw, make, accept, endorse, discount, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and other negotiable or transferable instruments. (5) To have one or more offices, to carry on all or any of its operations and businesses, without restriction to the same extent as natural persons might or could do, to purchase or otherwise acquire, to hold, own, to mortgage, sell, convey or otherwise dispose of, real and personal property, of every class and description, in any State, District, Territory or Colony of the United States, and in any foreign country or place. 4 (6) It is the intention that the objects, purposes and powers specified and clauses contained in this paragraph shall (except where otherwise expressed in said paragraph) be nowise limited or restricted by reference to or inference from the terms of any other clause of this or any other paragraph in this charter, but that the objects, purposes and powers specified in each of the clauses of this paragraph shall be regarded as independent objects, purposes and powers. FOURTH: - (a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is forty-one million (41,000,000) shares, consisting of: (1) One million (1,000,000) shares of Preferred stock, par value $10.00 per share (hereinafter referred to as "Preferred Stock"); and (2) Forty million (40,000,000) shares of Common Stock, par value $1.00 per share (hereinafter referred to as "Common Stock"). (b) Shares of Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors each of said series to be distinctly designated. All shares of any one series of Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends, if any, thereon shall be cumulative, if made cumulative. The voting powers and the preferences and relative, participating, optional and other special rights of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and, subject to the provisions of subparagraph 1 of Paragraph (c) of this Article FOURTH, the Board of Directors of the Corporation is hereby expressly granted authority to fix by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock, the voting powers and the designations, preferences and relative, optional and other special rights, and the qualifications, limitations and restrictions of such series, including, but without limiting the generality of the foregoing, the following: (1) The distinctive designation of, and the number of shares of Preferred Stock which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (2) The rate and times at which, and the terms and conditions on which, dividends, if any, on Preferred Stock of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes, or series of the same or other class of 5 stock and whether such dividends shall be cumulative or non-cumulative; (3) The right, if any, of the holders of Preferred Stock of such series to convert the same into or exchange the same for, shares of any other class or classes or of any series of the same or any other class or classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (4) Whether or not Preferred Stock of such series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which, Preferred Stock of such series may be redeemed. (5) The rights, if any, of the holders of Preferred Stock of such series upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the Corporation. (6) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock of such series; and (7) The voting powers, if any, of the holders of such series of Preferred Stock which may, without limiting the generality of the foregoing include the right, voting as a series or by itself or together with other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such circumstances and on such conditions as the Board of Directors may determine. (c) (1) After the requirements with respect to preferential dividends on the Preferred Stock (fixed in accordance with the provisions of section (b) of this Article FOURTH), if any, shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts (fixed in accordance with the provisions of section (b) of this Article FOURTH), and subject further to any conditions which may be fixed in accordance with the provisions of section (b) of this Article FOURTH, then and not otherwise the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. (2) After distribution in full of the preferential amount, if any, (fixed in accordance with the provisions of section (b) of this Article FOURTH), to be distributed to the holders of Preferred Stock in the event of voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up, of the Corporation, the holders of the Common Stock shall be entitled to 6 receive all of the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. (3) Except as may otherwise be required by law or by the provisions of such resolution or resolutions as may be adopted by the Board of Directors pursuant to section (b) of this Article FOURTH, each holder of Common Stock shall have one vote in respect of each share of Common Stock held on all matters voted upon by the stockholders. (d) No holder of any of the shares of any class or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued stock of any class or series or any additional shares of any class or series to be issued by reason of any increase of the authorized capital stock of the Corporation of any class or series, or bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for stock of the Corporation of any class or series, or carrying any right to purchase stock of any class or series, but any such unissued stock, additional authorized issue of shares of any class or series of stock or securities convertible into or exchangeable for stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations, whether such holders or others, and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its sole discretion. (e) The relative powers, preferences and rights of each series of Preferred Stock in relation to the relative powers, preferences and rights of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to authority granted in section (b) of this Article FOURTH and the consent, by class or series vote or otherwise, of the holders of such of the series of Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in the resolution or resolutions as to any series of Preferred Stock adopted pursuant to section (b) of this Article FOURTH that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock. 7 (f) Subject to the provisions of section (e), shares of any series of Preferred Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (g) Shares of Common Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (h) The authorized amount of shares of Common Stock and of Preferred Stock may, without a class or series vote, be increased or decreased from time to time by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote thereon. FIFTH: - (a) The business and affairs of the Corporation shall be conducted and managed by a Board of Directors. The number of directors constituting the entire Board shall be not less than five nor more than twenty-five as fixed from time to time by vote of a majority of the whole Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the whole Board shall be twenty-four until otherwise fixed by a majority of the whole Board. (b) The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the whole Board permits, with the term of office of one class expiring each year. At the annual meeting of stockholders in 1982, directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting and directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next annual election of directors. At such election, the stockholders shall elect a successor to such director to hold office until the next election of the class for which such director shall have been chosen and until his successor shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. (c) Notwithstanding any other provisions of this Charter or Act of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Charter or Act of Incorporation or the ByLaws of the Corporation), any director or the entire Board of Directors of the 8 Corporation may be removed at any time without cause, but only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast at a meeting of the stockholders called for that purpose. (d) Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Such nominations shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation not less than 14 days nor more than 50 days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than 21 days' notice of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of the Corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders. Notice of nominations which are proposed by the Board of Directors shall be given by the Chairman on behalf of the Board. (e) Each notice under subsection (d) shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of such nominee and (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee. (f) The Chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. (g) No action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. SIXTH: - The Directors shall choose such officers, agent and servants as may be provided in the By-Laws as they may from time to time find necessary or proper. SEVENTH: - The Corporation hereby created is hereby given the same powers, rights and privileges as may be conferred upon corporations organized under the Act entitled "An Act Providing a General Corporation Law", approved March 10, 1899, as from time to time amended. EIGHTH: - This Act shall be deemed and taken to be a private Act. 9 NINTH: - This Corporation is to have perpetual existence. TENTH: - The Board of Directors, by resolution passed by a majority of the whole Board, may designate any of their number to constitute an Executive Committee, which Committee, to the extent provided in said resolution, or in the By-Laws of the Company, shall have and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. ELEVENTH: - The private property of the stockholders shall not be liable for the payment of corporate debts to any extent whatever. TWELFTH: - The Corporation may transact business in any part of the world. THIRTEENTH: - The Board of Directors of the Corporation is expressly authorized to make, alter or repeal the By-Laws of the Corporation by a vote of the majority of the entire Board. The stockholders may make, alter or repeal any By-Law whether or not adopted by them, provided however, that any such additional By-Laws, alterations or repeal may be adopted only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class). FOURTEENTH: - Meetings of the Directors may be held outside of the State of Delaware at such places as may be from time to time designated by the Board, and the Directors may keep the books of the Company outside of the State of Delaware at such places as may be from time to time designated by them. FIFTEENTH: - (a) In addition to any affirmative vote required by law, and except as otherwise expressly provided in sections (b) and (c) of this Article FIFTEENTH: (A) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with or into (i) any Interested Stockholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Stockholder), which, after such merger or consolidation, would be an Affiliate (as hereinafter defined) of an Interested Stockholder, or (B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of related transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate fair market value of $1,000,000 or more, or 10 (C) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of related transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $1,000,000 or more, or (D) the adoption of any plan or proposal for the liquidation or dissolution the Corporation, or (E) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any similar transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder, or any Affiliate of any Interested Stockholder, shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for