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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
STERLING HOUSE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
KANSAS 48-1097141
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
</TABLE>
453 SOUTH WEBB ROAD, SUITE 500
WICHITA, KANSAS 67207
(316) 684-8300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
TIMOTHY J. BUCHANAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
STERLING HOUSE CORPORATION
453 SOUTH WEBB ROAD, SUITE 500
WICHITA, KANSAS 67207
(316) 684-8300
(Name, address, including zip code, telephone number, including area code, of
agent for service)
COPY TO:
JEFFREY D. PEIER, ESQUIRE
KLENDA, MITCHELL, AUSTERMAN & ZUERCHER, L.L.C.
1600 EPIC CENTER
301 NORTH MAIN STREET
WICHITA, KANSAS 67202-4888
(316) 267-0331
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective, depending
on market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT (1) PRICE (1) FEE
<S> <C> <C> <C> <C>
6.75% Debentures Due 2006 (2)...... $35,000,000 100% $35,000,000 $10,606.06 (3)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) There are also being registered hereunder the number of shares of Common
Stock, no par value of the Registrant (the "Conversion Shares") issuable
upon conversion of the Debentures being registered hereunder, together with
such additional indeterminate number of shares as may become issuable upon
conversion by means of adjustment in the conversion price.
(3) Pursuant to Rule 457(i), no registration fee is payable with respect to the
Conversion Shares since the Conversion Shares will be issued for no separate
consideration. Conversion Shares will be issued only upon the conversion of
the Debentures at the initial conversion price of $22.42, subject to
adjustment in certain cases, in principal amount of Debentures per share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED NOVEMBER 1, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
STERLING HOUSE CORPORATION
$35,000,000 6.75% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2006
(INTEREST PAYABLE JUNE 30 AND DECEMBER 30)
1,561,106 SHARES COMMON STOCK, NO PAR VALUE
This Prospectus relates to $35,000,000 aggregate principal amount of
Convertible Subordinated Debentures due 2006 (the "Debentures") of Sterling
House Corporation, a Kansas corporation (the "Company"), issued in a private
placement on May 17, 1996 (the "Debenture Offering") and the 1,561,106 shares of
common stock, no par value (the "Common Stock"), of the Company that are
issuable upon conversion of the Debentures, subject to adjustment under certain
circumstances. The Debentures or the shares of Common Stock issued upon
conversion of the Debentures may be offered from time to time for the account of
holders of Debentures named herein (the "Selling Debentureholders"). See "Plan
of Distribution." The Company will not receive any proceeds from this offering.
The aggregate principal amount of Debentures that may be offered by the
Selling Debentureholders pursuant to this Prospectus is $35,000,000. Information
concerning such Selling Debentureholders may change from time to time and will
be set forth in Supplements to this Prospectus. Accordingly, the aggregate
principal amount of Debentures offered hereby may increase or decrease. As of
the date of this Prospectus, the aggregate principal amount of Debentures
outstanding is $35,000,000.
The Debentures are convertible into Common Stock at any time after the
effectiveness of the registration statement of which this Prospectus is a part
and at or prior to maturity, unless previously redeemed, at a conversion price
of $22.42 per share, subject to adjustment under certain circumstances. Prior to
this offering, there has not been any public market for the Debentures, although
the Debentures have been eligible for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") market. The Common Stock is
traded on the American Stock Exchange ("AMEX") under the symbol "SGH." On
October 30, 1996, the last reported sale price of the Common Stock, as reported
by AMEX, was $12 5/8 per share.
The Debentures are redeemable, in whole or in part, at the option of the
Company, for cash, at any time on or after July 15, 1999 on at least 30 days'
notice at the redemption prices set forth herein plus accrued interest. See
"Description of Debentures."
The Debentures are unsecured obligations of the Company and are subordinated
in right of payment to all existing and future Senior Indebtedness (as defined)
of the Company. The Indenture (as defined) does not restrict the incurrence of
Senior Indebtedness or other Indebtedness (as defined) by the Company or any
subsidiary. At June 30, 1996 the Company had approximately $4,900,000 of Senior
Indebtedness.
SEE "RISK FACTORS" COMMENCING ON PAGE 3 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE DEBENTURES AND THE COMMON
STOCK.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
The Company has been advised by the Selling Debentureholders that the
Selling Debentureholders, acting as principals for their own account, directly,
through agents designated from time to time, or through dealers or underwriters
also to be designated, may sell all or a portion of the Debentures or shares of
Common Stock offered hereby from time to time on terms to be determined at the
time of sale. The aggregate proceeds to the Selling Debentureholders from the
sale of Debentures and Common Stock offered by the Selling Debentureholders
hereby will be the purchase price of such Debentures or Common Stock less any
commissions, if any. For information concerning indemnification arrangements
between the Company and the Selling Debentureholders, see "Plan of
Distribution."
The Selling Debentureholders and any broker-dealers, agents or underwriters
that participate with the Selling Debentureholders in the distribution of the
Debentures or shares of Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended (the "Securities Act"), in
which event any commissions received by such broker-dealers, agents or
underwriters and any profit on the resale of the Debentures or shares of Common
Stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS NOVEMBER , 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the United States Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by the Company may be
inspected at the public reference facilities of the Commission located at
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549, at the New York
Regional Office of the Commission, Seven World Trade Center, Suite 1300, New
York, New York 10048, and at the Chicago Regional Office of the Commission, 500
West Madison Street, Suite 1400, Chicago, Illinois 60621. Copies of such
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a World Wide Web site on the
Internet at HTTP:\\WWW.SEC.GOV that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act, with respect to the
registration of the Debentures and the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto, certain portions of which have been omitted
as permitted by the rules and regulations of the Commission. Statements
contained in this Prospectus or in any document incorporated by reference herein
as to the contents of any contract or other documents referred to herein or
therein are not necessarily complete and, in each instance, reference is made to
the copy of such documents filed as an exhibit to the Registration Statement or
such other documents, which may be obtained from the Commission as indicated
above upon payment of the fees prescribed by the Commission. Each such statement
is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein by reference: (i) the Company's 1995 Annual
Report on Form 10-K for the fiscal year ended December 31, 1995; (ii) the
Company's Current Report on Form 8-K dated April 8, 1996 and Amendment No. 1
thereto on Form 8-K/A dated June 10, 1996; (iii) the Company's Current Report on
Form 8-K dated June 10, 1996; (iv) the Company's Current Report on Form 8-K
dated August 12, 1996 and Amendment No. 1 thereto on Form 8-K/A dated October
15, 1996; (v) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31 and June 30, 1996; (vi) the Company's Proxy Statement dated March
31, 1996 related to the Annual Meeting of Shareholders held on May 24, 1996; and
(vii) the description of the Company's Capital Stock contained in the Company's
Registration Statement on Form 8-A dated October 26, 1995. In addition, each
document filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to
termination of the offering of the Debentures or Common Stock shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the date such document is filed with the Commission.
Any statement contained herein, or any document, all or a portion of which
is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Prospectus to the extent that a statement contained herein, or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of the Registration Statement or this Prospectus. All
information appearing in this Prospectus is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in the
documents incorporated herein by reference. This Prospectus incorporates
documents by reference which are not presented herein or delivered herewith.
These documents (other than exhibits thereto) are available without charge, upon
written or oral request by any person to whom this Prospectus has been
delivered, from R. Gail Knott, Chief Financial Officer, Sterling House
Corporation, 453 South Webb Road, Suite 500, Wichita, Kansas 67207, telephone
(316) 684-8300.
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RISK FACTORS
AN INVESTMENT IN THE DEBENTURES OR THE COMMON STOCK OFFERED HEREBY INVOLVES
VARIOUS RISKS. PROSPECTIVE INVESTORS ARE URGED TO CAREFULLY CONSIDER EACH OF THE
FOLLOWING RISKS, IN CONJUNCTION WITH THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS, BEFORE PURCHASING THE DEBENTURES OR THE COMMON STOCK IN THIS
OFFERING.
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS PROSPECTUS ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY,
INCLUDING, WITHOUT LIMITATION, RISKS ASSOCIATED WITH THE COMPANY'S ABILITY TO
DEVELOP, CONSTRUCT, ACQUIRE OR FRANCHISE ADDITIONAL ASSISTED LIVING RESIDENCES
IN ACCORDANCE WITH THE COMPANY'S DEVELOPMENT SCHEDULE, MANAGEMENT OF QUARTER TO
QUARTER RESULTS, AND OTHER RISKS DETAILED IN THESE "RISK FACTORS." UPDATED
INFORMATION WILL BE PERIODICALLY PROVIDED BY THE COMPANY AS REQUIRED BY THE
SECURITIES ACT AND THE EXCHANGE ACT.
HISTORY OF, AND ANTICIPATED, LOSSES
Newly opened residences typically operate at a loss during the first six
months of operations. In addition, the development and construction of
residences involves substantial capital expenditures over a typical six- to
nine-month construction period. As a result of the Company's development,
construction and management start-up activities, the Company has experienced net
losses in each year since its inception. For the years ended December 31, 1993,
1994 and 1995 and the six-month periods ended June 30, 1995 and 1996 the Company
incurred net losses of approximately $162,000, $494,000, $2,183,000, $446,000
and $331,000, respectively. The success of the Company's future operations is
directly tied to the expansion of its operational base. There can be no
assurance that the Company will not experience unforeseen expenses,
difficulties, complications and delays which could result in greater than
anticipated operating losses or otherwise materially adversely affect the
Company's financial condition and results of operations.
ABILITY TO DEVELOP, CONSTRUCT, ACQUIRE OR FRANCHISE ADDITIONAL ASSISTED LIVING
RESIDENCES
As of September 30, 1996, the Company's operations consisted of 50
residences which were either managed and/or franchised by the Company. The
Company's prospects for growth are directly affected by its ability to develop,
construct and, to a lesser extent, acquire and franchise additional assisted
living residences. As part of the Company's overall development plan, the
Company has 33 residences under construction, 16 of which the Company
anticipates opening during the remainder of 1996. In addition, the Company has
purchase commitments for an additional 30 parcels of real estate for residences
under development. The success of the Company's growth strategy will also depend
upon, among other factors, the Company's ability to obtain governmental licenses
and approvals, and the competitive environment for development and acquisitions.
The nature of such licenses and approvals and the timing and likelihood of
obtaining them vary widely by location and by the types of services to be
offered at the residence. The Company has developed and constructed 37
company-owned residences and 7 of the franchised residences using its own
construction management resources. However, to satisfy its future development
and construction plans, the Company may recruit third party developers and
general contractors. There is no assurance that the Company will be able to
recruit a sufficient number of such persons or that the Company will be able to
effectively monitor and administer their development and construction
activities. As a result of these various risks, there can be no assurance that
the Company will be successful in developing, constructing, acquiring or
franchising any additional residences or that any developed or acquired
residences will, if completed, be successful. Moreover, there can be no
assurance that the Company will be able to successfully manage its anticipated
rapid expansion or that such rapid expansion will not have a material adverse
effect on the Company's financial condition or results of operations. See "The
Company--Expansion" and "--Properties."
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NEED FOR ADDITIONAL FINANCING
The Company estimates that its existing working capital and financing
commitments will provide adequate capital to fund the Company's development,
construction and, to a lesser extent, acquisition of additional assisted living
residences over the next twelve months, including, as part of its overall
development plan, the 33 residences under construction and the 30 residences to
be developed on the sites for which the Company has purchase commitments.
However, additional financing may be necessary in order to meet the Company's
development plan if such plan is modified or if certain assumptions of the
development plan prove to be inaccurate. There can be no assurance that the
Company will generate sufficient cash flow to fund its future working capital
and debt service requirements or growth. In such event, the Company would have
to seek additional financing through debt or equity offerings, bank borrowings,
sale/leaseback transactions with real estate investment trusts or otherwise.
There can be no assurance that any future financing will be available to the
Company or, if available, that the terms will be acceptable to the Company.
The Company's fixed payment obligations will significantly increase as the
Company pursues its development plan. Failure to meet these obligations may
result in the Company being in default of its financing agreements and, as a
consequence, the Company may lose its ability to operate any individual
residence or other residences which may be cross-collateralized. There can be no
assurance that the Company will generate sufficient cash flow to meet its
obligations. In addition, the Company anticipates that future development of
residences may be financed with construction loans and, therefore, there is a
risk that, upon completion of construction, permanent financing for newly
developed residences may not be available or may be available only on terms that
are unfavorable or unacceptable to the Company.
GEOGRAPHIC CONCENTRATION OF RESIDENCES
Substantially all of the residences, including residences under construction
and development, are located in Kansas, Oklahoma, Texas, Florida, Ohio and
Colorado. Until the Company's operations become more geographically dispersed,
the Company will be more susceptible to downturns in local and regional
economies and changes in state or local regulation because such conditions and
events could affect a relatively high percentage of the total number of
residences currently in operation or under construction and development. As a
result of such factors, there can be no assurance that such geographic
concentration will not have a material adverse effect on the Company's financial
condition or results of operations. See "The Company--Properties."
CONSTRUCTION RISKS
Delays are common in the construction industry. Disruptive events may
include shortages of, or inability to obtain, labor or materials, the inability
of the general contractor or subcontractors to perform under their contracts,
strikes, adverse weather conditions, changes in federal, state or local laws or
regulations, and other factors or circumstances presently unknown to or
unanticipated by the Company. The Company may have little control over such
events, and such events may adversely affect the cost and completion time of any
development project, including the risk that development opportunities may
become uneconomical or may be abandoned. Any of these or other factors could
result in cost overruns and could delay, or even prevent, completion of one or
more additional residences.
ENVIRONMENTAL LIABILITY RISKS ASSOCIATED WITH REAL PROPERTY
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and cleanup
costs incurred by such parties in connection with the contamination. Such laws
typically impose cleanup responsibility and liability without
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regard to whether the owner knew of or caused the presence of the contaminants,
and the liability under such laws has been interpreted to be joint and several
unless the harm is divisible and there is a reasonable basis for allocation of
responsibility. The costs of investigation, remediation or removal of such
substances may be substantial, and the presence of such substances, or the
failure to properly remediate such property, may adversely affect the owner's
ability to sell or lease such property or to borrow using such property as
collateral. In addition, some environmental laws create a lien on the
contaminated site in favor of the government for damages and costs it incurs in
connection with the contamination. Persons who arrange for the disposal or
treatment of hazardous or toxic substances also may be liable for the costs of
removal or remediation of such substances at the disposal or treatment facility,
whether or not such facility is owned or operated by such person. Finally, the
owner of a site may be subject to common law claims by third parties based on
damages and costs resulting from environmental contamination emanating from a
site.
The Company has conducted, or is in the process of conducting, environmental
assessments of all of the undeveloped sites and sites currently under
construction as well as 37 of the Company's current residences. The completed
assessments have not revealed any environmental liability that the Company
believes would have a material adverse effect on the Company's business, assets
or results of operations, nor is the Company aware of any such environmental
liability. The Company has not conducted environmental assessments with respect
to four of the Company's present residences. It is possible that there are
material environmental liabilities of which the Company is unaware. The Company
believes that the residences are in compliance in all material respects with all
federal, state and local laws, ordinances and regulations regarding hazardous or
toxic substances or petroleum products. The Company has not been notified by any
governmental authority, and is not otherwise aware, of any material
non-compliance, liability or claim relating to hazardous or toxic substances or
petroleum products in connection with any of the present residences.
DEPENDENCE ON SENIOR MANAGEMENT
The Company depends, and will continue to depend, upon the services of Mr.
Timothy J. Buchanan, its Chief Executive Officer and Chairman of the Board, and
Mr. Steven L. Vick, its President. The Company has entered into employment
agreements with these two executives and has obtained key employee insurance
policies covering the lives of Messrs. Buchanan and Vick in the amounts of $1.0
million each. The loss of the services of either or both of such officers or the
Company's inability to attract additional management personnel in the future
could have a material adverse effect on the Company's financial condition or
results of operations.
STAFFING AND LABOR COSTS
The Company competes with other providers of long-term care with respect to
attracting and retaining qualified or skilled personnel. The Company is
dependent upon its ability to continue to attract and retain management
personnel who will be responsible for the day-to-day operations of each
residence. The Company is also dependent upon the available labor pool of low
wage employees. The Company is also subject to the Fair Labor Standards Act,
which governs such matters as minimum wage, overtime, and other working
conditions. A shortage of nurses and/or trained personnel, or other general
inflationary pressures, may require the Company to enhance its wage and benefits
package in order to compete. No assurance can be given that the Company's labor
costs will not increase, or that, if they do increase, they can be matched by
corresponding increases in resident revenues.
GOVERNMENT REGULATION
Health care is an area of extensive and frequent regulatory change. The
assisted living industry for long-term care is relatively new, and, accordingly,
the manner and extent to which it is regulated at the federal, state and local
levels is evolving. Changes in the laws or new interpretations of existing laws
may
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have a significant effect on methods and costs of doing business, and the amount
of reimbursement from governmental and other third party payors. The Company
will be subject to varying degrees of regulation and licensing by health or
social service agencies and other regulatory authorities in the various states
and localities where it operates or intends to operate.
The success of the Company will depend in part upon its ability to satisfy
the applicable regulations and requirements and to procure and maintain required
licenses as the regulatory environment for assisted living evolves. The
Company's operations could also be adversely affected by, among other things,
regulatory developments such as mandatory increases in the scope and quality of
care to be offered to residents and revisions in licensing and certification
standards. However, there can be no assurance that federal, state or local laws
or regulatory procedures which might adversely impact the Company's business,
financial condition, results of operations or prospects will not be imposed or
expanded.
The sale of franchises is regulated by the Federal Trade Commission and by
certain state agencies located in jurisdictions other than those states where
the Company currently conducts franchise operations. Principally, these
regulations require that certain written disclosures be made prior to the sale
of a franchise. In addition, some states have relationship laws which prescribe
the basis for terminating a franchisee's rights and regulate both the
franchisor's and its franchisees' post-termination rights and obligations. There
can be no assurance that changes in such regulations will not have an adverse
impact upon the ability of the Company to continue its franchising activities.
The Company and its activities are subject to zoning, health and other state
and local government regulations. Zoning variances or use permits are often
required for construction. Severely restrictive regulations could impair the
ability of the Company to open additional residences at desired locations or
could result in costly delays. Several residences have been financed by assisted
living residence revenue bonds. In order to continue to qualify for favorable
tax treatment of the interest payable on such bonds, the residences must comply
with certain federal income tax requirements, principally pertaining to the
maximum income level of a specified portion of the residents. Failure to satisfy
these requirements constitutes an event of default under the bonds, thereby
accelerating their maturity.
Certain states provide for Medicaid reimbursement for assisted living
services pursuant to Medicaid Waiver Programs permitted by the federal
government. Historically, the Company has not provided services in states with a
Medicaid Waiver Program; however, effective September 25, 1996, the Company
became certified as a Medicaid provider in the state of Texas. As a provider of
services under the Medicaid Waiver Program, the Company is subject to all of the
requirements of such program, including the fraud and abuse laws, violations of
which may result in civil and criminal penalties and exclusions from further
participation in the Medicaid Waiver Program. The Company intends to comply with
all applicable laws, including the fraud and abuse laws; however, there can be
no assurance that administrative or judicial interpretation of existing laws or
regulations will not have a material adverse impact on the Company's results of
operations or financial condition. See "The Company--Government Regulation."
DEPENDENCE ON ATTRACTING SENIORS WITH SUFFICIENT RESOURCES TO PAY
The Company currently, and for the foreseeable future, expects to rely
primarily on the ability of its residents to pay for the Company's charges from
their own and their families' financial resources. Inflation or other
circumstances which adversely affect the ability of seniors to pay for assisted
living services could have an adverse effect on the Company. In the event that
the Company encounters difficulty in attracting seniors with adequate resources
to pay for the Company's services, the Company would be adversely affected.
COMPETITION
The Company competes principally on the basis of price, quality, level and
range of services offered, as well as the appearance and design of its
residences. While the Company believes that its residences are
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distinctive in design and operating concept, it is aware of other companies with
similar or competitive concepts. The long-term care industry is highly
competitive and the Company expects that the assisted living industry, in
particular, will become more competitive in the future. The Company competes
with numerous companies providing similar long-term care alternatives, such as
home health agencies, life care at home, community-based service programs,
retirement communities and convalescent centers. While there presently are few
assisted living residences existing in the markets the Company serves, the
Company expects that, as assisted living becomes increasingly recognized as an
alternative form of long-term care, competition will grow from new market
entrants focusing primarily on assisted living. Nursing facilities that provide
long-term care services are also a potential source of competition to the
Company. Moreover, in the implementation of the Company's expansion program, the
Company expects to face competition for development sites and potential
acquisition of existing assisted living residences. Some of the Company's
present and potential competitors are significantly larger and have, or may
obtain, greater financial resources than those of the Company. Consequently,
there can be no assurance that the Company will not encounter increased
competition in the future which could limit its ability to attract residents or
expand its business and could have a material adverse effect on the Company's
financial condition, results of operations and prospects. See "The
Company--Competition."
DISRUPTION OF FRANCHISE ACTIVITIES
Historically, the Company has franchised two franchisee groups with respect
to residences, three of which are under development or construction. For the
foreseeable future, the Company intends to continue to offer franchises to a
select number of qualified franchisees. The success of the Company's franchise
activities is dependent upon the individual development and operational efforts
of these franchisees and a continuing cooperative relationship between the
Company and its franchisees. If any of the franchisees are unsuccessful in their
operations or commit acts that are detrimental to the reputation of the Sterling
House-Registered Trademark- concept or if the Company's business relationship
with any one or more of the franchisees should deteriorate, then there could be
a disruption in additional franchising activity, a decrease in franchise related
revenues or an increase in the Company's related franchise costs, which could
have a material adverse effect on the Company's results of operations or
financial condition.
LIABILITIES AND INSURANCE
The business of providing health care services entails an inherent risk of
liability. In recent years, long-term care providers have become subject to an
increasing number of lawsuits alleging negligence or similar legal theories.
Such lawsuits generally involve large claims and are expensive to defend. The
Company maintains liability insurance intended to cover such claims and the
Company believes that its insurance is in keeping with industry standards. There
can be no assurance, however, that any particular claim against the Company will
be covered by its insurance or that claims in excess of the Company's insurance
coverage will not be brought against the Company. A successful uninsured claim
or a successful claim which exceeds the Company's coverage could have a material
adverse effect upon the Company's financial condition or results of operations.
Claims against the Company, regardless of their merit or eventual outcome, may
also have a material adverse effect upon the Company's ability to attract
residents or expand its business and would require management to devote time to
matters unrelated to the operation of the Company's business. In addition, the
Company's insurance policies must be renewed annually. There can be no assurance
that the Company will be able to obtain liability insurance coverage in the
future or that, if such coverage is available, it will be available on
acceptable terms.
CONTROL BY INSIDERS
Messrs. Buchanan and Vick, the Chief Executive Officer and Chairman of the
Board, and President, respectively, and Dr. D. Ray Cook and Mr. Ronald L.
Mercer, directors of the Company, beneficially own an aggregate of approximately
47% of the outstanding Common Stock of the Company (36% if all of the
7
<PAGE>
Debentures are converted into Common Stock). Accordingly, they may be in a
position to control the election of the Company's directors, to thereby control
the policies and operations of the Company, and to determine the outcome of
corporate transactions, or other matters submitted for stockholder approval.
These matters include, without limitation, mergers, consolidations, the sale of
all or substantially all of the Company's assets and other changes in control of
the Company. In addition, the Company's 1995 Stock Option Plan (the "1995 Stock
Option Plan") authorizes the issuance of options to purchase up to 237,000
shares of Common Stock to employees and directors of the Company. The Company
has granted options to purchase 37,000 shares of Common Stock under the 1995
Stock Option Plan, of which options to purchase 3,449 shares of Common Stock
have been exercised. The Company has also granted an aggregate of 72,000 options
to certain directors of the Company outside of the 1995 Stock Option Plan. The
issuance of additional shares of Common Stock to management pursuant to the
exercise of options granted under the 1995 Stock Option Plan or to directors
pursuant to the exercise of options granted outside of the 1995 Stock Option
Plan would further increase the number of shares held by present management and
principal stockholders.
ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation and Bylaws contain, among other
things, provisions establishing a classified Board of Directors, authorizing
shares of preferred stock with respect to which the Board of Directors has the
power to fix the rights, preferences, privileges and restrictions without any
further vote or action by the stockholders, and requiring a super-majority vote
of stockholders in order to remove directors in certain instances, amend the
Articles of Incorporation and approve certain business combinations with respect
to a "related person." The Company is also subject to the Kansas Control
Acquisition Act (the "Control Act") which is intended to discourage hostile
takeovers of Kansas based corporations primarily through the imposition of
procedural hurdles that prevent certain types of acquiring stockholders from
gaining immediate voting power over shares acquired in significant amounts. The
application of the Control Act and/or the provisions of the Company's Articles
of Incorporation and Bylaws could delay, deter or prevent a merger,
consolidation, tender offer, or other business combination or change of control
involving the Company that some or a majority of the Company's stockholders
might consider to be in their personal best interests, including offers or
attempted takeovers that might otherwise result in such stockholders receiving a
premium over the market price for the Common Stock, and may adversely affect the
market price of, and the voting and other rights of, the holders of Common
Stock. The Company has not issued, and currently has no plans to issue, shares
of preferred stock.
SHARES ELIGIBLE FOR FUTURE SALE
The Company presently has a total of 5,038,449 shares of Common Stock
outstanding. Of these shares, 2,205,449 shares are freely tradeable without
restriction or limitation under the Securities Act, except for shares owned by
"affiliates" (as that term is defined under the rules and regulations under the
Securities Act) of the Company. The remaining 2,833,000 shares are "restricted"
securities within the meaning of Rule 144 under the Securities Act. Unless
registered under the Securities Act prior thereto, these restricted shares will
not be eligible to be sold publicly until approximately October 26, 1997. There
are also 237,000 shares of Common Stock issuable pursuant to the Company's 1995
Stock Option Plan, of which the Company has made a one-time grant of
non-qualified options to purchase 37,000 shares of Common Stock at $0.10 per
share to certain executive officers and key employees (excluding Messrs.
Buchanan and Vick). These options vested immediately and are exercisable in
three 20% increments at the end of each six-month period subsequent to October
26, 1995 and the remaining 40% will become exercisable on October 26, 1997. As
of September 30, 1996, options to purchase 3,449 shares of Common Stock have
been exercised. There are also 72,000 shares of Common Stock issuable pursuant
to options granted to the Company's four outside directors on November 20, 1995.
These options vested immediately and are exercisable in three 33.33% increments
commencing on November 20, 1996 and on each of the next two anniversaries of the
date of grant. No prediction can be made as to the effect, if any,
8
<PAGE>
that future sales of shares, or the availability of shares for future sales,
will have on the market price of the Common Stock from time to time. The sale of
substantial amounts of Common Stock, or the perception that such sales could
occur, could adversely affect prevailing market prices for the Common Stock.
ABSENCE OF PUBLIC MARKET
Prior to this offering, there has been no public market for the Debentures,
although the Debentures have been eligible for trading in the PORTAL market. The
Company does not intend to apply for listing of the Debentures on any national
securities exchange or Nasdaq. It is unlikely that an active or liquid trading
market will develop or be sustained for the Debentures. After completion of this
offering, the market price of the Common Stock into which the Debentures are
convertible could be subject to significant fluctuations in response to various
factors and events, including the liquidity of the market for the Common Stock,
variations in the Company's operating results, the Company's ability to meet
market expectations, new statutes or regulations or changes in the
interpretation of existing statutes or regulations affecting the health care
industry generally or assisted living residence businesses in particular. In
addition, the stock market in recent years has experienced broad price and
volume fluctuations that often have been unrelated to the operating performance
of particular companies. These market fluctuations also may adversely affect the
market price of the Common Stock. See "Plan of Distribution" and "Description of
Debentures."
SUBORDINATION OF DEBENTURES
The Debentures are unsecured obligations of the Company and are subordinated
in right of payment to all existing and future Senior Indebtedness of the
Company. The Indenture does not restrict the incurrence of Senior Indebtedness
or other Indebtedness by the Company or any subsidiary. At June 30, 1996, the
Company had approximately $4,900,000 of Senior Indebtedness. See "Description of
Debentures--Subordination of Debentures."
DIVIDEND POLICY
The Company has never paid any cash dividends and, for the foreseeable
future, the Company expects to retain all earnings to finance the future
expansion and development of its business. Any future payment of cash dividends
will depend, among other factors, upon the earnings, capital requirements,
operating and financial condition of the Company, other relevant factors, and,
more importantly, upon compliance with various financial covenants contained in
future financing agreements to which the Company may become a party, the effect
of which is to make the payment of dividends unlikely during the foreseeable
future.
9
<PAGE>
THE COMPANY
GENERAL
The Company constructs, owns, operates, manages and franchises Sterling
House-Registered Trademark- assisted living residences, providing a wide range
of health care, assisted living care and services to the frail elderly. Assisted
living care is an emerging segment of the long-term care industry serving the
rapidly growing elderly population who may require assistance with the
activities of daily living, such as dressing, bathing and eating ("ADLs"), or
routine skilled nursing services. The Company's operations provide elderly
residents with a broad range of cost-effective health care and personal support
services on a 24-hour basis, enabling them to maintain an independent and
dignified lifestyle in a residential homelike setting.
The Company was co-founded in 1991 by Timothy J. Buchanan, Chief Executive
Officer and Chairman of the Board, and Steven L. Vick, President, and has
actively expanded its assisted living operations through the development,
operation and selective franchising of Sterling House-Registered Trademark-
residences. At September 30, 1996, the Company had in operation 41 assisted
living residences with 1,372 units. The Company also had under construction or
development a total of 63 residences; 1 building with 42 units in Kansas, 5
buildings with 194 units in Oklahoma, 19 buildings with 746 units in Texas, 18
buildings with 772 units in Florida, 13 buildings with 539 units in Ohio, and 7
buildings with 310 units in Colorado. Sterling House-Registered Trademark-
residences are located primarily in select affluent suburban areas as well as
small to medium sized communities with populations in excess of 10,000.
The Company is following its plan to construct, develop, manage, and, to a
lesser extent, acquire additional assisted living residences in states which the
Company believes possess attractive demographic and favorable regulatory
environments. As of September 30, 1996, all of the Company's residences were
100% private pay and did not rely on government reimbursement for revenue.
Effective October 1996, the Company began accepting residents in the state of
Texas for which the Company will receive Medicaid reimbursement under the Texas
Medicaid Waiver Program; however, the Company expects to continue to focus
primarily on private pay residents. In support of continued expansion, the
Company has opened regional offices in Edmond, Oklahoma; Lewisville, Texas;
Denton, Texas; and Stuart, Florida.
The Company is a Kansas corporation, with its principal executive office
located at 453 South Webb Road, Suite 500, Wichita, Kansas 67207.
INDUSTRY
The long-term care industry encompasses a broad range of accommodations and
health care services that are provided primarily to seniors. Home-based care,
congregate living or retirement centers and care in family member's homes
provide viable options for those seniors needing limited services on an as-
needed basis. However, services in congregate or retirement centers are often
limited to meals and housekeeping.
As people age, their need for assistance often increases, and care in the
residential type setting of an assisted living residence may be preferable and
more cost effective than home based or nursing home care options. Assisted
living services typically include assistance with supportive services such as
housekeeping, meals and laundry, as well as personal care such as bathing,
dressing and mobility, and routine nursing services such as medication
assistance and health monitoring. Generally, residents of assisted living
residences require higher levels of care than those residents in congregate or
retirement settings, but require lower levels of care than skilled nursing home
patients. For seniors in need of continuous unscheduleable 24 hours a day
attendance by a skilled nurse or practitioner, a skilled nursing facility may be
required. The typical age of an assisted living resident is 83 - 85 years old.
The aging of the U.S. population as well as other social trends contribute
to the growth of the assisted living industry. Those seniors age 85 and over are
considered the prime market for assisted living facilities. The U.S. Census
Bureau estimates that the number of these individuals will increase from 3.1
million in
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<PAGE>
1990, to over 4.3 million by the year 2000. According to the U.S. General
Accounting Office, in 1991 there were over 7.0 million people in the U.S. who
needed assistance with ADLs, and the number of people needing such assistance is
expected to double by the year 2020.
Historically, the philosophy and structure of the long-term care industry
have focused on meeting the medical needs of seniors in a clinical setting, and
the government reimbursement structure, through Medicaid and Medicare, has
primarily been based on the more expensive "medical-model" of care. As the
population of seniors and the cost of health care continues to dramatically
increase, and the demand for cost-containment of long-term health care
intensifies, both public and private payors will actively seek alternatives. The
Company believes that these and other pressures and trends will increase the
demand for the assisted living model of care and housing, and that seniors will
find the home-like residential setting a more preferred alternative.
STERLING HOUSE-REGISTERED TRADEMARK- SERVICES
Sterling House-Registered Trademark- provides a broad range of healthcare
and support services to residents on an individualized basis in a comfortable
home-like atmosphere. With building features such as residentially scaled
spaces, private apartments including locking doors, living area, bedroom area,
private bath, individual temperature controls and kitchenettes, the residents'
apartments are viewed as their home, in which they receive services. The broad
range of services offered by the Company include, without limitation, personal
care, support services, supplemental services, dementia care and nursing
services, all available 24 hours a day and designed to respond to the residents'
individual needs, enabling them to maintain a dignified more independent
lifestyle. Services are delivered in an "unbundled" manner through the Sterling
House-Registered Trademark- "Personalized Service Plans" targeted specifically
at each resident's individual needs and preferences.
In designing each resident's Personalized Service Plan, the Company
periodically assesses the needs and desires of a resident by conducting
interviews with the resident and, if appropriate, family members and medical
personnel. A service assessment matrix is utilized to establish a point score
which represents the resident's position within the Company's range of care and
services, and thereby determining the resulting charge for services within the
Company's four levels of pricing. Additionally, the Company offers a variety of
apartment layouts including studio, one bedroom and one bedroom deluxe designs.
The resulting combination of apartment types and service pricing determines each
resident's total monthly charge for housing and services.
STERLING HOUSE-REGISTERED TRADEMARK- OPERATIONS
Each Sterling House-Registered Trademark- residence is managed by a Director
who is responsible for the overall day-to-day operations including oversight of
the quality of care, compliance with state regulations and corporate policies,
marketing and community relations, and financial and budgetary performance. The
Director is responsible for all professional and non-professional staff employed
on either a full- or part-time basis, as well as independent contractors.
Routine nursing services are provided by nurses who are typically employed by
the Company. On occasion, certain nursing services may be delegated by the nurse
to trained members of the staff. The Company consults with outside providers,
such as pharmacists and dieticians, to assist residents with services such as
medication review and menu planning to meet special dietary needs. Personal
care, dietary services, housekeeping and laundry services are performed
primarily by staff members who are either full- or part-time and are trained to
perform a variety of services.
The Company's residences are divided into regional districts. There are
currently two in Kansas, three in Oklahoma, three in Texas, two in Florida, and
one in Ohio, each of which is supervised by a District Manager. The Company
maintains regional offices in Oklahoma, Texas and Florida in addition to its
headquarters in Wichita, Kansas. Additional districts as well as regional
offices will be added as additional locations are developed. Each District
Manager is responsible for managing the overall operations of the
11
<PAGE>
Sterling House-Registered Trademark- residences within his or her district, as
well as monitoring and supervising Directors in his or her district to assure
continued compliance with quality of care, financial performance, state
regulations and corporate policies and procedures. They also work in conjunction
with the Company's Regional Marketing Representatives to assist and oversee the
Directors in developing and maintaining an active and effective marketing
program.
Regional Marketing Representatives implement corporate marketing plans from
residence start-up through stabilization and provide training, direction and
assistance to Directors and staff for community relations, marketing and census
retention. Each Regional Marketing Representative makes presentations to groups
and organizations on the Sterling House-Registered Trademark- philosophy and
develops working relationships with local and regional administrative and health
care related professionals. Corporate direction and support in all areas of
operations for Directors, Regional Marketing Representatives and District and
Regional Managers are provided by the executive and support staffs who work out
of the Company's headquarters. Accounting services, data processing, accounts
payable, payroll services and human resources are all provided at the Company's
headquarters.
COMPETITION
The Company competes with numerous other companies and long-term care
providers offering similar services such as home health agencies, life care at
home, community based service programs, retirement communities and convalescent
centers. The long-term care industry, generally, is highly competitive and the
Company expects that assisted living in particular will become increasingly
competitive. While the Company believes that presently there is generally a
moderate number of assisted living facilities in the markets where the Company
intends to operate, as assisted living receives increased attention and more
states include assisted living in their Medicaid Waiver Programs, as well as
additional sources of capital and financing become available, competition will
grow from new market entrants, as well as other existing providers focusing on
assisted living.
Historically, the Company's residences have been 100% private pay; however,
effective September 25, 1996, the Company became certified as a Medicaid
provider in the state of Texas. The Company expects to continue to focus
primarily on private pay residents. The Company believes its low cost of
operations will allow it to operate and compete in this market segment.
Competition for residents among assisted living providers is typically based
on the quality of service, pricing, population, living environment, range of
services and location. In addition, certain of the Company's competitors are
larger than the Company and have or may obtain greater resources than those of
the Company. The Company's competitors consist primarily of long-term care
providers and other assisted living providers operating in similar geographic
areas. The Company believes that there is moderate competition for the lower to
middle income portions of the private pay market the Company serves.
GOVERNMENT REGULATION
Currently, assisted living residences are not specifically regulated as such
by the federal government. However, the Company's assisted living residences are
subject to certain state regulations and licensing requirements. For example,
residences located in the State of Kansas are licensed by the Kansas Department
of Health and Environment as assisted living facilities, residences located in
the State of Oklahoma are licensed by the Oklahoma State Department of Health as
residential care facilities, residences in Texas are licensed as personnel care
facilities and residences in Florida are licensed as adult congregate living
facilities and extended congregate care facilities. Assisted living is a
relatively new concept as compared to other forms of long-term care (e.g.,
nursing homes) and, as a result, its regulation by government is still evolving
and is currently minimal in comparison with regulations imposed upon other
licensed health care operators. While regulations and licensing requirements
vary significantly from state
12
<PAGE>
to state, they generally include requirements relating to matters such as
licensure, fire safety, sanitation, staff training, staffing levels, and living
accommodations such as size of rooms, number of bathrooms and ventilation, as
well as other regulatory requirements related more specifically to certain of
the health care services provided by the Company.
The Company believes that its residences are in substantial compliance with
all applicable regulatory requirements. However, in the ordinary course of
business, a residence could be cited for deficiencies. In such cases, the
Company expects to take appropriate and timely corrective action to eliminate
such deficiencies.
Medicaid provides insurance for certain financially or medically needy
persons, regardless of age, and is funded jointly by federal, state and local
governments. However, without a Medicaid Waiver Program, states can only use
federal Medicaid funds for long-term nursing facilities. Under the Medicaid
Waiver Program, states apply to the Health Care Financing Administration for a
waiver to use Medicaid funds to support community-based options for the low
income elderly that need long-term care. These waivers permit states to
reallocate a portion of Medicaid funding from nursing facility care to other
forms of care such as assisted living. Historically, the Company has not
provided services in states with a Medicaid Waiver Program; however, effective
September 25, 1996, the Company became certified as a Medicaid provider in the
state of Texas. As a provider of services under the Medicaid Waiver Program, the
Company is subject to all of the requirements of such program, including the
fraud and abuse laws, violations of which may result in civil and criminal
penalties and exclusions from further participation in the Medicaid Waiver
Program.
