Exhibit 4(4)
CITY SAVINGS FINANCIAL CORPORATION
5,000 Capital Securities
Floating Rate Capital Securities
(Liquidation Amount $1,000.00 per Capital Security)
PLACEMENT AGREEMENT
--------------------
June 16, 2003
FTN Financial Capital Markets
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
City Savings Financial Corporation, a Indiana corporation (the "Company"),
and its financing subsidiary City Savings Statutory Trust I, a Connecticut
statutory trust (the "Trust," and hereinafter together with the Company, the
"Offerors"), hereby confirm their agreement (this "Agreement") with you as
placement agents (the "Placement Agents"), as follows:
Section 1. Issuance and Sale of Securities.
1.1. Introduction. The Offerors propose to issue and sell at the Closing
(as defined in Section 2.3.1 hereof) 5,000 of the Trust's Floating Rate Capital
Securities, with a liquidation amount of $1,000.00 per capital security (the
"Capital Securities"), to Preferred Term Securities X, Ltd., a company with
limited liability established under the laws of the Cayman Islands (the
"Purchaser") pursuant to the terms of a Subscription Agreement entered into, or
to be entered into on or prior to the Closing Date (as defined in Section 2.3.1
hereof), between the Offerors and the Purchaser (the "Subscription Agreement"),
the form of which is attached hereto as Exhibit A and incorporated herein by
this reference.
1.2. Operative Agreements. The Capital Securities shall be fully and
unconditionally guaranteed on a subordinated basis by the Company with respect
to distributions and amounts payable upon liquidation, redemption or repayment
(the "Guarantee") pursuant and subject to the Guarantee Agreement (the
"Guarantee Agreement"), to be dated as of the Closing Date and executed and
delivered by the Company and U.S. Bank National Association ("U.S. Bank"), as
trustee (the "Guarantee Trustee"), for the benefit from time to time of the
holders of the Capital Securities. The entire proceeds from the sale by the
Trust to the holders of the Capital Securities shall be combined with the entire
proceeds from the sale by the Trust to the Company of its common securities (the
"Common Securities"), and shall be
used by the Trust to purchase $5,155,000.00 in principal amount of the Floating
Rate Junior Subordinated Deferrable Interest Debentures (the "Debentures") of
the Company. The Capital Securities and the Common Securities for the Trust
shall be issued pursuant to an Amended and Restated Declaration of Trust among
U.S. Bank, as institutional trustee (the "Institutional Trustee"), the
Administrators named therein, and the Company, to be dated as of the Closing
Date and in substantially the form heretofore delivered to the Placement Agents
(the "Trust Agreement"). The Debentures shall be issued pursuant to an Indenture
(the "Indenture"), to be dated as of the Closing Date, between the Company and
U.S. Bank, as indenture trustee (the "Indenture Trustee"). The documents
identified in this Section 1.2 and in Section 1.1 are referred to herein as the
"Operative Documents."
1.3. Rights of Purchaser. The Capital Securities shall be offered and sold
by the Trust directly to the Purchaser without registration of any of the
Capital Securities, the Debentures or the Guarantee under the Securities Act of
1933, as amended (the "Securities Act"), or any other applicable securities laws
in reliance upon exemptions from the registration requirements of the Securities
Act and other applicable securities laws. The Offerors agree that this Agreement
shall be incorporated by reference into the Subscription Agreement and the
Purchaser shall be entitled to each of the benefits of the Placement Agents and
the Purchaser under this Agreement and shall be entitled to enforce obligations
of the Offerors under this Agreement as fully as if the Purchaser were a party
to this Agreement. The Offerors and the Placement Agents have entered into this
Agreement to set forth their understanding as to their relationship and their
respective rights, duties and obligations.
1.4. Legends. Upon original issuance thereof, and until such time as the
same is no longer required under the applicable requirements of the Securities
Act, the Capital Securities and Debentures certificates shall each contain a
legend as required pursuant to any of the Operative Documents.
Section 2. Purchase of Capital Securities.
2.1. Exclusive Rights; Purchase Price. From the date hereof until the
Closing Date (which date may be extended by mutual agreement of the Offerors and
the Placement Agents), the Offerors hereby grant to the Placement Agents the
exclusive right to arrange for the sale of the Capital Securities to the
Purchaser at a purchase price of $1,000.00 per Capital Security.
2.2. Subscription Agreement. The Offerors hereby agree to evidence their
acceptance of the subscription by countersigning a copy of the Subscription
Agreement and returning the same to the Placement Agents.
2.3. Closing and Delivery of Payment.
2.3.1. Closing; Closing Date. The sale and purchase of the Capital
Securities by the Offerors to the Purchaser shall take place at a closing
(the "Closing") at the offices of ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇., at 10:00
a.m. (St. Louis time) on June 26, 2003, or such other business day as may
be agreed upon by the Offerors and the Placement Agents (the "Closing
Date"); provided, however, that in no event shall the Closing Date occur
later than June 30, 2003 unless consented to by the Purchaser. Payment by
the Purchaser shall be payable in the manner set forth in the Subscription
Agreement and shall be made prior to or on the Closing Date.
2.3.2. Delivery. The certificate for the Capital Securities shall be
in definitive form, registered in the name of the Purchaser and in the
aggregate amount of the Capital Securities purchased by the Purchaser.
2.3.3. Transfer Agent. The Offerors shall deposit the certificate
representing the Capital Securities with the Institutional Trustee or other
appropriate party prior to the Closing Date.
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2.4. Placement Agents' Fees and Expenses.
2.4.1. Placement Agents' Compensation. Because the proceeds from the
sale of the Capital Securities shall be used to purchase the Debentures
from the Company, the Company shall pay an aggregate of $30.00 for each
$1,000.00 of principal amount of Debentures sold to the Trust (excluding
the Debentures related to the Common Securities purchased by the Company).
Of this amount, $15.00 for each $1,000.00 of principal amount of Debentures
shall be payable to FTN Financial Capital Markets and $15.00 for each
$1,000.00 of principal amount of Debentures shall be payable to ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. Such amount shall be delivered to the Trustee or
such other person designated by the Placement Agents on the Closing Date
and shall be allocated between and paid to the respective Placement Agents
as directed by the Placement Agents.
2.4.2. Costs and Expenses. Whether or not this Agreement is terminated
or the sale of the Capital Securities is consummated, the Company hereby
covenants and agrees that it shall pay or cause to be paid (directly or by
reimbursement) all reasonable costs and expenses incident to the
performance of the obligations of the Offerors under this Agreement,
including all fees, expenses and disbursements of counsel and accountants
for the Offerors; all reasonable expenses incurred by the Offerors incident
to the preparation, execution and delivery of the Trust Agreement, the
Indenture, and the Guarantee; and all other reasonable costs and expenses
incident to the performance of the obligations of the Company hereunder and
under the Trust Agreement.
2.5. Failure to Close. If any of the conditions to the Closing specified in
this Agreement shall not have been fulfilled to the satisfaction of the
Placement Agents or if the Closing shall not have occurred on or before 10:00
a.m. (St. Louis time) on June 30, 2003, then each party hereto, notwithstanding
anything to the contrary in this Agreement, shall be relieved of all further
obligations under this Agreement without thereby waiving any rights it may have
by reason of such nonfulfillment or failure; provided, however, that the
obligations of the parties under Sections 2.4.2, 7.5 and 9 shall not be so
relieved and shall continue in full force and effect.
Section 3. Closing Conditions. The obligations of the Purchaser and the
Placement Agents on the Closing Date shall be subject to the accuracy, at and as
of the Closing Date, of the representations and warranties of the Offerors
contained in this Agreement, to the accuracy, at and as of the Closing Date, of
the statements of the Offerors made in any certificates pursuant to this
Agreement, to the performance by the Offerors of their respective obligations
under this Agreement, to compliance, at and as of the Closing Date, by the
Offerors with their respective agreements herein contained, and to the following
further conditions:
3.1. Opinions of Counsel. On the Closing Date, the Placement Agents shall
have received the following favorable opinions, each dated as of the Closing
Date: (a) from ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel for the Offerors and addressed to the
Purchaser and the Placement Agents in substantially the form set forth on
Exhibit B-1 attached hereto and incorporated herein by this reference, (b) from
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, special Connecticut counsel to the Offerors and addressed
to the Purchaser, the Placement Agents and the Offerors, in substantially the
form set forth on Exhibit B-2 attached hereto and incorporated herein by this
reference and (c) from ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇., special tax counsel to the
Offerors, and addressed to the Placement Agents and the Offerors, in
substantially the form set forth on Exhibit B-3 attached hereto and incorporated
herein by this reference, subject to the receipt by ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇.
of a representation letter from the Company in the form set forth in Exhibit B-3
completed in a manner reasonably satisfactory to ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇.
(collectively, the "Offerors' Counsel Opinions"). In rendering the Offerors'
Counsel Opinions, counsel to the Offerors may rely as to factual matters upon
certificates or other documents furnished by officers, directors and trustees of
the Offerors (copies of which shall be delivered to the Placement Agents and the
Purchaser)
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and by government officials, and upon such other documents as counsel to the
Offerors may, in their reasonable opinion, deem appropriate as a basis for the
Offerors' Counsel Opinions. Counsel to the Offerors may specify the
jurisdictions in which they are admitted to practice and that they are not
admitted to practice in any other jurisdiction and are not experts in the law of
any other jurisdiction. If the Offerors' counsel is not admitted to practice in
the State of New York, the opinion of Offerors' counsel may assume, for purposes
of the opinion, that the laws of the State of New York are substantively
identical, in all respects material to the opinion, to the internal laws of the
state in which such counsel is admitted to practice. Such Offerors' Counsel
Opinions shall not state that they are to be governed or qualified by, or that
they are otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal Opinion
Accord of the ABA Section of Business Law (1991).
3.2. Officer's Certificate. At the Closing Date, the Purchaser and the
Placement Agents shall have received certificates from the Chief Executive
Officer of the Company, dated as of the Closing Date, stating that (i) the
representations and warranties of the Offerors set forth in Section 5 hereof are
true and correct as of the Closing Date and that the Offerors have complied with
all agreements and satisfied all conditions on their part to be performed or
satisfied at or prior to the Closing Date, (ii) since the date of this Agreement
the Offerors have not incurred any liability or obligation, direct or
contingent, or entered into any material transactions, other than in the
ordinary course of business, which is material to the Offerors, and (iii)
covering such other matters as the Placement Agents may reasonably request.
3.3. Administrator's Certificate. At the Closing Date, the Purchaser and
the Placement Agents shall have received a certificate of one or more
Administrators of the Trust, dated as of the Closing Date, stating that the
representations and warranties of the Trust set forth in Section 5 are true and
correct as of the Closing Date and that the Trust has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Date.
3.4. Purchase Permitted by Applicable Laws; Legal Investment. The purchase
of and payment for the Capital Securities as described in this Agreement and
pursuant to the Subscription Agreement shall (a) not be prohibited by any
applicable law or governmental regulation, (b) not subject the Purchaser or the
Placement Agents to any penalty or, in the reasonable judgment of the Purchaser
and the Placement Agents, other onerous conditions under or pursuant to any
applicable law or governmental regulation, and (c) be permitted by the laws and
regulations of the jurisdictions to which the Purchaser and the Placement Agents
are subject.
3.5. Consents and Permits. The Company and the Trust shall have received
all consents, permits and other authorizations, and made all such filings and
declarations, as may be required from any person or entity pursuant to any law,
statute, regulation or rule (federal, state, local and foreign), or pursuant to
any agreement, order or decree to which the Company or the Trust is a party or
to which either is subject, in connection with the transactions contemplated by
this Agreement.
3.6. Sale of Purchaser Securities. The Purchaser shall have sold securities
issued by the Purchaser in an amount such that the net proceeds of such sale
shall be (i) available on the Closing Date and (ii) in an amount sufficient to
purchase the Capital Securities and all other capital or similar securities
contemplated in agreements similar to this Agreement and the Subscription
Agreement.
