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EXHIBIT 4.9
AMENDED AND RESTATED DECLARATION OF TRUST
OF
HFC CAPITAL TRUST I
OF
HAWTHORNE FINANCIAL CORPORATION
Dated as of March 28, 2001
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TABLE OF CONTENTS
PAGE
ARTICLE I INTERPRETATION AND DEFINITIONS ......................................... 2
SECTION 1.1 Definitions .................................................. 2
ARTICLE II TRUST INDENTURE ACT ................................................... 8
SECTION 2.1 Trust Indenture Act; Application ............................. 8
SECTION 2.2 Lists of Holders of Securities ............................... 8
SECTION 2.3 Reports by the Property Trustee .............................. 9
SECTION 2.4 Periodic Reports to Property Trustee ......................... 9
SECTION 2.5 Evidence of Compliance with Conditions Precedent ............. 9
SECTION 2.6 Events of Default; Waiver .................................... 9
SECTION 2.7 Default; Notice .............................................. 11
ARTICLE III ORGANIZATION ......................................................... 12
SECTION 3.1 Name ......................................................... 12
SECTION 3.2 Office ....................................................... 12
SECTION 3.3 Purpose ...................................................... 12
SECTION 3.4 Authority .................................................... 12
SECTION 3.5 Title to Property of the Trust ............................... 12
SECTION 3.6 Powers and Duties of the Administrative Trustees ............. 13
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees ......... 15
SECTION 3.8 Powers and Duties of the Property Trustee .................... 16
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee .. 18
SECTION 3.10 Certain Rights of Property Trustee ........................... 20
SECTION 3.11 Delaware Trustee ............................................. 22
SECTION 3.12 Execution of Documents ....................................... 22
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities ....... 23
SECTION 3.14 Duration of Trust ............................................ 23
SECTION 3.15 Mergers ...................................................... 23
ARTICLE IV SPONSOR ............................................................... 25
SECTION 4.1 Sponsor's Purchase of Common Securities ...................... 25
SECTION 4.2 Responsibilities of the Sponsor .............................. 25
SECTION 4.3 Right to Proceed ............................................. 25
SECTION 4.4 Right to Dissolve Trust ...................................... 25
ARTICLE V TRUSTEES ............................................................... 26
SECTION 5.1 Number of Trustees; Appointment of Co-Trustee ................ 26
SECTION 5.2 Delaware Trustee ............................................. 26
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SECTION 5.3 Property Trustee; Eligibility ................................ 27
SECTION 5.4 Certain Qualifications of Administrative Trustees and Delaware
Trustee Generally ............................................ 28
SECTION 5.5 Administrative Trustees ...................................... 28
SECTION 5.6 Appointment, Removal and Resignation of Trustees ............. 29
SECTION 5.7 Vacancies Among Trustees ..................................... 30
SECTION 5.8 Effect of Vacancies .......................................... 31
SECTION 5.9 Meetings ..................................................... 31
SECTION 5.10 Delegation of Power .......................................... 31
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business .. 31
ARTICLE VI DISTRIBUTIONS ......................................................... 32
SECTION 6.1 Distributions ................................................ 32
ARTICLE VII ISSUANCE OF SECURITIES ............................................... 32
SECTION 7.1 General Provisions Regarding Securities ...................... 32
SECTION 7.2 Execution and Authentication ................................. 33
SECTION 7.3 Form and Dating .............................................. 33
SECTION 7.4 Registrar, Paying Agent and Exchange Agent ................... 34
SECTION 7.5 Paying Agent to Hold Money in Trust .......................... 34
SECTION 7.6 Replacement Securities ....................................... 35
SECTION 7.7 Outstanding Capital Securities ............................... 35
SECTION 7.8 Capital Securities in Treasury ............................... 35
SECTION 7.9 Temporary Securities ......................................... 36
SECTION 7.10 Cancellation ................................................. 36
SECTION 7.11 CUSIP Numbers ................................................ 36
ARTICLE VIII DISSOLUTION OF TRUST ................................................ 36
SECTION 8.1 Dissolution of Trust ......................................... 36
ARTICLE IX TRANSFER OF INTERESTS ................................................. 37
SECTION 9.1 Transfer of Securities ....................................... 37
SECTION 9.2 Transfer Procedures and Restrictions ......................... 38
SECTION 9.3 Deemed Security Holders ...................................... 44
ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS ... 44
SECTION 10.1 Liability .................................................... 44
SECTION 10.2 Exculpation .................................................. 44
SECTION 10.3 Fiduciary Duty ............................................... 45
SECTION 10.4 Indemnification .............................................. 46
SECTION 10.5 Outside Businesses ........................................... 48
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ARTICLE XI ACCOUNTING ............................................................ 49
SECTION 11.1 Fiscal Year .................................................. 49
SECTION 11.2 Certain Accounting Matters ................................... 49
SECTION 11.3 Banking ...................................................... 49
SECTION 11.4 Withholding .................................................. 50
ARTICLE XII AMENDMENTS AND MEETINGS .............................................. 50
SECTION 12.1 Amendments ................................................... 50
SECTION 12.2 Meetings of the Holders; Action by Written Consent ........... 52
ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE ............ 54
SECTION 13.1 Representations and Warranties of Property Trustee ........... 54
SECTION 13.2 Representations and Warranties of Delaware Trustee ........... 54
ARTICLE XIV MISCELLANEOUS ........................................................ 55
SECTION 14.1 Notices ...................................................... 55
SECTION 14.2 Governing Law ................................................ 56
SECTION 14.3 Intention of the Parties ..................................... 57
SECTION 14.4 Headings ..................................................... 57
SECTION 14.5 Successors and Assigns ....................................... 57
SECTION 14.6 Partial Enforceability ....................................... 57
SECTION 14.7 Counterparts ................................................. 57
ANNEX I
TERMS OF
10.18% MMCapS(SM)
10.18% COMMON SECURITIES ................................................... I-1
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE ....................................... A1-1
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE ........................................ A2-1
ANNEX II
TRANSFEREE LETTER .......................................................... II-1
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CROSS-REFERENCE TABLE*
Section of
Trust Indenture
Act of 1939, as Section of
amended Declaration
- ------------------- -----------------
310(a) ..................................................... 5.3
310(b) ..................................................... 5.3(c); 5.3(d)
311(a) ..................................................... 2.2(b)
311(b) ..................................................... 2.2(b)
312(a) ..................................................... 2.2(a)
312(b) ..................................................... 2.2(b)
313 ..................................................... 2.3
314(a) ..................................................... 2.4, 2.7(c);
3.6(j)
314(c) ..................................................... 2.5
315(a) ..................................................... 3.6(j); 3.9
315(b) ..................................................... 2.7(a)
315(c) ..................................................... 3.9(a)
315(d) ..................................................... 3.9(b)
316(a) ..................................................... 2.6
316(c) ..................................................... 3.6(e)
317(a) ..................................................... 3.8(e); 3.8(h)
317(b) ..................................................... 3.8(i); 7.5
318 ..................................................... 2.1
- --------------
* This Cross-Reference Table does not constitute part of this Declaration
and shall not affect the interpretation of any of its terms or
provisions.
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AMENDED AND RESTATED
DECLARATION OF TRUST
OF
HFC CAPITAL TRUST I
Dated as of March 28, 2001
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated
and effective as of March 28, 2001, by and among the Trustees (as defined
herein), the Sponsor (as defined herein) and the Holders (as defined herein),
from time to time, of undivided beneficial interests in the assets of the Trust
to be issued pursuant to this Declaration;
WHEREAS, the Delaware Trustee (as defined herein) and the
Sponsor established HFC Capital Trust I (the "Trust"), a trust created under the
Delaware Business Trust Act pursuant to a Declaration of Trust dated as of March
7, 2001 (the "Original Declaration"), and a Certificate of Trust filed with the
Secretary of State of the State of Delaware on March 12, 2001, for the sole
purpose of issuing and selling certain securities representing undivided
beneficial interests in the assets of the Trust, investing the proceeds thereof
in certain Debentures of the Debenture Issuer (each as hereinafter defined), and
engaging in only those activities necessary, advisable or incidental thereto;
and
WHEREAS, all of the Trustees (as defined herein) and the
Sponsor, by this Declaration, amend and restate each and every term and
provision of the Original Declaration;
WHEREAS, all of the Trustees and the Sponsor, by this
Declaration, ratify the actions of each Trustee taken prior to the date hereof;
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration and, in consideration
of the mutual covenants contained herein and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties,
intending to be legally bound hereby, amend and restate in its entirety the
Original Declaration and agree as follows:
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ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) capitalized terms used in this Declaration but not defined in the
preamble above or elsewhere herein have the respective meanings assigned to them
in this Section 1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to
this Amended and Restated Declaration of Trust and each Annex and Exhibit
hereto, as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to
this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Declaration unless otherwise defined in this Declaration or unless
the context otherwise requires;
(f) a term defined in the Indenture (as defined herein) has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or the context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Administrative Trustee" has the meaning set forth in Section
5.1.
"Affiliate" has the same meaning as given to that term in Rule
405 under the Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent, Registrar or Exchange Agent.
"Authorized Officer" of a Person means any other Person that is
authorized to legally bind such former Person.
"Business Day" means any day other than a Saturday, a Sunday, or
a day on which banking institutions in Wilmington, Delaware, El Segundo,
California or New York, New York are authorized or required by law or executive
order to remain closed.
"Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time
to time, or any successor legislation.
"Capital Securities" has the meaning specified in Section
7.1(a).
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"Capital Securities Guarantee" means the Capital Securities
Guarantee Agreement, dated as of the Closing Time, entered into by Hawthorne
Financial Corporation with respect to the Capital Securities.
"Capital Security Certificate" has the meaning set forth in
Section 7.3.
"Closing Time" means the "Closing Time" as defined in the
Purchase Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor legislation.
"Commission" means the United States Securities and Exchange
Commission as from time to time constituted, or if at any time after the
execution of this Declaration such Commission is not existing and performing the
duties now assigned to it under applicable federal securities laws, then the
body performing such duties at such time.
"Common Securities" has the meaning specified in Section 7.1(a).
"Common Security Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit
A-2.
"Common Securities Guarantee" means the Common Securities
Guarantee Agreement, dated as of the Closing Time, entered into by Hawthorne
Financial Corporation, with respect to the Common Securities.
"Common Securities Subscription Agreement" means the Common
Securities Subscription Agreement, dated as of the Closing Time, between the
Trust and Hawthorne Financial Corporation relating to the Common Securities.
"Company Indemnified Person" means (a) any Administrative
Trustee; (b) any Affiliate of any Administrative Trustee; (c) any officers,
directors, shareholders, members, partners, employees, representatives or agents
of any Administrative Trustee; or (d) any officer, employee or agent of the
Trust or its Affiliates.
"Corporate Trust Office" means the office of the Property
Trustee at which the corporate trust business of the Property Trustee shall, at
any particular time, be principally administered, which office at the date of
execution of this Declaration is located at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
"Covered Person" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means Hawthorne Financial Corporation, a
Delaware corporation, or any successor entity resulting from any consolidation,
amalgamation, merger or other business combination, in its capacity as issuer of
the Debentures under the Indenture.
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"Debenture Subscription Agreement" means the Debenture
Subscription Agreement, dated as of the Closing Time, between the Debenture
Issuer and the Trust in respect of the Debentures.
"Debenture Trustee" means Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as trustee under
the Indenture until a successor is appointed thereunder, and thereafter means
such successor trustee.
"Debentures" means the 10.18% Junior Subordinated Deferrable
Interest Debentures due June 8, 2031, of the Debenture Issuer issued pursuant to
the Indenture.
"Default" means an event, act or condition that with notice or
lapse of time, or both, would constitute an Event of Default.
"Definitive Capital Securities" has the meaning set forth in
Section 7.3.
"Delaware Trustee" has the meaning set forth in Section 5.1.
"Direct Action" has the meaning set forth in Section 3.8(e).
"Distribution" means a distribution payable to Holders in
accordance with Section 6.1.
"Event of Default" with respect to the Securities means an Event
of Default (as defined in the Indenture) that has occurred and is continuing
with respect to the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"Exchange Agent" has the meaning set forth in Section 7.4.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System.
"Fiduciary Indemnified Person" has the meaning set forth in
Section 10.4(b).
"Fiscal Year" has the meaning set forth in Section 11.1.
"Holder" means a Person in whose name a Security or Successor
Security is registered on the register maintained by or on behalf of the
Registrar, such Person being a beneficial owner of the Trust within the meaning
of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a
Fiduciary Indemnified Person.
"Indenture" means the Indenture, dated as of the Closing Time,
between the Debenture Issuer and the Debenture Trustee, as amended from time to
time.
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"Initial Optional Redemption Date" has the meaning set forth in
Section 4(b) of Annex I hereto.
"Investment Company" means an investment company as defined in
the Investment Company Act.
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in Section
4(c) of Annex I hereto.
"Legal Action" has the meaning set forth in Section 3.6(g).
"Like Amount" has the meaning set forth in Section 3 of Annex I
hereto.
"List of Holders" has the meaning set forth in Section 2.2(a).
"Majority in Liquidation Amount" means, with respect to the
Trust Securities, except as otherwise provided in the terms of the Capital
Securities or by the Trust Indenture Act, Holders of outstanding Trust
Securities voting together as a single class or, as the context may require,
Holders of outstanding Capital Securities or Holders of outstanding Common
Securities voting separately as a class, excluding the Trust and the Debenture
Issuer and any Affiliate thereof, who are the record owners of more than 50% of
the aggregate liquidation amount (including the amount that would be paid on
redemption, liquidation or otherwise, plus accumulated and unpaid Distributions
to but excluding the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by an Authorized Officer of such Person. Any Officers'
Certificate delivered by the Trust shall be signed by at least one
Administrative Trustee. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Declaration shall
include:
(a) a statement that each officer signing the Certificate has
read the covenants or conditions and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the
Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of each
such officer, such condition or covenant has been complied with.
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"Opinion of Counsel" means a written opinion of counsel, who may
be an employee of the Sponsor, and who shall be acceptable to the Property
Trustee.
"Paying Agent" has the meaning specified in Section 7.4.
"Payment Amount" has the meaning specified in Section 6.1.
"Placement Agency Agreement" means the Placement Agency
Agreement, dated March 21, 2001, by and among the Sponsor, the Trust and the
Placement Agent named therein.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Property Trustee" has the meaning set forth in Section 5.3(a).
"Property Trustee Account" has the meaning set forth in Section
3.8(c)(i).
"Quorum" means a majority of the Administrative Trustees or, if
there are only two Administrative Trustees, both of them.
"Redemption Price" has the meaning set forth in Section 4(a) of
Annex I hereto.
"Registrar" has the meaning set forth in Section 7.4.
"Regulatory Capital Event" has the meaning set forth in Section
4(c) of Annex I hereto.
"Related Party" means, with respect to the Sponsor, any direct
or indirect wholly owned subsidiary of the Sponsor or any other Person that
owns, directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means any officer within the Corporate
Trust Office of the Property Trustee with direct responsibility for the
administration of this Declaration and also means, with respect to a particular
corporate trust matter, any other officer of the Property Trustee to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
"Restricted Capital Security" means a Capital Security required
by Section 9.2 to contain a Restricted Securities Legend.
"Restricted Definitive Capital Securities" has the meaning set
forth in Section 7.3.
"Restricted Securities Legend" has the meaning set forth in
Section 9.2(c).
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"Rule 3a-5" means Rule 3a-5 under the Investment Company Act, or
any successor rule or regulation.
"Rule 144" means Rule 144 under the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"Rule 144A" means Rule 144A under the Securities Act, as such
rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
"Securities" or "Trust Securities" means the Common Securities
and the Capital Securities.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, or any successor legislation.
"Securities Guarantees" means the Common Securities Guarantee
and the Capital Securities Guarantee.
"Special Event" has the meaning set forth in Section 4(c) of
Annex I hereto.
"Special Event Redemption Price" has the meaning set forth in
Section 4(c) of Annex I hereto.
"Sponsor" means Hawthorne Financial Corporation, a Delaware
corporation, or any successor entity resulting from any merger, consolidation,
amalgamation or other business combination, in its capacity as sponsor of the
Trust.
"Subscription Agreement" means the Subscription Agreement
relating to the Capital Securities, dated March 21, 2001, by and among the
Trust, the Debenture Issuer and MMCapS(SM) Funding I, Ltd.
"Successor Delaware Trustee" has the meaning set forth in
Section 5.6(b)(ii).
"Successor Entity" has the meaning set forth in Section
3.15(b)(i).
"Successor Property Trustee" has the meaning set forth in
Section 3.8(f)(ii).
"Successor Securities" has the meaning set forth in Section
3.15(b)(i).
"Super Majority" has the meaning set forth in Section 2.6(a)
(ii).
"Tax Event" has the meaning set forth in Section 4(c) of Annex I
hereto.
"Treasury Regulations" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by the
United States Treasury Department, as such regulations may be amended from time
to time (including corresponding provisions of succeeding regulations).
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"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.
"Trust Property" means (a) the Debentures, (b) any cash on
deposit in or owing to the Property Trustee Account and (c) all proceeds and
rights in respect of the foregoing and any other property and assets for the
time being held or deemed to be held by the Property Trustee pursuant to this
Declaration.
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue as a trustee of
the Trust in accordance with the terms hereof, and all other Persons who may
from time to time be duly appointed, qualified and serving as Trustees in
accordance with the provisions hereof, and references herein to a Trustee or the
Trustees shall refer to such Person or Persons solely in their capacity as
trustees hereunder.