the purpose of this Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) The term "business combination" as used in this Article FIFTEENTH shall mean any transaction which is referred to any one or more of clauses (A) through (E) of paragraph 1 of the section (a). (b) The provisions of section (a) of this Article FIFTEENTH shall not be applicable to any particular business combination and such business combination shall require only such affirmative vote as is required by law and any other provisions of the Charter or Act of Incorporation of By-Laws if such business combination has been approved by a majority of the whole Board. (c) For the purposes of this Article FIFTEENTH: (1) A "person" shall mean any individual firm, corporation or other entity. (2) "Interested Stockholder" shall mean, in respect of any business combination, any person (other than the Corporation or any Subsidiary) who or which as of the record date for the determination of stockholders entitled to notice of and to vote on 11 such business combination, or immediately prior to the consummation of any such transaction: (A) is the beneficial owner, directly or indirectly, of more than 10% of the Voting Shares, or (B) is an Affiliate of the Corporation and at any time within two years prior thereto was the beneficial owner, directly or indirectly, of not less than 10% of the then outstanding voting Shares, or (C) is an assignee of or has otherwise succeeded in any share of capital stock of the Corporation which were at any time within two years prior thereto beneficially owned by any Interested Stockholder, and such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (3) A person shall be the "beneficial owner" of any Voting Shares: (A) which such person or any of its Affiliates and Associates (as hereafter defined) beneficially own, directly or indirectly, or (B) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding, or (C) which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation. (4) The outstanding Voting Shares shall include shares deemed owned through application of paragraph (3) above but shall not include any other Voting Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options or otherwise. (5) "Affiliate" and "Associate" shall have the respective meanings given those terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981. 12 (6) "Subsidiary" shall mean any corporation of which a majority of any class of equity security (as defined in Rule 3a11-1 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect in December 31, 1981) is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Investment Stockholder set forth in paragraph (2) of this section (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (d) majority of the directors shall have the power and duty to determine for the purposes of this Article FIFTEENTH on the basis of information known to them, (1) the number of Voting Shares beneficially owned by any person (2) whether a person is an Affiliate or Associate of another, (3) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in paragraph (3) of section (c), or (4) whether the assets subject to any business combination or the consideration received for the issuance or transfer of securities by the Corporation, or any Subsidiary has an aggregate fair market value of $1,00,000 or more. (e) Nothing contained in this Article FIFTEENTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. SIXTEENTH: Notwithstanding any other provision of this Charter or Act of Incorporation or the By-Laws of the Corporation (and in addition to any other vote that may be required by law, this Charter or Act of Incorporation by the By-Laws), the affirmative vote of the holders of at least two-thirds of the outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter or Act of Incorporation. SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Laws as the same exists or may hereafter be amended. (b) Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a Director of the Corporation existing hereunder with respect to any act or omission occurring prior to the time of such repeal or modification." 13 EXHIBIT B BY-LAWS WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON JANUARY 16, 1997 BY-LAWS OF WILMINGTON TRUST COMPANY ARTICLE I STOCKHOLDERS' MEETINGS Section 1. The Annual Meeting of Stockholders shall be held on the third Thursday in April each year at the principal office at the Company or at such other date, time, or place as may be designated by resolution by the Board of Directors. Section 2. Special meetings of all stockholders may be called at any time by the Board of Directors, the Chairman of the Board or the President. Section 3. Notice of all meetings of the stockholders shall be given by mailing to each stockholder at least ten (10) days before said meeting, at his last known address, a written or printed notice fixing the time and place of such meeting. Section 4. A majority in the amount of the capital stock of the Company issued and outstanding on the record date, as herein determined, shall constitute a quorum at all meetings of stockholders for the transaction of any business, but the holders of a small number of shares may adjourn, from time to time, without further notice, until a quorum is secured. At each annual or special meeting of stockholders, each stockholder shall be entitled to one vote, either in person or by proxy, for each shares of stock registered in the stockholder's name on the books of the Company on the record date for any such meeting as determined herein. ARTICLE II DIRECTORS Section 1. The number and classification of the Board of Directors shall be as set forth in the Charter of the Bank. Section 2. No person who has attained the age of seventy-two (72) years shall be nominated for election to the Board of Directors of the Company, provided, however, that this limitation shall not apply to any person who was serving as director of the Company on September 16, 1971. Section 3. The class of Directors so elected shall hold office for three years or until their successors are elected and qualified. Section 4. The affairs and business of the Company shall be managed and conducted by the Board of Directors. Section 5. The Board of Directors shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Board of Directors or the President. Section 6. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board of Directors or by the President, and shall be called upon the written request of a majority of the directors. Section 7. A majority of the directors elected and qualified shall be necessary to constitute a quorum for the transaction of business at any meeting of the Board of Directors. Section 8. Written notice shall be sent by mail to each director of any special meeting of the Board of Directors, and of any change in the time or place of any regular meeting, stating the time and place of such meeting, which shall be mailed not less than two days before the time of holding such meeting. Section 9. In the event of the death, resignation, removal, inability to act, or disqualification of any director, the Board of Directors, although less than a quorum, shall have the right to elect the successor who shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, and until such director's successor shall have been duly elected and qualified. Section 10. The Board of Directors at its first meeting after its election by the stockholders shall appoint an Executive Committee, a Trust Committee, an Audit Committee and a Compensation Committee, and shall elect from its own members a Chairman of the Board of Directors and a President who may be the same person. The Board of Directors shall also elect at such meeting a Secretary and a Treasurer, who may be the same person, may appoint at any time such other committees and elect or appoint such other officers as it may deem advisable. The Board of Directors may also elect at such meeting one or more Associate Directors. Section 11. The Board of Directors may at any time remove, with or without cause, any member of any Committee appointed by it or any associate director or officer elected by it and may appoint or elect his successor. Section 12. The Board of Directors may designate an officer to be in charge of such of the departments or division of the Company as it may deem advisable. ARTICLE III COMMITTEES Section I. Executive Committee (A) The Executive Committee shall be composed of not more than nine members who shall be selected by the Board of Directors from its own members and who 2 shall hold office during the pleasure of the Board. (B) The Executive Committee shall have all the powers of the Board of Directors when it is not in session to transact all business for and in behalf of the Company that may be brought before it. (C) The Executive Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Executive Committee or at the call of the Chairman of the Board of Directors. The majority of its members shall be necessary to constitute a quorum for the transaction of business. Special meetings of the Executive Committee may be held at any time when a quorum is present. (D) Minutes of each meeting of the Executive Committee shall be kept and submitted to the Board of Directors at its next meeting. (E) The Executive Committee shall advise and superintend all investments that may be made of the funds of the Company, and shall direct the disposal of the same, in accordance with such rules and regulations as the Board of Directors from time to time make. (F) In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Company by its directors and officers as contemplated by these By-Laws any two available members of the Executive Committee as constituted immediately prior to such disaster shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Company in accordance with the provisions of Article III of these By-Laws; and if less than three members of the Trust Committee is constituted immediately prior to such disaster shall be available for the transaction of its business, such Executive Committee shall also be empowered to exercise all of the powers reserved to the Trust Committee under Article III Section 2 hereof. In the event of the unavailability, at such time, of a minimum of two members of such Executive Committee, any three available directors shall constitute the Executive Committee for the full conduct and management of the affairs and business of the Company in accordance with the foregoing provisions of this Section. This By-Law shall be subject to implementation by Resolutions of the Board of Directors presently existing or hereafter passed from time to time for that purpose, and any provisions of these By-Laws (other than this Section) and any resolutions which are contrary to the provisions of this Section or to the provisions of any such implementary Resolutions shall be suspended during such a disaster period until it shall be determined by any interim Executive Committee acting under this section that it shall be to the advantage of the Company to resume the conduct and management of its affairs and business under all of the other provisions of these By-Laws. 3 Section 2. Trust Committee (A) The Trust Committee shall be composed of not more than thirteen members who shall be selected by the Board of Directors, a majority of whom shall be members of the Board of Directors and who shall hold office during the pleasure of the Board. (B) The Trust Committee shall have general supervision over the Trust Department and the investment of trust funds, in all matters, however, being subject to the approval of the Board of Directors. (C) The Trust Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members or at the call of its chairman. A majority of its members shall be necessary to constitute a quorum for the transaction of business. (D) Minutes of each meeting of the Trust Committee shall be kept and promptly