3.7. Information. Prior to or on the Closing Date, the Offerors shall have
furnished to the Placement Agents such further information, certificates,
opinions and documents addressed to the Purchaser and the Placement Agents,
which the Placement Agents may reasonably request, including, without
limitation, a complete set of the Operative Documents or any other documents or
certificates required by this Section 3; and all proceedings taken by the
Offerors in connection with the issuance,
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offer and sale of the Capital Securities as herein contemplated shall be
reasonably satisfactory in form and substance to the Placement Agents.
If any condition specified in this Section 3 shall not have been fulfilled
when and as required in this Agreement, or if any of the opinions or
certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Placement Agents, this
Agreement may be terminated by the Placement Agents by notice to the Offerors at
any time at or prior to the Closing Date. Notice of such termination shall be
given to the Offerors in writing or by telephone or facsimile confirmed in
writing.
Section 4. Conditions to the Offerors' Obligations. The obligations of the
Offerors to sell the Capital Securities to the Purchaser and consummate the
transactions contemplated by this Agreement shall be subject to the accuracy, at
and as of the Closing Date, of the representations and warranties of the
Placement Agents contained in this Agreement and to the following further
conditions:
4.1. Executed Agreement. The Offerors shall have received from the
Placement Agents an executed copy of this Agreement.
4.2. Fulfillment of Other Obligations. The Placement Agents shall have
fulfilled all of their other obligations and duties required to be fulfilled
under this Agreement prior to or at the Closing.
Section 5. Representations and Warranties of the Offerors. Except as set forth
on the Disclosure Schedule (as defined in Section 11.1) attached hereto, if any,
the Offerors jointly and severally represent and warrant to the Placement Agents
and the Purchaser as of the date hereof and as of the Closing Date as follows:
5.1. Securities Law Matters.
(a) Neither the Company nor the Trust, nor any of their "Affiliates"
(as defined in Rule 501(b) of Regulation D under the Securities Act
("Regulation D")), nor any person acting on any of their behalf has,
directly or indirectly, made offers or sales of any security, or solicited
offers to buy any security, under circumstances that would require the
registration under the Securities Act of any of the Capital Securities, the
Guarantee or the Debentures (collectively, the "Securities") or any other
securities to be issued, or which may be issued, by the Purchaser.
(b) Neither the Company nor the Trust, nor any of their Affiliates,
nor any person acting on its or their behalf has (i) other than the
Placement Agents, offered for sale or solicited offers to purchase the
Securities, (ii) engaged or will engage, in any "directed selling efforts"
within the meaning of Regulation S under the Securities Act ("Regulation
S") with respect to the Securities, or (iii) engaged in any form of
offering, general solicitation or general advertising (within the meaning
of Regulation D) in connection with any offer or sale of any of the
Securities.
(c) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(d) Neither the Company nor the Trust is or, after giving effect to
the offering and sale of the Capital Securities and the consummation of the
transactions described in this Agreement, will be an "investment company"
or an entity "controlled" by an "investment company," in each case within
the meaning of Section 3(a) of the Investment Company Act of 1940, as
amended (the "Investment Company Act") without regard to Section 3(c) of
the Investment Company Act.
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(e) Neither the Company nor the Trust has paid or agreed to pay to any
person or entity (other than the Placement Agents) any compensation for
soliciting another to purchase any of the Securities.
5.2. Organization, Standing and Qualification of the Trust. The Trust has
been duly created and is validly existing in good standing as a statutory trust
under the Connecticut Statutory Trust Act (the "Statutory Trust Act") with the
power and authority to own property and to conduct the business it transacts and
proposes to transact and to enter into and perform its obligations under the
Operative Documents. The Trust is duly qualified to transact business as a
foreign entity and is in good standing in each jurisdiction in which such
qualification is necessary, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the Trust. The Trust is not
a party to or otherwise bound by any agreement other than the Operative
Documents. The Trust is and will, under current law, be classified for federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation.
5.3. Trust Agreement. The Trust Agreement has been duly authorized by the
Company and, on the Closing Date, will have been duly executed and delivered by
the Company and the Administrators of the Trust, and, assuming due
authorization, execution and delivery by the Institutional Trustee, will be a
valid and binding obligation of the Company and such Administrators, enforceable
against them in accordance with its terms, subject to (a) applicable bankruptcy,
insolvency, moratorium, receivership, reorganization, liquidation and other laws
relating to or affecting creditors' rights generally, and (b) general principles
of equity (regardless of whether considered and applied in a proceeding in
equity or at law) ("Bankruptcy and Equity"). Each of the Administrators of the
Trust is an employee or a director of the Company or of a financial institution
subsidiary of the Company and has been duly authorized by the Company to execute
and deliver the Trust Agreement.
5.4. Guarantee Agreement and the Indenture. Each of the Guarantee and the
Indenture has been duly authorized by the Company and, on the Closing Date will
have been duly executed and delivered by the Company, and, assuming due
authorization, execution and delivery by the Guarantee Trustee, in the case of
the Guarantee, and by the Indenture Trustee, in the case of the Indenture, will
be a valid and binding obligation of the Company enforceable against it in
accordance with its terms, subject to Bankruptcy and Equity.
5.5. Capital Securities and Common Securities. The Capital Securities and
the Common Securities have been duly authorized by the Trust Agreement and, when
issued and delivered against payment therefor on the Closing Date to the
Purchaser, in the case of the Capital Securities, and to the Company, in the
case of the Common Securities, will be validly issued and represent undivided
beneficial interests in the assets of the Trust. None of the Capital Securities
or the Common Securities is subject to preemptive or other similar rights. On
the Closing Date, all of the issued and outstanding Common Securities will be
directly owned by the Company free and clear of any pledge, security interest,
claim, lien or other encumbrance.
5.6. Debentures. The Debentures have been duly authorized by the Company
and, at the Closing Date, will have been duly executed and delivered to the
Indenture Trustee for authentication in accordance with the Indenture, and, when
authenticated in the manner provided for in the Indenture and delivered against
payment therefor by the Trust, will constitute valid and binding obligations of
the Company entitled to the benefits of the Indenture enforceable against the
Company in accordance with their terms, subject to Bankruptcy and Equity, except
as any indemnification or contribution provisions thereof may be limited under
applicable securities law.
5.7. Power and Authority. This Agreement has been duly authorized, executed
and delivered by the Company and the Trust and constitutes the valid and binding
obligation of the Company and the
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Trust, enforceable against the Company and the Trust in accordance with its
terms, subject to Bankruptcy and Equity.
5.8. No Defaults. The Trust is not in violation of the Trust Agreement or,
to the knowledge of the Administrators, any provision of the Statutory Trust
Act. The execution, delivery and performance by the Company or the Trust of this
Agreement or the Operative Documents to which it is a party, and the
consummation of the transactions contemplated herein or therein and the use of
the proceeds therefrom, will not conflict with or constitute a breach of, or a
default under, or result in the creation or imposition of any lien, charge or
other encumbrance upon any property or assets of the Trust, the Company or any
of the Company's Subsidiaries (as defined in Section 5.11 hereof) pursuant to
any contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Trust, the Company or any of its Subsidiaries is a party
or by which it or any of them may be bound, or to which any of the property or
assets of any of them is subject, except for a conflict, breach, default, lien,
charge or encumbrance which could not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect nor will such action result in any
violation of the Trust Agreement or the Statutory Trust Act or require the
consent, approval, authorization or order of any court or governmental agency or
body. As used herein, the term "Material Adverse Effect" means any one or more
effects that individually or in the aggregate are material and adverse to the
Offeror's ability to consummate the transactions contemplated herein or in the
Operative Documents or any one or more effects that individually or in the
aggregate are material and adverse to the condition (financial or otherwise),
earnings, affairs, business, prospects or results of operations of the Company
and its Subsidiaries taken as whole, whether or not occurring in the ordinary
course of business.
5.9. Organization, Standing and Qualification of the Company. The Company
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of Indiana, with all requisite corporate power and
authority to own its properties and conduct the business it transacts and
proposes to transact, and is duly qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction where the nature of its
activities requires such qualification, except where the failure of the Company
to be so qualified would not, singly or in the aggregate, have a Material
Adverse Effect.
5.10. Subsidiaries of the Company. Each of the Company's significant
subsidiaries (as defined in Section 1-02(w) of Regulation S-X to the Securities
Act (the "Significant Subsidiaries")) is listed in Exhibit C attached hereto and
incorporated herein by this reference. Each Significant Subsidiary has been duly
organized and is validly existing and in good standing under the laws of the
jurisdiction in which it is chartered or organized, with all requisite power and
authority to own its properties and conduct the business it transacts and
proposes to transact, and is duly qualified to transact business and is in good
standing as a foreign entity in each jurisdiction where the nature of its
activities requires such qualification, except where the failure of any such
Significant Subsidiary to be so qualified would not, singly or in the aggregate,
have a Material Adverse Effect. All of the issued and outstanding shares of
capital stock of the Significant Subsidiaries (a) have been duly authorized and
are validly issued, (b) are fully paid and nonassessable, and (c) are wholly
owned, directly or indirectly, by the Company free and clear of any security
interest, mortgage, pledge, lien, encumbrance, restriction upon voting or
transfer, preemptive rights, claim, equity or other defect.
5.11. Permits. The Company and each of its subsidiaries (as defined in
Section 1-02(x) of Regulation S-X to the Securities Act) (the "Subsidiaries")
have all requisite power and authority, and all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from regulatory or
governmental officials, bodies and tribunals, to own or lease their respective
properties and to conduct their respective businesses as now being conducted,
except such authorizations, approvals, orders, licenses, certificates and
permits which, if not obtained and maintained, would not, singly or in the
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aggregate, have a Material Adverse Effect, and neither the Company nor any of
its Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such authorizations, approvals, orders,
licenses, certificates or permits which, singly or in the aggregate, if the
failure to be so licensed or approved is the subject of an unfavorable decision,
ruling or finding, would, singly or in the aggregate, have a Material Adverse
Effect; and the Company and its Subsidiaries are in compliance with all
applicable laws, rules, regulations and orders and consents, the violation of
which would, singly or in the aggregate, have a Material Adverse Effect.
5.12. Conflicts, Authorizations and Approvals. Neither the Company nor any
of its Subsidiaries is in violation of its respective articles or certificate of
incorporation, charter or by-laws or similar organizational documents or in
default in the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other agreement or instrument to which either the Company or any
of its Subsidiaries is a party, or by which it or any of them may be bound or to
which any of the property or assets of the Company or any of its Subsidiaries is
subject, the effect of which violation or default in performance or observance
would have, singly or in the aggregate, a Material Adverse Effect.
5.13. Holding Company Registration and Deposit Insurance. The Company is
duly registered (i) as a bank holding company or financial holding company under
the Bank Holding Company Act of 1956, as amended, and the regulations of the
Board of Governors of the Federal Reserve System or (ii) as a savings and loan
holding company under the Home Owners' Loan Act of 1933, as amended, and the
regulations of the Office of Thrift Supervision, and the deposit accounts of the
Company's Subsidiary depository institutions are insured by the Federal Deposit
Insurance Corporation ("FDIC") to the fullest extent permitted by law and the
rules and regulations of the FDIC, and no proceedings for the termination of
such insurance are pending or threatened.