The success of the Company will be dependent, in part, upon its ability to
satisfy applicable regulations and requirements and to maintain any required
licenses. The Company's operations could also be adversely affected by, among
other things, regulatory changes such as mandatory increases in the scope and
quality of care to be provided to residents and revisions in licensing and
certification standards.
In order to comply with the terms of the revenue bonds used to finance eight
of the Company's residences, the Company is required to lease a minimum of 20%
of the apartments in each such residence to low or moderate income persons as
defined pursuant to the Internal Revenue Code of 1986, as amended.
The Company is subject to the Fair Labor Standards Act, which governs such
matters as minimum wage, overtime and other working conditions. A portion of the
Company's personnel is paid at rates related to the federal minimum wage and
accordingly, increases in the minimum wage will result in an increase in the
Company's labor costs.
The sale of franchises is regulated by the Federal Trade Commission and by
certain state agencies located in jurisdictions other than those states where
the Company currently operates. Principally, these regulations require that
certain written disclosures be made prior to the offer for sale of a franchise.
The disclosure documents are subject to state review and registration
requirements and must be periodically updated, not less frequently than
annually. In addition, some states have relationship laws which prescribe the
basis for terminating a franchisee's rights and regulate both the Company's and
its franchisees' post-termination rights and obligations.
EXPANSION
Sterling House-Registered Trademark- residences generally range in size from
33 - 50 apartments and are carefully designed to minimize walking distance in a
comfortable and easy to navigate layout. Each residence provides a distinctive
residential home-like atmosphere, unlike the "institutional" or "hotel" feel
common to many traditional skilled nursing and large congregate care facilities,
yet is designed to be an efficient, economical health care delivery setting. The
Company locates residences in a variety of markets, including select affluent
suburban areas and small to medium size communities with populations in excess
of 10,000.
13
<PAGE>
The Company is currently developing new residences in Kansas, Oklahoma,
Texas, Florida, Ohio and Colorado. As of September 30, 1996, the Company had
under construction 33 residences containing 1,309 units; 1 in Kansas with 42
units, 4 in Oklahoma with 148 units, 17 in Texas with 667 units, 7 in Florida
with 294 units and 4 in Ohio with 158 units. Additionally, the Company has under
development and land purchase commitments for a total of 30 residences, 1 in
Oklahoma, 2 in Texas, 11 in Florida, 7 in Colorado and 9 in Ohio.
The Company develops and constructs residences utilizing a combination of
both its in-house construction subsidiary and outside developers and
contractors. Currently the Company has retained a third party developer in
Florida and has also retained nonaffiliated general contractors for construction
of properties in Florida and Ohio and some properties in Texas. The Company
anticipates that it will continue to use this combination of in-house and third
party contractors to facilitate its continued expansion. All aspects relating to
development, including site selection, plans, specifications, costs, architect
selection, bonding issues and budget compliance are approved by the Company and
typically managed from its headquarters. The Company estimates construction time
for a new residence to be approximately six to nine months, and once opened,
estimates that it will take approximately nine months to achieve a stabilized
occupancy level of 95% or higher.
TRADEMARKS, PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION
The Company is the registered owner of the service mark "Sterling
House-Registered Trademark-" (Reg. No. 1,827,828) as recorded on the principal
register of the United States Patent and Trademark Office. The service mark
registration will expire on March 22, 2004. The Company expects that it will
renew its service mark at that time. The Company also claims a copyright in all
policy and procedures notebooks, operations manuals, architectural plans,
advertisements and other similar materials developed for use in and promotion of
the Sterling House-Registered Trademark- residence system and in the trade dress
protection of the physical residences.
EMPLOYEES
As of September 30, 1996, the Company had approximately 750 employees,
approximately 300 of whom were employed in full-time positions. The Company has
no collective bargaining agreements with any of its employees. The Company
believes that its labor relations are good.
14
<PAGE>
PROPERTIES
The following chart sets forth, as of September 30, 1996, the location,
number of units, ownership, the quarterly period during which operations
commenced and those under construction or development for the Company's
residences:
<TABLE>
<CAPTION>
COMMENCED
LOCATION UNITS OWNERSHIP OPERATIONS
- ----------------------------------- --------- ------------ ----------------
<S> <C> <C> <C>
OWNED OR LEASED
- -----------------------------------
Augusta, KS 21 Owned 4th Qtr. 1991
Wichita, KS 26 Leased 3rd Qtr. 1993
Abilene, KS 26 Owned 4th Qtr. 1993
Bethany, OK 26 Leased 1st Qtr. 1994
Junction City, KS 26 Owned 1st Qtr. 1994
McPherson, KS 33 Leased 2nd Qtr. 1994
Emporia, KS 26 Owned 3rd Qtr. 1994
Salina, KS 33 Leased 3rd Qtr. 1994
Arkansas City, KS 33 Owned 4th Qtr. 1994
Great Bend, KS 33 Leased 1st Qtr. 1995
Ponca City, OK 33 Leased 1st Qtr. 1995
Dodge City, KS 35 Leased 3rd Qtr. 1995
Bartlesville, OK 33 Leased 3rd Qtr. 1995
Midwest City, OK 33 Leased 4th Qtr. 1995
Derby, KS 26 Leased 1st Qtr. 1996
Wellington, KS 26 Leased 1st Qtr. 1996
Hays, KS 33 Leased 1st Qtr. 1996
Enid, OK 33 Leased 1st Qtr. 1996
Shawnee, OK 33 Leased 1st Qtr. 1996
Stillwater, OK 33 Leased 1st Qtr. 1996
Oklahoma City, OK - 89th St. 33 Leased 1st Qtr. 1996
Chickasha, OK 33 Leased 1st Qtr. 1996
Edmond, OK 37 Leased 2nd Qtr. 1996
Norman, OK 33 Leased 2nd Qtr. 1996
Duncan, OK 33 Leased 2nd Qtr. 1996
Lawton, OK 37 Leased 2nd Qtr. 1996
Broken Arrow, OK 37 Owned 2nd Qtr. 1996
Denton, TX 37 Owned 2nd Qtr. 1996
Ennis, TX 33 Owned 2nd Qtr. 1996
Corsicana, TX 33 Owned 2nd Qtr. 1996
Paris, TX 37 Owned 2nd Qtr. 1996
Palestine, TX 37 Leased 2nd Qtr. 1996
Liberal, KS 45 Owned 3rd Qtr. 1996
Waxahachie, TX 37 Leased 3rd Qtr. 1996
Texarkana, TX 37 Leased 3rd Qtr. 1996
Muskogee, OK 37 Leased 3rd Qtr. 1996
Claremore, OK 37 Leased 3rd Qtr. 1996
Oklahoma City, OK - 122nd St. 37 Leased 3rd Qtr. 1996
Ada, OK 37 Owned 3rd Qtr. 1996
Stuart, FL 42 Leased 3rd Qtr. 1996
Vero Beach, FL 42 Leased 3rd Qtr. 1996
---------
Total Units 1,372
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
COMMENCED
LOCATION UNITS OWNERSHIP OPERATIONS
- ----------------------------------- --------- ------------ ----------------
<S> <C> <C> <C>
MANAGED OR FRANCHISED
- -----------------------------------
Olathe, KS - I 37 Franchised 4th Qtr. 1992
Topeka, KS 37 Franchised 2nd Qtr. 1994
Pratt, KS 44 Managed 3rd Qtr. 1994
Lenexa, KS 38 Franchised 4th Qtr. 1994
Lawrence, KS 37 Franchised 2nd Qtr. 1995
Leawood, KS 37 Franchised 3rd Qtr. 1995
Olathe, KS - II 42 Franchised 4th Qtr. 1995
Colorado Springs, CO 37 Franchised 3rd Qtr. 1996
Coffeyville, KS 37 Managed 4th Qtr. 1996
---------
Total Units 346
<CAPTION>
UNDER CONSTRUCTION UNITS RESIDENCES
- ----------------------------------- --------- ------------
<S> <C> <C> <C>
Kansas 42 1
Oklahoma 148 4
Texas 667 17
Florida 294 7
Ohio 158 4
--------- ------------
Total 1,309 33
<CAPTION>
UNDER DEVELOPMENT RESIDENCES
- ----------------------------------- ------------
<S> <C> <C> <C>
Oklahoma 1
Texas 2
Florida 11
Colorado 7
Ohio 9
------------
Total 30
</TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
Because of the Company's historic losses, the Company has experienced a
deficiency of earnings to fixed charges throughout its existence. There was a
deficiency of earnings to fixed charges for the period from April 15, 1991
(Inception) to December 31, 1991 of approximately $70,000, deficiencies of
approximately $55,000, $147,000, $527,000 and $1,427,000 for the years ended
December 31, 1992, 1993, 1994 and 1995, respectively, and a deficiency of
approximately $696,000 for the six-month period ended June 30, 1996. For the
purposes of calculating the ratio of earnings to fixed charges, earnings before
interest and taxes has been added to fixed charges and that sum has been divided
by such fixed charges. Fixed charges consist principally of interest on debt,
amortization of deferred debt issuance costs and the interest component of
rental expenses.
USE OF PROCEEDS
The proceeds from the sale of the Debentures and shares of Common Stock
offered hereby are solely for the account of the Selling Debentureholders.
Accordingly, the Company will receive none of the proceeds from sales thereof.
SELLING DEBENTUREHOLDERS
The Debentures being offered hereby were acquired by the Selling
Debentureholders in connection with a private placement of the Debentures by the
Company on May 17, 1996 pursuant to Rule 144A, and
16
<PAGE>
Regulation D under the Securities Act or in permitted resale transactions from
the initial purchasers of the Debentures (the "Initial Purchasers") or holders
acquiring such Debentures from prior holders thereof in further permitted resale
transactions. The following table sets forth information concerning the
principal amount of Debentures beneficially owned by such Selling
Debentureholders which may be offered from time to time pursuant to this
Prospectus. Other than as a result of the ownership of Debentures or Common
Stock, none of the Selling Debentureholders has had any material relationship
with the Company within the past three years, except as noted herein. The table
has been prepared based upon information furnished to the Company by the Trustee
(as defined) for the Debentures, by Depository Trust Company (the "Depository"),
and by or on behalf of the Selling Debentureholders.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
OF DEBENTURES OF DEBENTURES PERCENT OF OUTSTANDING
NAME BENEFICIALLY OWNED THAT MAY BE SOLD DEBENTURES
- ------------------------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
</TABLE>
Information concerning the Selling Debentureholders may change from time to
time and will be set forth in Prospectus Supplements. As of the date of this
Prospectus, the aggregate principal amount of Debentures outstanding is
$35,000,000.00.
Because the Selling Debentureholders may offer all or some of the Debentures
and shares of Common Stock issued upon conversion thereof pursuant to the
offering contemplated by this Prospectus, and because there are currently no
agreements, arrangements or understandings with respect to the sale of any of
the Debentures or shares of Common Stock that will be held by the Selling
Debentureholders after completion of this offering, no estimate can be given as
to the principal amount of Debentures or shares of Common Stock that will be
held by the Selling Debentureholders after completion of this offering. See
"Plan of Distribution."
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from this offering. The
Company has been advised by the Selling Debentureholders that the Selling
Debentureholders may sell all or a portion of the Debentures and shares of
Common Stock offered hereby from time to time on terms to be determined at the
times of such sales. The Selling Debentureholders may also make private sales
directly or through a broker or brokers. Alternatively, any of the Selling
Debentureholders may from time to time offer the Debentures or shares of Common
Stock through underwriters, including any of the Initial Purchasers, dealers or
agents, who may receive compensation in the form of underwriting discounts,
commissions or concessions from the Selling Debentureholders and the purchasers
of the Debentures or shares of Common Stock for whom they may act as agent. To
the extent required, the aggregate principal amount of Debentures and number of
shares of Common Stock to be sold, the names of the Selling Debentureholders,
the purchase price, the name of any such agent, dealer or underwriter and any
applicable commissions with respect to a particular offer will be set forth in
an accompanying Prospectus Supplement. The aggregate proceeds to the Selling
Debentureholders from the sale of the Debentures and Common Stock offered by the
Selling Debentureholders hereby will be the purchase price of such Debentures
and shares of Common Stock less any commissions. There is no assurance that the
Selling Debentureholders will sell any or all of the Debentures or shares of
Common Stock offered hereby.
The Debentures and the shares of Common Stock issued upon conversion of the
Debentures may be sold from time to time in one or more transactions at fixed
offering prices, which may be changed, or at
17
<PAGE>
varying prices determined at the time of sale or at negotiated prices. Such
prices will be determined by the holders of such securities or by agreement
between such holders and underwriters or dealers who may receive fees or
commissions in connection therewith.
The Company does not intend to apply for listing of the Debentures on any
national securities exchange or on Nasdaq. The Company does not anticipate that
an active market for the Debentures will develop.
In order to comply with the securities laws of certain states, if
applicable, the Debentures and shares of Common Stock will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the Debentures and shares of Common Stock may not be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
The Selling Debentureholders and any broker-dealers, agents or underwriters
that participate with the Selling Debentureholders in the distribution of the
Debentures or shares of Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act, in which event any commissions received by
such broker-dealers, agents or underwriters and any profit on the resale of the
Debentures or shares of Common Stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
The Debentures were originally sold to the Initial Purchasers on May 17,
1996 in a private placement at a purchase price of 100% of their principal
amount. Under certain circumstances, the Company agreed to indemnify and hold
the Initial Purchases and certain subsequent holders of the Debentures harmless
against certain liabilities under the Securities Act that could arise in
connection with the sale of the Debentures by the Initial Purchasers or such
subsequent holders.
The Company will pay all expenses incident to this offering and sale of the
Debentures and Common Stock to the public other than underwriting discounts and
selling commissions and fees.
DESCRIPTION OF DEBENTURES
The Debentures were issued under an Indenture dated as of May 23, 1996 (the
"Indenture") between the Company and Fleet National Bank, as the trustee under
the Indenture (the "Trustee"). The terms of the Debentures include those stated
in the Indenture and those made a part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended.
The following is a summary of certain provisions of the Indenture and does
not purport to be complete and is qualified in its entirety by reference to the
detailed provisions of the Indenture, including the definitions of certain terms
therein to which reference is hereby made, for a complete statement of such
provisions. Wherever particular provisions or sections of the Indenture or terms
defined therein are referred to herein, such provisions, sections or definitions
are incorporated herein by reference.
GENERAL
The Debentures are unsecured general obligations of the Company, subject to
the rights of holders of Senior Indebtedness of the Company, and will mature on
June 30, 2006. The Debentures are limited to $35,000,000 aggregate principal
amount and bear interest semiannually on June 30 and December 30 of each year
commencing December 30, 1996 at the rate per annum of 6.75%. The first payment
will be for the period from the date of original issuance to December 30, 1996.
The Company will pay interest on the Debentures to the persons who are
registered holders of Debentures at the close of business on June 15 or December
15 preceding the interest payment date. Principal (and premium, if any) and
interest will be payable, the Debentures will be convertible and exchangeable,
and transfers thereof will be registerable, at the office or agency of the
Company maintained for such purposes, initially at the offices of the Trustee.
18
<PAGE>
The Company may pay principal and interest by check and may mail an interest
check to a holder's registered address. Holders must surrender Debentures to a
Paying Agent to collect principal payments.
The Trustee currently acts as Paying Agent, Registrar and Conversion Agent.
The Company may change any Paying Agent, Registrar, Conversion Agent or
co-registrar upon prior written notice to the Trustee and may act in any such
capacity itself.
DELIVERY AND FORM OF DEBENTURES
Those Debentures initially sold to qualified institutional buyers (as
defined in Rule 144A under the Securities Act, were issued in global form (the
"Rule 144A Global Debentures") and were deposited on May 23, 1996 with the
Depository and registered in the name of Cede & Co., as nominee of the
Depository. Those Debentures that were initially sold to institutional
accredited investors were initially issued in fully registered form. The Rule
144A Global Debentures to be resold as set forth herein will be initially issued
in global form (the "New Global Debentures") and will be deposited on or about
the date of effectiveness of this Registration Statement on behalf of the
Depository and registered in the name of Cede & Co. Beneficial interests in the
Rule 144A Global Debentures and the New Global Debentures may be exchanged for
definitive securities in accordance with the terms of the Indenture.
A holder may transfer or exchange Debentures in accordance with the
Indenture. No service charge will be made for any registration of transfer,
exchange or conversion of Debentures, except for any tax or other governmental
charges that may be imposed in connection therewith. The Registrar need not
transfer or exchange any Debentures selected for redemption. Also, in the event
of a partial redemption, it need not transfer or exchange any Debentures for a
period of 15 days before selecting Debentures to be redeemed. The Indenture does
not contain any provision requiring the Company to repurchase the Debentures at
the option of the holders thereof in the event of a leveraged buyout,
recapitalization or similar restructuring of the Company, even though the
Company's creditworthiness and the market value of the Debentures may decline
significantly as a result of such transaction. The Indenture does not protect
holders of the Debentures against any decline in credit quality, whether
resulting from any such transaction or from any other cause. The registered
holder of a Debenture may be treated as its owner for all purposes.
CONVERSION RIGHTS
The holders of the Debentures are entitled at any time after the
Registration Date and prior to maturity, subject to prior redemption, to convert
the Debentures or portions thereof (which are $1,000 or multiples thereof) into
shares of Common Stock at the conversion price set forth in the Debenture
(subject to adjustments as described below.) No payment or adjustment will be
made for accrued interest on a converted Debenture. If any Debenture not called
for redemption is converted between a record date for the payment of interest
and the next succeeding interest payment date, such Debenture must be
accompanied by funds equal to the interest payable to the registered holder on
such interest payment date on the principal amount so converted. The Company
will not issue fractional interests in shares of Common Stock upon conversion of
the Debentures and, instead, will deliver a check for the fractional share based
upon the market value of the Common Stock on the last trading day prior to the
conversion date. If the Debentures are called for redemption, conversion rights
will expire at the close of business on the redemption date, unless the Company
defaults in payment due upon such redemption.
The conversion price is subject to adjustments, as set forth in the
Indenture, in certain events, including the payment of dividends or
distributions on the Company's Common Stock in shares of capital stock;
subdivisions or combinations of the Common Stock into a greater or smaller
number of shares; reclassification of the shares resulting in an issuance of any
shares of the Company's capital stock; distribution of rights or warrants to all
holders of Common Stock entitling them to purchase Common Stock at less than the
current price at that time; and the distribution to all holders of Common Stock
of
19
<PAGE>
assets, excluding certain cash dividends and distributions, or debt securities
or any rights or warrants to purchase securities of the Company; provided,
however, that no adjustment will be required if holders of the Debentures
received notice of and are allowed to participate in such transactions. No
adjustment will be required for rights to purchase Common Stock pursuant to a
Company plan for reinvestment of dividends or interest, or for a change in the
par value of the Common Stock. To the extent that Debentures become convertible
into cash, no adjustment will be required thereafter as to cash. No adjustment
in the conversion prices need be made unless such adjustment would require a
change of at least one percent (1%) in the conversion price; however, any
adjustment that would otherwise be required to be made shall be carried forward
and taken into account in any subsequent adjustment. The Company may voluntarily
reduce the conversion price for a period of time.
If the Company pays dividends on the Common Stock in shares of capital stock
or subdivides or combines the Common Stock or issues by reclassification of its
Common Stock any shares of its capital stock or merges with, or transfers or
leases substantially all of its assets to, another corporation or trust, the
holders of the Debentures then outstanding will be entitled thereafter to
convert such Debentures into the kind and amount of shares of capital stock,
other securities, cash or other assets which they would have owned immediately
after such event had such Debentures been converted before the effective date of
the transaction.
Any Debentures called for redemption, unless surrendered for conversion on
or before the close of business on the redemption date, are subject to being
purchased from the holder of such Debentures at the redemption price by one or
more investment banks or other purchasers who may agree with the Company to
purchase such Debentures and convert them into Common Stock of the Company.
In the event of a taxable distribution to holders of Common Stock which
results in an adjustment of the conversion price, the holders of the Debentures
may, in certain circumstances, be deemed to have received a distribution subject
to United States federal income tax as a dividend.
SUBORDINATION OF DEBENTURES
The indebtedness evidenced by the Debentures is subordinated and junior in
right of payment to the extent set forth in the Indenture to the prior payment
in full of amounts then due on all Senior Indebtedness. No payment shall be made
by the Company on account of principal of (or premium, if any) or interest on
the Debentures or on account of the purchase or other acquisition of Debentures,
if there shall have occurred and be continuing a default with respect to any
Senior Indebtedness permitting the holders to accelerate the maturity thereof,
or with respect to the payment of any Senior Indebtedness and such default shall
be the subject of a judicial proceeding or the Company shall have received
notice of such default from certain authorized persons, unless and until such
default or event of default shall have been cured or waived or shall have ceased
to exist. By reason of these provisions, in the event of default on any Senior
Indebtedness, whether now outstanding or hereafter issued, payments of principal
of (and premium, if any) and interest on the Debentures may not be permitted to
be made until such Senior Indebtedness is paid in full, or the event of default
on such Senior Indebtedness is cured or waived.
Upon any acceleration of the principal of the Debentures or any distribution
of assets of the Company upon any receivership, dissolution, winding-up,
liquidation, reorganization or similar proceedings of the Company, whether
voluntary or involuntary, or in bankruptcy or insolvency, all amounts due or to
become due upon all Senior Indebtedness must be paid in full before the holders
of the Debentures or the Trustee are entitled to receive or retain any assets so
distributed in respect of the Debentures. By reason of this provision, in the
event of insolvency, holders of the Debentures may recover less, ratably, than
holders of Senior Indebtedness.
"Senior Indebtedness" is defined to mean the principal, premium, if any,
unpaid interest on and all other amounts payable under or in respect of
Indebtedness of the Company for money borrowed. There is no limit on the amount
of Senior Indebtedness that the Company may incur.
20
<PAGE>
OPTIONAL REDEMPTION
The Debentures are subject to redemption, as a whole or in part, at any time
or from time to time commencing after July 15, 1999 at the option of the Company
on at least 30 days' and not more than 60 days' prior notice by mail. The
redemption prices (expressed as a percentage of principal amount) are as follows
for the 12-month period beginning after July 15 of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ------------------------------------------------------------- -------------
<S> <C>
1999......................................................... 102%
2000......................................................... 101%
2001 and thereafter.......................................... 100%
</TABLE>
MODIFICATION OF THE INDENTURE
Under the Indenture, with certain exceptions, the rights and obligations of
the Company with respect to the Debentures and the rights of holders of the
Debentures may only be modified by the Company and the Trustee with the written
consent of the holders of at least 66 2/3% in principal amount of the
outstanding Debentures. However, without the consent of each holder of any
Debenture affected, an amendment, waiver or supplement may not: (i) reduce the
amount of Debentures whose holders must consent to an amendment; (ii) reduce the
rate or change the time of payment of interest on any Debenture; (iii) reduce
the principal of or change the fixed maturity of any Debenture; (iv) make any
Debenture payable in money other than that stated in the Debenture; (v) change
the provisions of the Indenture regarding the right of a majority of the
Debentureholders to waive defaults under the Indenture or impair the right of
any Debentureholder to institute suit for the enforcement of any payment of
principal of and interest on the Debentures on and after their respective due
dates; or (vi) make any change that adversely affects the right to convert any
Debenture.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The following is a summary of certain provisions of the Indenture relating
to events of default, notice and waiver.
The following are Events of Default under the Indenture with respect to the
Debentures: (i) default in the payment of interest on the Debentures when due
and payable which continues for 30 days; (ii) default in the payment of
principal (and premium, if any) on the Debentures when due and payable, at
maturity, upon redemption or otherwise, which continues for five business days;
(iii) failure to perform any other covenant of the Company contained in the
Indenture or the Debentures which continues for 60 days after notice as provided
in the Indenture; (iv) acceleration of any indebtedness for money borrowed
(including obligations under leases required to be capitalized on the balance
sheet of the lessee under generally accepted accounting principles but not
including any indebtedness or obligation for which recourse is limited to
property purchased) in an aggregate principal amount in excess of $1,000,000,
whether existing on the date of the execution of the Indenture or thereafter
created, if such acceleration is not annulled within ten days after written
notice to the Company of such acceleration; and (v) certain events of
bankruptcy, insolvency or reorganization relating to the Company.
If an Event of Default occurs and is continuing with respect to the
Debentures, either the Trustee or the holders of at least a majority in
principal amount of the Debentures may declare all of the Debentures to be due
and payable immediately.
The Company will not (i) declare or pay any dividends or make any
distribution to holders of its capital stock or (ii) purchase, redeem or
otherwise acquire or retire for value any of its Common Stock, or any warrants,
rights or options, to purchase or acquire any shares of its Common Stock (other
than the
21
<PAGE>
Debentures or any other convertible indebtedness of the Company that is neither
secured nor subordinated to the Debentures), if at the time any of the
aforementioned Events of Default has occurred and is continuing or would exist
immediately after giving effect to such action.
Pursuant to the terms of the Indenture, the Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Debentures. Subject
to certain limitations, holders of a majority in principal amount of the
Debentures may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Debentureholders notice of any default (except a
default in payment of principal or interest) if it determines that withholding
notice is in their interests. The Company is required to file with the Trustee
annually an officers' statement as to the absence of defaults in fulfilling any
of its obligations under the Indenture.
No consent of Debentureholders is required for the Company to consolidate
with or merge into or transfer or transfer substantially all of its assets to
another corporation or trust which assumes the obligations of the Company under
the Indenture and Debentures or for any reorganization within the meaning of
Section 368(a)(1)(B) of the Internal Revenue Code; nor is any such consent of
Debentureholders required for any amendment of the Indenture or the Debentures
by the Company and the Trustee to cure any ambiguity, defect or inconsistency,
or to provide for uncertificated Debentures in addition to certified Debentures,
or to make any change that does not adversely affect the right of any
Debentureholder.
The Debentures may not be sold or otherwise transferred except in accordance
with the provisions set forth in the Indenture.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that the Company may not merge or consolidate with,
or sell or convey all, or substantially all, of its assets to another person
unless such person is a company or a trust; such person assumes by supplemental
indenture all the obligations of the Company under the Debentures and the
Indenture; and immediately after the transaction no default or Event of Default
shall exist.
MARKETABILITY
The Debentures are a new issue of securities with no established trading
market. The Company does not intend to list the Debentures on Nasdaq or on any
national securities exchange. No assurance can be given as to the liquidity of
the trading market for the Debentures. See "Risk Factors."
GOVERNING LAW
The Indenture and the Debentures will be governed by and construed in
accordance with the laws of the State of New York.
REGISTRATION RIGHTS AGREEMENT
The Company has agreed to use its best efforts, subject to the receipt of
necessary information from the purchasers, to prepare and file with the
Commission a registration statement with respect to the resale of the Debentures
and the Conversion Shares from time to time in the over-the-counter market, in
privately negotiated transactions or, with respect to the Conversion Shares
only, on the AMEX, as the case may be, and to cause the registration statement
to become effective not later than November 19, 1996. The Company has also
agreed to prepare and file such amendments and supplements to the registration
statement as may be necessary to keep the registration statement effective until
all the Debentures and the Conversion Shares have been sold thereby or until the
Debentures and the Conversion Shares are no longer, by reason of Rule 144(k) of
the Securities Act or any other rule of similar effect, required to be
registered for the sale thereof by the Purchasers.
22
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the validity of the Debentures and the
Common Stock offered hereby will be passed upon for the Company by Klenda,
Mitchell, Austerman & Zuercher, L.L.C., 1600 Epic Center, 301 North Main Street,
Wichita, Kansas 67202-4888.
EXPERTS
The consolidated financial statements of Sterling House Corporation, the
combined financial statements of Sterling Franchise Acquisition Group and the
financial statements of High Plains Senior Living, Inc. incorporated by
reference in this Prospectus and the Registration Statement have been audited by
Ernst & Young LLP, independent auditors, to the extent indicated in their
reports thereon incorporated herein by reference. Such financial statements have
been incorporated herein by reference in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.
23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY SELLING DEBENTUREHOLDER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Risk Factors.............................................................. 3
The Company............................................................... 10
Ratio of Earnings to Fixed Charges........................................ 16
Use of Proceeds........................................................... 16
Selling Debentureholders.................................................. 16
Plan of Distribution...................................................... 17
Description of Debentures................................................. 18
Legal Matters............................................................. 23
Experts................................................................... 23
</TABLE>
[LOGO]
STERLING
HOUSE
CORPORATION
$35,000,000 6.75% CONVERTIBLE
SUBORDINATED DEBENTURES
DUE 2006
1,561,106 SHARES
COMMON STOCK
---------------------
PROSPECTUS
---------------------
NOVEMBER , 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this offering, all of which will
be borne by the Registrant are as follows:
<TABLE>
<S> <C>
SEC Registration Fee................................................ $10,606.06
American Stock Exchange Listing Fee*................................ 17,500.00
Accounting Fees and Expenses*....................................... 6,500.00
Legal Fees and Expenses*............................................ 25,000.00
Blue Sky Fees and Expenses*......................................... 5,000.00
Transfer Agent/Registrar Fees and Expenses*......................... 5,000.00
Printing*........................................................... 20,000.00
Miscellaneous*...................................................... 5,393.94
---------
Total............................................................... $95,000.00
---------
---------
</TABLE>
*Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sterling House Corporation (the "Company") is incorporated in Kansas. K.S.A.
17-6305 of the Kansas general corporation code provides that a Kansas
corporation may indemnify its directors, officers, employees and agents in
connection with actions, suits or proceedings brought against them by a third
party or in the right of the corporation, by reason of the fact that they were
or are such directors, officers, employees or agents, against expenses incurred
in any action, suit or proceedings. Article VII of the Articles of Incorporation
and Section 60 of the Bylaws of the Company provide for indemnification of
directors and officers to the fullest extent permitted by the Kansas general
corporation code. Reference is made to the Articles of Incorporation of the
Registrant, filed as Exhibit 4.1 hereto, and to the Bylaws, filed as Exhibit 4.2
hereto.
The Registrant has directors' and officers' liability insurance covering
certain liabilities incurred by the Company's directors and officers in
connection with the performance of their duties.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<S> <C>
2.1 Section 351 Agreement dated as of August 26, 1995, by and among the Company and its related
entities (Incorporated by reference to the same titled exhibit to the Company's Registration
Statement on Form S-1, Registration No. 33-96288).
2.2 Purchase Agreement dated June 6, 1996, between Sterling House Corporation and High Plains Senior
Living, Inc. (Incorporated by reference to the same titled exhibit to the Company's Current
Report on Form 8-K dated August 12, 1996).
4.1 Articles of Incorporation of the Company (Incorporated by reference to the same titled exhibit
to the Company's Registration Statement on Form S-1, Registration No. 33-96288).
4.2 Bylaws of the Company (Incorporated by reference to the same titled exhibit to the Company's
Registration Statement on Form S-1, Registration No. 33-96288).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<S> <C>
4.3 Specimen of Common Stock Certificate (Incorporated by reference to the same titled exhibit to
the Company's Registration Statement on Form S-1, Registration No. 33-96288).
4.4 Form of Sterling House Corporation Grant of Incentive Stock Options (Incorporated by reference
to the same titled exhibit to the Company's Registration Statement on Form S-1, Registration
No. 33-96288).
4.5 Revised form of Sterling House Corporation Non-Qualified Stock Option Agreement (Incorporated by
reference to the same titled exhibit to the Company's Registration Statement on Form S-1,
Registration No. 33-96288).
4.6 Schedule of Employees Receiving Stock Option Grants (Incorporated by reference to the same
titled exhibit to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
4.7 Form of Sterling House Corporation Director's Stock Option Agreement (Incorporated by reference
to the same titled exhibit to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
4.8 Schedule of Directors Receiving Stock Option Grants (Incorporated by reference to the same
titled exhibit to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
4.9 Form of Registration Rights Agreement, dated as of May 17, 1996, between the Company and the
initial purchasers of its 6.75% Convertible Subordinated Debentures due 2006.
4.10 Form of 6.75% Convertible Subordinated Debenture due 2006.
4.11 Indenture, dated as of May 23, 1996, between the Company and Fleet National Bank, as Trustee, in
respect of the Company's 6.75% Convertible Subordinated Debentures due 2006.
5.1 Opinion of Klenda, Mitchell, Austerman & Zuercher, L.L.C.
12.1 Statement re computation of earnings to fixed charges.
23.1 Consent of Klenda, Mitchell, Austerman & Zuercher, L.L.C. (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
24.1 Power of Attorney (included on Page II-4).
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939.
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or controlling persons of
the Registrant pursuant to the foregoing provisions in Item 15, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-2
<PAGE>
(b) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
PROVIDED, HOWEVER, that paragraphs (b)(1)(i) and (b)(1)(ii) do not apply
if the Registration Statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the Registrant pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
the Registration Statement.
(2) That for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offer thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing a Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Wichita, State of Kansas, on this 31st day of
October, 1996.
STERLING HOUSE CORPORATION
By /s/ TIMOTHY J. BUCHANAN
------------------------------------
Timothy J. Buchanan
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below on this Registration Statement hereby constitutes and appoints Timothy J.
Buchanan, Steven L. Vick and R. Gail Knott, and each of them, with full power to
act without the other, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities (until revoked in writing)
to sign any and all amendments to this Registration Statement (including
post-effective amendments and amendments thereto), and to file the same, with
all exhibits and schedules thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, thereby, ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated:
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -----------------
Chairman of the Board and
/s/ TIMOTHY J. BUCHANAN Chief Executive Officer
- ------------------------------ (Principal Executive October 31, 1996
Timothy J. Buchanan Officer)
/s/ STEVEN L. VICK
- ------------------------------ President and Director October 31, 1996
Steven L. Vick
/s/ R. GAIL KNOTT Chief Financial Officer
- ------------------------------ (Principal Financial October 31, 1996
R. Gail Knott Officer)
II-4
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -----------------
/s/ MICHAEL F. BUSHEE
- ------------------------------ Director October 31, 1996
Michael F. Bushee
/s/ D. RAY COOK, M.D.
- ------------------------------ Director October 31, 1996
D. Ray Cook, M.D.
/s/ DIANA M. LAING
- ------------------------------ Director October 31, 1996
Diana M. Laing
/s/ RONALD L. MERCER
- ------------------------------ Director October 31, 1996
Ronald L. Mercer
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<S> <C>
2.1 Section 351 Agreement dated as of August 26, 1995, by and among the Company and its related
entities (Incorporated by reference to the same titled exhibit to the Company's Registration
Statement on Form S-1, Registration No. 33-96288).
2.2 Purchase Agreement dated June 6, 1996, between Sterling House Corporation and High Plains Senior
Living, Inc. (Incorporated by reference to the same titled exhibit to the Company's Current
Report on Form 8-K dated August 12, 1996).
4.1 Articles of Incorporation of the Company (Incorporated by reference to the same titled exhibit
to the Company's Registration Statement on Form S-1, Registration No. 33-96288).
4.2 Bylaws of the Company (Incorporated by reference to the same titled exhibit to the Company's
Registration Statement on Form S-1, Registration No. 33-96288).
4.3 Specimen of Common Stock Certificate (Incorporated by reference to the same titled exhibit to
the Company's Registration Statement on Form S-1, Registration No. 33-96288).
4.4 Form of Sterling House Corporation Grant of Incentive Stock Options (Incorporated by reference
to the same titled exhibit to the Company's Registration Statement on Form S-1, Registration
No. 33-96288).
4.5 Revised form of Sterling House Corporation Non-Qualified Stock Option Agreement (Incorporated by
reference to the same titled exhibit to the Company's Registration Statement on Form S-1,
Registration No. 33-96288).
4.6 Schedule of Employees Receiving Stock Option Grants (Incorporated by reference to the same
titled exhibit to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
4.7 Form of Sterling House Corporation Director's Stock Option Agreement (Incorporated by reference
to the same titled exhibit to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
4.8 Schedule of Directors Receiving Stock Option Grants (Incorporated by reference to the same
titled exhibit to the Company's Annual Report on Form 10-K for the year ended December 31,
1995).
4.9 Form of Registration Rights Agreement, dated as of May 17, 1996, between the Company and the
initial purchasers of its 6.75% Convertible Subordinated Debentures due 2006.
4.10 Form of 6.75% Convertible Subordinated Debenture due 2006.
4.11 Indenture, dated as of May 23, 1996, between the Company and Fleet National Bank, as Trustee, in
respect of the Company's 6.75% Convertible Subordinated Debentures due 2006.
5.1 Opinion of Klenda, Mitchell, Austerman & Zuercher, L.L.C.
12.1 Statement re computation of earnings to fixed charges.
23.1 Consent of Klenda, Mitchell, Austerman & Zuercher, L.L.C. (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
24.1 Power of Attorney (included on Page II-4).
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939.
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of May 17, 1996, by and between Sterling House Corporation, a Kansas
corporation (the "Company"), and the purchaser whose name and address is set
forth on the signature page hereof (the "Purchaser").
This Agreement is made pursuant to the Purchase Agreement, dated as of May
17, 1996, between the Company and the Purchaser (the "Purchase Agreement"). In
order to induce the Purchaser to enter into the Purchase Agreement, the Company
has agreed to provide for the benefit of the holders (initially consisting of
the Purchaser and the Other Purchasers as defined below) of the Company's
Transfer Restricted Securities (as defined below) the registration rights set
forth in this Agreement. The execution of this Agreement is a condition to the
Closing under the Purchase Agreement.
The Company proposes to enter into substantially this same form of
registration rights agreement with certain other investors (the "Other
Purchasers") and expects to complete sales of the Debentures to them. The
Purchaser and the Other Purchasers are hereinafter sometimes collectively
referred to as the "Purchasers," and this Agreement and the registration rights
agreements executed by the Other Purchasers are hereinafter sometimes
collectively referred to as the "Agreements." The term "Placement Agent" shall
mean National Westminster Bank PLC, New York Branch.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
CLOSING: Has the meaning such term is given in the Purchase
Agreement.
<PAGE>
CLOSING DATE: Has the meaning such term is given in the Purchase
Agreement.
COMMON STOCK: The shares of common stock of the Company, no par
value.
DEBENTURES: The Company's 6.75% Convertible Subordinated Debentures
due 2006 being sold and issued pursuant to the Purchase Agreement and the
Indenture in an aggregate principal amount of $35,000,000.
EFFECTIVE DATE: The date the Shelf Registration is declared effective
by the SEC.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended from
time to time.
INDEMNIFIED HOLDER: See Section 6(a).
INDENTURE: The Indenture, dated as of May 23, 1996, between the
Company and Fleet National Bank, as Trustee.
NASD: National Association of Securities Dealers, Inc.
PERSON: Any individual, partnership, corporation, trust or
unincorporated organization, or government (or any agency, instrumentality or
political subdivision thereof).
PROSPECTUS: The prospectus included in any Registration Statement, as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Transfer Restricted Securities, pursuant
to any registration covered by the Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus.
REGISTRABLE SECURITIES: The Debentures and the shares of Common Stock
issuable upon conversion of the Debentures; PROVIDED THAT a Debenture or a share
of Common Stock, as the case may be, ceases to be a Registrable Security when it
is no longer a Transfer Restricted Security.
-2-
<PAGE>
REGISTRATION EXPENSES. See Section 5.
REGISTRATION STATEMENT: Any registration statement of the Company
which covers any of the Transfer Restricted Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective amendments,
and all exhibits and all material incorporated by reference in such Registration
Statement.
SECURITIES ACT: The Securities Act of 1933, as amended from time to
time.
SEC: The Securities and Exchange Commission.
SHELF REGISTRATION: See Section 3.