submitted to the Board of Directors. (E) The Trust Committee shall have the power to appoint Committees and/or designate officers or employees of the Company to whom supervision over the investment of trust funds may be delegated when the Trust Committee is not in session. Section 3. Audit Committee (A) The Audit Committee shall be composed of five members who shall be selected by the Board of Directors from its own members, none of whom shall be an officer of the Company, and shall hold office at the pleasure of the Board. (B) The Audit Committee shall have general supervision over the Audit Division in all matters however subject to the approval of the Board of Directors; it shall consider all matters brought to its attention by the officer in charge of the Audit Division, review all reports of examination of the Company made by any governmental agency or such independent auditor employed for that purpose, and make such recommendations to the Board of Directors with respect thereto or with respect to any other matters pertaining to auditing the Company as it shall deem desirable. (C) The Audit Committee shall meet whenever and wherever the majority of its members shall deem it to be proper for the transaction of its business, and a majority of its Committee shall constitute a quorum. Section 4. Compensation Committee (A) The Compensation Committee shall be composed of not more than 4 five (5) members who shall be selected by the Board of Directors from its own members who are not officers of the Company and who shall hold office during the pleasure of the Board. (B) The Compensation Committee shall in general advise upon all matters of policy concerning the Company brought to its attention by the management and from time to time review the management of the Company, major organizational matters, including salaries and employee benefits and specifically shall administer the Executive Incentive Compensation Plan. (C) Meetings of the Compensation Committee may be called at any time by the Chairman of the Compensation Committee, the Chairman of the Board of Directors, or the President of the Company. Section 5. Associate Directors (A) Any person who has served as a director may be elected by the Board of Directors as an associate director, to serve during the pleasure of the Board. (B) An associate director shall be entitled to attend all directors meetings and participate in the discussion of all matters brought to the Board, with the exception that he would have no right to vote. An associate director will be eligible for appointment to Committees of the Company, with the exception of the Executive Committee, Audit Committee and Compensation Committee, which must be comprised solely of active directors. Section 6. Absence or Disqualification of Any Member of a Committee (A) In the absence or disqualification of any member of any Committee created under Article III of the By-Laws of this Company, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absence or disqualified member. ARTICLE IV OFFICERS Section 1. The Chairman of the Board of Directors shall preside at all meetings of the Board and shall have such further authority and powers and shall perform such duties as the Board of Directors may from time to time confer and direct. He shall also exercise such powers and perform such duties as may from time to time be agreed upon between himself and the President of the Company. Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board of 5 Directors shall preside at all meetings of the Board of Directors at which the Chairman of the Board shall not be present and shall have such further authority and powers and shall perform such duties as the Board of Directors or the Chairman of the Board may from time to time confer and direct. Section 3. The President shall have the powers and duties pertaining to the office of the President conferred or imposed upon him by statute or assigned to him by the Board of Directors in the absence of the Chairman of the Board the President shall have the powers and duties of the Chairman of the Board. Section 4. The Chairman of the Board of Directors or the President as designated by the Board of Directors, shall carry into effect all legal directions of the Executive Committee and of the Board of Directors, and shall at all times exercise general supervision over the interest, affairs and operations of the Company and perform all duties incident to his office. Section 5. There may be one or more Vice Presidents, however denominated by the Board of Directors, who may at any time perform all the duties of the Chairman of the Board of Directors and/or the President and such other powers and duties as may from time to time be assigned to them by the Board of Directors, the Executive Committee, the Chairman of the Board or the President and by the officer in charge of the department or division to which they are assigned. Section 6. The Secretary shall attend to the giving of notice of meetings of the stockholders and the Board of Directors, as well as the Committees thereof, to the keeping of accurate minutes of all such meetings and to recording the same in the minute books of the Company. In addition to the other notice requirements of these By-Laws and as may be practicable under the circumstances, all such notices shall be in writing and mailed well in advance of the scheduled date of any other meeting. He shall have custody of the corporate seal and shall affix the same to any documents requiring such corporate seal and to attest the same. Section 7. The Treasurer shall have general supervision over all assets and liabilities of the Company. He shall be custodian of and responsible for all monies, funds and valuables of the Company and for the keeping of proper records of the evidence of property or indebtedness and of all the transactions of the Company. He shall have general supervision of the expenditures of the Company and shall report to the Board of Directors at each regular meeting of the condition of the Company, and perform such other duties as may be assigned to him from time to time by the Board of Directors of the Executive Committee. Section 8. There may be a Controller who shall exercise general supervision over the internal operations of the Company, including accounting, and shall render to the Board of Directors at appropriate times a report relating to the general condition and internal operations of the Company. 6 There may be one or more subordinate accounting or controller officers however denominated, who may perform the duties of the Controller and such duties as may be prescribed by the Controller. Section 9. The officer designated by the Board of Directors to be in charge of the Audit Division of the Company with such title as the Board of Directors shall prescribe, shall report to and be directly responsible only to the Board of Directors. There shall be an Auditor and there may be one or more Audit Officers, however denominated, who may perform all the duties of the Auditor and such duties as may be prescribed by the officer in charge of the Audit Division. Section 10. There may be one or more officers, subordinate in rank to all Vice Presidents with such functional titles as shall be determined from time to time by the Board of Directors, who shall ex officio hold the office Assistant Secretary of this Company and who may perform such duties as may be prescribed by the officer in charge of the department or division to whom they are assigned. Section 11. The powers and duties of all other officers of the Company shall be those usually pertaining to their respective offices, subject to the direction of the Board of Directors, the Executive Committee, Chairman of the Board of Directors or the President and the officer in charge of the department or division to which they are assigned. ARTICLE V STOCK AND STOCK CERTIFICATES Section 1. Shares of stock shall be transferrable on the books of the Company and a transfer book shall be kept in which all transfers of stock shall be recorded. Section 2. Certificate of stock shall bear the signature of the President or any Vice President, however denominated by the Board of Directors and countersigned by the Secretary or Treasurer or an Assistant Secretary, and the seal of the corporation shall be engraved thereon. Each certificate shall recite that the stock represented thereby is transferrable only upon the books of the Company by the holder thereof or his attorney, upon surrender of the certificate properly endorsed. Any certificate of stock surrendered to the Company shall be cancelled at the time of transfer, and before a new certificate or certificates shall be issued in lieu thereof. Duplicate certificates of stock shall be issued only upon giving such security as may be satisfactory to the Board of Directors or the Executive Committee. Section 3. The Board of Directors of the Company is authorized to fix in advance a record date for the determination of the stockholders entitled to notice of, and to vote at, any meeting of stockholders and any adjournment thereof, or entitled to receive payment of 7 any dividend, or to any allotment or rights, or to exercise any rights in respect of any change, conversion or exchange of capital stock, or in connection with obtaining the consent of stockholders for any purpose, which record date shall not be more than 60 nor less than 10 days proceeding the date of any meeting of stockholders or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent. ARTICLE VI SEAL Section 1. The corporate seal of the Company shall be in the following form: Between two concentric circles the words "Wilmington Trust Company" within the inner circle the words "Wilmington, Delaware." ARTICLE VII FISCAL YEAR Section 1. The fiscal year of the Company shall be the calendar year. ARTICLE VIII EXECUTION OF INSTRUMENTS OF THE COMPANY Section 1. The Chairman of the Board, the President or any Vice President, however denominated by the Board of Directors, shall have full power and authority to enter into, make, sign, execute, acknowledge and/or deliver and the Secretary or any Assistant Secretary shall have full power and authority to attest and affix the corporate seal of the Company to any and all deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes, mortgages and all other instruments incident to the business of this Company or in acting as executor, administrator, guardian, trustee, agent or in any other fiduciary or representative capacity by any and every method of appointment or by whatever person, corporation, court officer or authority in the State of Delaware, or elsewhere, without any specific authority, ratification, approval or confirmation by the Board of Directors or the Executive Committee, and any and all such instruments shall have the same force and validity as although expressly authorized by the Board of Directors and/or the Executive Committee. 