5.14. Financial Statements.
(a) The consolidated balance sheets of the Company and all of its
Subsidiaries as of June 30, 2002 and June 30, 2001 and related consolidated
income statements and statements of changes in shareholders' equity for the
3 years ended June 30, 2002 together with the notes thereto, and the
consolidated balance sheets of the Company and all of its Subsidiaries as
of March 31, 2003 and the related consolidated income statements and
statements of changes in shareholders' equity for the 3 months then ended,
copies of each of which have been provided to the Placement Agents
(together, the "Financial Statements"), have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
(except as may be disclosed therein) and fairly present in all material
respects the financial position and the results of operations and changes
in shareholders' equity of the Company and all of its Subsidiaries as of
the dates and for the periods indicated (subject, in the case of interim
financial statements, to normal recurring year-end adjustments, none of
which shall be material). The books and records of the Company and all of
its Subsidiaries have been, and are being, maintained in all material
respects in accordance with generally accepted accounting principles and
any other applicable legal and accounting requirements and reflect only
actual transactions.
(b) The information in the Company's report on form H(b)-11 dated
March 31, 2003 (the "H(b)-11") previously provided to the Placement Agents
fairly presents in all material respects the financial position of the
Company and all of its Subsidiaries as of such date.
(c) Since the respective dates of the Financial Statements and the
H(b)-11, there has been no material adverse change or development with
respect to the financial condition or earnings of the Company and all of
its Subsidiaries, taken as a whole.
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(d) The accountants of the Company who certified the Financial
Statements are independent public accountants of the Company and its
Subsidiaries within the meaning of the Securities Act and the rules and
regulations thereunder.
5.15. Regulatory Enforcement Matters. Neither the Company nor any of its
Subsidiaries is subject or is party to, or has received any notice or advice
that any of them may become subject or party to, any investigation with respect
to, any cease-and-desist order, agreement, consent agreement, memorandum of
understanding or other regulatory enforcement action, proceeding or order with
or by, or is a party to any commitment letter or similar undertaking to, or is
subject to any directive by, or has been since January 1, 2000, a recipient of
any supervisory letter from, or since January 1, 2000, has adopted any board
resolutions at the request of, any Regulatory Agency (as defined below) that
currently restricts in any material respect the conduct of their business or
that in any material manner relates to their capital adequacy, their credit
policies, their ability or authority to pay dividends or make distributions to
their shareholders or make payments of principal or interest on their debt
obligations, their management or their business (each, a "Regulatory
Agreement"), nor has the Company or any of its Subsidiaries been advised since
January 1, 2000, by any Regulatory Agency that it is considering issuing or
requesting any such Regulatory Agreement. There is no material unresolved
violation, criticism or exception by any Regulatory Agency with respect to any
report or statement relating to any examinations of the Company or any of its
Subsidiaries. As used herein, the term "Regulatory Agency" means any federal or
state agency charged with the supervision or regulation of depository
institutions, bank, financial or savings and loan holding companies, or engaged
in the insurance of depository institution deposits, or any court,
administrative agency or commission or other governmental agency, authority or
instrumentality having supervisory or regulatory authority with respect to the
Company or any of its Subsidiaries.
5.16. No Material Change. Since December 31, 2002, there has been no
material adverse change or development with respect to the condition (financial
or otherwise), earnings, affairs, business, prospects or results of operations
of the Company or its Subsidiaries on a consolidated basis, whether or not
arising in the ordinary course of business.
5.17. No Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any material liability, whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due,
including any liability for taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit, proceeding, hearing, charge, complaint, claim or demand against
the Company or its Subsidiaries giving rise to any such liability), except (i)
for liabilities set forth in the Financial Statements and (ii) normal
fluctuation in the amount of the liabilities referred to in clause (i) above
occurring in the ordinary course of business of the Company and all of its
Subsidiaries since the date of the most recent balance sheet included in the
Financial Statements.
5.18. Litigation. No charge, investigation, action, suit or proceeding is
pending or, to the knowledge of the Offerors, threatened, against or affecting
the Company or its Subsidiaries or any of their respective properties before or
by any courts or any regulatory, administrative or governmental official,
commission, board, agency or other authority or body, or any arbitrator, wherein
an unfavorable decision, ruling or finding could have, singly or in the
aggregate, a Material Adverse Effect.
5.19. Deferral of Interest Payments on Debentures. The Company has no
present intention to exercise its option to defer payments of interest on the
Debentures as provided in the Indenture. The Company believes that the
likelihood that it would exercise its right to defer payments of interest on the
Debentures as provided in the Indenture at any time during which the Debentures
are outstanding is remote because of the restrictions that would be imposed on
the Company's ability to declare or pay dividends or distributions on, or to
redeem, purchase, acquire or make a liquidation payment with respect
9
to, any of the Company's capital stock and on the Company's ability to make any
payments of principal, interest or premium on, or repay, repurchase or redeem,
any of its debt securities that rank pari passu in all respects with, or junior
in interest to, the Debentures.
Section 6. Representations and Warranties of the Placement Agents. Each
Placement Agent represents and warrants to the Offerors as to itself (but not as
to the other Placement Agent) as follows:
6.1. Organization, Standing and Qualification.
(a) FTN Financial Capital Markets is a division of First Tennessee
Bank National Association, a national banking association duly organized,
validly existing and in good standing under the laws of the United States,
with full power and authority to own, lease and operate its properties and
conduct its business as currently being conducted. FTN Financial Capital
Markets is duly qualified to transact business as a foreign corporation and
is in good standing in each other jurisdiction in which it owns or leases
property or conducts its business so as to require such qualification and
in which the failure to so qualify would, individually or in the aggregate,
have a material adverse effect on the condition (financial or otherwise),
earnings, business, prospects or results of operations of FTN Financial
Capital Markets.
(b) ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. is a corporation duly organized,
validly existing and in good standing under the laws of the State of New
York, with full power and authority to own, lease and operate its
properties and conduct its business as currently being conducted. ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. is duly qualified to transact business as a foreign
corporation and is in good standing in each other jurisdiction in which it
owns or leases property or conducts its business so as to require such
qualification and in which the failure to so qualify would, individually or
in the aggregate, have a material adverse effect on the condition
(financial or otherwise), earnings, business, prospects or results of
operations of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
6.2. Power and Authority. The Placement Agent has all requisite power and
authority to enter into this Agreement, and this Agreement has been duly and
validly authorized, executed and delivered by the Placement Agent and
constitutes the legal, valid and binding agreement of the Placement Agent,
enforceable against the Placement Agent in accordance with its terms, subject to
Bankruptcy and Equity and except as any indemnification or contribution
provisions thereof may be limited under applicable securities laws.
6.3. General Solicitation. In the case of the offer and sale of the
Securities, no form of general solicitation or general advertising was used by
the Placement Agent or its representatives including, but not limited to,
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Neither the Placement Agent nor its
representatives have engaged or will engage in any "directed selling efforts"
within the meaning of Regulation S with respect to the Securities.
6.4. Purchaser. The Placement Agent has made such reasonable inquiry as is
necessary to determine that the Purchaser is acquiring the Capital Securities
for its own account, that the Purchaser does not intend to distribute the
Capital Securities in contravention of the Securities Act or any other
applicable securities laws, and that the Purchaser is not a "U.S. person" as
that term is defined under Rule 902 of the Securities Act.
6.5. Qualified Purchasers. The Placement Agent has not offered or sold and
will not arrange for the offer or sale of the Securities except (i) in an
offshore transaction complying with Rule 903 of Regulation S, or (ii) to those
the Placement Agent reasonably believes are "accredited investors" (as
10
defined in Rule 501 of Regulation D), or (iii) in any other manner that does not
require registration of the Securities under the Securities Act. In connection
with each such sale, the Placement Agent has taken or will take reasonable steps
to ensure that the Purchaser is aware that (a) such sale is being made in
reliance on an exemption under the Securities Act and (b) future transfers of
the Securities will not be made except in compliance with applicable securities
laws.
6.6. Offering Circulars. Neither the Placement Agent nor its
representatives will include any non-public information about the Company, the
Trust or any of their affiliates in any registration statement, prospectus,
offering circular or private placement memorandum used in connection with any
purchase of Capital Securities without the prior written consent of the Trust
and the Company.
Section 7. Covenants of the Offerors. The Offerors covenant and agree with the
Placement Agents and the Purchaser as follows:
7.1. Compliance with Representations and Warranties. During the period from
the date of this Agreement to the Closing Date, the Offerors shall use their
best efforts and take all action necessary or appropriate to cause their
representations and warranties contained in Section 5 hereof to be true as of
the Closing Date, after giving effect to the transactions contemplated by this
Agreement, as if made on and as of the Closing Date.
7.2. Sale and Registration of Securities. The Offerors and their Affiliates
shall not nor shall any of them permit any person acting on their behalf (other
than the Placement Agents), to directly or indirectly (i) sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Securities Act) that would or could be integrated with the sale
of the Capital Securities in a manner that would require the registration under
the Securities Act of the Securities or (ii) make offers or sales of any such
Security, or solicit offers to buy any such Security, under circumstances that
would require the registration of any of such Securities under the Securities
Act.
7.3. Use of Proceeds. The Trust shall use the proceeds from the sale of the
Capital Securities to purchase the Debentures from the Company.
7.4. Investment Company. The Offerors shall not engage, or permit any
Subsidiary to engage, in any activity which would cause it or any Subsidiary to
be an "investment company" under the provisions of the Investment Company Act.
7.5. Reimbursement of Expenses. If the sale of the Capital Securities
provided for herein is not consummated (i) because any condition set forth in
Section 3 hereof is not satisfied, or (ii) because of any refusal, inability or
failure on the part of the Company or the Trust to perform any agreement herein
or comply with any provision hereof other than by reason of a breach by the
Placement Agents, the Company shall reimburse the Placement Agents upon demand
for all of their pro rata share of out-of-pocket expenses (including reasonable
fees and disbursements of counsel) in an amount not to exceed $50,000.00 that
shall have been incurred by them in connection with the proposed purchase and
sale of the Capital Securities. Notwithstanding the foregoing, the Company shall
have no obligation to reimburse the Placement Agents for their out-of-pocket
expenses if the sale of the Capital Securities fails to occur because the
condition set forth in Section 3.6 is not satisfied or because either of the
Placement Agents fails to fulfill a condition set forth in Section 4.
7.6. Directed Selling Efforts, Solicitation and Advertising. In connection
with any offer or sale of any of the Securities, the Offerors shall not, nor
shall either of them permit any of their Affiliates or any person acting on
their behalf, other than the Placement Agents, to, (i) engage in any "directed
selling efforts" within the meaning of Regulation S, or (ii) engage in any form
of general solicitation or general advertising (as defined in Regulation D).
11
7.7. Compliance with Rule 144A(d)(4) under the Securities Act. So long as
any of the Securities are outstanding and are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act, the Offerors will, during
any period in which they are not subject to and in compliance with Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or the Offerors are not exempt from such reporting requirements pursuant to and
in compliance with Rule 12g3-2(b) under the Exchange Act, provide to each holder
of such restricted securities and to each prospective purchaser (as designated
by such holder) of such restricted securities, upon the request of such holder
or prospective purchaser in connection with any proposed transfer, any
information required to be provided by Rule 144A(d)(4) under the Securities Act,
if applicable. This covenant is intended to be for the benefit of the holders,
and the prospective purchasers designated by such holders, from time to time of
such restricted securities. The information provided by the Offerors pursuant to
this Section 7.7 will not, at the date thereof, contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
7.8. Quarterly Reports. Within 50 days of the end of each calendar year
quarter and within 100 days of the end of each calendar year during which the
Debentures are issued and outstanding, the Offerors shall submit to The Bank of
New York a completed quarterly report in the form attached hereto as Exhibit D.
The Offerors acknowledge and agree that The Bank of New York and its successors
and assigns is a third party beneficiary of this Section 7.8
Section 8. Covenants of the Placement Agents. The Placement Agents covenant and
agree with the Offerors that, during the period from the date of this Agreement
to the Closing Date, the Placement Agents shall use their best efforts and take
all action necessary or appropriate to cause their representations and
warranties contained in Section 6 to be true as of Closing Date, after giving
effect to the transactions contemplated by this Agreement, as if made on and as
of the Closing Date. The Placement Agents further covenant and agree not to
engage in hedging transactions with respect to the Capital Securities unless
such transactions are conducted in compliance with the Securities Act.