"20% in Liquidation Amount" means, with respect to the Trust
Securities, except as otherwise provided in the terms of the Capital Securities
or by the Trust Indenture Act, Holders of outstanding Trust Securities voting
together as a single class or, as the context may require, Holders of
outstanding Capital Securities or Holders of outstanding Common Securities
voting separately as a class, excluding the Trust and the Debenture Issuer and
any Affiliate thereof, who are the record owners of 20% or more of the aggregate
liquidation amount (including the amount that would be paid on redemption,
liquidation or otherwise, plus accumulated and unpaid Distributions to but
excluding the date upon which the voting percentages are determined) of all
outstanding Securities of the relevant class.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust Indenture
Act that are required to be part of this Declaration in order for this
Declaration to be qualified under the Trust Indenture Act and shall, to the
extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Declaration limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Declaration shall
not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Administrative Trustees on behalf of the
Trust shall provide the Property Trustee, unless the Property Trustee is
Registrar for the Securities, (i)
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within 14 days after each record date for payment of Distributions, a list, in
such form as the Property Trustee may reasonably require, of the names and
addresses of the Holders ("List of Holders") as of such record date, provided,
that neither the Sponsor nor the Administrative Trustees on behalf of the Trust
shall be obligated to provide such List of Holders at any time that the List of
Holders does not differ from the most recent List of Holders given to the
Property Trustee by the Sponsor and the Administrative Trustees on behalf of the
Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a
written request for a List of Holders as of a date no more than 14 days before
such List of Holders is given to the Property Trustee. The Property Trustee
shall preserve, in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it or which it receives in
the capacity as Paying Agent (if acting in such capacity), provided, that the
Property Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under
Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
Within 60 days after the date hereof, and no later than the
anniversary date hereof in each succeeding year, the Property Trustee shall
provide to the Holders of the Capital Securities such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Property Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Property Trustee.
Each of the Sponsor and the Administrative Trustees on behalf of
the Trust shall provide to the Property Trustee and the Commission such
documents, reports and information as are required by Section 314 (if any) of
the Trust Indenture Act and shall provide to the Property Trustee the compliance
certificate required by Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Administrative Trustees on behalf of
the Trust shall provide to the Property Trustee such evidence of compliance with
any conditions precedent provided for in this Declaration that relate to any of
the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) of the Trust Indenture Act may be given in the form of an Officers'
Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in Liquidation Amount of Capital
Securities may, by vote, on behalf of the Holders of all of the Capital
Securities, waive any past Event of Default in respect of the Capital Securities
and its consequences, provided, that if the underlying Event of Default under
the Indenture:
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(i) is not waivable under the Indenture, the Event of
Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a
majority in aggregate principal amount of the holders of the
Debentures (a "Super Majority") to be waived under the
Indenture, the Event of Default under the Declaration may only
be waived by the vote of the Holders of at least the proportion
in aggregate liquidation amount of the Capital Securities that
the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
Default shall cease to exist, and any Event of Default with respect to the
Capital Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other Default or an Event of Default with respect to the Capital
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Capital Securities of an Event of Default with respect to the Capital
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in Liquidation Amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided, that if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except where
the Holders of the Common Securities are deemed to have waived
such Event of Default under the Declaration as provided below in
this Section 2.6(b), the Event of Default under the Declaration
shall also not be waivable; or
(ii) requires the consent or vote of a Super Majority to
be waived, except where the Holders of the Common Securities are
deemed to have waived such Event of Default under the
Declaration as provided below in this Section 2.6(b), the Event
of Default under the Declaration may only be waived by the vote
of the Holders of at least the proportion in aggregate
liquidation amount of the Common Securities that the relevant
Super Majority represents of the aggregate principal amount of
the Debentures outstanding;
provided further, each Holder of Common Securities will be deemed to have waived
any such Event of Default and all Events of Default with respect to the Common
Securities and their consequences if all Events of Default with respect to the
Capital Securities have been cured, waived or otherwise eliminated, and until
such Events of Default have been so cured, waived or otherwise eliminated, the
Property Trustee will be deemed to be acting solely on behalf of the
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Holders of the Capital Securities and only the Holders of the Capital Securities
will have the right to direct the Property Trustee in accordance with the terms
of the Securities. The foregoing provisions of this Section 2.6(b) shall be in
lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and
such Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are
hereby expressly excluded from this Declaration and the Securities, as permitted
by the Trust Indenture Act. Subject to the foregoing provisions of this Section
2.6(b), upon such waiver, any such Default shall cease to exist and any Event of
Default with respect to the Common Securities arising therefrom shall be deemed
to have been cured for every purpose of this Declaration, but no such waiver
shall extend to any subsequent or other Default or Event of Default with respect
to the Common Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the Property
Trustee, at the direction of the Holders of the Capital Securities, constitutes
a waiver of the corresponding Event of Default under this Declaration. The
foregoing provisions of this Section 2.6(c) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Default; Notice.
(a) The Property Trustee shall, within 90 days after the Property
Trustee has knowledge of the occurrence of a Default with respect to the
Securities, transmit by mail, first class postage prepaid, to the Holders,
notices of all such Defaults, unless such Defaults have been cured before the
giving of such notice or previously waived; provided, however, that except in
the case of a Default arising from the nonpayment of principal of (or premium,
if any) or interest (including Compounded Interest and Additional Sums (as such
terms are defined in the Indenture), if any) on any of the Debentures, the
Property Trustee shall be protected in withholding such notice if and so long as
a Responsible Officer in good faith determines that the withholding of such
notice is in the interests of the Holders.
(b) The Property Trustee shall not be deemed to have knowledge of any
Default or Event of Default except:
(i) a Default or Event of Default under Section 5.01(a)
(other than the payment or nonpayment of Compounded Interest,
Additional Sums and interest on any Other Debentures) or 5.01(b)
(other than payment or nonpayment of principal of any Other
Debentures) of the Indenture; or
(ii) any Default or Event of Default as to which the
Property Trustee shall have received written notice or of which
a Responsible Officer charged with the administration of the
Declaration shall have actual knowledge.
(c) Within ten Business Days after the Property Trustee has knowledge of
the occurrence of any Event of Default, the Property Trustee shall transmit
notice of such Event of Default to the Holders of the Capital Securities, the
Administrative Trustees and the Sponsor, unless such Event of Default shall have
been cured or waived. The Sponsor and the Administrative Trustees shall file
annually with the Property Trustee a certification as to whether
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or not they are in compliance with all the conditions and covenants applicable
to them under this Declaration.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named HFC Capital Trust I as such name may be
modified from time to time by the Administrative Trustees following written
notice to the Delaware Trustee, the Property Trustee and the Holders. The
Trust's activities may be conducted under the name of the Trust or any other
name deemed advisable by the Administrative Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust is 2381
Rosecrans Avenue, El Segundo, California 90245. On ten Business Days' prior
written notice to the Delaware Trustee, the Property Trustee and the Holders of
Securities, the Administrative Trustees may designate another principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to
issue and sell Securities, (b) use the proceeds from the sale of the Securities
to acquire the Debentures, and (c) except as otherwise limited herein, to engage
in only those other activities necessary, advisable or incidental thereto,
including without limitation, those activities specified in Sections 3.6, 3.8,
3.9, 3.10, 3.11 and/or 3.12. The Trust shall not borrow money, issue debt or
reinvest proceeds derived from investments, mortgage or pledge any of its
assets, or otherwise undertake (or permit to be undertaken) any activity that
would cause the Trust not to be classified for United States federal income tax
purposes as a grantor trust.
SECTION 3.4 Authority.
Subject to the limitations provided in this Declaration and to
the specific duties of the Property Trustee, the Administrative Trustees shall
have exclusive and complete authority to carry out the purposes of the Trust. An
action taken by one or more of the Administrative Trustees in accordance with
their powers shall constitute the act of and serve to bind the Trust and an
action taken by the Property Trustee on behalf of the Trust in accordance with
its powers shall constitute the act of and serve to bind the Trust. In dealing
with the Trustees acting on behalf of the Trust, no Person shall be required to
inquire into the authority of the Trustees to bind the Trust. Persons dealing
with the Trust are entitled to rely conclusively on the power and authority of
the Trustees as set forth in this Declaration.
SECTION 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the Debentures
and the Property Trustee Account or as otherwise provided in this Declaration,
legal title to all assets of
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the Trust shall be vested in the Trust. The Holders shall not have legal title
to any part of the assets of the Trust, but shall have an undivided beneficial
interest in the assets of the Trust.
SECTION 3.6 Powers and Duties of the Administrative Trustees.
Subject to Section 5.5, the Administrative Trustees acting
individually or together shall have the exclusive right, power, duty and
authority, and are hereby authorized and directed, to cause the Trust to engage
in the following activities:
(a) to execute, enter into and deliver the Common Securities
Subscription Agreement and to execute, deliver, issue and sell the Securities in
accordance with this Declaration; provided, however, that (i) the Trust may
issue no more than one series of Capital Securities and no more than one series
of Common Securities, (ii) there shall be no interests in the Trust other than
the Securities, and (iii) the issuance of Securities shall be limited to a
simultaneous issuance of both Capital Securities and Common Securities at the
Closing Time;
(b) in connection with the issue and sale of the Capital Securities, at
the direction of the Sponsor, to:
(i) execute and file any documents prepared by the
Sponsor, or take any acts as determined by the Sponsor to be
necessary in order to qualify or register all or part of the
Capital Securities in any State in which the Sponsor has
determined to qualify or register such Capital Securities for
sale;
(ii) execute, enter into, deliver and perform the
Subscription Agreement, the Placement Agency Agreement and
letters, instruments, agreements or documents relating to the
Capital Securities.
(c) to execute, enter into, deliver and perform the Debenture
Subscription Agreement, to acquire the Debentures with the proceeds of the sale
of the Capital Securities and the Common Securities; provided, however, that the
Administrative Trustees shall cause legal title to the Debentures to be held of
record in the name of the Property Trustee for the benefit of the Holders;
(d) to give the Sponsor and the Property Trustee prompt written notice
of the occurrence of a Special Event;
(e) to establish a record date with respect to all actions to be taken
hereunder that require a record date to be established, including and with
respect to, for the purposes of Section 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders with respect to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be required of
the Administrative Trustees pursuant to the terms of the Securities;
(g) to the fullest extent permitted by law, to bring or defend, pay,
collect, compromise, arbitrate, resort to legal action, or otherwise adjust
claims or demands of or against
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the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property
Trustee has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees, agents (who may be
designated as officers with titles), managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under the
Trust Indenture Act;
(j) to give the certificate required by Section 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by any
Administrative Trustee;
(k) to incur expenses that are necessary or incidental to carry out any
of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, Registrar and
Exchange Agent for the Securities or to appoint a Paying Agent for the
Securities as provided in Section 7.4 except for such time as such power to
appoint a Paying Agent is vested in the Property Trustee;
(m) to give prompt written notice to the Property Trustee and to the
Holders of any notice received from the Debenture Issuer of its election to
defer payments of interest on the Debentures by extending the interest payment
period under the Indenture;
(n) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders or to enable the Trust
to effect the purposes for which the Trust was created;
(o) to take any action, not inconsistent with this Declaration or with
applicable law, that the Administrative Trustees determine in their discretion
to be necessary or desirable in carrying out the activities of the Trust as set
out in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be an
Investment Company required to be registered under the
Investment Company Act;
(ii) causing the Trust to continue to be classified for
United States federal income tax purposes as a grantor trust;
and
(iii) cooperating with the Debenture Issuer to ensure
that the Debentures will be treated as indebtedness of the
Debenture Issuer for United States federal income tax purposes;
(p) to take all action necessary to cause all applicable tax returns and
tax information reports that are required to be filed with respect to the Trust
to be duly prepared and filed by the Administrative Trustees, on behalf of the
Trust; and
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(q) to execute and deliver all documents, agreements, certificates and
instruments, exercise all rights and powers, perform all duties and do all
things for and on behalf of the Trust in all matters necessary, advisable or
incidental to the foregoing or the transactions contemplated thereby.
The Administrative Trustees must exercise the powers set forth
in this Section 3.6 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.3, and the Administrative Trustees
shall not take any action that is inconsistent with the purposes and functions
of the Trust set forth in Section 3.3.
Subject to this Section 3.6, the Administrative Trustees shall
have none of the powers or the authority of the Property Trustee set forth in
Section 3.8.
Any expenses incurred by the Administrative Trustees pursuant to
this Section 3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
The Trust shall not, and the Trustees (including the Property
Trustee and the Delaware Trustee) shall not, and the Administrative Trustees
shall cause the Trust not to, engage in any activity other than as required or
authorized by this Declaration. Notwithstanding any provision in this
Declaration to the contrary, the Trust shall not:
(i) invest any proceeds received by the Trust from
holding the Debentures, but shall distribute all such proceeds
to Holders pursuant to the terms of this Declaration and of the
Securities;
(ii) acquire any assets other than as expressly provided
herein;
(iii) possess Trust Property for other than a Trust
purpose or execute any mortgage in respect of, or pledge, any
Trust Property;
(iv) make any loans or incur any indebtedness other than
loans represented by the Debentures;
(v) possess any power or otherwise act in such a way as
to vary the Trust Property or the terms of the Securities in any
way whatsoever;
(vi) issue any securities or other evidences of
beneficial ownership of, or beneficial interest in, the Trust
other than the Securities;
(vii) other than as provided in this Declaration or
Annex I hereto, (A) direct the time, method and place of
conducting any proceeding with respect to any remedy available
to the Debenture Trustee, or exercising any trust or power
conferred upon the Debenture Trustee with respect to the
Debentures, (B) waive any past default that is waivable under
the Indenture, or (C) exercise any right to rescind or annul any
declaration that the principal of all the Debentures shall be
due and payable; or
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(viii) consent to any amendment, modification or
termination of the Indenture or the Debentures where such
consent shall be required unless the Trust shall have received
an opinion of independent tax counsel experienced in such
matters to the effect that such amendment, modification or
termination will not cause more than an insubstantial risk that
the Trust will not be classified as a grantor trust for United
States federal income tax purposes.
SECTION 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Property Trustee in trust for the benefit of the Trust
and the Holders. The right, title and interest of the Property Trustee to the
Debentures shall vest automatically in each Person who may hereafter be
appointed as Property Trustee in accordance with Section 5.6. Such vesting and
cessation of title shall be effective whether or not conveyancing documents with
regard to the Debentures have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and
interest in the Debentures to the Administrative Trustees or to the Delaware
Trustee (if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest
bearing trust account (the "Property Trustee Account") in the
name of and under the exclusive control of the Property Trustee
on behalf of the Holders and, upon the receipt of payments of
funds made in respect of the Debentures held by the Property
Trustee, deposit such funds into the Property Trustee Account
and make payments or cause the Paying Agent to make payments to
the Holders from the Property Trustee Account in accordance with
Section 6.1; funds in the Property Trustee Account shall be held
uninvested until disbursed in accordance with this Declaration;
and the Property Trustee Account shall be an account that is
maintained with a banking institution the rating on whose
long-term unsecured indebtedness by a "nationally recognized
statistical rating organization," as that term is defined for
purposes of Rule 436(g)(2) under the Securities Act, is at least
equal to the rating assigned to the Capital Securities, unless
the Capital Securities are not rated, in which case the banking
institution's long term unsecured indebtedness shall be rated at
least investment grade by a "nationally recognized statistical
rating organization;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the
Securities to the extent the Debentures are redeemed or mature;
and
(iii) upon written notice of distribution issued by the
Administrative Trustees in accordance with the terms of the
Securities, engage in such
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ministerial activities as shall be necessary or appropriate to
effect the distribution of the Debentures to Holders upon the
occurrence of certain events.
(d) The Property Trustee shall take all actions and perform such duties
as may be specifically required of the Property Trustee pursuant to the terms of
this Declaration and the Securities.
(e) Subject to Section 3.9(a), the Property Trustee shall take any Legal
Action which arises out of or in connection with an Event of Default of which a
Responsible Officer has actual knowledge or the Property Trustee's duties and
obligations under this Declaration or the Trust Indenture Act; and if the
Property Trustee shall have failed to take such Legal Action following a written
request from the Holders, the Holders of the Capital Securities may, to the
fullest extent permitted by law, take such Legal Action, to the same extent as
if such Holders of Capital Securities held an aggregate principal amount of
Debentures equal to the aggregate liquidation amount of such Capital Securities,
without first proceeding against the Property Trustee or the Trust; provided,
however, that if an Event of Default has occurred and is continuing and such
event is attributable to the failure of the Debenture Issuer to pay the
principal of or premium, if any, or interest (including Compounded Interest and
Additional Sums, if any) on the Debentures on the date such principal, premium,
if any, or interest (including Compounded Interest and Additional Sums, if any)
is otherwise payable (or in the case of redemption, on the redemption date),
then a Holder of Capital Securities may directly institute a proceeding for
enforcement of payment to such Holder of the principal of or premium, if any, or
interest (including Compounded Interest and Additional Sums, if any) on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Capital Securities of such Holder (a "Direct Action") on or after the
respective due date specified in the Debentures. In connection with such Direct
Action, the Holders of the Common Securities will be subrogated to the rights of
such Holder of Capital Securities to the extent of any payment made by the
Debenture Issuer to such Holder of Capital Securities in such Direct Action.
Except as provided in the preceding sentences, the Holders of Capital Securities
will not be able to exercise directly any other remedy available to the holders
of the Debentures.
(f) The Property Trustee shall continue to serve as a Trustee until
either:
(i) the Trust has been completely liquidated and the
proceeds of the liquidation distributed to the Holders pursuant
to the terms of the Securities and this Declaration; or
(ii) a successor Property Trustee has been appointed and
has accepted that appointment in accordance with Section 5.6 (a
"Successor Property Trustee").
(g) The Property Trustee shall have the legal power to exercise all of
the rights, powers and privileges of a holder of Debentures under the Indenture
and, if an Event of Default actually known to a Responsible Officer occurs and
is continuing, the Property Trustee shall, for the benefit of Holders, enforce
its rights as holder of the Debentures subject to the rights of the Holders
pursuant to the terms of this Declaration and the Securities.