8 ARTICLE IX COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES Section 1. Directors and associate directors of the Company, other than salaried officers of the Company, shall be paid such reasonable honoraria or fees for attending meetings of the Board of Directors as the Board of Directors may from time to time determine. Directors and associate directors who serve as members of committees, other than salaried employees of the Company, shall be paid such reasonable honoraria or fees for services as members of committees as the Board of Directors shall from time to time determine and directors and associate directors may be employed by the Company for such special services as the Board of Directors may from time to time determine and shall be paid for such special services so performed reasonable compensation as may be determined by the Board of Directors. ARTICLE X INDEMNIFICATION Section 1. (A) The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The Corporation shall indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the Corporation. (B) The Corporation shall pay the expenses incurred in defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER, that the payment of expenses incurred by a Director officer in his capacity as a Director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Director or officer to repay all amounts advanced if it should be ultimately determined that the Director or officer is not entitled to be indemnified under this Article or otherwise. (C) If a claim for indemnification or payment of expenses, under this Article X is not paid in full within ninety days after a written claim therefor has been received by the Corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification of payment of expenses 9 under applicable law. (D) The rights conferred on any person by this Article X shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Charter or Act of Incorporation, these By-Laws, agreement, vote of stockholders or disinterested Directors or otherwise. (E) Any repeal or modification of the foregoing provisions of this Article X shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. ARTICLE XI AMENDMENTS TO THE BY-LAWS Section 1. These By-Laws may be altered, amended or repealed, in whole or in part, and any new By-Law or By-Laws adopted at any regular or special meeting of the Board of Directors by a vote of the majority of all the members of the Board of Directors then in office. 10 EXHIBIT C SECTION 321(B) CONSENT Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended, Wilmington Trust Company hereby consents that reports of examinations by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. WILMINGTON TRUST COMPANY Dated: March 19, 1997 By: /S/ EMMETT R. HARMON -------------------- Name: Emmett R. Harmon Title: Vice President EXHIBIT D NOTICE This form is intended to assist state nonmember banks and savings banks with state publication requirements. It has not been approved by any state banking authorities. Refer to your appropriate state banking authorities for your state publication requirements. R E P O R T O F C O N D I T I O N Consolidating domestic subsidiaries of the WILMINGTON TRUST COMPANY of WILMINGTON - ----------------------------------------------------------- ----------------- Name of Bank City in the State of DELAWARE , at the close of business on December 31, 1996. -------------
ASSETS Thousands of dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coins..........................213,895 Interest-bearing balances........................................................ 0 Held-to-maturity securities.......................................................... 465,818 Available-for-sale securities..........................................................752,297 Federal funds sold......................................................................95,000 Securities purchased under agreements to resell........................................ 39,190 Loans and lease financing receivables: Loans and leases, net of unearned income. . . . . . . 3,634,003 LESS: Allowance for loan and lease losses. . . . . . 51,847 LESS: Allocated transfer risk reserve. . . . . . . . 0 Loans and leases, net of unearned income, allowance, and reserve...........3,582,156 Assets held in trading accounts..............................................................0 Premises and fixed assets (including capitalized leases)................................89,129 Other real estate owned................................................................. 3,520 Investments in unconsolidated subsidiaries and associated companies....................... 52 Customers' liability to this bank on acceptances outstanding.................................0 Intangible assets........................................................................4,593 Other assets...........................................................................114,300 Total assets.........................................................................5,359,950 CONTINUED ON NEXT PAGE LIABILITIES Deposits: In domestic offices..................................................................3,749,697 Noninterest-bearing . . . . . . . . 852,790 Interest-bearing. . . . . . . . . . 2,896,907 Federal funds purchased................................................................ 77,825 Securities sold under agreements to repurchase........................................ 192,295 Demand notes issued to the U.S. Treasury................................................53,526 Trading liabilities..........................................................................0 Other borrowed money:................................................................../////// With original maturity of one year or less...................................714,000 With original maturity of more than one year..................................43,000 Mortgage indebtedness and obligations under capitalized leases........................... 0 Bank's liability on acceptances executed and outstanding.....................................0 Subordinated notes and debentures............................................................0 Other liabilities..................................................................... 98,756 Total liabilities.................................................................. 4,929,099 Limited-life preferred stock and related surplus.............................................0 EQUITY CAPITAL Perpetual preferred stock and related surplus................................................0 Common Stock...............................................................................500 Surplus.................................................................................62,118 Undivided profits and capital reserves.................................................367,371 Net unrealized holding gains (losses) on available-for-sale securities................ 862 Total equity capital...................................................................430,851 Total liabilities, limited-life preferred stock, and equity capital..................5,359,950
2 EX-25.3 12 EXHIBIT 25.3 Registration No. =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) WILMINGTON TRUST COMPANY (Exact name of trustee as specified in its charter) Delaware 51-0055023 (State of incorporation) (I.R.S. employer identification no.) Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 (Address of principal executive offices) Cynthia L. Corliss Vice President and Trust Counsel Wilmington Trust Company Rodney Square North Wilmington, Delaware 19890 (302) 651-8516 (Name, address and telephone number of agent for service) BANKATLANTIC BANCORP, INC. (Exact name of obligor as specified in its charter) Florida 65-0507804 (State of incorporation) (I.R.S. employer identification no.) 1750 East Sunrise Boulevard Fort Lauderdale, Florida 33304 (Address of principal executive offices) (Zip Code) Guarantee of BankAtlantic Bancorp, Inc. of certain obligations under Trust Preferred Securities of BBC Capital Trust I (Title of the indenture securities) =============================================================================== ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Deposit Insurance Co. State Bank Commissioner Five Penn Center Dover, Delaware Suite #2901 Philadelphia, PA (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the trustee, describe each affiliation: Based upon an examination of the books and records of the trustee and upon information furnished by the obligor, the obligor is not an affiliate of the trustee. ITEM 3. LIST OF EXHIBITS. List below all exhibits filed as part of this Statement of Eligibility and Qualification. A. Copy of the Charter of Wilmington Trust Company, which includes the certificate of authority of Wilmington Trust Company to commence business and the authorization of Wilmington Trust Company to exercise corporate trust powers. B. Copy of By-Laws of Wilmington Trust Company. C. Consent of Wilmington Trust Company required by Section 321(b) of Trust Indenture Act. D. Copy of most recent Report of Condition of Wilmington Trust Company. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wilmington Trust Company, a corporation organized and existing under the laws of Delaware, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Wilmington and State of Delaware on the 19th day of March, 1997. WILMINGTON TRUST COMPANY [SEAL] Attest:/S/ W. CHRIS SPONENBERG By:/S/ EMMETT R. HARMON ------------------------ ----------------------- Assistant Secretary Name: Emmett R. Harmon Title: Vice President 2 EXHIBIT A AMENDED CHARTER WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON MAY 9, 1987 AMENDED CHARTER OR ACT OF INCORPORATION OF WILMINGTON TRUST COMPANY WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act of Incorporation of which company has been from time to time amended and changed by merger agreements pursuant to the corporation law for state banks and trust companies of the State of Delaware, does hereby alter and amend its Charter or Act of Incorporation so that the same as so altered and amended shall in its entirety read as follows: FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY. SECOND: - The location of its principal office in the State of Delaware is at Rodney Square North, in the City of Wilmington, County of New Castle; the name of its resident agent is WILMINGTON TRUST COMPANY whose address is Rodney Square North, in said City. In addition to such principal office, the said corporation maintains and operates branch offices in the City of Newark, New Castle County, Delaware, the Town of Newport, New Castle County, Delaware, at Claymont, New Castle County, Delaware, at Greenville, New Castle County Delaware, and at Milford Cross Roads, New Castle County, Delaware, and shall be empowered to open, maintain and operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in the City of Wilmington, New Castle County, Delaware, and such other branch offices or places of business as may be authorized from time to time by the agency or agencies of the government of the State of Delaware empowered to confer such authority. THIRD: - (a) The nature of the business and the objects and purposes proposed to be transacted, promoted or carried on by this Corporation are to do any or all of the things herein mentioned as fully and to the same extent as natural persons might or could do and in any part of the world, viz.: (1) To sue and be sued, complain and defend in any Court of law or equity and to make and use a common seal, and alter the seal at pleasure, to hold, purchase, convey, mortgage or otherwise deal in real and personal estate and property, and to appoint such officers and agents as the business of the Corporation shall require, to make by-laws not inconsistent with the Constitution or laws of the United States or of this State, to discount bills, notes or other evidences of debt, to receive deposits of money, or securities for money, to buy gold and silver bullion and foreign coins, to buy and sell bills of exchange, and generally to use, exercise and enjoy all the powers, rights, privileges and franchises incident to a corporation which are proper or necessary for the transaction of the business of the Corporation hereby created. (2) To insure titles to real and personal property, or any estate or interests therein, and to guarantee the holder of such property, real or personal, against any claim or claims, adverse to his interest therein, and to prepare and give certificates of title for any lands or premises in the State of Delaware, or elsewhere. (3) To act as factor, agent, broker or attorney in the receipt, collection, custody, investment and management of funds, and the purchase, sale, management and disposal of property of all descriptions, and to prepare and execute all papers which may be necessary or proper in such business. (4) To prepare and draw agreements, contracts, deeds, leases, conveyances, mortgages, bonds and legal papers of every description, and to carry on the business of conveyancing in all its branches. (5) To receive upon deposit for safekeeping money, jewelry, plate, deeds, bonds and any and all other personal property of every sort and kind, from executors, administrators, guardians, public officers, courts, receivers, assignees, trustees, and from all fiduciaries, and from all other persons and individuals, and from all corporations whether state, municipal, corporate or private, and to rent boxes, safes, vaults and other receptacles for such property. (6) To act as agent or otherwise for the purpose of registering, issuing, certificating, countersigning, transferring or underwriting the stock, bonds or other obligations of any corporation, association, state or municipality, and may receive and manage any sinking fund therefor on such terms as may be agreed upon between the two parties, and in like manner may act as Treasurer of any corporation or municipality. (7) To act as Trustee under any deed of trust, mortgage, bond or other instrument issued by any state, municipality, body politic, corporation, association or person, either alone or in conjunction with any other person or persons, corporation or corporations. 