Section 9. Indemnification.
9.1. Indemnification Obligation. The Offerors shall jointly and severally
indemnify and hold harmless the Placement Agents and the Purchaser and each of
their respective agents, employees, officers and directors and each person that
controls either of the Placement Agents or the Purchaser within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, and agents,
employees, officers and directors or any such controlling person of either of
the Placement Agents or the Purchaser (each such person or entity, an
"Indemnified Party") from and against any and all losses, claims, damages,
judgments, liabilities or expenses, joint or several, to which such Indemnified
Party may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Offerors), insofar as such losses, claims, damages,
judgments, liabilities or expenses (or actions in respect thereof) arise out of,
or are based upon, or relate to, in whole or in part, (a) any untrue statement
or alleged untrue statement of a material fact contained in any information
(whether written or oral) or documents executed in favor of, furnished or made
available to the Placement Agents or the Purchaser by the Offerors, or (b) any
omission or alleged omission to state in any information (whether written or
oral) or documents executed in favor of, furnished or made available to the
Placement Agents or the Purchaser by the Offerors a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse each Indemnified Party for any legal and other expenses as such
expenses are reasonably incurred by such Indemnified Party in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, judgments, liability, expense or action described in this Section 9.1.
In addition to their other obligations
12
under this Section 9, the Offerors hereby agree that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding arising out of, or based upon, or related to the matters described
above in this Section 9.1, they shall reimburse each Indemnified Party on a
quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, each Indemnified Party shall promptly
return such amounts to the Offerors together with interest, determined on the
basis of the prime rate (or other commercial lending rate for borrowers of the
highest credit standing) announced from time to time by First Tennessee Bank
National Association (the "Prime Rate"). Any such interim reimbursement payments
which are not made to an Indemnified Party within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request.
9.2. Conduct of Indemnification Proceedings. Promptly after receipt by an
Indemnified Party under this Section 9 of notice of the commencement of any
action, such Indemnified Party shall, if a claim in respect thereof is to be
made against the Offerors under this Section 9, notify the Offerors in writing
of the commencement thereof; but, subject to Section 9.4, the omission to so
notify the Offerors shall not relieve them from any liability pursuant to
Section 9.1 which the Offerors may have to any Indemnified Party unless and to
the extent that the Offerors did not otherwise learn of such action and such
failure by the Indemnified Party results in the forfeiture by the Offerors of
substantial rights and defenses. In case any such action is brought against any
Indemnified Party and such Indemnified Party seeks or intends to seek indemnity
from the Offerors, the Offerors shall be entitled to participate in, and, to the
extent that they may wish, to assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Party; provided, however, if the defendants in
any such action include both the Indemnified Party and the Offerors and the
Indemnified Party shall have reasonably concluded that there may be a conflict
between the positions of the Offerors and the Indemnified Party in conducting
the defense of any such action or that there may be legal defenses available to
it and/or other Indemnified Parties which are different from or additional to
those available to the Offerors, the Indemnified Party shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party.
Upon receipt of notice from the Offerors to such Indemnified Party of their
election to so assume the defense of such action and approval by the Indemnified
Party of counsel, the Offerors shall not be liable to such Indemnified Party
under this Section 9 for any legal or other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof unless (i) the
Indemnified Party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso in the preceding
sentence (it being understood, however, that the Offerors shall not be liable
for the expenses of more than one separate counsel representing the Indemnified
Parties who are parties to such action), or (ii) the Offerors shall not have
employed counsel reasonably satisfactory to the Indemnified Party to represent
the Indemnified Party within a reasonable time after notice of commencement of
the action, in each of which cases the fees and expenses of counsel of such
Indemnified Party shall be at the expense of the Offerors.
9.3. Contribution. If the indemnification provided for in this Section 9 is
required by its terms, but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an Indemnified Party under Section 9.1
in respect of any losses, claims, damages, liabilities or expenses referred to
herein or therein, then the Offerors shall contribute to the amount paid or
payable by such Indemnified Party as a result of any losses, claims, damages,
judgments, liabilities or expenses referred to herein (i) in such proportion as
is appropriate to reflect the relative benefits received by the Offerors, on the
one hand, and the Indemnified Party, on the other hand, from the offering of
such Capital Securities, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative
13
fault of the Offerors, on the one hand, and the Placement Agents, on the other
hand, in connection with the statements or omissions or inaccuracies in the
representations and warranties herein or other breaches which resulted in such
losses, claims, damages, judgments, liabilities or expenses, as well as any
other relevant equitable considerations. The respective relative benefits
received by the Offerors, on the one hand, and the Placement Agents, on the
other hand, shall be deemed to be in the same proportion, in the case of the
Offerors, as the total price paid to the Offerors for the Capital Securities
sold by the Offerors to the Purchaser (net of the compensation paid to the
Placement Agents hereunder, but before deducting expenses), and in the case of
the Placement Agents, as the compensation received by them, bears to the total
of such amounts paid to the Offerors and received by the Placement Agents as
compensation. The relative fault of the Offerors and the Placement Agents shall
be determined by reference to, among other things, whether the untrue statement
or alleged untrue statement of a material fact or the omission or alleged
omission of a material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the Offerors
or the Placement Agents and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The provisions set forth in Section 9.2 with respect to notice of commencement
of any action shall apply if a claim for contribution is made under this Section
9.3; provided, however, that no additional notice shall be required with respect
to any action for which notice has been given under Section 9.2 for purposes of
indemnification. The Offerors and the Placement Agents agree that it would not
be just and equitable if contribution pursuant to this Section 9.3 were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in this Section
9.3. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages, judgments, liabilities or expenses referred to in this
Section 9.3 shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim. In no
event shall the liability of the Placement Agents hereunder be greater in amount
than the dollar amount of the compensation (net of payment of all expenses)
received by the Placement Agents upon the sale of the Capital Securities giving
rise to such obligation. No person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not found guilty of such fraudulent
misrepresentation.
9.4. Additional Remedies. The indemnity and contribution agreements
contained in this Section 9 are in addition to any liability that the Offerors
may otherwise have to any Indemnified Party.
9.5. Additional Indemnification. The Company shall indemnify and hold
harmless the Trust against all loss, liability, claim, damage and expense
whatsoever, as due from the Trust under Sections 9.1 through 9.4 hereof.
Section 10. Rights and Responsibilities of Placement Agents.
10.1. Reliance. In performing their duties under this Agreement, the
Placement Agents shall be entitled to rely upon any notice, signature or writing
which they shall in good faith believe to be genuine and to be signed or
presented by a proper party or parties. The Placement Agents may rely upon any
opinions or certificates or other documents delivered by the Offerors or their
counsel or designees to either the Placement Agents or the Purchaser.
10.2. Rights of Placement Agents. In connection with the performance of
their duties under this Agreement, the Placement Agents shall not be liable for
any error of judgment or any action taken or omitted to be taken unless the
Placement Agents were grossly negligent or engaged in willful misconduct in
connection with such performance or non-performance. No provision of this
Agreement shall require the Placement Agents to expend or risk their own funds
or otherwise incur any financial liability on behalf of the Purchaser in
connection with the performance of any of their duties hereunder. The
14
Placement Agents shall be under no obligation to exercise any of the rights or
powers vested in them by this Agreement.
Section 11. Miscellaneous.
11.1. Disclosure Schedule. The term "Disclosure Schedule," as used herein,
means the schedule, if any, attached to this Agreement that sets forth items the
disclosure of which is necessary or appropriate as an exception to one or more
representations or warranties contained in Section 5 hereof; provided, that any
item set forth in the Disclosure Schedule as an exception to a representation or
warranty shall be deemed an admission by the Offerors that such item represents
an exception, fact, event or circumstance that is reasonably likely to result in
a Material Adverse Effect. The Disclosure Schedule shall be arranged in
paragraphs corresponding to the section numbers contained in Section 5. Nothing
in the Disclosure Schedule shall be deemed adequate to disclose an exception to
a representation or warranty made herein unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
immediately preceding sentence, the mere listing (or inclusion of a copy) of a
document or other item in the Disclosure Schedule shall not be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
representation or warranty has to do with the existence of the document or other
item itself. Information provided by the Company in response to any due
diligence questionnaire shall not be deemed part of the Disclosure Schedule and
shall not be deemed to be an exception to one or more representations or
warranties contained in Section 5 hereof unless such information is specifically
included on the Disclosure Schedule in accordance with the provisions of this
Section 11.1.
11.2. Legal Expenses. At Closing, the Placement Agents shall provide a
credit for the Offerors' transaction-related legal expenses in the amount of
$10,000.00.
11.3. Notices. Prior to the Closing, and thereafter with respect to matters
pertaining to this Agreement only, all notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier or overnight air courier guaranteeing next
day delivery:
if to the Placement Agents, to:
FTN Financial Capital Markets
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, General Counsel
15
with a copy to:
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
and
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
if to the Offerors, to:
City Savings Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
All such notices and communications shall be deemed to have been duly given
(i) at the time delivered by hand, if personally delivered, (ii) five business
days after being deposited in the mail, postage prepaid, if mailed, (iii) when
answered back, if telexed, (iv) the next business day after being telecopied, or
(v) the next business day after timely delivery to a courier, if sent by
overnight air courier guaranteeing next day delivery. From and after the
Closing, the foregoing notice provisions shall be superseded by any notice
provisions of the Operative Documents under which notice is given. The Placement
Agents, the Company, and their respective counsel, may change their respective
notice addresses from time to time by written notice to all of the foregoing
persons.
11.4. Parties in Interest, Successors and Assigns. Except as expressly set
forth herein, this Agreement is made solely for the benefit of the Placement
Agents, the Purchaser and the Offerors and any person controlling the Placement
Agents, the Purchaser or the Offerors and their respective successors and
assigns; and no other person shall acquire or have any right under or by virtue
of this Agreement. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.
16
11.5. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
11.6. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
11.7. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO CONFLICTS OF
LAWS) OF THE STATE OF NEW YORK.
11.8. Entire Agreement. This Agreement, together with the Operative
Documents and the other documents delivered in connection with the transactions
contemplated by this Agreement, is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, together with the Operative Documents and the other
documents delivered in connection with the transaction contemplated by this
Agreement, supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
11.9. Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the Placement Agents' and the Purchaser's rights and
privileges shall be enforceable to the fullest extent permitted by law.
11.10. Survival. The Placement Agents and the Offerors, respectively, agree
that the representations, warranties and agreements made by each of them in this
Agreement and in any certificate or other instrument delivered pursuant hereto
shall remain in full force and effect and shall survive the delivery of, and
payment for, the Capital Securities.
Signatures appear on the following page
17
If this Agreement is satisfactory to you, please so indicate by signing the
acceptance of this Agreement and deliver such counterpart to the Offerors
whereupon this Agreement will become binding between us in accordance with its
terms.
Very truly yours,
CITY SAVINGS FINANCIAL CORPORATION
By:
------------------------------------------------------
Name:
----------------------------------------------------
Title:
---------------------------------------------------
CITY SAVINGS STATUTORY TRUST I
By:
------------------------------------------------------
Name:
----------------------------------------------------
Title: Administrator
CONFIRMED AND ACCEPTED,
as of the date first set forth above
FTN FINANCIAL CAPITAL MARKETS,
a division of First Tennessee Bank National Association,
as a Placement Agent
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, INC.,
a New York corporation, as a Placement Agent
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
18
EXHIBIT A
FORM OF SUBSCRIPTION AGREEMENT
CITY SAVINGS STATUTORY TRUST [I]
CITY SAVINGS FINANCIAL CORPORATION
SUBSCRIPTION AGREEMENT
June 26, 2003
THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among City Savings
Statutory Trust I (the "Trust"), a statutory trust created under the Connecticut
Statutory Trust Act (Chapter 615 of Title 34 of the Connecticut General
Statutes, Section 500, et seq.), City Savings Financial Corporation, a Indiana
corporation, with its principal offices located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company" and, collectively with the Trust,
the "Offerors"), and Preferred Term Securities X, Ltd. (the "Purchaser").