TRANSFER RESTRICTED DEBENTURES: The Debentures upon original issuance
thereof and at all times subsequent thereto until the earlier of the following:
(i) such Debentures have been effectively registered under Section 5 of the
Securities Act and disposed of in accordance with the Registration Statement
covering them or (ii) such Debentures have been distributed to the public
pursuant to Rule 144 (or any similar provisions then in force).
TRANSFER RESTRICTED SECURITIES: The Transfer Restricted Debentures
and the Transfer Restricted Shares.
TRANSFER RESTRICTED SHARES: The shares of Common Stock issuable upon
conversion of the Debentures until the earlier of the following: (i) such
shares of Common Stock have been effectively registered under Section 5 of the
Securities Act and disposed of in accordance with the Registration Statement
covering them or (ii) such shares of Common Stock have been distributed to the
public pursuant to Rule 144 (or any similar provisions then in force).
TRUSTEE: The Trustee under the Indenture.
2. SECURITIES SUBJECT TO THIS AGREEMENT
-3-
<PAGE>
(a) REGISTRABLE SECURITIES. The securities entitled to the benefits of
this Agreement are the Registrable Securities.
(b) HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to be a holder
of Registrable Securities whenever such Person is the beneficial owner of
Registrable Securities. The Company is entitled to treat the record holder of
Registrable Securities as beneficial owner of Registrable Securities unless
otherwise notified by such holder.
3. SHELF REGISTRATION: TIMING OF FILING, EFFECTIVENESS AND PERIOD OF USABILITY
Subject to the provisions of Section 4 hereof, the Company shall use its
best efforts to cause to be declared effective not later than November 19, 1996
a "shelf" Registration Statement (a "Shelf Registration") on Form S-3 or any
other appropriate form pursuant to Rule 415 (or similar rule that may be adopted
by the SEC) under the Securities Act for all the Registrable Securities, which
form shall be available for the sale of the Registrable Securities in accordance
with the intended method or methods of distribution thereof.
The Company agrees to use its best efforts to keep the Registration
Statement continuously effective and usable for resale of Registrable Securities
until 1095 days (the "Effectiveness Period") from the Effective Date or such
shorter period which will terminate when all the Registrable Securities covered
by such Registration Statement have been sold pursuant to such Registration
Statement or when all Registrable Securities otherwise have been sold pursuant
to Rule 144 or are freely tradeable in essentially the same manner as
contemplated in Section 4 below.
4. REGISTRATION PROCEDURES
In connection with the Company's obligation to file a Registration
Statement as provided in Section 3 hereof, the Company will as expeditiously as
possible:
(a) before filing a Registration Statement or Prospectus or any
amendments or supplements thereto, furnish to Purchaser and the holders of
the Registrable
-4-
<PAGE>
Securities covered by such Registration Statement a copy of all such
documents proposed to be filed, which documents will be subject to
the review of Purchaser and such holders and the Company will not file any
Registration Statement or amendment thereto or any Prospectus or any
supplement thereto to which the holders of a majority in aggregate
principal amount of the Registrable Securities covered by such Registration
Statement shall reasonably object (provided that the Company may assume,
for the purposes of the foregoing that any holder of Registrable Securities
has no objection if the Company has not received notice from such holder
within five business days after delivery of such documents to such holder);
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement, and such supplements to the
Prospectus, as may be required by the rules, regulations or instructions
applicable to the registration form utilized by the Company or by the
Securities Act or rules and regulations thereunder for shelf registration
or otherwise necessary to keep the Registration Statement effective for the
applicable period and cause the Prospectus as so supplemented to be filed
pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable
period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Registration Statement or supplement to
the Prospectus;
(c) notify Purchaser and the holders of Registrable Securities
promptly, and confirm such advice in writing:
(1) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same
has become effective,
(2) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration
-5-
<PAGE>
Statement or the initiation of any proceedings for that purpose, and
(3) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose;
(d) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(e) furnish, without charge, to Purchaser and each selling holder of
Registrable Securities, at least one conformed copy of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference
and all exhibits (including those incorporated by reference);
(f) deliver to Purchaser and each selling holder of Registrable
Securities without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons may reasonably request; the Company consents to the use of the
Prospectus or any amendment or supplement thereto by each of Purchaser and
the selling holders of Registrable Securities in connection with the
offering and sale of the Registrable Securities covered by the Prospectus
or any amendment or supplement thereto;
(g) at least 14 days prior to filing of the Registration Statement,
use its best efforts to furnish by certified mail to the beneficial holders
of the Registrable Securities, at the addresses of record specified on the
transfer books held by the Trustee, notice of the Company's intention to
file a Registration Statement and request that all holders of Registrable
Securities desiring to sell their Registrable Securities pursuant to the
Registration Statement notify the Company promptly in writing;
-6-
<PAGE>
(h) cooperate with Purchaser and the selling holders of Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing
any restrictive legends;
(i) use its best efforts to cause the Registrable Securities covered
by the Registration Statement to be registered with or approved by such
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such Registrable
Securities in such jurisdictions as the sellers may specify in response to
inquiries to be made by the Company, provided that the Company will not be
required to qualify generally to do business in any jurisdiction where it
is not then so qualified or to take any action which would subject it to
general service of process in any such jurisdiction where it is not then so
subject;
(j) as provided in Section 3, if any event shall occur as a result of
which it is necessary, in the opinion of counsel for the Company or for the
holders of a majority of the Registrable Securities, to amend or supplement
the Prospectus in order to make the Prospectus not misleading in the light
of the circumstances existing at the time it is delivered to a purchaser,
prepare a supplement or post-effective amendment to the Registration
Statement or the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, the Prospectus
will not contain an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading;
(k) obtain a CUSIP number for all Registrable Securities (unless
already obtained), not later than the Effective Date;
(l) make available for inspection during normal business hours by a
representative of the holders of a majority of Registrable Securities and
any attorney or accountant retained by such representative, all financial
-7-
<PAGE>
and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to
supply all information reasonably requested by Purchaser or any such
attorney or accountant in connection with the Registration Statement;
provided that all such records, information or documents shall be kept
confidential by such Persons unless disclosure of such records, information
or documents is required by court or administrative order or is generally
available to the public other than as a result of disclosure in violation
of this paragraph (l);
(m) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make generally available to their security
holders an earning statement satisfying the provisions of Section 11(a) of
the Securities Act (in accordance with Rule 158 thereunder or otherwise),
no later than 45 days after the end of the 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the
Company's first fiscal quarter commencing after the Effective Date, which
statements shall cover said 12-month period;
(n) cause the Indenture to be qualified under the Trust Indenture Act
of 1939, as amended from time to time (the "TIA"), and, in connection
therewith, cooperate with the Trustee under the Indenture and the holders
of the Debentures to effect such changes to the Indenture as may be
required for the Indenture to be so qualified in accordance with the terms
of the TIA and execute, and use their best efforts to cause the Trustee to
execute, all documents as may be required to effect such changes, and all
other forms and documents required to be filed with the SEC to enable the
Indenture to be so qualified in a timely manner; and
(o) if at any time an event of the kind described in Section 4(j)
shall occur, promptly notify Purchaser and the holders of Registrable
Securities that the use of the Prospectus must be discontinued.
Each selling holder of Registrable Securities as to which any registration
is being effected agrees, as a condition to the
-8-
<PAGE>
registration obligations with respect to such holder provided herein, to
furnish to the Company such information regarding the distribution of such
securities as the Company may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company
described in paragraph 4(o), such holder will forthwith discontinue disposition
of Registrable Securities until such holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 4(j) hereof, or until
it is advised in writing by the Company (which notice the Company shall give as
promptly as possible), that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
by reference in the Prospectus, and, if so directed by the Company, such holder
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including without limitation:
(1) all registration, filing and listing fees;
(2) fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with
blue sky qualifications of the Registrable Securities and determination of
their eligibility for investment under the laws of such jurisdictions as
the holders of a majority in principal amount of the Registrable Securities
being sold may reasonably designate);
(3) printing, messenger, telephone and delivery expenses;
(4) fees and disbursements of counsel for the Company;
-9-
<PAGE>
(5) fees and disbursements of all independent certified public
accountants of the Company (including the expenses of any special audit
necessary to satisfy the requirements of the Securities Act and any "cold
comfort" letters required by or incident to such performance);
(6) securities acts liability insurance if the Company so desires;
(7) fees and expenses of other Persons retained by the Company; and
(8) fees and expenses associated with any NASD filing required to be
made in connection with the Registration Statement
(all such expenses being herein called "Registration Expenses") will be borne by
the Company, regardless of whether the Registration Statement becomes effective.
The Company will, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the securities to
be registered on a securities exchange, rating agency fees and the fees and
expenses of any Person, including special experts, retained by the Company.
6. INDEMNIFICATION AND CONTRIBUTION
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees, to indemnify and
hold harmless each holder of Registrable Securities, its officers, directors,
employees and agents and each Person who controls such holder within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
(each such person being sometimes hereinafter referred to as an "Indemnified
Holder") from and against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation and legal expenses) arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement or Prospectus or in any amendment
or supplement thereto or in any preliminary
-10-
<PAGE>
prospectus, or arising out of or based upon any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or expenses arise out of or are based upon any
such untrue statement or omission or allegation thereof based upon
information furnished in writing to the Company by such holder expressly for
use therein; PROVIDED, HOWEVER, that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any preliminary prospectus
if (i) such holder failed to send or deliver a copy of the Prospectus with or
prior to the delivery of written confirmation of the sale of Registrable
Securities and (ii) the Prospectus would have completely corrected such
untrue statement or omission; and PROVIDED FURTHER, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission in the
Prospectus, if such untrue statement or alleged untrue statement, omission or
alleged omission is completely corrected in an amendment or supplement to the
Prospectus and if, having previously been furnished by or on behalf of the
Company with copies of the Prospectus as so amended or supplemented, such
holder thereafter fails to deliver such Prospectus as so amended or
supplemented, prior to or concurrently with the sale of a Registrable
Security to the person asserting such loss, claim, damage, liability or
expense who purchased such Registrable Security which is the subject thereof
from such holder. This indemnity will be in addition to any liability which
the Company may otherwise have. The Company will also indemnify
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution, their officers and
directors and each Person who controls such Persons (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) to the
same extent as provided above with respect to the indemnification of the
holders of Registrable Securities.
If any action or proceeding (including any governmental investigation or
inquiry) shall be brought or asserted against any Indemnified Holder in respect
of which indemnity may be
-11-
<PAGE>
sought from the Company, such Indemnified Holder shall promptly notify the
Company in writing (but the omission to so notify the Company shall not
relieve it of any liability that it may have against any Indemnified Holder
otherwise than under this subsection), and the Company shall assume the
defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Holder and the payment of all expenses. Indemnified
Holders shall have the right, collectively, to employ their own counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be the expense of the Indemnified Holders
unless (a) the Company has agreed to pay such fees and expenses or (b) the
Company shall have failed to assume the defense of such action or proceeding
and have failed to employ counsel reasonably satisfactory to the Indemnified
Holders in any such action or proceeding or (c) the named parties to any such
action or proceeding (including any impleaded parties) include the
Indemnified Holders and the Company, and the Indemnified Holders shall have
been advised by counsel that there may be one or more legal defenses
available to the Indemnified Holders which are different from or additional
to those available to the Company (in which case, if the Indemnified Holders
notify the Company in writing that they elect to employ their own counsel at
the expense of the Company, the Company shall not have the right to assume
the defense of such action or proceeding on behalf of the Indemnified
Holders, it being understood, however, that the Company shall not, in
connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (together with appropriate local counsel) at any time for the
Indemnified Holders which firm shall be designated in writing by the
Indemnified Holders representing at least a majority of the aggregate
principal amount of the outstanding Debentures). Any such fees and expenses
payable by the Company shall be paid to the Indemnified Holders entitled
thereto as incurred by the Indemnified Holders. The Company shall not be
liable for any settlement of any such action or proceeding effected without
its written consent, but if settled with its written consent, or if there be
a final judgment for the plaintiff in any such action or proceeding, the
Company agrees to indemnify and hold harmless the Indemnified Holders from
and
-12-
<PAGE>
against any loss or liability by reason of such settlement or judgment.
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. Each holder of
Registrable Securities agrees to indemnify and hold harmless the Company, its
respective directors and officers and each Person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from the
Company to such holder, but only with respect to information relating to such
holder furnished in writing by such holder expressly for use in any Registration
Statement or Prospectus, or any amendment or supplement thereto, or any
preliminary prospectus. In case any action or proceeding shall be brought
against the Company or its respective directors or officers or any such
controlling person, in respect of which indemnity may be sought against a holder
of Registrable Securities, such holder shall have the rights and duties given
the Company, and the Company or its respective directors or officers or such
controlling person shall have the rights and duties given to each holder by the
preceding paragraph. In no event shall the liability of any selling holder of
Registrable Securities hereunder be greater in amount than the dollar amount of
the proceeds received by such holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation. Each holder of Registrable
Securities will also indemnify underwriters, selling brokers, dealer managers
and similar securities industry professionals participating in the distribution,
their officers and directors and each Person who controls such Persons (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) to the same extent as provided above with respect to the indemnification of
the Company. The Company and each holder of Registrable Securities shall be
entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above with respect to information
so furnished in writing by such Persons specifically for inclusion in any
Prospectus or Registration Statement.
(c) CONTRIBUTION. If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under
-13-
<PAGE>
Section 6(a) or Section 6(b) hereof (other than by reason of exceptions
provided in those Sections) in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company from the sale of the Debentures to Purchaser pursuant to the Purchase
Agreement on the one hand and each holder of Registrable Securities from the
offering of the Registrable Securities by such holder, on the other hand, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company on the one hand and each holder of Registrable Securities on
the other in connection with the statements or omissions that resulted in
such losses, claims, damages, or liabilities, as well as the other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and each holder of Registrable Securities on the other shall be
deemed to be in the same proportion as the aggregate amount paid by Purchaser
to the Company pursuant to the Purchase Agreement for the Registrable
Securities purchased by such holder that were sold pursuant to the
Registration Statement bears to the difference (the "Difference") between the
amount such holder paid for the Registrable Securities that were sold
pursuant to the Registration Statement and the amount received by such holder
from such sale. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the particular holder and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
Company and the holders of Registrable Securities agree that it would not be
just and equitable if contributions pursuant to this subsection (c) were to
be determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable consideration referred to in the
first sentence of this subsection (c). The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to
in the first sentence of this subsection
-14-
<PAGE>
(c) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigation or
defending against any action or claim that is the subject of this subsection
(c). Notwithstanding the provision of this subsection (c), each holder of
Registrable Securities shall not be required to contribute any amount in
excess of the amount by which the Difference exceeds the amount of any
damages that such holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act), shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
7. RULE 144 AND RULE 144A
For so long as the Company is subject to the reporting requirements of
Section 13 or 15 of the Exchange Act, the Company covenants that it will file
the reports required to be filed by it under the Securities Act and Section
13(a) or 15(d) of the Exchange Act and the rules and regulations adopted by the
SEC thereunder. If the Company is not subject to the reporting requirements of
Section 13 or 15 of the Exchange Act, the Company also covenants that it will
provide the information required pursuant to Rule 144A(d)(4) under the
Securities Act upon the request of any holder of Registrable Securities which
continues to be "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act and it will take such further action as any holder of
such Registrable Securities may reasonably request, all to the extent required
from time to time to enable such holder to sell its Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, so long as such provision does not require the
public filing of information relating to the Company which the Company is not
otherwise required to file, (b) Rule 144A under the Securities Act, as such Rule
may be amended from time to time, or (c) any similar rule or regulation
hereafter adopted by the SEC that does not require the public filing of
information relating to the Company. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
-15-
<PAGE>
8. MISCELLANEOUS
(a) NO INCONSISTENT AGREEMENTS. The Company will not on or after the
date of this Agreement enter into any agreement with respect to their
securities which is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the holders of Registrable
Securities hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the Company's securities under any
such agreements.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will not
take any action, or permit any change to occur, with respect to the
Registrable Securities which would adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given unless the Company has obtained the written consent
of holders of a majority of the Transfer Restricted Debentures and a majority
of the Transfer Restricted Shares. Notwithstanding the foregoing, a waiver
of consent to departure from the provision hereof that relates exclusively to
the rights of holders of Registrable Securities whose securities are being
sold pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other holders of Registrable Securities may
be given by the holders of a majority of the Transfer Restricted Securities
being sold.
(d) NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, telecopier, or nationally recognized overnight express
courier postage prepaid, and shall be deemed given when so mailed or if
telecopied, when receipt is acknowledged, and shall be delivered as addressed
as follows:
-16-
<PAGE>
(1) if to the Purchaser, at the most current address given by the
Purchaser to the Company in accordance with the provisions of this Section
8(d), which address initially is as set forth on the signature page hereto;
(2) if to a holder of Registrable Securities, at its address of
record as indicated on the books of the transfer agent and registrar for
the Registrable Securities; and
(3) if to the Company, initially at its address set forth in the
Purchase Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 8(d).
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the addresses specified in the Indenture.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent holders of Registrable Securities.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
RULES AS TO CONFLICTS OF LAW.
(i) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability
of any such provision in
-17-
<PAGE>
every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(j) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein with respect to the registration rights granted
by the Company with respect to the securities sold pursuant to the Purchase
Agreement. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
[signature pages follow]
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
STERLING HOUSE CORPORATION
By: /s/ Timothy J. Buchanan
------------------------------
Name: Timothy J. Buchanan
Title: Chairman and CEO
Print or Type:
Name of Purchaser
(Individual or Institution):
/s/
---------------------------------
Name of Individual representing
Purchaser (if an Institution):
/s/
---------------------------------
Title of Individual representing
Purchaser (if an Institution):
/s/
---------------------------------
Signature by:
Individual Purchaser or Individual
representing Purchaser:
---------------------------------
Address:
-------------------------
Telephone:
----------------------
Telecopier:
---------------------
-19-
<PAGE>
Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by
the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation (55
Water Street, New York, New York) ("DTC"), to the issuer or its agent for
registration of transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or such other name as may be requested
by an authorized representative of DTC (and any payment is made to Cede & Co.
or such other entity as may be requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede &
Co., has an interest herein.
THIS SECURITY HAS BEEN ACQUIRED BY THE HOLDER FOR THE PURPOSE OF INVESTMENT
AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION. THIS
SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS
AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES
AND AGREES FOR THE BENEFIT OF THE COMPANY THAT: (I) IT HAS ACQUIRED A
"RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT;
(II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)
TO STERLING HOUSE CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) IN THE CASE OF A
HOLDER WHO IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT), FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, OR
(D) IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT OR PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (AND CONFIRMED IN AN OPINION OF COUNSEL ACCEPTABLE IN FORM
AND SUBSTANCE TO THE ISSUER OF THIS SECURITY IF THE ISSUER SO REQUESTS) AND,
IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND (III) IT WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE.
<PAGE>
STERLING HOUSE CORPORATION
6.75% Convertible Subordinated Debenture Due 2006
CUSIP No. 859331AA8
STERLING HOUSE CORPORATION, a Kansas corporation, promises to pay to
6.75% 6.75%
DUE 2006 DUE 2006
CEDE & CO.
----------------
or registered assigns, the principal sum of Thirty Three Million Eight
Hundred Thousand Dollars, on June 30, 2006
Interest Payment Dated: June 30 and December 30
Record Dates: June 15 and December 15
Additional provisions of this Security are set forth on other
side of this Security.
Dated: May 23, 1996
CERTIFICATE OF AUTHENTICATION STERLING HOUSE CORPORATION
FLEET NATIONAL BANK,
as Trustee, certifies that this
is one of the Securities referred
to in the within mentioned
Indenture.
By: /s/ By: /s/ Timothy J. Buchanan By: /s/ Steven L. Vick
------------------- ----------------------- -------------------
Authorized Signatory SEAL Chairman of the Board President
<PAGE>
STERLING HOUSE CORPORATION
6.75% Convertible Subordinated Debenture Due 2006
CUSIP No. 859331AA8
1. INTEREST. Sterling House Corporation, a Kansas corporation (the
"Company"), promises to pay interest on the principal amount of this Security
at the rate per annum shown above. The Company will pay interest semiannually
on June 30 and December 30 of each year beginning December 30, 1996. Interest
on the Securities will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from May 23, 1996; provided that,
if there is no existing Default in the payment of interest, and if this
Security is authenticated between a record date referred to on the face
hereof and the next succeeding interest payment date, interest shall accrue
from such interest payment date. Interest will be computed on the basis of a
360 day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Securities
(except defaulted interest) to the persons who are the registered Holders of
the Securities at the close of business on the December 15 or June 15 next
preceding the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal and premium payments. The Company will pay
principal, premium and interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts. The
Company, however, may pay principal, premium and interest by its check
payable in such money. It may mail an interest check to a Holder's registered
address.
The payment of principal of and premium, if any, on this Security shall
be payable only upon surrender of this Security at the office or agency of
the Paying Agent in the Borough of Manhattan, City and State of New York or
the City of Providence, State of Rhode Island. Payments of principal of,
premium, if any, and interest on this Security shall be made at the office or
agency of the Trustee maintained in the Borough of Manhattan, City and State
of New York or the City of Providence, State of Rhode Island, or, in the case
of any such payments other than the payment of principal and premium, if any,
at the Company's option, by check mailed to the Person entitled thereto at
such Person's address last appearing on the Company's register.
3. REGISTRAR AND AGENTS. Initially, Fleet National Bank will act as
Registrar, Paying Agent, Conversion Agent and agent for service of notices
and demands. The Company may change any Registrar, co-registrar, Paying
Agent, Conversion Agent and agent for service of notices and demands without
notice. The Company or any of its Subsidiaries may act as Paying Agent or
Conversion Agent. The address of Fleet National Bank is 111 Westminster
Street, Providence, Rhode Island 02903.
4. INDENTURE; LIMITATIONS. The Company issued the Securities under an
Indenture, dated as of May 23, 1996 (the "Indenture"), between the Company
and Fleet National Bank (the "Trustee"). Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) as in effect on the date of the Indenture. The
Securities are subject to all such terms, and the Holders of the Securities
are referred to the Indenture and said Act for a statement of them.
The Securities are general unsecured obligations of the Company limited
to $35,000,000 principal amount. The Indenture imposes certain limitations on
the ability of the Company to, among other things, make payments in respect
of its Capital Stock, merge or consolidate with any other Person and sell,
lease, transfer or otherwise dispose of its properties or assets.
<PAGE>
5. OPTIONAL REDEMPTION BY THE COMPANY. The Company may, at its option,
redeem the Securities at any time, in whole or in part, together with accrued
and unpaid interest to the Redemption Date, after July 15, 1999 in accordance
with the following schedule:
REDEMPTION
AFTER JULY 15, PRICE
-------------- ----------
1999 102%
2000 101%
2001 and thereafter 100%
6. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the Redemption Date to each Holder
of Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 principal amount may be redeemed in part,
but only in whole multiples thereof. On and after the Redemption Date
interest ceases to accrue on Securities or portions of them called for
redemption.
7. CONVERSION. A Holder of a Security may convert such Security into
shares of common stock of the Company after the effective date of the
Registration Statement and before June 30, 2006. If the Security is called
for redemption, the Holder may convert it at any time before the close of
business on the date fixed for such redemption. The initial conversion price
is $22.42 per share, subject to adjustment in certain events. To determine
the number of shares issuable upon conversion of a Security, divide the
principal amount to be converted by the conversion price in effect on the
conversion date. The Company will deliver a check for any fractional share.
To convert a Security, a Holder must (1) complete and sign the
conversion notice on the back of the Security, (2) surrender the Security to
the Conversion Agent, (3) furnish appropriate endorsements and transfer
documents if required by the Registrar or Conversion Agent and (4) pay any
transfer or similar tax if required. No payment or adjustment is to be made
on conversion for interest accrued hereon or for dividends on shares of
common stock issued on conversion; PROVIDED, HOWEVER, that if a Security is
surrendered for conversion after the record date for a payment of interest
and on or before the interest payment date, then, notwithstanding such
conversion, the interest falling due to such interest payment date will be
paid to the Person in whose name the Security is registered at the close of
business on such record date and any Security surrendered for conversion
during the period from the close of business on any regular record date to
the opening of business on the corresponding interest payment date must be
accompanied by payment of an amount equal to the interest payable on such
interest payment date. A Holder may convert a portion of a Security if the
portion is $1,000 principal amount or an integral multiple thereof.
If the Company is a party to a consolidation or merger or a transfer or
lease of all or substantially all of its assets, the right to convert a
Security into shares of common stock may be changed into a right to convert
it into securities, cash or other assets of the Company or another Person.
8. SUBORDINATION. This Security is subordinated to all Senior
Indebtedness of the Company. To the extent and in the manner provided in the
Indenture, Senior Indebtedness must be paid before any payment may be made to
any Holders of Securities. Any Securityholder by accepting this Security
agrees to such subordination and authorizes the Trustee to give it effect.
In addition to all other rights of Senior Indebtedness described in the
Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness
and entitled to the benefits of the subordination provisions irrespective of
any amendment, modification or waiver of any term of any instrument relating
to the Senior Indebtedness or extension or renewal of the Senior Indebtedness.
<PAGE>
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities issued under the
Indenture are in the aggregate principal amount of up to $35,000,000. The
Securities are in registered form without coupons in denominations of $1,000
principal amount and integral multiples thereof. A Holder may register the
transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the
transfer of or exchange any Securities selected for redemption or register
the transfer of or exchange any Securities for a period of 15 days before a
selection of Securities to be redeemed.
10. PERSONS DEEMED OWNERS. The registered Holder of a Security may be
treated as its owner for all purposes.
11. UNCLAIMED MONEY. If money for the payment of principal or interest
on any Securities remains unclaimed for two years, the Trustee and the Paying
Agent will pay the money back to the Company at its written request. After
that, Holders may look only to the Company for payment.
12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. The Indenture will be
discharged and canceled except for certain sections thereof upon payment of
all the Securities, or upon the irrevocable deposit with the Trustee of funds
or U.S. Government Obligations maturing on or before such payment date or
Redemption Date, sufficient to pay principal, premium, if any, and interest
on such payment or redemption.
13. AMENDMENT AND WAIVER. Subject to certain exceptions, without notice
to the Holders of the Securities, the Indenture or the Securities may be
amended with the consent of the Holders of at least 66-2/3% in principal
amount of the Securities then outstanding and any existing default or
compliance with any provision may be waived with the consent of the Holders
of a majority in principal amount of the Securities then outstanding. Without
the consent of or notice to any Securityholder, the Company may amend or
supplement the Indenture or the Securities to, among other things, provide
for uncertificated Securities, to cure any ambiguity, defect or inconsistency
or make any other change that does not adversely affect the rights of any
Securityholder.
14. SUCCESSORS. When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture, the predecessor will be
released from those obligations.
15. DEFAULTS AND REMEDIES. If an Event of Default, as defined in the
Indenture (other than a Event of Default relating to bankruptcy of the
Company), occurs and is continuing, the Trustee or the Holders of a majority
in principal amount of Securities may declare all the Securities to be due
and payable immediately in the manner and with the effect provided in the
Indenture. If an Event of Default relating to bankruptcy of the Company
occurs, then all Securities shall become immediately due and payable without
any declaration or act on the part of the Trustee or any Holder. Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee may require indemnity satisfactory to it,
subject to the provisions of the TIA, before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in
principal amount of the Securities then outstanding may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
Securities notice of any continuing default (except a default in payment of
principal or interest) if it determines that withholding notice is in their
interests. The Company is required to file periodic reports with the Trustee
as to the absence of any Default or Event of Default.
16. TRUSTEE DEALINGS WITH THE COMPANY. Fleet National Bank, the Trustee
under the Indenture, in its individual or any other capacity, may make loans
to, accept deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates, as if
it were not Trustee.
17. NO RECOURSE AGAINST OTHERS. No shareholder, director, officer or
incorporator, as such, past, present or future, of the Company or any
successor corporation shall have any liability for any obligation of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder
of a Security by accepting a Security waives and releases all such liability.
The waiver and release are part of the consideration for the issuance of the
Securities.
18. AUTHENTICATION. This Security shall not be valid until the Trustee
signs the certificate of authentication on the other side of this Security.
<PAGE>
19. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as: TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of
survivorship and not as tenants in common), CUST (=Custodian), and U/G/M/A
(=Uniform Gifts to Minors Act).
The Company will furnish to any Securityholder upon written request and
without charge a copy for the Indenture. It also will furnish the text of
this Security in larger type. Requests may be made to: Sterling House
Corporation, 453 South Webb Road, Suite 500, Wichita, Kansas 67207.
Attention: President.
<PAGE>
TRANSFER NOTICE
If you the Holder wants to assign this Security, fill in the form below and
have your signature guaranteed:
For value received, I or we assign and transfer this Security to:
___________________________.
(INSERT ASSIGNEE'S SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER)
-------------------------------------------------------
-------------------------------------------------------
................................................................................
................................................................................
................................................................................
(Print or type assignee's name, address and zip code)
...............................................................agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
In connection with the transfer of this Security, the undersigned
certifies that:
(Check one)
/ / (a) This Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in compliance with the exemption from
registration under the Securities Act provided by Rule 144A.
/ / (b) This Security is being transferred to Sterling House
Corporation.
/ / (c) Transfer other than those above in connection with which the
Company has received an opinion of counsel (satisfactory to
it in form and substance) to the effect that the transfer is
being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of
the Securities Act.
<PAGE>
/ / (d) This Security is being exchanged for a beneficial interest
in the Rule 144A Global Security and the undersigned is a
"qualified institutional buyer" (as defined in Rule 144A
under the Securities Act of 1933).
- -------------------
Date:...........................................................
Your signature:.................................................
(Sign exactly as your name appears on the other
side of this Security)
Signature Guarantee*:...........................................
*Signature must be guaranteed by an eligible guarantor institution within the
meaning of Securities and Exchange Commission Rule 17Ad-15 (including banks,
stock brokers, savings and loan associations, national securities exchanges,
registered securities associations, clearing agencies and credit unions) with
membership or participation in an approved signature guarantee medallion
program.
IF NONE OF THE FOREGOING BOXES IS CHECKED, THE TRUSTEE SHALL NOT BE OBLIGATED
TO REGISTER THE TRANSFER OF THIS SECURITY UNLESS AND UNTIL THE CONDITIONS TO
ANY SUCH TRANSFER OF REGISTRATION SET FORTH HEREIN, ON THE FACE HEREOF AND IN
THE INDENTURE SHALL HAVE BEEN SATISFIED.
<PAGE>
CONVERSION NOTICE
To convert this Security into shares of common stock of the Company, check
the box:
----------
----------
To convert only part of this Security, state the principal amount to be
converted (which must be a minimum of $1,000 or any multiple thereof):
-----------------------------------------------------------
$
-----------------------------------------------------------
If you want the Security certificate, if any, made out in another person's
name, fill in the form below:
(INSERT OTHER PERSON'S SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER)
----------------------------------------------------------------------
----------------------------------------------------------------------
................................................................................
................................................................................
................................................................................
................................................................................
(Print or type assignee's name, address and zip code)
- -------------------
Date:...........................................................
Your Signature:.................................................
(Sign exactly as your name appears on the other side of this Security)
Signature Guaranteed By:........................................
Note: Signature must be guaranteed by
a member firm of the New York Stock Exchange
or a commercial bank or trust company.
<PAGE>
- --------------------------------------------------------------------------------
STERLING HOUSE CORPORATION
$35,000,000
6.75% Convertible Subordinated Debentures due 2006
INDENTURE
Dated as of May 23, 1996
FLEET NATIONAL BANK,
AS TRUSTEE
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CROSS-REFERENCE TABLE
STERLING HOUSE CORPORATION
Trust Indenture
ACT Section Indenture
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Section 310(a)(1) 7.10; 12.1
(a)(2) 12.1
(a)(3) 12.1
(a)(4) 12.1
(a)(5) 12.1
(b) 7.10; 12.1
(c) 12.1
Section 311(a) 7.11; 12.1
(b) 7.11; 12.1
(c) 12.1
Section 312(a) 12.1
(b) 12.1; 12.3
(c) 12.1; 12.3
Section 313(a) 7.6; 12.1
(b) 7.6; 12.1
(c) 7.6; 12.1
(d) 7.6; 12.1
Section 314(a) 4.2; 12.1
(b) 12.1
(c) 12.1
(d) 12.1
(e) 12.1
(f) 12.1
Section 315(a) 7.1; 12.1
(b) 7.1; 12.1
(c) 7.1; 12.1
(d) 7.1; 12.1
(e) 7.1; 12.1
Section 316(a) 7.1; 12.1
(b) 7.1; 12.1
(c) 7.1; 12.1
Section 317(a) 12.1
(b) 12.1
Section 318(a) Not Applicable
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Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
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TABLE OF CONTENTS
PAGE
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ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . . 1
SECTION 1.1 Definitions. . . . . . . . . . . . . 1
SECTION 1.2 Other Definitions. . . . . . . . . . 5
SECTION 1.3 Incorporation by Reference to Trust
Indenture Act. . . . . . . . . . . . 5
SECTION 1.4 Rules of Construction. . . . . . . . 6
ARTICLE 2
THE SECURITIES. . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.1 Form; Dating; Incorporation of Form
in Indenture . . . . . . . . . . . . 6
SECTION 2.2 Execution and Authentication . . . . 8
SECTION 2.3 Registrar and Agents . . . . . . . . 9
SECTION 2.4 Paying Agent to Hold Money in Trust. 9
SECTION 2.5 Transfer and Exchange. . . . . . . . 10
SECTION 2.6 Replacement Securities . . . . . . . 15
SECTION 2.7 Outstanding Securities . . . . . . . 15
SECTION 2.8 Temporary Securities . . . . . . . . 16
SECTION 2.9 Cancellation . . . . . . . . . . . . 17
SECTION 2.10 Defaulted Interest . . . . . . . . . 17
SECTION 2.11 Securityholder Lists . . . . . . . . 17
SECTION 2.12 Persons Deemed Owners. . . . . . . . 18
SECTION 2.13 CUSIP Number . . . . . . . . . . . . 18
ARTICLE 3
REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.1 Notices to Trustee . . . . . . . . . 18
SECTION 3.2 Selection of Securities to be
Redeemed . . . . . . . . . . . . . . 18
SECTION 3.3 Notice of Redemption by the Company. 19
SECTION 3.4 Effect of Notice of Redemption . . . 20
SECTION 3.5 Deposit of Redemption Price. . . . . 20
SECTION 3.6 Securities Redeemed in Part. . . . . 20
ARTICLE 4
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COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.1 Payment of the Securities. . . . . . 20
SECTION 4.2 Commission Reports . . . . . . . . . 21
SECTION 4.3 Waiver of Stay, Extension or
Usury Laws . . . . . . . . . . . . . 21
SECTION 4.4 Notice of Default. . . . . . . . . . 22
SECTION 4.5 Compliance Certificates. . . . . . . 22
SECTION 4.6 Limitation on Dividends and Other
Distributions. . . . . . . . . . . . 22
ARTICLE 5
SUCCESSOR CORPORATION . . . . . . . . . . . . . . . . . . . 23
SECTION 5.1 When Company May Merge, etc. . . . . 23
SECTION 5.2 Successor Corporation or Trust
Substituted. . . . . . . . . . . . . 23
ARTICLE 6
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . 24
SECTION 6.1 Events of Default. . . . . . . . . . 24
SECTION 6.2 Acceleration . . . . . . . . . . . . 26
SECTION 6.3 Other Remedies . . . . . . . . . . . 26
SECTION 6.4 Waiver of Defaults and Events of
Default. . . . . . . . . . . . . . . 27
SECTION 6.5 Control by Majority. . . . . . . . . 27
SECTION 6.6 Rights of Holders to Receive
Payment. . . . . . . . . . . . . . . 27
SECTION 6.7 Collection Suit by Trustee . . . . . 28
SECTION 6.8 Trustee May File Proofs of Claim . . 28
SECTION 6.9 Priorities . . . . . . . . . . . . . 29
SECTION 6.10 Undertaking for Costs. . . . . . . . 29
SECTION 6.11 Limitation on Suits. . . . . . . . . 29
ARTICLE 7
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 7.1 Duties of Trustee. . . . . . . . . . 30
SECTION 7.2 Rights of Trustee. . . . . . . . . . 31
SECTION 7.3 Individual Rights of Trustee . . . . 32
SECTION 7.4 Trustee's Disclaimer . . . . . . . . 32
SECTION 7.5 Notice of Defaults . . . . . . . . . 33
SECTION 7.6 Reports by Trustee to Holders. . . . 33
SECTION 7.7 Compensation and Indemnity . . . . . 33
SECTION 7.8 Replacement of Trustee . . . . . . . 34
SECTION 7.9 Successor Trustee by Merger, etc.. . 35
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SECTION 7.10 Eligibility; Disqualification. . . . 35
SECTION 7.11 Preferential Collection of Claims
Against Company. . . . . . . . . . . 36
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE . . . . . . . . . . 36
SECTION 8.1 Satisfaction, Discharge and
Defeasance of the Securities . . . . 36
SECTION 8.2 Satisfaction and Discharge of
Indenture. . . . . . . . . . . . . . 37
SECTION 8.3 Survival of Certain Obligations. . . 37
SECTION 8.4 Application of Trust Money . . . . . 38
SECTION 8.5 Paying Agent to Repay Monies Held. . 38
SECTION 8.6 Return of Unclaimed Monies . . . . . 38
SECTION 8.7 Reinstatement. . . . . . . . . . . . 39
ARTICLE 9
AMENDMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . 39
SECTION 9.1 Amendments and Waivers Without
Consent of Holders . . . . . . . . . 39
SECTION 9.2 Amendments and Waivers with Consent
of Holders . . . . . . . . . . . . . 40
SECTION 9.3 Compliance with Trust Indenture Act. 41
SECTION 9.4 Revocation and Effect of Consents. . 41
SECTION 9.5 Notation on or Exchange of
Securities . . . . . . . . . . . . . 42
SECTION 9.6 Trustee to Sign Amendments, etc. . . 42
ARTICLE 10
CONVERSION OF SECURITIES. . . . . . . . . . . . . . . . . . 42
SECTION 10.1 Right of Conversion; Conversion
Price. . . . . . . . . . . . . . . . 42
SECTION 10.2 Issuance of Shares on Conversion . . 43
SECTION 10.3 No Adjustment for Interest or
Dividends. . . . . . . . . . . . . . 44
SECTION 10.4 Adjustment of Conversion Price . . . 44
SECTION 10.5 Notice of Adjustment of Conversion
Price. . . . . . . . . . . . . . . . 47
SECTION 10.6 Notice of Certain Corporate Action . 48
SECTION 10.7 Taxes on Conversions . . . . . . . . 49
SECTION 10.8 Fractional Shares. . . . . . . . . . 49
SECTION 10.9 Cancellation of Converted Securities 49
SECTION 10.10 Provisions in Case of Consolidation,
Merger or Sale of Assets . . . . . . 50
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SECTION 10.11 Disclaimer by Trustee of
Responsibility for Certain Matters . 50
SECTION 10.12 Covenant to Reserve Shares . . . . . 51
ARTICLE 11
SUBORDINATION; SENIORITY. . . . . . . . . . . . . . . . . . 51
SECTION 11.1 Securities Subordinated to Senior
Indebtedness . . . . . . . . . . . . 51
SECTION 11.2 Company Not to Make Payments with
Respect to Securities in Certain
Circumstances. . . . . . . . . . . . 52
SECTION 11.3 Subrogation of Securities. . . . . . 54
SECTION 11.4 Authorization by Holders of
Securities . . . . . . . . . . . . . 56
SECTION 11.5 Notices to Trustee . . . . . . . . . 56
SECTION 11.6 Trustee's Relation to Senior
Indebtedness . . . . . . . . . . . . 57
SECTION 11.7 No Impairment of Subordination . . . 57
SECTION 11.8 Article 11 Not To Prevent Events
of Default . . . . . . . . . . . . . 58
SECTION 11.9 Paying Agents other than the
Trustee. . . . . . . . . . . . . . . 58
SECTION 11.10 Securities Senior to Subordinated
Indebtedness . . . . . . . . . . . . 58
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 12.1 Trust Indenture Act Controls . . . . 58
SECTION 12.2 Notices. . . . . . . . . . . . . . . 58
SECTION 12.3 Communications by Holders with Other
Holders. . . . . . . . . . . . . . . 60
SECTION 12.4 Certificate and Opinion as to
Conditions Precedent . . . . . . . . 60
SECTION 12.5 Statements Required in Certificate
and Opinion. . . . . . . . . . . . . 60
SECTION 12.6 Rules by Trustee and Agents. . . . . 61
SECTION 12.7 Record Date. . . . . . . . . . . . . 61
SECTION 12.8 Legal Holidays . . . . . . . . . . . 61
SECTION 12.9 Governing Law. . . . . . . . . . . . 61
SECTION 12.10 No Adverse Interpretation of Other
Agreements . . . . . . . . . . . . . 61
SECTION 12.11 No Recourse Against Others . . . . . 61
SECTION 12.12 Successors . . . . . . . . . . . . . 62
SECTION 12.13 Multiple Counterparts. . . . . . . . 62
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SECTION 12.14 Table of Contents, Headings, etc.. . 62
SECTION 12.15 Severability . . . . . . . . . . . . 62
EXHIBIT A
FORM OF SECURITY. . . . . . . . . . . . . . . . . . . . . . 64
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INDENTURE dated as of May 23, 1996 by and between Sterling House
Corporation, a Kansas corporation (the "Company"), and Fleet National Bank, a
national banking association, as trustee ("Trustee").