2 (8) To guarantee the validity, performance or effect of any contract or agreement, and the fidelity of persons holding places of responsibility or trust; to become surety for any person, or persons, for the faithful performance of any trust, office, duty, contract or agreement, either by itself or in conjunction with any other person, or persons, corporation, or corporations, or in like manner become surety upon any bond, recognizance, obligation, judgment, suit, order, or decree to be entered in any court of record within the State of Delaware or elsewhere, or which may now or hereafter be required by any law, judge, officer or court in the State of Delaware or elsewhere. (9) To act by any and every method of appointment as trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity in the receiving, holding, managing, and disposing of any and all estates and property, real, personal or mixed, and to be appointed as such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian or bailee by any persons, corporations, court, officer, or authority, in the State of Delaware or elsewhere; and whenever this Corporation is so appointed by any person, corporation, court, officer or authority such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity, it shall not be required to give bond with surety, but its capital stock shall be taken and held as security for the performance of the duties devolving upon it by such appointment. (10) And for its care, management and trouble, and the exercise of any of its powers hereby given, or for the performance of any of the duties which it may undertake or be called upon to perform, or for the assumption of any responsibility the said Corporation may be entitled to receive a proper compensation. (11) To purchase, receive, hold and own bonds, mortgages, debentures, shares of capital stock, and other securities, obligations, contracts and evidences of indebtedness, of any private, public or municipal corporation within and without the State of Delaware, or of the Government of the United States, or of any state, territory, colony, or possession thereof, or of any foreign government or country; to receive, collect, receipt for, and dispose of interest, dividends and income upon and from any of the bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property held and owned by it, and to exercise in respect of all such bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property, any and all the rights, powers and privileges of individual 4 owners thereof, including the right to vote thereon; to invest and deal in and with any of the moneys of the Corporation upon such securities and in such manner as it may think fit and proper, and from time to time to vary or realize such investments; to issue bonds and secure the same by pledges or deeds of trust or mortgages of or upon the whole or any part of the property held or owned by the Corporation, and to sell and pledge such bonds, as and when the Board of Directors shall determine, and in the promotion of its said corporate business of investment and to the extent authorized by law, to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and convey real and personal property of any name and nature and any estate or interest therein. (b) In furtherance of, and not in limitation, of the powers conferred by the laws of the State of Delaware, it is hereby expressly provided that the said Corporation shall also have the following powers: (1) To do any or all of the things herein set forth, to the same extent as natural persons might or could do, and in any part of the world. (2) To acquire the good will, rights, property and franchises and to undertake the whole or any part of the assets and liabilities of any person, firm, association or corporation, and to pay for the same in cash, stock of this Corporation, bonds or otherwise; to hold or in any manner to dispose of the whole or any part of the property so purchased; to conduct in any lawful manner the whole or any part of any business so acquired, and to exercise all the powers necessary or convenient in and about the conduct and management of such business. (3) To take, hold, own, deal in, mortgage or otherwise lien, and to lease, sell, exchange, transfer, or in any manner whatever dispose of property, real, personal or mixed, wherever situated. (4) To enter into, make, perform and carry out contracts of every kind with any person, firm, association or corporation, and, without limit as to amount, to draw, make, accept, endorse, discount, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and other negotiable or transferable instruments. (5) To have one or more offices, to carry on all or any of its operations and businesses, without restriction to the same extent as natural persons might or could do, to purchase or otherwise acquire, to hold, own, to mortgage, sell, convey or otherwise dispose of, real and personal property, of every class and description, in any State, District, Territory or Colony of the United States, and in any foreign country or place. 4 (6) It is the intention that the objects, purposes and powers specified and clauses contained in this paragraph shall (except where otherwise expressed in said paragraph) be nowise limited or restricted by reference to or inference from the terms of any other clause of this or any other paragraph in this charter, but that the objects, purposes and powers specified in each of the clauses of this paragraph shall be regarded as independent objects, purposes and powers. FOURTH: - (a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is forty-one million (41,000,000) shares, consisting of: (1) One million (1,000,000) shares of Preferred stock, par value $10.00 per share (hereinafter referred to as "Preferred Stock"); and (2) Forty million (40,000,000) shares of Common Stock, par value $1.00 per share (hereinafter referred to as "Common Stock"). (b) Shares of Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors each of said series to be distinctly designated. All shares of any one series of Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends, if any, thereon shall be cumulative, if made cumulative. The voting powers and the preferences and relative, participating, optional and other special rights of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and, subject to the provisions of subparagraph 1 of Paragraph (c) of this Article FOURTH, the Board of Directors of the Corporation is hereby expressly granted authority to fix by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock, the voting powers and the designations, preferences and relative, optional and other special rights, and the qualifications, limitations and restrictions of such series, including, but without limiting the generality of the foregoing, the following: (1) The distinctive designation of, and the number of shares of Preferred Stock which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (2) The rate and times at which, and the terms and conditions on which, dividends, if any, on Preferred Stock of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes, or series of the same or other class of 5 stock and whether such dividends shall be cumulative or non-cumulative; (3) The right, if any, of the holders of Preferred Stock of such series to convert the same into or exchange the same for, shares of any other class or classes or of any series of the same or any other class or classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (4) Whether or not Preferred Stock of such series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which, Preferred Stock of such series may be redeemed. (5) The rights, if any, of the holders of Preferred Stock of such series upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the Corporation. (6) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock of such series; and (7) The voting powers, if any, of the holders of such series of Preferred Stock which may, without limiting the generality of the foregoing include the right, voting as a series or by itself or together with other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such circumstances and on such conditions as the Board of Directors may determine. (c) (1) After the requirements with respect to preferential dividends on the Preferred Stock (fixed in accordance with the provisions of section (b) of this Article FOURTH), if any, shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts (fixed in accordance with the provisions of section (b) of this Article FOURTH), and subject further to any conditions which may be fixed in accordance with the provisions of section (b) of this Article FOURTH, then and not otherwise the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. (2) After distribution in full of the preferential amount, if any, (fixed in accordance with the provisions of section (b) of this Article FOURTH), to be distributed to the holders of Preferred Stock in the event of voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up, of the Corporation, the holders of the Common Stock shall be entitled to 6 receive all of the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. (3) Except as may otherwise be required by law or by the provisions of such resolution or resolutions as may be adopted by the Board of Directors pursuant to section (b) of this Article FOURTH, each holder of Common Stock shall have one vote in respect of each share of Common Stock held on all matters voted upon by the stockholders. (d) No holder of any of the shares of any class or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued stock of any class or series or any additional shares of any class or series to be issued by reason of any increase of the authorized capital stock of the Corporation of any class or series, or bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for stock of the Corporation of any class or series, or carrying any right to purchase stock of any class or series, but any such unissued stock, additional authorized issue of shares of any class or series of stock or securities convertible into or exchangeable for stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations, whether such holders or others, and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its sole discretion. (e) The relative powers, preferences and rights of each series of Preferred Stock in relation to the relative powers, preferences and rights of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to authority granted in section (b) of this Article FOURTH and the consent, by class or series vote or otherwise, of the holders of such of the series of Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in the resolution or resolutions as to any series of Preferred Stock adopted pursuant to section (b) of this Article FOURTH that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock. 7 (f) Subject to the provisions of section (e), shares of any series of Preferred Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (g) Shares of Common Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (h) The authorized amount of shares of Common Stock and of Preferred Stock may, without a class or series vote, be increased or decreased from time to time by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote thereon. FIFTH: - (a) The business and affairs of the Corporation shall be conducted and managed by a Board of Directors. The number of directors constituting the entire Board shall be not less than five nor more than twenty-five as fixed from time to time by vote of a majority of the whole Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the whole Board shall be twenty-four until otherwise fixed by a majority of the whole Board. (b) The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the whole Board permits, with the term of office of one class expiring each year. At the annual meeting of stockholders in 1982, directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting and directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next annual election of directors. At such election, the stockholders shall elect a successor to such director to hold office until the next election of the class for which such director shall have been chosen and until his successor shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. (c) Notwithstanding any other provisions of this Charter or Act of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Charter or Act of Incorporation or the ByLaws of the Corporation), any director or the entire Board of Directors of the 8 Corporation may be removed at any time without cause, but only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast at a meeting of the stockholders called for that purpose. (d) Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Such nominations shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation not less than 14 days nor more than 50 days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than 21 days' notice of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of the Corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders. Notice of nominations which are proposed by the Board of Directors shall be given by the Chairman on behalf of the Board. (e) Each notice under subsection (d) shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of such nominee and (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee. (f) The Chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. (g) No action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. SIXTH: - The Directors shall choose such officers, agent and servants as may be provided in the By-Laws as they may from time to time find necessary or proper. SEVENTH: - The Corporation hereby created is hereby given the same powers, rights and privileges as may be conferred upon corporations organized under the Act entitled "An Act Providing a General Corporation Law", approved March 10, 1899, as from time to time amended. EIGHTH: - This Act shall be deemed and taken to be a private Act. 9 NINTH: - This Corporation is to have perpetual existence. TENTH: - The Board of Directors, by resolution passed by a majority of the whole Board, may designate any of their number to constitute an Executive Committee, which Committee, to the extent provided in said resolution, or in the By-Laws of the Company, shall have and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. ELEVENTH: - The private property of the stockholders shall not be liable for the payment of corporate debts to any extent whatever. TWELFTH: - The Corporation may transact business in any part of the world. THIRTEENTH: - The Board of Directors of the Corporation is expressly authorized to make, alter or repeal the By-Laws of the Corporation by a vote of the majority of the entire Board. The stockholders may make, alter or repeal any By-Law whether or not adopted by them, provided however, that any such additional By-Laws, alterations or repeal may be adopted only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class). FOURTEENTH: - Meetings of the Directors may be held outside of the State of Delaware at such places as may be from time to time designated by the Board, and the Directors may keep the books of the Company outside of the State of Delaware at such places as may be from time to time designated by them. FIFTEENTH: - (a) In addition to any affirmative vote required by law, and except as otherwise expressly provided in sections (b) and (c) of this Article FIFTEENTH: (A) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with or into (i) any Interested Stockholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Stockholder), which, after such merger or consolidation, would be an Affiliate (as hereinafter defined) of an Interested Stockholder, or (B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of related transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate fair market value of $1,000,000 or more, or 10 (C) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of related transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $1,000,000 or more, or (D) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation, or (E) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any similar transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder, or any Affiliate of any Interested Stockholder, shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for the purpose of this Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) The term "business combination" as used in this Article FIFTEENTH shall mean any transaction which is referred to any one or more of clauses (A) through (E) of paragraph 1 of the section (a). (b) The provisions of section (a) of this Article FIFTEENTH shall not be applicable to any particular business combination and such business combination shall require only such affirmative vote as is required by law and any other provisions of the Charter or Act of Incorporation of By-Laws if such business combination has been approved by a majority of the whole Board. (c) For the purposes of this Article FIFTEENTH: (1) A "person" shall mean any individual firm, corporation or other entity. (2) "Interested Stockholder" shall mean, in respect of any business combination, any person (other than the Corporation or any Subsidiary) who or which as of the record date for the determination of stockholders entitled to notice of and to vote on 11 such business combination, or immediately prior to the consummation of any such transaction: (A) is the beneficial owner, directly or indirectly, of more than 10% of the Voting Shares, or (B) is an Affiliate of the Corporation and at any time within two years prior thereto was the beneficial owner, directly or indirectly, of not less than 10% of the then outstanding voting Shares, or (C) is an assignee of or has otherwise succeeded in any share of capital stock of the Corporation which were at any time within two years prior thereto beneficially owned by any Interested Stockholder, and such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (3) A person shall be the "beneficial owner" of any Voting Shares: (A) which such person or any of its Affiliates and Associates (as hereafter defined) beneficially own, directly or indirectly, or (B) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding, or (C) which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation. (4) The outstanding Voting Shares shall include shares deemed owned through application of paragraph (3) above but shall not include any other Voting Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options or otherwise. (5) "Affiliate" and "Associate" shall have the respective meanings given those terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981. 12 (6) "Subsidiary" shall mean any corporation of which a majority of any class of equity security (as defined in Rule 3a11-1 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect in December 31, 1981) is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Investment Stockholder set forth in paragraph (2) of this section (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (d) majority of the directors shall have the power and duty to determine for the purposes of this Article FIFTEENTH on the basis of information known to them, (1) the number of Voting Shares beneficially owned by any person (2) whether a person is an Affiliate or Associate of another, (3) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in paragraph (3) of section (c), or (4) whether the assets subject to any business combination or the consideration received for the issuance or transfer of securities by the Corporation, or any Subsidiary has an aggregate fair market value of $1,00,000 or more. (e) Nothing contained in this Article FIFTEENTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. SIXTEENTH: Notwithstanding any other provision of this Charter or Act of Incorporation or the By-Laws of the Corporation (and in addition to any other vote that may be required by law, this Charter or Act of Incorporation by the By-Laws), the affirmative vote of the holders of at least two-thirds of the outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter or Act of Incorporation. SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Laws as the same exists or may hereafter be amended. (b) Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a Director of the Corporation existing hereunder with respect to any act or omission occurring prior to the time of such repeal or modification." 13 EXHIBIT B BY-LAWS WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON JANUARY 16, 1997 BY-LAWS OF WILMINGTON TRUST COMPANY ARTICLE I STOCKHOLDERS' MEETINGS Section 1. The Annual Meeting of Stockholders shall be held on the third Thursday in April each year at the principal office at the Company or at such other date, time, or place as may be designated by resolution by the Board of Directors. Section 2. Special meetings of all stockholders may be called at any time by the Board of Directors, the Chairman of the Board or the President. Section 3. Notice of all meetings of the stockholders shall be given by mailing to each stockholder at least ten (10) days before said meeting, at his last known address, a written or printed notice fixing the time and place of such meeting. Section 4. A majority in the amount of the capital stock of the Company issued and outstanding on the record date, as herein determined, shall constitute a quorum at all meetings of stockholders for the transaction of any business, but the holders of a small number of shares may adjourn, from time to time, without further notice, until a quorum is secured. At each annual or special meeting of stockholders, each stockholder shall be entitled to one vote, either in person or by proxy, for each shares of stock registered in the stockholder's name on the books of the Company on the record date for any such meeting as determined herein. ARTICLE II DIRECTORS Section 1. The number and classification of the Board of Directors shall be as set forth in the Charter of the Bank. Section 2. No person who has attained the age of seventy-two (72) years shall be nominated for election to the Board of Directors of the Company, provided, however, that this limitation shall not apply to any person who was serving as director of the Company on September 16, 1971. Section 3. The class of Directors so elected shall hold office for three years or until their successors are elected and qualified. Section 4. The affairs and business of the Company shall be managed and conducted by the Board of Directors. Section 5. The Board of Directors shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Board of Directors or the President. Section 6. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board of Directors or by the President, and shall be called upon the written request of a majority of the directors. Section 7. A majority of the directors elected and qualified shall be necessary to constitute a quorum for the transaction of business at any meeting of the Board of Directors. Section 8. Written notice shall be sent by mail to each director of any special meeting of the Board of Directors, and of any change in the time or place of any regular meeting, stating the time and place of such meeting, which shall be mailed not less than two days before the time of holding such meeting. Section 9. In the event of the death, resignation, removal, inability to act, or disqualification of any director, the Board of Directors, although less than a quorum, shall have the right to elect the successor who shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, and until such director's successor shall have been duly elected and qualified. Section 10. The Board of Directors at its first meeting after its election by the stockholders shall appoint an Executive Committee, a Trust Committee, an Audit Committee and a Compensation Committee, and shall elect from its own members a Chairman of the Board of Directors and a President who may be the same person. The Board of Directors shall also elect at such meeting a Secretary and a Treasurer, who may be the same person, may appoint at any time such other committees and elect or appoint such other officers as it may deem advisable. The Board of Directors may also elect at such meeting one or more Associate Directors. Section 11. The Board of Directors may at any time remove, with or without cause, any member of any Committee appointed by it or any associate director or officer elected by it and may appoint or elect his successor. Section 12. The Board of Directors may designate an officer to be in charge of such of the departments or division of the Company as it may deem advisable. ARTICLE III COMMITTEES Section I. Executive Committee (A) The Executive Committee shall be composed of not more than nine members who shall be selected by the Board of Directors from its own members and who 2 shall hold office during the pleasure of the Board. (B) The Executive Committee shall have all the powers of the Board of Directors when it is not in session to transact all business for and in behalf of the Company that may be brought before it. (C) The Executive Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Executive Committee or at the call of the Chairman of the Board of Directors. The majority of its members shall be necessary to constitute a quorum for the transaction of business. Special meetings of the Executive Committee may be held at any time when a quorum is present. (D) Minutes of each meeting of the Executive Committee shall be kept and submitted to the Board of Directors at its next meeting. (E) The Executive Committee shall advise and superintend all investments that may be made of the funds of the Company, and shall direct the disposal of the same, in accordance with such rules and regulations as the Board of Directors from time to time make. (F) In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Company by its directors and officers as contemplated by these By-Laws any two available members of the Executive Committee as constituted immediately prior to such disaster shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Company in accordance with the provisions of Article III of these By-Laws; and if less than three members of the Trust Committee is constituted immediately prior to such disaster shall be available for the transaction of its business, such Executive Committee shall also be empowered to exercise all of the powers reserved to the Trust Committee under Article III Section 2 hereof. In the event of the unavailability, at such time, of a minimum of two members of such Executive Committee, any three available directors shall constitute the Executive Committee for the full conduct and management of the affairs and business of the Company in accordance with the foregoing provisions of this Section. This By-Law shall be subject to implementation by Resolutions of the Board of Directors presently existing or hereafter passed from time to time for that purpose, and any provisions of these By-Laws (other than this Section) and any resolutions which are contrary to the provisions of this Section or to the provisions of any such implementary Resolutions shall be suspended during such a disaster period until it shall be determined by any interim Executive Committee acting under this section that it shall be to the advantage of the Company to resume the conduct and management of its affairs and business under all of the other provisions of these By-Laws. 3 Section 2. Trust Committee (A) The Trust Committee shall be composed of not more than thirteen members who shall be selected by the Board of Directors, a majority of whom shall be members of the Board of Directors and who shall hold office during the pleasure of the Board. (B) The Trust Committee shall have general supervision over the Trust Department and the investment of trust funds, in all matters, however, being subject to the approval of the Board of Directors. (C) The Trust Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members or at the call of its chairman. A majority of its members shall be necessary to constitute a quorum for the transaction of business. (D) Minutes of each meeting of the Trust Committee shall be kept and promptly submitted to the Board of Directors. (E) The Trust Committee shall have the power to appoint Committees and/or designate officers or employees of the Company to whom supervision over the investment of trust funds may be delegated when the Trust Committee is not in session. Section 3. Audit Committee (A) The Audit Committee shall be composed of five members who shall be selected by the Board of Directors from its own members, none of whom shall be an officer of the Company, and shall hold office at the pleasure of the Board. (B) The Audit Committee shall have general supervision over the Audit Division in all matters however subject to the approval of the Board of Directors; it shall consider all matters brought to its attention by the officer in charge of the Audit Division, review all reports of examination of the Company made by any governmental agency or such independent auditor employed for that purpose, and make such recommendations to the Board of Directors with respect thereto or with respect to any other matters pertaining to auditing the Company as it shall deem desirable. (C) The Audit Committee shall meet whenever and wherever the majority of its members shall deem it to be proper for the transaction of its business, and a majority of its Committee shall constitute a quorum. Section 4. Compensation Committee (A) The Compensation Committee shall be composed of not more than 4 five (5) members who shall be selected by the Board of Directors from its own members who are not officers of the Company and who shall hold office during the pleasure of the Board. (B) The Compensation Committee shall in general advise upon all matters of policy concerning the Company brought to its attention by the management and from time to time review the management of the Company, major organizational matters, including salaries and employee benefits and specifically shall administer the Executive Incentive Compensation Plan. (C) Meetings of the Compensation Committee may be called at any time by the Chairman of the Compensation Committee, the Chairman of the Board of Directors, or the President of the Company. Section 5. Associate Directors (A) Any person who has served as a director may be elected by the Board of Directors as an associate director, to serve during the pleasure of the Board. (B) An associate director shall be entitled to attend all directors meetings and participate in the discussion of all matters brought to the Board, with the exception that he would have no right to vote. An associate director will be eligible for appointment to Committees of the Company, with the exception of the Executive Committee, Audit Committee and Compensation Committee, which must be comprised solely of active directors. Section 6. Absence or Disqualification of Any Member of a Committee (A) In the absence or disqualification of any member of any Committee created under Article III of the By-Laws of this Company, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absence or disqualified member. ARTICLE IV OFFICERS Section 1. The Chairman of the Board of Directors shall preside at all meetings of the Board and shall have such further authority and powers and shall perform such duties as the Board of Directors may from time to time confer and direct. He shall also exercise such powers and perform such duties as may from time to time be agreed upon between himself and the President of the Company. Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board of 5 Directors shall preside at all meetings of the Board of Directors at which the Chairman of the Board shall not be present and shall have such further authority and powers and shall perform such duties as the Board of Directors or the Chairman of the Board may from time to time confer and direct. Section 3. The President shall have the powers and duties pertaining to the office of the President conferred or imposed upon him by statute or assigned to him by the Board of Directors in the absence of the Chairman of the Board the President shall have the powers and duties of the Chairman of the Board. Section 4. The Chairman of the Board of Directors or the President as designated by the Board of Directors, shall carry into effect all legal directions of the Executive Committee and of the Board of Directors, and shall at all times exercise general supervision over the interest, affairs and operations of the Company and perform all duties incident to his office. Section 5. There may be one or more Vice Presidents, however denominated by the Board of Directors, who may at any time perform all the duties of the Chairman of the Board of Directors and/or the President and such other powers and duties as may from time to time be assigned to them by the Board of Directors, the Executive Committee, the Chairman of the Board or the President and by the officer in charge of the department or division to which they are assigned. Section 6. The Secretary shall attend to the giving of notice of meetings of the stockholders and the Board of Directors, as well as the Committees thereof, to the keeping of accurate minutes of all such meetings and to recording the same in the minute books of the Company. In addition to the other notice requirements of these By-Laws and as may be practicable under the circumstances, all such notices shall be in writing and mailed well in advance of the scheduled date of any other meeting. He shall have custody of the corporate seal and shall affix the same to any documents requiring such corporate seal and to attest the same. Section 7. The Treasurer shall have general supervision over all assets and liabilities of the Company. He shall be custodian of and responsible for all monies, funds and valuables of the Company and for the keeping of proper records of the evidence of property or indebtedness and of all the transactions of the Company. He shall have general supervision of the expenditures of the Company and shall report to the Board of Directors at each regular meeting of the condition of the Company, and perform such other duties as may be assigned to him from time to time by the Board of Directors of the Executive Committee. Section 8. There may be a Controller who shall exercise general supervision over the internal operations of the Company, including accounting, and shall render to the Board of Directors at appropriate times a report relating to the general condition and internal operations of the Company. 