RECITALS:
A. The Trust desires to issue 5,000 of its Floating Rate Capital Securities
(the "Capital Securities"), liquidation amount $1,000.00 per Capital Security,
representing an undivided beneficial interest in the assets of the Trust (the
"Offering"), to be issued pursuant to an Amended and Restated Declaration of
Trust (the "Declaration") by and among the Company, U.S. Bank National
Association ("U.S. Bank"), the administrators named therein, and the holders (as
defined therein), which Capital Securities are to be guaranteed by the Company
with respect to distributions and payments upon liquidation, redemption and
otherwise pursuant to the terms of a Guarantee Agreement between the Company and
U.S. Bank, as trustee (the "Guarantee"); and
B. The proceeds from the sale of the Capital Securities will be combined
with the proceeds from the sale by the Trust to the Company of its common
securities, and will be used by the Trust to purchase an equivalent amount of
Floating Rate Junior Subordinated Deferrable Interest Debentures of the Company
(the "Debentures") to be issued by the Company pursuant to an indenture to be
executed by the Company and U.S. Bank, as trustee (the "Indenture"); and
C. In consideration of the premises and the mutual representations and
covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF CAPITAL SECURITIES
1.1. Upon the execution of this Agreement, the Purchaser hereby agrees to
purchase from the Trust 5,000 Capital Securities at a price equal to $1,000.00
per Capital Security (the "Purchase Price") and the Trust agrees to sell such
Capital Securities to the Purchaser for said Purchase Price. The rights and
preferences of the Capital Securities are set forth in the Declaration. The
Purchase Price is payable in immediately available funds on June 26, 2003, or
such other business day as may be designated by the Purchaser, but in no event
later than June 30, 2003 (the "Closing Date"). The Offerors shall provide the
Purchaser wire transfer instructions no later than 1 day following the date
hereof.
1.2. The certificate for the Capital Securities shall be delivered by the
Trust on the Closing Date to the Purchaser or its designee.
A-1
1.3. The Placement Agreement, dated June 16, 2003 (the "Placement
Agreement"), among the Offerors and the Placement Agents identified therein
includes certain representations and warranties, covenants and conditions to
closing and certain other matters governing the Offering. The Placement
Agreement is hereby incorporated by reference into this Agreement and the
Purchaser shall be entitled to each of the benefits of the Placement Agents and
the Purchaser under the Placement Agreement and shall be entitled to enforce the
obligations of the Offerors under such Placement Agreement as fully as if the
Purchaser were a party to such Placement Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
2.1. The Purchaser understands and acknowledges that neither the Capital
Securities, the Debentures nor the Guarantee have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any other
applicable securities law, are being offered for sale by the Trust in
transactions not requiring registration under the Securities Act, and may not be
offered, sold, pledged or otherwise transferred by the Purchaser except in
compliance with the registration requirements of the Securities Act or any other
applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.
2.2. The Purchaser represents, warrants and certifies that (i) it is not a
"U.S. person" as such term is defined in Rule 902 under the Securities Act, (ii)
it is not acquiring the Capital Securities for the account or benefit of any
such U.S. person, (iii) the offer and sale of Capital Securities to the
Purchaser constitutes an "offshore transaction" under Regulation S of the
Securities Act, and (iv) it will not engage in hedging transactions with regard
to the Capital Securities unless such transactions are conducted in compliance
with the Securities Act and the Purchaser agrees to the legends and transfer
restrictions set forth on the Capital Securities certificate.
2.3. The Purchaser represents and warrants that it is purchasing the
Capital Securities for its own account, for investment, and not with a view to,
or for offer or sale in connection with, any distribution thereof in violation
of the Securities Act or other applicable securities laws, subject to any
requirement of law that the disposition of its property be at all times within
its control and subject to its ability to resell such Capital Securities
pursuant to an effective registration statement under the Securities Act or
under Rule 144A or any other exemption from registration available under the
Securities Act or any other applicable Securities law.
2.4. The Purchaser represents and warrants that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties specified herein, and to consummate the transactions contemplated
herein and it has full right and power to subscribe for Capital Securities and
perform its obligations pursuant to this Agreement.
2.5. The Purchaser, a Cayman Islands Company whose business includes
issuance of certain notes and acquiring the Capital Securities and other similar
securities, represents and warrants that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of purchasing the Capital Securities, has had the opportunity to ask
questions of, and receive answers and request additional information from, the
Offerors and is aware that it may be required to bear the economic risk of an
investment in the Capital Securities.
2.6. The Purchaser represents and warrants that no filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is necessary or
A-2
required for the performance by the Purchaser of its obligations under this
Agreement or to consummate the transactions contemplated herein.
2.7. The Purchaser represents and warrants that this Agreement has been
duly authorized, executed and delivered by the Purchaser.
2.8. The Purchaser represents and warrants that (i) the Purchaser is not in
violation or default of any term of its Memorandum of Association or Articles of
Association, of any provision of any mortgage, indenture, contract, agreement,
instrument or contract to which it is a party or by which it is bound or of any
judgment, decree, order, writ or, to its knowledge, any statute, rule or
regulation applicable to the Purchaser which would prevent the Purchaser from
performing any material obligation set forth in this Agreement; and (ii) the
execution, delivery and performance of and compliance with this Agreement, and
the consummation of the transactions contemplated herein, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or the suspension, revocation, impairment, forfeiture or non-renewal of any
permit, license, authorization or approval applicable to the Purchaser, its
business or operations or any of its assets or properties which would prevent
the Purchaser from performing any material obligations set forth in this
Agreement.
2.9. The Purchaser represents and warrants that the Purchaser is an
exempted company with limited liability duly incorporated, validly existing and
in good standing under the laws of the jurisdiction where it is organized, with
full power and authority to perform its obligations under this Agreement.
2.10. The Purchaser understands and acknowledges that the Company will rely
upon the truth and accuracy of the foregoing acknowledgments, representations,
warranties and agreements and agrees that, if any of the acknowledgments,
representations, warranties or agreements deemed to have been made by it by its
purchase of the Capital Securities are no longer accurate, it shall promptly
notify the Company.
2.11. The Purchaser understands that no public market exists for any of the
Capital Securities, and that it is unlikely that a public market will ever exist
for the Capital Securities.
ARTICLE III
MISCELLANEOUS
3.1. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:
To the Offerors: City Savings Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
To the Purchaser: Preferred Term Securities X, Ltd.
c/o Maples Finance Limited
P.O. Box 1093 GT
Queensgate House
South Church Street
A-3
▇▇▇▇▇▇ Town, Grand Cayman
Cayman Islands
Attention: The Directors
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Unless otherwise expressly provided herein, notices shall be deemed to have
been given on the date of mailing, except notice of change of address, which
shall be deemed to have been given when received.
3.2. This Agreement shall not be changed, modified or amended except by a
writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.
3.3. Upon the execution and delivery of this Agreement by the Purchaser,
this Agreement shall become a binding obligation of the Purchaser with respect
to the purchase of Capital Securities as herein provided.
3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
3.5. The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
3.6. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
3.7. In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that all of the Offerors' and the Purchaser's rights and privileges
shall be enforceable to the fullest extent permitted by law.
Signatures appear on the following page
A-4
IN WITNESS WHEREOF, I have set my hand the day and year first written
above.
PREFERRED TERM SECURITIES X, LTD.
By:
--------------------------------------------------
Print Name:
-----------------------------------------
Title:
----------------------------------------------
IN WITNESS WHEREOF, this Agreement is agreed to and accepted as of the day
and year first written above.
CITY SAVINGS FINANCIAL CORPORATION
By:
------------------------------------------------------
Name:
----------------------------------------------------
Title:
---------------------------------------------------
CITY SAVINGS STATUTORY TRUST I
By:
------------------------------------------------------
Name:
----------------------------------------------------
Title: Administrator
A-5
EXHIBIT B-1
FORM OF COMPANY COUNSEL OPINION
June 26, 2003
Preferred Term Securities X, Ltd. FTN Financial Capital Markets
c/o Maples Finance Limited ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
P. O. Box 1093 GT Memphis, Tennessee 38117
Queensgate House
South Church Street ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
▇▇▇▇▇▇ Town, Grand Cayman ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as counsel to City Savings Financial Corporation (the
"Company"), a Indiana corporation in connection with a certain Placement
Agreement, dated June 16, 2003, (the "Placement Agreement"), between the Company
and Savings Statutory Trust I (the "Trust"), on one hand, and FTN Financial
Capital Markets and ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. (the "Placement Agents"), on
the other hand. Pursuant to the Placement Agreement, and subject to the terms
and conditions stated therein, the Trust will issue and sell to Preferred Term
Securities X, Ltd. (the "Purchaser"), $5,000,000.00 aggregate principal amount
of Floating Rate Capital Securities (liquidation amount $1,000.00 per capital
security) (the "Capital Securities").
Capitalized terms used herein and not otherwise defined shall have the same
meanings ascribed to them in the Placement Agreement.
The law covered by the opinions expressed herein is limited to the law of
the United States of America and of the State of Indiana.
We have made such investigations of law as, in our judgment, were necessary
to render the following opinions. We have also reviewed (a) the Company's
Articles of Incorporation, as amended, and its By-Laws, as amended; and (b) such
corporate documents, records, information and certificates of the Company and
its Subsidiaries, certificates of public officials or government authorities and
other documents as we have deemed necessary or appropriate as a basis for the
opinions hereinafter expressed. As to certain facts material to our opinions, we
have relied, with your permission, upon statements, certificates or
representations, including those delivered or made in connection with the
above-referenced transaction, of officers and other representatives of the
Company and its Subsidiaries and the Trust.
As used herein, the phrase "to our knowledge" or "to the best of our
knowledge" or other similar phrase means the actual knowledge of the attorneys
who have had active involvement in the transactions described above or who have
prepared or signed this opinion letter, or who otherwise have devoted
substantial attention to legal matters for the Company.
Based upon and subject to the foregoing and the further qualifications set
forth below, we are of the opinion as of the date hereof that:
B-1-1
1. The Company is validly existing and in good standing under the laws of
the State of Indiana and is duly registered as a savings and loan holding
company under the Home Owners' Loan Act of 1933, as amended]. Each of the
Significant Subsidiaries is validly existing and in good standing under the laws
of its jurisdiction of organization. Each of the Company and the Significant
Subsidiaries has full corporate power and authority to own or lease its
properties and to conduct its business as such business is currently conducted
in all material respects. To the best of our knowledge, all outstanding shares
of capital stock of the Significant Subsidiaries have been duly authorized and
validly issued, and are fully paid and nonassessable except to the extent such
shares may be deemed assessable under 12 U.S.C. Section 1831o or 12 U.S.C.
Section 55, and are owned of record and beneficially, directly or indirectly, by
the Company.
2. The issuance, sale and delivery of the Debentures in accordance with the
terms and conditions of the Placement Agreement and the Operative Documents have
been duly authorized by all necessary actions of the Company. The issuance, sale
and delivery of the Debentures by the Company and the issuance, sale and
delivery of the Trust Securities by the Trust do not give rise to any preemptive
or other rights to subscribe for or to purchase any shares of capital stock or
equity securities of the Company or the Significant Subsidiaries pursuant to the
corporate Articles of Incorporation or Charter, By-Laws or other governing
documents of the Company or the Significant Subsidiaries, or, to the best of our
knowledge, any agreement or other instrument to which either Company or the
Subsidiaries is a party or by which the Company or the Significant Subsidiaries
may be bound.