RECITALS OF THE COMPANY
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Company's 6.75%
Convertible Subordinated Debentures due 2006 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 DEFINITIONS.
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company.
For the purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting
securities or by agreement or otherwise.
"Agent" means any Registrar, Paying Agent, Conversion Agent, co-registrar
or agent for service of notices and demands.
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar Federal or
State law for the relief of debtors.
"Board of Directors of the Company" means the Board of Directors of the
Company or any committee of the Board of Directors of the Company.
"Board Resolution" means a resolution certified by the Secretary or an
Assistant Secretary of the Company to have been duly adopted by the Board of
Directors of the Company and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
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"Business Day" means a day that is not a Legal Holiday.
"Capital Stock" means any and all shares or other equivalents (however
designated) of capital stock, including all common stock and all preferred
stock, in the case of corporation, or partnership interests or other
equivalents (however designated) in the case of a partnership or common
shares of beneficial interest or other equivalents (however designated) in
the case of a trust.
"Closing Price" means with respect to the shares of Capital Stock of the
Company on any day, (i) the reported last sale price regular way or, in case
no such reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way, in either case on the American
Stock Exchange, or (ii) if the shares of Capital Stock are not listed or
admitted to trading on the American Stock Exchange, the reported last sale
price regular way or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices regular way, in
either case on the principal national securities exchange on which the shares
of Capital Stock are listed or admitted to trading, or (iii) if the shares of
Capital Stock are not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices as
furnished by any New York Stock Exchange member firm selected from time to
time by the Company for that purpose.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is
located at 111 Westminster Street, Providence, Rhode Island 02903.
"Custodian" means any receiver, trustee, liquidator or similar official
under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
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"Dollar" or "$" means the lawful money of the United States of America.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" or "Securityholder" means the Person in whose name a Security is
registered on the Security Register.
"Indebtedness" as applied to any Person, means, without duplication: (i)
all indebtedness for borrowed money whether or not evidenced by a promissory
note, draft or similar instrument; (ii) that portion of obligations with
respect to any lease that is properly classified as a liability on a balance
sheet in accordance with generally accepted accounting principles; (iii)
notes payable and drafts accepted representing extensions of credit; (iv) any
balance owed for all or any part of the deferred purchase price of property
or services, which purchase price is due more than six months from the date
of incurrence of the obligation in respect thereof (except any such balance
that constitutes (a) a trade payable or an accrued liability arising in the
ordinary course of business or (b) a trade draft or note payable issued in
the ordinary course of business in connection with the purchase of goods or
services), if and to the extent such debt would appear as a liability upon a
balance sheet of such Person prepared in accordance with generally accepted
accounting principles; (v) any debt of others described in the preceding
clauses (i) through (iv) which such Person has guaranteed or for which it is
otherwise liable; and (vi) any deferral, amendment, renewal, extension,
supplement or refunding of any of the foregoing indebtedness; PROVIDED,
HOWEVER, that, in computing the "Indebtedness" of any Person, there shall be
excluded any particular indebtedness if, upon or prior to the maturity
thereof and at the time of determination of such indebtedness, there shall
have been deposited with a depository in trust money (or evidences of
indebtedness if permitted by the instrument creating such indebtedness) in
the necessary amount to pay, redeem or satisfy such indebtedness as it
becomes due, and the amount so deposited shall not be included in any
computation of the assets of such Person.
"Indenture" means this Indenture as amended or supplemented from time to
time.
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"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary or the Controller of the Company.
"Officers' Certificate" means a certificate signed by two Officers or by
an Officer and an Assistant Treasurer, Assistant Secretary or Assistant
Controller of the Company. See Sections 12.4 and 12.5.
"Opinion of Counsel" means a written opinion from Edwards & Angell or any
other legal counsel who is reasonably acceptable to the Trustee. The counsel
may be an employee of or counsel to the Company or the Trustee. See Sections
12.4 and 12.5.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Redemption Date" when used with respect to any Security to be redeemed,
means the date fixed for such redemption pursuant to this Indenture.
"Redemption Price" when used with respect to any Security to be redeemed,
means the price fixed for such redemption pursuant to this Indenture as
specified in the form of Security annexed hereto as Exhibit A.
"Registration Statement" means the registration statement that the Company
is required to file with the Securities and Exchange Commission pursuant to
that certain Registration Rights Agreement, dated as of May 17, 1996, by and
between the Company and the Holders from time to time of the Securities.
"Restricted Security", means the Securities, upon original issuance
thereof, and all Securities issued upon registration of transfer thereof or
in exchange therefor, and at all times subsequent thereto, until, in the case
of any such Securities the earlier of the following: (i) such Securities
have been effectively registered under Section 5 of the Securities Act and
disposed of in accordance with a registration statement covering them or (ii)
such Securities have been
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distributed to the public pursuant to Rule 144 of the Securities Act (or any
similar provisions then in force). When any Security which is a Restricted
Security ceases to be a Restricted Security, such Restricted Security shall
no longer be subject to the transfer restrictions as imposed by Section
2.5(2) hereof.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Securities" means the securities in the form of Exhibit A hereto that are
issued under this Indenture as amended or supplemented from time to time.
"Senior Indebtedness" means the principal, premium, if any, and unpaid
interest (including interest accruing on or after the filing of any petition
in bankruptcy or for reorganization relating to the Company whether or not a
claim for post-filing interest is allowed in such proceeding), fees, charges,
expenses, reimbursement and indemnification obligations, and all other
amounts payable under or in respect of Indebtedness of the Company, whether
any such Indebtedness exists as of the date of this Indenture or shall
hereafter be created, incurred, assumed or guaranteed; PROVIDED, HOWEVER,
that Senior Indebtedness shall not include (A) Indebtedness owed to a
Subsidiary, (B) Indebtedness of the Company which is expressly pari passu to
the Securities or (C) Subordinated Indebtedness.
"Subordinated Indebtedness" means the principal, premium, if any, and
interest on any Indebtedness of the Company which by its terms is expressly
subordinated in right of payment to the Securities.
"Subsidiary" means a Person the majority of whose voting stock is owned by
the Company or a subsidiary of the Company. Voting stock is Capital Stock
having voting power under ordinary circumstances to elect directors or
similar positions.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa
- -77bbbb) as amended by the Trust Indenture Reform Act of 1990 and as in
effect on the date of this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
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"Trust Officer", when used with respect to the Trustee, means an officer
of the Trustee customarily performing functions in corporate trust matters or
any other officer of the Trustee to whom such matter is referred because of
his knowledge of and familiarity with the particular subject.
"United States" means the United States of America.
SECTION 1.2 OTHER DEFINITIONS.
TERM DEFINED IN SECTION
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"Company Order" 2.2
"Conversion Agent" 2.3
"conversion price" 10.1
"current market price" 10.4
"DTC" 2.3
"Depository" 2.3
"Event of Default" 6.1
"Legal Holiday" 12.8
"Paying Agent" 2.3
"Payment or Distribution" 11.1
"Registered Accredited
Investor Securities" 2.1
"Registrar" 2.3
"Rule 144A Securities" 2.1
"Rule 13e-3 Transaction" 10.6
"Security Register" 2.3
"U.S. Government Obligations" 8.1
SECTION 1.3 INCORPORATION BY REFERENCE TO TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Securities.
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"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the indenture securities.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rules
have the meanings assigned to them therein.
SECTION 1.4 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with United States generally accepted accounting
principles in effect as of the time as to which such accounting principles
are to be applied;
(3) "or" is not exclusive; and
(4) words in the singular include the plural, and in the plural
include the singular.
ARTICLE 2
THE SECURITIES
SECTION 2.1 FORM; DATING; INCORPORATION OF FORM IN INDENTURE.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $35,000,000, except for
Securities authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu
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of, other Securities pursuant to Sections 2.3, 2.5, 2.6, 2.8, 3.6, 9.5 or
10.1.
The Securities shall be known and designated as the 6.75% Convertible
Subordinated Notes Due 2006 of the Company. Their fixed maturity shall be
June 30, 2006, and they shall bear interest at the rate per annum of 6.75%,
from and including the date of issuance thereof until maturity or earlier
redemption, payable semiannually on June 30 and December 30 commencing
December 30, 1996, until the principal thereof is paid or made available for
payment.
The principal of and premium, if any, and interest on the Securities shall
be payable at the office or agency of the Company in the Borough of
Manhattan, the City of New York maintained for such purpose and at any other
office or agency maintained by the Company for such purpose; provided,
however, that at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register.
The Securities shall be redeemable as provided in Article 3.
The Securities shall be subordinated in right of payment to Senior
Indebtedness, to the extent provided in Article 11.
The Securities shall be convertible as provided in Article 10.
The Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A which is incorporated in and made part
of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rules, agreements to which the
Company is subject, or usage. The Company shall approve the form of the
Securities and any notation, legend or endorsement on them. Each Security
shall be dated the date of its authentication.
The terms and provisions contained in the Securities shall constitute, and
are hereby expressly made, a part of this Indenture and to the extent
applicable, the Company and the Trustee, by their execution and delivery of
this Indenture,
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expressly agree to such terms and provisions and to be bound thereby.
The Securities (the "Rule 144A Securities") issued to "qualified
institutional buyers"(as such term is defined in Rule 144A under the
Securities Act) will initially be issued in the form of a global Security in
the aggregate principal amount of the Rule 144A Securities, which Security
shall be in substantially the form of Exhibit A hereto, including the
paragraphs referred to in footnotes 1 and 2, and is hereinafter referred to
as the "Rule 144A Global Security."
All other Securities will be issued in fully registered form in
denominations of U.S. $1,000 and integral multiples thereof, which Securities
shall be in substantially the form of Exhibit A hereto, excluding the
information called for by footnote 1 thereto but including the information
called for by footnote 2 thereto, and are hereinafter collectively referred
to as "Registered Accredited Investor Securities."
SECTION 2.2 EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Securities for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Security no longer holds that office
at the time the Trustee authenticates the Security, the Security shall
nevertheless be valid.
A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security. Such signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the
Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 2.9, for all purposes of this Indenture
such Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
The Trustee shall authenticate Securities for original issue in the
aggregate principal amount of up to $35,000,000 upon the execution of the
Indenture and a written order or orders of
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the Company signed by two Officers or by an Officer and an Assistant
Treasurer of the Company (a "Company Order"). The aggregate principal amount
of the Securities outstanding at any time may not exceed that amount.
The Trustee may appoint an authenticating agent to authenticate
Securities. An authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with the Company or an Affiliate.
The Securities shall be issuable only in registered form without coupons.
The Securities shall be issuable only in denominations of $1,000 principal
amount and any whole multiples thereof.
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SECTION 2.3 REGISTRAR AND AGENTS.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar"), an
office or agency where Securities may be presented for payment ("Paying
Agent"), an office or agency where Securities may be presented for conversion
("Conversion Agent") and an office or agency where notices and demands to or
upon the Company in respect of the Securities and this Indenture may be
served. The Registrar shall keep a register of the Securities (the "Security
Register") and of their transfer and exchange. The Company may have one or
more co-registrars, one or more additional Paying Agents and one or more
additional Conversion Agents. The Company or any Subsidiary may act as
Paying Agent and/or Conversion Agent. The term "Paying Agent" includes any
additional paying agent and the term "Conversion Agent" includes any
additional conversion agent.
The Company may change any Paying Agent, Registrar, Conversion Agent or
Co-Registrar on sixty (60) days' prior written notice to the Trustee. The
Company shall notify the Trustee in writing of the name and address of any
such Agent. If the Company fails to maintain a Registrar, Paying Agent,
Conversion Agent or agent for service of notices and demands, or fails to
give the foregoing notice, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar, Paying Agent,
Conversion Agent and agent for service of notices and demands.
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With respect to the Securities issuable or issued in whole or in part in
the form of Rule 144A Global Securities, the Company hereby appoints The
Depository Trust Company ("DTC"), at present located at 55 Water Street, New
York, New York, 10041 as the depository for the Rule 144A Global Securities
upon the terms and subject to the conditions herein set forth. (DTC and its
successor or successors as such depository are herein called the
"Depository.")
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.
At least one Business Day prior to each due date of the principal of,
premium if any, and interest on any Securities, the Company shall deposit
with each Paying Agent a sum sufficient to pay such principal, premium, if
any, and interest so becoming due. The Company shall require each Paying
Agent other than the Trustee to agree in writing that it will hold in trust
for the benefit of Holders of Securities or the Trustee all money held by the
Paying Agent for the payment of principal of, premium if any, or interest on
the Securities and to notify the Trustee of any default by the Company (or
any other obligor on the Securities) in making any such payment. If the
Company or a Subsidiary acts as Paying Agent, it shall on or before each due
date of the principal of, premium, if any, or interest on any Securities
segregate the money and hold it as a separate trust fund. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee
and the Trustee may at any time during the continuance of any payment
default, upon written request to a Paying Agent, require such Paying Agent to
forthwith pay to the Trustee all sums so held in trust by such Paying Agent.
Upon doing so, the Paying Agent (if other than the Company or a Subsidiary
thereof) shall have no further liability for the money.
The final installment of principal of and premium, if any, on this Security
shall be payable only upon surrender of this Security at the office or agency of
the Company maintained for such purpose. Payments of principal of and premium,
if any, and interest on this Security shall be made at the office or agency of
the Company maintained for such purpose, or, in the case of any such payments
other than the final payment of principal and premium, if any, at the Company's
option, by check mailed to the Person entitled thereto at such Person's address
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last appearing on the Security Register maintained by the Registrar.
SECTION 2.5 TRANSFER AND EXCHANGE.
(1) When a Security is presented to the Registrar or a co-registrar with
a request to register the transfer thereof, the Registrar or co-registrar
shall register the transfer as requested, and when Securities are presented
to the Registrar or a co-registrar with a request to exchange them for an
equal principal amount of Securities of other authorized denominations, the
Registrar shall make the exchange as requested provided that every Security
represented or surrendered for registration of transfer or exchange shall be
duly endorsed and accompanied by a written instrument of transfer
satisfactory to the Company and the Registrar duly executed by the Company or
such Holder's attorney-in-fact duly authorized in writing; PROVIDED, FURTHER,
that the Registrar or co-registrar, as the case may be, shall not register
the transfer of such Security if such Security is a Restricted Security
unless the conditions in Section 2.5(2) hereof shall have been satisfied.
The Holder of each Security, including each Restricted Security, by such
Holder's acceptance thereof, agrees to be bound by the transfer restrictions
set forth herein and in the legend on such Security.
(2) Whenever any Restricted Security is presented or surrendered for
registration of transfer or exchange for a Security registered in a name
other than that of the holder, no registration of transfer or exchange shall
be made unless:
(a) The registered Holder presenting such Restricted Security for
transfer shall have certified to the Trustee in writing that the registered
Holder is transferring the Restricted Security to the Company;
(b) The Trustee has received written certification from the
registered Holder, and a written opinion of counsel acceptable in form and
substance to the Company and the Trustee, indicating that the transfer is
being made pursuant to an available exemption from, or a transaction not
otherwise subject to, the registration requirements of the Securities Act;
or
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(c) In the case of Rule 144A Securities, the registered Holder
presenting such Restricted Security for transfer shall have certified to
the Trustee in writing that such registered Holder is transferring such
Restricted Securities to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) in compliance with the exemption from
registration as provided by Rule 144A under the Securities Act.
For purposes of this Section 2.5(2), such certification to the Trustee in
writing shall be in the form of the Transfer Notice set forth on the reverse
of such Security.
(3) Each certificate evidencing Restricted Securities shall bear a legend
in substantially the following form:
THIS SECURITY HAS BEEN ACQUIRED BY THE HOLDER FOR THE PURPOSE OF INVESTMENT
AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION.
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS
SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF,
REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE COMPANY THAT:
(I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO STERLING HOUSE CORPORATION, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) IN THE CASE OF A HOLDER WHO IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT),
FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A,
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE
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144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, OR (D) IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES
ACT OR PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (AND CONFIRMED IN AN OPINION OF
COUNSEL ACCEPTABLE IN FORM AND SUBSTANCE TO THE ISSUER OF THIS SECURITY
IF THE ISSUER SO REQUESTS) AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF
THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE.
The above legend may be removed from a certificate when it no longer
evidences a Security which is a Restricted Security.
(4) To permit registrations of transfers and exchanges, the Company shall
issue and the Trustee or any authenticating agent shall authenticate
Securities at the Registrar's or co-registrar's request. No service charge
shall be made for any registration of transfer or exchange of Securities but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto, but this
provision shall not apply to any exchange pursuant to Section 2.8, 3.6, 9.5
or 10.2 not involving any transfer.
(5) The Registrar shall not be required (i) to issue, register the
transfer of or exchange Securities during a period beginning at the opening
of business 15 days before the day of any selection of Securities for
redemption under Section 3.2 and ending at the close of business on the day
of selection, or (ii) to register the transfer or exchange of any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
(6) Any Restricted Security as to which the restrictions on transfer set
forth in Section 2.5(2) hereof shall have expired in accordance with their terms
or shall have terminated may, upon surrender of such Restricted Security for
exchange to the Trustee in accordance with the provisions of this Section 2.5(6)
(accompanied, in the event that such restrictions on transfer have terminated by
reason of a transfer pursuant to
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Rule 144 (or any successor provision), by an opinion of counsel reasonably
acceptable to the Company, addressed to the Company and the Trustee and in
form and scope satisfactory to the Company, to the effect that the transfer
of such Restricted Security has been made in compliance with Rule 144 (or
such successor provision)), be exchanged for a new Security, of like tenor
and aggregate principal amount, which shall not bear the restrictive legend
required by Section 2.5(3) hereof. The Company shall promptly inform the
Trustee in writing of the effective date of any registration statement
registering the Securities under the Securities Act.
(7) If the Security so surrendered for exchange is a Registered
Accredited Investor Security and the Holder thereof requests in writing that
such Registered Accredited Investor Security be exchanged for an interest in
the Rule 144A Global Security, such Registered Accredited Investor Security
will be exchangeable into an equal aggregate principal amount of beneficial
interests in the Rule 144A Global Security; PROVIDED, HOWEVER, that, if such
Registered Accredited Investor Security is a Restricted Security, such
exchange may only be made if such Holder certifies to the Trustee in writing
that such Holder is a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) by completing the Transfer Notice on the
reverse of such Security. Upon any exchange as provided in the immediately
preceding sentence, the Trustee shall cancel such Registered Accredited
Investor Security and cause, or direct any custodian for the Rule 144A Global
Security to cause, in accordance with the standing instructions and
procedures existing between the Depository and any such custodian, the
aggregate principal amount of Securities represented by the Rule 144A Global
Security to be increased accordingly. If no Rule 144A Global Securities are
then outstanding, the Company shall issue and the Trustee shall authenticate
a new Rule 144A Global Security in the appropriate principal amount.
Any person having a beneficial interest in a Rule 144A Global Security may
upon request exchange such beneficial interest for a Registered Accredited
Investor Security only as provided in this paragraph. Upon receipt by the
Company and the Trustee of (i) written instructions (or such other form of
instructions as is customary) on behalf of any person having a beneficial
interest in a Rule 144A Global Security and (ii) in the case of a Restricted
Security, the following additional
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information and documents (all of which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the person
designated as being the beneficial owner, a certification to that
effect from such person; or
(B) if such beneficial interest is being transferred to a person
other than the person designated as being the beneficial owner,
the provisions of Section 3(b) hereof have been satisfied;
in which case the Trustee or any custodian for the Rule 144A Global Security,
at the direction of the Trustee, shall, in accordance with the standing
instructions and procedures existing between the Depository and such
custodian, cause the aggregate principal amount of the Rule 144A Global
Security to be reduced accordingly and, following such reduction, the Company
shall execute and the Trustee shall authenticate and deliver to the
transferee a Registered Security in the appropriate principal amount and, if
such Security is a Restricted Security, including the appropriate legend.
Securities issued in exchange for a beneficial interest in the Rule 144A
Global Security pursuant to this paragraph shall be registered in such names
and in such authorized denominations as shall be instructed to the Trustee.
The Trustee shall deliver such Securities to the persons in whose names such
Securities are so registered.
(8) Notwithstanding any other provision of this Agreement (other than the
provisions set forth in Section 3(c) hereof), the Rule 144A Global Security
may not be transferred as a whole except by the Depository to a nominee of
the Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by Depository or any such nominee to a successor
Depository or a nominee of such successor Depository.
(9) If at any time either (i) the Depository for the Rule 144A Global
Security notifies the Company that the Depository is unwilling or unable to
continue as Depository for the Rule 144A Global Security and a successor
Depository for the Rule 144A Global Security is not appointed by the Company
within 90 days after delivery of such notice, or (ii) the Company, at
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its sole discretion, notifies the Trustee in writing that it elects to cause
the issuance of Registered Securities under this Indenture, then the Company
shall execute, and the Trustee shall authenticate and deliver, Registered
Securities in an aggregate principal amount equal to the principal amount of
the Rule 144A Global Security in exchange for such Rule 144A Global Security.
(10) At such time as all beneficial interests in the Rule 144A Global
Security have either been exchanged for Registered Securities, redeemed,
repurchased or canceled, the Rule 144A Global Security shall be returned to
or retained and canceled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in the Rule 144A Global Security is
exchanged for Registered Securities, redeemed, repurchased or canceled, the
principal amount of Securities represented by the Rule 144A Global Security
shall be reduced accordingly and an endorsement shall be made on the Rule
144A Global Security, by the Trustee or any custodian therefor, at the
direction of the Trustee, to reflect such reduction.
(11) The transfer and exchange of the Rule 144A Global Security or
beneficial interests therein shall be effected through the Depository, in
accordance with this Indenture and the procedures of the Depository therefor,
which shall include restrictions on transfer comparable to those set forth
herein to the extent required by the Securities Act.
SECTION 2.6 REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the Holder of a
Security presents evidence to the satisfaction of the Company and the Trustee
that the Security has been lost, destroyed or wrongfully taken, the Company
shall issue and the Trustee shall authenticate a new Security in replacement
of and substitution for such Security if the requirements of the Trustee and
the Company are met. An indemnity bond may be required by the Company or the
Trustee that is sufficient in the judgment of the Company to protect the
Company and is sufficient in the judgment of the Trustee to protect the
Trustee or any Agent from any loss which it may suffer if a Security is
replaced pursuant to this Section 2.6. The Company and the Trustee may
charge for its expense in replacing a Security.
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In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its sole discretion may,
instead of issuing a new Security, pay or authorize the payment or convert or
authorize the conversion of such Security.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
SECTION 2.7 OUTSTANDING SECURITIES.
Securities outstanding at any time are all Securities theretofore
authenticated and delivered under this Indenture except: (a) Securities
theretofore canceled by the Trustee or delivered to the Trustee for
cancellation; and (b) Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this Indenture,
other than any Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid obligations of the
Issuer; PROVIDED, that in determining whether the Securityholders of the
requisite principal amount of outstanding Securities are present at a meeting of
Securityholders for quorum purposes or have voted or taken or concurred in any
action under this Indenture, including the making of any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such determination as to the presence of a quorum or upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which a Trust Officer of the Trustee actually knows to be so owned
shall be disregarded.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding until the Trustee receives proof
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satisfactory to it that the replaced Security is held by a bona fide
purchaser.
If the Paying Agent (other than the Company or a Subsidiary) holds on a
Redemption Date or maturity date money deposited with it by or on behalf of the
Company sufficient to pay the principal of, premium, if any, and accrued
interest on Securities payable on that date, then on and after that date such
Securities cease to be outstanding and interest on them ceases to accrue.
A Security does not cease to be outstanding because the Company or an
Affiliate holds the Security.
SECTION 2.8 TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but
may have non-material variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Securities in exchange for
temporary Securities upon written order of the Company signed by two
Officers. Until so exchanged, temporary Securities represent the same rights
as definitive Securities. Upon request of the Trustee, the Company shall
provide a certificate to the effect that the temporary Securities meet the
requirements of the second sentence of this Section 2.8.
SECTION 2.9 CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, the Paying Agent and the Conversion Agent shall
forward to the Trustee any Securities surrendered to them for transfer,
exchange, payment or conversion. The Trustee shall cancel all Securities
surrendered for transfer, exchange, payment or conversion and destroy canceled
Securities and deliver a certificate of such destruction to the Company unless
the Company directs the Trustee in writing prior to such destruction to deliver
canceled Securities to the Company. Subject to Sections 2.6, 3.6 and the second
paragraph of Section 10.2, the Company may not issue Securities to replace
Securities that it has previously paid or delivered to the
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Trustee for cancellation or that a Securityholder has converted pursuant to
Article 10 hereof.
SECTION 2.10 DEFAULTED INTEREST.
If the Company defaults in a payment of interest on Securities, it shall
pay the defaulted interest to the Persons who are Holders of the Securities on a
subsequent special record date. After the deposit by the Company with the
Trustee of money sufficient to pay such defaulted interest, the Trustee shall
fix the special record date and payment date. Each such special record date
shall be not less than 10 days prior to such payment date. Each such payment
date shall be not more than 60 days after the deposit by the Company of money to
pay the defaulted interest. At least 15 days before the special record date,
the Company shall mail to each Holder of a Security, with a copy to the Trustee,
a notice that states the special record date, the payment date, and the amount
of defaulted interest to be paid.
SECTION 2.11 SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Registrar shall
furnish to the Trustee at least seven Business Days prior to each semiannual
interest payment date and at such other times as the Trustee may reasonably
request in writing a list in such form and as of such date as the Trustee may
require of the names and addresses of Securityholders upon which the Trustee may
conclusively rely. The Trustee may destroy any such list upon receipt of a
replacement list. The Paying Agent will solicit from each Securityholder a
certification of social security number or taxpayer identification number in
accordance with its customary practice and as required by law, unless the Paying
Agent is in possession of such certification. Each Paying Agent is authorized
to impose back-up withholding with respect to payments to be made to
Securityholders to the extent required by law.
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SECTION 2.12 PERSONS DEEMED OWNERS.
Prior to registration of transfer, the Company, the Trustee and any agent
of the Company or the Trustee may treat the Person in whose name such Security
is registered as the owner of such Security and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 2.13 CUSIP NUMBER.
The Company shall use a "CUSIP" number when issuing the Rule 144A
Securities, but shall not use a "CUSIP" number when issuing Registered
Accredited Investor Securities. The Trustee may use the CUSIP number in notices
of redemption or exchange as a convenience to Securityholders; provided that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Securities and that
reliance may be placed only on the other identification numbers printed on the
Securities.
ARTICLE 3
REDEMPTION
SECTION 3.1 NOTICES TO TRUSTEE.
If the Company wants to redeem the Securities pursuant to the optional
redemption provisions of Paragraph 5 of the Securities, it shall notify the
Trustee of the Redemption Date and the principal amount of Securities to be
redeemed. The notice shall be in writing and accompanied by an Officers'
Certificate stating that the redemption complies with the provisions of this
Indenture. Redemptions provided for in Paragraph 5 of the Securities shall be
effected as provided in said Paragraph 5 or as otherwise agreed upon by the
Company and the Trustee.
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SECTION 3.2 SELECTION OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed, the Trustee shall
select the Securities to be redeemed pro rata or by lot or by any other method
that the Trustee considers fair and appropriate under the circumstances. The
Trustee shall promptly notify the Company of the Securities to be so called for
redemption. The Trustee shall make the selection from Securities outstanding
and not previously called for redemption. The Trustee may select for redemption
portions of the principal of Securities that have denominations larger than
$1,000 principal amount. Securities and portions of them it selects shall be in
principal amounts of $1,000 or multiples thereof. Provisions of this Indenture
that apply to Securities called for redemption also apply to portions of
Securities called for redemption. The Trustee's selection of Securities for
redemption by any method authorized by this Section 3.2 shall be conclusively
deemed reasonable.
Upon any redemption of less than all the Securities, the Company and the
Trustee, for the purpose of selecting Securities to be redeemed, may treat as
outstanding any Securities surrendered for conversion during the period of 15
days next preceding the selection of the Securities and need not treat as
outstanding any Security authenticated and delivered during such period in
exchange for the unconverted portion of any Security converted in part during
such period.
SECTION 3.3 NOTICE OF REDEMPTION BY THE COMPANY.
At least 30 days but not more than 60 days before a Redemption Date, the
Company shall mail a notice of redemption by first-class mail to each Holder of
Securities to be redeemed, with a copy to the Trustee.
The notice shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the Conversion Price;
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(4) the name and address of the Paying Agent and the Conversion
Agent;
(5) that Securities called for redemption may be converted at any
time before the close of business on the Redemption Date and, if not
converted prior to the close of business on the Redemption Date, the right
of conversion will be lost;
(6) that Holders who want to convert Securities must satisfy the
requirements of Paragraph 7 thereof;
(7) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(8) that interest on Securities called for redemption ceases to
accrue on and after the Redemption Date; and
(9) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof will
be issued.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. If a CUSIP
number is listed in such notice or printed on the Security, the notice shall
state that no representation is made as to the correctness or accuracy of such
CUSIP number.
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the applicable Redemption Date and at the applicable
Redemption Price. Upon surrender to the Paying Agent, such Securities shall be
paid at the Redemption Price, plus accrued interest to the Redemption Date.
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SECTION 3.5 DEPOSIT OF REDEMPTION PRICE.
On or before the Redemption Date, the Company shall deposit with the Paying
Agent (or if the Company or a Subsidiary is the Paying Agent, shall segregate
and hold in trust or cause such Subsidiary to segregate and hold in trust) in
immediately available funds money sufficient to pay the Redemption Price of and
accrued interest on all Securities to be redeemed on that date. The Trustee or
the Paying Agent shall return to the Company any money so deposited not required
for that purpose.
SECTION 3.6 SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Trustee shall
authenticate for the Holder, at the expense of the Company, a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
COVENANTS
SECTION 4.1 PAYMENT OF THE SECURITIES.
The Company shall pay the principal of, premium, if any, and interest on
the Securities on the dates and in the manner provided in the Securities and
this Indenture. An installment of principal, premium, if any, or interest shall
be considered paid on the date it is due if the Trustee or Paying Agent (if
other than the Company or a Subsidiary) holds on that date money designated for
and sufficient to pay the installment. The Company shall pay interest on
overdue principal and premium, if any, at the rate borne by the Security; it
shall pay interest, including post-petition interest in the event of a
proceeding under any Bankruptcy Law, on overdue installments of interest at the
same rate to the extent lawful.
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SECTION 4.2 COMMISSION REPORTS.
The Company shall file with the Trustee, promptly after filing with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which the Company is required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
The Company shall also comply with the other provisions of TIA Section 314(a).
So long as the Securities remain outstanding, the Company shall cause its
annual reports to shareholders (containing audited financial statements) and any
other financial reports furnished by it to shareholders to be mailed to the
Holders at their addresses appearing in the Security Register maintained by the
Registrar.
For so long as any of the Rule 144A Securities remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Company covenants and agrees that it shall, during any
period in which it is not subject to Section 13 or 15(d) of the Exchange Act,
make available to any holder or beneficial holder of securities which continue
to be restricted securities in connection with any sale thereof to any
prospective purchase of such securities from such holder or beneficial holder,
the information specified in, and meeting the requirements of the Rule
144A(d)(4) under the Securities Act.
SECTION 4.3 WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company expressly waives (to the extent that it may lawfully do so) any
stay or extension law or any usury law or other law that would prohibit or
forgive the Company from paying all or any portion of the principal of, premium,
if any, or interest on Securities as contemplated herein, wherever enacted, now
or at any time hereafter in force, or that may affect the covenants or the
performance of this Indenture, and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit
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the execution of every such power as though no such law had been enacted.
SECTION 4.4 NOTICE OF DEFAULT.
The Company will, so long as any Securities are outstanding, deliver to the
Trustee, within 10 days of becoming aware of any Default or Event of Default in
the performance of any covenant, agreement or condition in this Indenture, an
Officers' Certificate specifying such Default or Event of Default, the period of
existence thereof and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.5 COMPLIANCE CERTIFICATES.
The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company (which as of the date hereof is December 31), a
written statement signed by the principal executive officer, principal financial
officer or principal accounting officer of the Company, stating, as to each
signer thereof:
(1) that a review of the activities of the Company during such year
and of performance under this Indenture has been made under his or her
supervision;
(2) that to the best of his or her knowledge, based on such review,
the Company has kept, observed, performed and fulfilled in all material
respects each and every condition and covenant contained in this Indenture
throughout such year, or, if there has been a default in the fulfillment of
any such condition or covenant, specifying each such default known to him
or her and the nature and status thereof; and
(3) the conversion price (as described in Article 10 of this
Indenture) then in effect.
The Company will give the Trustee written notice of a change in the fiscal
year of the Company, within a reasonable time after such change is effected.
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SECTION 4.6 LIMITATION ON DIVIDENDS AND OTHER DISTRIBUTIONS.
The Company will not declare or pay any dividends or make any distribution
to holders of its Capital Stock (other than dividends or distributions payable
in Capital Stock of the Company), or purchase, redeem or otherwise acquire or
retire for value any of its Capital Stock or permit any Subsidiary to purchase,
redeem or otherwise acquire or retire for value any of the Company's Capital
Stock if at the time of any of the aforementioned actions an Event of Default
has occurred and is continuing or would exist immediately after giving effect to
such action.
Notwithstanding the foregoing, the provisions of this Section 4.6 will not
prevent (i) the payment of any dividend within 60 days after the date of
declaration when the payment would have complied with the foregoing provisions
on the date of declaration; or (ii) the retirement of any share of the Company's
Capital Stock by exchange for, or out of the proceeds of the substantially
concurrent sale (other than to a Subsidiary) of, other shares of its Capital
Stock.
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.1 WHEN COMPANY MAY MERGE, ETC.
The Company shall not consolidate with or merge into, or transfer all or
substantially all of its assets to, another Person in any transaction in which
the Company is not the continuing or surviving entity unless (i) the resulting,
surviving or transferee Person is a corporation which assumes by supplemental
indenture, in form satisfactory to the Trustee, all the obligations of the
Company under the Securities and this Indenture; (ii) such corporation is
organized and existing under the laws of the United States, a State thereof or
the District of Columbia although it in turn may be owned by a foreign entity;
(iii) immediately after giving effect to such transaction no Default or Event of
Default shall have happened and be continuing and the Officers' Certificate
referred to in the following clause reflects that such Officers are not aware of
any such Default or
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Event of Default that shall have happened and be continuing, and (iv) the
Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer
and such supplemental indenture comply with this Indenture, and thereafter
all obligations of the Company shall terminate.
SECTION 5.2 SUCCESSOR CORPORATION OR TRUST SUBSTITUTED.
Upon any consolidation or merger, or any transfer of all or substantially
all of the assets of the Company in accordance with Section 5.1, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor corporation has been named as the Company
herein; the Company shall thereupon be relieved of any further obligation or
liability hereunder or upon the Securities; and the Company as the predecessor
corporation may thereupon or at any time thereafter be dissolved, wound up or
liquidated. Such successor corporation thereupon may cause to be signed, and
may issue either in its own name or in the name of Sterling House Corporation,
any or all of the Securities issuable hereunder which theretofore shall not have
been signed by the Company and delivered to the Trustee; and, upon the order of
such successor corporation, instead of the Company, and subject to all the
terms, conditions and limitations in this Indenture prescribed, the Trustee
shall authenticate and shall deliver any Securities which previously shall have
been signed and delivered by the Officers to the Trustee for authentication, and
any Securities which such successor corporation thereafter shall cause to be
signed and delivered to the Trustee for that purpose. All the Securities so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Securities
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theretofore or thereafter issued in accordance with the terms of this
Indenture as though all such Securities had been issued at the date of the
execution hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT.
An "Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
occasioned by the provisions of Article 11 or be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order or any
court or any order, rule or regulation of any administrative or governmental
body):
(1) the Company defaults in the payment of interest on any Security
when the same becomes due and payable and such default continues for a
period of 30 days;
(2) the Company defaults in the payment of the principal of or
premium, if any, on any Security when the same becomes due and payable at
maturity, upon redemption or otherwise, and such default continues for five
Business Days;
(3) the Company fails to comply with any of its other covenants,
agreements or conditions in the Securities or this Indenture and such
default continues for the period and after the notice specified in the last
paragraph of this Section 6.1;
(4) there shall be a default under any bond, debenture, note or other
evidence of Indebtedness or under any mortgage, indenture or other
instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness of the Company or any Subsidiary, whether any
such Indebtedness now exists or shall hereafter be created, if (a) either
(i) such event of default results from the failure to
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pay any such Indebtedness at maturity or (ii) as a result of such event
of default, the maturity of such Indebtedness has been accelerated prior
to its stated maturity and such acceleration shall not be rescinded or
annulled or the accelerated amount paid within ten days after notice to
the Company of such acceleration, or such Indebtedness having been
discharged and (b) the principal amount of such Indebtedness, together
with the principal amount of any other such Indebtedness in default for
failure to pay principal or interest thereon, or the maturity of which
has been so accelerated, aggregates $1,000,000 or more;
(5) the Company pursuant to or within the meaning of any Bankruptcy
Law:
(a) commences a voluntary case or proceeding,
(b) consents to the entry of an order for relief against it in
an involuntary case or proceeding,
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(d) makes a general assignment for the benefit of its creditors;
or
(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law:
(a) for relief against the Company in an involuntary case or
proceeding,
(b) appointing a Custodian of the Company or for all or
substantially all of its property, or
(c) ordering the liquidation of the Company,
and the order or decree remains unstayed and in effect for 90 days.