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(h) The Property Trustee shall be authorized to undertake any actions
set forth in Section 317(a) of the Trust Indenture Act.
(i) For such time as the Property Trustee is the Paying Agent, the
Property Trustee may authorize one or more Persons to act as additional Paying
Agents and to pay Distributions, redemption payments or liquidation payments on
behalf of the Trust with respect to all Securities and any such Paying Agent
shall comply with Section 317(b) of the Trust Indenture Act. Any such additional
Paying Agent may be removed by the Property Trustee at any time the Property
Trustee remains as Paying Agent and a successor Paying Agent or additional
Paying Agents may be (but are not required to be) appointed at any time by the
Property Trustee while the Property Trustee is acting as Paying Agent.
(j) Subject to this Section 3.8, the Property Trustee shall have none of
the duties, liabilities, powers or the authority of the Administrative Trustees
set forth in Section 3.6.
Notwithstanding anything expressed or implied to the contrary in
this Declaration or any Annex or Exhibit hereto, (i) the Property Trustee must
exercise the powers set forth in this Section 3.8 in a manner that is consistent
with the purposes and functions of the Trust set out in Section 3.3, and (ii)
the Property Trustee shall not take any action that is inconsistent with the
purposes and functions of the Trust set out in Section 3.3.
(k) If the Property Trustee or any Holder has instituted any proceeding
to enforce any right or remedy under this Declaration and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Property Trustee or to such Holder, then and in every such case the
Sponsor, the Property Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Property Trustee and the Holders shall continue as though no such proceeding had
been instituted.
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.
(a) The Property Trustee, before the occurrence of any Event of Default
(of which, other than in the case of Events of Default under Sections 5.01(a)
and 5.01(b) of the Indenture, which the Property Trustee is deemed to have
knowledge of as provided in Section 2.7(b) hereof, a Responsible Officer of the
Property Trustee has actual knowledge) and after the curing or waiving of all
such Events of Default that may have occurred, shall undertake to perform only
such duties as are specifically set forth in this Declaration and in the
Securities and no implied covenants shall be read into this Declaration against
the Property Trustee. In case an Event of Default has occurred (that has not
been cured or waived pursuant to Section 2.6) of which a Responsible Officer has
actual knowledge, the Property Trustee shall exercise such of the rights and
powers vested in it by this Declaration, and use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
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(i) prior to the occurrence of an Event of Default (of
which, other than in the case of Events of Default under
Sections 5.01(a) and 5.01(b) of the Indenture, which the
Property Trustee is deemed to have knowledge of as provided in
Section 2.7(b) hereof, a Responsible Officer of the Property
Trustee has actual knowledge) and after the curing or waiving of
all such Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee
shall be determined solely by the express provisions of
this Declaration and in the Securities and the Property
Trustee shall not be liable except for the performance
of such duties and obligations as are specifically set
forth in this Declaration and in the Securities, and no
implied covenants or obligations shall be read into this
Declaration against the Property Trustee; and
(B) in the absence of bad faith on the part of the
Property Trustee, the Property Trustee may conclusively
rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Property
Trustee and conforming to the requirements of this
Declaration; provided, however, that in the case of any
such certificates or opinions that by any provision
hereof are specifically required to be furnished to the
Property Trustee, the Property Trustee shall be under a
duty to examine the same to determine whether or not on
their face they conform to the requirements of this
Declaration;
(ii) the Property Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer,
unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of a
Majority in Liquidation Amount of the Securities relating to the
time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or exercising any
trust or power conferred upon the Property Trustee under this
Declaration;
(iv) no provision of this Declaration shall require the
Property Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of
its duties or in the exercise of any of its rights or powers;
(v) the Property Trustee's sole duty with respect to the
custody, safekeeping and physical preservation of the Debentures
and the Property Trustee Account shall be to deal with such
property in a similar manner as the Property Trustee deals with
similar property for its own account, subject
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to the protections and limitations on liability afforded to the
Property Trustee under this Declaration and the Trust Indenture
Act;
(vi) the Property Trustee shall have no duty or
liability for or with respect to the value, genuineness,
existence or sufficiency of the Debentures or the payment of any
taxes or assessments levied thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise
agree in writing with the Sponsor. Money held by the Property
Trustee need not be segregated from other funds held by it
except in relation to the Property Trustee Account maintained by
the Property Trustee pursuant to Section 3.8(c)(i) and except to
the extent otherwise required by law; and
(viii) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Sponsor with their respective duties under this Declaration, nor
shall the Property Trustee be liable for any default or
misconduct of the Administrative Trustees or the Sponsor.
SECTION 3.10 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may conclusively rely and shall
be fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;
(ii) any direction or act of the Sponsor or the
Administrative Trustees contemplated by this Declaration may be
sufficiently evidenced by an Officers' Certificate;
(iii) whenever in the administration of this
Declaration, the Property Trustee shall deem it desirable that a
matter be proved or established before taking, suffering or
omitting any action hereunder, the Property Trustee (unless
other evidence is herein specifically prescribed) may, in the
absence of bad faith on its part, request and conclusively rely
upon an Officers' Certificate which, upon receipt of such
request, shall be promptly delivered by the Sponsor or the
Administrative Trustees;
(iv) the Property Trustee shall have no duty to see to
any recording, filing or registration of any instrument
(including any financing or continuation statement or any filing
under tax or securities laws) or any rerecording, refiling or
registration thereof;
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(v) the Property Trustee may consult with counsel or
other experts of its selection, and the advice or opinion of
such counsel and experts with respect to legal matters or advice
within the scope of such experts' area of expertise shall be
full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith
and in accordance with such advice or opinion; such counsel may
be counsel to the Sponsor or any of its Affiliates, and may
include any of its employees; and the Property Trustee shall
have the right at any time to seek instructions concerning the
administration of this Declaration from any court of competent
jurisdiction;
(vi) the Property Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this
Declaration at the request or direction of any Holder, unless
such Holder shall have provided to the Property Trustee security
and indemnity, reasonably satisfactory to the Property Trustee,
against the costs, expenses (including reasonable attorneys'
fees and expenses and the expenses of the Property Trustee's
agents, nominees or custodians) and liabilities that might be
incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the
Property Trustee; provided, however, that, nothing contained in
this Section 3.10(a)(vi) shall be taken to relieve the Property
Trustee, upon the occurrence of an Event of Default (of which,
other than in the case of Events of Default under Sections
5.01(a) and 5.01(b) of the Indenture, which the Property Trustee
is deemed to have knowledge of as provided in Section 2.7(b)
hereof, a Responsible Officer of the Property Trustee has actual
knowledge), of its obligation to exercise the rights and powers
vested in it by this Declaration;
(vii) the Property Trustee shall not be bound to make
any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document,
but the Property Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as
it may see fit;
(viii) the Property Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, custodians, nominees or
attorneys, and the Property Trustee shall not be responsible for
any misconduct or negligence on the part of any such agent,
custodian, nominee or attorney appointed with due care by it
hereunder;
(ix) any action taken by the Property Trustee or its
agents hereunder shall bind the Trust and the Holders, and the
signature of the Property Trustee or its agents alone shall be
sufficient and effective to perform any such action and no third
party shall be required to inquire as to the authority of the
Property Trustee to so act or as to its compliance with any of
the terms and
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provisions of this Declaration, both of which shall be
conclusively evidenced by the Property Trustee's or its agent's
taking such action;
(x) whenever in the administration of this Declaration
the Property Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Property Trustee (i) may
request instructions from the Holders which instructions may
only be given by the Holders of the same proportion in
liquidation amount of the Securities as would be entitled to
direct the Property Trustee under the terms of the Securities in
respect of such remedy, right or action, (ii) may refrain from
enforcing such remedy or right or taking such other action until
such instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such
instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any
obligation to take any action that is discretionary under the
provisions of this Declaration; and
(xii) the Property Trustee shall not be liable for any
action taken, suffered, or omitted to be taken by it in good
faith, without negligence or willful misconduct, and reasonably
believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose any duty
or obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other
than Section 5.2, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Trustees described in this Declaration (except as
required under the Business Trust Act). Except as set forth in Section 5.2, the
Delaware Trustee shall be a Trustee for the sole and limited purpose of
fulfilling the requirements of Section 3807 of the Business Trust Act. In the
event the Delaware Trustee shall at any time be required to take any action or
perform any duty hereunder, the Delaware Trustee shall be entitled to the
benefits of Section 3.9(b)(ii) to (viii), inclusive, and Section 3.10. No
implied covenants or obligations shall be read into this Declaration against the
Delaware Trustee.
SECTION 3.12 Execution of Documents.
Unless otherwise required by applicable law, each Administrative
Trustee, individually, is authorized to execute and deliver on behalf of the
Trust any documents,
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agreements, instruments or certificates that the Administrative Trustees have
the power and authority to execute pursuant to Section 3.6.
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities
The recitals contained in this Declaration and the Securities
shall be taken as the statements of the Sponsor, and the Trustees do not assume
any responsibility for their correctness. The Trustees make no representations
as to the value or condition of the Trust Property or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.14 Duration of Trust.
The Trust, unless earlier dissolved pursuant to the provisions
of Article VIII hereof, shall dissolve on June 8, 2036.
SECTION 3.15 Mergers.
(a) The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any Person, except as described in
Section 3.15(b) and (c) and except with respect to the distribution of
Debentures to Holders pursuant to Section 8.1(a)(iii) of this Declaration or
Section 3 of Annex I.
(b) The Trust may, at the request of the Sponsor, with the consent of
the Administrative Trustees or, if there are more than two, a majority of the
Administrative Trustees and without the consent of the Holders, the Delaware
Trustee or the Property Trustee, merge with or into, consolidate, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to, a trust organized as such under the
laws of any State; provided, that:
(i) such successor entity (the "Successor Entity")
either:
(A) expressly assumes all of the obligations of the
Trust under the Securities; or
(B) substitutes for the Securities other securities
having substantially the same terms as the Securities
(the "Successor Securities") so long as the Successor
Securities rank the same as the Securities rank in
priority with respect to Distributions and payments upon
liquidation, redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the
Successor Entity that possesses the same powers and duties as
the Property Trustee with respect to the Debentures;
(iii) the Successor Securities (excluding any securities
substituted for the Common Securities) are listed, quoted or
included for trading, or any
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Successor Securities will be listed, quoted or included for
trading upon notification of issuance, on any national
securities exchange or with any other organization on which the
Capital Securities are then listed, quoted or included;
(iv) if the Capital Securities or the Debentures are
rated, such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the Capital
Securities (including any Successor Securities) or the
Debentures to be downgraded by any nationally recognized
statistical rating organization that publishes a rating on the
Capital Securities or the Debentures;
(v) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders
(including the holders of any Successor Securities) in any
material respect (other than with respect to any dilution of the
interests of such Holders or holders, as the case may be, in the
Successor Entity);
(vi) the Successor Entity has a purpose substantially
identical to that of the Trust;
(vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Sponsor has
received an opinion of independent counsel to the Trust
experienced in such matters to the effect that:
(A) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges
of the Holders (including the holders of any Successor
Securities) in any material respect (other than with
respect to any dilution of the interests of such Holders
or holders, as the case may be, in the Successor
Entity);
(B) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the
Trust nor the Successor Entity will be required to
register as an Investment Company; and
(C) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Trust
(or the Successor Entity) will continue to be classified
as a grantor trust for United States federal income tax
purposes;
(viii) the Sponsor or any permitted successor or
assignee of the Sponsor owns all of the common securities of the
Successor Entity and guarantees the obligations of the Successor
Entity under the Successor Securities at least to the extent
provided by the Securities Guarantees; and
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(ix) there shall have been furnished to the Property
Trustee an Officers' Certificate and an Opinion of Counsel, each
to the effect that all conditions precedent in this Declaration
to such transaction have been satisfied.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with
the consent of Holders of 100% in aggregate liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to, any other Person or permit any other Person to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Trust or the Successor Entity not to be classified as a grantor
trust for United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
At the Closing Time, pursuant to the Common Securities
Subscription Agreement, the Sponsor will purchase all of the Common Securities
then issued by the Trust, in an amount equal to at least 3% of the total capital
of the Trust, at the same time as the Capital Securities are issued and sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Capital Securities,
the Sponsor shall have the exclusive right and responsibility to engage in, or
direct the Administrative Trustees to engage in, the following activities:
(a) to determine the States in which to take appropriate action to
qualify or register for sale all or part of the Capital Securities and to do any
and all such acts, other than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and prepare for execution and filing
any documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
States; and
(b) to negotiate the terms of, execute, enter into and deliver the
Subscription Agreement and the Placement Agency Agreement.
SECTION 4.3 Right to Proceed.
The Sponsor acknowledges the rights of the Holders of Capital
Securities, in the event that a failure of the Trust to make any payments in
respect of the Capital Securities is attributable to the failure of the
Debenture Issuer to pay the principal of or premium (if any) or interest on the
Debentures, to institute a proceeding directly against the Debenture Issuer for
enforcement of its payment obligations in respect of the Debentures.
SECTION 4.4 Right to Dissolve Trust.
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The Sponsor will have the right at any time to dissolve the
Trust and, after satisfaction of liabilities to creditors of the Trust as
required by applicable law, to cause the Debentures to be distributed to the
Holders in liquidation of the Trust. Such right is subject to the Sponsor's
having received (i) an Opinion of Counsel to the effect that such distribution
will not cause the Holders of Capital Securities to recognize gain or loss for
United States federal income tax purposes and (ii) all required regulatory
approvals.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees; Appointment of Co-Trustee.
The number of Trustees initially shall be five (5), and:
(a) at any time before the issuance of any Securities, the Sponsor may,
by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may be
increased or decreased by vote of the Holders of a Majority in Liquidation
Amount of the Common Securities voting as a class at a meeting of the Holders of
the Common Securities;
provided, however, that, the number of Trustees shall in no event be less than
two (2); provided further, that (1) one Trustee, in the case of a natural
person, shall be a person who is a resident of the State of Delaware or that, if
not a natural person, is an entity which has its principal place of business in
the State of Delaware (the "Delaware Trustee"); (2) there shall be at least one
Trustee who is an employee or officer of, or is affiliated with, the Sponsor (an
"Administrative Trustee"); and (3) one Trustee shall be the Property Trustee for
so long as this Declaration is required to qualify as an indenture under the
Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if it
meets the applicable requirements. Notwithstanding the above, unless an Event of
Default shall have occurred and be continuing, at any time or times, for the
purpose of meeting the legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the Trust Property may at the time be located,
the Holders of a Majority in Liquidation Amount of the Common Securities acting
as a class at a meeting of the Holders of the Common Securities, and the
Administrative Trustees shall have power to appoint one or more Persons either
to act as a co-trustee, jointly with the Property Trustee, of all or any part of
the Trust Property, or to act as separate trustee of any such property, in
either case with such powers as may be provided in the instrument of
appointment, and to vest in such Person or Persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of this Declaration. In case an Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make any such
appointment of a co-trustee.
SECTION 5.2 Delaware Trustee.
For so long as required by the Business Trust Act, the Delaware
Trustee shall be:
(a) a natural person who is a resident of the State of Delaware; or
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(b) if not a natural person, an entity which has its principal place of
business in the State of Delaware, and otherwise meets the requirements of
applicable law,
provided, however, that, if the Property Trustee has its principal place of
business in the State of Delaware and otherwise meets the requirements of
applicable law, then the Property Trustee shall also be the Delaware Trustee and
Section 3.11 shall have no application.
The initial Delaware Trustee shall be:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Telephone: (302) 651-1000
Telecopier: (302) 651-8882
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee (the "Property Trustee")
which shall act as Property Trustee and which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under
the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a
corporation or Person permitted by the Commission to act as an
indenture trustee under the Trust Indenture Act, authorized
under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least fifty million U.S.
dollars ($50,000,000), and subject to supervision or examination
by federal, state, territorial or District of Columbia
authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then for
the purposes of this Section 5.3(a)(ii), the combined capital
and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent
report of condition so published.
(b) If at any time the Property Trustee shall cease to be eligible to so
act under Section 5.3(a), the Property Trustee shall immediately resign in the
manner and with the effect set forth in Section 5.6(c).
(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 330(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
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(d) The Capital Securities Guarantee shall be deemed to be specifically
described in this Declaration for purposes of clause (i) of the first proviso
contained in Section 310 (b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Telephone: (302) 651-1000
Telecopier: (302) 651-8882
SECTION 5.4 Certain Qualifications of Administrative Trustees and Delaware
Trustee Generally.
Each Administrative Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural person
who is at least 21 years of age or a legal entity that shall act through one or
more Authorized Officers.
SECTION 5.5 Administrative Trustees.
The initial Administrative Trustees shall be:
Simone F. Lagomarsino
Karen Abajian
Eileen Lyon
c/o Hawthorne Financial Corporation
2381 Rosecrans Avenue
El Segundo, California 90245
Telephone: (310) 725-5000
Telecopier: (310) 643-8304
(a) Except as otherwise expressly set forth in this Declaration and
except if a meeting of the Administrative Trustees is called with respect to any
matter over which the Administrative Trustees have power to act, any power of
the Administrative Trustees may be exercised by, or with the consent of, any one
such Administrative Trustee.
(b) Unless otherwise required by the Business Trust Act or other
applicable law, any Administrative Trustee acting alone is authorized to execute
on behalf of the Trust any documents which the Administrative Trustees have the
power and authority to cause the Trust to execute pursuant to Section 3.6.
(c) An Administrative Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purposes of signing any documents which the Administrative
Trustees have power and authority to cause the Trust to execute pursuant to
Section 3.6.