6 There may be one or more subordinate accounting or controller officers however denominated, who may perform the duties of the Controller and such duties as may be prescribed by the Controller. Section 9. The officer designated by the Board of Directors to be in charge of the Audit Division of the Company with such title as the Board of Directors shall prescribe, shall report to and be directly responsible only to the Board of Directors. There shall be an Auditor and there may be one or more Audit Officers, however denominated, who may perform all the duties of the Auditor and such duties as may be prescribed by the officer in charge of the Audit Division. Section 10. There may be one or more officers, subordinate in rank to all Vice Presidents with such functional titles as shall be determined from time to time by the Board of Directors, who shall ex officio hold the office Assistant Secretary of this Company and who may perform such duties as may be prescribed by the officer in charge of the department or division to whom they are assigned. Section 11. The powers and duties of all other officers of the Company shall be those usually pertaining to their respective offices, subject to the direction of the Board of Directors, the Executive Committee, Chairman of the Board of Directors or the President and the officer in charge of the department or division to which they are assigned. ARTICLE V STOCK AND STOCK CERTIFICATES Section 1. Shares of stock shall be transferrable on the books of the Company and a transfer book shall be kept in which all transfers of stock shall be recorded. Section 2. Certificate of stock shall bear the signature of the President or any Vice President, however denominated by the Board of Directors and countersigned by the Secretary or Treasurer or an Assistant Secretary, and the seal of the corporation shall be engraved thereon. Each certificate shall recite that the stock represented thereby is transferrable only upon the books of the Company by the holder thereof or his attorney, upon surrender of the certificate properly endorsed. Any certificate of stock surrendered to the Company shall be cancelled at the time of transfer, and before a new certificate or certificates shall be issued in lieu thereof. Duplicate certificates of stock shall be issued only upon giving such security as may be satisfactory to the Board of Directors or the Executive Committee. Section 3. The Board of Directors of the Company is authorized to fix in advance a record date for the determination of the stockholders entitled to notice of, and to vote at, any meeting of stockholders and any adjournment thereof, or entitled to receive payment of 7 any dividend, or to any allotment or rights, or to exercise any rights in respect of any change, conversion or exchange of capital stock, or in connection with obtaining the consent of stockholders for any purpose, which record date shall not be more than 60 nor less than 10 days proceeding the date of any meeting of stockholders or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent. ARTICLE VI SEAL Section 1. The corporate seal of the Company shall be in the following form: Between two concentric circles the words "Wilmington Trust Company" within the inner circle the words "Wilmington, Delaware." ARTICLE VII FISCAL YEAR Section 1. The fiscal year of the Company shall be the calendar year. ARTICLE VIII EXECUTION OF INSTRUMENTS OF THE COMPANY Section 1. The Chairman of the Board, the President or any Vice President, however denominated by the Board of Directors, shall have full power and authority to enter into, make, sign, execute, acknowledge and/or deliver and the Secretary or any Assistant Secretary shall have full power and authority to attest and affix the corporate seal of the Company to any and all deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes, mortgages and all other instruments incident to the business of this Company or in acting as executor, administrator, guardian, trustee, agent or in any other fiduciary or representative capacity by any and every method of appointment or by whatever person, corporation, court officer or authority in the State of Delaware, or elsewhere, without any specific authority, ratification, approval or confirmation by the Board of Directors or the Executive Committee, and any and all such instruments shall have the same force and validity as although expressly authorized by the Board of Directors and/or the Executive Committee. 8 ARTICLE IX COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES Section 1. Directors and associate directors of the Company, other than salaried officers of the Company, shall be paid such reasonable honoraria or fees for attending meetings of the Board of Directors as the Board of Directors may from time to time determine. Directors and associate directors who serve as members of committees, other than salaried employees of the Company, shall be paid such reasonable honoraria or fees for services as members of committees as the Board of Directors shall from time to time determine and directors and associate directors may be employed by the Company for such special services as the Board of Directors may from time to time determine and shall be paid for such special services so performed reasonable compensation as may be determined by the Board of Directors. ARTICLE X INDEMNIFICATION Section 1. (A) The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The Corporation shall indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the Corporation. (B) The Corporation shall pay the expenses incurred in defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER, that the payment of expenses incurred by a Director officer in his capacity as a Director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Director or officer to repay all amounts advanced if it should be ultimately determined that the Director or officer is not entitled to be indemnified under this Article or otherwise. (C) If a claim for indemnification or payment of expenses, under this Article X is not paid in full within ninety days after a written claim therefor has been received by the Corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification of payment of expenses 9 under applicable law. (D) The rights conferred on any person by this Article X shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Charter or Act of Incorporation, these By-Laws, agreement, vote of stockholders or disinterested Directors or otherwise. (E) Any repeal or modification of the foregoing provisions of this Article X shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. ARTICLE XI AMENDMENTS TO THE BY-LAWS Section 1. These By-Laws may be altered, amended or repealed, in whole or in part, and any new By-Law or By-Laws adopted at any regular or special meeting of the Board of Directors by a vote of the majority of all the members of the Board of Directors then in office. 10 EXHIBIT C SECTION 321(B) CONSENT Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended, Wilmington Trust Company hereby consents that reports of examinations by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. WILMINGTON TRUST COMPANY Dated: March 19, 1997 By: /S/ EMMETT R. HARMON -------------------- Name: Emmett R. Harmon Title: Vice President EXHIBIT D NOTICE This form is intended to assist state nonmember banks and savings banks with state publication requirements. It has not been approved by any state banking authorities. Refer to your appropriate state banking authorities for your state publication requirements. R E P O R T O F C O N D I T I O N Consolidating domestic subsidiaries of the WILMINGTON TRUST COMPANY of WILMINGTON - ----------------------------------------------------------- ------------------ Name of Bank City in the State of DELAWARE , at the close of business on December 31, 1996. -------------
ASSETS Thousands of dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coins..........................213,895 Interest-bearing balances........................................................ 0 Held-to-maturity securities.......................................................... 465,818 Available-for-sale securities..........................................................752,297 Federal funds sold......................................................................95,000 Securities purchased under agreements to resell........................................ 39,190 Loans and lease financing receivables: Loans and leases, net of unearned income. . . . . . . 3,634,003 LESS: Allowance for loan and lease losses. . . . . . 51,847 LESS: Allocated transfer risk reserve. . . . . . . . 0 Loans and leases, net of unearned income, allowance, and reserve...........3,582,156 Assets held in trading accounts..............................................................0 Premises and fixed assets (including capitalized leases)................................89,129 Other real estate owned................................................................. 3,520 Investments in unconsolidated subsidiaries and associated companies....................... 52 Customers' liability to this bank on acceptances outstanding.................................0 Intangible assets........................................................................4,593 Other assets...........................................................................114,300 Total assets.........................................................................5,359,950 CONTINUED ON NEXT PAGE LIABILITIES Deposits: In domestic offices..................................................................3,749,697 Noninterest-bearing................. 852,790 Interest-bearing.................... 2,896,907 Federal funds purchased................................................................ 77,825 Securities sold under agreements to repurchase........................................ 192,295 Demand notes issued to the U.S. Treasury................................................53,526 Trading liabilities..........................................................................0 Other borrowed money:................................................................../////// With original maturity of one year or less...................................714,000 With original maturity of more than one year..................................43,000 Mortgage indebtedness and obligations under capitalized leases........................... 0 Bank's liability on acceptances executed and outstanding.....................................0 Subordinated notes and debentures............................................................0 Other liabilities..................................................................... 98,756 Total liabilities................................................................... 4,929,099 Limited-life preferred stock and related surplus.............................................0 EQUITY CAPITAL Perpetual preferred stock and related surplus................................................0 Common Stock...............................................................................500 Surplus.................................................................................62,118 Undivided profits and capital reserves.................................................367,371 Net unrealized holding gains (losses) on available-for-sale securities................ 862 Total equity capital...................................................................430,851 Total liabilities, limited-life preferred stock, and equity capital..................5,359,950
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