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A default under clause (3) is not an Event of Default until the Trustee
notifies the Company, or the Holders of a majority in principal amount of the
Securities then outstanding notify the Company and the Trustee in writing, of
the default and the Company does not cure the default within 60 days after
receipt of such notice. The notice must specify the default, demand that it be
remedied and state that the notice is a "Notice of Default." The Trustee shall
give such notice to the Company only if directed to do so in writing by the
Holders of a majority in principal amount of the Securities then outstanding.
Such notice by the Trustee shall not be deemed to be a certification by the
Trustee as to whether an Event of Default has occurred.
SECTION 6.2 ACCELERATION.
If an Event of Default (other than an Event of Default specified in Section
6.1(5) or 6.1(6) occurs and is continuing, the Trustee by notice to the Company,
or the Holders of a majority in principal amount of the Securities then
outstanding by notice to the Company and the Trustee, may declare to be due and
payable immediately the principal amount of the Securities plus accrued interest
to the date of acceleration. Upon any such declaration, such amount shall be
due and payable immediately, and upon payment of such amount all of the
Company's obligations with respect to the Securities, other than obligations
under Section 7.7, shall terminate. If an Event of Default specified in Section
6.1(5) or 6.1(6) occurs, all unpaid principal and accrued interest on the
Securities then outstanding shall become and be immediately due and payable
without any declaration or the act on the part of the Trustee or any Holder.
The Holders of a majority in principal amount of the outstanding Securities by
written notice to the Trustee may rescind an acceleration and its consequences
if (x) all existing Events of Default, other than the non-payment of the
principal of the Securities, which have become due solely by such declaration of
acceleration, have been cured or waived, (y) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal and premium, if any, which has become due otherwise than by such
declaration of acceleration, has been paid, and (z) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction. The
Trustee may rely upon such notice of rescission without any independent
investigation as to the satisfaction of conditions (x), (y) and (z).
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SECTION 6.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of and premium, if any, or interest on the Securities or to enforce
the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.4 WAIVER OF DEFAULTS AND EVENTS OF DEFAULT.
Subject to Section 9.2, the Holders of a majority in principal amount of
the Securities then outstanding, on behalf of all the Securityholders, by
written notice to the Trustee may waive a Default or Event of Default with
respect to the Securities and its consequences. When a Default or Event of
Default is waived, it is considered to be cured and ceases to exist; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
SECTION 6.5 CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the Securities then
outstanding may direct in writing the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on it. The Trustee, however, may refuse to follow any direction
that conflicts with law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of other Securityholders, it being understood
that (subject to Section 7.1) the Trustee shall have no duty to ascertain
whether or not such actions or forbearances are unduly prejudicial to such
Securityholders or that may involve the Trustee in personal liability or for
which the Trustee does not have adequate indemnification pursuant to Sections
7.1(5) and 7.2(6); PROVIDED
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that, the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 6.6 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Subject to Article 11, notwithstanding any other provision of this
Indenture, the right of any Securityholder to receive payment of principal of,
premium, if any, and interest on the Security, on or after the respective due
dates expressed in the Security, or to bring suit for the enforcement of any
such payment on or after such respective dates, is absolute and unconditional
and shall not be impaired or affected without the consent of the Holder.
Notwithstanding any other provision of this Indenture, the right of any
Holder of any Security to convert such Security or to bring suit for the
enforcement of such right shall not be impaired or affected without the written
consent of the Holder.
SECTION 6.7 COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of interest or principal, and premium, if
any, specified in Section 6.1(1) or (2) occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against
the Company or any other obligor on the Securities for the whole amount of
unpaid principal, and premium, if any, and accrued interest remaining unpaid on
the Securities, together with interest on overdue principal, and premium, if
any, and to the extent that payment of such interest is lawful, interest on
overdue installments of interest, in each case at the rate borne by the
Securities and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.8 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Holders of
Securities allowed in any judicial proceedings relative to the
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Company (or any other obligor upon the Securities), its creditors or its
property and shall be entitled and empowered to collect and receive any
monies or other property payable or deliverable on any such claims and
to distribute the same. Any Custodian in any such judicial proceeding
is hereby authorized by each Securityholder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the making
of such payments directly to the Holders of Securities, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan or reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceedings.
SECTION 6.9 PRIORITIES.
If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:
FIRST: to the Trustee amounts due under Section 7.7;
SECOND: to holders of any Senior Indebtedness as required by Article 11;
and
THIRD: to the Holders of the Securities for amounts due and unpaid on
the Securities for principal, premium, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Securities for principal, premium, if any, and interest,
respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders of Securities pursuant to this Section 6.9.
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SECTION 6.10 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorney's fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.10
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.6 or a suit by Holders of more than 10% in principal amount of the Securities
then outstanding or a suit by any holder of Senior Indebtedness.
SECTION 6.11 LIMITATION ON SUITS.
A Securityholder may not pursue any remedy with respect to this Indenture
or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in aggregate principal amount of the
Securities at the time outstanding make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense satisfactory to the
Trustee;
(4) the Trustee does not comply with the request within 60 days after
receipt of notice, the request and the offer of security or indemnity; and
(5) the Holders of a majority in aggregate principal amount of the
Securities at the time outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day period.
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A Securityholder may not use this Indenture to prejudice the rights of
any other Securityholder or to obtain a preference or priority over any
other Securityholder.
ARTICLE 7
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE.
(1) The duties and responsibilities of the Trustee shall be as provided
by the TIA. If an Event of Default has occurred and is continuing, the
Trustee shall exercise its rights and powers vested in it by this Indenture
and use the same degree of care and skill in their exercise as a prudent
Person would exercise or use under the circumstances in the conduct of his
own affairs.
(2) Except during the continuance of an Event of Default and after the
curing or waiving of all such Events of Default which may have occurred:
(a) The Trustee need perform only those duties that are specifically
set forth in this Indenture, and the Trustee shall not be liable except for
the performance of such duties as are specifically set forth in this
Indenture, and no others, and no implied covenants or obligation shall be
read into this Indenture against the Trustee.
(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any statements certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. The Trustee, however, shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
(3) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
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(a) This paragraph does not limit the effect of paragraph (2) of this
Section 7.1.
(b) The Trustee shall not be liable for any error in judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(c) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(4) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (1), (2) and (3) of this Section 7.1 and
subject to Sections 315 and 316 of the TIA.
(5) Subject to subsection (3), the Trustee may refuse to perform any
duty or exercise any right or power unless, subject to the provisions of the
TIA, it receives indemnity satisfactory to it against any loss, liability,
expense or fee.
(6) The Trustee shall not be liable for interest on any money received
by it. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
SECTION 7.2 RIGHTS OF TRUSTEE.
(1) The Trustee may rely on and shall be protected in acting or
refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
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(2) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, or both, which shall conform
to Section 12.5. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officers' Certificate or
Opinion of Counsel.
(3) The Trustee may act through agents or attorneys and shall not be
responsible for the misconduct or negligence of such agents or attorneys
appointed with due care and shall not be responsible for their supervision.
(4) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
(5) The Trustee may consult with counsel of its choice and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by the Trustee hereunder in good faith and reliance thereon.
(6) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders of Securities pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction.
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. The Trustee, however, is subject to
Sections 7.10 and 7.11.
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SECTION 7.4 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in the Indenture or any
statement in the Securities other than its certificate of authentication or
in any document used in the sale of the Securities other than any statement
in writing provided by the Trustee expressly for use in such document.
SECTION 7.5 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
actually known to the Trustee, the Trustee shall mail to each Holder of
Securities notice of the Default or Event of Default within 90 days after it
becomes known to the Trustee. Except in the case of a default in payment of
principal of, premium, if any, or interest on any Security, the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in
good faith determines that withholding the notice is in the interests of
Holders of Securities. Notwithstanding anything to the contrary expressed in
this Indenture, the Trustee shall not be deemed to have knowledge of any
Event of Default hereunder unless and until a Trust Officer shall have actual
knowledge thereof, or shall have received written notice thereof from the
Company at its principal Corporate Trust Office as specified in Section 12.1.
The Trustee shall not be deemed to have actual knowledge of an Event of
Default hereunder, except in the case of an Event of Default under Sections
6.1(1) or 6.1(2) (provided that the Trustee is the Paying Agent), until a
Trust Officer receives written notice thereof from the Company or any
Securityholder that such a Default or an Event of Default has occurred.
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with May 15 of the first year
in which Securities are outstanding hereunder, the Trustee, if required by
the provisions of TIA Section 313(a), shall mail to each Securityholder a
brief report dated as of January 15
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of such year that complies with TIA Section 313(a). The Trustee also shall
comply with TIA Section 313(b), Section 313(c) and Section 313(d).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the Securities and Exchange Commission and each
securities exchange, if any, on which the Securities are listed. The Company
agrees to notify the Trustee in writing whenever the Securities become listed
or delisted on or from any securities exchange.
SECTION 7.7 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation for its services (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust). The Company shall reimburse
the Trustee upon request for all reasonable disbursements, expenses and
advances incurred or made by it. Such expenses may include, but shall not be
limited to, the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability incurred by it in connection with the
acceptance or administration of this trust, including the costs and expenses
of defending itself against any claim or liability in connection with the
Securities or the exercise or performance of any of its powers or duties
hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity and the Company
may elect by written notice to the Trustee to assume the defense of any such
claim at the Company's expense with counsel reasonably satisfactory to the
Trustee; provided, however, that if the Trustee is advised by counsel that
the interests of the Company and the Trustee conflict, the Trustee shall have
the right to retain separate counsel.
The Company need not reimburse the Trustee for any expense or indemnify
it against any loss or liability incurred by it through the Trustee's
negligence or willful misconduct. The Company shall not be liable for any
settlement of any claim or action effected without the Company's consent,
which consent
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shall not be unreasonably withheld. To secure the Company's payment
obligations in this Section, the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1 occurs, the expenses and the compensation
for the services are intended to constitute expenses of administration under
any applicable bankruptcy or comparable law. The provisions of this Section
shall survive termination of this Indenture.
SECTION 7.8 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance
of appointment as provided in this Section 7.8.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities then outstanding may remove
the Trustee by so notifying the Trustee and may appoint a successor Trustee
with the Company's written consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee.
If a successor Trustee does not take office within 45 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of a majority in
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principal amount of the Securities then outstanding may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall, upon payment of its fees and expenses,
transfer all property held by it as Trustee to the successor Trustee, subject
to the lien provided for in Section 7.7, the resignation or removal of the
retiring Trustee shall become effective, and the successor Trustee shall have
all the rights, powers and duties of the Trustee under this Indenture.
Notwithstanding the replacement of the Trustee pursuant to this Section 7.8,
the Company's obligations under Section 7.7 shall continue for the benefit of
the retiring Trustee with respect to expenses and liabilities incurred by it
and compensation earned by it prior to such replacement or otherwise or the
Indenture. A successor Trustee shall mail notice of its succession to each
Holder of Securities.
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust assets to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA
Section 310(b), including the optional provision permitted by the second
sentence of TIA Section 310(b)(9).
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SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.1 SATISFACTION, DISCHARGE AND DEFEASANCE OF THE SECURITIES.
The Company shall be deemed to have paid and discharged the entire
indebtedness on the Securities after the date of the deposit referred to in
paragraph (1) below, the provisions of this Indenture shall no longer be in
effect in respect of the Securities, and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of such indebtedness; PROVIDED that the following conditions shall
have been satisfied:
(1) the Company has deposited or caused to be deposited with the
Trustee irrevocably as trust funds in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of the
Securities, with reference to this Section 8.1, (a) money or (b) U.S.
Government Obligations or (c) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to
pay and discharge the entire indebtedness on all the Securities for
principal, premium, if any, and interest, if any, to the maturity date of
the Securities as such principal, premium, if any, or interest becomes due
and payable in accordance with the terms of this Indenture and the
Securities;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company in
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connection with all of the Securities, including all fees and expenses of
the Trustee; and
(3) the Company has delivered to the Trustee an Opinion of Counsel
and an Officers' Certificate, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of the
entire Indebtedness on the Securities and the discharge of this Indenture
and the termination of the Company's obligations hereunder have been
complied with.
"U.S. Government Obligations" means direct, non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for the
timely payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
SECTION 8.2 SATISFACTION AND DISCHARGE OF INDENTURE.
In addition to its rights under Section 8.1, the Company may terminate all
of its obligations under this Indenture when:
(1) all of the Securities theretofore authenticated and delivered
(other than (a) Securities which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 2.7 hereof and (b)
Securities for whose payment money has theretofore been deposited with the
Trustee or the Paying Agent in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust,
as provided in Section 2.4 and Section 8.6 hereof) have been delivered to
the Trustee for cancellation; and
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company in connection with the outstanding Securities,
including all fees and expenses of the Trustee.
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SECTION 8.3 SURVIVAL OF CERTAIN OBLIGATIONS.
Notwithstanding the satisfaction and discharge of this Indenture pursuant
to Section 8.1, the respective obligations of the Company specified in Sections
2.3, 2.4, 2.5, 2.6, 2.11, 4.1, 7.7, 8.5, 8.6, 8.7 and in Article 10 shall
survive until the Securities are no longer outstanding, and after the Securities
are no longer outstanding, or upon compliance with Section 8.2, only the
obligations of the Company in such Sections 7.7 and 8.6 shall survive. Nothing
contained in this Article 8 shall abrogate any of the obligations or duties of
the Trustee under this Indenture.
SECTION 8.4 APPLICATION OF TRUST MONEY.
(1) Subject to the provisions of Section 8.6, all money and U.S.
Government Obligations deposited with the Trustee for the Securities pursuant to
Section 8.1 or Section 8.2, and all money received by the Trustee in respect of
U.S. Government Obligations deposited with the Trustee for the Securities
pursuant to Section 8.1 or Section 8.2 shall be held in trust and reinvested by
the Trustee in (a) U.S. Government Obligations or (b) beneficial interests in
one or more mutual funds which invest solely in U.S. Government Obligations and
which are rated in the highest applicable rating category by a nationally-
recognized statistical rating organization in accordance with the Company's
written instructions and applied by the Trustee in accordance with the
provisions of the Securities and this Indenture, to the payment, either directly
or through any Paying Agent (including the Company or any Subsidiary acting as
Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of
the principal, premium, if any, and interest, if any, on the Securities; but
such money need not be segregated from other funds except to the extent required
by law. Money and U.S. Government Obligations so held in trust are not subject
to the subordination provisions of Article 11.
(2) The Trustee shall deliver or pay to the Company from time to time upon
the Company's written request any U.S. Government Obligations or money held by
it as provided in Section 8.1 or Section 8.2 which, in the written opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are then
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in excess of the amount thereof which then would have been required to
be deposited for the purpose for which such U.S. Government Obligations,
or money, were deposited or received.
SECTION 8.5 PAYING AGENT TO REPAY MONIES HELD.
Upon the satisfaction and discharge of this Indenture, all monies then held
by any Paying Agent under the provisions of this Indenture shall, upon written
demand of the Company, be repaid to it or paid to the Trustee, and thereupon
such Paying Agent shall be released from all further liability with respect to
such monies.
SECTION 8.6 RETURN OF UNCLAIMED MONIES.
Any monies deposited with or paid to the Trustee or any Paying Agent for
the Securities, or then held by the Company in trust, for the payment of any
principal, premium, if any, and interest, if any, on the Securities and not
applied but remaining unclaimed by the Holders of the Securities for two years
after the date upon which the principal of, premium, if any, and interest, if
any, on the Securities, as the case may be, shall have become due and payable,
shall, unless otherwise required by mandatory provisions of applicable escheat
or abandoned or unclaimed property law, be repaid to the Company by such Trustee
or any Paying Agent on written demand by the Company or (if then held by the
Company or any Affiliate) shall be discharged from such trust; and the Holders
of the Securities entitled to receive such payment shall thereafter look only to
the Company for the payment thereof; PROVIDED, HOWEVER, that, before being
required to make any such repayment, the Trustee may, or shall at the written
request of the Company, at the expense of the Company, cause to be published
once in an authorized newspaper in the same city in which the place of payment
with respect to the Securities shall be located and in an authorized newspaper
in the City of New York, or mail to each such Holder, a notice (in such form as
may be deemed appropriate by the Trustee) that said monies remain unclaimed and
that, after a date named therein, any unclaimed balance of said monies then
remaining will be returned to the Company.
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SECTION 8.7 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.1 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.1 until
such time as the Trustee or Paying Agent is permitted to apply all such money or
U.S. Government Obligations in accordance with Section 8.4; PROVIDED, HOWEVER,
that if the Company has made any payment of principal of, premium, if any, or
interest on the Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS AND WAIVERS
SECTION 9.1 AMENDMENTS AND WAIVERS WITHOUT CONSENT OF HOLDERS.
The Company, when authorized by Board Resolution, and the Trustee at any
time and from time to time, may amend or supplement this Indenture, (any such
amendment or supplement to be in a form satisfactory to the Trustee) or the
Securities without notice to or consent of any Securityholder for any of the
following purposes:
(1) to comply with Section 5.1; or
(2) to provide for uncertificated Securities in addition to or in
place of certificated Securities; or
(3) to cure any ambiguity, defect or inconsistency, or to make any
other change that does not adversely affect the interests of the Holders of
Securities in any material respect; or
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(4) to add to the covenants of the Company, for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company; or
(5) to add any Event of Default.
The Trustee shall be entitled to receive upon request an Opinion of Counsel
to its satisfaction with respect to any supplement to this Indenture without
consent of the Holders that all conditions precedent have been satisfied.
SECTION 9.2 AMENDMENTS AND WAIVERS WITH CONSENT OF HOLDERS.
With the written consent of the Holders of not less than 66-2/3% in
aggregate principal amount of the Securities at the time outstanding, the
Company, when authorized by Board Resolution, and the Trustee may amend or
supplement this Indenture (any such amendment or supplement to be in a form
satisfactory to the Trustee) or the Securities for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of any supplemental indenture or of modifying in any manner
the rights of the Holders of the Securities. The Holders of a majority in
principal amount of the Securities then outstanding may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Securities without notice to any Securityholder. Subject to Section 9.4,
without the consent of each Holder of Securities affected, however, an
amendment, supplement or waiver, including a waiver pursuant to Section 6.4, may
not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment or waiver;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the fixed maturity of any
Security;
(4) waive (except unless theretofore cured) a default in the payment
of the principal of (and premium, if any on), interest on or redemption
amounts with respect to any Security;
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(5) make any Security payable in currency other than that stated in
the Security;
(6) make any change in Sections 6.4, 6.6 or 9.2;
(7) make any change that adversely affects the right to convert any
Security; or
(8) make any change in Article 11 that adversely affects the rights
of any Securityholder.
To secure a consent of the Holders under this Section, it shall not be
necessary for the Holders to approve the particular form of any proposed
amendment or waiver; rather, it shall be sufficient if such consent approves the
substance thereof.
After an amendment under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment.
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Securities shall
comply with the TIA as then in effect.
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS.
Subject to this Indenture, each amendment, supplement or waiver evidencing
other action shall become effective in accordance with its terms. Until an
amendment, supplement or waiver becomes effective, a consent to it by a Holder
of a Security is a continuing consent by the Holder even if notation of the
consent is not made on any Security. Any such Holder or subsequent Holder,
however, may revoke the consent as to his Security or portion of a Security, if
the Trustee receives the notice of revocation before the date the amendment,
waiver or other action becomes effective.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders
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at such record date (or their duly designated proxies) and only those
Persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such Persons continue to
be Holders after such record date. No consent shall be valid or effective for
more than 90 days after such record date unless consent from Holders of the
principal amount of Securities then outstanding required hereunder for such
amendment, supplement or waiver to be effective shall have also been given and
not revoked within such 90-day period.
After an amendment, waiver or other action becomes effective, pursuant to
Section 9.1 or Section 9.2, as the case may be, it shall bind every Holder of a
Security.
SECTION 9.5 NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may request the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determine, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms the
cost and expense of which will be borne by the Company.
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee need not sign any amendment that adversely affects its rights
or interests, as determined by the Trustee in its sole discretion. In signing
or refusing to sign any amendment the Trustee shall be entitled to receive and
shall be fully protected in relying upon, an Opinion of Counsel stating that
such amendment is authorized or permitted by this Indenture. The Company may
not sign an amendment until its Board of Directors approves it.
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ARTICLE 10
CONVERSION OF SECURITIES
SECTION 10.1 RIGHT OF CONVERSION; CONVERSION PRICE.
Subject to the provisions of Section 7 of the Securities, the Holder of any
Security or Securities shall have the right, at such Holder's option, at any
time after the effective date of the Registration Statement and before the close
of business on June 30, 2006 (except that, with respect to any Security or
portion of a Security which shall be called for redemption, such right shall
terminate at the close of business on the Redemption Date fixed for redemption
of such Security or portion of a Security unless the Company shall default in
payment due upon redemption thereof), to convert, subject to the terms and
provisions of this Article 10, the principal of any such Security or Securities
or any portion thereof which is $1,000 principal amount or an integral multiple
thereof into shares of common stock of the Company, no par value ("Common
Stock"), initially at the conversion price per share of $22.42 or, in case an
adjustment of such price has taken place pursuant to the provisions of Section
10.4, then at the price as last adjusted (such price or adjusted price being
referred to herein as the "conversion price"), upon surrender of the Security or
Securities, the principal of which is so to be converted, accompanied by written
notice of conversion duly executed, to the Company, at any time during usual
business hours at the office or agency maintained by it for such purpose, and,
if so required by the Conversion Agent or Registrar, accompanied by a written
instrument or instruments of transfer in form satisfactory to the Conversion
Agent or Registrar duly executed by the Holder or his duly authorized
representative in writing. For convenience, the conversion of any portion of
the principal of any Security or Securities into shares of Common Stock is
hereinafter sometimes referred to as the conversion of such Security or
Securities.
SECTION 10.2 ISSUANCE OF SHARES ON CONVERSION.
As promptly as practicable after the surrender, as herein provided, of any
Security or Securities for conversion, the Company shall deliver or cause to be
delivered at its said office or agency, to or upon the written order of the
Holder of the Security or Securities so surrendered, certificates
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representing the number of fully paid and nonassessable shares of Common
Stock into which such Security or Securities may be converted in
accordance with the provisions of this Article 10. Such conversion
shall be deemed to have been made as of the close of business on the
date that such Security or Securities shall have been surrendered for
conversion by delivery thereof with a written notice of conversion duly
executed, so that the rights of the Holder of such Security or
Securities as a Securityholder shall cease at such time and, subject to
the following provisions of this paragraph, the Person or Persons
entitled to receive the shares of Common Stock upon conversion of such
Security or Securities shall be treated for all purposes as having
become the record holder or holders of such shares of Common Stock at
such time and such conversion shall be at the conversion price in effect
at such time; PROVIDED, HOWEVER, that no such surrender on any date when
the stock transfer books of the Company shall be closed shall be
effective to constitute the Person or Persons entitled to receive the
shares of Common Stock upon such conversion as the record holder or
holders of such shares of Common Stock on such date, but such surrender
shall be effective to constitute the Person or Persons entitled to
receive such shares of Common Stock as the record holder or holders
thereof for all purposes at the close of business on the next succeeding
day on which such stock transfer books are open; and PROVIDED, FURTHER,
that in such event such conversion shall be at the conversion price in
effect on the date that such Security or Securities shall have been
surrendered for conversion by delivery thereof, as if the stock transfer
books of the Company had not been closed. The Company shall give or
cause to be given to the Trustee written notice whenever the stock
transfer books of the Company shall be closed.
Upon Conversion of any Security which is converted in part only, the
Company shall execute and the Trustee shall authenticate and deliver to or on
the order of the Holder thereof, at the expense of the Company, a new Security
or Securities of authorized denominations in principal amount equal to the
unconverted portion of such Security.
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SECTION 10.3 NO ADJUSTMENT FOR INTEREST OR DIVIDENDS.
No payment or adjustment in respect of interest on the Securities or
dividends on the shares of Common Stock shall be made upon the conversion of any
Security or Securities; PROVIDED, HOWEVER, that if a Security or any portion
thereof shall be converted subsequent to any regular record date and on or prior
to the next succeeding interest payment date, the interest falling due on such
interest payment date shall be payable on such interest payment date
notwithstanding such conversion, and such interest (whether or not punctually
paid or duly provided for) shall be paid to the Person in whose name such
Security is registered at the close of business on such regular record date and
Securities surrendered for conversion during the period from the close of
business on any regular record date to the opening of business on the
corresponding interest payment date must be accompanied by payment of an amount
equal to the interest payable on such interest payment date.
SECTION 10.4 ADJUSTMENT OF CONVERSION PRICE.
(1) In case the Company shall pay or make a dividend or other distribution
on any class of Capital Stock of the Company in shares of Common Stock, the
conversion price in effect at the opening of business on the day following the
date fixed for the determination of shareholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such conversion
price by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or other distribution,
such reduction to become effective immediately after the opening of business on
the day following the date fixed for such determination.
(2) In case the Company shall issue rights or warrants to all or
substantially all holders of its shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible into
or exchangeable for Common Stock) at a price per share (or having a conversion
or exchange price per share) less than the current market price per share
(determined as provided in paragraph (6) of this Section 10.4) of
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the shares of Common Stock on the date fixed for the determination of
shareholders entitled to receive such rights or warrants, the conversion
price in effect at the opening of business on the day following the date
fixed for such determination shall be reduced by multiplying such
conversion price by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the number of shares of
Common Stock which the aggregate of the subscription price of the total
number of shares of Common Stock so offered for subscription or purchase
(or the aggregate conversion of exchange price of the convertible or
exchangeable securities so offered) would purchase at such current
market price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately
after the opening of business on the day following the date fixed for
such determination. In the event that all of the shares of Common Stock
subject to such rights or warrants have not been issued when such rights
or warrants expire, then the conversion price shall promptly be
readjusted to the conversion price which would then be in effect had the
adjustment upon the issuance of such rights or warrants been made on the
basis of the actual number of shares of Common Stock issued upon the
exercise of such rights or warrants. For the purposes of this paragraph
(2), the number of shares of Common Stock at any time outstanding shall
not include shares held in the treasury of the Company but shall include
shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company will not issue any
rights or warrants in respect of shares of Common Stock held in the
treasury of the Company.
(3) In case the outstanding shares of Common Stock shall be subdivided
into a greater number of shares, the conversion price in effect at the opening
of business on the day following the day upon which such subdivision becomes
effective shall be proportionately reduced, and, conversely, in case outstanding
shares of Common Stock shall each be combined into a smaller number of shares,
the conversion price in effect at the opening of business on the day following
the day upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day
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following the day upon which such subdivision or combination becomes
effective.
(4) In case the Company shall, by dividend or otherwise, distribute to all
or substantially all holders of shares of Common Stock evidences of indebtedness
or assets (including securities, but excluding any (a) rights or warrants
referred to in paragraph (2) of this Section 10.4, (b) any dividend or
distribution not prohibited by Section 4.6 hereof and (c) any dividend or
distribution referred to in paragraph (1) of this Section 10.4), the conversion
price shall be adjusted so that the same shall equal the price determined by
multiplying the conversion price in effect immediately prior to the close of
business on the day fixed for the determination of shareholders entitled to
receive such distribution by a fraction of which the numerator shall be the
current market price per share (determined as provided in paragraph (6) of this
Section) of the shares of Common Stock on the date fixed for such determination
less the then fair market value as determined by the Board of Directors of the
Company (whose determination shall be conclusive and described in a resolution
of the Board of Directors of the Company filed with the Trustee) of the portion
of the assets or evidences of indebtedness so distributed allocable to one share
of Common Stock and the denominator shall be such current market price per share
of the shares of Common Stock, such adjustment to become effective immediately
prior to the opening of business on the day following the date fixed for the
determination of shareholders entitled to receive such distribution.
(5) In case the shares of Common Stock shall be changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other than a subdivision or
combination of shares or a stock dividend described in paragraph (1) or (3) of
this Section 10.4, or a consolidation, merger or sale of assets described in
Section 10.10), then and in each such event the Holders of Securities shall have
the right thereafter to convert such Securities into the kind and amount of
shares of stock and other securities and property receivable upon such
reorganization, reclassification or other change, by holders of the number of
shares of Common Stock into which such Securities might have been converted
immediately prior to such reorganization, reclassification or change.
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(6) For the purpose of any computation under paragraphs (2) and (4) for
this Section, the current market price per share of Common Stock on any date
shall be deemed to be the average of the Closing Prices for the 15 consecutive
Business Days selected by the Company commencing not more than 30 and not less
than 20 Business Days before the date in question.
(7) No adjustment in the conversion price shall be required unless such
adjustment (plus any adjustments not previously made by reason of this paragraph
(7)) would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this paragraph (7)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this paragraph (7) shall be
made to the nearest cent.
(8) The Company may, but shall not be required to, make such reductions in
the conversion price, in addition to those required by paragraph (1), (2), (3),
(4) and (5) of this Section 10.4 as the Company's Board of Directors considers
to be advisable in order to avoid or diminish any income tax to any holders of
shares of Common Stock resulting from any dividend or distribution of stock or
issuance of rights or warrants to purchase or subscribe for stock or from any
event treated as such for income tax purposes or for any other reasons. The
Board of Directors shall have the power to resolve any ambiguity or correct any
error in the adjustments made pursuant to this Section 10.4 and its actions in
so doing shall be final and conclusive.
(9) The adjustments provided for in this Section 10.4 shall be made
successively whenever any event listed above shall occur.
SECTION 10.5 NOTICE OF ADJUSTMENT OF CONVERSION PRICE.
Whenever the conversion price for the Securities is adjusted as herein
provided:
(1) the Company shall compute the adjusted conversion price in
accordance with Section 10.4 and shall prepare an Officers' Certificate
setting forth the adjusted conversion price and showing in reasonable
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detail the facts upon which such adjustment is based and the computation
thereof, and such certificate shall forthwith be filed at each office or
agency maintained for the purpose of conversion of the Securities pursuant
to Section 2.4 and with the Trustee; and
(2) a notice stating that the conversion price has been adjusted and
setting forth the adjusted conversion price shall as soon as practicable be
mailed by the Company to all Holders of the Securities at their last
addresses as they shall appear in the Security Register.
(3) If the conversion price is adjusted and the Company fails to file
an Officers' Certificate with the Trustee as provided by Section 10.5(1)
and the Trustee is acting as the Conversion Agent, the Trustee shall be
entitled to rely conclusively on the conversion price set forth in the
Officer's Certificate most recently received by the Trustee (or as set
forth in the Securities and this Indenture if the conversion price shall
not have been adjusted).
SECTION 10.6 NOTICE OF CERTAIN CORPORATE ACTION.
(1) In case:
(a) the Company shall authorize the granting to holders of its shares
of Common Stock of rights or warrants entitling them to subscribe for or
purchase any shares of Capital Stock of any class or of any other rights;
or
(b) of any reclassification of the shares of Common Stock of the
Company, or of any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is required, or
of the sale or transfer of all or substantially all of the assets of the
Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
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then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of the Securities pursuant to Section 2.3 and shall
cause to be mailed to the Trustee and all Holders of the Securities at their
last addresses as they shall appear in the Security Register, at least 20 days
(or 10 days in any case specified in clause (a) or (b) above) prior to the
applicable record date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be taken, the date as of which the
Holders of shares of Common Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined, or (y) the date on which
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of shares of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. Such notice shall also state
whether such transaction will result in any adjustment in the conversion price
applicable to the Securities and, if so, shall state what the adjusted
conversion price will be and when it will become effective. Neither the failure
to give the notice required by this Section, nor any defect therein, to any
particular Holder shall affect the sufficiency of the notice or the legality or
validity of any such dividend, distribution, right, warrant, reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding-up,
or the vote on any action authorizing such with respect to the other holders.
(2) In case the Company or any Affiliate of the Company shall propose to
engage in a "Rule 13e-3 Transaction" as defined in the Commission's Rule 13e-3
under the Exchange Act, the Company shall, no later than the date on which any
information with respect to such Rule 13e-3 Transaction is first required to be
given to the Commission or any other Person pursuant to such Rule 13e-3, cause
to be mailed to all Holders at their last addresses as they shall appear in the
Security Register, a copy of all information required to be given to the holders
of the Company's Capital Stock pursuant to such Rule 13e-3. The information
required to be given under this paragraph shall be in addition to and not in
lieu of any other information
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required to be given by the Company pursuant to this Section 10.6 or any
other provision of the Securities or this Indenture.
SECTION 10.7 TAXES ON CONVERSIONS.
The Company will pay any and all stamp or similar taxes that may be payable
in respect of the issuance or delivery of shares of Common Stock on conversion
of the Securities pursuant hereto. The Company shall not, however, be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of shares of Common Stock in a name other than that of the
Holder of the Security or Securities to be converted, and no such issuance or
delivery shall be made unless and until the Person requesting such issuance has
paid to the Company the amount of any such tax, or has established to the
satisfaction of the Company that such tax has been paid.
SECTION 10.8 FRACTIONAL SHARES.
No fractional shares or scrip representing fractional shares shall be
issued upon any conversion of the Securities. If any such conversion would
otherwise require the issuance of a fractional share an amount equal to such
fraction multiplied by the current market price per share of Common Stock
(determined as provided in paragraph (6) of Section 10.4) on the day of
conversion shall be paid to the Holder in cash by the Company.
SECTION 10.9 CANCELLATION OF CONVERTED SECURITIES.
All Securities delivered for conversion shall be delivered to the Trustee
or the Conversion Agent to be canceled by or at the direction of the Trustee or
the Conversion Agent, which shall dispose of the same as provided in Section
2.10.
SECTION 10.10 PROVISIONS IN CASE OF CONSOLIDATION, MERGER OR SALE OF ASSETS.
(1) In case of any consolidation of the Company with, or merger of the
Company into, any Person, or in case of any merger of another Person into the
Company (other than a consolidation or merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock), or in case of any sale or transfer of all or substantially all of
the assets of the
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Company, the Person formed by such consolidation or resulting from such
merger or which acquires such assets, as the case may be, shall execute
and deliver to the Trustee a supplemental indenture providing that the
Holder of each Security then outstanding shall have the right
thereafter, during the period such Security shall be convertible as
specified in Section 10.1 to convert such Security only into the kind
and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of
shares of Common Stock into which such Security might have been
converted immediately prior to such consolidation, merger, sale or
transfer. Such supplemental indenture shall provide for adjustments
which, for events subsequent to the effective date of such supplemental
indenture, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 10. The above provisions of
this Section 10.10 shall similarly apply to successive consolidations,
mergers, sales or transfers.
(2) The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any such supplemental indenture
relating either to the kind or amount of shares of stock or securities or
property receivable by Holders upon the conversion of their Securities after
any such reclassification, change, consolidation, merger, sale or conveyance
or to any adjustment to be made with respect thereto.
SECTION 10.11 DISCLAIMER BY TRUSTEE OF RESPONSIBILITY FOR CERTAIN MATTERS.
The Trustee and each Conversion Agent (other than the Company or any
Subsidiary) shall not at any time be under any duty or responsibility to any
Holder of the Securities to determine whether any facts exist which may require
any adjustment of the conversion price, how it should be calculated or what it
should be, or with respect to the nature or extent of any such adjustment when
made, or with respect to the method employed, or herein or in any supplemental
indenture provided to be employed, in making the same. The Trustee and each
Conversion Agent (other than the Company or any Subsidiary) shall not be
accountable with respect to the validity, value, kind or amount of any shares of
Common Stock, or of any securities or property, which may at any time be issued
or delivered upon the conversion of any Security; and it makes no representation
with respect thereto. The Trustee and each Conversion Agent (other than the
Company or any Subsidiary) shall not be responsible for any
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failure of the Company to issue, transfer or deliver any shares of
Common Stock or stock certificates or other securities or property upon
the surrender of any Security for the purpose of conversion or, subject
to Section 7.1, to comply with any of the covenants of the Company
contained in this Article 10.
SECTION 10.12 COVENANT TO RESERVE SHARES.
The Company covenants that it will at all times reserve and keep available,
free from preemptive rights, out of its authorized shares of Common Stock,
solely for the purpose of issuance upon conversion of the Securities as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding Securities. The Company covenants that all
shares of Common Stock which shall be so issuable shall be, when issued, duly
and validly issued and fully paid and non-assessable. For purposes of this
Section 10.12, the number of shares of Common Stock which shall be deliverable
upon the conversion of all outstanding Securities shall be computed as if at the
time of computation all outstanding Securities were held by a single holder.
ARTICLE 11
SUBORDINATION; SENIORITY
SECTION 11.1 SECURITIES SUBORDINATED TO SENIOR INDEBTEDNESS.
(1) The Company agrees, and each Holder of the Securities by his
acceptance thereof likewise agrees, that the payment of the principal of,
premium, if any, and interest on the Securities (all of the foregoing, a
"Payment or Distribution") is subordinated and junior in right of payment, to
the extent and in the manner provided in this Article 11, except as provided in
Article 8, to the prior payment in full in cash of all Senior Indebtedness
whether outstanding on the date hereof or hereafter created, incurred, assumed
or guaranteed.
A Payment or Distribution shall include any asset of any kind or character,
and may consist of cash, securities or other property, by set-off or otherwise,
and shall include, without limitation, any purchase, redemption or other
acquisition of Securities or the making of any deposit of funds or securities
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pursuant to this Indenture (including, without limitation, any deposit pursuant
to Article 8 hereof).
(2) The Senior Indebtedness of the Company shall continue to be Senior
Indebtedness and entitled to the benefit of these subordination provisions
irrespective of any amendment, modification or waiver of any term of any
instrument relating to refinancing of the Senior Indebtedness.
(3) All the provisions of this Indenture and the Securities shall be
subject to the provisions of this Article 11 so far as they may be applicable
thereto, except that nothing in this Article 11 shall apply to claims for, or
payments to, the Trustee under or pursuant to Section 7.7.
(4) No right of any holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time or in any way be affected or
impaired by any failure to act on the part of the Company, any Paying Agent, the
Holders of the Securities, the Trustee or the holders of the Senior
Indebtedness, or by any noncompliance by the Company, any Paying Agent, the
Holders of the Securities or the Trustee with any of the terms, provisions and
covenants of the Securities or this Indenture, regardless of any knowledge
thereof that any such holder of Senior Indebtedness may have or be otherwise
charged with.
SECTION 11.2 COMPANY NOT TO MAKE PAYMENTS WITH RESPECT TO SECURITIES IN
CERTAIN CIRCUMSTANCES.
No Payment or Distribution shall be made by the Company, the Trustee or any
Paying Agent on account of principal of, premium, if any, or interest on the
Securities, whether upon stated maturity, upon redemption or acceleration, or
otherwise, or on account of the purchase or other acquisition of Securities,
whether upon stated maturity, upon redemption or acceleration, or otherwise, if
there shall have occurred and be continuing a default with respect to any Senior
Indebtedness permitting the acceleration thereof or with respect to the payment
of any Senior Indebtedness and (a) such default is the subject of a judicial
proceeding or (b) notice of such default in writing or by telegram has been
given to the Company by any holder or holders of any Senior Indebtedness, unless
and until the Company shall have received written notice from such holder or
holders that
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such default or event of default shall have been cured or waived or
shall have ceased to exist.