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SECTION 5.6 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.6(b) hereof and to Section 6(b) of Annex I
hereto, Trustees may be appointed or removed without cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor;
(ii) unless an Event of Default shall have occurred and
be continuing after the issuance of any Securities, by vote of
the Holders of a Majority in Liquidation Amount of the Common
Securities voting as a class at a meeting of the Holders of the
Common Securities; and
(iii) if an Event of Default shall have occurred and be
continuing after the issuance of the Securities, with respect to
the Property Trustee or the Delaware Trustee, by vote of Holders
of a Majority in Liquidation Amount of the Capital Securities
voting as a class at a meeting of Holders of the Capital
Securities, and with respect to the Administrative Trustees, in
the manner set forth in Section 5.6(a)(ii) hereof.
(b) (i) The Trustee that acts as Property Trustee shall
not be removed in accordance with Section 5.6(a) until a
Successor Property Trustee has been appointed and has accepted
such appointment by written instrument executed by such
Successor Property Trustee and delivered to the removed Property
Trustee, the Administrative Trustees and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not
be removed in accordance with this Section 5.6(a) until a
successor Trustee possessing the qualifications to act as
Delaware Trustee under Sections 5.2 and 5.4 (a "Successor
Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor
Delaware Trustee and delivered to the removed Delaware Trustee,
the Property Trustee (if the removed Delaware Trustee is not
also the Property Trustee), the Administrative Trustees and the
Sponsor.
(c) A Trustee appointed to office shall hold office until his successor
shall have been appointed or until his death, removal or resignation. Any
Trustee may resign from office (without need for prior or subsequent accounting)
by an instrument in writing signed by the Trustee and delivered to the other
Trustees, the Sponsor and the Trust, which resignation shall take effect upon
such delivery or upon such later date as is specified therein; provided,
however, that:
(i) No such resignation of the Trustee that acts as the
Property Trustee shall be effective:
(A) until a Successor Property Trustee has been
appointed and has accepted such appointment by
instrument executed by such Successor Property Trustee
and delivered to the Trust, the Sponsor, the Delaware
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Trustee (if the resigning Property Trustee is not also
the Delaware Trustee) and the resigning Property
Trustee; or
(B) until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the
Holders; and
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware
Trustee has been appointed and has accepted such appointment by
instrument executed by such Successor Delaware Trustee and
delivered to the Trust, the Property Trustee (if the resigning
Delaware Trustee is not also the Property Trustee), the Sponsor
and the resigning Delaware Trustee.
(d) The Holders of the Common Securities or, if an Event of Default
shall have occurred and be continuing after the issuance of the Securities, the
Holders of the Capital Securities shall use their best efforts to promptly
appoint a Successor Property Trustee or Successor Delaware Trustee, as the case
may be, if the Property Trustee or the Delaware Trustee delivers an instrument
of resignation in accordance with this Section 5.6.
(e) If no Successor Property Trustee or Successor Delaware Trustee shall
have been appointed and accepted appointment as provided in this Section 5.6
within 60 days after delivery of an instrument of resignation or removal, the
Property Trustee or Delaware Trustee resigning or being removed, as applicable,
may petition any court of competent jurisdiction for appointment of a Successor
Property Trustee or Successor Delaware Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Property Trustee or Successor Delaware Trustee, as the case may be.
(f) No Property Trustee or Delaware Trustee shall be liable for the acts
or omissions to act of any Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
(g) At the time of resignation or removal of the Property Trustee or the
Delaware Trustee, the Sponsor shall pay to such Trustee any amounts that may be
owed to such Trustee pursuant to Section 10.4.
(h) Any successor Delaware Trustee shall file an amendment to the
Certificate of Trust with the Secretary of State of the State of Delaware
identifying the name and principal place of business of such Successor Delaware
Trustee in the State of Delaware.
SECTION 5.7 Vacancies Among Trustees.
If a Trustee ceases to hold office for any reason and the number
of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees
is increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Administrative Trustees or, if
there are more than two, a majority of the Administrative Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.6.
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SECTION 5.8 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of a
Trustee shall not operate to dissolve, liquidate or annul the Trust or to
terminate this Declaration. Whenever a vacancy in the number of Administrative
Trustees shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 5.6, the Administrative
Trustees in office, regardless of their number, shall have all the powers
granted to the Administrative Trustees and shall discharge all the duties
imposed upon the Administrative Trustees by this Declaration.
SECTION 5.9 Meetings.
If there is more than one Administrative Trustee, meetings of
the Administrative Trustees shall be held from time to time upon the call of any
Administrative Trustee. Regular meetings of the Administrative Trustees may be
held at a time and place fixed by resolution of the Administrative Trustees.
Notice of any in-person meetings of the Administrative Trustees shall be hand
delivered or otherwise delivered in writing (including by facsimile, with a hard
copy by overnight courier) not less than 24 hours before such meeting. Notice of
any telephonic meetings of the Administrative Trustees or any committee thereof
shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of an Administrative Trustee at a meeting shall constitute a waiver
of notice of such meeting except where an Administrative Trustee attends a
meeting for the express purpose of objecting to the transaction of any activity
on the ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Administrative
Trustees may be taken at a meeting by vote of a majority of the Administrative
Trustees present (whether in person or by telephone) and eligible to vote with
respect to such matter, provided, that a Quorum is present, or without a meeting
by the unanimous written consent of the Administrative Trustees. In the event
there is only one Administrative Trustee, any and all action of such
Administrative Trustee shall be evidenced by a written consent of such
Administrative Trustee.
SECTION 5.10 Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section 3.6
or making any other governmental filing.
(b) The Administrative Trustees shall have power to delegate from time
to time to such of their number or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Administrative Trustees or otherwise as the Administrative
Trustees may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of this Declaration.
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business.
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Any Person into which the Property Trustee or the Delaware
Trustee or any Administrative Trustee that is not a natural person, as the case
may be, may be merged or converted or with which it may be consolidated, or any
Person resulting from any merger, conversion or consolidation to which the
Property Trustee or the Delaware Trustee, as the case may be, shall be a party,
or any Person succeeding to all or substantially all the corporate trust
business of the Property Trustee or the Delaware Trustee, as the case may be,
shall be the successor of the Property Trustee or the Delaware Trustee, as the
case may be, hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided such Person shall
be otherwise qualified and eligible under this Article and provided further that
such Person shall file an amendment to the Certificate of Trust with the
Delaware Secretary of State as contemplated in Section 5.6(h).
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions in accordance with the
applicable terms of the relevant Holder's Securities. If and to the extent that
the Debenture Issuer makes a payment of interest (including Compounded Interest
and Additional Sums), premium and/or principal on the Debentures held by the
Property Trustee (the amount of any such payment being a "Payment Amount"), the
Property Trustee shall and is directed, to the extent funds are available for
that purpose, to make a distribution (a "Distribution") of the Payment Amount to
Holders in accordance with the terms of the Securities.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Administrative Trustees shall, on behalf of the Trust, issue one
class of MMCapS(SM) representing undivided preferred beneficial interests in the
assets of the Trust having such terms as are set forth in Annex I (the "Capital
Securities") and one class of common securities representing undivided common
beneficial interests in the assets of the Trust having such terms as are set
forth in Annex I (the "Common Securities"). The Trust shall issue no securities
or other interests in the assets of the Trust other than the Capital Securities
and the Common Securities.
(b) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this Declaration, the
Securities so issued shall be deemed to be validly issued and, subject to the
terms of this Declaration, fully paid and nonassessable undivided beneficial
interests in the assets of the Trust and entitled to the
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benefits of this Declaration, and the Holders thereof shall be entitled to the
benefits of this Declaration.
(d) Every Person, by virtue of having become a Holder in accordance with
the terms of this Declaration, shall be deemed to have expressly assented and
agreed to the terms of, and shall be bound by, this Declaration.
SECTION 7.2 Execution and Authentication.
(a) The Securities shall be signed on behalf of the Trust by an
Administrative Trustee. In case any Administrative Trustee of the Trust who
shall have signed any of the Securities shall cease to be such Administrative
Trustee before the Securities so signed shall be delivered by the Trust, such
Securities nevertheless may be delivered as though the Person who signed such
Securities had not ceased to be such Administrative Trustee; and any Securities
may be signed on behalf of the Trust by such persons who, at the actual date of
execution of such Security, shall be the Administrative Trustees of the Trust,
although at the date of the execution and delivery of this Declaration any such
person was not an Administrative Trustee.
(b) One Administrative Trustee shall sign the Capital Securities for the
Trust by manual or facsimile signature. Unless otherwise determined by an
Administrative Trustee on behalf of the Trust, an Administrative Trustee shall
sign the Common Securities for the Trust by manual signature.
A Capital Security shall not be valid until authenticated by the
manual signature of an authorized signatory of the Property Trustee. The
signature shall be conclusive evidence that the Capital Security has been
authenticated under this Declaration. A Common Security shall be valid upon
execution by an Administrative Trustee without any act of the Property Trustee.
Upon a written order of the Trust signed by one Administrative
Trustee, the Property Trustee shall authenticate the Capital Securities for
original issue. The aggregate number of Capital Securities outstanding at any
time shall not exceed the number set forth in Annex I hereto except as provided
in Section 7.6.
The Property Trustee may appoint an authenticating agent
acceptable to the Trust to authenticate Capital Securities. An authenticating
agent may authenticate Capital Securities whenever the Property Trustee may do
so. Each reference in this Declaration to authentication by the Property Trustee
includes authentication by such agent. An authenticating agent has the same
rights as the Property Trustee hereunder with respect to the Sponsor or an
Affiliate.
SECTION 7.3 Form and Dating.
The Capital Securities shall be evidenced by one or more
certificates substantially in the form of Exhibit A-1, and the Common Securities
shall be evidenced by one or more certificates substantially in the form of
Exhibit A-2. The Property Trustee's certificate of authentication shall be
substantially in the form set forth in Exhibit A-1. Certificates representing
the Securities may be printed, lithographed or engraved or may be produced in
any
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other manner as is reasonably acceptable to an Administrative Trustee, as
evidenced by the execution thereof. The Securities may have letters, "CUSIP" or
other numbers, notations or other marks of identification or designation and
such legends or endorsements required by law, stock exchange rule, agreements to
which the Trust is subject, if any, or usage, provided, that any such notation,
legend or endorsement is in a form acceptable to the Administrative Trustees, as
evidenced by their execution thereof. The Trust at the direction of the Sponsor,
shall furnish any such legend not contained in Exhibit A-1 to the Property
Trustee in writing. Each Capital Security shall be dated the date of its
authentication. The terms and provisions of the Securities set forth in Annex I
and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the
terms of this Declaration and, to the extent applicable, the Property Trustee
and the Sponsor, by their execution and delivery of this Declaration, expressly
agree to such terms and provisions and to be bound thereby.
Purchasers of Capital Securities will be entitled to receive
physical delivery of certificated Capital Securities in the form of individual
certificates ("Capital Security Certificate") in definitive, fully registered
form ("Definitive Capital Securities") without distribution coupons and with the
Restricted Securities Legend set forth in Exhibit A-1 hereto ("Restricted
Definitive Capital Securities"). Restricted Definitive Capital Securities will
bear the Restricted Securities Legend set forth on Exhibit A-1 unless removed in
accordance with Section 9.2.
SECTION 7.4 Registrar, Paying Agent and Exchange Agent.
The Trust shall maintain in Wilmington, Delaware (i) an office
or agency where Capital Securities may be presented for registration of transfer
("Registrar"), (ii) an office or agency where Capital Securities may be
presented for payment ("Paying Agent") and (iii) an office or agency where
Securities may be presented for exchange ("Exchange Agent"). The Registrar shall
keep a register of the Capital Securities and of their transfer. The Trust may
appoint the Registrar, the Paying Agent and the Exchange Agent and may appoint
one or more co-registrars, one or more additional paying agents and one or more
additional Exchange Agents in such other locations as it shall determine. The
term "Registrar" includes any additional registrar, the term "Paying Agent"
includes any additional paying agent and the term "Exchange Agent" includes any
additional Exchange Agent. The Trust may change any Paying Agent, Registrar,
co-registrar or Exchange Agent without prior notice to any Holder. The Paying
Agent shall be permitted to resign as Paying Agent upon 30 days' written notice
to the Property Trustee, the Administrative Trustees and the Sponsor. The Trust
shall notify the Property Trustee of the name and address of any Agent not a
party to this Declaration. If the Trust fails to appoint or maintain another
entity as Registrar, Paying Agent or Exchange Agent, the Property Trustee shall
act as such. The Trust or any of its Affiliates may act as Paying Agent,
Registrar, or Exchange Agent. The Trust shall act as Paying Agent, Registrar and
Exchange Agent for the Common Securities.
The Trust initially appoints the Property Trustee as Registrar,
Paying Agent and Exchange Agent for the Capital Securities.
SECTION 7.5 Paying Agent to Hold Money in Trust.
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The Trust shall require each Paying Agent other than the
Property Trustee to agree in writing that the Paying Agent will hold in trust
for the benefit of Holders or the Property Trustee all money held by the Paying
Agent for the payment of liquidation amounts or Distributions, and will notify
the Property Trustee if there are insufficient funds for such purpose. While any
such insufficiency continues, the Property Trustee may require a Paying Agent to
pay all money held by it to the Property Trustee. The Trust at any time may
require a Paying Agent to pay all money held by it to the Property Trustee and
to account for any money disbursed by it. Upon payment over to the Property
Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust)
shall have no further liability for the money. If the Trust or the Sponsor or an
Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent.
SECTION 7.6 Replacement Securities.
If a Holder claims that a Security owned by it has been lost,
destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Capital Securities to the
Property Trustee, an Administrative Trustee shall execute and the Property
Trustee shall, upon receipt of written direction from an Administrative Trustee,
authenticate and make available for delivery a replacement Security if the
Property Trustee's requirements are met. An indemnity bond must be provided by
the Holder which, in the judgment of the Property Trustee, is sufficient to
protect the Trustees, the Sponsor, the Trust or any authenticating agent from
any loss which any of them may suffer if a Security is replaced. The Trust may
charge such Holder for its expenses in replacing a Security.
SECTION 7.7 Outstanding Capital Securities.
The Capital Securities outstanding at any time are all the
Capital Securities authenticated by the Property Trustee except for those
canceled by it, those delivered to it for cancellation, and those described in
this Section as not outstanding.
If a Capital Security is replaced, paid or purchased pursuant to
Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Capital
Security is held by a bona fide purchaser.
If Capital Securities are considered paid in accordance with the
terms of this Declaration, they cease to be outstanding and Distributions on
them shall cease to accumulate.
A Capital Security does not cease to be outstanding because one
of the Trust, the Sponsor or an Affiliate of the Sponsor holds the Security.
SECTION 7.8 Capital Securities in Treasury.
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Capital
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Property Trustee shall be fully
protected in relying on any such direction, waiver or consent, only Securities
which the Property Trustee actually knows are so owned shall be so disregarded.
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SECTION 7.9 Temporary Securities.
Until Definitive Capital Securities are ready for delivery, the
Trust may prepare and, in the case of the Capital Securities, the Property
Trustee shall, upon receipt of written direction from an Administrative Trustee,
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of Definitive Capital Securities but may have variations that the
Trust considers appropriate for temporary Securities. Without unreasonable
delay, the Trust shall prepare and, in the case of the Capital Securities, the
Property Trustee shall, upon receipt of a Corporation Order, authenticate
Definitive Capital Securities in exchange for temporary Securities.
SECTION 7.10 Cancellation.
The Trust at any time may deliver Capital Securities to the
Property Trustee for cancellation. The Registrar, Paying Agent and Exchange
Agent shall forward to the Property Trustee any Capital Securities surrendered
to them for registration of transfer, redemption, exchange or payment. The
Property Trustee shall promptly cancel all Capital Securities surrendered for
registration of transfer, redemption, exchange, payment, replacement or
cancellation and shall dispose of canceled Capital Securities in accordance with
its customary procedures unless the Trust otherwise directs. The Trust may not
issue new Capital Securities to replace Capital Securities that it has paid or
that have been delivered to the Property Trustee for cancellation or that any
Holder has exchanged.
SECTION 7.11 CUSIP Numbers.
The Trust in issuing the Capital Securities may use "CUSIP"
numbers (if then generally in use), and, if so, the Property Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders of Capital
Securities; provided, that, any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Capital
Securities or as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the Capital
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Sponsor will promptly notify the Property Trustee
of any change in the CUSIP numbers.
ARTICLE VIII
DISSOLUTION OF TRUST
SECTION 8.1 Dissolution of Trust.
(a) The Trust shall automatically dissolve:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or
liquidation or its equivalent with respect to the Sponsor; or
the revocation of the Sponsor's charter and the expiration of 90
days after the date of revocation without a reinstatement
thereof;
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(iii) following the distribution of a Like Amount of the
Debentures to the Holders, provided, that the Property Trustee
has received written notice from the Sponsor directing the
Property Trustee to dissolve the Trust (which direction is
optional, and except as otherwise expressly provided below,
within the discretion of the Sponsor), and provided further,
that such direction and such distribution is conditioned on (a)
the receipt by the Sponsor of any and all required regulatory
approvals, and (b) the Sponsor's receipt and delivery to the
Administrative Trustees of an opinion of independent tax counsel
experienced in such matters, which opinion may rely on public or
private rulings of the Internal Revenue Service, to the effect
that the Holders of the Capital Securities will not recognize
any gain or loss for United States federal income tax purposes
as a result of the dissolution of the Trust and the distribution
of Debentures;
(iv) upon the entry of a decree of judicial dissolution
of the Trust by a court of competent jurisdiction;
(v) when all of the Securities shall have been called
for redemption and the amounts necessary for redemption thereof
shall have been paid to the Holders in accordance with the terms
of the Securities;
(vi) upon the redemption or repayment of the Debentures
or at such time as no Debentures are outstanding; or
(vii) the expiration of the term of the Trust provided
in Section 3.14.