3. The Company has all requisite corporate power to enter into and perform
its obligations under the Placement Agreement and the Subscription Agreement,
and the Placement Agreement and the Subscription Agreement have been duly and
validly authorized, executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company enforceable in accordance
with their terms, except as the enforcement thereof may be limited by general
principles of equity and by bankruptcy or other laws affecting creditors' rights
generally, and except as the indemnification and contribution provisions thereof
may be limited under applicable laws and certain remedies may not be available
in the case of a non-material breach.
4. Each of the Indenture, the Trust Agreement and the Guarantee Agreement
has been duly authorized, executed and delivered by the Company, and is a valid
and legally binding obligation of the Company enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
receivership, moratorium and other laws affecting the rights and remedies of
creditors generally and of general principles of equity.
5. The Debentures have been duly authorized, executed and delivered by the
Company, are entitled to the benefits of the Indenture and are legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other laws affecting the rights and
remedies of creditors generally and of general principles of equity.
6. To the best of our knowledge, neither the Company, the Trust, nor any
other Subsidiaries of the Company is in breach or violation of, or default
under, with or without notice or lapse of time or both, its Articles of
Incorporation or Charter, By-Laws or other governing documents (including
without limitation, the Trust Agreement). The execution, delivery and
performance of the Placement Agreement and the Operative Documents and the
consummation of the transactions contemplated by the Placement Agreement and the
Operative Documents do not and will not (i) result in the creation or imposition
of any material lien, claim, charge, encumbrance or restriction upon any
property or assets of the Company or its Subsidiaries, or (ii) conflict with,
constitute a material breach or violation of, or constitute a material default
under, with or without notice or lapse of time or both, any of the terms,
provisions or conditions of
B-1-2
(A) the Articles of Incorporation or Charter, By-Laws or other governing
documents of the Company or its Subsidiaries, or (B) to the best of our
knowledge, any material contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease, franchise, license or any other agreement or
instrument to which the Company or its Subsidiaries is a party or by which any
of them or any of their respective properties may be bound or (C) any order,
decree, judgment, franchise, license, permit, rule or regulation of any court,
arbitrator, government, or governmental agency or instrumentality, domestic or
foreign, known to us having jurisdiction over the Company or its Subsidiaries or
any of their respective properties which, in the case of each of (i) or (ii)
above, is material to the Company and its Subsidiaries on a consolidated basis.
7. Except for filings, registrations or qualifications that may be required
by applicable securities laws, no authorization, approval, consent or order of,
or filing, registration or qualification with, any person (including, without
limitation, any court, governmental body or authority) is required under the
laws of the State of Indiana in connection with the transactions contemplated by
the Placement Agreement and the Operative Documents in connection with the offer
and sale of the Capital Securities as contemplated by the Placement Agreement
and the Operative Documents.
8. To the best of our knowledge (i) no action, suit or proceeding at law or
in equity is pending or threatened to which the Offerors or their Subsidiaries
are or may be a party, and (ii) no action, suit or proceeding is pending or
threatened against or affecting the Offerors or their Subsidiaries or any of
their properties, before or by any court or governmental official, commission,
board or other administrative agency, authority or body, or any arbitrator,
wherein an unfavorable decision, ruling or finding could reasonably be expected
to have a material adverse effect on the consummation of the transactions
contemplated by the Placement Agreement and the Operative Documents or the
issuance and sale of the Capital Securities as contemplated therein or the
condition (financial or otherwise), earnings, affairs, business, or results of
operations of the Offerors and their Subsidiaries on a consolidated basis.
9. Assuming the truth and accuracy of the representations and warranties of
the Placement Agents in the Placement Agreement and the Purchaser in the
Subscription Agreement, it is not necessary in connection with the offering,
sale and delivery of the Capital Securities, the Debentures and the Guarantee
Agreement (or the Guarantee) to register the same under the Securities Act of
1933, as amended, under the circumstances contemplated in the Placement
Agreement and the Subscription Agreement.
10. Neither the Company nor the Trust is or after giving effect to the
offering and sale of the Capital Securities and the consummation of the
transactions described in the Placement Agreement will be, an "investment
company" or an entity "controlled" by an "investment company," in each case
within the meaning of the Investment Company Act of 1940, as amended, without
regard to Section 3(c) of such Act.
The opinion expressed in the first two sentences of numbered paragraph 1 of
this Opinion Letter is based solely upon certain certificates and confirmations
issued by the applicable governmental officer or authority with respect to each
of the Company and the Significant Subsidiaries.
With respect to the foregoing opinions, since no member of this firm is
actively engaged in the practice of law in the States of Connecticut or New
York, we do not express any opinions as to the laws of such states and have (i)
relied, with your approval, upon the opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP with
respect to matters of Connecticut law and (ii) assumed, with your approval and
without rendering any opinion to such effect, that the laws of the State of New
York, in all respects material to this opinion, are substantively identical to
the laws of the State of Indiana, without regard to conflict of law provisions.
B-1-3
This opinion is rendered to you solely pursuant to Section 3.1(a) of the
Placement Agreement. As such, it may be relied upon by you only and may not be
used or relied upon by any other person for any purpose whatsoever without our
prior written consent.
Very truly yours,
B-2-4
EXHIBIT B-2
FORM OF CONNECTICUT COUNSEL OPINION
TO THE PARTIES LISTED
ON SCHEDULE I HERETO
Ladies and Gentlemen:
We have acted as special counsel in the State of Connecticut (the "State")
for City Savings Statutory Trust I (the "Trust"), a Connecticut statutory trust
formed pursuant to the Amended and Restated Declaration of Trust (the "Trust
Agreement") dated as of the date hereof, among City Savings Financial
Corporation, a Indiana corporation (the "Sponsor"), U.S. Bank National
Association, a national banking association ("U.S. Bank"), in its capacity as
Institutional Trustee (the "Institutional Trustee"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, each, an individual, (each, an
"Administrator") in connection with the issuance by the Trust to the Holders (as
defined in the Trust Agreement) of its capital securities (the "Capital
Securities") pursuant to the Placement Agreement dated as of June 16, 2003 (the
"Placement Agreement"), the issuance by the Trust to the Sponsor of its Common
Securities, pursuant to the Trust Agreement and the acquisition by the Trust
from the Sponsor of Debentures, issued pursuant to the Indenture dated as of the
date hereof (the "Indenture").
The Institutional Trustee has requested that we deliver this opinion to you
in accordance with Section 3.1(b) of the Placement Agreement. Capitalized terms
not otherwise defined herein shall have the meanings specified in, or defined by
reference in or set forth in the Operative Documents (as defined below).
Our representation of the Trust has been as special counsel for the limited
purposes stated above. As to all matters of fact (including factual conclusions
and characterizations and descriptions of purpose, intention or other state of
mind), we have relied, with your permission, entirely upon (i) the
representations and warranties of the parties set forth in the Operative
Documents and (ii) certificates delivered to us by the management of U.S. Bank,
and have assumed, with your permission, without independent inquiry, the
accuracy of those representations, warranties and certificates.
We have examined the following documents to which the Trust is a party,
each of which is dated the date hereof, unless otherwise noted:
(i) the Trust Agreement;
(ii) the Placement Agreement;
(iii) the Subscription Agreement;
(iv) the Certificate of Common Securities;
(v) the Certificate of Capital Securities;
(vi) the Guarantee Agreement;
(vii) the Certificate of Trust filed with the
Secretary of State of the State of
Connecticut dated June 12, 2003; and
B-2-1
(viii) a Certificate of Legal Existence for the
Trust obtained from the Secretary of State
of the State of Connecticut dated June 12,
2003 (the "Certificate of Legal Existence").
The documents referenced in subparagraphs (i) through (vii) above are
hereinafter referred to collectively as the "Operative Documents."
We have also examined originals, or copies, certified or otherwise
identified to our satisfaction, of such other corporate and public records and
agreements, instruments, certificates and other documents as we have deemed
necessary or appropriate for the purposes of rendering this opinion. For
purposes of our opinion rendered in paragraph 1 below, with respect to the legal
existence of the Trust, our opinion relies entirely upon and is limited by the
Certificate of Legal Existence, which is attached hereto as Exhibit A.
We have assumed, with your permission, the genuineness of all signatures
(other than those on behalf of U.S. Bank, the Guarantee Trustee, Indenture
Trustee, Institutional Trustee and the Trust), the conformity of the originals
of all documents reviewed by us as copies, the authenticity and completeness of
all original documents reviewed by us in original or copy form and the legal
competence of each individual executing any document.
When an opinion set forth below is given to the best of our knowledge, or
to our knowledge, or with reference to matters of which we are aware or which
are known to us, or with another similar qualification, the relevant knowledge
or awareness is limited to the actual knowledge or awareness of the individual
lawyers in the firm who have participated directly and substantively in the
specific transactions to which this opinion relates and without any special or
additional investigation undertaken for the purposes of this opinion except as
indicated herein.
For the purposes of this opinion we have made such examination of law as we
have deemed necessary. The opinions expressed below are limited solely to the
internal substantive laws of the State (as applied by courts located in the
State without regard to choice of law) and we express no opinion as to the laws
of any other jurisdiction. To the extent to which this opinion deals with
matters governed by or relating to the laws of any other state or jurisdiction,
we have assumed, with your permission, that the Operative Documents are governed
by the internal substantive laws of the State.
We express no opinion as to (i) the effect of suretyship defenses, or
defenses in the nature thereof, with respect to the obligations of any
applicable guarantor, joint obligor, surety, accommodation party, or other
secondary obligor or any provisions of the Trust Agreement with respect to
indemnification or contribution and (ii) the accuracy or completeness of any
exhibits or schedules to the Operative Documents. No opinion is given herein as
to the choice of law or internal substantive rules of law that any court or
other tribunal may apply to the transactions contemplated by the Operative
Documents. No opinion is expressed herein as to the application or effect of
federal securities laws or as to the securities or so-called "Blue Sky" laws of
Connecticut or of any other state or other jurisdiction.
Our opinion, with your permission, is further subject to the following
exceptions, qualifications and assumptions:
(a) We have assumed without any independent investigation that (i)
each party to the Operative Documents, other than U.S. Bank, the Guarantee
Trustee, Indenture Trustee, Institutional Trustee and the Trust, as
applicable, at all times relevant thereto, is validly existing and in good
standing under the laws of the jurisdiction in which it is organized, and
is qualified to do business and in good standing under the laws of each
jurisdiction where such qualification is required generally or necessary in
order for such party to enforce its rights under such Operative
B-2-2
Documents, (ii) each party to the Operative Documents, at all times
relevant thereto, had and has the full power, authority and legal right
under its certificate of incorporation, partnership agreement, by-laws, and
other governing organizational documents, and the applicable corporate,
partnership, or other enterprise legislation and other applicable laws, as
the case may be (other than U.S. Bank, the Guarantee Trustee, Indenture
Trustee, Institutional Trustee or the Trust) to execute, deliver and to
perform its obligations under, the Operative Documents, and (iii) each
party to the Operative Documents other than U.S. Bank, the Guarantee
Trustee, Indenture Trustee, Institutional Trustee or the Trust has duly
executed and delivered each of such agreements and instruments to which it
is a party and that the execution and delivery of such agreements and
instruments and the transactions contemplated thereby have been duly
authorized by proper corporate or other organizational proceedings as to
each such party.
(b) We have assumed without any independent investigation (i) that the
Institutional Trustee, the Sponsor and the Administrators have received the
agreed to and stated consideration for the incurrence of the obligations
applicable to it under the Trust Agreement and each of the other Operative
Documents, (ii) that each of the Operative Documents (other than the Trust
Agreement) is a valid, binding and enforceable obligation of each party
thereto other than the Trust, U.S. Bank and the Institutional Trustee, as
applicable; and, for the purposes of this opinion letter, we herein also
assume that each of the Operative Documents (other than the Trust
Agreement) constitutes a valid, binding and enforceable obligation of U.S.