Upon any acceleration of the principal of the Securities or any payment by
the Company or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any dissolution or
winding up or liquidation or reorganization of the Company, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings,
all amounts due or to become due upon all Senior Indebtedness shall first be
paid in full in cash, or payment thereof provided for to the satisfaction of the
holders thereof, before any Payment or Distribution is made on account of the
redemption price or principal of (and premium, if any) or interest on the
Securities; and (subject to the power of a court of competent jurisdiction to
make other equitable provision, which shall have been determined by such court
to give effect to the rights conferred in this Article upon the Senior
Indebtedness and the holders thereof with respect to the Securities or the
Holders thereof or the Trustee, by a lawful plan of reorganization or
readjustment under applicable law) upon any such dissolution or winding up or
liquidation or reorganization, any Payment or Distribution by the Company or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (other than securities of the Company as reorganized or
readjusted or securities of the Company or any other company, trust or
corporation provided for by a plan of reorganization or readjustment, the
payment of which is junior or otherwise subordinate, at least to the extent
provided in this Article 11 with respect to the Securities to the payment of all
Senior Indebtedness at the time outstanding and to the payment of all securities
issued in exchange therefor to the holders of the Senior Indebtedness at the
time outstanding), to which the Holders of the Securities or the Trustee would
be entitled except for the provisions of this Article 11, shall be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other Person making such Payment or Distribution directly to the holders of
Senior Indebtedness of the Company or their representative or representatives,
or to the trustee or trustees under any indenture pursuant to which any
instruments evidencing any Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay all Senior
Indebtedness in full in cash, after giving effect to any concurrent payment or
distribution to or for
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the holders of Senior Indebtedness, before any Payment or Distribution
is made to the Holders of the Securities or to the Trustee, except that
the Trustee will have a lien for the payment of its fees and expenses.
In the event that, notwithstanding the foregoing, any Payment or
Distribution by the Company of any kind or character, whether such payment shall
be in cash, property or securities, prohibited by the foregoing, and the Company
shall have made payment to the Trustee or the Holders of the Securities before
all Senior Indebtedness is paid in full in cash, or provision is made for such
payment to the satisfaction of the holders thereof, and if such fact shall then
have been or thereafter be made known to a Trust Officer of the Trustee or, as
the case may be, such Holder, then and in such event such Payment or
Distribution shall be paid over by the Trustee (if the Notice required by
Section 11.5 has been received by the Trustee) or such Holder or delivered to
the holders of Senior Indebtedness or their representative or representatives,
or to the trustee or trustees under any indenture pursuant to which any
instruments evidencing any Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in cash, after giving effect to any concurrent Payment or
Distribution to or for the holders of such Senior Indebtedness, and, until so
delivered, the same shall be held in trust by any Holder of a Security as the
property of the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company into,
another Person or the liquidation or dissolution of the Company following the
conveyance or transfer of its property as an entirety, or substantially as an
entirety, to another corporation upon the terms and conditions provided in
Article 5 shall not be deemed a dissolution, winding up, liquidation or
reorganization for the purposes of this Section 10.2 if such other Person shall,
as a part of such consolidation, merger, conveyance or transfer, comply with the
conditions stated in Article 5. Nothing in this Section shall apply to claims
of, or payments to, the Trustee under or pursuant to Section 7.7.
The holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Holders of the Securities, without
incurring responsibility to
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the Holders of the Securities and without impairing or releasing the
obligations of the Holders of the Securities hereunder to the holders of
Senior Indebtedness: (i) change the manner, place or terms of payment or
change or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend in any manner Senior Indebtedness or
any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the
collection of Senior Indebtedness; (iv) apply any amounts received to
any liability of the Company owing to holders of Senior Indebtedness;
and/or (v) exercise or refrain from exercising any rights against the
Company and any other Person.
SECTION 11.3 SUBROGATION OF SECURITIES.
Subject to the payment in full in cash of all amounts then due (whether by
acceleration of the maturity thereof or otherwise) on account of all Senior
Indebtedness at the time outstanding, the Holders of the Securities shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
Payments or Distributions of cash, property or securities of the Company
applicable to the Senior Indebtedness until the principal of, premium, if any,
and interest on the Securities shall be paid in full; and, for the purposes of
such subrogation, no Payments or Distributions to the holders of Senior
Indebtedness to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article 11, and no payments over
pursuant to the provisions of this Article 11 to the holders of Senior
Indebtedness by Holders of the Securities or the Trustee, shall, as between the
Company, the Company's creditors other than holders of Senior Indebtedness, and
the Holders of the Securities, be deemed to be a payment by the Company to or on
account of the Senior Indebtedness. It is understood that the provisions of
this Article 11 are and are intended solely for the purpose of defining the
relative rights of the Holders of the Securities, on the one hand, and the
holders of Senior Indebtedness, on the other hand.
Nothing contained in this Article 11 or elsewhere in this Indenture or in
the Securities is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness, and the Holders of the
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Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of, premium, if any, and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of the Company other than
the holders of Senior Indebtedness, nor shall anything herein or therein prevent
the Trustee or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article 11 of the holders of Senior Indebtedness in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy. Nothing in this Article 11 shall prevent
conversions of Securities pursuant to Article 10.
Upon any payment or distribution of assets of the Company referred to in
this Article 11, the Trustee, subject to the provisions of Section 7.1, and the
Holders of the Securities shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which any dissolution, winding
up, liquidation or reorganization proceedings are pending, or certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of the Securities, for the purpose of ascertaining the Persons entitled to
participate in such distribution, the holders of Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 11.
SECTION 11.4 AUTHORIZATION BY HOLDERS OF SECURITIES.
Each holder of a Security by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate, as between the Holder of the Security and the holders of Senior
Indebtedness, the subordination provided in this Article 11 and appoints the
Trustee his attorney-in-fact for any and all such purposes including, without
limitation, to execute, verify, deliver and file any proofs of claim which any
holder of Senior Indebtedness may at any time require in order to prove and
realize upon any rights or claims pertaining to the Securities
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and to effectuate the full benefit of the subordination contained
herein. Upon failure of the Trustee so to do, any such holder of Senior
Indebtedness shall be deemed to be irrevocably appointed the agent and
attorney-in-fact of the Holder to execute, verify, deliver and file any
such proofs of claim.
SECTION 11.5 NOTICES TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of any fact
known to it which would prohibit the making of any payment of moneys to or by
the Trustee in respect of the Securities pursuant to the provisions of this
Article 11. Notwithstanding the provisions of this Article 11 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment of
moneys to or by the Trustee in respect of the Securities pursuant to the
provisions of this Article 11 unless and until a Trust Officer of the Trustee
shall have received at its Corporate Trust Office written notice thereof from
the Company or a holder or holders of Senior Indebtedness or from any trustee or
agent therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Section 7.1, shall be entitled in all
respects to assume that no such facts exist; PROVIDED, HOWEVER, that if a Trust
Officer of the Trustee shall not have received at least three Business Days
prior to the date upon which by the terms hereof any such moneys may become
payable for any purpose (including, without limitation, the payment of the
principal of, premium, if any, or interest on any Security) with respect to such
moneys the notice provided for in this Section 11.5, then, anything herein
contained to the contrary notwithstanding, the Trustee shall have the full power
and authority to receive such moneys and to apply the same to the purpose for
which they were received and shall not be affected by any notice to the contrary
which may be received by it within three Business Days prior to such date.
The Trustee shall be entitled to rely conclusively on the delivery to it of
a written notice by a Person representing himself to be a holder of Senior
Indebtedness (or a trustee on behalf of such holder) to establish that such
notice has been given by a holder of Senior Indebtedness or a trustee or agent
on behalf of any such holder. In the event that the Trustee determines in good
faith that further evidence is required with
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respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article 11,
the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article 11, and
if such evidence is not furnished, the Trustee may defer any payment to
such Person pending judicial determination as to the right of such
Person to receive such payment.
SECTION 11.6 TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article 11 in respect of any Senior Indebtedness at any time
held by it, to the same extent as any other holder of Senior Indebtedness, and
nothing in Section 7.11 or elsewhere in this Indenture shall deprive the Trustee
of any of its rights as such holder.
With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article 11, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not owe any
fiduciary duty to the holders of Senior Indebtedness and shall not be liable to
any such holder if it shall mistakenly pay over or distribute to Holders of the
Securities or the Company or any other Person money or assets to which any
holder of Senior Indebtedness shall be entitled by virtue of this Article 11 or
otherwise.
SECTION 11.7 NO IMPAIRMENT OF SUBORDINATION.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company,
the Trustee or the Holder of any of the Securities or by any act, or failure to
act, in good faith, by any such holder of Senior Indebtedness, or by any
noncompliance by the Company, the Trustee or the Holder of any of the Securities
with the terms, provisions and covenants of
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this Indenture, regardless of any knowledge thereof which any such
holder may have or otherwise be charged with.
SECTION 11.8 ARTICLE 11 NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of, premium, if any,
or interest on the Securities by reason of any provision in this Article 11
shall not be construed as preventing the occurrence of an Event of Default with
respect to such Securities under Section 6.1.
SECTION 11.9 PAYING AGENTS OTHER THAN THE TRUSTEE.
In any case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article 11 shall in such case (unless the context shall
otherwise require) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article 11 in addition to or in place of the Trustee.
SECTION 11.10 SECURITIES SENIOR TO SUBORDINATED INDEBTEDNESS.
The indebtedness represented by the Securities will be senior and prior in
right of payment to all Subordinated Indebtedness, to the extent and in the
manner provided in such Subordinated Indebtedness.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provisions shall control. The provisions of TIA Sections 310
through 317 that
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impose duties on any Person (including the provisions automatically
deemed included herein unless expressly excluded by this Indenture) are
a part of and govern this Indenture, whether or not physically contained
herein.
SECTION 12.2 NOTICES.
Any notices or other communications required or permitted hereunder shall
be in writing, and shall be sufficiently given if made by hand delivery, or
first class mail, postage prepaid (except that any notice by the Trustee to the
Company of a default or an Event of Default under this Indenture shall be by
registered or certified mail, postage prepaid, return receipt requested), or by
a nationally-recognized overnight express courier service (which notices or
communications shall be deemed received, in the case of the Company, the
business day after the receipt thereof by such service and, in the case of the
Trustee, upon receipt), addressed as follows:
if to the Company:
Sterling House Corporation
453 South Webb Road
Suite 500
Wichita, Kansas 67207
Telephone: (316) 684-8300
Telecopier: (316) 684-1517
if to the Trustee:
Fleet National Bank
111 Westminster Street
Providence, Rhode Island 02903
Attention: Stephen Maceroni
Telephone: (401) 278-6347
Telecopier: (401) 278-3763
The Company or the Trustee by notice to the other may designate additional or
different addresses as shall be furnished in writing by either party. Any
notice or communication to the Company or the Trustee shall be deemed to have
been given or made as of the date so delivered if personally delivered, and five
(5) calendar days after mailing if sent by registered or certified
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mail (except that a notice of change of address shall not be deemed to
have been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed to
the address of such Securityholder as it appears on the registration books of
the Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
In case by reason of the suspension of regular mail service, or by reason
of any other cause, it shall be impossible to mail any notice, as required by
this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
If the Company mails any notice or communication to Securityholders, it
shall mail a copy to the Trustee and all Agents at the same time.
SECTION 12.3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 12.5) stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture
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relating to the proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 12.5) stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.
SECTION 12.5 STATEMENTS REQUIRED IN CERTIFICATE AND OPINION.
Each Certificate and Opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
SECTION 12.6 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Registrar, Paying Agent or Conversion Agent may make
reasonable rules for its functions.
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SECTION 12.7 RECORD DATE.
Whenever the Company or the Trustee solicits an act of Securityholders,
the Company or the Trustee may fix in advance of the solicitation of such act
a date as the record date for determining Securityholders entitled to perform
said act. The record date shall be not more than 15 days prior to the date
fixed for the solicitation of said act.
SECTION 12.8 LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banks or
trust companies in the city in which either the Trustee or the Company is
located are not required to be open. If a payment date is a Legal Holiday at
a place of payment, payment may be made at that place on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 12.9 GOVERNING LAW.
The laws of the State of New York shall govern this Indenture and the
Securities without regard to principles of conflicts of law.
SECTION 12.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 12.11 NO RECOURSE AGAINST OTHERS.
No shareholder, director or officer, as such, past, present or future,
of the Company or of any successor corporation or trust shall have any
liability for any obligation of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder of a Security by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.
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SECTION 12.12 SUCCESSORS.
All agreements of the Company in this Indenture and the Securities shall
bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 12.13 MULTIPLE COUNTERPARTS.
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent the same agreement.
SECTION 12.14 TABLE OF CONTENTS, HEADINGS, ETC.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 12.15 SEVERABILITY.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby, and a Holder shall have no claim therefor against any party hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
STERLING HOUSE CORPORATION,
a Kansas corporation
By: /s/ Timothy J. Buchanan
------------------------------
Name: Timothy J. Buchanan
Title: Chairman and CEO
FLEET NATIONAL BANK,
as Trustee
By: /s/
------------------------------
Name:
Title:
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EXHIBIT A
FORM OF SECURITY
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[FORM OF FACE OF SECURITY]
Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by
the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation (55
Water Street, New York, New York) ("DTC"), to the issuer or its agent for
registration of transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or such other name as may be requested
by an authorized representative of DTC (and any payment is made to Cede & Co.
or such other entity as may be requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede &
Co., has an interest herein.(1)
[THIS SECURITY HAS BEEN ACQUIRED BY THE HOLDER FOR THE PURPOSE OF INVESTMENT
AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION. THIS
SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS
AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES
AND AGREES FOR THE BENEFIT OF THE COMPANY THAT: (I) IT HAS ACQUIRED A
"RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT;
(II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)
TO STERLING HOUSE CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) IN THE CASE OF A
HOLDER WHO IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
- --------------------------
(1) This paragraph should be included only if the Security is issued in
global form.
<PAGE>
UNDER THE SECURITIES ACT), FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, OR
(D) IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT OR PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (AND CONFIRMED IN AN OPINION OF COUNSEL ACCEPTABLE IN FORM
AND SUBSTANCE TO THE ISSUER OF THIS SECURITY IF THE ISSUER SO REQUESTS) AND,
IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND (III) IT WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE.](2)
STERLING HOUSE CORPORATION
6.75% Convertible Subordinated Debenture Due 2006
STERLING HOUSE CORPORATION, a Kansas corporation, promises to pay to
6.75% S P E C I M E N 6.75%
DUE 2006 DUE 2006
or registered assigns, the principal sum of _____________________ Dollars, on
June 30, 2006
Interest Payment Dated: June 30 and December 30
Record Dates: June 15 and December 15
Additional provisions of this Security are set forth on other side
of this Security.
- --------------------------
(2) To be included on all Securities which
are Restricted Securities.
-2-
<PAGE>
Dated:
CERTIFICATE OF AUTHENTICATION STERLING HOUSE CORPORATION
FLEET NATIONAL BANK,
as Trustee, certifies that this
is one of the Securities referred
to in the within mentioned
Indenture.
By: By:
By:
Authorized Signatory SEAL Chairman of the Board
President
-3-
<PAGE>
[FORM OF REVERSE OF SECURITY]
STERLING HOUSE CORPORATION
6.75% Convertible Subordinated Debenture Due 2006
1. INTEREST. Sterling House Corporation, a Kansas corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. The Company will pay interest semiannually on
June 30 and December 30 of each year beginning December 30, 1996. Interest on
the Securities will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from May 23, 1996; provided that, if
there is no existing Default in the payment of interest, and if this Security is
authenticated between a record date referred to on the face hereof and the next
succeeding interest payment date, interest shall accrue from such interest
payment date. Interest will be computed on the basis of a 360 day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Securities
(except defaulted interest) to the persons who are the registered Holders of the
Securities at the close of business on the December 15 or June 15 next preceding
the interest payment date. Holders must surrender Securities to a Paying Agent
to collect principal and premium payments. The Company will pay principal,
premium and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. The Company, however,
may pay principal, premium and interest by its check payable in such money. It
may mail an interest check to a Holder's registered address.
The payment of principal of and premium, if any, on this Security shall
be payable only upon surrender of this Security at the office or agency of the
Paying Agent in the Borough of Manhattan, City and State of New York or the City
of Providence, State of Rhode Island. Payments of principal of, premium, if
any, and interest on this Security shall be made at the office or agency of the
Trustee maintained in the Borough of Manhattan, City and State of New York or
the City of Providence, State of Rhode Island, or, in the case of any such
payments other than the payment of principal and premium, if any, at the
Company's option, by check mailed to the Person entitled thereto
<PAGE>
at such Person's address last appearing on the Company's register.
3. REGISTRAR AND AGENTS. Initially, Fleet National Bank will act as
Registrar, Paying Agent, Conversion Agent and agent for service of notices and
demands. The Company may change any Registrar, co-registrar, Paying Agent,
Conversion Agent and agent for service of notices and demands without notice.
The Company or any of its Subsidiaries may act as Paying Agent or Conversion
Agent. The address of Fleet National Bank is 111 Westminster Street,
Providence, Rhode Island 02903.
4. INDENTURE; LIMITATIONS. The Company issued the Securities under an
Indenture, dated as of May 23, 1996 (the "Indenture"), between the Company and
Fleet National Bank (the "Trustee"). Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of the Indenture. The Securities are
subject to all such terms, and the Holders of the Securities are referred to the
Indenture and said Act for a statement of them.
The Securities are general unsecured obligations of the Company
limited to $35,000,000 principal amount. The Indenture imposes certain
limitations on the ability of the Company to, among other things, make
payments in respect of its Capital Stock, merge or consolidate with any other
Person and sell, lease, transfer or otherwise dispose of its properties or
assets.
5. OPTIONAL REDEMPTION BY THE COMPANY. The Company may, at its
option, redeem the Securities at any time, in whole or in part, together with
accrued and unpaid interest to the Redemption Date, after July 15, 1999 in
accordance with the following schedule:
Redemption
After July 15, Price
-------------- -----
1999 102%
2000 101%
2001 and thereafter 100%
-2-
<PAGE>
6. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 principal amount may be redeemed in part, but
only in whole multiples thereof. On and after the Redemption Date interest
ceases to accrue on Securities or portions of them called for redemption.
7. CONVERSION. A Holder of a Security may convert such Security into
shares of common stock of the Company after the effective date of the
Registration Statement and before June 30, 2006. If the Security is called for
redemption, the Holder may convert it at any time before the close of business
on the date fixed for such redemption. The initial conversion price is $22.42
per share, subject to adjustment in certain events. To determine the number of
shares issuable upon conversion of a Security, divide the principal amount to be
converted by the conversion price in effect on the conversion date. The Company
will deliver a check for any fractional share.
To convert a Security, a Holder must (1) complete and sign the conversion
notice on the back of the Security, (2) surrender the Security to the Conversion
Agent, (3) furnish appropriate endorsements and transfer documents if required
by the Registrar or Conversion Agent and (4) pay any transfer or similar tax if
required. No payment or adjustment is to be made on conversion for interest
accrued hereon or for dividends on shares of common stock issued on conversion;
PROVIDED, HOWEVER, that if a Security is surrendered for conversion after the
record date for a payment of interest and on or before the interest payment
date, then, notwithstanding such conversion, the interest falling due to such
interest payment date will be paid to the Person in whose name the Security is
registered at the close of business on such record date and any Security
surrendered for conversion during the period from the close of business on any
regular record date to the opening of business on the corresponding interest
payment date must be accompanied by payment of an amount equal to the interest
payable on such interest payment date. A Holder may convert a portion of a
Security if the portion is $1,000 principal amount or an integral multiple
thereof.
-3-
<PAGE>
If the Company is a party to a consolidation or merger or a transfer or
lease of all or substantially all of its assets, the right to convert a Security
into shares of common stock may be changed into a right to convert it into
securities, cash or other assets of the Company or another Person.
8. SUBORDINATION. This Security is subordinated to all Senior
Indebtedness of the Company. To the extent and in the manner provided in the
Indenture, Senior Indebtedness must be paid before any payment may be made to
any Holders of Securities. Any Securityholder by accepting this Security agrees
to such subordination and authorizes the Trustee to give it effect.
In addition to all other rights of Senior Indebtedness described in the
Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness and
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of any instrument relating to the
Senior Indebtedness or extension or renewal of the Senior Indebtedness.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities issued under the
Indenture are in the aggregate principal amount of up to $35,000,000. The
Securities are in registered form without coupons in denominations of $1,000
principal amount and integral multiples thereof. A Holder may register the
transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption or register the transfer
of or exchange any Securities for a period of 15 days before a selection of
Securities to be redeemed.
10. PERSONS DEEMED OWNERS. The registered Holder of a Security may be
treated as its owner for all purposes.
11. UNCLAIMED MONEY. If money for the payment of principal or
interest on any Securities remains unclaimed for two years, the Trustee and
the Paying Agent will pay the money back to the Company at its written
request. After that, Holders may look only to the Company for payment.
-4-
<PAGE>
12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. The Indenture will be
discharged and canceled except for certain sections thereof upon payment of all
the Securities, or upon the irrevocable deposit with the Trustee of funds or
U.S. Government Obligations maturing on or before such payment date or
Redemption Date, sufficient to pay principal, premium, if any, and interest on
such payment or redemption.
13. AMENDMENT AND WAIVER. Subject to certain exceptions, without notice
to the Holders of the Securities, the Indenture or the Securities may be amended
with the consent of the Holders of at least 66-2/3% in principal amount of the
Securities then outstanding and any existing default or compliance with any
provision may be waived with the consent of the Holders of a majority in
principal amount of the Securities then outstanding. Without the consent of or
notice to any Securityholder, the Company may amend or supplement the Indenture
or the Securities to, among other things, provide for uncertificated Securities,
to cure any ambiguity, defect or inconsistency or make any other change that
does not adversely affect the rights of any Securityholder.
14. SUCCESSORS. When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture, the predecessor will be
released from those obligations.
15. DEFAULTS AND REMEDIES. If an Event of Default, as defined in the
Indenture (other than a Event of Default relating to bankruptcy of the Company),
occurs and is continuing, the Trustee or the Holders of a majority in principal
amount of Securities may declare all the Securities to be due and payable
immediately in the manner and with the effect provided in the Indenture. If an
Event of Default relating to bankruptcy of the Company occurs, then all
Securities shall become immediately due and payable without any declaration or
act on the part of the Trustee or any Holder. Holders of Securities may not
enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it, subject to the provisions
of the TIA, before it enforces the Indenture or the Securities. Subject to
certain limitations, Holders of a majority in principal amount of the Securities
then outstanding may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of Securities notice of any continuing
default (except a default in payment of
-5-
<PAGE>
principal or interest) if it determines that withholding notice is in
their interests. The Company is required to file periodic reports with
the Trustee as to the absence of any Default or Event of Default.
16. TRUSTEE DEALINGS WITH THE COMPANY. Fleet National Bank, the Trustee
under the Indenture, in its individual or any other capacity, may make loans to,
accept deposits from, and perform services for the Company or its Affiliates,
and may otherwise deal with the Company or its Affiliates, as if it were not
Trustee.
17. NO RECOURSE AGAINST OTHERS. No shareholder, director, officer or
incorporator, as such, past, present or future, of the Company or any successor
corporation shall have any liability for any obligation of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
18. AUTHENTICATION. This Security shall not be valid until the Trustee
signs the certificate of authentication on the other side of this Security.
19. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as: TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to
Minors Act).
The Company will furnish to any Securityholder upon written request and
without charge a copy for the Indenture. It also will furnish the text of this
Security in larger type. Requests may be made to: Sterling House Corporation,
453 South Webb Road, Suite 500, Wichita, Kansas 67207. Attention: President.
-6-
<PAGE>
TRANSFER NOTICE
If you the Holder wants to assign this Security, fill in the form below and have
your signature guaranteed:
For value received, I or we assign and transfer this Security to
(INSERT ASSIGNEE'S SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER)
--------------------------------------------------
--------------------------------------------------
...............................................................................
...............................................................................
...............................................................................
...............................................................................
(Print or type assignee's name, address and zip code)
.............................................................. agent to
transfer agent to transfer this Security on the books of the Company. The
agent may substitute another to act for him.
In connection with the transfer of this Security, the undersigned
certifies that:
(Check one)
/ / (a) This Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in compliance with the exemption from
registration under the Securities Act provided by Rule
144A.
/ / (b) This Security is being transferred to Sterling House
Corporation.
-7-
<PAGE>
/ / (c) Transfer other than those above in connection with which
the Company has received an opinion of counsel
(satisfactory to it in form and substance) to the effect
that the transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the
registration requirements of the Securities Act.
/ / (d) This Security is being exchanged for a beneficial interest
in the Rule 144A Global Security and the undersigned is a
"qualified institutional buyer" (as defined in Rule 144A
under the Securities Act of 1933).
- -------------------------------------------------------------------------------
Date:
-------------------------------------------------------------------------
Your signature:
---------------------------------------------------------------
(Sign exactly as your name appears on the other
side of this Security)
Signature Guarantee*:
---------------------------------------------------------
*Signature must be guaranteed by an eligible guarantor institution within the
meaning of Securities and Exchange Commission Rule 17Ad-15 (including banks,
stock brokers, savings and loan associations, national securities exchanges,
registered securities associations, clearing agencies and credit unions) with
membership or participation in an approved signature guarantee medallion program
if this Security is to be delivered other than to and in the name of the
registered holder.
IF NONE OF THE FOREGOING BOXES IS CHECKED, THE TRUSTEE SHALL NOT BE OBLIGATED TO
REGISTER THE TRANSFER OF THIS SECURITY UNLESS AND UNTIL THE CONDITIONS TO ANY
SUCH TRANSFER OF REGISTRATION SET FORTH HEREIN, ON THE FACE HEREOF AND IN THE
INDENTURE SHALL HAVE BEEN SATISFIED.
-8-
<PAGE>
CONVERSION NOTICE
To convert this Security into shares of common stock of the Company,
check the box:
----------
----------
To convert only part of this Security, state the principal amount to be
converted (which must be a minimum of $1,000 or any multiple thereof):
--------------------------------------------------------
$
--------------------------------------------------------
If you want the Security certificate, if any, made out in another person's name,
fill in the form below:
(INSERT OTHER PERSON'S SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER)
-----------------------------------------------------------------
-----------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- -------------------------------------------------------------------------------
Date:
-------------------------------------------------------------------------
Your signature:
---------------------------------------------------------------
-9-
<PAGE>
(Sign exactly as your name appears on the other side of this Security)
Signature Guaranteed By:
------------------------------------------------------
Note: Signature must be guaranteed
by a member firm of the New York
Stock Exchange or a commercial
bank or trust company.
-10-
<PAGE>
KLENDA, MITCHELL, AUSTERMAN & ZUERCHER, L.L.C.
<TABLE>
<S> <C>
Alexander B. Mitchell, II Attorneys At Law Geoffrey B. Amend
Gary M. Austerman 1600 Epic Center Jennifer L. Grier
Michael R. Biggs 301 N. Main Deborah L. Mahoney +
Alan D. Herman Wichita, Kansas 67202-4888 Mary T. Malicoat +
John V. Wachtel, IV Daniel C. Schulte +
J. Michael Morris Telephone Todd E. Shadid
David D. Broomfield (316) 267-0331 -------------
Jeffrey D. Peier Of Counsel
Ron D. Beal Telefacsimile Vincent L. Bogart, Chtd.
Scott A. Eads (316) 267-0333 Patricia J. Coffey + +
+ Mark J. Lazzo Ronald M. Gott
John B. Gilliam Bruce W. Zuercher +
Gregory B. Klenda -------------
Christopher A. McElgunn L. D. Klenda (1937-1996)
Robert D. Wiechman, Jr. -------------
November 1, 1996
+ licensed also in Missouri
++ licensed also in Colorado
</TABLE>
Sterling House Corporation
453 South Webb Road, Suite 500
Wichita, Kansas 67207
Re: $35,000,000 Aggregate Principal Amount of
6.75% Convertible Subordinated Debentures
due 2006; 1,561,106 Shares of Common Stock
Ladies and Gentlemen:
At your request, we have examined the registration statement on Form S-3
(the "Registration Statement") being filed by you today with the Securities and
Exchange Commission in connection with the registration, under the Securities
Act of 1933, as amended, of $35,000,000 aggregate principal amount of 6.75%
Convertible Subordinated Debentures due 2006 (the "Debentures") and 1,561,106
shares of common stock, no par value per share, issuable upon conversion of the
Debentures (the "Common Stock"). The Common Stock and the Debentures are
referred to herein as the "Securities." We also have examined the form of
indenture entered into by Sterling House Corporation (the "Company") and Fleet
National Bank, as Trustee, relating to the Debentures (the "Indenture").
In our capacity as your counsel in connection with such registration, we
are familiar with the corporate proceedings taken and proposed to be taken by
the Company in connection with the authorization and issuance of the Securities
and for the purposes of this opinion, have assumed such proceedings will be
timely completed in the manner presently proposed. In addition, we have made
such legal and factual examinations and inquiries, including an examination of
originals or copies certified or otherwise identified to our satisfaction of
such documents, corporate records and instruments, as we have deemed necessary
or appropriate for the purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to authentic original documents of all documents submitted to us as copies.
<PAGE>
November 1, 1996
Page 2
Subject to the foregoing and the other matters set forth herein, it is our
opinion that, as of the date hereof, the Debentures have been duly authorized by
the Company and constitute legally valid and binding obligations of the Company.
The opinion rendered above is subject to the following exceptions,
limitations and qualifications: (i) the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors; (ii) the effect
of general principles of equity, whether enforcement is considered in a
proceeding in equity or at law, and the discretion of the court before which any
proceeding therefor may be brought; (iii) public policies applied by courts
which may limit any right or obligation thereunder; and (iv) whether
acceleration of the payment of the Debentures may affect the collectibility of
any portion of the stated principal amount thereof which might be determined to
constitute unearned interest thereon.
To the extent that the obligations of the Company under the Indenture may
be dependent upon such matters, we assume and you have permitted us to so assume
for purposes of this opinion that the Trustee is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization; that the Trustee is duly qualified to engage in the activities
contemplated by the Indenture; that the Indenture has been duly authorized,
executed and delivered by the Trustee and constitutes the legally valid, binding
and enforceable obligation of the Trustee enforceable against the Trustee in
accordance with its terms; that the Trustee is in compliance, generally with
respect to acting as a trustee under the Indenture, with all applicable laws and
regulations; and that the Trustee has the requisite organizational and legal
power and authority to perform its obligations under the Indenture.
We consent to your filing this opinion as an exhibit to the Registration
Statement and to the reference to our firm under the caption "Legal Matters" in
the prospectus included therein.
/s/ Klenda, Mitchell, Austerman & Zuercher, L.L.C.
--------------------------------------------------
Klenda, Mitchell, Austerman & Zuercher, L.L.C.
<PAGE>
EXHIBIT 12.1
STATEMENT RE: COMPUTATION OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED
APRIL 15, 1991 DECEMBER 31,
(INCEPTION) TO ------------------------------------------ JUNE 30,
DECEMBER 31, 1991 1992 1993 1994 1995 1996
------------------- --------- --------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Consolidated pretax loss from continuing
operations.................................... $ (70) $ (55) $ (147) $ (494) $ (1,082) $ (470)
Interest expense, including amortization of debt
issuance costs................................ 9 60 72 136 720 559
Less interest capitalized during the period..... 0 0 0 (33) (345) (226)
Interest portion of rental expense.............. 0 0 0 0 20 413
--- --- --------- --------- --------- -----
Earnings.................................... $ (61) $ 5 $ (75) $ (391) $ (687) $ 276
--- --- --------- --------- --------- -----
--- --- --------- --------- --------- -----
Interest........................................ 9 60 72 136 720 559
Interest portion of rental expense.............. 0 0 0 0 20 413
--- --- --------- --------- --------- -----
Fixed charges............................... $ 9 $ 60 $ 72 $ 136 $ 740 $ 972
--- --- --------- --------- --------- -----
--- --- --------- --------- --------- -----
Deficiency of earnings to fixed charges......... $ (70) $ (55) $ (147) $ (527) $ (1,427) $ (696)
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Sterling House
Corporation for the registration of $35,000,000 of 6.75% Convertible
Subordinated Debentures due 2006 and the shares of Common Stock issuable upon
conversion of such debentures, and to the incorporation by reference therein of
our reports dated (1) March 26, 1996, with respect to the consolidated financial
statements of Sterling House Corporation included in its Annual Report on Form
10-K for the year ended December 31, 1995, (2) June 5, 1996, with respect to the
combined financial statements Sterling Franchise Acquisition Group included in
Sterling House Corporation's Current Report on Form 8-K/A dated June 10, 1996
and (3) September 27, 1996, with respect to the financial statements of High
Plains Senior Living, Inc. included in Sterling House Corporation's Current
Report on Form 8-K/A dated October 15, 1996, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
Wichita, Kansas
October 30, 1996
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
----------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
----------
/ / CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
FLEET NATIONAL BANK
---------------------------------------------------------
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Not applicable 04-317415
- ------------------------------- -----------------------------
(State of incorporation (I.R.S. Employer
if not a national bank) Identification No.)
One Monarch Place, Springfield, MA 01102
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Pat Beaudry, 777 Main Street, Hartford, CT 06115 (203) 728-2065
--------------------------------------------------------------
(Name, address and telephone number of agent for service)
Sterling House Corporation
---------------------------------------------------
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Kansas 48-1097141
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
453 South Webb Road, Suite 500
Wichita, Kansas 67207
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
6.75 Debentures due 2006 (2)
------------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject,
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise
corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor and underwriter. If the obligor or
any underwriter for the obligor is an affiliate of the trustee,
describe each such affiliation.
None with respect to the trustee.
Item 16. List of exhibits.
List below all exhibits filed as a part of this statement of
eligibility and qualification.
(1) A copy of the Articles of Association of the trustee as
now in effect.
(2) A copy of the Certificate of Authority of the trustee
to do business.
(3) A copy of the Certification of Fiduciary Powers of the
trustee.
(4) A copy of the By-Laws of the trustee as now in effect.
(5) Consent of the trustee required by Section 321(b)
of the Act.
(6) A copy of the latest Consolidated Reports of Condition
and Income of the trustee published pursuant to law or
the requirements of its supervising or examining authority.
NOTES
In as much as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base answers to Item 2, the answers to said Items are
based upon imcomplete information. Said Items may, however, be considered
correct unless amended by an amendment to this Form T-1.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Hartford, and State of
Connecticut, on the 22nd day of October, 1996.
FLEET NATIONAL BANK,
AS TRUSTEE
By: /s/Frank Kimball
-------------------------
Frank Kimball
Its Vice President
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FLEET NATIONAL BANK
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Fleet National Bank."
SECOND. The main office of the Association shall be in Springfield, Hampden
County Commonwealth of Massachusetts. The general business of the Association
shall be conducted at its main office and its branches.
THIRD. The board of directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special meeting thereof.
Unless otherwise provided by the laws of the United States, any vacancy in the
board of directors for any reason, including an increase in the number thereof,
may be filled by action of the board of directors.
FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the board of
directors may designate, on the day of each year specified therefore in the
bylaws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the board of
directors.
FIFTH. The authorized amount of capital stock of this Association shall be
eight million five hundred thousand (8,500,000) shares of which three million
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The capital
stock may be increased or decreased from time to time, in accordance with
the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion, may from time to time determine and at such
price as the board of directors may from time to time fix.
<PAGE>
The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:
a. The number of shares constituting that series and the distinctive
designation of that series;
b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and whether they shall be
payable in preference to, or in another relation to, the dividends payable
to any other class or classes or series of stock;
c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;
e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;
g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;
h. The right of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Association and
whether such rights shall be in preference to, or in another relation to,
the comparable rights of any other class or classes or series of stock; and
i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.
Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of preferred
stock and by the provisions of any applicable law.
Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.
Except as otherwise provided by the resolution or resolutions providing for the
issue of any series of preferred stock, after payment shall have been made to
the holders of preferred stock of the full amount of dividends to which they
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any other series of preferred stock, the holders of common stock shall
be entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.
Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.
The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.
<PAGE>
SIXTH. The board of directors shall appoint one of its members president of
this Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact the business
of this Association.
The board of directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.
TENTH. (a) Right to Indemnification. Each person who was or is made 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 (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust, or other enterprise, including service with respect
to an employee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.
(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the Association.
With respect to proceedings to enforce a claimant's rights to indemnification,
the Association shall indemnify any such claimant in connection with such a
proceeding only as provided in subsection (d) hereof.
(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
<PAGE>
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.
(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association, the claimant may at any time
thereafter bring suit against the Association to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.
(e) Non-Exclusivity of Rights. The rights to indemnification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.
(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.
ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at
which an amendment to the articles of association of this Association is to be
considered shall be given as hereinabove set forth.
I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.
Secretary/Assistant Secretary
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Dated at , as of .
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Revision of February 15, 1996
<PAGE>
EXHIBIT 2
[LOGO]
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COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that:
(1) The Comptroller of the Currency, pursuant to Revised Statutes
324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession,
custody and control of all records pertaining to the chartering, regulation and
supervision of all National Banking Associations.
(2) "Fleet National Bank", Springfield, Massachusetts
(Charter No. 1338), is a National Banking Association formed under the
laws of the United States and is authorized thereunder to transact the
business of banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department, in the City of
Washington and District of Columbia, this
14th day of August, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 2
[LOGO]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
Certification of Fiduciary Powers
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
the records in this Office evidence "Fleet National Bank",
Springfield, Massachusetts, (Charter No. 1338), was granted, under the hand
and seal of the Comptroller, the right to act in all fiduciary capacities
authorized under the provisions of The Act of Congress approved
September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the
authority so granted remains in full force and effect.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
Office of the Comptroller of the Currency
to be affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 4
AMENDED AND RESTATED BY-LAWS OF
FLEET NATIONAL BANK
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.
If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
which special notice shall be given in accordance with the provisions of law,
and of these bylaws.
Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.
Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the
shareholders shall be mailed, postage prepaid, at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote thereat
at his address as shown upon the books of the Association; but any failure to
mail such notice to any shareholder or any irregularity therein, shall not
affect the validity of such meeting or of any of the proceedings thereat.
Notice of a special meeting shall also state the purpose of the meeting.
Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.
Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cashier, but no officer, clerk, teller or bookeeper of the Association may act
as a proxy.
<PAGE>
Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names of more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.
Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meeting by written consent of the shareholders.
ARTICLE II
DIRECTORS
Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.
Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December 15,
1995 who has attanined the age of 65 on or prior to such date shall be permitted
to continue to serve as a director until the date of the first meeting of the
stockholders of the Association held on or after the date on which such person
attains the age of 70.
-2-
<PAGE>
Section 3. General Powers. The Board of Directors shall exercise all the
coporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and dispositon of all its
property and affairs.
Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.
Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.
Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.
Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time, and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.
Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.
Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such a meeting shall constitute presence in person
at such a meeting.
Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.
Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.
Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The Board of Directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee, with full voting powers, not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member of the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee or, in his absence, a member of the Committee chosen by
a majority of the members present shall preside at meetings of the Executive
Committee.
-3-
<PAGE>
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts.
All acts done and powers and authority conferred by the Executive Committee,
from time to time, within the scope of its authority, shall be deemed to be,
and may be certified as being, the acts of and under the authority of the
Board.
Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liablity
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 3. Audit Committee. The Board shall appoint from its members and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Commitee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.
The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls, including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in liew thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.
The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.
-4-
<PAGE>
Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Commmunity Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.
Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.
Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.
Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.
Section 9. Quorum. A majority of a Committee of the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place and stead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.
Section 10. Record. The committes of the Board of Directors shall keep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.
Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.
Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.
ARTICLE IV
WAIVER OF NOTICE OF MEETINGS
Section 1. Waiver. Whenever notice is required to be given to any shareholder,
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.
-5-
<PAGE>
ARTICLE V
OFFICERS AND AGENTS
Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and-
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.
Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.
Section 3. President. The President shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.
-6-
<PAGE>
Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.
Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.
Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.
Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.
Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.
ARTICLE VI
TRUST DEPARTMENT
Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.