(b) As soon as is practicable upon completion of winding up of the Trust
following the occurrence of an event referred to in Section 8.1(a) and the
satisfaction of creditors of the Trust in accordance with applicable law, the
Administrative Trustees shall terminate the Trust by filing a certificate of
cancellation with the Secretary of State of the State of Delaware in accordance
with the Business Trust Act.
(c) The provisions of Section 3.9 and Article X shall survive the
dissolution and termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
(a) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
accordance with the terms of the Securities. To the fullest extent permitted by
law, any transfer or purported transfer of any Security not made in accordance
with this Declaration shall be null and void.
(b) Subject to this Article IX, Capital Securities may only be
transferred, in whole or in part, in accordance with the terms and conditions
set forth in this Declaration. To the
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fullest extent permitted by law, any transfer or purported transfer of any
Security not made in accordance with this Declaration shall be null and void.
(c) For so long as the Securities remain outstanding, the Sponsor agrees
(i) not to transfer ownership of the Common Securities of the Trust, provided
that any permitted successor of the Sponsor under the Indenture may succeed to
the Sponsor's ownership of the Common Securities, (ii) not to cause, as Sponsor
of the Trust, or to permit, as Holder of the Common Securities, the dissolution,
winding-up or liquidation of the Trust, except as provided in this Declaration
and (iii) to use its best efforts to cause the Trust (a) to remain a business
trust, except in connection with the distribution of Debentures to the Holders
in liquidation of the Trust, the redemption of all of the Securities, or certain
mergers, consolidations or amalgamations, each as permitted by this Declaration,
and (b) to otherwise continue to be classified as a grantor trust for United
States federal income tax purposes.
(d) The Registrar shall provide for the registration of Capital
Securities and of the transfer of Capital Securities, which will be effected
without charge but only upon payment (with such indemnity as the Registrar may
require) in respect of any tax or other governmental charges that may be imposed
in relation to it. Upon surrender for registration of transfer of any Capital
Securities, an Administrative Trustee shall cause one or more new Capital
Securities to be issued in the name of the designated transferee or transferees.
Every Capital Security surrendered for registration of transfer shall be
accompanied by a written instrument of transfer in form satisfactory to the
Registrar duly executed by the Holder or such Holder's attorney duly authorized
in writing. Each Capital Security surrendered for registration of transfer shall
be delivered to the Registrar and canceled in accordance with Section 7.10. A
transferee of a Capital Security shall be entitled to the rights and subject to
the obligations of a Holder hereunder upon the receipt by such transferee of a
Capital Security. By acceptance of a Capital Security or any interest therein,
each transferee shall be deemed to have agreed to be bound by this Declaration.
SECTION 9.2 Transfer Procedures and Restrictions.
(a) General. If Capital Securities are issued upon the transfer,
exchange or replacement of Capital Securities bearing the Restricted Securities
Legend set forth in Exhibit A-1 hereto, or if a request is made to remove such
Restricted Securities Legend on Capital Securities, the Capital Securities so
issued shall bear the Restricted Securities Legend, or the Restricted Securities
Legend shall not be removed, as the case may be, unless there is delivered to
the Trust and the Property Trustee such satisfactory evidence, which shall
include an Opinion of Counsel, as may be reasonably required by the Trust and
the Property Trustee, that neither the Restricted Securities Legend nor the
restrictions on transfer set forth therein are required to ensure that transfers
thereof are made pursuant to an exception from the registration requirements of
the Securities Act or, with respect to Restricted Capital Securities, that such
Securities are not "restricted" within the meaning of Rule 144. Upon provision
of such satisfactory evidence, the Property Trustee, at the written direction of
an Administrative Trustee on behalf of the Trust, shall authenticate and deliver
Capital Securities that do not bear the legend.
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(b) Transfer and Exchange of Definitive Capital Securities. When
Definitive Capital Securities are presented to the Registrar or co-registrar:
(x) to register the transfer of such Definitive Capital
Securities; or
(y) to exchange such Definitive Capital Securities which
became mutilated, destroyed, defaced, stolen or lost, for an
equal number of Definitive Capital Securities, the Registrar or
co-registrar shall register the transfer or make the exchange as
requested if its reasonable requirements for such transaction
are met;
provided, however, that the Definitive Capital Securities
surrendered for registration of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the
Trust and the Registrar or co-registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing; and
(ii) in the case of Definitive Capital Securities that
are Restricted Definitive Capital Securities:
(A) if such Restricted Capital Securities are being
delivered to the Registrar by a Holder for registration
in the name of such Holder, without transfer,
certification(s) from such Holder to that effect; or
(B) if such Restricted Capital Securities are being
transferred: (i) certification(s) in a form
substantially similar to that attached hereto as the
form of "Assignment" in Exhibit A-1, and (ii) if the
Trust or Registrar so requests, evidence reasonably
satisfactory to them as to the compliance with the
restrictions set forth in the Restricted Securities
Legend.
(c) Legend.
(i) Except as permitted by the following paragraph (ii),
each Capital Security Certificate evidencing each Definitive
Capital Security and all Capital Securities issued in exchange
thereof or substitution thereof shall bear a legend (the
"Restricted Securities Legend") in substantially the following
form:
THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES
LAW. NEITHER THIS CAPITAL SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF
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SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION
DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH HAWTHORNE
FINANCIAL CORPORATION (THE "CORPORATION") OR ANY "AFFILIATE" OF
THE CORPORATION WAS THE OWNER OF THIS CAPITAL SECURITY (OR ANY
PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A) TO THE
CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS
THIS CAPITAL SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
(D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (a)(1), (2), (3), (7) OR (8) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF
HFC CAPITAL TRUST I (THE "TRUST") AND THE CORPORATION PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D) OR
(E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER
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INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO
CLAUSE (D) TO REQUIRE THAT THE TRANSFEROR DELIVER TO THE TRUST A
LETTER FROM THE TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX II
TO THE DECLARATION. SUCH HOLDER FURTHER AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS CAPITAL SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE
BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR
ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, (THE "CODE")
(EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE
"PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY
AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR
HOLD THE CAPITAL SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF
AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION
CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER
APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF CAPITAL
SECURITIES IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION
4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY
PURCHASER OR HOLDER OF THE CAPITAL SECURITIES OR ANY INTEREST
THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND
HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT
PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO
WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER
PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR
ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE
BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION
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UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH
THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
In all circumstances, each Capital Security Certificate shall bear the following
legend:
THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100
CAPITAL SECURITIES) AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY
ATTEMPTED TRANSFER OF CAPITAL SECURITIES IN A BLOCK HAVING A LIQUIDATION
AMOUNT OF LESS THAN $100,000 (100 CAPITAL SECURITIES) SHALL BE DEEMED TO
BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE
SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH CAPITAL SECURITIES FOR ANY
PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON
SUCH CAPITAL SECURITIES, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED
TO HAVE NO INTEREST WHATSOEVER IN SUCH CAPITAL SECURITIES.
(ii) Upon any sale or transfer of a Restricted Capital
Security pursuant to an effective registration statement under
the Securities Act or pursuant to Rule 144 the Registrar shall
permit the Holder thereof to exchange such Restricted Capital
Security for a Definitive Capital Security that does not bear
the Restricted Securities Legend and rescind any restriction on
the transfer of such Restricted Capital Security.
(d) Obligations with Respect to Transfers and Exchanges of Capital
Securities.
(i) To permit registrations of transfers and exchanges,
the Trust shall execute and the Property Trustee shall
authenticate Definitive Capital Securities at the Registrar's or
co-registrar's request in accordance with the terms of this
Declaration.
(ii) Registrations of transfers or exchanges will be
effected without charge, but only upon payment (with such
indemnity as the Trust or the Sponsor may require) in respect of
any tax or other governmental charge that may be imposed in
relation to it.
(iii) The Registrar or co-registrar shall not be
required to register the transfer of or exchange of (a) Capital
Securities during a period beginning at the opening of business
15 days before the day of mailing of a notice of redemption or
any notice of selection of Capital Securities for redemption
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and ending at the close of business on the day of such mailing
or (b) any Capital Security so selected for redemption in whole
or in part, except the unredeemed portion of any Capital
Security being redeemed in part.
(iv) Prior to the due presentation for registration of
transfer of any Capital Security, the Trust, the Property
Trustee, the Paying Agent, the Registrar or any co-registrar may
deem and treat the Person in whose name a Capital Security is
registered as the absolute owner of such Capital Security for
the purpose of receiving Distributions on such Capital Security
and for all other purposes whatsoever, and none of the Trust,
the Property Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
(v) All Capital Securities issued upon any registration
of transfer or exchange pursuant to the terms of this
Declaration shall evidence the same security and shall be
entitled to the same benefits under this Declaration as the
Capital Securities surrendered upon such registration of
transfer or exchange.
(e) No Obligation of the Property Trustee.
(i) The Property Trustee shall have no responsibility or
obligation to any Person with respect to any ownership interest
in the Capital Securities or with respect to the delivery to any
beneficial owner or other Person of any notice (including any
notice of redemption) or the payment of any amount, under or
with respect to such Capital Securities. All notices and
communications to be given to the Holders and all payments to be
made to Holders under the Capital Securities shall be given or
made only to or upon the order of the registered Holders.
(ii) The Property Trustee and the Registrar shall have
no obligation or duty to monitor, determine or inquire as to
compliance with any restrictions on transfer imposed under this
Declaration or under applicable law with respect to any transfer
of any interest in any Capital Security other than to require
delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when
expressly required by, the terms of this Declaration, and to
examine the same to determine whether or not on their face they
substantially comply with the express requirements hereof.
(f) Minimum Transfers. Capital Securities may only be transferred in
minimum blocks of $100,000 aggregate liquidation amount (100 Capital Securities)
and multiples of $1,000 in excess thereof. Any attempted transfer of Capital
Securities in a block having an aggregate liquidation amount of less than
$100,000 shall be deemed to be voided and of no legal effect whatsoever. Any
such purported transferee shall be deemed not to be a Holder of such Capital
Securities for any purpose, including, but not limited to, the receipt of
Distributions on
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such Capital Securities, and such purported transferee shall be deemed to have
no interest whatsoever in such Capital Securities.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any Security
shall be registered on the books and records of the Trust as the sole owner and
Holder of such Security for purposes of receiving Distributions and for all
other purposes whatsoever and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such Security on the part of any
Person, whether or not the Trust shall have actual or other notice thereof.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration, the Securities
Guarantees and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of
the capital contributions (or any return thereon) of the Holders
which shall be made solely from assets of the Trust; and
(ii) required to pay to the Trust or to any Holder any
deficit upon dissolution of the Trust or otherwise.
(b) The Sponsor shall be liable for all of the debts and obligations of
the Trust (other than in respect of the Securities).
(c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders
shall be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence (or in the case
of the Property Trustee or the Delaware Trustee, negligence) or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to
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the Trust by any Person as to matters the Indemnified Person reasonably believes
are within such other Person's professional or expert competence and who has
been selected with reasonable care by or on behalf of the Trust, including
information, opinions, reports or statements as to the value and amount of the
assets, liabilities, profits, losses, or any other facts pertinent to the
existence and amount of assets from which Distributions to Holders might
properly be paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the Property Trustee under the Trust Indenture Act), are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises
between any Covered Person and any Indemnified Person, or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified
Person shall act in a manner that is, or provides terms that
are, fair and reasonable to the Trust or any Holder of
Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider
such interests and factors as it desires, including its own
interests, and shall have no duty or obligation to give any
consideration to any interest of or factors affecting the Trust
or any other Person; or
(ii) in its "good faith" or under another express
standard, the Indemnified Person shall act under such express
standard and shall not be
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subject to any other or different standard imposed by this
Declaration or by applicable law.
SECTION 10.4 Indemnification.
(a) (i) The Sponsor shall indemnify, to the full extent permitted by
law, any Company Indemnified Person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Trust) by reason of the fact that he is or was a
Company Indemnified Person, against expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Company Indemnified Person
did not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(ii) The Sponsor shall indemnify, to the full extent permitted
by law, any Company Indemnified Person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Trust to procure a judgment in its favor by reason of the fact
that he is or was a Company Indemnified Person against expenses (including
attorneys' fees and expenses) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust and except that no such indemnification shall be
made in respect of any claim, issue or matter as to which such Company
Indemnified Person shall have been adjudged to be liable to the Trust unless and
only to the extent that the Court of Chancery of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such Person is fairly and reasonably entitled to indemnity for such expenses
which such Court of Chancery or such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action without
prejudice or the settlement of an action without admission of liability) in
defense of any action, suit or proceeding referred to in paragraphs (i) and (ii)
of this Section 10.4(a), or in defense of any claim, issue or matter therein, he
or she shall be indemnified, to the full extent permitted by law, against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(a) (unless ordered by a court) shall be made by the Sponsor only as
authorized in the specific case upon a determination that indemnification of the
Company Indemnified Person is
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proper in the circumstances because he or she has met the applicable standard of
conduct set forth in paragraphs (i) and (ii). Such determination shall be made
(1) by the Administrative Trustees by a majority vote of a Quorum consisting of
such Administrative Trustees who were not parties to such action, suit or
proceeding, (2) if such a Quorum is not obtainable, or, even if obtainable, if a
Quorum of disinterested Administrative Trustees so directs, by independent legal
counsel in a written opinion, or (3) by the Common Security Holder of the Trust.
(v) Expenses (including attorneys' fees and expenses) incurred
by a Company Indemnified Person in defending a civil, criminal, administrative
or investigative action, suit or proceeding referred to in paragraphs (i) and
(ii) of this Section 10.4(a) shall be paid by the Sponsor in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Company Indemnified Person to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified by the Sponsor as authorized in this Section 10.4(a).
Notwithstanding the foregoing, no advance shall be made by the Sponsor if a
determination is reasonably and promptly made (i) by the Administrative Trustees
by a majority vote of a Quorum of disinterested Administrative Trustees, (ii) if
such a Quorum is not obtainable, or, even if obtainable, if a Quorum of
disinterested Administrative Trustees so directs, by independent legal counsel
in a written opinion or (iii) by the Common Security Holder of the Trust, that,
based upon the facts known to the Administrative Trustees, counsel or the Common
Security Holder at the time such determination is made, such Company Indemnified
Person acted in bad faith or in a manner that the Common Security Holder did not
believe to be in, or believed was opposed to, the best interests of the Trust,
or, with respect to any criminal proceeding, that such Company Indemnified
Person believed or had reasonable cause to believe his or her conduct was
unlawful. In no event shall any advance be made in instances where the
Administrative Trustees, independent legal counsel or Common Security Holder
reasonably determine that a Company Indemnified Person deliberately breached his
or her duty to the Trust or its Common or Capital Security Holders.
(vi) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section 10.4(a) shall
not be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any agreement,
vote of stockholders or disinterested directors of the Sponsor or Capital
Security Holders of the Trust or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office. All
rights to indemnification under this Section 10.4(a) shall be deemed to be
provided by a contract between the Sponsor and each Company Indemnified Person
who serves in such capacity at any time while this Section 10.4(a) is in effect.
Any repeal or modification of this Section 10.4(a) shall not affect any rights
or obligations then existing.
(vii) The Sponsor or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company Indemnified Person
against any liability asserted against him or her and incurred by him or her in
any such capacity, or arising out of his or her status as such, whether or not
the Debenture Issuer would have the power to indemnify him or her against such
liability under the provisions of this Section 10.4(a).
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(viii) For purposes of this Section 10.4(a), references to "the
Trust" shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in a
consolidation or merger, so that any person who is or was a director, trustee,
officer or employee of such constituent entity, or is or was serving at the
request of such constituent entity as a director, trustee, officer, employee or
agent of another entity, shall stand in the same position under the provisions
of this Section 10.4(a) with respect to the resulting or surviving entity as he
or she would have with respect to such constituent entity if its separate
existence had continued.
(ix) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 10.4(a) shall, unless otherwise
provided when authorized or ratified, continue as to a Person who has ceased to
be a Company Indemnified Person and shall inure to the benefit of the heirs,
executors and administrators of such a Person.
(b) The Sponsor agrees to indemnify the (i) Property Trustee, (ii) the
Delaware Trustee, (iii) any Affiliate of the Property Trustee or the Delaware
Trustee, and (iv) any officers, directors, shareholders, members, partners,
employees, representatives, custodians, nominees or agents of the Property
Trustee or the Delaware Trustee (each of the Persons in (i) through (iv),
including the Property Trustee and the Delaware Trustee in their respective
individual capacities, being referred to as a "Fiduciary Indemnified Person")
for, and to hold each Fiduciary Indemnified Person harmless against, any and all
loss, liability, damage, action, suit, claim or expense including taxes (other
than taxes based on the income of such Fiduciary Indemnified Person) of any kind
and nature whatsoever incurred without negligence or bad faith on the part of
such Fiduciary Indemnified Person, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder, including the
costs and expenses (including reasonable legal fees and expenses) of defending
against or investigating any claim or liability in connection with the exercise
or performance of any of the powers or duties of such Fiduciary Indemnified
Person hereunder. The obligation to indemnify as set forth in this Section
10.4(b) shall survive the resignation or removal of the Property Trustee or the
Delaware Trustee and the satisfaction and discharge of this Declaration.