Bank, the Guarantee Trustee and the Indenture Trustee, as applicable under
Connecticut and federal law (as to which such matters we are delivering to
you a separate opinion letter on this date, which is subject to the
assumptions, qualifications and limitations set forth therein).
(c) The enforcement of any obligations of U.S. Bank, the Sponsor and
the Administrators, as applicable, under the Trust Agreement and the
obligations of the Trust under the other Operative Documents may be limited
by the receivership, conservatorship and supervisory powers of depository
institution regulatory agencies generally, as well as by bankruptcy,
insolvency, reorganization, moratorium, marshaling or other laws and rules
of law affecting the enforcement generally of creditors' rights and
remedies (including such as may deny giving effect to waivers of debtors'
or guarantors' rights); and we express no opinion as to the status under
any fraudulent conveyance laws or fraudulent transfer laws of any of the
obligations of U.S. Bank, the Sponsor, the Administrators or the Trust
under any of the Operative Documents.
(d) We express no opinion as to the enforceability of any particular
provision of the Trust Agreement or the other Operative Documents relating
to remedies after default.
(e) We express no opinion as the availability of any specific or
equitable relief of any kind.
(f) The enforcement of any rights may in all cases be subject to an
implied duty of good faith and fair dealing and to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity).
(g) We express no opinion as to the enforceability of any particular
provision of any of the Operative Documents relating to (i) waivers of
rights to object to jurisdiction or venue, or consents to jurisdiction or
venue, (ii) waivers of rights to (or methods of) service of process, or
rights to trial by jury, or other rights or benefits bestowed by operation
of law, (iii) waivers of any applicable defenses, setoffs, recoupments, or
counterclaims, (iv) waivers or variations of provisions which are not
capable of waiver or variation under Sections 1-102, 9-602, 9-603 or other
provisions of the Uniform Commercial Code ("UCC") of the State, (v) the
grant of powers
B-2-3
of attorney to any person or entity, or (vi) exculpation or exoneration
clauses, indemnity clauses, and clauses relating to releases or waivers of
unmatured claims or rights.
(h) We have made no examination of, and no opinion is given herein as
to the Trustee's or the Trust's title to or other ownership rights in, or
the existence of any liens, charges or encumbrances on, or adverse claims
against, any asset or property held by the Institutional Trustee or the
Trust. We express no opinion as to the creation, validity, attachment,
perfection or priority of any mortgage, security interest or lien in any
asset or property held by the Institutional Trustee or the Trust.
(i) We express no opinion as to the effect of events occurring,
circumstances arising, or changes of law becoming effective or occurring,
after the date hereof on the matters addressed in this opinion letter, and
we assume no responsibility to inform you of additional or changed facts,
or changes in law, of which we may become aware.
(j) We express no opinion as to any requirement that any party to the
Operative Documents (or any other persons or entities purportedly entitled
to the benefits thereof) qualify or register to do business in any
jurisdiction in order to be able to enforce its rights thereunder or obtain
the benefits thereof.
Based upon the foregoing and subject to the limitations and qualifications
set forth herein, we are of the opinion that:
1. The Trust has been duly formed and is validly existing as a statutory
trust under the Connecticut Statutory Trust Act, Chapter 615 of Title 34 of the
Connecticut General Statutes, Section 500, et seq. (the "Act").
2. The Trust Agreement constitutes a valid and binding obligation of U.S.
Bank and the Institutional Trustee enforceable against U.S. Bank and the
Institutional Trustee in accordance with the terms thereof.
3. The Trust Agreement constitutes a valid and binding obligation of the
Sponsor and the Administrators, enforceable against the Sponsor and the
Administrators in accordance with its terms.
4. The Trust has the requisite trust power and authority to (a) execute and
deliver, and to perform its obligations under, the Operative Documents, and (b)
perform its obligations under such Operative Documents.
5. Each of the Operative Documents to which the Trust is a party
constitutes a valid and binding obligation of the Trust, enforceable against the
Trust in accordance with the terms thereof.
6. The Capital Securities have been duly authorized by the Trust under the
Trust Agreement, and the Capital Securities, when duly executed and delivered to
the Holders in accordance with the Trust Agreement, the Placement Agreement and
the Subscription Agreement, will be validly issued, fully paid and nonassessable
and will evidence undivided beneficial interests in the assets of the Trust and
will be entitled to the benefits of the Trust Agreement.
7. The Common Securities have been duly authorized by the Trust Agreement,
and the Common Securities, when duly executed and delivered to the Company in
accordance with the Trust Agreement, the Placement Agreement and the
Subscription Agreement and delivered and paid for in accordance therewith, will
be validly issued, fully paid and nonassessable (subject to Section 9.1(b) of
the Trust Agreement which provides that the Holders of Common Securities are
liable for debts and
B-2-4
obligations of the Trust to the extent such debts and
obligations are not satisfied out of the Trust's assets) and will evidence
undivided beneficial interests in the assets of the Trust and will be entitled
to the benefits of the Trust Agreement.
8. Neither the execution, delivery or performance by the Trust of the
Operative Documents, the consummation by the Trust of the transactions
contemplated thereby, nor compliance by the Trust with any of the terms and
provisions thereof, (a) violates the Trust Agreement, or, to the best of our
knowledge, contravenes or will contravene any provision of, or constitutes a
default under, or results in any breach of, or results in the creation of any
lien (other than as permitted under the Operative Documents) upon property of
the Trust under, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement, license or other
agreement or instrument, in each case known to us, to which it is a party or by
which it is bound or (b) violates any applicable State law governing the Trust,
or, to the best of our knowledge, any judgment or order of any court or other
tribunal, in each case known to us, applicable to or binding on it.
9. No consent, approval, order or authorization of, giving of notice to, or
registration with, or taking of any other action in respect of, any State
governmental authority regulating the Trust is required for the execution,
delivery, validity or performance of, or the carrying out by, the Trust of any
of the transactions contemplated by the Operative Documents, other than any such
consent, approval, order, authorization, registration, notice or action as has
been duly obtained, given or taken.
10. The Holders, as the beneficial holders of the Capital Securities, will
be entitled to the same limitation of personal liability extended to
shareholders of domestic corporations organized under the laws of the State.
11. Under the Trust Agreement, the issuance of the Capital Securities is
not subject to preemptive rights.
12. Assuming that the Trust will not be taxable as a corporation for
federal income tax purposes, but rather will be classified for such purposes as
a grantor trust under Subpart E, Part I of Subchapter J of the Internal Revenue
Code of 1986, as amended, the Trust will not be subject to any tax, fee or other
government charge under the laws of the State of Connecticut or any political
subdivision thereof.
This opinion is rendered solely for the benefit of those institutions
listed on Schedule I hereto and their successors and assigns in connection with
the transactions contemplated by the Operative Documents and may not be used or
relied upon by any other person or for any other purpose.
Very truly yours,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
B-2-5
SCHEDULE I
U.S. Bank National Association
FTN Financial Capital Markets
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
Preferred Term Securities X, Ltd.
Preferred Term Securities X, Inc.
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇.
City Savings Financial Corporation
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
B-2-6
EXHIBIT A TO EXHIBIT B-2
CERTIFICATE OF LEGAL EXISTENCE
(See Tab No. 6)
B-2-7
EXHIBIT B-3
FORM OF TAX COUNSEL OPINION
[
City Savings Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
City Savings Statutory Trust I
c/o City Savings Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
FTN Financial Capital Markets
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as special tax counsel to City Savings Financial Corporation
and to City Savings Statutory Trust I in connection with the proposed issuance
of (i) Floating Rate Capital Securities, liquidation amount $1,000.00 per
Capital Security (the "Capital Securities") of City Savings Statutory Trust I, a
statutory business trust created under the laws of Connecticut (the "Trust"),
pursuant to the terms of the Amended and Restated Declaration of Trust dated as
of the date hereof by City Savings Financial Corporation, a Indiana corporation
(the "Company"), U.S. Bank National Association, as institutional trustee, and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, as Administrators (the
"Trust Agreement"), (ii) Junior Subordinated Deferrable Interest Debentures (the
"Corresponding Debentures") of the Company issued pursuant to the terms of an
Indenture dated as of the date hereof from the Company to U.S. Bank National
Association, as trustee (the "Indenture"), which Debentures are to be sold by
the Company to the Trust, and (iii) the Guarantee Agreement of the Company with
respect to the Capital Securities dated as of the date hereof (the "Guarantee")
between the Company and U.S. Bank National Association, as guarantee trustee.
The Capital Securities and the Corresponding Debentures are to be issued as
contemplated by the Offering Circular (the "Offering Circular") dated June 16,
2003 prepared by Preferred Term Securities X, Ltd., an entity formed under the
Companies Law of the Cayman Islands, and Preferred Term Securities X, Inc., a
Delaware corporation.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of documents, corporate records and other instruments as we
have deemed necessary or appropriate for purposes of this opinion including (i)
the Offering Circular, (ii) the Indenture, (iii) the form of the Corresponding
Debentures attached as an exhibit to the Indenture, (iv) the Trust Agreement,
(v) the Guarantee, and (vi) the form of Capital Securities Certificate attached
as an exhibit to the Trust Agreement (collectively the "Documents").
Furthermore, we have relied upon certain representations made by the Company and
upon the opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP as to certain matters of Connecticut
law. In such examination, we have assumed the authenticity of all documents
submitted to
B-3-1
us as originals, the conformity to original documents of all documents submitted
to us as certified or photostatic copies, the authenticity of the originals of
such latter documents, the genuineness of all signatures and the correctness of
all representations made therein. We have further assumed that there are no
agreements or understandings contemplated therein other than those contained in
the Documents.
Based upon the foregoing, and assuming (i) that the final Documents will be
substantially identical to the forms examined, (ii) full compliance with all the
terms of the final Documents, and (iii) the accuracy of representations made by
the Company and delivered to us, we are of the opinion that:
(a) The Corresponding Debentures will be classified as indebtedness of the
Company for U.S. federal income tax purposes.
(b) The Trust will be characterized as a grantor trust and not as an
association taxable as a corporation for U.S. federal income tax
purposes.
The opinions expressed above are based on existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing Treasury
regulations, published interpretations by the Internal Revenue Service of the
Code and such Treasury regulations, and existing court decisions, any of which
could be changed at any time. Any such changes may or may not be retroactively
applied, and may result in federal income tax consequences that differ from
those reflected in the opinions set forth above. We note that there is no
authority directly on point dealing with securities such as the Capital
Securities or with transactions of the type described herein, and that the
authorities on which this opinion is based are subject to various
interpretations. Further, you should be aware that opinions of counsel have no
official status and are not binding on the Internal Revenue Service or the
courts. Accordingly, we can provide no assurance that the interpretation of the
federal income tax laws set forth in our opinions will prevail if challenged by
the IRS in an administrative or judicial proceeding.
We have also assumed that each transaction contemplated herein will be
carried out strictly in accordance with the Documents. Any variance in the facts
may result in Federal income tax consequences that differ from those reflected
in the opinions set forth above.
Additionally, we undertake no obligation to update this opinion in the
event there is either a change in the legal authorities, in the facts (including
the taking of any action by any party to any of the transactions described in
the Documents relating to such transactions) or in the Documents on which this
opinion is based, or an inaccuracy in any of the representations upon which we
have relied in rendering this opinion.
We express no opinion with respect to any matter not specifically addressed
by the foregoing opinions, including state or local tax consequences, or any
federal, state, or local issue not specifically referred to and discussed above
including, without limitation, the effect on the matters covered by this opinion
of the laws of any other jurisdiction.
This letter is delivered for the benefit of the specified addressees and
may not be relied upon by any other person. No portion of this letter may be
quoted or otherwise referred to in any document or delivered to any other person
or entity without the express written consent of ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇.
This opinion letter is rendered as of the date set forth above.
Very truly yours,
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇.