-7-
<PAGE>
ARTICLE VII
BRANCH OFFICES
Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.
Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.
ARTICLE VIII
SIGNATURE POWERS
Section 1. Authorization. The power of officers, employees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.
-8-
<PAGE>
ARTICLE IX
STOCK CERTIFICATES AND TRANSFERS
Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.
Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to time by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.
Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.
Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.
Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.
ARTICLE X
THE CORPORATE SEAL
Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.
ARTICLE XI
BUSINESS HOURS
Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business on such days, and for such
hours as the Chairman, or the President, or any Executive Vice President, or
such other officer as the Board of Directors shall from time to time
designate, may determine as to each office to conform to local custom and
convenience, provided that any one or more of the main and branch offices or
certain departments thereof may be open for such hours as the President, or
such other officer as the Board of Directors shall from time to time designate,
may determine as to each office or department on any legal holiday on which
work is not prohibited by law, and provided further that any one or more of
the main and branch offices or certain departments thereof may be ordered
closed or open on any day for such hours as to each office or department as
the President, or such other officer as the Board of Directors shall from time
to time designate, subject to applicable laws regulations, may determine when
such action may be required by reason of disaster or other emergency condition.
ARTICLE IX
CHANGES IN BY-LAWS
Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.
A true copy
Attest:
Secretary/Assistant Secretary
- ---------------------------------------
Dated at , as of .
--------------------------------------- ----------------------
Revision of January 11, 1993
-9-
<PAGE>
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under the Indenture to be entered into between
Sterling House Corporation and Fleet National Bank, as Trustee,
does hereby consent that, pursuant to Section 321(b) of the Trust Indenture
Act of 1939, reports of examinations with respect to the undersigned by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
FLEET NATIONAL BANK,
AS TRUSTEE
By /s/ Frank Kimball
-------------------------------
Frank Kimball
Its: Vice President
Dated:
<PAGE>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
Federal Financial Institutions Examination Council
- --------------------------------------------------------------------------------
[FEDERAL FINANCIAL Please refer to page i, [1]
INSTITUTIONS EXAMINATION Table of Contents, for
COUNCIL LOGO] the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(960630)
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1996 -----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Giro S. DeRosa, Vice President
-----------------------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and
Income (including the supporting schedules) have been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and are true to the best of my knowledge and belief.
/s/ Giro DeRosa
- --------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Report
July 25, 1996
- --------------------------------------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate Federal
Reserve District Bank.
State Nonmember Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
National Banks: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- --------------------------------------------------------------------------------
<PAGE>
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | Banks should affix
--------------------- the address label
(RCRI 90150) in this space.
CALL NO. 196 31 06-30-96
STAR: 25-0590 00327 STCERT: 25-02490
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
Board of Governors of the Federal Reserve System, Federal Deposit
Insurance Corporation, Office of the Comptroller of the Currency
<PAGE>
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
___ ___
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | | Banks should affix the address label in this space. |
______________________
(RCRI 9050) CALL NO. 196 31 06-30-96
STBK: 25-0590 00327 STCERT: 25-02499
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
|___ ___|
</TABLE>
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
FFIEC 031
Page i
/2/
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
________________________________________________________________________________
TABLE OF CONTENTS
SIGNATURE PAGE Cover
REPORT OF INCOME
Schedule RI--Income Statement...........................................RI-1,2,3
Schedule RI-A--Changes in Equity Capital....................................RI-4
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses..................................................................RI-4,5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority..........................................................RI-5
Schedule RI-D--Income from
International Operations..................................................RI-6
Schedule RI-E--Explanations...............................................RI-7,8
REPORT OF CONDITION
Schedule RC--Balance Sheet................................................RC-1,2
Schedule RC-A--Cash and Balances Due
From Depository Institutions..............................................RC-3
Schedule RC-B--Securities...............................................RC-3,4,5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases..............................................RC-6,7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only).....................................................RC-7a,7b
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks)..................................RC-8
Schedule RC-E--Deposit Liabilities....................................RC-9,10,11
Schedule RC-F--Other Assets................................................RC-11
Schedule RC-G--Other Liabilities...........................................RC-11
Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices.........................................................RC-12
Schedule RC-I--Selected Assets and Liabilities
of IBFs..................................................................RC-13
Schedule RC-K--Quarterly Averages..........................................RC-13
Schedule RC-L--Off-Balance Sheet Items...............................RC-14,15,16
Schedule RC-M--Memoranda................................................RC-17,18
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets..............................................RC-19,20
Schedule RC-O--Other Data for Deposit
Insurance Assessments.................................................RC-21,22
Schedule RC-R--Regulatory Capital.......................................RC-23,24
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Condition and Income.....................................................RC-25
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
DISCLOSURE OF ESTIMATED BURDEN
The estimated average burden associated with this information collection is
32.2 hours per respondent and is estimated to vary from 15 to 230 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the required
form, and completing the information collection, but exclude the time for
compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs, Office of Management and Budget,
Washington, D.C. 20503, and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, National and State nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll free on (800) 688-FDIC (3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-1
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Consolidated Report of Income
for the period January 1, 1996 - June 30, 1996
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
<TABLE>
<CAPTION>
Schedule RI--Income Statement _________
| I480 |
______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________|_____________________|
<S> <C> <C>
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate .................................................. | 4011 616,395 | 1.a.(1)(a)
(b) Loans to depository institutions .............................................. | 4019 588 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ........... | 4024 286 | 1.a.(1)(c)
(d) Commercial and industrial loans ............................................... | 4012 562,807 | 1.a.(1)(d)
(e) Acceptances of other banks .................................................... | 4026 261 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans ............................................ | 4054 9,643 | 1.a.(1)(f)(1)
(2) Other ..................................................................... | 4055 97,346 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions ........................ | 4056 0 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ////////////////// |
subdivisions in the U.S.: | ////////////////// |
(1) Taxable obligations ....................................................... | 4503 0 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations .................................................... | 4504 5,232 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices ........................................... | 4058 84,576 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4059 1,981 | 1.a.(2)
b. Income from lease financing receivables: | ////////////////// |
(1) Taxable leases .................................................................... | 4505 75,341 | 1.b.(1)
(2) Tax-exempt leases ................................................................. | 4307 791 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ////////////////// |
(1) In domestic offices ............................................................... | 4105 914 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4106 142 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations ... | 4027 209,142 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ////////////////// |
(a) Taxable securities ............................................................ | 4506 0 | 1.d.(2)(a)
(b) Tax-exempt securities ......................................................... | 4507 2,953 | 1.d.(2)(b)
(3) Other domestic debt securities .................................................... | 3657 12,164 | 1.d.(3)
(4) Foreign debt securities ........................................................... | 3658 3,348 | 1.d.(4)
(5) Equity securities (including investments in mutual funds) ......................... | 3659 10,212 | 1.d.(5)
e. Interest income from trading assets.................................................... | 4069 360 | 1.e.
______________________
</TABLE>
____________
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
Dollar Amounts in Thousands | Year-to-date |
___________________________________________________________________________________ ______________
<S> <C> <C>
1. Interest income (continued) | RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased | ////////////////// |
under agreements to resell in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4020 24,925 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ | 4107 1,719,407 | 1.g.
2. Interest expense: | ////////////////// |
a. Interest on deposits: | ////////////////// |
(1) Interest on deposits in domestic offices: | ////////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ////////////////// |
telephone and preauthorized transfer accounts) .............. | 4508 8,583 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................... | 4509 133,915 | 2.a.(1)(b)(1)
(2) Other savings deposits .................................. | 4511 26,678 | 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ | 4174 88,690 | 2.a.(1)(b)(3)
(4) All other time deposits ................................. | 4512 214,225 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs .......................................... | 4172 50,022 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ////////////////// |
agreements to repurchase in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4180 152,094 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading | ////////////////// |
liabilities, and other borrowed money ............................... | 4185 121,525 | 2.c.
d. Interest on mortgage indebtedness and obligations under | ////////////////// |
capitalized leases .................................................. | 4072 361 | 2.d.
e. Interest on subordinated notes and debentures ....................... | 4200 26,110 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... | 4073 822,203 | 2.f.
___________________________
3. Net interest income (item 1.g minus 2.f) ............................... | ////////////////// | RIAD 4074 | 897,204 | 3.
___________________________
4. Provisions: | ////////////////// |
___________________________
a. Provision for loan and lease losses ................................. | ////////////////// | RIAD 4230 | 21,672 | 4.a.
b. Provision for allocated transfer risk ............................... | ////////////////// | RIAD 4243 | 0 | 4.b.
___________________________
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities .................................... | 4070 144,614 | 5.a.
b. Service charges on deposit accounts in domestic offices ............. | 4080 111,736 | 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum | ////////////////// |
items 8.a through 8.d)............................................... A220 10,646 5.c.
d. Other foreign transaction gains (losses) ............................ | 4076 247 | 5.d.
e. Not applicable | ////////////////// |
f. Other noninterest income: | ////////////////// |
(1) Other fee income ................................................ | 5407 372,950 | 5.f.(1)
(2) All other noninterest income* ................................... | 5408 211,593 | 5.f.(2)
___________________________
g. Total noninterest income (sum of items 5.a through 5.f) ............. | ////////////////// | RIAD 4079 | 851,786 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. | ////////////////// | RIAD 3521 | 1 | 6.a.
b. Realized gains (losses) on available-for-sale securities ............ | ////////////////// | RIAD 3196 | 16,126 | 6.b.
___________________________
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ...................................... | 4135 322,146 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) .... | 4217 114,912 | 7.b.
c. Other noninterest expense* .......................................... | 4092 631,554 | 7.c.
___________________________
d. Total noninterest expense (sum of items 7.a through 7.c) ............ | ////////////////// | RIAD 4093 | 1,068,612 | 7.d.
___________________________
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |
___________________________
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)| ////////////////// | RIAD 4301 | 674,833 | 8.
9. Applicable income taxes (on item 8) .................................... | ////////////////// | RIAD 4302 | 280,303 | 9.
___________________________
10. Income (loss) before extraordinary items and other adjustments | ////////////////// |
___________________________
(item 8 minus 9) ....................................................... | ////////////////// | RIAD 4300 | 394,530 | 10.
_________________________________________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
4
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________ ______________
<S> <C> <C>
11. Extraordinary items and other adjustments: | ////////////////// |
a. Extraordinary items and other adjustments, gross of income taxes* . | 4310 0 | 11.a.
b. Applicable income taxes (on item 11.a)* ........................... | 4315 0 | 11.b.
c. Extraordinary items and other adjustments, net of income taxes | ////////////////// |__________________________
(item 11.a minus 11.b) ............................................ | ////////////////// | RIAD 4320 | 0 | 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ......................... | ////////////////// | RIAD 4340 | 394,530 | 12.
_________________________________________________
</TABLE>
<TABLE>
<CAPTION>
__________
| I481 |
_______________
Memoranda | Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes .......................... | 4513 1,798 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8) ............................................................... | 8431 20,910 | M.2.
3.-4. Not applicable | ////////////////// |
5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number |
nearest whole number) ........................................................................... | 4150 9,852 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | //// MM DD YY |
accounting this calendar year, report the date of the bank's acquisition ........................ | 9106 00/00/00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): | //// Bil Mil Thou |
a. Interest rate exposures ...................................................................... | 8757 1,428 | M.8.a.
b. Foreign exchange exposures ................................................................... | 8758 9,218 | M.8.b.
c. Equity security and index exposures .......................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures ................................................................ | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income.....................................................| 8761 (5,575)| M.9.a.
b. Net (increase) decrease to interest expense ...................................................| 8762 (5,752)| M.9.b.
c. Other (noninterest) allocations ...............................................................| 8763 (172)| M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions).................................| A251 0 | M.10.
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
5
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses. _________
| I483 |
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition | ////////////////// |
and Income ...................................................................................... | 3215 1,342,473 | 1.
2. Equity capital adjustments from amended Reports of Income, net* ................................. | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) ............................ | 3217 1,342,473 | 3.
4. Net income (loss) (must equal Schedule RI, item 12) ............................................. | 4340 394,530 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net .............................. | 4346 0 | 5.
6. Changes incident to business combinations, net .................................................. | 4356 4,161,079 | 6.
7. LESS: Cash dividends declared on preferred stock ................................................ | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock ................................................... | 4460 490,634 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions | ////////////////// |
for this schedule) .............................................................................. | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ................ | 8433 (46,607)| 11.
12. Foreign currency translation adjustments ........................................................ | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ........ | 4415 (1,003,722)| 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, | ////////////////// |
item 28) ........................................................................................ | 3210 4,357,119 | 14.
______________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
<TABLE>
<CAPTION>
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
__________
| I486 |
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4651 35,701 | 4661 8,412 | 1.a.
b. To non-U.S. addressees (domicile) ..................................... | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository institutions .................. | 4653 0 | 4663 0 | 2.a.
b. To foreign banks ...................................................... | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers ...... | 4655 2 | 4665 22 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4645 38,139 | 4617 19,005 | 4.a.
b. To non-U.S. addressees (domicile) ..................................... | 4646 0 | 4618 102 | 4.b.
5. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures: | ////////////////// | ////////////////// |
a. Credit cards and related plans ........................................ | 4656 1,137 | 4666 733 | 5.a.
b. Other (includes single payment, installment, and all student loans) ... | 4657 7,864 | 4667 2,681 | 5.b.
6. Loans to foreign governments and official institutions ................... | 4643 0 | 4627 0 | 6.
7. All other loans .......................................................... | 4644 826 | 4628 541 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ......................................... | 4658 3,729 | 4668 3,241 | 8.a.
b. Of non-U.S. addressees (domicile) ..................................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8) ......................................... | 4635 87,398 | 4605 34,737 | 9.
___________________________________________
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-B--Continued
Part I. Continued
Memoranda
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1-3. Not applicable | ////////////////// | ////////////////// |
4. Loans to finance commercial real estate, construction, and land | ////////////////// | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, items 4 and 7, above .............................. | 5409 383 | 5410 1,374 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, item 1, above): | ////////////////// | ////////////////// |
a. Construction and land development ..................................... | 3582 189 | 3583 253 | M.5.a.
b. Secured by farmland ................................................... | 3584 145 | 3585 131 | M.5.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ..................... | 5411 2,650 | 5412 108 | M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties ...... | 5413 13,892 | 5414 1,231 | M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties ............. | 3588 837 | 3589 395 | M.5.d.
e. Secured by nonfarm nonresidential properties .......................... | 3590 17,988 | 3591 6,294 | M.5.e.
|_________________________________________|
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income.......... | 3124 266,943 | 1.
2. Recoveries (must equal part I, item 9, column B above) ........................................ | 4605 34,737 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) ................................. | 4635 87,398 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... | 4230 21,672 | 4.
5. Adjustments* (see instructions for this schedule) ................................ ............ | 4815 636,497 | 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ////////////////// |
item 4.b) ..................................................................................... | 3123 872,451 | 6.
|____________________|
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
| I489 | Less than
____________ ________ Minus
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Federal ....................................................................................... | 4780 N/A | 1.
2. State and local................................................................................ | 4790 N/A | 2.
3. Foreign ....................................................................................... | 4795 N/A | 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) ............ | 4770 N/A | 4.
____________________________| |
5. Deferred portion of item 4 ........................................ | RIAD 4772 | N/A | ////////////////// | 5.
__________________________________________________
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-6
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs where international operations
account for more than 10 percent of total revenues, total assets, or net income.
Part I. Estimated Income from International Operations
__________
| I492 | Less than
______ ________ Minus
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked ................................................................... | 4837 N/A | 1.a.
b. Interest expense booked .................................................................. | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs | ////////////////// |
(item 1.a minus 1.b) ..................................................................... | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices .. | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices .......... | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ..................................... | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations .............................. | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations ............. | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations ....................... | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a | ////////////////// |
minus 3.b and 3.c) ....................................................................... | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d) ................................................. | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs ................................. | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5) ........................................................... | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6 .... | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7) .............. | 4341 N/A | 8.
______________________
<CAPTION>
Memoranda ______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Intracompany interest income included in item 1.a above ..................................... | 4847 N/A | M.1.
2. Intracompany interest expense included in item 1.b above .................................... | 4848 N/A | M.2.
______________________
</TABLE>
<TABLE>
<CAPTION>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income booked at IBFs .............................................................. | 4849 N/A | 1.
2. Interest expense booked at IBFs ............................................................. | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items ................................................... | 5491 N/A | 3.a.
b. Fees and other noninterest income ........................................................ | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs) ........................................................... | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs) ............................................................................ | 4853 N/A | 5.
______________________
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-7
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
__________
| I495 | Less than
______ ________ Minus
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains on other real estate owned ..................................................... | 5415 0 | 1.a.
b. Net gains on sales of loans .............................................................. | 5416 0 | 1.b.
c. Net gains on sales of premises and fixed assets .......................................... | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 5.f.(2): | ////////////////// |
_____________
d. | TEXT 4461 | Income on Mortgages Held for Resale | 4461 81,194 | 1.d.
e. | TEXT 4462 | Gain From Branch Divestitures | 4462 77,976 | 1.e.
___________
f. | TEXT 4463 |______________________________________________________________________________| 4463 | 1.f.
_____________
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets ................................................ | 4531 135,939 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net losses on other real estate owned .................................................... | 5418 0 | 2.b.
c. Net losses on sales of loans ............................................................. | 5419 0 | 2.c.
d. Net losses on sales of premises and fixed assets ......................................... | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 7.c: | ////////////////// |
_____________
e. | TEXT 4464 | Intercompany Corporate Support Function Charges | 4464 143,184 | 2.e.
___________
f. | TEXT 4467 | Intercompany Data Processing & Programming Charges | 4467 158,034 | 2.f.
___________
g. | TEXT 4468 |______________________________________________________________________________| 4468 | 2.g.
_____________
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and | ////////////////// |
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe | ////////////////// |
all extraordinary items and other adjustments): | ////////////////// |
_____________
a. (1) | TEXT 4469 |__________________________________________________________________________| 4469 | 3.a.(1)
_____________
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2)
_____________ ____________________________
b. (1) | TEXT 4487 |__________________________________________________________________________| 4487 | 3.b.(1)
_____________
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2)
_____________ ____________________________
c. (1) | TEXT 4489 |__________________________________________________________________________| 4489 | 3.c.(1)
_____________
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2)
____________________________
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, | ////////////////// |
item 2) (itemize and describe all adjustments): | ////////////////// |
_____________
a. | TEXT 4492 |______________________________________________________________________________| 4492 | 4.a.
___________
b. | TEXT 4493 |______________________________________________________________________________| 4493 | 4.b.
_____________
5. Cumulative effect of changes in accounting principles from prior years (from | ////////////////// |
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
_____________
a. | TEXT 4494 |______________________________________________________________________________| 4494 | 5.a.
___________
b. | TEXT 4495 |______________________________________________________________________________| 4495 | 5.b.
_____________
6. Corrections of material accounting errors from prior years (from Schedule RI-A, | ////////////////// |
item 10) (itemize and describe all corrections): | ////////////////// |
_____________
a. | TEXT 4496 | 4496 | 6.a.
___________|______________________________________________________________________________
b. | TEXT 4497 4497 | 6.b.
____________|____________________________________________________________________________________________________
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-8
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
_____________
a. | TEXT 4498 | Fleet National Bank Surplus Distribution to FFG | 4498 (1,003,722) | 7.a.
__________________________________________________________________________________________| |
b. | TEXT 4499 | | 4499 | 7.b.
___________________________________________________________________________________________
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, | ////////////////// |
item 5) (itemize and describe all adjustments): | ////////////////// |
_____________ | |
a. | TEXT 4521 | 12/31/95 Ending Balance of Pooled Entities | 4521 | 8.a.
___________________________________________________________________________________________| |
b. | TEXT 4522 | | 4522 | 8.b.
___________________________________________________________________________________________| |
____________________
9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 | Less than
______________________ Minus
at its option, any other significant items affecting the Report of Income):
___
No comment |X| (RIAD 4769)
___
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-1
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.
Schedule RC--Balance Sheet
__________
| C400 | Less than
____________ ________ Minus
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1) ................................... | 0081 4,130,928 | 1.a.
b. Interest-bearing balances(2) ............................................................ | 0071 46,521 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. | 1754 257,441 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ | 1773 7,250,067 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices | ////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// |
a. Federal funds sold ...................................................................... | 0276 17,428 | 3.a.
b. Securities purchased under agreements to resell ......................................... | 0277 0 | 3.b.
4. Loans and lease financing receivables: ____________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) | RCFD 2122 | 31,278,251 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ................... | RCFD 3123 | 872,451 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve ....................... | RCFD 3128 | 0 | ////////////////// | 4.c.
____________________________
d. Loans and leases, net of unearned income, | ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c) ..................................... | 2125 30,405,800 | 4.d.
5. Trading assets (from schedule RC-D )........................................................ | 3545 71,354 | 5.
6. Premises and fixed assets (including capitalized leases) ................................... | 2145 534,844 | 6.
7. Other real estate owned (from Schedule RC-M) ............................................... | 2150 34,546 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding ............................... | 2155 16,634 | 9.
10. Intangible assets (from Schedule RC-M) ..................................................... | 2143 2,283,414 | 10.
11. Other assets (from Schedule RC-F) .......................................................... | 2160 3,978,638 | 11.
12. Total assets (sum of items 1 through 11) ................................................... | 2170 49,027,615 | 12.
______________________
</TABLE>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
11
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC--Continued
___________________________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
<S> <C> <C>
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, | /////////////////////// |
part I) ............................................................................... | RCON 2200 34,110,580 | 13.a.
____________________________
(1) Noninterest-bearing(1) ................................ | RCON 6631 10,202,036 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ...................................... | RCON 6636 23,908,544 | /////////////////////// | 13.a.(2)
____________________________
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II) .............................................................................. | RCFN 2200 1,745,663 | 13.b.
____________________________
(1) Noninterest-bearing ................................... | RCFN 6631 400 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 1,745,263 | /////////////////////// | 13.b.(2)
____________________________
14. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | /////////////////////// |
a. Federal funds purchased ............................................................... | RCFD 0278 4,302,800 | 14.a.
b. Securities sold under agreements to repurchase ........................................ | RCFD 0279 566,036 | 14.b.
15. a. Demand notes issued to the U.S. Treasury .............................................. | RCON 2840 14,411 | 15.a.
b. Trading liabilities (from Schedule RC-D) .............................................. | RCFD 3548 57,446 | 15.b.
16. Other borrowed money: | /////////////////////// |
a. With a remaining maturity of one year or less.......................................... | RCFD 2332 487,435 | 16.a.
b. With a remaining maturity of more than one year........................................ | RCFD 2333 893,259 | 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ........................... | RCFD 2910 11,561 | 17.
18. Bank's liability on acceptances executed and outstanding ................................. | RCFD 2920 16,634 | 18.
19. Subordinated notes and debentures ........................................................ | RCFD 3200 1,213,219 | 19.
20. Other liabilities (from Schedule RC-G) ................................................... | RCFD 2930 1,251,452 | 20.
21. Total liabilities (sum of items 13 through 20) ........................................... | RCFD 2948 44,670,496 | 21.
| /////////////////////// |
22. Limited-life preferred stock and related surplus ......................................... | RCFD 3282 0 | 22.
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus ............................................ | RCFD 3838 125,000 | 23.
24. Common stock ............................................................................. | RCFD 3230 19,487 | 24.
25. Surplus (exclude all surplus related to preferred stock).................................. | RCFD 3839 2,551,927 | 25.
26. a. Undivided profits and capital reserves ................................................ | RCFD 3632 1,693,408 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ | RCFD 8434 (32,703)| 26.b.
27. Cumulative foreign currency translation adjustments ...................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27) ........................................ | RCFD 3210 4,357,119 | 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | /////////////////////// |
and 28) .................................................................................. | RCFD 3300 49,027,615 | 29.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external __________________
auditors as of any date during 1995 ............................................................... | RCFD 6724 N/A | M.1.
__________________
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
____________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
12
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
__________
| C405 | Less than
_________________________________ ________ Minus
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin .................................................................... | 0022 3,402,522 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .............. | ////////////////// | 0020 2,655,163 | 1.a.
b. Currency and coin .................................................... | ////////////////// | 0080 747,539 | 1.b.
2. Balances due from depository institutions in the U.S. ................... | ////////////////// | 0082 500,301 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ... | 0083 0 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their IBFs) ................................... | 0085 500,373 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks .. | ////////////////// | 0070 7,902 | 3.
a. Foreign branches of other U.S. banks ................................. | 0073 690 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ........... | 0074 7,948 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ................................. | 0090 265,916 | 0090 0 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b) .................................. | 0010 4,177,449 | 0010 4,176,641 | 5.
___________________________________________
<CAPTION>
______________________
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column B above) .............................................................................. | 0050 453,780 | M.1.
______________________
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
_______
| C410 | Less
| | than
| | Minus
___________________________________________________________________________ ________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ......... | 0211 250 | 0213 250 | 1286 1,274,624 | 1287 1,252,546 | 1.
2. U.S. Government agency | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and corporation obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) .............. | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3) ................... | 1294 0 | 1295 0 | 1297 498 | 1298 505 | 2.b.
_____________________________________________________________________________________
</TABLE>
_____________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
13
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued
_____________________________________________________________________________________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
3. Securities issued by states | ////////////////// |/ //////////////// | ////////////////// | ///////////////// |
and political subdivisions | ////////////////// |////////////////// | ////////////////// | ///////////////// |
in the U.S.: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. General obligations ......... | 1676 150,357 |1677 150,242 | 1678 0 | 1679 0 | 3.a.
b. Revenue obligations ......... | 1681 8,887 |1686 8,889 | 1690 0 | 1691 0 | 3.b.
c. Industrial development | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and similiar obligations .....| 1694 0 |1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Pass-through securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Guaranteed by | ////////////////// |////////////////// | ////////////////// | ///////////////// |
GNMA ....................... | 1698 0 |1699 0 | 1701 861,176 | 1702 852,929 | 4.a.(1)
(2) Issued by FNMA | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and FHLMC ................. | 1703 908 |1705 908 | 1706 4,854,605 | 1707 4,831,023 | 4.a.(2)
(3) Other pass-through | ////////////////// |////////////////// | ///////////////////| ///////////////// |
secruities ................. | 1709 4 |1710 4 | 1711 0 | 1713 0 | 4.a.(3)
b. Other mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (include CMO's, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
REMICs, and stripped | ////////////////// |////////////////// | ////////////////// | ///////////////// |
MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Issued or guaranteed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by FNMA, FHLMC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
or GNMA ............... | 1714 0 |1715 0 | 1716 0 | 1717 0 | 4.b.(1)
(2) Collateralized | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by MBS issued or | ////////////////// |////////////////// | ////////////////// | ///////////////// |
guaranteed by FNMA, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
FHLMC, or GNMA ........ | 1718 0 |1719 0 | 1731 0 | 1732 0 | 4.b.(2)
(3) All other mortgage- | ////////////////// |////////////////// | ////////////////// | //////////////// |
backed securities ..... | 1733 0 |1734 0 | 1735 518 | 1736 518 | 4.b.(3)
5. Other debt securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Other domestic debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities.................. | 1737 0 |1738 0 | 1739 817 | 1741 812 | 5.a.
b. Foreign debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities ................. | 1742 97,035 |1743 78,878 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Investments in mutual | ////////////////// |////////////////// | ////////////////// | ///////////////// |
funds ...................... | ////////////////// |////////////////// | 1747 0 | 1748 0 | 6.a.
b. Other equity securities | ////////////////// |////////////////// | ////////////////// | ///////////////// |
with readily determin- | ////////////////// |////////////////// | ////////////////// | ///////////////// |
able fair values ........... | ////////////////// |////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (1) ............. | ////////////////// |////////////////// | 1752 311,734 | 1753 311,734 | 6.c.
7. Total (sum of items 1 | ////////////////// |////////////////// | ////////////////// | ///////////////// |
through 6) (total of | ////////////////// |////////////////// | ////////////////// | ///////////////// |
column A must equal | ////////////////// |////////////////// | ////////////////// | ///////////////// |
Schedule RC, item 2.a) | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(total of column D must | ////////////////// |////////////////// | ////////////////// | ///////////////// |
equal Schedule RC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
item 2.b) ..................... | 1754 257,441 | 1771 239,171 | 1772 7,303,972 | 1773 7,250,067 | 7.
|__________________________________________________________________________________|
</TABLE>
____________
1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
14
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued
<CAPTION>
___________
Memoranda | C412 | Less than
___________ _________ Minus
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Pledged securities(2) ......................................................................... | 0416 2,308,912 | M.1.
2. Maturity and repricing data for debt securities(2),(3),(4) (excluding those in | ////////////////// |
nonaccrual status): | ////////////////// |
a. Fixed rate debt securities with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | 0343 72,490 | M.2.a.(1)
(2) Over three months through 12 months .................................................... | 0344 77,125 | M.2.a.(2)
(3) Over one year through five years ....................................................... | 0345 2,734,577 | M.2.a.(3)
(4) Over five years ........................................................................ | 0346 2,925,207 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) ..... | 0347 5,809,399 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | 4544 531,365 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4545 855,010 | M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | 4551 0 | M.2.b.(3)
(4) Less frequently than every five years .................................................. | 4552 0 | M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)) .. | 4553 1,386,375 | M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt | ////////////////// |
securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual | ////////////////// |
debt securities included in Schedule RC-N, item 9, column C) ............................... | 0393 7,195,774 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included | ////////////////// |
in Schedule RC-B, items 3 through 5, column A, above) ......................................... | 5365 0 | M.4.
5. Not applicable | ////////////////// |
6. Floating rate debt securities with a remaining maturity of one year or less(2),(4) (included in | ////////////////// |
Memorandum items 2.b(1) through 2.b.(4) above)................................................. | 5519 3,700 | M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// |
trading securities during the calendar year-to-date (report the amortized cost at date of sale | ////////////////// |
or transfer ................................................................................... | 1778 0 | m.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost ............................................................................. | 8780 0 | M.8.a.
b. Fair Value ................................................................................. | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items 2, 3, and 5): | ////////////////// |
a. Amortized cost ............................................................................. | 8782 0 | M.9.a.
b. Fair Value ................................................................................. | 8783 0 | M.9.b.
----------------------
</TABLE>
____________
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
15
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-6
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
_________
Do not deduct the allowance for loan and lease losses from amounts | C415 | Less than
reported in this schedule. Report total loans and leases, net of unearned _________________________________|________| Minus
income. Exclude assets held for trading. | (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate ........................................... | 1410 11,754,916 | ////////////////// | 1.
a. Construction and land development ................................... | ////////////////// | 1415 433,880 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) ....................................................... | ////////////////// | 1420 2,172 | 1.b
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ................... | ////////////////// | 1797 2,022,596 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens ...................................... | ////////////////// | 5367 4,418,239 | 1.c.(2)(a)
(b) Secured by junior liens ..................................... | ////////////////// | 5368 492,952 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ........... | ////////////////// | 1460 559,373 | 1.d.
e. Secured by nonfarm nonresidential properties ........................ | ////////////////// | 1480 3,825,704 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. ..................................... | ////////////////// | 1505 143,682 | 2.a.
(1) To U.S. branches and agencies of foreign banks .................. | 1506 0 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. ........................... | 1507 143,682 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. ........................ | 1517 0 | 1517 12,345 | 2.b.
c. To banks in foreign countries ....................................... | ////////////////// | 1510 672 | 2.c.
(1) To foreign branches of other U.S. banks ......................... | 1513 149 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries ............................. | 1516 523 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers .... | 1590 5,889 | 1590 5,889 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ....................................... | 1763 12,446,547 | 1763 12,402,858 | 4.a.
b. To non-U.S. addressees (domicile) ................................... | 1764 83,521 | 1764 54,074 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks ....................................................... | 1756 0 | 1756 0 | 5.a.
b. Of foreign banks .................................................... | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper) ......... | ////////////////// | 1975 2,217,352 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) ............................................. | 2008 161,652 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans).. | 2011 2,055,700 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks) ................................................. | 2081 0 | 2081 0 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations) ........................................................... | 2107 167,100 | 2107 167,100 | 8.
9. Other loans ............................................................ | 1563 2,146,172 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured).. | ////////////////// | 1545 156,275 | 9.a.
b. All other loans (exclude consumer loans) ............................ | ////////////////// | 1564 1,989,897 | 9.b.
10. Lease financing receivables (net of unearned income) ................... | ////////////////// | 2165 2,300,055 | 10.
a. Of U.S. addressees (domicile) ....................................... | 2182 2,300,055 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile) ................................... | 2183 0 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ........ | 2123 0 | 2123 0 | 11.
12. Total loans and leases, net of unearned income (sum of items 1 through | ////////////////// | ////////////////// |
10 minus item 11) (total of column A must equal Schedule RC, item 4.a).. | 2122 31,278,251 | 2122 31,205,115 | 12.
___________________________________________
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page: RC-7
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-C--Continued
Part I. Continued
___________________________________________
| (Column A) | (Column B) |
| Consolidated | Domestic |
Memoranda | Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above .............. | 1496 0 | 1496 0 | M.1.
2. Loans and leases restructured and in compliance with modified terms | ////////////////// | ////////////////// |
(included in Schedule RC-C, part I, above and not reported as past due | ////////////////// | ////////////////// |
or nonaccrual in Schedule RC-N, Memorandum item 1): | ////////////////// | ////////////////// |
a. Loans secured by real estate: | ////////////////// | ////////////////// |
(1) To U.S. addressees (domicile) ................................... | 1687 511 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... | 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans | ////////////////// |
to individuals for household, family, and other personal expenditures)| 8691 0 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables | ////////////////// |
of non-U.S. addressees (domicile) included in Memorandum item 2.b | ////////////////// |
above ............................................................... | 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those | ////////////////// |
in nonaccrual status): | ////////////////// |
a. Fixed rate loans and leases with a remaining maturity of: | ////////////////// |
(1) Three months or less ............................................ | 0348 10,215,575 | M.3.a.(1)
(2) Over three months through 12 months ............................. | 0349 369,421 | M.3.a.(2)
(3) Over one year through five years ................................ | 0356 3,479,742 | M.3.a.(3)
(4) Over five years ................................................. | 0357 5,791,166 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of | ////////////////// |
Memorandum items 3.a.(1) through 3.a.(4)) ....................... | 0358 19,855,904 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently .................................... | 4554 8,960,876 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . | 4555 1,848,295 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than | ////////////////// |
annually ........................................................ | 4561 250,031 | M.3.b.(3)
(4) Less frequently than every five years ........................... | 4564 12,721 | M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) | ////////////////// |
through 3.b.(4)) ................................................ | 4567 11,071,923 | M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) | ////////////////// |
(must equal the sum of total loans and leases, net, from | ////////////////// |
Schedule RC-C, part I, item 12, plus unearned income from | ////////////////// |
Schedule RC-C, part I, item 11, minus total nonaccrual loans and | ////////////////// |
leases from Schedule RC-N, sum of items 1 through 8, column C) ...... | 1479 30,927,827 | M.3.c.
d. FLOATING RATE LOANS WITH A REMAINING MATURITY OF ONE YEAR OR LESS | ////////////////// |
(INCLUDED IN MEMORANDUM ITEMS 3.b.(1) THROUGH 3.b.(4) ABOVE)......... | A246 1,543,411 | M.3.d.
4. Loans to finance commercial real estate, construction, and land | ////////////////// |
development activities (NOT SECURED BY REAL ESTATE) included in | ////////////////// |
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ........... | 2746 271,706 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, | ////////////////// |
above .................................................................. | 5369 0 | M.5.
| ////////////////// |_____________________
6. Adjustable rate closed-end loans secured by first liens on 1-4 family | ////////////////// | RCON Bil Mil Thou |
residential properties (included in Schedule RC-C, part I, item | ////////////////// | ___________________|
1.c.(2)(a), column B, page RC-6) ....................................... | ////////////////// | 5370 1.655.898 | M.6.
|_________________________________________|
</TABLE>
_____________________________
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplememtal Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
17
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7a
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<S> <C>
Schedule RC-C--Continued
Part II. Loans to Small Businesses and Small Farms
Schedule RC-C, Part II is to be reported only with the June Report of Condition.
Report the number and amount currently outstanding as of June 30 of business loans with "original amounts" of $1,000,000 or less
and farm loans with "original amounts" of $500,000 or less. The following guidelines should be used to determine the "original
amount" of a loan: (1) For loans drawn down under lines of credit or loan commitments, the "original amount" of the loan is the
size of the line of credit or loan commitment when the line of credit or loan commitment was most recently approved, extended, or
renewed prior to the report date. However, if the amount currently outstanding as of the report date exceeds this size, the
"original amount" is the amount currently outstanding on the report date. (2) For loan participations and syndications, the
"original amount" of the loan participation or syndication is the entire amount of the credit originated by the lead lender.
(3) For all other loans, the "original amount" is the total amount of the loan at origination or the amount currently
outstanding as of the report date, whichever is larger.
Loans to Small Businesses
</TABLE>
<TABLE>
<S> <C>
1. Indicate in the appropriate box at the right whether all or substantially all of the dollar volume of your
bank's "Loans secured by nonfarm nonresidential properties" in domestic offices reported in Schedule RC-C,
part I, item 1.e, column B, and all or substantially all of the dollar volume of your bank's
"Commercial and industrial loans to U.S. addressees" in domestic offices reported in Schedule RC-C, __________
part I, item 4.a, column B, have original amounts of $100,000 or less (If your bank has no loans ________| C415 | Less than
outstanding in both of these two loan categories, place an "X" in the box marked "NO" and go to | RCON YES NO| Minus
Item 5; otherwise, see instructions for further information.).................................. | 6999 | |///| x | 1.
___________________
If YES, complete items 2.a and 2.b below, skip items 3 and 4, and go to item 5.
If NO and your bank has loans outstanding in either loan category, skip items 2.a and 2.b,
complete items 3 and 4 below, and go to item 5. _____________________
| Number of Loans |
2. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |/////////// |
a. "Loans secured by nonfarm nonresidential properties" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 1.e, column B....... | 5562 N/A | 2.a.
b. "Commercial and industrial loans to U.S. addressees" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 4.a, column B ...... | 5563 N/A | 2.b.
______________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
____________________ ____________________
Dollar Amounts in Thousands | RCON | ///////////| RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
3. Number and amount currently outstanding of "Loans secured by nonfarm | /////////////////////////////////////// | 1.
nonresidential properties" in domestic offices reported in Schedule RC-C | /////////////////////////////////////// | 1.a.
part I item 1.e, column B (sum of items 3.a through 3.c must be less | /////////////////////////////////////// |
or equal to Schedule RC-C, part I, item 1.e, column B): | /////////////////////////////////////// | 1.b
a. With original amounts of $100,000 or less ........................... | 5564 1,988 | 5565 76,370 | 3.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5566 2,805 | 5567 332,639 | 3.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5568 2,736 | 5569 952,476 | 3.c.
4. Number and amount currently outstanding of "Commercial and industrial | /////////////////////////////////////// |
loans to U.S. addressees" in domestic offices reported in Schedule RC-C, | /////////////////////////////////////// |
part I, item 4.a, column B (sum of items 4.a through 4.c must be less | /////////////////////////////////////// |
than or equal to Schedule RC-C, part I, item 4.a, column B): | /////////////////////////////////////// |
a. With original amounts of $100,000 or less ........................... | 5570 11,433 | 5571 337,759 | 4.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5572 2,127 | 5573 228,713 | 4.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5574 1,968 | 5575 601,126 | 4.c.