(c) The Sponsor agrees to pay the Property Trustee and the Delaware
Trustee, from time to time, such compensation for all services rendered by the
Property Trustee and the Delaware Trustee hereunder as may be mutually agreed
upon in writing by the Sponsor and the Property Trustee or the Delaware Trustee,
as the case may be, and, except as otherwise expressly provided herein, to
reimburse the Property Trustee and the Delaware Trustee upon its or their
request for all reasonable expenses (including legal fees and expenses),
disbursements and advances incurred or made by the Property Trustee or the
Delaware Trustee, as the case may be, in accordance with the provisions of this
Declaration, except any such expense, disbursement or advance as may be
attributable to its or their negligence or bad faith.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Property Trustee (subject to Section 5.3(c)) may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, similar or dissimilar to the business of the Trust, and the
Trust and the Holders shall have no rights by virtue of this
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Declaration in and to such independent ventures or the income or profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
business of the Trust, shall not be deemed wrongful or improper. No Covered
Person, the Sponsor, the Delaware Trustee, or the Property Trustee shall be
obligated to present any particular investment or other opportunity to the Trust
even if such opportunity is of a character that, if presented to the Trust,
could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware
Trustee and the Property Trustee shall have the right to take for its own
account (individually or as a partner or fiduciary) or to recommend to others
any such particular investment or other opportunity. Any Covered Person, the
Delaware Trustee and the Property Trustee may engage or be interested in any
financial or other transaction with the Sponsor or any Affiliate of the Sponsor,
or may act as depositary for, trustee or agent for, or act on any committee or
body of holders of, securities or other obligations of the Sponsor or its
Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the
calendar year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the Administrative
Trustees shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail each transaction
of the Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied. The Trust shall use the accrual method of accounting for
United States federal income tax purposes. The books of account and the records
of the Trust shall be examined by and reported upon as of the end of each Fiscal
Year of the Trust by a firm of independent certified public accountants selected
by the Administrative Trustees.
(b) The Administrative Trustees shall cause to be duly prepared and
delivered to each of the Holders any annual United States federal income tax
information statement required by the Code, containing such information with
regard to the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Administrative Trustees shall endeavor to
deliver all such information statements within 30 days after the end of each
Fiscal Year of the Trust.
(c) The Administrative Trustees shall cause to be duly prepared and
filed with the appropriate taxing authority, an annual United States federal
income tax return, on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to be
filed by the Administrative Trustees on behalf of the Trust with any state or
local taxing authority.
SECTION 11.3 Banking.
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The Trust may maintain one or more bank accounts in the name and
for the sole benefit of the Trust; provided, however, that all payments of funds
in respect of the Debentures held by the Property Trustee shall be made directly
to the Property Trustee Account and no other funds of the Trust shall be
deposited in the Property Trustee Account. The sole signatories for such
accounts shall be designated by the Administrative Trustees; provided, however,
that the Property Trustee shall designate the signatories for the Property
Trustee Account.
SECTION 11.4 Withholding.
The Trust and the Administrative Trustees shall comply with all
withholding requirements under United States federal, state and local law. The
Trust shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably be
requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Administrative Trustees shall cause
to be filed required forms with applicable jurisdictions and, unless an
exemption from withholding is properly established by a Holder, shall remit
amounts withheld with respect to the Holder to applicable jurisdictions. To the
extent that the Trust is required to withhold and pay over any amounts to any
authority with respect to Distributions or allocations to any Holder, the amount
withheld shall be deemed to be a Distribution in the amount of the withholding
to the Holder. In the event of any claim of excess withholding, Holders shall be
limited to an action against the applicable jurisdiction. If the amount required
to be withheld was not withheld from actual Distributions made, the Trust may
reduce subsequent Distributions by the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration (including Section
7 of Annex I hereto) or by any applicable terms of the Securities, this
Declaration may only be amended by a written instrument approved and executed
by:
(i) the Sponsor and the Administrative Trustees (or, if
there are more than two Administrative Trustees, a majority of
the Administrative Trustees);
(ii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Property Trustee, the
Property Trustee; and
(iii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Delaware Trustee, the
Delaware Trustee.
(b) No amendment shall be made, and any such purported amendment shall
be void and ineffective:
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(i) unless, in the case of any proposed amendment, the
Property Trustee shall have first received an Officers'
Certificate from each of the Trust and the Sponsor that such
amendment is permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities);
(ii) unless, in the case of any proposed amendment which
affects the rights, powers, duties, obligations or immunities of
the Property Trustee, the Property Trustee shall have first
received:
(A) an Officers' Certificate from each of the Trust and
the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including
the terms of the Securities); and
(B) an Opinion of Counsel (who may be counsel to the
Sponsor or the Trust) that such amendment is permitted
by, and conforms to, the terms of this Declaration
(including the terms of the Securities) and that all
conditions precedent to the execution and delivery of
such amendment have been satisfied;
provided, however, that the Property Trustee shall not be required to sign any
such amendment; and
(iii) to the extent the result of such amendment would
be to:
(A) cause the Trust to fail to continue to be classified
for purposes of United States federal income taxation as
a grantor trust;
(B) reduce or otherwise adversely affect the powers of
the Property Trustee in contravention of the Trust
Indenture Act; or
(C) cause the Trust to be deemed to be an Investment
Company required to be registered under the Investment
Company Act.
(c) At such time after the Trust has issued any Securities that remain
outstanding, any amendment that would adversely affect the rights, privileges or
preferences of any Holder (other than an amendment pursuant to (g) below) may be
effected only with such additional requirements as may be set forth in the terms
of such Securities;
(d) Section 10.1(c) and this Section 12.1 shall not be amended without
the consent of all of the Holders;
(e) Article Four shall not be amended without the consent of the Holders
of a Majority in Liquidation Amount of the Common Securities;
(f) The rights of the Holders of the Common Securities under Article V
to increase or decrease the number of, and appoint and remove Trustees shall not
be amended without the consent of the Holders of a Majority in Liquidation
Amount of the Common Securities; and
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(g) Notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders to:
(i) cure any ambiguity, correct or supplement any
provision in this Declaration that may be inconsistent with any
other provision of this Declaration or to make any other
provisions with respect to matters or questions arising under
this Declaration which shall not be inconsistent with the other
provisions of the Declaration; and
(ii) to modify, eliminate or add to any provisions of
the Declaration to such extent as shall be necessary to ensure
that the Trust will be classified for United States federal
income tax purposes as a grantor trust at all times that any
Securities are outstanding or to ensure that the Trust will not
be required to register as an Investment Company under the
Investment Company Act;
provided, however, that in each clause above, such action shall not adversely
affect in any material respect the interests of the Holders, and any such
amendments of this Declaration shall become effective when notice thereof is
given to the Holders.
SECTION 12.2 Meetings of the Holders; Action by Written Consent.
(a) Meetings of the Holders of any class of Securities may be called at
any time by the Administrative Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms of
the Securities or the rules of any stock exchange on which the Capital
Securities are listed or admitted for trading. The Administrative Trustees shall
call a meeting of the Holders of such class if directed to do so by the Holders
of at least 20% in Liquidation Amount of such class of Securities. Such
direction shall be given by delivering to the Administrative Trustees one or
more notices in writing stating that the signing Holders wish to call a meeting
and indicating the general or specific purpose for which the meeting is to be
called. Any Holders calling a meeting shall specify in writing the Capital
Security Certificates held by the Holders exercising the right to call a meeting
and only those Securities specified shall be counted for purposes of determining
whether the required percentage set forth in the second sentence of this
paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders:
(i) notice of any such meeting shall be given to all the
Holders having a right to vote thereat at least seven days and
not more than 60 days before the date of such meeting. Whenever
a vote, consent or approval of the Holders is permitted or
required under this Declaration or the rules of any stock
exchange on which the Capital Securities are listed or admitted
for trading, such vote, consent or approval may be given at a
meeting of the Holders; any action that may be taken at a
meeting of the Holders may be taken without a meeting if a
consent in writing setting forth the action so taken is signed
by the Holders owning not less than the minimum amount of
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Securities in liquidation amount that would be necessary to
authorize or take such action at a meeting at which all Holders
having a right to vote thereon were present and voting; prompt
notice of the taking of action without a meeting shall be given
to the Holders entitled to vote who have not consented in
writing; and the Administrative Trustees may specify that any
written ballot submitted to the Security Holder for the purpose
of taking any action without a meeting shall be returned to the
Trust within the time specified by the Administrative Trustees;
(ii) each Holder may authorize any Person to act for it
by proxy on all matters in which a Holder is entitled to
participate, including waiving notice of any meeting, or voting
or participating at a meeting; no proxy shall be valid after the
expiration of eleven months from the date thereof unless
otherwise provided in the proxy; every proxy shall be revocable
at the pleasure of the Holder executing it; and, except as
otherwise provided herein, all matters relating to the giving,
voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies,
and judicial interpretations thereunder, as if the Trust were a
Delaware corporation and the Holders were stockholders of a
Delaware corporation;
(iii) each meeting of the Holders shall be conducted by
the Administrative Trustees or by such other Person that the
Administrative Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration,
the terms of the Securities, the Trust Indenture Act or the
listing rules of any stock exchange on which the Capital
Securities are then listed or trading, otherwise provides, the
Administrative Trustees, in their sole discretion, shall
establish all other provisions relating to meetings of Holders,
including notice of the time, place or purpose of any meeting at
which any matter is to be voted on by any Holders, waiver of any
such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in
person or by proxy or any other matter with respect to the
exercise of any such right to vote.
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ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
The Trustee that acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(a) the Property Trustee is a Delaware banking corporation, a national
banking association or a bank or trust company, duly organized, validly existing
and in good standing under the laws of the United States or the State of
Delaware as the case may be, with corporate power and authority to execute and
deliver, and to carry out and perform its obligations under the terms of, this
Declaration;
(b) the execution, delivery and performance by the Property Trustee of
this Declaration has been duly authorized by all necessary corporate action on
the part of the Property Trustee; and this Declaration has been duly executed
and delivered by the Property Trustee and under Delaware law (excluding any
securities laws) constitutes a legal, valid and binding obligation of the
Property Trustee, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the enforcement of
such remedies is considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Declaration by the
Property Trustee does not conflict with or constitute a breach of the charter or
by-laws of the Property Trustee; and
(d) no consent, approval or authorization of, or registration with or
notice to, any federal or state banking authority governing the trust powers of
the Property Trustee is required for the execution, delivery or performance by
the Property Trustee of this Declaration.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) the Delaware Trustee is a Delaware banking corporation, a national
banking association or a bank or trust company, duly organized, validly existing
and in good standing under the laws of the United States or the State of
Delaware, as the case may be, with corporate
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power and authority to execute and deliver, and to carry out and perform its
obligations under the terms of, this Declaration;
(b) the execution, delivery and performance by the Delaware Trustee of
this Declaration has been duly authorized by all necessary corporate action on
the part of the Delaware Trustee; and this Declaration has been duly executed
and delivered by the Delaware Trustee and under Delaware law (excluding any
securities laws) constitutes a legal, valid and binding obligation of the
Delaware Trustee, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the enforcement of
such remedies is considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Declaration by the
Delaware Trustee does not conflict with or constitute a breach of the charter or
by-laws of the Delaware Trustee; and
(d) no consent, approval or authorization of, or registration with or
notice to, any federal or Delaware banking authority governing the trust powers
of the Delaware Trustee is required for the execution, delivery or performance
by the Delaware Trustee of this Declaration; and
(e) the Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its principal
place of business in the State of Delaware, and is a Person that satisfies for
the Trust Section 3807(a) of the Business Trust Act.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
All notices provided for in this Declaration shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, overnight courier service or confirmed
telecopy, as follows:
(a) if given to the Trust, in care of the Administrative Trustees at the
Trust's mailing address set forth below (or such other address as the Trust may
give notice of to the Property Trustee, the Delaware Trustee and the Holders):
HFC Capital Trust I
c/o Hawthorne Financial Corporation
2381 Rosecrans Avenue
El Segundo, California 90245
Telephone: (310) 725-5000
Telecopier: (310) 643-8304
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(b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as Delaware Trustee may give notice of to the
Holders):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telecopier: (302) 651-8882
Telephone: (302) 651-1000
(c) if given to the Property Trustee, at the Property Trustee's mailing
address set forth below (or such other address as the Property Trustee may give
notice of to the Holders):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Telephone: (302) 651-1000
Telecopier: (302) 651-8882
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice to the Trust):
Hawthorne Financial Corporation
2381 Rosecrans Avenue
El Segundo, California 90245
Telephone: (310) 725-5000
Telecopier: (310) 643-8304
(e) if given to any other Holder, at the address set forth on the books
and records of the Trust.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 14.2 Governing Law.
This Declaration and the rights of the parties hereunder shall
be governed by and construed in accordance with the laws of the State of
Delaware without regard to conflict of laws principles thereof.
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SECTION 14.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust. The
provisions of this Declaration shall be interpreted to further this intention of
the parties.
SECTION 14.4 Headings.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
SECTION 14.5 Successors and Assigns.
Whenever in this Declaration any of the parties hereto is named
or referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether or not so expressed.
SECTION 14.6 Partial Enforceability.
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Declaration, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 14.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one or more of such counterpart signature
pages. All of such counterpart signature pages shall be read as though one, and
they shall have the same force and effect as though all of the signers had
signed a single signature page.
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IN WITNESS WHEREOF, the undersigned has caused these presents to
be executed as of the day and year first above written.
-----------------------------------------
Simone F. Lagomarsino
as Administrative Trustee
-----------------------------------------
Karen Abajian
as Administrative Trustee
-----------------------------------------
Eileen Lyon
as Administrative Trustee
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By:
-------------------------------------
NAME:
TITLE:
WILMINGTON TRUST COMPANY,
as Property Trustee
By:
-------------------------------------
NAME:
TITLE:
HAWTHORNE FINANCIAL CORPORATION,
as Sponsor and Debenture Issuer
By:
-------------------------------------
Simone F. Lagomarsino
PRESIDENT AND CHIEF EXECUTIVE OFFICER
S-1
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ANNEX I
TERMS OF
10.18% MMCAPS(SM)
10.18% COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration
of Trust of HFC Capital Trust I, dated as of March 28, 2001 (as amended from
time to time, the "Declaration"), the designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Securities are
set out below (each capitalized term used but not defined herein has the meaning
set forth in the Declaration or, if not defined in such Declaration, as defined
in the Indenture (as defined in the Declaration):
1. Designation and Number.
(a) Capital Securities. 9,000 MMCapS(SM) of the Trust (the "Capital
Securities") with an aggregate liquidation amount with respect to the assets of
the Trust of Nine Million Dollars ($9,000,000) and with a liquidation amount
with respect to the assets of the Trust of One Thousand Dollars ($1,000) (the
"Liquidation Amount") per security, are hereby designated for the purposes of
identification only as "10.18% Capital Securities. The certificates evidencing
the Capital Securities shall be substantially in the form of Exhibit A-1 to the
Declaration, with such changes and additions thereto or deletions therefrom as
may be required by ordinary usage, custom or practice or to conform to the rules
of any exchange or quotation system on or in which the Capital Securities are
listed, traded or quoted.
(b) Common Securities. 300 Common Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust of Three
Hundred Thousand Dollars ($300,000) and a liquidation amount with respect to the
assets of the Trust of $1,000 per security, are hereby designated for the
purposes of identification only as "10.18% Common Securities" (the "Common
Securities"). The certificates evidencing the Common Securities shall be
substantially in the form of Exhibit A-2 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice.
2. Distributions.
(a) Distributions on each Security will be payable at a fixed rate per
annum of 10.18% (the "Coupon Rate") of the Liquidation Amount of $1,000 per
Security, such rate being the rate of interest payable on the Debentures to be
held by the Property Trustee. Distributions in arrears for more than one
semi-annual period will bear additional Distributions thereon compounded
semi-annually at the Coupon Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein, includes distributions of any and all
such interest, if any, payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made with respect to the Debentures
held by the Property Trustee and to the extent the Property Trustee has funds
legally available therefor.
(b) Distributions on the Securities will be cumulative, will accumulate
from the most recent date to which Distributions have been paid or, if no
Distributions have been paid, from
Annex I-1
65
March 28, 2001 and will be payable semi-annually in arrears on June 8th and
December 8th of each year, commencing June 8, 2001 (each, a "Distribution
Date"), except as otherwise described below. Distributions will be computed on
the basis a 360-day year of twelve 30-day months. As long as no Event of Default
has occurred and is continuing under the Indenture, the Debenture Issuer has the
right under the Indenture to defer payments of interest by extending the
interest payment period at any time and from time to time on the Debentures for
a period not exceeding 10 consecutive semi-annual periods, including the first
such semi-annual period during such period (each an "Extension Period"), during
which Extension Period no interest shall be due and payable on the Debentures,
provided, that no Extension Period shall end on a date other than an Interest
Payment Date for the Debentures or extend beyond the Maturity Date of the
Debentures. As a consequence of such deferral, Distributions will also be
deferred. Notwithstanding such deferral, Distributions will continue to
accumulate with additional Distributions thereon (to the extent permitted by
applicable law but not at a rate greater than the rate at which interest is then
accruing on the Debentures) at the Coupon Rate compounded semi-annually during
any such Extension Period. Prior to the termination of any such Extension
Period, the Debenture Issuer may further defer payments of interest by further
extending such Extension Period, provided, that such extension does not cause
such Extension Period, together with all such previous and further extensions
within such Extension Period, to exceed 10 consecutive semi-annual periods,
including the first semi-annual period during such Extension Period, end on a
date other than an Interest Payment Date for the Debentures or extend beyond the
Maturity Date of the Debentures. Upon the termination of any Extension Period
and the payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the close of
business on the 15TH day of the month immediately preceding the month in which
the relevant Distribution Date occurs, which Distribution Dates correspond to
the Interest Payment Dates for the Debentures. The relevant record dates for the
Common Securities shall be the same as the record dates for the Capital
Securities. Distributions payable on any Securities that are not punctually paid
on any Distribution Date, as a result of the Debenture Issuer having failed to
make a payment under the Debentures, will cease to be payable to the Holder on
the relevant record date, and such defaulted Distribution will instead be
payable to the Person in whose name such Securities are registered on the
special record date or other specified date determined in accordance with the
Indenture. If any date on which Distributions are payable on the Securities is
not a Business Day, then payment of the Distributions payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except that if such
next succeeding Business Day falls in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day with the same
force and effect as if made on such date.