B-3-2
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Re: Representations Concerning the Issuance of Floating Rate Junior
Subordinated Deferrable Interest Debentures (the "Debentures") to City
Savings Statutory Trust I (the "Trust") and Sale of Trust Securities
(the "Trust Securities") of the Trust
Ladies and Gentlemen:
In accordance with your request, City Savings Financial Corporation (the
"Company") hereby makes the following representations in connection with the
preparation of your opinion letter as to the United States federal income tax
consequences of the issuance by the Company of the Debentures to the Trust and
the sale of the Trust Securities.
Company hereby represents that:
1. The sole assets of the Trust will be the Debentures, any interest paid
on the Debentures to the extent not distributed, proceeds of the Debentures, or
any of the foregoing.
2. The Company intends to use the net proceeds from the sale of the
Debentures for general corporate purposes.
3. The Trust was not formed to conduct any trade or business and is not
authorized to conduct any trade or business. The Trust exists for the exclusive
purposes of (i) issuing and selling the Trust Securities, (ii) using the
proceeds from the sale of Trust Securities to acquire the Debentures, and (iii)
engaging only in activities necessary or incidental thereto.
4. The Trust was formed to facilitate direct investment in the assets of
the Trust, and the existence of multiple classes of ownership is incidental to
that purpose. There is no intent to provide holders of such interests in the
Trust with diverse interests in the assets of the Trust.
5. The Company intends to create a debtor-creditor relationship between the
Company, as debtor, and the Trust, as a creditor, upon the issuance and sale of
the Debentures to the Trust by the Company. The Company will (i) record and at
all times continue to reflect the Debentures as indebtedness on its separate
books and records for financial accounting purposes, and (ii) treat the
Debentures as indebtedness for all United States tax purposes.
6. During each year, the Trust's income will consist solely of payments
made by the Company with respect to the Debentures. Such payments will not be
derived from the active conduct of a financial business by the Trust. Both the
Company's obligation to make such payments and the measurement of the amounts
payable by the Company are defined by the terms of the Debentures. Neither the
Company's obligation to make such payments nor the measurement of the amounts
payable by the Company is dependent on income or profits of Company or any
affiliate of the Company.
7. The Company expects that it will be able to make, and will make, timely
payment of amounts identified by the Debentures as principal and interest in
accordance with the terms of the Debentures with available capital or
accumulated earnings.
B-3-3
8. The Company presently has no intention to defer interest payments on the
Debentures, and it considers the likelihood of such a deferral to be remote
because, if it were to exercise its right to defer payments of interest with
respect to the Debentures, it would not be permitted to declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any capital stock of the Company or any
affiliate of the Company (other than payments of dividends or distributions to
the Company) or make any payment of principal of or interest or premium, if any,
on or repay, repurchase, or redeem any debt securities of the Company or any
affiliate of the Company that rank pari passu in all respects with or junior in
interest to the Debentures, in each case subject to limited exceptions stated in
Section 2.11 of the Indenture to be entered into in connection with the issuance
of the Debentures.
9. Immediately after the issuance of the Debentures, the debt-to-equity
ratio of the Company (as determined for financial accounting purposes, but
excluding deposit liabilities from the Company's debt) will be within standard
depository institution industry norms and, in any event, will be no higher than
four to one (4 : 1).
10. To the best of our knowledge, the Company is currently in compliance
with all federal, state, and local capital requirements, except to the extent
that failure to comply with any such requirements would not have a material
adverse effect on the Company and its affiliates.
11. The Company will not issue any class of common stock or preferred stock
senior to the Debentures during their term.
12. The Internal Revenue Service has not challenged the interest deduction
on any class of the Company's subordinated debt in the last ten (10) years on
the basis that such debt constitutes equity for federal income tax purposes.
The above representations are accurate as of the date below and will
continue to be accurate through the issuance of the Trust Securities, unless you
are otherwise notified by us in writing. The undersigned understands that you
will rely on the foregoing in connection with rendering certain legal opinions,
and possesses the authority to make the representations set forth in this letter
on behalf of the Company.
Very truly yours,
CITY SAVINGS FINANCIAL CORPORATION
Date: [__________], 2003 By: _________________________________
Title: _________________________________
B-3-4
EXHIBIT C
SIGNIFICANT SUBSIDIARIES
City Savings Bank
C-1
EXHIBIT D
FORM OF QUARTERLY REPORT
Preferred Term Securities X, Ltd.
c/o The Bank of New York
Collateralized Debt Obligation Group
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
CDO Relationship Manager
BANK HOLDING COMPANY
As of [March 31, June 30, September 30 or December 31], 20__
Tier 1 to Risk Weighted Assets _________%
Ratio of Double Leverage _________%
Non-Performing Assets to Loans and OREO _________%
Ratio of Reserves to Non-Performing Loans _________%
Ratio of Net Charge-Offs to Loans _________%
Return on Average Assets (annualized)** _________%
Net Interest Margin (annualized)** _________%
Efficiency Ratio _________%
Ratio of Loans to Assets _________%
Ratio of Loans to Deposits _________%
Total Assets $_________
Year to Date Income $_________
-------------------
* A table describing the quarterly report calculation procedures is provided on
page D-2
** To annualize Return on Average Assets and Net Interest Margin do the
following:
1st Quarter-multiply income statement item by 4, then divide by balance sheet
item(s)
2nd Quarter-multiply income statement item by 2,then divide by balance sheet
item(s)
3rd Quarter-divide income statement item by 3, then multiply by 4, then divide
by balance sheet item(s)
4th Quarter-should already be an annual number
NO ADJUSTMENT SHOULD BE MADE TO BALANCE SHEET ITEMS
D-1
Financial Definitions
======================= ================================================== ===================================================
Report Item Corresponding FRY-9C or LP Line Items with Line
Item corresponding Schedules Description of Calculation
======================= ================================================== ===================================================
"Tier 1 Capital" to BHCK7206 Tier 1 Risk Ratio: Core Capital (Tier 1)/
Risk Weighted Assets Schedule HC-R Risk-Adjusted Assets
----------------------- -------------------------------------------------- ---------------------------------------------------
Ratio of Double (BHCP0365)/(BHCP3210) Total equity investments in subsidiaries divided
Leverage Schedule PC in the LP by the total equity capital. This field is
calculated at the parent company level.
"Subsidiaries" include bank, bank holding
company, and nonbank subsidiaries.
----------------------- -------------------------------------------------- ---------------------------------------------------
Non-Performing Assets (BHCK5525-BHCK3506+BHCK5526-BHCK3507+BHCK2744)/ Total+Nonperforming Assets (NPLs+Foreclosed Real
to Loans and OREO (BHCK2122+BHCK2744) Estate+Other Nonaccrual & Repossessed Assets)/
Schedules HC-C, HC-M & HC-N Total Loans + Foreclosed Real Estate
----------------------- -------------------------------------------------- ---------------------------------------------------
Ratio of Reserves to (BHCK3123+BHCK3128)/(BHCK5525-BHCK3506+BHCK5526- Total) Loan Loss and Allocated Transfer Risk
Non-Performing Loans BHCK3507) Reserves/ Total Nonperforming Loans (Nonaccrual +
Schedules HC & HC-N Restructured)
----------------------- -------------------------------------------------- ---------------------------------------------------
Ratio of Net (BHCK4635-BHCK4605)/(BHCK3516) Net charge offs for the period as a percentage of
Charge-Offs to Loans Schedules HI-B & HC-K average loans.
----------------------- -------------------------------------------------- ---------------------------------------------------
Return on Assets (BHCK4340/BHCK3368) Net Income as a percentage of Assets.
Schedules HI & HC-K
----------------------- -------------------------------------------------- ---------------------------------------------------
Net Interest Margin (BHCK4519)/(BHCK3515+BHCK3365+BHCK3516+BHCK3401+ (Net5Interest Income Fully Taxable Equivalent, if
BHCK985) available / Average Earning Assets)
Schedules HI Memorandum and HC-K
----------------------- -------------------------------------------------- ---------------------------------------------------
Efficiency Ratio (BHCK4093)/(BHCK4519+BHCK4079) (Noninterest Expense)/ (Net Interest Income
Schedule HI Fully Taxable Equivalent, if available, plus
Noninterest Income)
----------------------- -------------------------------------------------- ---------------------------------------------------
Ratio of Loans to (BHCKB528+BHCK5369)/BHCK2170) Total Loans & Leases (Net of Unearned Income &
Assets Schedule ▇▇ ▇▇▇▇▇ of Reserve)/ Total Assets
----------------------- -------------------------------------------------- ---------------------------------------------------
Ratio of Loans to (BHCKB528+BHCK5369)/(BHDM6631+BHDM6636+BHFN6631+ Total) Loans & Leases (Net of Unearned Income &
Deposits BHFN6636) Gross of Reserve)/ Total Deposits (Includes
Schedule HC Domestic and Foreign Deposits)
----------------------- -------------------------------------------------- ---------------------------------------------------
Total Assets (BHCK2170) The sum of total assets. Includes cash and
Schedule HC balances due from depository institutions;
purchased under agreements to resell; loans and
lease financing receivables; trading assets;
premises and fixed assets; other real estate
owned; investments in unconsolidated subsidiaries
and associated companies; customer's liability on
acceptances outstanding; intangible assets; and
other assets.
----------------------- -------------------------------------------------- ---------------------------------------------------
Net Income (BHCK4300) The sum of income (loss) before extraordinary
Schedule HI items and other adjustments and extraordinary
items; and other adjustments, net of income
taxes.
----------------------- -------------------------------------------------- ---------------------------------------------------
D-2
SCHEDULE 11.1
Section 5.15 Disclosure
The bank subsidiary (the "Bank") of City Savings Financial Corporation is
currently engaged in discussions with the Office of Thrift Supervision and the
Indiana Department of Financial Institutions (the "DFI") concerning the proper
accounting and regulatory treatment of loans it acquires pursuant to agreements
with two mortgage brokers. The OTS and the DFI have asserted that the
acquisition of these loans by the Bank constitutes a financing under Financial
Accounting Statement No. 140 ("FAS 140") and not a purchase of loans from the
mortgage brokers. If the position of the banking regulators is correct, the
acquired mortgage loans would need to be risk-weighted at 100%, rather than 50%,
for purposes of OTS' regulatory capital requirements. This change would require
the Bank to have more capital in order to be deemed well-capitalized. The
regulators have also indicated that the financing arrangements with the mortgage
bankers could violate the loan-to-one-borrower regulation or could be deemed an
inappropriate concentration of risk. The Bank and its public accountants do not
agree with the positions expressed by the OTS and the DFI. On May 30, 2003, the
Bank submitted to those regulators written materials in support of its position.
If the regulators do not accept the position of the Bank and its public
accountants, the Bank intends to limit its activities with mortgage brokers in a
manner which will not raise concentration of risk or loan-to-one-borrower
issues. The Bank would also expect to continue to be well-capitalized following
any such change in its activities.
Section 5.18 Disclosure
The bank subsidiary of City Savings Financial Corporation is party to a
lawsuit asserting, among other things, that the Bank interfered with
transactional relationships between the Indiana Housing Finance Authority (IHFA)
and the Greater Michigan City Community Development Corporation (GMCCDC). Among
other defendants is the Bank's president, who also served as president of the
GMCCDC during the period covered by the lawsuit. The Bank accepted deeds in lieu
of foreclosure on properties that it believed to be collateral on loans to the
GMCCDC. The IHFA asserts certain rights to those properties among other claims.
The total amount received by the Bank on the sale of the foreclosed properties
was approximately $320,000. The IHFA is suing for unspecified damages and other
costs.
The defense and other costs of litigation of the Bank may be covered by
insurance, but the Bank's insurer is currently reviewing that determination, and
there are certain exclusions in the policies which might apply to deny coverage.
The Bank and its president intend to vigorously defend the action. It is
impossible at this time for the Bank to predict the outcome of this pending
litigation or impact on the Bank's operations or financial condition.