___________________________________________
</TABLE>
17a
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7b
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-C -- Continued
Part II. Continued
Agricultural Loans to Small Farms
<TABLE>
<S> <C> <C>
5. Indicate in the appropriate box at the right whether all or substantially all of the
dollar volume of your bank's "Loans secured by farmland (including farm residential
and other improvements)" in domestic offices reported in Schedule RC-C, part I, item
1.b, column B, and all or substantially all of the dollar volume of your bank's
"Loans to finance agricultural production and other loans to farmers" in domestic
offices reported in Schedule RC-C, part I, item 3, column B, have original amounts
of $100,000 or less (If your bank has no loans outstanding in both of these two YES NO
loan categories, place an "X" in the box marked "NO" and do not complete items 7 _______________________
and 8; otherwise, see instructions for further information.)................................... | 6860 | | /// | X | 5.
|_____________________|
If YES, complete items 6.a and 6.b below and do not complete items 7 and 8.
If NO and your bank has loans outstanding in either loan category, skip items 6.a and 6.b
and complete items 7 and 8 below.
</TABLE>
<TABLE>
<S> <C>
______________________
| Number of Loans |
6. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |//////////// |
a. "Loans secured by farmland (including farm residential and other |______| |
improvements)" in domestic offices reported in Schedule RC-C, part I, | ////////////////// |
item 1.b, column B........................................................ | 5576 N/A | 6.a.
b. "Loans to finance agricultural production and other loans to farmers" in | ////////////////// |
domestic offices reported in Schedule RC-C, part I, item 3, column B...... | 5577 N/A | 6.b.
|____________________|
</TABLE>
<TABLE>
<S> <C> <C>
_____________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
|_____________________|______________________|
Dollar Amounts in Thousands | RCON |/////////////| RCON Bil Mil Thou |
________________________________________________________________________________| ______| |_____________________ |
7. Number and amount currently outstanding of "Loans secured by farmland | ////////////////////////////////////////// |
(including farm residential and other improvements)" in domestic offices | ////////////////////////////////////////// |
reported in Schedule RC-C, part I, item 1.b, column B (sum of items 7.a | ////////////////////////////////////////// |
through 7.c must be less than or equal to Schedule RC-C, part I, item 1.b, | ////////////////////////////////////////// |
column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5578 18 | 5579 292 | 7.a.
b. With original amounts of more than $100,000 through $250,000............ | 5580 8 | 5581 850 | 7.b.
c. With original amounts of more than $250,000 through $500,000............ | 5582 4 | 5583 1,030 | 7.c.
8. Number and amount currently outstanding of "Loans to finance agricultural | ////////////////////////////////////////// |
production and other loans to farmers" in domestic offices reported in | ////////////////////////////////////////// |
Schedule RC-C, part I, item 3, column B (sum of items 8.a through 8.c | ////////////////////////////////////////// |
must be less than or equal to Schedule RC-C, part I, item 3, column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5584 46 | 5585 992 | 8.a.
b. With original amounts of more than $100,000 through $250,000............ | 5586 17 | 5587 1,877 | 8.b.
c. With original amounts of more than $250,000 through $500,000............ | 5588 4 | 5589 1,054 | 8.c.
|_____________________|______________________|
</TABLE>
17b
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-8
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).
__________
| C420 |
__________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou|
__________________________________________________________________________________________________| ________________________|
<S> <C> <C>
ASSETS | /////////////////////// |
1. U.S. Treasury securities in domestic offices ................................................ | RCON 3531 0 | 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- | /////////////////////// |
backed securities) .......................................................................... | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... | RCON 3533 0 | 3.
4. Mortgage-backed securities (MBS) in domestic offices: | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS) ................................................. | RCON 3535 0 | 4.b.
c. All other mortgage-backed securities ......................................................| RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices ................................................... | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices ................................................. | RCON 3538 0 | 6.
7. Commercial paper in domestic offices ........................................................ | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices ..................................................... | RCON 3540 0 | 8.
9. Other trading assets in domestic offices .................................................... | RCON 3541 0 | 9.
10. Trading assets in foreign offices ........................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts: | /////////////////////// |
a. In domestic offices ...................................................................... | RCON 3543 66,696 | 11.a.
b. In foreign offices ....................................................................... | RCFN 3544 4,658 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... | RCFD 3545 71,354 | 12.
<CAPTION>
___________________________
___________________________
| ///////// Bil Mil Thou |
LIABILITIES | ________________________|_
<S> <C> <C>
13. Liability for short positions ............................................................... | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts ................................................................................... | RCFD 3547 57,446 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... | RCFD 3548 57,446 | 15.
___________________________
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-9
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
__________
| C425 | Less than
______________________________________________________ ________ Minus
| | Nontransaction |
| Transaction Accounts | Accounts |
_________________________________________ ____________________
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including| demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
__________________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations .......... | 2201 8,615,650 | 2240 8,158,203 | 2346 22,594,478 | 1.
2. U.S. Government ...................................... | 2202 58,650 | 2280 58,605 | 2520 42,512 | 2.
3. States and political subdivisions in the U.S. ........ | 2203 818,151 | 2290 706,072 | 2530 702,686 | 3.
4. Commercial banks in the U.S. ......................... | 2206 836,005 | 2310 836,005 | 2550 771 | 4.
5. Other depository institutions in the U.S. ............ | 2207 221,571 | 2312 221,571 | 2349 2,968 | 5.
6. Banks in foreign countries ........................... | 2213 18,445 | 2320 18,445 | 2236 0 | 6.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) .................... | 2216 108 | 2300 108 | 2377 0 | 7.
8. Certified and official checks ........................ | 2330 198,585 | 2330 198,585 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ........................................... | 2215 10,767,165 | 2210 10,197,594 | 2385 23,343,415 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCON Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | ////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ......................... | 6835 2,735,425 | M.1.a.
b. Total brokered deposits ..................................................................... | 2365 1,636,611 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ////////////////// |
(1) Issued in denominations of less than $100,000 ........................................... | 2343 2,350 | M.1.c.(1)
(2) Issued EITHER in denominations of $100,000 OR in denominations greater than $100,000 | ////////////////// |
and participated out by the broker in shares of $100,000 or less ........................ | 2344 1,634,261 | M.1.c.(2)
d. MATURITY DATA FOR BROKERED DEPOSITS: | ////////////////// |
(1) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF LESS THAN $100,000 WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.c.(1) ABOVE)................. | A243 171 | M.1.d.(1)
(2) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF $100,000 OR MORE WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.b ABOVE)..................... | A244 509,265 | M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | ////////////////// |
reported in item 3 above which are secured or collateralized as required under state law) ... | 5590 457,587 | M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must | ////////////////// |
equal item 9, column C above): | ////////////////// |
a. Savings deposits: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................................................... | 6810 10,738,339 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................. | 0352 2,655,659 | M.2.a.(2)
b. Total time deposits of less than $100,000 ................................................... | 6648 7,247,099 | M.2.b.
c. Time certificates of deposit of $100,000 or more ............................................ | 6645 2,702,318 | M.2.c.
d. Open-account time deposits of $100,000 or more .............................................. | 6646 0 | M.2.d.
3. All NOW accounts (included in column A above) .................................................. | 2398 569,571 | M.3.
4. Not applicable
______________________
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-10
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
_________________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of | ////////////////// |
Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) | ////////////////// |
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: | ////////////////// |
(1) Three months or less.................................................................... | A225 1,684,248 | M.5.a.(1)
(2) Over three months through 12 months..................................................... | A226 3,493,722 | M.5.a.(2)
(3) Over one year........................................................................... | A227 2,002,999 | M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently............................................................ | A228 66,130 | M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly......................... | A229 0 | M.5.b.(2)
(3) Less frequently than annually........................................................... | A230 0 | M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above)............... | A231 45,084 | M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates | ////////////////// |
of deposit of $100,000 or more and open-account time deposits of $100,000 or more) | ////////////////// |
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum | ////////////////// |
items 2.c and 2.d above):(1) | ////////////////// |
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | A232 534,657 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | A233 754,429 | M.6.a.(2)
(3) Over one year through five years ....................................................... | A234 1,282,541 | M.6.a.(3)
(4) Over five years ........................................................................ | A235 36,761 | M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | A236 31,182 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | A237 37,950 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | A238 24,798 | M.6.b.(3)
(4) Less frequently than every five years .................................................. | A239 0 | M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above)............... | A240 19,186 | M.6.c.
______________________
</TABLE>
_______________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-11
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
______________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations ................................................... | 2621 1,730,162 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ | 2623 0 | 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs).... | 2625 0 | 3.
4. Foreign governments and official institutions (including foreign central banks) ............... | 2650 0 | 4.
5. Certified and official checks ................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................ | 2668 15,501 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... | 2200 1,745,663 | 7.
Memorandum
Dollar Amounts in Thousands |RCFN Bil Mil Thou |
________________________________________________________________________________________________________________________
1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) |A245 1,745,263 | M.1.
______________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-F--Other Assets
__________
| C430 | Less
than
_________________ ________ Minus
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Income earned, not collected on loans ........................................................ | RCFD 2164 167,538 | 1.
2. Net deferred tax assets(1) ................................................................... | RCFD 2148 0 | 2.
3. Excess residential mortgage servicing fees receivable ........................................ | RCFD 5371 134,288 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2168 3,676,812 | 4.
_____________ ___________________________
a. | TEXT 3549 | Mortgages held for Resale | RCFD 3549 | 1,858,683 | /////////////////////// | 4.a.
_________________________________________________________________| | | |
___________
b. | TEXT 3550 |____________________________________________________| RCFD 3550 | | /////////////////////// | 4.b.
___________
c. | TEXT 3551 |____________________________________________________| RCFD 3551 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... | RCFD 2160 3,978,638 | 5.
___________________________
<CAPTION>
Memorandum ___________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes ............................... | RCFD 5610 0 | M.1.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-G--Other Liabilities
__________
| C435 | Less
than
_________________ ________ Minus
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2) ............................ | RCON 3645 58,011 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. | RCFD 3646 594,954 | 1.b.
2. Net deferred tax liabilities(1) .............................................................. | RCFD 3049 119,644 | 2.
3. Minority interest in consolidated subsidiaries ............................................... | RCFD 3000 0 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2938 478,843 | 4.
_____________ ___________________________
a. | TEXT 3552 |____________________________________________________| RCFD 3552 | | /////////////////////// | 4.a.
___________
b. | TEXT 3553 |____________________________________________________| RCFD 3553 | | /////////////////////// | 4.b.
___________
c. | TEXT 3554 |____________________________________________________| RCFD 3554 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... | RCFD 2930 1,251,452 | 5.
</TABLE>
____________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-12
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
__________
| C440 | Less
than
____________ ________ Minus
| Domestic Offices |
____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding .................................... | 2155 16,634 | 1.
2. Bank's liability on acceptances executed and outstanding ........................................ | 2920 16,634 | 2.
3. Federal funds sold and securities purchased under agreements to resell .......................... | 1350 17,428 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase ...................... | 2800 4,868,836 | 4.
5. Other borrowed money ............................................................................ | 3190 1,380,694 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ....................... | 2941 1,669,058 | 7.
| ////////////////// |
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) . | 2192 48,946,123 | 8.
| ////////////////// |
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs)| 3129 42,919,946 | 9.
______________________
</TABLE>
<TABLE>
<CAPTION>
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices. ______________________
| RCON Bil Mil Thou |
____________________
<S> <C> <C>
10. U.S. Treasury securities ....................................................................... | 1779 1,252,796 | 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed | ////////////////// |
securities) .................................................................................... | 1785 505 | 11.
12. Securities issued by states and political subdivisions in the U.S. ............................. | 1786 159,244 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1787 5,684,860 | 13.a.(1)
(2) Other pass-through securities ........................................................... | 1869 4 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1877 0 | 13.b.(1)
(2) All other mortgage-backed securities..................................................... | 2253 518 | 13.b.(2)
14. Other domestic debt securities ................................................................. | 3159 812 | 14.
15. Foreign debt securities ........................................................................ | 3160 97,035 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds ................................................................. | 3161 0 | 16.a.
b. Other equity securities with readily determinable fair values ............................... | 3162 0 | 16.b.
c. All other equity securities ................................................................. | 3169 311,734 | 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) .......... | 3170 7,507,508 | 17.
______________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank .............................. | 3051 0 | M.1.
OR | ////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank ................................ | 3059 N/A | M.2.
______________________
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-13
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices. __________
| C445 | Less
than
____________ ________ Minus
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) ................. | 2133 0 | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, | ////////////////// |
column A) ..................................................................................... | 2076 0 | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) .... | 2077 0 | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ..................................... | 2898 0 | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ....................................................................... | 2379 0 | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ..... | 2381 0 | 6.
______________________
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule RC-K--Quarterly Averages (1)
__________
| C455 | Less
than
_________________ ________ Minus
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
ASSETS | /////////////////////// |
1. Interest-bearing balances due from depository institutions .............................. | RCFD 3381 10,737 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ...... | RCFD 3382 6,349,267 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) ................... | RCFD 3383 155,938 | 3.
4. a. Other debt securities(2) ............................................................. | RCFD 3647 98,458 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock). | RCFD 3648 347,675 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3365 812,114 | 5.
6. Loans: | ///////////////////// // |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ...................................................................... | RCON 3360 31,884,320 | 6.a.(1)
(2) Loans secured by real estate ..................................................... | RCON 3385 14,940,513 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers .............. | RCON 3386 5,935 | 6.a.(3)
(4) Commercial and industrial loans .................................................. | RCON 3387 12,923,362 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ...... | RCON 3388 2,224,980 | 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............ | RCFN 3360 70,458 | 6.b.
7. Trading assets .......................................................................... | RCFD 3401 105,824 | 7.
8. Lease financing receivables (net of unearned income) .................................... | RCFD 3484 2,231,479 | 8.
9. Total assets (4) ........................................................................ | RCFD 3368 52,282,230 | 9.
LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............ | RCON 3485 965,535 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................ | RCON 3486 9,210,475 | 11.a.
b. Other savings deposits ............................................................... | RCON 3487 3,907,216 | 11.b.
c. Time certificates of deposit of $100,000 or more ..................................... | RCON 3345 2,653,452 | 11.c.
d. All other time deposits .............................................................. | RCON 3469 7,513,443 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs.. | RCFN 3404 1,765,593 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3353 6,363,286 | 13.
14. Other borrowed money .................................................................... | RCFD 3355 2,670,145 | 14.
___________________________
</TABLE>
_______________
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the
quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
23
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-14
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk. __________
| C460 | Less
____________ ________| than
| Minus
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ////////////////// |
equity lines ............................................................................... | 3814 1,637,875 | 1.a.
b. Credit card lines .......................................................................... | 3815 32,940 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate ....................................... | 3816 648,369 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... | 6550 383,022 | 1.c.(2)
d. Securities underwriting .................................................................... | 3817 0 | 1.d.
e. Other unused commitments ................................................................... | 3818 18,626,522 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. | 3819 2,337,268 | 2.
___________________________
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 158,029 | ////////////////// | 2.a.
___________________________
3. Performance standby letters of credit and foreign office guarantees ........................... | 3821 175,703 | 3.
a. Amount of performance standby letters of credit conveyed to | ////////////////// |
___________________________
others .......................................................... | RCFD 3822 | 12,580 | ////////////////// | 3.a.
___________________________
4. Commercial and similar letters of credit ...................................................... | 3411 176,335 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by | ////////////////// |
the reporting bank ............................................................................ | 3428 16,524 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank ........................................................................... | 3429 7,409 | 6.
7. Securities borrowed ........................................................................... | 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | ////////////////// |
against loss by the reporting bank) ........................................................... | 3433 0 | 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated as sold for | ////////////////// |
Call Report purposes: | ////////////////// |
a. FNMA and FHLMC residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3650 246,244 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3651 246,244 | 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3652 33,550 | 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3653 33,550 | 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3654 0 | 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3655 0 | 9.c.(2)
d. Small business obligations transferred with recourse under Section 208 of the | ////////////////// |
Riegle Community Development and Regulatory Improvement Act of 1994: | ////////////////// |
(1) Outstanding principal balance of small business obligations transferred | ////////////////// |
as of the report date................................................................... | A249 0 | 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date.................. | A250 0 | 9.d.(2)
10. When-issued securities: | ////////////////// |
a. Gross commitments to purchase .............................................................. | 3434 0 | 10.a.
b. Gross commitments to sell .................................................................. | 3435 0 | 10.b.
11. Spot foreign exchange contracts ............................................................... | 8765 622,366 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 3430 0 | 12.
a. | TEXT 3555 |______________________________________________________| RCFD 3555 | | ////////////////// | 12.a.
b. | TEXT 3556 |______________________________________________________| RCFD 3556 | | ////////////////// | 12.b.
___________
c. | TEXT 3557 |______________________________________________________| RCFD 3557 | | ////////////////// | 12.c.
_____________
d. | TEXT 3558 |______________________________________________________| RCFD 3558 | | ////////////////// | 12.d.
_____________ _______________________________________________
Dollar Amounts in Thousands RCFD Bil Mil Thou
_________________________________________________________________________________________________________________________
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC,item 28,"Total equity capital") | 5591 0 | 13.
_____________ __________________________
a. | TEXT 5592 |______________________________________________________| RCFD 5592 | | ////////////////// | 13.a.
___________
b. | TEXT 5593 |______________________________________________________| RCFD 5593 | | ////////////////// | 13.b.
___________
c. | TEXT 5594 |______________________________________________________| RCFD 5594 | | ////////////////// | 13.c.
_____________
d. | TEXT 5595 |______________________________________________________| RCFD 5595 | | ////////////////// | 13.d.
_____________
________________________________________________
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-15
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
_____________
| C461 | Less
| | than
_________________________________________ ____________________________|___________| Minus
| (Column A) | (Column B) | (Column C) | (Column D) |
| Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
| Contracts | Contracts | Contracts | Contracts |
|___________________|____________________|____________________|____________________|
Dollar Amounts in Thousands |Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou |
_______________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
| Off-balance Sheet Derivatives | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| Position Indicators | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
____________________________________| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
14. Gross amounts (e.g., notional | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
amounts) (for each column, sum of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
items 14.a through 14.e must equal | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
sum of items 15, 16.a, and 16.b): |___________________|____________________|___________________ |____________________|
a. Futures contracts ............. | 1,229,392 | 0 | 0 | 36,486 | 14.a.
|___________________|____________________|____________________|____________________|
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
|___________________|____________________|____________________|____________________|
b. Forward contracts ............. | 2,576,500 | 1,931,682 | 0 | 21,832 | 14.b.
|___________________|____________________|____________________|____________________|
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
|___________________|____________________|____________________|____________________|
c. Exchange-traded option contracts:| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
(1) Written options .......... | 0 | 0 | 0 | 0 | 14.c.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 450,000 | 0 | 0 | 2,206 | 14.c.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
|___________________|____________________|____________________|____________________|
d. Over-the-counter option contracts: | //////////////////| ///////////////// | ///////////////// | //////////////// |
(1) Written options .......... | 1,324,980 | 3,887 | 0 | 0 | 14.d.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 10,131,934 | 3,887 | 0 | 0 | 14.d.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
|___________________|____________________|____________________|____________________|
e. Swaps ............................ | 19,502,262 | 0 | 0 | 0 | 14.e.
|___________________|____________________|____________________|____________________|
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
|___________________|____________________|____________________|____________________|
15. Total gross notional amount of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading ......................... | 3,386,305 | 1,939,456 | 0 | 2,206 | 15.
|___________________|____________________|____________________|____________________|
| RCFD A126 | RFD A127 | RCFD 8723 | RCFD 8724 |
|___________________|____________________|____________________|____________________|
16. Total gross notional amount of | ///////////////// | //////////////// | ///////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
purposes other than trading: | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
a. Contracts marked to market ... | 4,202,500 | 0 | 0 | 36,486 | 16.a.
|___________________|____________________|____________________|____________________|
| RCFD 8725 | RCFD 8726 | RCF 8727 | RCFD 8728 |
|___________________|____________________|____________________|____________________|
b. Contracts not marked to market | 27,626,263 | 0 | 0 | 21,832 | 16.b.
|___________________|____________________|____________________|____________________|
| RCFD 8729 | RCFD 8730 | RFD 8731 | RCFD 8732 |
|___________________|____________________|____________________|____________________|
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-16
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
<CAPTION>
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
___________________________________| Contracts | Contracts | Contracts | Contracts |
| Off-balance Sheet Derivatives |___________________|____________________|____________________|____________________|
| Position Indicators |RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
|_____________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
17. Gross fair values of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8733 29,782 | 8734 41,523 | 8735 0 | 8736 58 | 17.a.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8737 20,932 | 8738 36,511 | 8739 0 | 8740 0 | 17.a.(2)
b. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are marked | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8741 524 | 8742 0 | 8743 0 | 8744 1,452 | 17.b.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8745 2,834 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are not | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
marked to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .................. | 8749 64,085 | 8750 0 | 8751 0 | 8752 100 | 17.c.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8753 111,703 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
|__________________________________________________________________________________|
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_________________________________________________________________________________________________________________________
<S> <C> <C>
1. -2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ////////////////// |
that are fee paid or otherwise legally binding) ................................................ | 3833 16,829,602 | M.3.
a. Participations in commitments with an original maturity | ////////////////// |
exceeding one year conveyed to others ................................|RCFD 3834 | 1,310,691 | ////////////////// | M.3.a.
________________________
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) issued | ////////////////// |
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above .............. | 3377 341,139 | M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that | ////////////////// |
have been securitized and sold without recourse (with servicing retained), amounts outstanding | ////////////////// |
by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles (to be completed for the | ////////////////// |
September report only)....................................................................... | 2741 N/A | M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY)................................... | 2742 0 | M.5.b.
c. All other consumer installment credit (including mobile home loans)(to be completed for the | ////////////////// |
September report only........................................................................ | 2743 N/A | M.5.c
|____________________|
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-17
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9| _____________
| C465 |
_________|___________|
Schedule RC-M--Memoranda | |
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////////// |
shareholders and their related interests ..................................................... | 6164 605,294 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of all | ////////////////// |
extensions of credit by the reporting bank (including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
___________________________| ////////////////// |
of total capital as defined for this purpose in agency regulations. | RCFD 6165 | 24 | ////////////////// |
___________________________| ////////////////// | 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) .................... | 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract ...................................................... | 5500 28,855,729 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer ........................................................ | 5501 55,604 | 4.b.(1)
(2) Serviced without recourse to servicer ..................................................... | 5502 32,340,522 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract .................................................. | 5503 190,640 | 4.c.(1)
(2) Serviced under a special option contract .................................................. | 5504 38,282,672 | 4.c.(2)
d. Mortgages serviced under other servicing contracts ............................................ | 5505 8,508,320 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile) .................................................................... | 2103 16,297 | 5.a.
b. Non-U.S. addressees (domicile) ................................................................ | 2104 337 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing rights ..................................................................... | 3164 1,483,959 | 6.a.
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships ....................................................... | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets .................................................. | 5507 126,463 | 6.b.(2)
c. Goodwill ...................................................................................... | 3163 672,992 | 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ........................ | 2143 2,283,414 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or | ////////////////// |
are otherwise qualifying for regulatory capital purposes ...................................... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt ...................................................................................| 3295 75,000 | 7.
______________________
</TABLE>
- ------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
27
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-18
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-M--Continued ________________________
Dollar Amounts in Thousands | Bil Mil Thou|
_____________________________________________________________________________________________ |_______________________|
<S> <C> <C>
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices ....................... | RCON 5508 4,537 | 8.a.(2)(a)
(b) Farmland in domestic offices ................................................ | RCON 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ....................... | RCON 5510 8,067 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .......... | RCON 5511 740 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ....................... | RCON 5512 21,202 | 8.a.(2)(e)
(f) In foreign offices .......................................................... | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ....... | RCFD 2150 34,546 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies ... | RCFD 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ....... | RCFD 2130 0 | 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies ................ | RCFD 5376 0 | 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | /////////////////////// |
item 23, "Perpetual preferred stock and related surplus" ............................... | RCFD 3778 125,000 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party products): | /////////////////////// |
a. Money market funds .................................................................. | RCON 6441 55,245 | 10.a.
b. Equity securities funds ............................................................. | RCON 8427 108,359 | 10.b.
c. Debt securities funds ............................................................... | RCON 8428 13,250 | 10.c.
d. Other mutual funds .................................................................. | RCON 8429 0 | 10.d.
e. Annuities ........................................................................... | RCON 8430 102,292 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through | /////////////////////// |
10.e. above) ........................................................................... | RCON 8784 150,100 | 10.f.
_________________________
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
| |
______________________
|Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou | |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
|1. Interbank holdings of capital instruments (to be completed for the December report only): | ////////////////// | |
| a. Reciprocal holdings of banking organizations' capital instruments ........................ | 3836 N/A | M.1.a. |
| b. Nonreciprocal holdings of banking organizations' capital instruments ..................... | 3837 N/A | M.1.b. |
______________________
| |
_________________________________________________________________________________________________________________________________
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-19
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
The FFIEC regards the information reported in __________
all of Memorandum item 1, in items 1 through 10, | C470 | Less than
column A, and in Memorandum items 2 through 4, ______________________________________________________|________| Minus
column A, as confidential. | (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1245 | 1246 71,390 | 1247 223,962 | 1.a.
b. To non-U.S. addressees (domicile) ............ | 1248 | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and | ///// | ////////////////// | ////////////////// |
acceptances of other banks: | ///// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | ///// | ////////////////// | ////////////////// |
institutions ................................. | 5377 | 5378 0 | 5379 0 | 2.a.
b. To foreign banks ............................. | 5380 | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and | ///// | ////////////////// | ////////////////// |
other loans to farmers .......................... | 1594 | 1597 385 | 1583 531 | 3.
4. Commercial and industrial loans: | ///// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1251 | 1252 11,945 | 1253 108,334 | 4.a.
b. To non-U.S. addressees (domicile) ............ | 1254 | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family, and | ///// | ////////////////// | ////////////////// |
other personal expenditures: | ///// | ////////////////// | ///////////////// |
a. Credit cards and related plans ............... | 5383 | 5384 1,187 | 5385 669 | 5.a.
b. Other (includes single payment, installment, | ///// | ////////////////// | ////////////////// |
and all student loans) ....................... | 5386 | 5387 22,600 | 5388 8,465 | 5.b.
6. Loans to foreign governments and official | ///// | ////////////////// | ////////////////// |
institutions .................................... | 5389 | 5390 0 | 5391 0 | 6.
7. All other loans ................................. | 5459 | 5460 14,909 | 5461 1,919 | 7.
8. Lease financing receivables: | ///// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ................ | 1257 | 1258 95 | 1259 6,544 | 8.a.
b. Of non-U.S. addressees (domicile) ............ | 1271 | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | ///// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets) . | 3505 | 3506 0 | 3507 85,778 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.
________________________________________________________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
10. Loans and leases reported in items 1 | | | |
through 8 above which are wholly or partially | ///// | ////////////////// | ////////////////// |
guaranteed by the U.S. Government ............... | 5612 | 5613 18,447 | 5614 21,415 | 10.
a. Guaranteed portion of loans and leases | ///// | ////////////////// | ////////////////// |
included in item 10 above .................... | 5615 | 5616 18,250 | 5617 16,952 | 10.a.
________________________________________________________________
</TABLE>
29
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-20
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Continued
__________
| C473 | Less than
______________________________________________________|________| Minus
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
Memoranda | accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Restructured loans and leases included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 1 through 8, above (and not | ///// | //// | |
reported in Schedule RC-C, part I, Memorandum | ///// | //// | |
item 2) ......................................... | 1658 | 1659 | | M.1.
2. Loans to finance commercial real estate, | ///// | //// | |
construction, and land development activities | ///// | //// | |
(not secured by real estate) included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 4 and 7, above ............. | 6558 | 6559 826 | 6560 7,043 | M.2.
|____________________|____________________ |___________________
3. Loans secured by real estate in domestic offices | RCON | RCON Bil Mil Thou | RCON Bil Mil Thou|
|___________________ |____________________ ____________________
(included in Schedule RC-N, item 1, above): | ///// | ////////////////// | ////////////////// |
a. Construction and land development ............ | 2759 | 2769 1,100 | 3492 26,422 | M.3.a.
b. Secured by farmland .......................... | 3493 | 3494 161 | 3495 0 | M.3.b.
c. Secured by 1-4 family residential properties: | ///// | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by | ///// | ////////////////// | ////////////////// |
1-4 family residential properties and | ///// | ////////////////// | ////////////////// |
extended under lines of credit ........... | 5398 | 5399 5,114 | 5400 17,374 | M.3.c.(1)
(2) All other loans secured by 1-4 family | ///// | ////////////////// | ////////////////// |
residential properties ................... | 5401 | 5402 58,079 | 5403 75,430 | M.3.c.(2)
d. Secured by multifamily (5 or more) | ///// | ////////////////// | ////////////////// |
residential properties ....................... | 3499 | 3500 521 | 3501 12,491 | M.3.d.
e. Secured by nonfarm nonresidential properties . | 3502 | 3503 6,415 | 3504 92,245 | M.3.e.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other | ///// | ////////////////// |
commodity and equity contracts: | ///// | ////////////////// |
a. Book value of amounts carried as assets ...... | 3522 | 3528 0 | M.4.a.
b. Replacement cost of contracts with a | ///// | ////////////////// |
positive replacement cost .................... | 3529 | 3530 0 | M.4.b.
___________________________________________
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-21
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
______________________
Schedule RC-O--Other Data for Deposit Insurance Assessments | C475 |
|____________________|
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits ...................................................... | 0030 216 | 1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits ................................... | 0031 N/A | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... | 0032 N/A | 1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits ..................................................... | 3510 216 | 2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits .................................. | 3512 N/A | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... | 3514 N/A | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 3520 101,763 | 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in | ////////////////// |
Puerto Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries .............................................. | 2211 206,111 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ................................. | 2351 20,089 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...................... | 5514 8 | 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .................. | 2229 0 | 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ..... | 2383 0 | 5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b) ..................................................... | 5515 0 | 5.c.
______________________
______________________
Item 6 is not applicable to state nonmember banks that have not been authorized by the | ////////////////// |
Federal Reserve to act as pass-through correspondents. | ////////////////// |
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit liabilities| ////////////////// |
of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, item 4 or 5, column B)..... | 2314 0 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// |
item 4 or 5, column A or C, but not column B).............................................. | 2315 0 | 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) | ////////////////// |
a. Unamortized premiums ...................................................................... | 5516 769 | 7.a.
b. Unamortized discounts ..................................................................... | 5517 0 | 7.b.
______________________
_______________________________________________________________________________________________________________________________
| |
|8. To be completed by banks with "Oakar deposits." |
______________________
| Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of | ////////////////// | |
| the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)) .... | 5518 2,188,589 | 8. |
______________________
| |
_______________________________________________________________________________________________________________________________
______________________
9. Deposits in lifeline accounts ................................................................ | 5596 ///////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 8432 0 | 10.
______________________
______________
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction
accounts and all transaction accounts other than demand deposits.
</TABLE>
31
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-22
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-O--Continued
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for | ////////////////// |
certain reciprocal demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if reciprocal demand balances | ////////////////// |
between the reporting bank and savings associations were reported on a net basis | ////////////////// |
rather than a gross basis in Schedule RC-E .................................................. | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances | ////////////////// |
between the reporting bank and U.S. branches and agencies of foreign banks were | ////////////////// |
reported on a gross basis rather than a net basis in Schedule RC-E .......................... | A181 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of | ////////////////// |
collection were included in the calculation of net reciprocal demand balances between | ////////////////// |
the reporting bank and the domestic offices of U.S. banks and savings associations | ////////////////// |
in Schedule RC-E ............................................................................ | A182 0 | 11.c.
____________________
Memoranda (to be completed each quarter except as noted) Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________ ___________________________|____________________|
1. Total deposits in domestic offices of the bank (sum of Memorandum it ems 1.a. (1) and | ////////////////// |
1.b.(1) must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposits accounts of $100,000 or less: | ////////////////// |
(1) amount of deposit accounts of $100,000 or less ....................................... | 2702 19,755,631 | M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number | ////////////////// |
completed for the June report only) .............................|RCON 3779 3,742,107 | ////////////////// | M.1.a.(2)
b. Deposit accounts of more than $100,000: | ////////////////// |
(1) Amount of deposit accounts of more than $100,000 ..................................... | 2710 14,354,949 | M.1.b.(1)
Number | ////////////////// |
(2) Number of deposit accounts of more than $100,000 ................|RCON 2722 27,062 | ////////////////// | M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by mutiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or
procedure for determining a better estimate of uninsured deposits than the ____________YES_______NO__
estimated described above .................................................................. | 6861| |///| x | M.2.a.
____________________
b. If the box marked YES has been checked, report the estimate of uninsured deposits |RCON Bil Mil Thou|
determined by using your bank's method or procedure .................................... | 5597 N/A | M.2.b.
_____________________________________________________________________________________________________________________________
| C477 | Less
Person to whom questions about the Reports of Condition and Income should be directed: | | than
|________| Minus
PAMELA S. FLYNN, VICE PRESIDENT (401) 278-5194
___________________________________________________________________________________ ______________________________________
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-23
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1995, must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets of less than
$1 billion must complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
<S> <C>
____________
| C480 | Less than
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed _____|__________| Minus
only by banks with total assets of less than $1 billion. Indicate in the appropriate | YES NO |
box at the right whether the bank has total capital greater than or equal to eight percent___________ _______________
of adjusted total assets ............................................................... | RCFD 6056 | |////| | 1.
_____________________________
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan
and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight
percent or that the bank is not in compliance with the risk-based capital guidelines.
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
|Subordinated Debt(1)| Other |
_________________________________________________________________ | and Intermediate | Limited- |
| NOTE: All banks are required to complete items 2 and 3 below | | Term Preferred | Life Capital |
| See optional worksheet for items 3.a through 3.f. | | Stock | Instruments |
|________________________________________________________________| ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original | | |
weighted average maturity of at least five years) with a remaining | | |
maturity of: | | |
a. One year or less ...................................................... | 3780 25,737 | 3786 0 | 2.a.
b. Over one year through two years ....................................... | 3781 737 | 3787 0 | 2.b.
c. Over two years through three years .................................... | 3782 10,745 | 3788 0 | 2.c.
d. Over three years through four years ................................... | 3783 0 | 3789 0 | 2.d.
e. Over four years through five years .................................... | 3784 0 | 3790 0 | 2.e.
f. Over five years ....................................................... | 3785 1,101,000 | 3791 0 | 2.f.
3. Amounts used in calculating regulatory capital ratios (report amounts | ////////////////// | ////////////////// |
determined by the bank for its own internal regulatory capital analyses): | ////////////////// | RCFD Bil Mil Thou |
a. Tier 1 capital......................................................... | ////////////////// | 8274 3,590,367 | 3.a.
b. Tier 2 capital......................................................... | ////////////////// | 8275 1,755,646 | 3.b.
c. Total risk-based capital............................................... | ////////////////// | 3792 5,346,013 | 3.c.
d. Excess allowance for loan and lease losses............................. | ////////////////// | A222 297,250 | 3.d.
e. Risk-weighted assets................................................... | ////////////////// | A223 45,718,856 | 3.e.
f. "Average total assets"................................................. | ////////////////// | A224 51,482,775 | 3.f.
___________________________________________
| (Column A) | (Column B) |
Items 4-9 and Memoranda items 1 and 2 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(2) |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items assigned | | |
to the Zero percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Securities issued by, other claims on, and claims unconditionally | ////////////////// | ////////////////// |
guaranteed by, the U.S. Government and its agencies and other | ////////////////// | ////////////////// |
OECD central governments .......................................... | 3794 2,147,648 | ////////////////// | 4.a.(1)
(2) All other ......................................................... | 3795 1,115,265 | ////////////////// | 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3796 101,488 | 4.b.
___________________________________________
</TABLE>
_____
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
33
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-24
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Continued
___________________________________________
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Claims conditionally guaranteed by the U.S. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ....................... | 3798 714,375 | ////////////////// | 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Govern- | ////////////////// | ////////////////// |
ment and its agencies and other OECD central governments; by | ////////////////// | ////////////////// |
securities issued by U.S. Government-sponsored agencies; and | ////////////////// | ////////////////// |
by cash on deposit ................................................ | 3799 0 | ////////////////// | 5.a.(2)
(3) All other ......................................................... | 3800 8,774,345 | ////////////////// | 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3801 791,065 | 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3802 5,265,173 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3803 409,680 | 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3804 31,799,547 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3805 10,122,631 | 7.b.
8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// |
risk-based capital ratio(2) .............................................. | 3806 83,713 | ////////////////// | 8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) .......................................... | 3807 49,900,066 | ////////////////// | 9.
___________________________________________
Memoranda
______________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
1.Current credit exposure across all off-balance sheet derivative contracts covered by the | ///////////////// |
risked-based capital standards .................................................................| 8764 135,825| M.1.
|___________________|
_____________________________________________________________________
| With a remaining maturity of |
|____________________________________________________________________|
| (Column A) | (Column B) | (Column C) |
| | | |
| One year or less | Over one year | Over five years |
| | through five years | |
|______________________|______________________|______________________|
|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|
|______________________|______________________|______________________|
2. Notional principal amounts of | | | |
off-balance sheet derivative contracts(3):| | | |
a. Interest rate contracts ................. | 3809 8,320,956 | 8766 18,597,686 | 8767 801,055 | M.2.a.
b. Foreign exchange contracts .............. | 3812 1,578,420 | 8769 101,907 | 8770 0 | M.2.b.
c. Gold contracts .......................... | 8771 15,291 | 8772 0 | 8773 0 | M.2.c.
d. Other precious metals contracts ......... | 8774 8,748 | 8775 0 | 8776 0 | M.2.d.
e. Other commodity contracts ............... | 8777 0 | 8778 0 | 8779 0 | M.2.e.
f. Equity derivative contracts ............. | A000 0 | A001 0 | A002 0 | M.2.f.
|____________________________________________________________________|
</TABLE>
_________________
1) Do not report in column B the risk-weighted amount of
assets reported in column A.
2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of these
securities in items 4 through 7 above. Item 8 also includes on-balance sheet
asset values (or portions thereof) of off-balance sheet interest rate, foreign
exchange rate, and commodity contracts and those contracts (e.g., futures
contracts) not subject to risk-based capital. Exclude from item 8 margin
accounts and accrued receivables as well as any portion of the allowance for
loan and lease losses in excess of the amount that may be included in Tier 2
capital. 3) Exclude foreign exchange contracts with an original maturity of 14
days or less and all futures contracts.
34
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK
Address: ONE MONARCH PLACE Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
City, State, Zip: SPRINGFIELD, MA 01102 Page RC-25
FDIC Certificate No.: 02499
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on June 30, 1996
FLEET NATIONAL BANK SPRINGFIELD , MASSACHUSETTS
- ------------------- ----------------- -------------
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public.
BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE
STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL
BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS
IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE
MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks
choosing not to make a statement may check the "No comment" box below and
should make no entries of any kind in the space provided for the narrative
statement; i.e., DO NOT enter in this space such phrases as "No statement,"
"Not applicable," "N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should
not exceed 100 words. Further, regardless of the number of words, the
statement must not exceed 750 characters, including punctuation, indentation,
and standard spacing between words and sentences. If any submission should
exceed 750 characters, as defined, it will be truncated at 750 characters with
no notice to the submitting bank and the truncated statement will appear as the
bank's statement both on agency computerized records and in computer-file
releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
__________________________________________________________________________
No comment |X| (RCON 6979) | c471 | C472 | Less than
Minus
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
/s/__Gero DeRosa_______________________________ ___7/25/96________
Signature of Executive Officer of Bank Date of Signature
35