(d) In the event that there is any money or other property held by or
for the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders.
3. Liquidation Distribution Upon Dissolution.
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66
In the event of any dissolution of the Trust, the Trust shall be
liquidated by the Administrative Trustees as expeditiously as the Administrative
Trustees determine to be possible by distributing to the Holders, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, a Like Amount (as defined below) of the Debentures, unless such
distribution is determined by the Property Trustee not to be practicable, in
which event such Holders will be entitled to receive out of the assets of the
Trust legally available for distribution to Holders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an amount
equal to the aggregate of the Liquidation Amount of $1,000 per Security plus
accumulated and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution").
"Like Amount" means (i) with respect to a redemption of the
Securities, Securities having a Liquidation Amount equal to the principal amount
of Debentures to be paid in accordance with their terms and (ii) with respect to
a distribution of Debentures upon the liquidation of the Trust, Debentures
having a principal amount equal to the Liquidation Amount of the Securities of
the Holder to whom such Debentures are distributed.
If, upon any such liquidation, the Liquidation Distribution can
be paid only in part because the Trust has insufficient assets legally available
to pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust with respect to the Securities shall be paid on a Pro Rata
basis.
4. Redemption and Distribution.
(a) Upon the repayment of the Debentures in whole or in part, at
maturity or otherwise (either at the option of the Debenture Issuer or pursuant
to a Special Event, as described below), the proceeds from such repayment shall
be simultaneously applied by the Property Trustee (subject to the Property
Trustee having received written notice no later than 45 days prior to such
repayment) to redeem a Like Amount of the Securities at a redemption price equal
to (i) in the case of the repayment of the Debentures on the Maturity Date, the
Maturity Redemption Price (as defined below), (ii) in the case of the optional
prepayment of the Debentures prior to the Initial Optional Redemption Date and
upon the occurrence and continuation of a Special Event, the Special Event
Redemption Price (as defined below) and (iii) in the case of the optional
prepayment of the Debentures on or after the Initial Optional Redemption Date,
the Optional Redemption Price (as defined below). The Maturity Redemption Price,
the Special Event Redemption Price and the Optional Redemption Price are
referred to collectively as the "Redemption Price." Holders will be given not
less than 30 nor more than 60 days prior written notice of such redemption.
(b) (i) The "Maturity Redemption Price" shall mean an amount equal to
100% of the principal amount of the Debentures, plus any accrued and unpaid
interest thereon (including Compounded Interest and Additional Sums, if any) to
the Maturity Date thereof.
(ii) The Debenture Issuer shall have the right (subject to the
conditions in the Indenture) to elect to prepay the Debentures, in whole or in
part, at any time on or after June 8, 2001 (the "Initial Optional Redemption
Date"), and, simultaneous with such prepayment, to cause a Like Amount of the
Securities to be redeemed by the Trust at the Optional Redemption Price on a Pro
Rata basis. "Optional Redemption Price" shall mean an amount
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67
equal to the applicable redemption price set forth below plus, accumulated and
unpaid Distributions thereon, if any, to the date of such redemption if redeemed
during the 12-month period beginning June 8th, of the years indicated below:
Percentage of
Liquidation
Year Amount
----------------------- --------------------
2011 105.090%
2012 104.581%
2013 104.072%
2014 103.563%
2015 103.054%
2016 102.545%
2017 102.036%
2018 101.527%
2019 101.018%
2020 100.509%
2021 and thereafter 100.00%
(c) If at any time an Investment Company Event, a Regulatory Capital
Event or a Tax Event (each as defined below, and each a "Special Event") occurs,
the Debenture Issuer shall have the right (subject to the conditions set forth
in the Indenture) at any time prior to the Initial Optional Redemption Date, to
prepay the Debentures in whole, but not in part, within the 90 days following
the occurrence of such Special Event (the "90 Day Period"), and, simultaneous
with such prepayment, to cause a Like Amount of the Securities to be redeemed by
the Trust at the Special Event Redemption Price on a Pro Rata basis.
"Investment Company Event" shall mean the receipt by the
Debenture Issuer and the Trust of a written opinion of independent securities
counsel experienced in such matters to the effect that as a result of (a) any
amendment to, or change (including any announced prospective change) in, the
laws or any regulations thereunder of the United States or any rules, guidelines
or policies of any applicable regulatory authority for the Debenture Issuer or
(b) any official administrative pronouncement or judicial decision interpreting
or applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of original
issuance of the Securities, the Trust is, or within 90 days of the date of such
opinion will be, considered an Investment Company that is required to be
registered under the Investment Company Act.
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68
"Regulatory Capital Event" shall mean the receipt by the
Debenture Issuer and the Trust of a written opinion of independent bank
regulatory counsel experienced in such matters to the effect that as a result of
(a) any amendment to, or change (including any announced prospective change) in,
the laws or any regulations thereunder of the United States or any rules,
guidelines or policies of an applicable regulatory authority for the Debenture
Issuer or (b) any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of original issuance of the Securities, the Capital Securities do not
constitute, or within 90 days of the date of such opinion will not constitute,
Tier 1 Capital (or its then equivalent) if the Debenture Issuer is a bank
holding company or if the Debenture Issuer is a savings and loan holding company
and is then subject to similar capital adequacy requirements; provided, however,
that the distribution of the Debentures in connection with the liquidation of
the Trust by the Debenture Issuer shall not in and of itself constitute a
Regulatory Capital Event.
"Special Event Redemption Price" shall mean, with respect to any
redemption of the Securities following a Special Event, an amount in cash equal
to (i) 106.09% of the principal amount of the Debentures, if the Special Event
occurs prior to June 8, 2011 and (ii) if the Special Event occurs on or after
June 8, 2011, the amount of the Optional Redemption Price (calculated as if the
Debenture Issuer had prepaid such Debentures on such date), plus, in the case of
(i) and (ii), any accrued and unpaid interest thereon (including Compounded
Interest and Additional Sums, if any) to the date of such redemption.
A "Tax Event" shall occur upon receipt by the Debenture Issuer
and the Trust of a written opinion of independent tax counsel experienced in
such matters to the effect that, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws or any regulations
thereunder of the United States or any political subdivision or taxing authority
thereof or therein, or (b) any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or which pronouncement or decision is announced on or after
the date of original issuance of the Securities, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States federal income tax with respect to
income received or accrued on the Debentures, (ii) the interest payable by the
Debenture Issuer on the Debentures is not, or within 90 days of the date of such
opinion will not be, deductible by the Debenture Issuer, in whole or in part,
for United States federal income tax purposes, or (iii) the Trust is, or will be
within 90 days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
(d) In the case of an optional redemption, if fewer than all the
outstanding Securities are to be so redeemed, the Common Securities and the
Capital Securities shall be redeemed Pro Rata and the Capital Securities to be
redeemed will be determined as described in Section 4(g)(ii) below. Upon the
entry of an order for the dissolution of the Trust by a court of competent
jurisdiction, the Debentures thereafter will be subject to optional redemption,
in whole, but not in part, on or after the Initial Optional Redemption Date.
(e) On and from the date fixed by the Administrative Trustees for any
distribution of Debentures and liquidation of the Trust: (i) the Securities will
no longer be deemed to be
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69
outstanding and (ii) any certificates representing Securities will be deemed to
represent beneficial interests in a Like Amount of Debentures until such
certificates are presented to the Debenture Issuer or its agent for transfer or
reissue.
(f) The Trust may not redeem fewer than all the outstanding Securities
unless all accumulated and unpaid Distributions have been paid on all Securities
for all semi-annual Distribution periods terminating on or before the date of
redemption.
(g) The procedure with respect to redemptions or distributions of
Securities shall be as follows:
(i) Notice of any redemption of, or notice of distribution of
Debentures in exchange for, the Securities (a "Redemption/Distribution
Notice") will be given by the Trust by mail to each Holder of Securities
to be redeemed or exchanged not fewer than 30 nor more than 60 days
before the date fixed for redemption or exchange thereof which, in the
case of a redemption, will be the date fixed for redemption of the
Debentures. For purposes of the calculation of the date of redemption or
exchange and the dates on which notices are given pursuant to this
Section 4(g)(i), a Redemption/Distribution Notice shall be deemed to be
given on the day such notice is first mailed by first-class mail,
postage prepaid, to Holders. Each Redemption/Distribution Notice shall
be addressed to the Holders at the address of each such Holder appearing
in the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing of either thereof with
respect to any Holder shall affect the validity of the redemption or
exchange proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Securities
are to be redeemed, the particular Securities to be redeemed shall be
selected on a Pro Rata basis (based upon Liquidation Amounts) not more
than 60 nor less than 30 days prior to the date fixed for redemption
from the outstanding Securities not previously called for redemption;
provided, however, that with respect to Holders that would be required
to hold less than 100 but more than zero Securities as a result of such
redemption, the Trust shall redeem Securities of each such Holder so
that after such redemption such Holder shall hold either 100 Securities
or such Holder no longer holds any Securities, and shall use such method
(including, without limitation, by lot) as the Trust shall deem fair and
appropriate; provided further, that any such redemption may be made on
the basis of the aggregate Liquidation Amount of Securities held by each
Holder thereof and may be made by making such adjustments as the Trust
deems fair and appropriate in order that fractional Securities shall not
thereafter remain outstanding.
(iii) If Securities are to be redeemed and the Trust gives a
Redemption/ Distribution Notice (which notice will be irrevocable),
then, with respect to Definitive Capital Securities and Common
Securities, provided that the Debenture Issuer has paid the Property
Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Debentures, the Property Trustee will
irrevocably deposit with the paying agent for the Capital Securities (if
other than the Property Trustee) funds sufficient to pay the applicable
Redemption Price to the Holders by check mailed to the
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70
address of the relevant Holder appearing on the books and records of the
Trust on the redemption date, and provided further, that any such
payment shall become due only upon surrender by the Holder of the
related certificated Capital Securities. If a Redemption/ Distribution
Notice shall have been given and funds deposited as required, if
applicable, then immediately prior to the close of business on the date
of such deposit, or on the redemption date, as applicable, Distributions
will cease to accumulate on the Securities so called for redemption and
all rights of Holders so called for redemption will cease, except the
right of the Holders of such Securities to receive the Redemption Price,
but without interest on such Redemption Price, and such Securities shall
cease to be outstanding.
(iv) Payment of accumulated and unpaid Distributions on the
Redemption Date of the Securities will be subject to the rights of
Holders at the close of business on a regular record date in respect of
a Distribution Date occurring on or prior to such Redemption Date.
Neither the Administrative Trustees nor the Trust shall be
required to register or cause to be registered the transfer of (i) any
Securities beginning at the opening of business 15 days before the day of
mailing of a notice of redemption or any notice of selection of Securities for
redemption or (ii) any Securities selected for redemption, except the unredeemed
portion of any Security being redeemed. If any date fixed for redemption of
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay). If payment
of the Redemption Price with respect to any Securities is improperly withheld or
refused and not paid either by the Property Trustee or by the Sponsor as
guarantor pursuant to the relevant Securities Guarantee, Distributions on such
Securities will continue to accumulate from the original redemption date to the
actual date of payment, in which case the actual payment date will be considered
the date fixed for redemption for purposes of calculating the Redemption Price.
(v) Redemption/Distribution Notices shall be sent by the
Property Trustee on behalf of the Trust to the Holders of the
Securities.
(vi) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws and banking
laws), the Sponsor or any of its subsidiaries may at any time and from
time to time purchase outstanding Capital Securities by tender, in the
open market or by private agreement.
5. Voting Rights - Capital Securities.
(a) Except as provided under Sections 5(b), 6(b) and 7 and as otherwise
required by law and the Declaration, the Holders of the Capital Securities will
have no voting rights.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee or executing any
trust or power conferred on such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07 of
the
Annex I-7
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Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Debentures or (iv) consent
to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in Liquidation Amount
of all outstanding Capital Securities; provided, however, that where a consent
under the Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of each Holder of the Capital Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Capital Securities except by subsequent vote of such Holders. The
Property Trustee shall notify each Holder of Capital Securities of any notice of
default with respect to the Debentures. In addition to obtaining the foregoing
approvals of such Holders of the Capital Securities, prior to taking any of the
foregoing actions, the Trustees shall obtain an opinion of counsel experienced
in such matters to the effect that the Trust will continue to be classified as a
grantor trust for United States federal income tax purposes after taking any
such action into account.
If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or premium, if any, or interest on the Debentures on the due
date (or, in the case of redemption, on the redemption date), then a Holder of
Capital Securities may institute a proceeding directly against the Debenture
Issuer for enforcement of payment to such Holder of the principal of or premium,
if any, or interest on a Like Amount of Debentures (a "Direct Action") on or
after the respective due date specified in the Debentures. In connection with
such Direct Action, the Common Securities Holder will be subrogated to the
rights of such Holder of Capital Securities to the extent of any payment made by
the Debenture Issuer to such Holder of Capital Securities in such Direct Action.
Except as provided in the second preceding sentence, or except as set forth in
the first sentence of Section 3.8(e) of the Declaration, the Holders of Capital
Securities will not be able to exercise directly any other remedy available to
the holders of the Debentures.
Any approval or direction of Holders of Capital Securities may
be given at a separate meeting of Holders of Capital Securities convened for
such purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which Holders of Capital Securities are entitled to vote to be mailed
to each Holder of record of Capital Securities. Each such notice will include a
statement setting forth (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution proposed for
adoption at such meeting on which such Holders are entitled to vote or of such
matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consent.
No vote or consent of the Holders of the Capital Securities will
be required for the Trust to redeem and cancel Capital Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
Notwithstanding that Holders of Capital Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor
shall not be entitled to vote or consent and shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
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6. Voting Rights - Common Securities.
(a) Except as provided under Sections 6(b), 6(c), and 7 or as otherwise
required by law and the Declaration, the Holders of the Common Securities will
have no voting rights.
(b) Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by the Holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
Holders of a Majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the Holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Sponsor as the Holder of the Common
Securities. No resignation or removal of a Trustee and no appointment of a
successor trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Declaration.
(c) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07 of
the Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Debentures or (iv) consent
to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in Liquidation Amount
of all outstanding Common Securities; provided, however, that where a consent
under the Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of each Holder of the Common Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Common Securities except by subsequent vote of such Holders. The Property
Trustee shall notify each Holder of Common Securities of any notice of default
with respect to the Debentures. In addition to obtaining the foregoing approvals
of such Holders of the Common Securities, prior to taking any of the foregoing
actions, the Trustees shall obtain an opinion of counsel experienced in such
matters to the effect that the Trust will continue to be classified as a grantor
trust for United States federal income tax purposes after taking any such action
into account.
If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or premium, if any, or interest on the Debentures on the due
date (or in the case of redemption, on the redemption date), then a Holder of
Common Securities may institute a Direct Action directly against the Debenture
Issuer for enforcement of payment to such Holder of the principal of or premium,
if any, or interest on a Like Amount of Debentures on or after the respective
due date specified in the Debentures. In connection with such Direct Action, the
rights of the Common Securities Holder will be subordinated to the rights of
Holders of Capital Securities in respect of any payment from the Debenture
Issuer in such Direct Action. Except as provided in the second preceding
sentence, the Holders of Common Securities will not be able to exercise directly
any other remedy available to the holders of the Debentures.
Annex I-9
73
Any approval or direction of Holders of Common Securities may be
given at a separate meeting of Holders of Common Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Administrative Trustees will cause a notice of
any meeting at which Holders of Common Securities are entitled to vote, or of
any matter upon which action by written consent of such Holders is to be taken,
to be mailed to each Holder of record of Common Securities. Each such notice
will include a statement setting forth (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought, and (iii) instructions
for the delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will
be required for the Trust to redeem and cancel Common Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
7. Amendments to Declaration.
In addition to the requirements set out in Section 12.1 of the
Declaration, the Declaration may be amended from time to time by the Sponsor,
the Property Trustee and the Administrative Trustees without the consent of the
Holders to (i) cure any ambiguity, correct or supplement any provisions in the
Declaration that may be inconsistent with any other provisions, or make any
other provisions with respect to matters or questions arising under the
Declaration which shall not be inconsistent with the other provisions of the
Declaration or (ii) modify, eliminate or add to any provisions of the
Declaration to such extent as shall be necessary to ensure that the Trust will
be classified for United States federal income tax purposes as a grantor trust
at all times that any Securities are outstanding or to ensure that the Trust
will not be required to register as an Investment Company under the Investment
Company Act; provided, however, that in each case, such action shall not
adversely affect in any material respect the interests of any Holder, and any
such amendments of the Declaration shall become effective when notice thereof is
given to the Holders. The Declaration may also be amended by the Trustees and
the Sponsor with (i) the consent of Holders representing a Majority in
Liquidation Amount of all outstanding Securities, and (ii) receipt by the
Trustees of an Opinion of Counsel to the effect that such amendment or the
exercise of any power granted to the Trustees in accordance with such amendment
will not affect the Trust's status as a grantor trust for United States federal
income tax purposes or the Trust's exemption from status as an Investment
Company under the Investment Company Act; provided, however, that, without the
consent of each Holder of Securities, the Declaration may not be amended to (i)
change the amount or timing of any Distribution on, or the payment required to
be made in respect of, the Securities as of a specified date, increase the
number or aggregate Liquidation Amount of the Securities or change of any of the
redemption provisions or (ii) restrict the right of a Holder of Securities to
institute suit for the enforcement of any such payment on or after such date.
8. Pro Rata.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
according to the aggregate Liquidation Amount of the Securities held by such
Holder in relation to the aggregate
Annex I-10
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Liquidation Amount of all Securities outstanding unless, in relation to a
payment, an Event of Default under the Declaration has occurred and is
continuing, in which case any funds available to make such payment shall be paid
first to each Holder of the Capital Securities pro rata according to the
aggregate Liquidation Amount of Capital Securities held by such Holder relative
to the aggregate Liquidation Amount of all Capital Securities outstanding and
then, only after satisfaction of all amounts owed to the Holders of the Capital
Securities, to each Holder of Common Securities pro rata according to the
aggregate Liquidation Amount of Common Securities held by such Holder relative
to the aggregate Liquidation Amount of all Common Securities outstanding.
9. Ranking.
The Capital Securities rank pari passu with the Common
Securities and payment thereon shall be made Pro Rata with the Common
Securities, except that, if an Event of Default under the Declaration occurs and
is continuing, no payments in respect of Distributions on, or payments upon
liquidation, redemption or otherwise with respect to, the Common Securities
shall be made until the Holders of the Capital Securities shall be paid in full
the Distributions, Redemption Price, Liquidation Distribution and any other
payments to which they are entitled at such time.
10. Acceptance of Capital Securities Guarantee, Common Securities
Guarantee, Indenture and Debentures.
Each Holder of Capital Securities and Common Securities, by the
acceptance thereof, agrees to the provisions of the Capital Securities
Guarantee, the Common Securities Guarantee, the Indenture and the Debentures, as
applicable, including the subordination provisions therein.
11. No Preemptive Rights.
Neither the issuance of Capital Securities, nor the issuance of
Common Securities is subject to preemptive or other similar rights. The Holders
shall have no preemptive or similar rights to subscribe for any additional
securities.
12. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the Capital
Securities Guarantee or the Common Securities Guarantee, as applicable, and the
Indenture (including any supplemental indenture) to a Holder without charge upon
written request to the Trust at its principal place of business.
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EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS CAPITAL
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH HAWTHORNE
FINANCIAL CORPORATION (THE "CORPORATION") OR ANY "AFFILIATE" OF THE CORPORATION
WAS THE OWNER OF THIS CAPITAL SECURITY (OR ANY PREDECESSOR OF THIS CAPITAL
SECURITY) ONLY (A) TO THE CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS
CAPITAL SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1),
(2), (3), (7) OR (8) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND NOT WITH
A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE
RIGHT OF HFC CAPITAL TRUST I (THE "TRUST") AND THE CORPORATION PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO CLAUSE (D) TO REQUIRE THAT
THE TRANSFEROR DELIVER TO THE TRUST A LETTER FROM THE TRANSFEREE SUBSTANTIALLY
IN THE FORM OF ANNEX II TO
Exhibit A-1-1
76
THE DECLARATION. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS CAPITAL SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT,
INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE CAPITAL SECURITIES OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,
95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND
HOLDING OF CAPITAL SECURITIES IS NOT PROHIBITED BY SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER
OR HOLDER OF THE CAPITAL SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO
HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT
AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN
TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON
ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR
ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH
PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION
UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO
APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED
ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100
CAPITAL SECURITIES) AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED
TRANSFER OF CAPITAL SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS
THAN $100,000 (100 CAPITAL SECURITIES) SHALL BE DEEMED TO BE VOID AND OF NO
LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE
THE HOLDER OF SUCH CAPITAL SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT
LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON SUCH CAPITAL SECURITIES, AND SUCH
PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH
CAPITAL SECURITIES.
Exhibit A-1-2
77
Certificate Number: [_________________] Aggregate Liquidation Amount:
$_____________
CUSIP Number: [__________]
Certificate Evidencing Capital Securities
of
HFC Capital Trust I
10.18% MMCapS(SM)
(liquidation amount $1,000 per Capital Security)
HFC Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies that
MMCapS(SM) FUNDING I, LTD. (the "Holder") is the registered owner of
$___________ in aggregate liquidation amount of the Capital Securities of the
Trust representing undivided preferred beneficial interests in the assets of the
Trust designated the 10.18% MMCapS(SM) (liquidation amount $1,000 per Capital
Security) (the "Capital Securities"). The Capital Securities are transferable on
the books and records of the Trust, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form for
transfer. The designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Capital Securities represented hereby are
issued and shall in all respects be subject to the provisions of the Amended and
Restated Declaration of Trust, dated as of March 28, 2001, as the same may be
amended from time to time (the "Declaration"), including the designation of the
terms of the Capital Securities as set forth in Annex I to the Declaration.
Capitalized terms used but not defined herein shall have the meaning given them
in the Declaration. The Sponsor will provide a copy of the Declaration, the
Capital Securities Guarantee and the Indenture (including any supplemental
indenture) to a Holder without charge upon written request to the Trust at its
principal place of business.
Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Capital Securities Guarantee to the extent provided therein.
By acceptance hereof, the Holder agrees, for United States
federal income tax purposes, to treat the Debentures as indebtedness and the
Capital Securities as evidence of indirect beneficial ownership in the
Debentures.
Exhibit A-1-3
78
IN WITNESS WHEREOF, the Trust has executed this certificate this
___th day of _______, 2001.
HFC CAPITAL TRUST I
By:
-------------------------------------
Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 10.18% MMCapS(SM) of HFC Capital Trust I referred to
in the within-mentioned Declaration.
Dated: ,
---------------- ----
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Property Trustee
By:
-------------------------------------
Authorized Signatory
Exhibit A-1-4
79
[FORM OF REVERSE OF SECURITY]
Distributions on each Capital Security will be payable at a
fixed rate per annum of 10.18% (the "Coupon Rate") of the liquidation amount of
$1,000 per Capital Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one semi-annual period will bear interest thereon compounded semi-annually
at the Coupon Rate (to the extent permitted by applicable law). The term
"Distribution," as used herein, includes such cash distributions and any and all
such interest, if any, payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Property Trustee and to the extent the Property Trustee has funds
legally available therefor.
Distributions on the Capital Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from March 28, 2001 and will be payable
semi-annually in arrears on June 8th and December 8th of each year, commencing
June 8, 2001 (each, a "Distribution Date"), except as otherwise described below.
Distributions will be computed on the basis of a 360-day year of twelve 30-day
months. As long as no Event of Default has occurred and is continuing under the
Indenture, the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period at any time and
from time to time on the Debentures for a period not exceeding 10 consecutive
semi-annual calendar periods, including the first such semi-annual period during
such extension period (each an "Extension Period"), provided, that no Extension
Period shall end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred.
Notwithstanding such deferral, semi-annual Distributions will continue to
accumulate with interest thereon (to the extent permitted by applicable law, but
not at a rate exceeding the rate of interest then accruing on the Debentures) at
the Coupon Rate compounded semi-annually during any such Extension Period. Prior
to the termination of any Extension Period, the Debenture Issuer may further
defer payments of interest by further extending such Extension Period; provided,
that such Extension Period, together with all such previous and further
extensions within such Extension Period, may not (i) exceed 10 consecutive
semi-annual periods, including the first semi-annual period during such
Extension Period, (ii) end on a date other than an Interest Payment Date for the
Debentures or (iii) extend beyond the Maturity Date of the Debentures. Payments
of accumulated Distributions will be payable to Holders as they appear on the
books and records of the Trust on the record date immediately preceding the end
of the Extension Period. Upon the termination of any Extension Period and the
payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
Exhibit A-1-5
80
Subject to receipt by the Sponsor of any and all required
regulatory approvals and to certain other conditions set forth in the
Declaration and the Indenture, the Property Trustee may, at the direction of the
Sponsor, at any time dissolve the Trust and after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, cause the Debentures to be
distributed to the Holders of the Securities in liquidation of the Trust or,
simultaneously with any redemption of the Debentures, cause a Like Amount of the
Securities to be redeemed by the Trust.
The Capital Securities shall be redeemable as provided in the
Declaration.
Exhibit A-1-6
81
The following abbreviations, when used in the inscription on the
face of this Certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN CON - as tenants in common
TEN ENT - as tenants in the entireties
JT TEN - as joint tenants with right of survival
UNIF GIFT MIN ACT - under Uniform Gift to Minors Act and not as
tenants
Additional abbreviations may also be used though not in the
above list.
----------
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby assigns and transfers this Capital
Security Certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Capital Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:
-----------------
Signature:
-------------------------------------------------------
Exhibit A-1-7
82
(Sign exactly as your name appears on the other side of this Capital Security
Certificate)
Signature Guarantee:
-----------------------------------------------------------
- -----------------------------
Signature must be guaranteed by an "eligible guarantor
institution" that is a bank, stockbroker, savings and loan
association or credit union meeting the requirements of the
Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as
may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
Exhibit A-1-8
83
In connection with any transfer of any of the Capital Securities evidenced by
this Certificate, the undersigned confirms that such Capital Securities are
being:
CHECK ONE BOX BELOW
(1) Y exchanged for the undersigned's own account without transfer; or
(2) Y transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933, as amended; or
(3) Y transferred to an institutional "accredited investor" within the
meaning of subparagraph (a)(1), (2), (3), (7) or (8) of Rule 501
under the Securities Act of 1933 that is acquiring the Capital
Securities for its own account, or for the account of such an
institutional "accredited investor," for investment purposes and
not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act of 1933, as
amended; or
(4) Y transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933, as
amended; or
(5) Y transferred pursuant to an effective registration statement.
Unless one of the boxes is checked, the Registrar will refuse to register any of
the Capital Securities evidenced by this Certificate in the name of any Person
other than the Holder hereof; provided, however, that if box (3) or (4) is
checked, the Registrar may require, prior to registering any such transfer of
the Capital Securities, such legal opinions, certifications and other
information as the Trust has reasonably requested to confirm that such transfer
is being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act of 1933, as amended, such as
the exemption provided by Rule 144 under such Act; provided further, that (i) if
box (2) is checked, by acceptance of this Certificate, the transferee shall be
deemed to have certified that it is a "qualified institutional buyer" (as
defined in Rule 144A) ("QIB") acquiring the Capital Securities for its own
account or for the account of another QIB over which it exercises sole
investment discretion and that it is aware that the Holder is relying upon the
exemption from registration afforded by Rule 144A in respect of the Holder's
transfer of Capital Securities to it or (ii) if box (3) is checked, the
transferee must also provide to the Registrar a Transferee Letter of
Representation in the form attached to the Declaration, provided further, that
after the date that a registration statement has been filed and so long as such
registration statement continues to be effective, only then may the Registrar
permit transfers for which box (5) has been checked.
-------------------------------------
Signature
Exhibit A-1-9
84
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW. NEITHER THIS COMMON SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
Exhibit A-2-1
85
This Certificate is not transferable except in compliance with Section 9.1(c) of
the Declaration.
Certificate Evidencing Common Securities
of
HFC Capital Trust I
10.18% Common Securities
(liquidation amount $1,000 per Common Security)
HFC Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies that Hawthorne
Financial Corporation (the "Holder") is the registered owner of ____ common
securities of the Trust representing undivided beneficial interests in the
assets of the Trust designated the 10.18% Common Securities (liquidation amount
$1,000 per Common Security) (the "Common Securities"). Subject to the terms of
Section 9.1(c) of the Declaration (as defined below), the Common Securities are
not transferable. The designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Common Securities represented hereby are
issued and shall in all respects be subject to the provisions of the Amended and
Restated Declaration of the Trust dated as of March 28, 2001 as the same may be
amended from time to time (the "Declaration"), including the designation of the
terms of the Common Securities as set forth in Annex I to the Declaration.
Capitalized terms used but not defined herein shall have the meaning given them
in the Declaration. The Sponsor will provide a copy of the Declaration, the
Common Securities Guarantee and the Indenture (including any supplemental
indenture) to a Holder without charge upon written request to the Trust at its
principal place of business.
Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Common Securities Guarantee to the extent provided therein.
By acceptance hereof, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Common Securities as evidence of indirect beneficial ownership in the
Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this
___th day of ___________, 2001.
HFC CAPITAL TRUST I
By:
-------------------------------------
Administrative Trustee
Exhibit A-2-2
86
[FORM OF REVERSE OF SECURITY]
Distributions on each Common Security will be payable at a rate of
10.18% per annum (the "Coupon Rate") of the liquidation amount of $1000 per
Common Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee. Distributions in arrears for more than one
semi-annual period will bear interest thereon compounded semi-annually at the
Coupon Rate (to the extent permitted by applicable law). The term
"Distributions," as used herein, includes such cash distributions and any and
all such interest, if any, payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Property Trustee and to the extent the Property Trustee has funds
legally available therefor.
Distributions on the Common Securities will be cumulative, will accrue
from the most recent date to which Distributions have been paid or, if no
Distributions have been paid, from March 28, 2001 and will be payable
semi-annually in arrears on June 8th and December 8th of each year, commencing
June 8, 2001 (each, a "Distribution Date"), except as otherwise described below.
Distributions will be computed on the basis of a 360-day year of twelve 30-day
months. As long as no Event of Default has occurred and is continuing under the
Indenture, the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period at any time and
from time to time on the Debentures for a period not exceeding 10 consecutive
calendar semi-annual periods, including the first such semi-annual period during
such extension period (each an "Extension Period"), provided, that no Extension
Period shall end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred.
Notwithstanding such deferral, semi-annual Distributions will continue to
accumulate with interest thereon (to the extent permitted by applicable law, but
not at a rate exceeding the rate of interest then accruing on the Debentures) at
the Coupon Rate compounded semi-annually during any such Extension Period. Prior
to the termination of any Extension Period, the Debenture Issuer may further
defer payments of interest by further extending such Extension Period; provided,
that such Extension Period, together with all such previous and further
extensions within such Extension Period, may not (i) exceed 10 consecutive
semi-annual periods, including the first semi-annual period during such
Extension Period, (ii) end on a date other than an Interest Payment Date for the
Debentures or (iii) extend beyond the Maturity Date of the Debentures. Payments
of accrued Distributions will be payable to Holders as they appear on the books
and records of the Trust on the record date immediately preceding the end of the
Extension Period. Upon the termination of any Extension Period and the payment
of all amounts then due, the Debenture Issuer may commence a new Extension
Period, subject to the above requirements.
Subject to the receipt by the Sponsor of any and all required regulatory
approvals and to certain other conditions set forth in the Declaration and the
Indenture, the Property Trustee may, at the direction of the Sponsor, at any
time dissolve the Trust and cause the Debentures to be distributed to the
Holders of the Securities in liquidation of the Trust or, simultaneously with
any redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.
The Common Securities shall be redeemable as provided in the
Declaration.
Exhibit A-2-3
87
Under certain circumstances, the rights of the holders of the Common
Securities shall be subordinate to the rights of the holders of the Capital
Securities, as provided in the Declaration.
Exhibit A-2-4
88
ANNEX II
TRANSFEREE LETTER OF REPRESENTATION
HFC Capital Trust I
c/o Hawthorne Financial Corporation
2381 Rosecrans Avenue
El Segundo, California 90245
Ladies and Gentlemen:
In connection with the proposed transfer to us of 10.18% MMCapS(SM) (the
"capital securities") of HFC Capital Trust I (the "Trust"), we confirm that:
1. We understand that the capital securities have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or other
applicable securities laws, and may not be offered, sold or otherwise
transferred except as permitted in the following sentence. We agree on our
behalf and on behalf of any investor account for which we are purchasing capital
securities to offer, sell or otherwise transfer such capital securities prior to
the date which is two years after the later of the date of original issue
thereof and the last date on which Hawthorne Financial Corporation (the
"Corporation") or any "affiliate" of the Corporation was the owner of such
capital securities (or any predecessor thereto) (the "Resale Restriction
Termination Date") only (a) to the Corporation, (b) pursuant to a registration
statement which has been declared effective under the Securities Act, (c) so
long as the capital securities are eligible for resale pursuant to Rule 144A
under the Securities Act, to a person we reasonably believe is a "qualified
institutional buyer" (a "QIB") as defined in Rule 144A under the Securities Act
that purchases for its own account or for the account of a QIB to whom notice is
given that the transfer is being made in reliance on Rule 144A, (d) to an
institutional "accredited investor" (an "Institutional Accredited Investor")
within the meaning of subparagraph (a)(1), (2), (7) or (8) of Rule 501 under the
Securities Act that is acquiring the capital securities for its own account or
for the account of such an Institutional Accredited Investor for investment
purposes and not with a view to, or for offer and sale in connection with, any
distribution in violation of the Securities Act or (e) pursuant to any other
available exemption from the registration requirements under the Securities Act,
subject to the right of the Trust and the Corporation prior to any such offer,
sale or transfer (i) pursuant to clause (d) or (e) above to require the delivery
of an opinion of counsel, certifications and/or other information satisfactory
to each of them and (ii) pursuant to clause (d) above to require that the
transferor deliver to the Trust a letter from the transferee substantially
similar to this letter.
2. We are an Institutional Accredited Investor purchasing for our own
account or for the account of such an Institutional Accredited Investor for
investment purposes and not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities Act or any other
applicable securities laws and we have such knowledge and experience in
financial
Annex II-1
89
and business matters as to be capable of evaluating the merits and risks of our
investment in the capital securities, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its investment for an
indefinite period.
3. We are acquiring the capital securities purchased by us for our own
account or for one or more accounts as to each of which we exercise sole
investment discretion.
4. You and the Corporation are entitled to rely upon this letter and you
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
5. We are (1) not an employee benefit plan within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or a plan to which Section 4975 of the Internal Revenue Code of 1986
("Code") is applicable, a trustee or other person acting on behalf of such
employee benefit plan or plan, or any other person or entity using the assets of
any employee benefit plan or plan to finance such purchase, or (2) such purchase
will not result in a prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code for which there is no applicable statutory or
administrative exemption. We make this representation to the trustees of the
Trust, Hawthorne Financial Corporation and MMCapS(SM) Funding I, Ltd.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
Very truly yours,
- -------------------------------
Name of Purchaser:
By:
Date:
The capital securities will be registered in the name of the beneficial
owner as follows:
Name:
Address:
Taxpayer ID Number:
Annex II-2